LEGISLATIVE COUNCIL ─ 21 January 2015 4753
OFFICIAL RECORD OF PROCEEDINGS
Wednesday, 21 January 2015
The Council met at Eleven o'clock
MEMBERS PRESENT:
THE PRESIDENT THE HONOURABLE JASPER TSANG YOK-SING, G.B.S., J.P.
THE HONOURABLE ALBERT HO CHUN-YAN
THE HONOURABLE LEE CHEUK-YAN
THE HONOURABLE JAMES TO KUN-SUN
THE HONOURABLE CHAN KAM-LAM, S.B.S., J.P.
THE HONOURABLE LEUNG YIU-CHUNG
DR THE HONOURABLE LAU WONG-FAT, G.B.M., G.B.S., J.P.
THE HONOURABLE EMILY LAU WAI-HING, J.P.
THE HONOURABLE TAM YIU-CHUNG, G.B.S., J.P.
THE HONOURABLE ABRAHAM SHEK LAI-HIM, G.B.S., J.P.
THE HONOURABLE TOMMY CHEUNG YU-YAN, S.B.S., J.P.
THE HONOURABLE FREDERICK FUNG KIN-KEE, S.B.S., J.P.
THE HONOURABLE VINCENT FANG KANG, S.B.S., J.P.
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THE HONOURABLE WONG KWOK-HING, B.B.S., M.H.
PROF THE HONOURABLE JOSEPH LEE KOK-LONG, S.B.S., J.P., Ph.D., R.N.
THE HONOURABLE JEFFREY LAM KIN-FUNG, G.B.S., J.P.
THE HONOURABLE ANDREW LEUNG KWAN-YUEN, G.B.S., J.P.
THE HONOURABLE WONG TING-KWONG, S.B.S., J.P.
THE HONOURABLE RONNY TONG KA-WAH, S.C.
THE HONOURABLE CYD HO SAU-LAN, J.P.
THE HONOURABLE STARRY LEE WAI-KING, J.P.
THE HONOURABLE CHAN HAK-KAN, J.P.
THE HONOURABLE CHAN KIN-POR, B.B.S., J.P.
DR THE HONOURABLE PRISCILLA LEUNG MEI-FUN, S.B.S., J.P.
DR THE HONOURABLE LEUNG KA-LAU
THE HONOURABLE WONG KWOK-KIN, S.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
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THE HONOURABLE WONG YUK-MAN
THE HONOURABLE CLAUDIA MO
THE HONOURABLE MICHAEL TIEN PUK-SUN, B.B.S., J.P.
THE HONOURABLE JAMES TIEN PEI-CHUN, G.B.S., J.P.
THE HONOURABLE NG LEUNG-SING, S.B.S., J.P.
THE HONOURABLE STEVEN HO CHUN-YIN
THE HONOURABLE FRANKIE YICK CHI-MING
THE HONOURABLE WU CHI-WAI, M.H.
THE HONOURABLE YIU SI-WING
THE HONOURABLE GARY FAN KWOK-WAI
THE HONOURABLE MA FUNG-KWOK, S.B.S., J.P.
THE HONOURABLE CHARLES PETER MOK, J.P.
THE HONOURABLE CHAN CHI-CHUEN
THE HONOURABLE CHAN HAN-PAN, J.P.
DR THE HONOURABLE KENNETH CHAN KA-LOK
THE HONOURABLE CHAN YUEN-HAN, S.B.S., J.P.
THE HONOURABLE LEUNG CHE-CHEUNG, B.B.S., M.H., J.P.
THE HONOURABLE KENNETH LEUNG
THE HONOURABLE ALICE MAK MEI-KUEN, J.P.
DR THE HONOURABLE KWOK KA-KI
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THE HONOURABLE KWOK WAI-KEUNG
THE HONOURABLE DENNIS KWOK
THE HONOURABLE CHRISTOPHER CHEUNG WAH-FUNG, S.B.S., J.P.
DR THE HONOURABLE FERNANDO CHEUNG CHIU-HUNG
THE HONOURABLE SIN CHUNG-KAI, S.B.S., J.P.
DR THE HONOURABLE HELENA WONG PIK-WAN
THE HONOURABLE IP KIN-YUEN
DR THE HONOURABLE ELIZABETH QUAT, J.P.
THE HONOURABLE MARTIN LIAO CHEUNG-KONG, S.B.S., J.P.
THE HONOURABLE POON SIU-PING, B.B.S., M.H.
THE HONOURABLE TANG KA-PIU, J.P.
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 TONY TSE WAI-CHUEN, B.B.S.
MEMBERS ABSENT:
DR THE HONOURABLE LAM TAI-FAI, S.B.S., J.P.
THE HONOURABLE CHEUNG KWOK-CHE
THE HONOURABLE CHRISTOPHER CHUNG SHU-KUN, B.B.S., M.H., J.P.
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PUBLIC OFFICERS ATTENDING:
PROF THE HONOURABLE K C CHAN, G.B.S., J.P. SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY
THE HONOURABLE GREGORY SO KAM-LEUNG, G.B.S., J.P. SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT
THE HONOURABLE RAYMOND TAM CHI-YUEN, G.B.S., J.P. SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS
THE HONOURABLE LAI TUNG-KWOK, S.B.S., I.D.S.M., J.P. SECRETARY FOR SECURITY
THE HONOURABLE EDDIE NG HAK-KIM, S.B.S., J.P. SECRETARY FOR EDUCATION
DR THE HONOURABLE KO WING-MAN, B.B.S., J.P. SECRETARY FOR FOOD AND HEALTH
THE HONOURABLE PAUL CHAN MO-PO, M.H., J.P. SECRETARY FOR DEVELOPMENT
MR JAMES HENRY LAU JR., J.P. UNDER SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY
CLERKS IN ATTENDANCE:
MR KENNETH CHEN WEI-ON, S.B.S., SECRETARY GENERAL
MISS FLORA TAI YIN-PING, ASSISTANT SECRETARY GENERAL
MISS ODELIA LEUNG HING-YEE, ASSISTANT SECRETARY GENERAL
MR MATTHEW LOO, ASSISTANT SECRETARY GENERAL
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PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members to the Chamber.
(After the summoning bell had been rung, a number of Members entered the Chamber)
TABLING OF PAPERS
The following papers were laid on the table under Rule 21(2) of the Rules of Procedure:
Subsidiary Legislation/Instruments L.N. No.
Land (Miscellaneous Provisions) (Amendment) Regulation 2015 ...... 5/2015
Minimum Wage Ordinance (Amendment of Schedule 3) Notice 2015 ...... 6/2015
Employment Ordinance (Amendment of Ninth Schedule) Notice 2015 ...... 7/2015
Amusement Rides (Safety) (Fees) (Amendment) Regulation 2015 ...... 8/2015
Import and Export (Fees) (Amendment) Regulation 2015 ...... 9/2015
Other Papers
No. 60 ─ Hospital Authority Annual Report 2013-2014
No. 61 ─ Samaritan Fund Financial Statements for the year ended 31 March 2014 and Report on the Fund
No. 62 ─ Legal Aid Services Council Annual Report 2013-2014
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Report No. 10/14-15 of the House Committee on Consideration of Subsidiary Legislation and Other Instruments
Report of the Bills Committee on Mandatory Provident Fund Schemes (Amendment) Bill 2014
Report of the Bills Committee on Pharmacy and Poisons (Amendment) Bill 2014
ORAL ANSWERS TO QUESTIONS
PRESIDENT (in Cantonese): Questions. First question.
Development of Hong Kong's Internet Economy and Cross-border E-commerce Activities
1. MRS REGINA IP (in Cantonese): President, according to a consultancy study in 2011 on the contribution of the Internet to Hong Kong's economy, one third of Hong Kong's Internet economy was driven by consumption, another third was contributed by net exports of e-commerce and Internet-related hardware, and the remaining third comprised government and private investments in Internet-related goods and services. The contribution of the Internet to the economy will rise from 5.9% of Hong Kong's gross domestic product in 2009 (that is, about HK$96 billion) to 7.2% in 2015, reflecting the increasing importance of the Internet to the economy. However, there are comments that the Government is not proactive in promoting the development of the Internet economy and cross-border e-commerce activities. In this connection, will the Government inform this Council:
(1) whether it has regularly collected data and conducted statistical analyses on Internet economic activities in Hong Kong; if it has, of the details;
(2) whether it will set up a standing working group comprising representatives from the Internet industry to study ways to support and boost the Internet economy, including formulating strategies to encourage private investments in this respect; and
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(3) as it is learnt that the Guangdong provincial authorities have all along been committed to promoting and developing cross-border e-commerce activities, and that Guangzhou, one of the pilot cities designated by the State Council for cross-border e-commerce services, has introduced tax relief measures such as bonded warehouses, bonded logistic parks as well as import duties on luggage and postal parcels, while Hong Kong lacks the measures and a department dedicated to promoting cross-border e-commerce activities proactively, whether the Government will take steps to catch up on this front?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, my reply to the three parts of the question is as follows:
(1) Since 2000, the Government has been conducting regular surveys on the usage of computers, Internet, e-commerce and other information technologies in various business sectors in Hong Kong, with a view to formulating measures to drive information technologies adoption among different economic sectors to enhance competitiveness. According to findings of the 2013 Survey on Information Technology Usage and Penetration in the Business Sector undertaken by the Census and Statistics Department, the value of e-commerce sales in Hong Kong increased by 104% from $139.6 billion in 2008 to $284.7 billion in 2012. E-commerce sales accounted for 3.7% of business receipts of local business establishments in 2012, of which 47.6% was business-to-consumer transactions, 51.5% was business-to-business transactions and the remaining 0.9% was related to government and non-business organizations. The new round of survey, which is under preparation, would commence in March.
(2) The Government is committed to facilitating the development of digital economy. The Task Force on Industry Facilitation under the Digital 21 Strategy Advisory Committee, comprising members from Government and the industry, advises on strategies and initiatives to facilitate the development of information and communications technology in Hong Kong. The Task Force deliberated on issues related to the development of Internet economy on various occasions, including the Sector-specific Programme, ways to LEGISLATIVE COUNCIL ─ 21 January 2015 4761
promote cloud computing adoption among small and medium enterprises (SMEs), usage of information technologies by local enterprises, and the International IT Fest which helps foster the development of digital economy in Hong Kong. Furthermore, the Working Group on Manufacturing Industries, Innovative Technology, and Cultural and Creative Industries under the Economic Development Commission had also considered the subject of e-commerce.
As regards encouraging private investment in the Internet economy, Hong Kong is a free market and private investments are mainly market-driven, with the Government implementing measures to support and facilitate the development of the industry and the market. For instance, in early 2014, the Office of the Government Chief Information Officer launched a one-stop interactive portal, iStartup@HK, for technology startups and prospective investors, providing them with a networking platform that can facilitate investment matching. Moreover, Cyberport and the Hong Kong Science and Technology Parks also arrange opportunities for their startups to meet with investors and pitch their innovative ideas and products in order to acquire funding.
On the other hand, Invest Hong Kong also promotes Hong Kong as a regional and global e-commerce service centre, introducing Hong Kong's well-developed information and communications technology infrastructure to overseas, Mainland and Taiwanese investors and encouraging them to collaborate with local research and development centres in respect of e-commerce technology and facilities, so as to foster the development of Hong Kong's e-commerce business.
(3) E-commerce is burgeoning in Hong Kong. We ranked third worldwide in the Digital Evolution Index compiled by the Tufts University in 2013, indicating that Hong Kong has a mature digital eco-system and a competitive e-commerce market. Our Internet take-up rate is very high, with mobile penetration rate standing at 237%. Our average peak Internet connection speed at 84.6 Mbps is the fastest globally. The robust digital and mobile connectivity of Hong Kong has provided a favourable environment for the development of e-commerce.
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Hong Kong thrives on free trade. Being a free port, Hong Kong does not levy customs tariff on imports or exports. Given the different economic structures of Hong Kong and Guangzhou, it is inappropriate to compare the fiscal measures of the two places.
Hong Kong and Guangdong have been working closely to facilitate cross-boundary e-commerce. Under the Mainland and Hong Kong Closer Economic Partnership Arrangement, Hong Kong and Guangdong have jointly implemented Mutual Recognition of Electronic Signature Certificates. This measure strengthens the security and reliability of cross-boundary electronic transactions, thus promoting the development of secure e-commerce between the two places.
MRS REGINA IP (in Cantonese): President, according to the statistics of the China E-Commerce Research Centre, the transaction amount of cross-border online shopping in the Mainland reached $70 billion in 2013. Due to the high confidence of Mainland netizens in Hong Kong commodities, Hong Kong should be able to play a pivotal role in the Mainland cross-border online shopping market in the future. Apart from the recognition of our brand name products received from Mainland customers, we possess the comprehensive ability to serve the Mainland online shopping market, and Hong Kong can also provide services for cross-border Renminbi payments. As far as I understand, a Nanfang e-Commerce Service Company has been established in Guangdong Province to co-ordinate members of the industry in the hope of enhancing the development of online shopping with Hong Kong. However, Hong Kong lacks a commercial organization to promote co-operation with the Mainland counterparts. May I know whether the Commerce and Economic Development Bureau will proactively promote it?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, as I have just mentioned in my main reply, Hong Kong has a well-developed Internet infrastructure which has provided a good foundation for the commercial development of Hong Kong. I agree with the suggestions of Mrs IP. In fact, both our services and commodities are attractive, and there is indeed a brand effect for Hong Kong in terms of its development in the Mainland. For this reason, we have maintained close contacts with relevant Mainland LEGISLATIVE COUNCIL ─ 21 January 2015 4763 organizations at different levels. In addition to the legislative protection for the privacy of electronic transactions and personal information, Hong Kong also provides safeguards for these transactions in the legal respect.
We also encourage SMEs to make good use of these electronic networks. I still think that these Mainland markets, particularly the consumer markets, have potentials for electronic transactions. In this regard, we also see that the Hong Kong Trade Development Council (HKTDC) has introduced many new initiatives which are well-received and have gained market entry to the Mainland. Since April last year, our suppliers can trade with their buyers directly online using the Small-Order Zone. At present, the Zone already has 5 100 registered suppliers who can reach out to 1.4 million buyers registered with the HKTDC, of whom most are from the Mainland. As far as I know, the number of transactions conducted through this platform has exceeded one million. We will therefore encourage development in this direction.
MR ANDREW LEUNG (in Cantonese): President, most of the Secretary's reply is beside the point. On last year's Singles Day alone, a leading online shopping company recorded $57.1 billion in sales. Hence, cross-border commerce is very important. The Secretary has mentioned that Hong Kong has sound infrastructure, well-developed Internet services and laws, and so on. But he has failed to identify ways to assist SMEs, particularly ways that can assist young people in running their online shopping business. Mrs Regina IP has earlier mentioned our credibility, product diversity, and the highly creative SMEs and young people. However, the entry threshold of online shopping market is rather high. Besides, if a business is to be known to customers, it has to attract eyeballs and pay for the service. As a matter of fact, these are things that SMEs will hardly be able to do. May I ask the Government what ideas it has ― this was a question raised long ago by the Business and Professionals Alliance for Hong Kong ― to help young people move upward, or help SMEs develop their scales of operation so as to enhance the development of online shopping?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr LEUNG for his question. I very much agree that online shopping has great potentials. I believe that, as a member of the Council of HKTDC, Mr LEUNG is well aware that apart from the Small-Order Zone which I have earlier mentioned, the Design Gallery of the HKTDC partnered with Taobao 4764 LEGISLATIVE COUNCIL ─ 21 January 2015 in 2010 to establish flagship stores on Tmall. Recently, since March 2014, the Design Gallery also has a presence on Jingdong Mall, the second largest online shopping platform in the Mainland. In these respects, the HKTDC has actually provided a lot of support to the business sector, especially the SMEs.
Of course, apart from these, we also provide training in various aspects and promote the application of these information technologies, particularly online channels, by SMEs. Mr LEUNG is right in saying that this needs investment and input of more resources. As such, cloud application is now the new trend. Cloud application can help reduce a lot of costs for the industry. Hence, in this period of time, the Office of the Government Chief Information Officer has launched a number of initiatives, especially the SME Cloud Promotion Campaign which aims to promote a cheaper and highly effective cloud computing among SMEs.
MR FRANKIE YICK (in Cantonese): President, Mr Andrew LEUNG's earlier remarks are very polite. I have read the main reply of the Secretary. In particular, part (3) of it is virtually an irrelevant answer to Mrs Regina IP's question. I doubt how far the authorities understand this question.
Mrs Regina IP's supplementary question just now is: Does the Government have some measures in place, and has it done anything to facilitate co-operation between Hong Kong business operators and their Guangzhou counterparts, as well as promote the development of the trading and logistics services industry both in Hong Kong and in the Mainland on a complementary and mutually reinforcing basis?
The Secretary has mentioned the various works done by the HKTDC. The logistics services industry is exactly the industry that I represent. No one in the industry has ever told me that they were invited by the Secretary to discuss what could be done. They feel worried as Guangzhou has been vigorously promoting such work, and the Mainland is currently developing the so-called warehouses and distribution centres, as well as some duty-free zones. We are very worried that Hong Kong's current status as a logistics centre will be gradually replaced. This is what we are worried about.
I would like to ask the Secretary what concrete actions will be taken?
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SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): The Honourable Member may not be very clear about it. In fact, we have done a lot of work on this front, particularly in respect of the logistics services industry.
Earlier, part (3) of the main reply gives an account of the measures implemented in Guangzhou or measures on this front, in which tax reliefs such as bonded warehouses, bonded logistic parks and some import duties are mentioned. In fact, I have already mentioned in my main reply that Hong Kong basically does not levy such tariff. Other places provide reductions in such taxes in order to attract foreign investors. But in fact, Hong Kong already has this advantage, as we basically do not levy such tariff. Therefore, we must ensure that there are other supportive measures which will better help the industry.
Over the years, the Office of the Government Chief Information Officer has made a lot of efforts in implementing the Sector-specific Programme to drive e-business for the benefits of the industry. A total of 18 projects have been completed so far. As for the logistics industry, there is an electronic transformation project which assists business operators in re-developing industry-specfic portal websites with additional features like customer relations management and other business functions. We also help the supply chain industry to increase product credibility through product certification. Therefore, we have made various efforts for different trades and industries to cater for their e-commerce development, so as to facilitate better market development and ensure smoother operation.
PRESIDENT (in Cantonese): Has your supplementary question not been answered?
MR FRANKIE YICK (in Cantonese): President, Mrs Regina IP's question has nothing to do with tax reliefs. Of course, we know that Hong Kong is tariff-free …
PRESIDENT (in Cantonese): Mr YICK, please raise your supplementary question in a simple way.
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MR FRANKIE YICK (in Cantonese): … The question is that Hong Kong lacks the measures and a department dedicated to promoting cross-border e-commerce activities proactively. Her supplementary question is whether the Government will take steps to catch up on this front. My supplementary question is similar.
PRESIDENT (in Cantonese): Secretary, do you have anything to add?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I think I have given an account of the various measures and responded to the questions just now. As regards whether we shall take steps to catch up, we certainly have much room for improvement. However, I have also mentioned that in the survey of the Tufts University, Hong Kong ranked third worldwide in the Index concerned. Certainly, we did not rank first and there is still room for improvement. But we cannot say that Hong Kong has lost its edges.
MR MARTIN LIAO (in Cantonese): President, science and technology have been advancing, and Internet has become an inevitable part of the development process of many industries. Currently, the Government is seeking to give e-cheques the same legal status as paper cheques. If successful, we will be the first to implement e-cheques in the region. But at the same time, the virtuality of the network, an excessively low entry threshold and a loose regulatory system have made Internet fraud and sale of fake products a new phenomenon in recent years. The existing legislation is still unable to keep pace with the times in respect of e-commerce development, especially in dealing with the issues of online transaction security, intellectual property right, product quality regulation, as well as consumer rights.
In this connection, I would like to ask the Government whether it will comprehensively review the existing legislation in order to assist various local industries to adapt to and leverage on the advantage of the electronic age, and even take this opportunity to upgrade or restructure themselves? If it will, what are the details; if it will not, what are the reasons?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr LIAO for his question. In fact, we really need to be on the cutting edge of science and technology. The implementation of e-cheque is LEGISLATIVE COUNCIL ─ 21 January 2015 4767 one of the measures. We hope to provide a more business-friendly environment to enable more transactions to be carried out on e-platforms.
We will keep exploring other supportive electronic facilities to cater for the development of the industry. We will continue to follow up on the issue. Instead of having a one-off review, we will conduct reviews from time to time to see whether the existing system can be improved. We will move with the times ans seek to be at the leading edge of the times. Therefore, we will keep this in view. Under these circumstances, we will work with the industries, especially the information technologies industry, in such forums as the working group of the Economic Development Commission to identify areas for which we can provide better support, and see how such services can be provided in the information technologies industry.
PRESIDENT (in Cantonese): Mr LIAO, has your supplementary question not been answered?
MR MARTIN LIAO (in Cantonese): I would like to ask whether there will be a review of the legislation?
PRESIDENT (in Cantonese): Secretary, Mr LIAO is asking whether there will be a review of the legislation.
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, in terms of legislation, there are in fact a lot of new things in the Internet world or online transactions, especially in financial technology. Recently, many startups have been established in Hong Kong because they can see that Hong Kong has a comparative advantage in this aspect. If we are to develop such products and there are legal requirements to meet, we will certainly legislate as appropriate. The principles pertaining to such transactions or business of relevant nature are often the same, regardless of whether they are done on the Internet platform or on those traditional platforms. We will consider legislating if Internet transactions need legal backup in a certain aspect.
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MR CHARLES PETER MOK (in Cantonese): President, there is a very important point in the main question, that is how to encourage more private investments. The biggest problem faced by technology industries companies in Hong Kong is the difficulties in securing capital investment. A few days ago in the Legislative Council, the Secretary talked in the context of the policy address about the importance of the eco-system for the development of cyber economy in Hong Kong. However, capital investment is the weakest link. The Policy Address has also mentioned Youth Development Fund and the Technology Start-up Support Scheme for Universities, but all these are not capital investment. Money is spent but it does not help to improve or increase the market value of technology companies. Hence, they are unable to attract venture capital funds.
Nevertheless, on last Wednesday (the day when the Policy Address was delivered), the State Council announced the establishment of a $40 billion national venture capital investment guidance fund to promote the development of emerging industries. It is putting efforts in this aspect to attract domestic and foreign capital for venture purpose. Between 1993 and 2005, Hong Kong also had the Applied Research Fund, the purpose of which was clearly defined as providing venture capital funding. The Government then allocated a provision of $750 million to fund startup ventures. But the Fund has ceased operation in 2005.
My supplementary question is: Will the Government consider relaunching this kind of measures, such as the Applied Research Fund, to provide similar funds to local enterprises to serve as venture capital funds?
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr MOK for his question. In fact, in this respect, I have exchanged views with Mr MOK in a Panel meeting. The recent situation in Hong Kong has been very encouraging. A lot of startups, especially those information technologies companies, have come to Hong Kong to make investments on this front. In my official capacity, I have come into contact with many of these fund managers who have recently been attracted to come to Hong Kong by these startups as well as the science and technology development. In fact, Hong Kong provides a very robust environment and the market is also able to meet such financing needs.
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As far as I know, it is not very difficult for many of these startups, especially those technologies companies, to look for these seed funds at the very beginning when they come to Hong Kong. However, as far as private funds and venture capital funds are concerned, we really need to put more efforts to attract more funds with a view to providing one-stop services to the enterprises. Such one-stop services ranging from seed funds to private funds, venture capital funds and future listing of the companies can better co-ordinate the needs of various parties.
What is the role of the Government in this context? We will keep an open mind and monitor the market-driven needs. If the market is not able to provide channels for such financing, we will figure out some way and will observe the practices adopted by the international community or other economies. Where necessary, we will consider these supportive measures.
PRESIDENT (in Cantonese): We have spent more than 24 minutes on this question. Second question.
Career and Life Planning Grant
2. DR CHIANG LAI-WAN (in Cantonese): Starting from the 2014-2015 school year, the Education Bureau allocates some $200 million each year to provide public sector schools and Direct Subsidy Scheme secondary schools operating classes at senior secondary levels with the Career and Life Planning Grant (the Grant) for strengthening the manpower and services for life planning education and career guidance. It has been reported that in a survey conducted by the Hong Kong Association of Careers Masters and Guidance Masters last year, 13% of the teachers surveyed indicated that the secondary schools in which they taught had used the Grant for non-life planning purposes such as organizing study tours. As such, the Chairperson of the Association has criticized that quite a number of secondary schools have a poor grasp of the life planning concept and merely use up the Grant in a simple and convenient way. Some principals have remarked that a majority of secondary schools have long developed life planning education and hence have used the Grant for other purposes. In this connection, will the Government inform this Council:
(1) of the latest progress of disbursement of the Grant;
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(2) whether it has established a system to monitor the use of the Grant by schools; if it has, of the details; if not, the reasons for that; and
(3) whether it has set performance indicators for the Grant to ensure the proper use of public money; if it has, of the details; if not, the reasons for that?
SECRETARY FOR EDUCATION (in Cantonese): President, regarding the three parts of the question raised by Dr CHIANG Lai-wan, I now reply one by one:
(1) Starting from the 2014-2015 school year (that is, September last year), the Education Bureau has provided public sector schools and Direct Subsidy Scheme schools operating classes at senior secondary levels with a recurrent Career and Life Planning Grant (the Grant) to strengthen life planning education for secondary students. The Grant, which is about $500,000 for the current school year, will be revised annually in line with the adjustment to the mid-point salary of the Graduate Master pay scale.
(2) The primary aim of providing the Grant for schools is to enhance the capacity of the teaching team responsible for life planning education so as to take forward comprehensive life planning education and career guidance service. Apart from issuing a circular and a guide to inform schools of the purpose and detailed arrangements of the Grant, the Education Bureau has organized three briefing sessions in mid-2014 to introduce to principals and teachers the use of the Grant. Key measures for monitoring the use of the Grant include:
(i) Schools should formulate a work plan on the use of the Grant. The work plan should be endorsed by respective Incorporated Management Committee/School Management Committee and uploaded onto the school's homepage to enhance transparency;
(ii) Schools should keep a separate ledger account for the Grant to record all the incomes and expenditures chargeable to the Grant, prepare and submit an annual audited accounts to the Education Bureau in accordance with the prescribed format and timeline to ensure the Grant is deployed for the intended purposes;
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(iii) Schools may include life planning education as one of the major concerns in the School Development Plan, and monitor and evaluate its implementation (including the use of the Grant) through the Annual School Plan and School Report. These documents which serve the development needs of the schools also facilitate professional discourse during consultancy visits by the Education Bureau; and
(iv) Although only four months have elapsed since the commencement of the 2014-2015 school year, the Education Bureau has been providing support to schools on life planning education services and monitoring schools on how to use the Grant through school visits.
During this period (the first four months), the Education Bureau has visited 102 schools. Based on our observation, the majority of schools have used the Grant properly, for example, near 90% of the schools have used 80% or more of the Grant on employment of staff, organization of life planning activities and enhancement of school-based career guidance services. The situation is clearly different from the results of the survey conducted by the Hong Kong Association of Careers Masters and Guidance Masters, as mentioned by the Honourable Member, between July and September last year, which is the period before ― and I stress that it is before ― schools take forward their plans. The Education Bureau will continue to provide support for schools and teachers. Should irregularities in using the grant be identified, advice on improvements will be given and follow up actions will be taken immediately. Given the individual context of schools and where circumstances allow, schools may use the remaining Grant to enrich school-based career guidance services such as financing needy students' participation in career exploration; engaging experts, the business sector and alumni in sharing with students; and organizing different career guidance services to cater for the needs of their students.
(3) Life planning is an ongoing and life-long process for personal fulfilment, with different foci at different stages of one's life. At the stage of schooling, life planning education plays a significant role in fostering students' self-understanding, personal planning, goal 4772 LEGISLATIVE COUNCIL ─ 21 January 2015
setting, reflective thinking and articulation to progression pathways. Effective life planning education and career guidance should be integrated with the school's curriculum, through which students are equipped with the knowledge, skills and attitude ― with particular emphasis on attitude ― relating to further study, career and self-management to enable them to make wise choices in accordance with their interests, abilities and orientations as well as connecting their career aspirations with whole-person development and life-long learning.
Schools in Hong Kong are at different stages of development in implementing life planning education. In this connection, schools are advised to set objectives, formulate strategies and build up monitoring/evaluation mechanism for continuous development, having regard to school-based needs. The Education Bureau has also provided school personnel with some suggested items that they may look for when evaluating the work plan on life planning education and career guidance. Some of these suggested items include: Can the activities/programmes really facilitate students' self-understanding and match their abilities, interests as well as career aspirations and formulation of individualized plan; are multifarious kinds of career guidance related activities arranged to suit diversified needs of students; to address the relevant objectives from different dimensions; and to consider whether different groups are taken care of.
The Education Bureau will continue to enhance support services for schools, including identifying professional development schools to share good practices; increasing the number of teacher training places from 80 to 240 per year; collaborating with business sector, tertiary institutions and the Qualifications Framework Secretariat in organizing talks, thematic seminars, workshops and visits for principals, teachers and parents; revamping the career guidance website to provide teachers, students and parents with more life planning information; and conducting different activities for parents to enhance their understanding about the importance of life planning education. To keep students abreast of different industries and professions as well as the related articulation pathways, the Education Bureau will also expand the Business-School Partnership LEGISLATIVE COUNCIL ─ 21 January 2015 4773
Programme to provide students with more career exploration opportunities and work related activities so that they can get prepared for work and life in the society. Through the above arrangements, we hope to achieve the goal of nurturing talent by promoting life planning for a bright future.
DR CHIANG LAI-WAN (in Cantonese): President, just now the Secretary has explained the follow-up actions taken and observations made on schools in relation to the life planning education. However, as to part (3) of my question, that is, "whether it has set performance indicators for the Grant", the Secretary has only replied that they have provided certain suggested items to schools.
My supplementary question is that, if we want to assess whether or not the programme is successful, we must have clear performance indicators. For example, before the programme starts, eight out of 10 students may not know what suits them best and what they would like to develop, or what they want to study and what career they want to pursue in future. However, if a survey is to be conducted in three years' time, perhaps more than 60% of the students will be clear about their future direction. This is how performance indicators work. Secretary, can you set performance indicators, so that an in-depth survey can be conducted on schools receiving the Grant from the Government to enable us to know whether more funding should be allocated to such programme, or to study how additional guidance can be provided to schools.
SECRETARY FOR EDUCATION (in Cantonese): I thank the Honourable Member for her supplementary question. This is an important topic. Just now Members have noted that I have mentioned several points. First, the entire life planning education should form an essential component of the school system for sustainable development. Therefore, we require that it should be included in the School Development Plan. This is the major premise. Apart from this, as to the interest of individual students, teachers may make use of professional services to conduct an aptitude research on students with the aid of psychological test tools. This is also part of the programme and is done in a comprehensive manner. As I have mentioned in part (3) of my reply, schools in Hong Kong are at different stages of development in implementing life planning education. Therefore, we will make more detailed suggestions and assessments on the operation of individual schools.
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The supplementary question that the Honourable Member has just asked is a good one. I believe schools will move in this direction in order to understand the situation before, during and after the programme. We should bear in mind that schools have just started to implement service consolidation and it takes some time to build a development ladder. The approach is that the first year will focus on individuals; the second year will be on the entire group; and in the third year, the development effectiveness may be tracked, and even the situation of students after graduation may be taken as one of the considerations. The business-school partnership can also serve such needs. For instance, if students can establish stronger contacts with schools after they have joined individual companies to work, we can learn more about the influence to which they are subject. This can help strengthen the arrangements for conducting activities in future.
MR FRANKIE YICK (in Cantonese): Secretary, you have cited some survey statistics in your main reply which suggest that the question raised by Dr CHIANG is not necessarily correct. But in my view, there is no smoke without fire. It seems that it is not just a problem pertaining to life planning. I have chatted with several headmasters of schools lately and was told that the same problem exist in other areas relating to learning experience. Where does the problem lie? It is not that schools do not want to attach importance to life planning, but that the curriculum is too heavy for schools belonging to certain bands and their students have to catch up with the curriculum. Failing that, all plans are meaningless since the students have failed their studies. Therefore, schools have no alternative but to force their students to study. I also note that each year, the Hong Kong Examinations and Assessment Authority will send the DSE papers to the United Kingdom (UK) for comparison and assessment. As far as I know, usually the result shows that Hong Kong's examination papers are of a higher standard of difficulty. May I ask the Secretary if this is the major cause of the problem? Why should we set such an abstruse curriculum, making it hard for students to catch up with the learning and forcing them to give up other things?
SECRETARY FOR EDUCATION (in Cantonese): President, I thank the Honourable Member for his supplementary question.
This is important, and that is why the second phase of the New Academic Structure Medium-term Review is under way. In the first phase, we have made adjustments to the stress of individual courses or student activities. We have LEGISLATIVE COUNCIL ─ 21 January 2015 4775 also made adjustments to the school-based assessments. This is part of the direction we are heading for.
The second point I wish to highlight is that different school subjects should be student-oriented. Just now the Honourable Member mentioned the practice of sending examination results to the UK for comparison and assessment. I have to point out one thing and that is, individual countries have also made adjustments having regard to the flabby curricula in the past. This is a point I have to make.
Therefore, we need to understand that while a curriculum needs not to be too difficult, it has to attain an appropriate standard in order to be on a par with world-class standards. This is our positioning.
MR MA FUNG-KWOK (in Cantonese): President, there are reports that different sorts of life planning activities and training courses proliferate in the wake of the announcement of this newly introduced subsidy policy. Courses on cosmetology, make-up and the hotel industry, and so on, beckon to schools, hoping that they will use the grants to buy their service. However, I note that tuition fees for these courses are not inexpensive, though they vary in quality. This has made it difficult for some schools to make their choice.
I wish to ask the Government whether it will provide proper information to facilitate schools to choose from these services, so as to ensure that the Grant is well spent?
SECRETARY FOR EDUCATION (in Cantonese): President, I thank the Honourable Member for his supplementary question. This is a very good hint to us. You can see that, back in November last year, we have invited a total of more than 500 schools and 100 commercial and industrial partner organizations to gather together to get to know and communicate with one another, to define the positioning of life planning education as a whole, and to provide more opportunities for collaboration.
On the second part, individual community organizations have provided different views and suggestions on new arrangements to schools. The focus of the schools is first on fostering students' self-understanding, then on enhancing the capacity, understanding and professionalism of teachers. This is the second part.
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On the third part, more than 170 commerce and industry and professional organizations, including the Hong Kong Institution of Engineers, have been working with us. It is not a matter of choice between courses, it is part of the overall development of students. Therefore, it is not about attending or finishing classes, it is about providing different exposures for students. As it has just been a few months since the launch of the new measures, it is necessary to gain experience for the building up of a new culture. In fact, we have started work in the first half of the first year. We will closely monitor the holistic development. Also, schools and the academic circle will often meet and exchange views in order to improve the entire process.
MR IP KIN-YUEN (in Cantonese): President, I express support for the efforts made in the context of life planning. The Secretary's reply this time clearly reveals the overall intent of the funding, that is to say, the provision of $500,000 is benchmarked to Graduate Master's mid-point salary and the rate will be subject to an annual adjustment. In other words, one of the important tasks of the Grant is to create jobs. Yet, the Government adopts the cash grant approach to deal with that. Apparently, the cash grant approach is more flexible, but such flexibility also enables schools to handle the Grant according to their own priorities, with the result that the Grant may not necessarily be used for life planning purpose. Moreover, it can be seen from the Secretary's reply that because of the Grant, schools are required by the authorities to do a lot of extra work on reporting, such as maintaining records on their webpage, and this has resulted in additional workload for them.
The supplementary question I would like to raise is whether the authorities have considered deploying the Grant in the form of job creation instead of a cash grant?
SECRETARY FOR EDUCATION (in Cantonese): President, I thank the Honourable Member for his supplementary question. We have conducted an extensive consultation at the initial design stage, during which a lot of schools have reminded us that individual schools are at different stages of development with a varied degree of maturity. They are of the view that while the dedicated teacher is responsible for certain functions, it is in fact the class teachers who have daily contact with students. Therefore, a responsible teaching team may serve as an important facilitator to give support to other teachers. This is the overall background.
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In this premise, our goal is not to create jobs. Instead, our major concerns should be students and life planning education. This is a task which cannot be accomplished by one or two teachers. This is not a question pertaining to individual jobs. The teaching team needs to take on an important role and achieve synergy between division of labour and specialization of functions. The best way to do it is to leave more room to schools to enable them to take forward the task according to their own circumstances. Moreover, Members need not worry about schools deploying the resources for other purposes because, as I have mentioned in part (2) of the main reply, the incomes and expenditures chargeable to the Grant are handled in a separate ledger account designated for such purpose, thus rendering schools unable to deploy the resources in other areas.
DR HELENA WONG (in Cantonese): President, I understand that in part (3) of her main question, Dr CHIANG Lai-wan wishes to assess the cost-effectiveness of the scheme after so many resources have been devoted to it. However, as an education worker, I also want to ask: what are the fundamental differences between the life planning programme being implemented currently and the study and career guidance and counselling that have been in place over the years? Actually, schools have been doing this all along. What Mr IP Kin-yuen was suggesting is that schools should employ an additional staff member to be responsible for such work. As far as life planning is concerned, will the Education Bureau contemplate extending the scope of programme so that schools can do more than just providing hard knowledge, such as briefings for students on the types of jobs they can choose in future and the jobs for which they are qualified after studying certain disciplines. Turning to the issue of self-understanding which, in my view, is also important, the question is, what should we do if we are to assess the effectiveness of life planning programme? Unless we set up a tracking mechanism, for example, a secondary school student thinks that he will become a school principal, then you trace him to see if he really becomes a principal after decades …
PRESIDENT (in Cantonese): Dr WONG, please raise your supplementary question.
DR HELENA WONG (in Cantonese): … or will you trace him to record other aspects of his life? If the person is not traceable, it will be difficult to assess the effectiveness of the programme. But the question is, life is changing. So, if life 4778 LEGISLATIVE COUNCIL ─ 21 January 2015 planning only serves to help him find out what he wants is to become a cook, a school principal or a legislator …
PRESIDENT (in Cantonese): Dr WONG, please stop making remarks.
DR HELENA WONG (in Cantonese): What I mean is that life planning should comprise a more important element. Does the Secretary agree that we need to build up students' basic abilities and, apart from self-understanding, he should have an understanding of the world around him and should know when he has to change and so on. The original direction of his planning may not be the right direction for him to pursue …
PRESIDENT (in Cantonese): Dr WONG, please stop making remarks.
DR HELENA WONG (in Cantonese): I want to ask the Secretary how much portion of life planning relates to enhancement and training of students' basic abilities, and how much portion of it relates to hard knowledge and hard targets?
SECRETARY FOR EDUCATION (in Cantonese): President, I thank the Honourable Member for her question which is also very important.
I have stressed in part (3) of my main reply that "life planning education plays a significant role in fostering students' self-understanding, personal planning, goal setting, reflective thinking and articulation to progression pathways", this is the part concerning abilities. Secondly, when launching the programme, we should also take into account the importance of training individual students for the growth of personal ability, and this should form part of the major school mechanism in order to ensure full implementation of the programme. As such, the foci of the first year, as I have mentioned in part (1) of the main reply, is that schools should begin to attach importance to this and turn this into the schools' ongoing activities and plans, so that they can become part of the development plan. This is also very important. So, we should co-ordinate the matter on various fronts. If we focus too much on individual students and there is no established mechanism in schools, the programme will not be sustainable.
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Furthermore, another important point, which is also a common situation worldwide, is that, it is necessary to enhance the professional development of and management on individual teachers in a school-based context before life planning can be implemented effectively. President, for that reason, we should consider and implement life planning in a multi-pronged manner and from a number of perspectives.
PRESIDENT (in Cantonese): This Council has spent more than 22 minutes on this question. Third question.
Systems for Declaration of Interests by and Pre-appointment Integrity Checking of Top Echelon of Government
3. MR ALBERT HO (in Cantonese): President, recently, a retired government official was convicted of misconduct in the public office and sentenced to imprisonment for concealing the acceptance of advantages and loans offered by other persons while in service. His legal representative pointed out in court that since 2000, the income of that government official had fallen short of expenditure and he had been heavily in debt, with debts reaching as much as $52 million in 2010. Yet, he could still pass the relevant integrity checking and was appointed as the Chief Secretary for Administration in 2005 and a Member of the Executive Council (ExCo) in 2007. Under the relevant systems of declaration of interests, politically appointed officials and ExCo Members are not required to declare their debts and liabilities. On the other hand, the incumbent Chief Executive was also alleged to have received, both before and after his assumption of office as Chief Executive, a remuneration of nearly $50 million in total from an Australian firm for providing services to that firm, and Article 47 of the Basic Law stipulates that the Chief Executive, on assuming office, shall declare his or her assets to the Chief Justice of the Court of Final Appeal. In this connection, will the executive authorities inform this Council:
(1) whether, with a view to enhancing public confidence, the authorities will revise the relevant systems of declaration of interests by requiring politically appointed officials and ExCo Members to declare their debts, contractual obligations and assets held through 4780 LEGISLATIVE COUNCIL ─ 21 January 2015
private companies or trusts, and conduct random checks regularly to verify the declarations; if they will, of the details; if not, the reasons for that;
(2) whether the items for checking under the system of integrity checking for politically appointed officials include debts and liabilities; if they do, why the said official could pass the integrity checking and be appointed despite being heavily in debt; if not, of the reasons for that; whether it has assessed if the fact that such a debt-ridden person could pass the integrity checking and be appointed to the post in the top echelon of the Government reflects that the integrity checking system on the whole has collapsed; if they have assessed, of the outcome; if not, the reasons for that; and
(3) whether they will consider establishing a system, in addition to Article 47 of the Basic Law, requiring the Chief Executive to declare his or her assets on assuming office and make such declarations open for public monitoring; if they will, of the details; if not, the reasons for that?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, in consultation with the Chief Executive's Office, I am authorized to respond to Mr HO's question on behalf of the relevant departments as follows:
(1) The current declaration system requires politically appointed officials of all ranks to declare their investment, shareholding, direct or indirect interest in any company; their directorships, proprietorships or partnerships in any company; and, if any, the specific details concerning their participation in any private company's affairs. They are also required to declare any investment and interest held by themselves or in the name of their spouses, children or other persons, agents or companies, but are actually acquired on their account or in which they have a beneficial interest.
According to the requirements of the Code for Officials under the Political Appointment System, investments and interests declared by politically appointed officials of all ranks in the prescribed form are LEGISLATIVE COUNCIL ─ 21 January 2015 4781 made available on the websites of the respective offices/bureaux for public inspection. Such declarations will be updated annually.
The Executive Council (ExCo) has put in place a rigorous and well-established system for declaration of interests. This is to ensure that unbiased and impartial advice is offered by ExCo Members to the Chief Executive. The declaration system mainly comprises two parts. The first part is regular declarations. On first appointment and annually thereafter, each ExCo Member should declare their personal interests, including (a) remunerated directorships; (b) remunerated employments, offices, trades, profession, and so on; (c) if the interests in the above two items include provision to clients of personal services which arise out of or relate in any manner to Members' position as ExCo Members, the clients' names; (d) land and property owned by Members in or outside Hong Kong; (e) names of companies or bodies in which Members have, either themselves or with or on behalf of their spouses or children, a beneficial interest in shareholdings; and (f) membership of boards, committees or other organizations. In addition, ExCo Members should declare to the Chief Executive on a confidential basis and in greater detail their financial interests, including shareholdings (irrespective of the amount) in companies as well as futures and options contracts, held by themselves or jointly with their spouses, children or other close relatives. Under the present system, assets held through private companies or trusts are to be declared in accordance with the guidelines issued by the ExCo Secretariat. Generally speaking, substantive controlling interests in private companies or trusts are to be declared. The details of the guidelines have been uploaded to the website of the ExCo Secretariat. The second part of the declaration system is declarations in respect of individual items discussed by the ExCo. It is the personal responsibility of ExCo Members to examine whether they have an interest in any item discussed by the ExCo and declare it before the ExCo discussion.
The aforementioned systems applicable to politically appointed officials and ExCo Members for declaration of interest are very rigorous and the Administration has no plan at present to revise them. In fact, the Independent Review Committee for the Prevention and Handling of Potential Conflicts of Interests (IRC), in 4782 LEGISLATIVE COUNCIL ─ 21 January 2015
its report dated 31 May 2012, considered that the system of declaration of interests and investments concerning politically appointed officials as well as the system for declaration of interests by ExCo Members were on the whole satisfactory. The IRC also studied the issue of handling the debts and liabilities of politically appointed officials and ExCo Members. Taking into account that politically appointed officials and ExCo Members are already required to disclose their debts and liabilities to the Chief Executive on an ad hoc basis under the present system and bearing in mind privacy concerns, the IRC did not consider it necessary to include the additional requirement to declare debts and liabilities in the regular declarations of investments and interests.
(2) All politically appointed officials need to undergo extended checking. The Government will provide extended checking questionnaires to prospective candidates for nomination to become politically appointed officials. The content of this questionnaire is the same as the one being used in the Civil Service. The subject undergoing extended checking needs to fill in his/her detailed personal particulars, education background, social activities, employment history, family members, and so on. The subject also needs to nominate two referees to facilitate understanding of his/her background, work, family and other relevant situations. The Police are responsible for the checking. Input from other law-enforcement agencies will be sought as necessary. The checking comprises interviews with the subject, his/her referees and supervisors as well as record checks. The effectiveness of the extended checking system is based on trust and co-operation of all the parties involved. It is therefore essential to uphold strict confidentiality of the stipulated arrangement or case content, or the relevant detailed information of the checking system.
(3) Article 47 of the Basic Law stipulates that the Chief Executive, on assuming office, shall declare his or her assets to the Chief Justice of the Court of Final Appeal of the Hong Kong Special Administrative Region and that this declaration shall be put on record. The Chief Executive has, as required under the Basic Law, made the declaration on assuming office to the Chief Justice of the Court of Final Appeal. At present, we have no plan to establish a separate system.
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MR ALBERT HO (in Cantonese): President, Hong Kong people would be very much agitated at the Government's reply and they might even find it very shameful of the SAR Government to adopt the same attitude taken by the Secretary in giving his main reply to ignore the fact that Hong Kong may be facing the worsening problem of corruption.
President, there is only one major point in my main question: A debt-ridden person had been allowed to join the Government and appointed to posts in the top echelon with debts reaching tens of millions of dollars. The person was tasked to make all sorts of important policy decisions everyday, while the income earned had fallen short of expenditure and the acceptance of advantages had never stopped, rendering it possible for a transfer of benefits. With a former government official convicted of such misconduct now, members of the public cannot help but ask: How could it be possible for the official to pass the integrity checking at the outset? Is there something wrong with the system? Is there any inadequacy in the declarations made? However, to everyone's surprise, the Secretary replied that there was nothing wrong with the system and everything would remain unchanged, and that declarations could be made to the Chief Executive by government officials as the Chief Executive had the authority to accept declarations made on a confidential basis. Yet, the personal conduct of the Chief Executive is also disputable since he had failed to declare the acceptance of advantages involving an amount of tens of millions of dollars and, by entering into another service contract, he had served two masters concurrently.
President, my request is very simple. I wonder how the Government can face the people of Hong Kong with such a reply and whether the Secretary has any sense of shame. I now let him reply again since Hong Kong people would not accept a reply like this. I have to voice my strong protest.
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, my main reply seeks mainly to provide, in response to Mr HO's question, specific information of the several systems in place for declaration of interests. Such declaration systems are underpinned by the existing Prevention of Bribery Ordinance but in certain aspects, they are also specific declaration systems extended from the Code for Officials under the Political Appointment System. Therefore, what I mentioned in the main reply are mainly institutional arrangements for declaration of interests. As for the individual case 4784 LEGISLATIVE COUNCIL ─ 21 January 2015 or incident which Mr HO had referred to, in particular the case mentioned in the main question, I would not comment on the case lest the judicial proceeding underway may be prejudiced.
I have also stated in the main reply that debts and liabilities are also items to be declared but they are not covered by the ExCo arrangements for regular declarations. Instead, examination in respect of each individual agenda item would be made at each ExCo meeting to identify if there is any possible conflict of interest in any item discussed and it is the personal responsibility of ExCo Members to examine whether their debts and liabilities, and so on, would constitute an interest which they have to declare. Views of the ExCo Secretariat may be sought if there is any doubt or query and the Department of Justice may also be consulted if necessary. The declarations made will be submitted to the Chief Executive, who will then assess whether formal declarations are required, whether the ExCo Members concerned should be asked to withdraw from the discussion of the items in question, whether the relevant ExCo documents should be withheld from them, and so on. Thus, certain institutional arrangements have already been in place under the current system.
As I have already stated in the main reply, the above system has to operate in collaboration with ExCo Members' fulfilment of their personal obligation to make declarations. Therefore, it is necessary to have such a collaboration for the system to work well.
MR ALBERT HO (in Cantonese): Can it be said that the system on the whole has collapsed?
PRESIDENT (in Cantonese): Mr HO, from what I have heard just now, the Secretary has already answered your supplementary question.
MISS CHAN YUEN-HAN (in Cantonese): President, I think the situation now is truly worrying to Hong Kong people since a number of public officers have got into trouble one after another since the reunification, including even the head of the Independent Commission Against Corruption. Under such circumstances, I do not think Hong Kong people would find the reply given by the Secretary today satisfactory because an undertaking has not been given to conduct a review. I LEGISLATIVE COUNCIL ─ 21 January 2015 4785 agree that the judicial proceeding to which the case concerning the former senior official relates is still in process but that does not necessarily justify the Government's tardiness in dealing with the matter. A review of the current system has to be conducted in the light of the fact that he was appointed back then despite his heavy debts of over $50 million, an amount far not proportionate to his income.
What I am most dissatisfied with the Secretary's main reply is the lack of intention to conduct a review, not even on the views expressed by the IRC as mentioned on declaration of debts and I must say that there is something terribly wrong with this approach. Hong Kong people are gravely concerned about the case since Hong Kong has earned the reputation of being one of the most corruption-free cities in the world or in Asia over these years and thus, the Administration should examine after the incident whether there is any loophole in the existing system and consider introducing the necessary amendments and supplements accordingly. The reply given by the Secretary just now is really a bit disappointing to me …
PRESIDENT (in Cantonese): Miss CHAN, please state your supplementary question.
MISS CHAN YUEN-HAN (in Cantonese): Therefore I would like to ask the Secretary if he has decided to refrain from taking action simply because the judicial proceeding to which the case relates is still in process? I think the Secretary should make it clear to Hong Kong people: Whether the Government would conclude the lesson of the case and introduce certain amendments to the system? I hope the Secretary can give us a concrete answer.
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, we can always examine the need of establishing a system and this has also been expressed by the Chief Secretary for Administration when answering a relevant question in this Council a few months ago.
In my reply to the supplementary question raised by Mr Albert HO just now, I have especially emphasized that as regards debts and liabilities, the current system for declaration of interests requires each ExCo Member to examine 4786 LEGISLATIVE COUNCIL ─ 21 January 2015 rigorously at each ExCo meeting to ascertain if their debts and liabilities would constitute any potential or actual conflict of interest in any item discussed and make a declaration accordingly. If ExCo Members fail to disclose their debts and liabilities on an ad hoc basis under the system in respect of individual items under deliberation, they should of course be held responsible politically and even be held legally liable.
As we can see from past cases cited by Miss CHAN Yuen-han just now, ExCo Members as public officers would be subject to the regulation of the common law offence of misconduct in public office and the legislative provisions under the Prevention of Bribery Ordinance, and be held legally liable should any irregularity arise in the making of declarations. Such being the case, it is believed that as far as the existing legal system and penalty provisions are concerned, a balance of different needs has already been achieved under the current system.
Let me emphasize once again that debts and liabilities are also items to be declared but declarations are made on an ad hoc basis in respect of each individual agenda item at each ExCo meeting.
DR FERNANDO CHEUNG (in Cantonese): President, it has been brought to light that Donald TSANG had, towards the end of his term of office, engaged in various corruptive activities and subsequently, the Honourable Mr Andrew LI had been appointed as Chairman of the IRC to review the regulatory framework in place to prevent any conflict of interest caused by the Chief Executive and other public officers. After review, the IRC had put forward quite a number of recommendations including the introduction of amendments to Section 8 of the Prevention of Bribery Ordinance to extend its scope to cover the Chief Executive as well. However, after LEUNG Chun-ying had assumed office, amendments have never been introduced to give effect to the IRC's proposal. In other words, nothing whatsoever has been done in the statutory regulatory regime to respond to the relevant request or recommendation put forward by the IRC.
I would like to ask the Government when will legislative amendments as recommended by the Honourable Mr Andrew LI be introduced, to Section 8 of the Prevention of Bribery Ordinance in particular?
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SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, over half of the tens of recommendations put forward by the IRC chaired by the Honourable Mr Andrew LI have already been implemented. As for the recommendation mentioned specifically by Dr Fernando CHEUNG just now on the Prevention of Bribery Ordinance, including whether and how Section 8 of the Ordinance should be extended to cover the Chief Executive, colleagues at the Department of Justice and the Administration Wing have been following up the issue.
Nevertheless, the recommendation involves some complicated issues concerning constitutional affairs and the operations of our legal system. In particular, since the Chief Executive is the head of the SAR Government and the HKSAR, whether the recommendation would lead to problems in constitutional arrangements? The matter is being handled thoroughly and prudently by the departments concerned, which would strive to complete the study as soon as possible before a consultation is conducted with Members of the Legislative Council.
PRESIDENT (in Cantonese): Dr CHEUNG, which part of your supplementary question has not been answered?
DR FERNANDO CHEUNG (in Cantonese): I have asked for the time frame for introducing amendments but the Secretary has not answered.
PRESIDENT (in Cantonese): The Secretary has already briefed Members on their handling of the issues concerned.
MR JAMES TIEN (in Cantonese): President, as a former ExCo Member, I think the situation before may be different from what we have now. Many public officers or ExCo Members in the past might focus only on the interests they have when making declarations, such as land ownership or company directorships. I have also noticed that the financial interests to be declared in greater detail as stated in the Government's main reply actually refer to what an ExCo Member or a senior public officer possesses but there is no mention of debts. Yet, in his 4788 LEGISLATIVE COUNCIL ─ 21 January 2015 replies to the supplementary questions raised by a few Members, the Secretary has said that during discussion of individual item, each ExCo Member has to examine if his or her interests or debts would have an actual interest in the item discussed.
I would like to ask the Secretary should ExCo Members be required to disclose the overall situation of their indebtedness also when they are asked to declare their interests? It is true that their mindset would change if they are heavily in debt, with debts reaching as much as tens of millions dollars and as everybody else, I can hardly imagine that the former Chief Secretary for Administration in question, who has served in government departments responsible for monetary and financial affairs, would perform so badly in managing his personal finance. This is something that no one would believe and can possibly imagine. Therefore, I would like to ask the Government whether a review would be conducted having regard to the case to require all ExCo Members (including Bureau Secretaries) to declare comprehensively, on assuming office, the overall situation of their indebtedness instead of disclosing their debts on an ad hoc basis in respect of individual items discussed?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, the Government would of course take heed of the views expressed by Mr James TIEN as well as public views on other similar cases. As I have pointed out in my clarification, a loan should be regarded as a debt though it is normally referred to as "loan". Loan is also included in the definition of "advantage" under the Prevention of Bribery Ordinance and thus, public officers taking out a loan would be subject to the regulation of the Ordinance. This is the first point I would like to make.
Secondly, with regard to declarations made by ExCo Members, Mr TIEN who as a former ExCo Member should know very well that they are required to examine rigorously at each ExCo meeting to ascertain if declarations would have to be made in respect of individual item discussed. As for Mr TIEN's suggestion to examine the need to require ExCo Members to, on assuming office, make a declaration of the overall situation, the idea would be conveyed to the department concerned for consideration and discussion on the approach to be adopted in handling the matter.
LEGISLATIVE COUNCIL ─ 21 January 2015 4789
MS CYD HO (in Cantonese): President, the existing mechanism cannot effectively prevent corruption at all, especially the problem of indebtedness. Even an ordinary police officer would have his promotion prospect affected by his credit records and relevant figures would be released every year by the Security Bureau and the Commissioner of Police to report on the number of police officers who are in debt and the amounts of debts involved, since these are issues of concern to the public. However, ExCo Members and high-ranking officials are surprisingly not required to disclose the situation of their indebtedness. I think this is simply ridiculous.
President, we remain gravely doubtful of the declaration procedure of giving the Chief Executive the role as gatekeeper for anti-corruption measures. Bureau Secretaries trying to conceal their actual interests behind companies registered overseas are required to make declarations to the Chief Executive only but the Chief Executive himself is also suspected of accepting advantages of $50 million and the general public have no trust in him at all. I would like to ask the Secretary if he is aware of the public perception that there are more and more high-ranking officials engaging in corruptive activities? Are you duty-bound to remove the doubts of the public? Do you dare to tell the public here today that the existing anti-corruption measures are adequate? Do you dare say to the public that they should be happy about the anti-corruption measures in place?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, the supplementary question raised by Ms Cyd HO consists of two parts and the first part is about the taking out of loans by civil servants. As I have pointed out just now, loan is also included in the definition of "advantage" under the Prevention of Bribery Ordinance and Acceptance of Advantages (Chief Executive's Permission) Notice would be issued by the Chief Executive under the Ordinance to specify how such issues as the taking out of loans should be handled. A detailed code has also been drawn up for civil servants to set out the names of lending institutions, how such loans should be taken out, and so on. Thus, stringent requirements have already been laid down in this regard and all civil servants or politically appointed officials have to abide by the rules.
I am asked in the second part of Ms Cyd HO's supplementary question to make some comments but I do not consider it appropriate to make such comments and express such views in a reply given to questions raised by Members.
4790 LEGISLATIVE COUNCIL ─ 21 January 2015
PRESIDENT (in Cantonese): We have spent almost 24 minutes on this question. Fourth question.
Report on Recent Community and Political Situation in Hong Kong
4. DR KWOK KA-KI (in Cantonese): President, on the 6th of this month, the Government published the Report on the Recent Community and Political Situation in Hong Kong (the Report). Paragraph 1.10 of the Report mentions that the Government decided to submit, outside the "Five-step Process" of constitutional development, the Report to the Hong Kong and Macao Affairs Office of the State Council, to reflect objectively and truthfully events related to constitutional development from 31 August to 15 December last year as well as the opinions and aspirations expressed by different sectors of the community. Paragraph 1.14, however, mentions that the Report is a collection(1) of materials in the public domain, and the authorities have not undertaken any independent investigation to verify the accuracy of such materials. Some members of the public have criticized that the materials collected(2) in the Report are incomprehensive and the summary of certain events lacks objectivity. In this connection, will the Government inform this Council:
(1) of the criteria based on which the authorities selected materials in the public domain for inclusion in the Report, and the reasons why some important events of public concern were omitted from the Report, such as the removal of Mr James TIEN from the Twelfth National Committee of the Chinese People's Political Consultative Conference as he had called for the Chief Executive to consider resignation;
(2) whether the authorities had, in preparing the summary of important events in Chapter Two of the Report, made reference to media reports and public comments on the events, particularly about the incident of the Lung Wo Road confrontations mentioned in paragraph 2.25; if so, of the details; as the authorities have indicated that, in collecting(3) the materials, they did not undertake
(1) In the Chinese version, the term is "蒐集". Mr KWOK pronounced "蒐" as "kwai3" instead of the correct pronunciation of "sau1".
(2) As above.
(3) As above. LEGISLATIVE COUNCIL ─ 21 January 2015 4791
any independent investigation to verify the accuracy of such materials, how the authorities ensure the authenticity of the materials, and that the Report can truthfully reflect public sentiment; and
(3) whether it was on the basis of specific justifications and analysis outcome that the authorities made the concluding remarks in paragraph 4.01 of the Report (that is, it is the common aspiration of the Central Authorities, the HKSAR Government, and the people of Hong Kong to implement universal suffrage for the Chief Executive election in 2017 in Hong Kong as scheduled and strictly in accordance with the Basic Law and the relevant Interpretation and Decisions of the Standing Committee of the National People's Congress); if so, of the details; if not, whether the above concluding remarks merely reflect the stance of the Government?
PRESIDENT (in Cantonese): Dr KWOK, you mentioned "蒐 集" three times in your main question. The word "蒐" should be pronounced as "sau1" instead of "kwai3".
DR KWOK KA-KI (in Cantonese): Yes, President.
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, Hong Kong is a pluralistic society. Constitutional development has been an extremely controversial issue for years, and different sectors of the community also hold different stances and views on the issue.
On 31 August 2014, the Standing Committee of the National People's Congress (NPCSC) adopted the Decision of the Standing Committee of the National People's Congress on Issues Relating to the Selection of the Chief Executive of the Hong Kong Special Administrative Region by Universal Suffrage and on the Method for Forming the Legislative Council of the Hong Kong Special Administrative Region in the Year 2016 (Decision), formally determining that universal suffrage for the Chief Executive election through "one person, one vote" could be implemented starting from 2017. However, there are still quite divergent opinions in different sectors of the community regarding the contents of the Decision and how to implement universal suffrage for the Chief Executive election in accordance with the relevant provisions of the Basic Law.
4792 LEGISLATIVE COUNCIL ─ 21 January 2015
The unlawful occupy movement which took place between the end of September and 15 December 2014 aroused widespread concern in the Hong Kong community. During this period, there were suggestions that the HKSAR Government could reflect to the Central Authorities the opinions of different sectors of the community on the Decision and on constitutional development since the NPCSC adopted the Decision in the end of August 2014. After carefully considering the constitutional arrangements and the situation then in the HKSAR, the HKSAR Government decided to, outside the "Five-step Process" of constitutional development, submit the Report on the Recent Community and Political Situation in Hong Kong (the Report) to the Hong Kong and Macao Affairs Office of the State Council by the Task Force on Constitutional Development, to reflect objectively and truthfully events in Hong Kong related to constitutional development from 31 August to 15 December last year, and the opinions and aspirations expressed by different sectors of the community. The Report was submitted on 6 January 2015, and was published on the same day.
Our reply to the specific questions raised by Dr KWOK is as follows:
(1) The Report is based on events, statements, and opinion polls related to constitutional development from 31 August to 15 December last year obtained from public sources by the Government, and reflects objectively and truthfully the opinions and aspirations expressed by different sectors of the community. The Report includes: (1) events related to constitutional development during the report period; (2) relevant statements made by various groups; and (3) relevant opinion polls conducted by various organizations. The Report has objectively and truthfully reflected the different opinions and aspirations toward constitutional development expressed by different sectors of the community.
(2) As mentioned in part (1) of the reply, the Report is compiled based on events, statements, and opinion polls related to constitutional development that the Government obtained from public sources, and has covered as far as possible different kinds of information collected by the Government, including the relevant reports from the media. As the Report is a collection of materials in the public domain, the Government did not conduct separately any independent investigation to verify the accuracy of such materials. As we have stated explicitly in Chapter One of the Report, in relation to the LEGISLATIVE COUNCIL ─ 21 January 2015 4793
statements made by various groups and relevant opinion polls included in the Annexes and Appendices to the Report, the version published by the relevant organizations shall prevail in case of any doubt or discrepancy.
(3) In addition, Chapter One of the Report has clearly stated that the HKSAR Government acknowledges that Hong Kong is a pluralistic society, and that different groups and individuals have different opinions toward constitutional development. After the Decision was adopted, there were still quite divergent opinions in the society regarding how to implement universal suffrage for the Chief Executive election in accordance with the relevant provisions of the Basic Law. We understand that all along, constitutional development has been an extremely controversial issue. In fact, the Report has endeavoured to reflect truthfully the different opinions and aspirations related to constitutional development expressed by different sectors, different political parties and individuals of the Hong Kong community from 31 August to 15 December last year, and has set out in the over a thousand pages of Appendices the relevant statements, results of opinion polls, and so on, collected by the Government. The information has also been uploaded in full to the website for public inspection. From the information set out in the Report, we can see that the issue of constitutional development remains controversial, and opinions remain divergent within the community. The situation up till now remains the same.
DR KWOK KA-KI (in Cantonese): President, since the NPCSC announced on 31 August the decision to "shut the door", society has become very divergent and torn apart. The Government turned a blind eye to the Umbrella Movement which lasted 79 days. Upon meeting the students, the Chief Secretary and the Secretary made two undertakings on 21 October, including the establishment of a public opinion platform to explore how the 31 August Decision could be amended, and the compilation of a public sentiment report. Upon the release of the Report, some people have criticized it as worse than assignments done by the primary or secondary students. President, the Government said the Report contained newspaper clippings it obtained, but it did not include the important report on the removal of Mr James TIEN from the CPPCC for asking in public 4794 LEGISLATIVE COUNCIL ─ 21 January 2015 the Chief Executive to consider resignation. Furthermore, in December, NPCSC member Rita FAN openly criticized the Government for failing to administer well to enable the people to live in harmony. Her words were also missing in the Report.
After the release of the Report, we can but again give a failing mark to the ability of the SAR Government. President, even WiseNews will not selectively include only those reports which are favourable to itself. What we find most regrettable is that the Report concludes that the majority of the Hong Kong public supports upholding the 31 August Decision …
PRESIDENT (in Cantonese): Dr KWOK, please raise your supplementary question.
DR KWOK KA-KI (in Cantonese): This move of the Government disappoints society very much. President, I would like to ask the Secretary: Has the Government considered making a public apology for releasing this failing Report? Or, would it continue to act like these three monkeys, failing to see what it should, hear what it should and say what it should?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): Having heard Dr KWOK asked this supplementary question in such an emotional tone, I have to doubt if he has gone through the Report. In the appendices to the Report, over 100 pages contained numerous aspirations made by students and some protesters in the occupied areas from 31 August to 15 December, including the demand for the Chief Executive to step down, the demand for us to resign and the demand for the revocation of the Decision by the NPCSC. Upon the release of the Report, the media has also listed the number of times the comments of some people as contained in the appendices of the Report had appeared. Thus, I definitely cannot agree with what Dr KWOK said, as he accused us of including only reports which are favourable to us. This is the first point.
Second, in paragraph 1.12 of the Report, we stated that we would try our best to obtain from public sources, in particular media reports, events pertaining to constitutional development, statements and opinion polls. Of course, there LEGISLATIVE COUNCIL ─ 21 January 2015 4795 may be omissions at times. Therefore, we said in paragraph 1.12 that we cannot guarantee that opinions ever expressed by each and every group or person are included.
Dr KWOK Ka-ki mentioned earlier that comments made by Mr James TIEN were not included in the Report. In this connection, I have noticed that in a subsequent interview by the media, Mr TIEN gave a very decent reply. Mr TIEN himself should explain the reason for asking the Chief Executive to resign, but I believe it has not only to do with constitutional development. Just now, Dr KWOK Ka-ki also mentioned a similar situation with Mrs FAN. In my opinion, her comments might not be purely on the constitutional development of the SAR. Mrs FAN could have been talking about governance then. Anyway, in this Report which has more than 1 000 pages, colleagues of the Constitutional and Mainland Affairs Bureau have done their utmost to obtain the relevant information in a very professional, objective and truthful manner. Should there be omission of opinions ever publicly expressed by any individual or group, we ask for your excuse.
DR KWOK KA-KI (in Cantonese): President, I have to clarify that we have gone through the entire Report. As a result, we arrive at such an observation. President, in my main question, I clearly asked why such analysis and conclusion had been arrived at, but the Secretary did not reply. Nonetheless, I do not intend to ask this.
Earlier, I asked in my supplementary question if the Secretary would apologize to the public for compiling such a bad report. Could he please answer "yes" or "no"?
PRESIDENT (in Cantonese): Dr KWOK, the Secretary has just replied. You criticized the Report as bad but the Secretary did not agree. Thus, he has in fact replied.
MR CHAN HAN-PAN (in Cantonese): President, apart from the Report, in the dialogue with the Hong Kong Federation of Students, the Government also mentioned the establishment of a platform with the participation of all sides to 4796 LEGISLATIVE COUNCIL ─ 21 January 2015 discuss political reform. There have been voices in society for all stakeholders to take an active part in the discussion on political reform in order to arrive at a consensus.
I would like to ask the authorities, with regard to the establishment of the platform, what latest ideas and progress are there? The pan-democratic lawmakers have clearly expressed that they will boycott all discussion that are based on the 31 August Decision. So, even if the platform is established, they may not participate. In that case, would it be meaningless to establish the platform?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): Thank you, Mr CHAN Han-pan. The Report has included the four specific responses made by the Chief Secretary for Administration on 21 October. Among them, the Chief Secretary said she noticed there were calls in society for the establishment of a platform with the participation of all sides to discuss political reform. We also consider it worthwhile for society to further explore the feasibility and advantage of establishing this platform.
Furthermore, the Chief Secretary also expressed that if this platform was established, it should discuss constitutional development beyond 2017. As Members are aware, of the four specific responses, we said that universal suffrage for the selection of the Chief Executive in 2017 was not the "endgame" model. This means that after the universal suffrage for the Chief Executive in 2017, there could still be room for further optimization and development. This is what we conceived then.
We have now launched the second round of consultation on the universal suffrage of the Chief Executive in 2017. We hope that all sectors of society will take part in it to tackle first the method of selection of the Chief Executive by universal suffrage.
MR JAMES TO (in Cantonese): President, in order to consider whether the Report is comprehensive and accurate, we have to look at the situation after the announcement by the NPCSC of the 31 August Decision. It is very obvious that LEGISLATIVE COUNCIL ─ 21 January 2015 4797 the occupation incident in Hong Kong is pertinent to the 31 August Decision. The Government seemed to have deliberately omitted certain articles which analysed in detail whether the 31 August Decision was unconstitutional.
Is it the intention of the Government to make up the Report to deceive the Central Authorities? Let me cite an example. Mr LIU Mengxiong wrote several articles which he made public to analyse in detail from the constitutional perspective pointing out that the 31 August Decision was unconstitutional, but all had been left out. Is the Government doing this to tell the Central Authorities that it has arrived at the conclusion that Hong Kong people are all in support of pushing ahead with the political reform in accordance with the 31 August Decision? Is the Government deceiving the Central Authorities deliberately?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): First, I believe the Central Authorities will not be deceived by the SAR Government. If I remember correctly, we discussed the preparation for the Report at the meeting of the Panel on Constitutional Affairs held in December. I cannot remember if Mr James TO was present ― he seemed not to be ― but a Member of his party told me that the Central Authorities actually had a good knowledge of the situation in Hong Kong and fully understood every aspect. The Member asked why we still had to compile the Report. In other words, the Central Authorities very much understand and are very clear of Hong Kong's situation. Therefore, I do not see eye to eye with Mr James TO on his earlier comments of whether the Central Authorities would be deceived.
Second, the Report has set out various opinion polls which reflected the different views held by the different sectors of the Hong Kong society towards the 31 August Decision of the NPCSC. Let me cite an example. The Television Broadcast Limited commissioned the Public Governance Programme of the Lingnan University to conduct an opinion poll soon after the announcement of the 31 August Decision by the NPCSC. The findings showed that 33.8% of the respondents accepted the Decision, 35.4% rejected; 45% of the people considered that the Legislative Council should pass the Decision of the NPCSC while 40.7% considered otherwise. The inclusion of this opinion poll in the Report is to show that the Hong Kong public holds very different views.
4798 LEGISLATIVE COUNCIL ─ 21 January 2015
I mentioned in my main reply that society is very divergent. The Report has included the above example as reference for the Hong Kong and Macao Affairs Office of the State Council. I want to say that apart from this example, many opposing views to the 31 August Decision have also been included in the 1 000-odd pages of the Report. As I said earlier, it has been pointed out in the Report that every day, many people in society published numerous commentaries, and it is difficult for us to include each and every one. If there really are omissions, we wish those concerned will excuse us.
MR JAMES TO (in Cantonese): Do you know what is meant by being irrelevant? My supplementary question was about why the only article which made the most detailed analysis from the constitutional perspective had been left out. I was not talking about opinion polls and views.
PRESIDENT (in Cantonese): Mr TO, you have repeated your supplementary question, please sit down. Secretary, do you have anything to add?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): President, I believe the Central Authorities obtain information from different avenues and have a good knowledge of the Hong Kong situation. Based on my experience accumulated over the years, I know the Central Authorities often watch the live broadcast of news bulletin of our television stations and also read all newspapers. Thus, in this regard, I believe the relevant departments of the Central Authorities have paid attention to the relevant articles.
(Mr James TO rose with the intention of contending with the Secretary)
PRESIDENT (in Cantonese): Mr TO, this is not a debate.
MR JAMES TO (in Cantonese): … why had the article featuring the most detailed analysis not been included? Had it been left out in the Report because the Central Authorities had read it already?
LEGISLATIVE COUNCIL ─ 21 January 2015 4799
PRESIDENT (in Cantonese): Mr TO, this is not a debate. The Secretary has replied. If you are not satisfied with the Secretary's response, please follow up through other avenues.
MR RONNY TONG (in Cantonese): We really cannot help it with this Government. When the Chief Secretary came to the Legislative Council the other day, she said the 31 August Decision was the "endgame" model, but in his earlier reply to Mr CHAN Han-pan, the Secretary seemed to imply otherwise. Nonetheless, there is one thing I am sure, and that is, I can tell from the main reply that the SAR Government regards itself as only a mouthpiece.
President, although there are less than two pages for the main reply, the Secretary said three time society is very divergent. When he mentioned it the last time, he even said "opinions remain divergent". President, since the divergence is so material, I would like to ask the Secretary: What views has the SAR Government put forward, and what it has done to narrow the divergence in society, especially the divergence between the Central Government and the pan-democratic camp?
SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS (in Cantonese): First, I have to clarify on behalf of the Chief Secretary, and hope that Mr Ronny TONG will accept. What the Chief Secretary said the other day was that the 31 August Decision, or the proposal which would be tabled in accordance with this Decision, was neither a midway proposal nor the "endgame" model. Rather, it would be a pragmatic proposal. I remember this is what she said. In fact, on that occasion, the Chief Secretary also repeatedly stressed that the regime for universal suffrage of the Chief Executive beyond 2017 could continue to be optimized.
Second, from an objective perspective, based on the opinions collected from all directions, it is crystal clear to any member of the Hong Kong public, including we as officials, that at the moment, there is substantial divergence in society regarding how to implement the selection method of the Chief Executive in 2017 in accordance with the Basic Law. The divergence is so substantial that if we are to table the motion to the Legislative Council today, I believe the chance of having it passed by two thirds of the Members of the Legislative Council is zero.
4800 LEGISLATIVE COUNCIL ─ 21 January 2015
However, the second round of consultation has just begun. We will be meeting with different organizations in succession, and we have started meeting various political parties of the Legislative Council. We wish that with these meetings, the divergence can be narrowed.
As regards the content of the consultation document, we have stated that it is our wish to develop as far as possible the largest room for the motion on amendment to Annex I which is to be based on the Basic Law and the 31 August Decision of the NPCSC, including the adoption of legal proposals or even administrative measures. We want to make the nomination procedure of the Nominating Committee open and transparent as far as possible, and enhance the accountability of the Nominating Committee. We wish that the several candidates to be nominated by the Nominating Committee can take into consideration whether the several million voters in Hong Kong can already make known their voting preference, or their voting preference for individual candidates, during the election period.
In the next few months, I wish to explain more to the people as far as I can. It is hoped that as a result of our efforts, the public and the majority of the Members of the Legislative Council will also be willing to accept the proposal put forward by the Government. We understand that it is difficult to narrow the divergence and seek consensus, but as the Chief Secretary said, the SAR Government will persist until the last moment.
PRESIDENT (in Cantonese): We have spent 23 minutes on this question.
MR RONNY TONG (in Cantonese): President, he has not replied to my supplementary question. He said the Government will continue to collect opinions and consult, but these are just the functions of a mouthpiece. I would like to ask the Secretary: What ideas would he try to put forward, and what concrete actions would he take to narrow our divergence? Is the Secretary talking on the phone? Would he please stop talking on the phone and answer my supplementary question first?
PRESIDENT (in Cantonese): Mr TONG, the Secretary has replied. We have spent almost 24 minutes on this question. Fifth question.
LEGISLATIVE COUNCIL ─ 21 January 2015 4801
Hazards of Gas Explosions at Lift Lobbies and Corridors of Buildings
5. MR CHAN HAN-PAN (in Cantonese): In November last year, a Principal Fireman died on duty and a number of firemen were injured in an explosion incident caused by gas leakage in Shek Kip Mei Estate. Some people are worried that as the majority of the lift lobbies and corridors of the residential buildings completed in recent years have adopted an enclosed design, the gas leaked into lift lobbies and corridors can hardly dissipate, and explosion may easily occur when the gas builds up to a certain level of concentration. In this connection, will the Government inform this Council:
(1) whether it has examined if the adoption of an enclosed design for the lift lobbies and corridors of residential buildings has increased the hazards of gas explosions in those places; if it has, of the details;
(2) whether the existing legislation and the codes of practice issued by the Buildings Department regulate the provision of natural ventilation in lift lobbies and corridors of residential buildings; if so, of the details; and
(3) given that the aforesaid explosion incident has caused casualties to firemen, whether the authorities will review if the existing procedures adopted and the equipment used by firemen in handling gas leakage are adequate; if they will, of the details; if not, the reasons for that?
SECRETARY FOR DEVELOPMENT (in Cantonese): Good morning, President and Honourable Members. The Buildings Ordinance (BO) provides for the planning, design and construction of buildings and their related works, regulating mainly the structural and fire safety, as well as hygiene and other aspects of buildings. Among others, the Building (Construction) Regulations and the Building (Planning) Regulations under the BO provides respectively that every building should be designed and constructed so as to provide adequate resistance to the spread of fire and smoke in case of fire and should be provided with means of escape in case of emergency. To help the industry to comply with the relevant statutory requirements, the Buildings Department (BD) has prepared the Code of Practice for Fire Safety in Buildings detailing the requirements on fire resisting structures and means of escape for buildings. One 4802 LEGISLATIVE COUNCIL ─ 21 January 2015 of the major objectives of the relevant provisions is to prevent or slow down the spread of fire and smoke to the means of escape or other floors in order to avoid posing danger to evacuees and firemen.
Mr CHAN's question touches on different policy areas and our consolidated reply to the three parts of the question is as follows:
(1) As mentioned above, the BO regulates mainly the structural and fire safety, as well as hygiene and other aspects of buildings having regard to the situation of Hong Kong. On the specific requirements of fire safety, the BD focused on the fire resisting ability and the safety of the means of escape in formulating the relevant requirements in accordance with the Building (Construction) Regulations and the Building (Planning) Regulations. The BD has not assessed the risk of gas explosion in residential buildings when formulating the relevant requirements.
(2) The Building (Planning) Regulations set out the standards for natural ventilation and windows in rooms used for habitation or as kitchens or toilets to ensure proper air circulation. According to the aforementioned Code of Practice for Fire Safety in Buildings, whether there can be windows for natural ventilation in a lift lobby and a common corridor depends on factors such as the design of means of escape and if there are adjacent buildings. When the lift lobby and common corridor of a building serve as a protected lobby for the separation of exit staircases and floors, or when there are buildings adjacent to the lobby or corridor, such area must maintain adequate fire resistance period, that is, to be capable of resisting the action of fire in a specified period of time, and there cannot be windows for natural ventilation in order to prevent the spread of fire and smoke to the exit staircase in case of fire which may pose danger to evacuees and firemen.
However, the BD, the Lands Department and the Planning Department co-issued the Joint Practice Note No. 1 in February 2001 to exempt green features meeting relevant conditions from the calculation of Gross Floor Area and/or site coverage so as to encourage developers to incorporate green features, such as widened common corridors, in private residential buildings for enhancement LEGISLATIVE COUNCIL ─ 21 January 2015 4803
of environmental effect. According to the Joint Practice Note, for widened common corridors in residential buildings, they will only be exempted from calculation of Gross Floor Area if windows are installed there for the purpose of natural ventilation.
(3) According to the Security Bureau, the Fire Services Department (FSD) has set up a dedicated investigation team to probe into the gas explosion at Shek Kip Mei Estate on 22 November 2014. The team would examine, among others, the existing operational guidelines for handling gas leakage incidents and the relevant protective equipment. Moreover, FSD has invited the Government Laboratory and the Gas Standards Office of the Electrical and Mechanical Services Department to assist in the investigation. The team has not yet completed its investigation at this moment. If the investigation report shows room for improvement in the existing guidelines or protective equipment, FSD will follow up under the established mechanism.
MR CHAN HAN-PAN (in Cantonese): President, in recent years, a number of researches pointed out that for fire escape staircase adopting an enclosed design, if any one of the smoke doors is not properly closed, the whole fire escape would be quickly filled with smoke during a fire. Moreover, many tenement buildings have trash bins placed in the staircases. When the smoke door is opened, what comes into your eyes first is trash bins and then staircase. At present, as the windows at the staircase are all closed, the bad odour in summer time has caused environmental problem, and the accumulation of gas has posed safety risks. Given that the BD has not conducted any risk assessment on gas leakage, I wish to ask the Secretary whether he will review the inadequacy in this respect?
PRESIDENT (in Cantonese): Which Secretary will reply? Secretary for Development, please reply.
SECRETARY FOR DEVELOPMENT (in Cantonese): President, as I have explained in the main reply, the enclosed design is adopted to provide resistance to the spread of fire, and it can ensure a safe means of escape in case of fire.
4804 LEGISLATIVE COUNCIL ─ 21 January 2015
The gas explosion situation mentioned earlier by Mr CHAN had not been taken into consideration when the Code was formulated years ago. In fact, this kind of incidents rarely occurred in the past. As stated in the report, we will take necessary follow-up actions in the light of the findings of the investigation report.
DR PRISCILLA LEUNG (in Cantonese): President, fireman is one of the most dangerous occupations. After the explosion incident, I have visited the scene on several occasions. While the residents of Shek Kip Mei Estate were thankful for the firemen died and injured in the incident, they were worried that similar incidents would happen again in the old neighbourhood. The residents urged me to enquire with the authorities to see if the Secretary can give me an answer. Earlier on, the spouses of the firemen who died in the course of duty have been requested to move out of the quarters soon after the incident. I do not know if the relevant policy has changed or not. It is because several firemen have sustained serious injuries and a Principal Fireman even died in the incident, the public are concerned about their well-being. What arrangements will be made for the life of the widows and children in future?
SECRETARY FOR SECURITY (in Cantonese): I am very grateful for Dr LEUNG's care and concern about the work of our front-line colleagues, particularly their well-being. I believe the people of Hong Kong are grieved at and saddened by the loss of a brave officer. The Government has proper arrangements in place for the tragic deaths of colleagues. We certainly will make the necessary compensation, and it is expected that many enthusiastic members of the public will make donations to help the family of the deceased officer. In respect of the well-being for the colleagues concerned, the Department will make the best endeavours, not only to offer assistance to the family on funeral matters, but also make long-term living arrangements for the widows and children.
On this aspect, I would like to assure Dr LEUNG that the colleagues responsible for welfare matters of the FSD have followed up closely on the incident and handled the case properly. As for the colleagues who sustained injuries, we also have a series of arrangements. Apart from the best medical treatment, they will receive suitable care while on sick leave. When they resume duty on the expiry of their sick leave, we will make appropriate arrangement. LEGISLATIVE COUNCIL ─ 21 January 2015 4805
No one wish to see our brave firefighters get injured or even sacrifice their life in the execution of duty. We have high regard for this incident and will make our best endeavours to handle welfare matters relating to our colleagues.
DR PRISCILLA LEUNG (in Cantonese): President, my supplementary question is very specific; that is, are the widows still entitled to live in the quarters? The relevant policy has all along been a big concern to us and we wish to have it amended.
PRESIDENT (in Cantonese): Dr LEUNG, you have repeated your supplementary question. Secretary, do you have anything to add?
SECRETARY FOR SECURITY (in Cantonese): The widows can still live in the quarters for a period of time until an alternative arrangement for accommodation is available for them. If they have a need, we will make alternative arrangements for the relevant government department to arrange accommodation for them. I can assure Dr LEUNG that what she is worrying about will never happen.
MR FREDERICK FUNG (in Cantonese): President, I express my condolence to the injured and deceased firemen and their families. President, my supplementary question is, the explosion occurred in a sizable building with 30 to 40 storeys accommodating some 800 residential units. Assuming that each unit has three residents on average, there are some 2 000 residents living in the building. At the time of evacuation that day, I noticed that some residents felt puzzled. Even on the floor where the explosion occurred, some residents were aware of the evacuation but some were not; some of them decided to leave but some decided to stay; some were able to leave on their own but some were not, and they include the elderly and disabled. Regarding the issue of evacuation, does the authority have a set of practice or operating model to ensure the proper conduct of systematic evacuation operations for the floor where the accident occurred or other affected floors, and even the building as a whole?
4806 LEGISLATIVE COUNCIL ─ 21 January 2015
SECRETARY FOR SECURITY (in Cantonese): The FSD has an established evacuation plan applicable for the scene of accidents. Of course, whether or not to execute the evacuation plan will depend on the actual circumstances at the time. As far as this incident is concerned, when the firemen who arrived at the scene in response to a report confirmed that there was a gas leakage, in view of the potential hazard, the first thing they did was to ask the residents in the vicinity to return to their own flats and close the doors instead of asking the residents to evacuate via the staircase. The firemen had to eliminate the potential hazard first. Unfortunately, the explosion occurred. After the explosion, the firemen first came to the rescue of the casualties, then they helped to stabilize the emotions of the residents in the vicinity and took steps to assist the evacuation of residents. The residents who were able to leave by themselves evacuated from the building under the lead of the firemen. The mobility-handicapped residents evacuated from the site under the assistance of the firemen or the ambulancemen, and certain procedures were involved in the process. According to our statistics, 186 residents followed the instructions of the firemen and evacuated by themselves. In addition, near the scene, we found three injured residents who lived in other flats and were sent to hospital for treatment after they were rescued by firemen.
Speaking of this incident, I would like to bring out one point as well. The FSD has frequently launched promotional campaigns through various media in order to educate the public what to do in case of a fire. Moreover, the Department conducts regular fire drills and briefings for large estates and residential developments in order to keep residents informed of what to do in case of emergency. For buildings managed by property management companies, the FSD provides relevant guidelines and training to security staff. Take the residential building where I live as an example, a notice will be put up one or two times a year to inform residents of the schedule of fire drills. I suggest that everyone should pay attention to these drills and, if time allows, participate in these drills physically. If unable to do so, one should remember to prepare the "three treasures for fire escape", and report to the relevant departments promptly in case of emergency, so that they will be able to know the flats in which there are victims being trapped inside and carry out rescue operations expeditiously.
IR DR LO WAI-KWOK (in Cantonese): President, the Secretary for Development referred to the Building (Construction) Regulations and the Building (Planning) Regulations that are relevant to the question in his main LEGISLATIVE COUNCIL ─ 21 January 2015 4807 reply. In fact, the Gas Safety Ordinance (GSO) is also directly relevant to the question. The GSO regulates the design, installation and utilization of gas facilities inside residential premises, it also requires that all domestic gas appliances and tubing must obtain approval from the Electrical and Mechanical Services Department (EMSD), and gas supply companies should inspect the gas installations inside residential premises on a regular basis. Concerning the serious incident caused by gas leakage, may I ask the Secretary for Development whether he will review the provisions, enforcement details and the relevant resources of the GSO?
SECRETARY FOR DEVELOPMENT (in Cantonese): President, we have provided the number of fire cases and casualties caused by gas leakage in the last five years in our reply to another Member's question earlier on. To be precise, we have provided those figures on 7 January in our reply to Dr CHIANG Lai-wan's question, the relevant figures are indeed relatively low. The recent incident unfortunately occurred in Shek Kip Mei is a rather unusual one. On gas safety, as Ir Dr LO said, the relevant GSO provisions are basically enforced through the EMSD, we embark on three aspects: (1) the maintenance of pipelines and facilities; (2) education and promotion; and (3) the issuance of various codes of practice to the industry. Currently speaking, this three-pronged approach is still relatively effective, including, among others, a safety inspection is carried out every 18 months for the purpose of the pipeline maintenance works I just mentioned; in addition, we will do a lot of work on education and promotion. At this stage, we have no plan to conduct a comprehensive review with respect to the GSO.
MR PAUL TSE (in Cantonese): President, part (1) of the Secretary's main reply seems to focus on premises with an enclosed design, particularly the buildings similar to the residential blocks of Shek Kip Mei Estate where the explosion occurred. I wish the Secretary can enlighten me on, according to his knowledge, the total number of this kind of buildings with potential risk due to the adoption of an enclosed design in Hong Kong? What worries me even more is that the relevant legislation mentioned by the Secretary only focuses on the fire resisting ability and the means of escape and has not dealt with the enclosed design. Will the Secretary follow up in this respect?
4808 LEGISLATIVE COUNCIL ─ 21 January 2015
SECRETARY FOR DEVELOPMENT (in Cantonese): President, I thank Mr Paul TSE for his supplementary question. Shek Kip Mei Estate where the incident occurred has not adopted an enclosed design. It is a sizable public housing estate, and its public corridors have not adopted an enclosed design. As I mentioned in my main reply, the introduction of an enclosed design back then is mainly to provide resistance to the spread of fire and to ensure the safety of the means of escape in case of fire. The assessment back then has not weighed in the risk of gas explosion in residential buildings. The ordinance, when it came into effect on 1 July 2007, focused on the older buildings, that is, it required the buildings completed before 1987 to enhance their fire resisting ability accordingly in this aspect. Upon the release of the investigation report on the incident by the dedicated investigation team, we will follow up under the established mechanism with regard to the findings and recommendations of the report.
MR FREDERICK FUNG (in Cantonese): President, my supplementary question is about explosion resistant or fire resistant facilities. The old public housing estates have the gas tap installed outside a residential unit, while the newly constructed public housing estates have the gas tap installed inside a residential unit. The design of gas tap has been revised. I believe the original design can prevent the mischief of switching off the gas tap outside a residential unit, rendering the residents inside have no gas to cook. Nonetheless, shifting the gas tap to indoor would create difficulty for firemen in case of incident. Will the authority consider installing an additional gas tap within the area accessible to the estate management officer, so that when the firemen arrive, they can switch off gas supply to certain storey or even the entire building? This is the first point.
Secondly, in most cases, the alarm bell will ring at the occurrence of these incidents; the alarm bell will also ring at the occurrence of lift incidents. But I am concerned about the hearing impaired as they do not hear the alarm. Is it possible for the authority concerned to install an additional facility such as a flashing red light which is visible to hearing impaired persons? Will the Secretary consider these two recommendations?
SECRETARY FOR DEVELOPMENT (in Cantonese): President, I thank Mr Frederick FUNG for his proposals on the gas tap of public housing estates and alarm facility respectively. We will give a reply to Mr FUNG after studying his proposals.
LEGISLATIVE COUNCIL ─ 21 January 2015 4809
PRESIDENT (in Cantonese): Last oral question.
Actions Taken Against People Allegedly Taking Part in Unlawful Assemblies on Pavements
6. DR FERNANDO CHEUNG (in Cantonese): President, it has been reported that on a number of occasions last month, the Police arbitrarily cordoned off areas on the pavements in Mong Kok and Causeway Bay and demanded people in the cordon areas to leave immediately. The Police displayed for a number of times yellow flags to warn those people who failed to leave immediately that they were taking part in unlawful assemblies, and demanded them to produce their identity cards for record. It has also been reported that the Police arrested over 200 road occupiers during the clearance operation in Admiralty last month and subsequently demanded the arrested persons to complete a new Voluntary Personal Background Information form to provide information irrelevant to their cases, including the schools attended, past occupations and particulars of family members. In this connection, will the Government inform this Council:
(1) of the respective justifications of the Police for setting up the aforesaid cordon areas and declaring that people in the cordon areas were taking part in unlawful assemblies; the criteria based on which the Police recorded the identity card information of people on the street, and whether they have assessed if such a practice contravenes the Personal Data (Privacy) Ordinance; if they have assessed, of the outcome; and
(2) whether the Police will use the Voluntary Personal Background Information form in future; of the reasons for obtaining from the arrested persons information irrelevant to the cases concerned; whether they did that in the past; whether the Police have assessed if such a practice has gone beyond what is needed for the investigation of the cases concerned and is tantamount to excessive collection of personal data; if they have assessed, of the outcome; for what purpose such data are to be used and when such data will be destroyed?
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SECRETARY FOR SECURITY (in Cantonese): President, according to section 10 of the Police Force Ordinance (Cap. 232), the duties of the Police Force include taking lawful measures for preserving the public safety and public order. The Administration's consolidated reply to the question raised by Dr Fernando CHEUNG is as follows:
Unlawful assemblies in Mong Kok and Causeway Bay
After the re-opening of the blocked roads in Mong Kok in end November 2014, some protesters gathered along various road sections in the district, including Sai Yeung Choi Street South, Nathan Road, Soy Street and Argyle Street, for mobile occupation in consecutive nights. Among the protesters were a number of troublemakers and radicals. On one pretext or another, such as shopping together and waiting for someone else as claimed, dropping money and picking it up deliberately, and crossing the road back and forth, they caused road blockage, disturbed public order and created nuisance to shop businesses by rummaging the goods, blocking shop accesses and even causing obstruction to shop attendants who tried to roll down the gates and close their shops. Worse still, some of them deliberately sneaked into the crowd, inciting people on the scene to provoke police officers and insult them with abusive language to create chaos on purpose. Some radicals even carried with them items such as refuse bins and dashed onto roads where traffic was running, in an attempt to cause road blockage. Their acts posed serious threat to road users and drivers. The protesters deliberately stirred up troubles everywhere, disrupted social order and obstructed the Police's enforcement actions. Residents, shop operators and road users in the district were in great distress as a result of the incident.
Similar situations were seen in Causeway Bay for many nights. Claimed to be shoppers, the protesters assembled on Yee Wo Street and blocked the pavements, attempted to obstruct traffic and disrupt public order. Nearby business operators and members of the public were unduly worried because of such malicious and disturbing acts. For fear of inviting persistent harassment, many shop operators were compelled to stay silent, while some even chose to close their shops early, at the expense of their businesses and the livelihood of their employees as well as locals and tourists who genuinely wanted to shop. As a result, the image of Hong Kong as an international city has been tarnished. The general public would not agree to these disturbing acts which went against law and order or other people's rights.
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According to section 10 of the Police Force Ordinance, the duties of the Police Force include taking lawful measures for preserving the public safety and public order, preventing crimes and offences, controlling traffic upon and removing obstructions from public thoroughfares, and so on. Section 6 of the Public Order Ordinance empowers the Commissioner of Police to control and direct the conduct of all public gatherings if he reasonably considers it to be necessary in the interests of public safety, public order or the protection of the rights and freedoms of others. As the abovementioned assemblies had led to chaos on the spot, disruption to social order and severe impact on public life and road users' rights, the Police had to take appropriate measures in accordance with the Police Force Ordinance and the Public Order Ordinance, including exercising controls on certain roads and dispersing people illegally assembling along individual pavements, in a bid to effectively ensure public safety and public order and avoid aggravation. Before the operations, the Police had, by means of loudspeakers and warning banners, repeatedly given advice and warnings, indicating that the protesters were participating in an unauthorized assembly. To this end, they were required to leave in a peaceful and orderly manner as soon as possible. During the incidents, those who were on business and those who resided in the area did have ample time and opportunities to leave. Against Police advice, some protestors continued to yell and dash around. To avoid aggravation, the Police took decisive actions to disperse those unlawfully assembling on the scene.
Under section 54 of the Police Force Ordinance concerning "Power to stop, detain and search", a police officer who finds any person in any street or other public place whom he reasonably suspects of having committed or of being about to commit or of intending to commit any offence may stop the person for the purpose of demanding that he produce proof of his identity for inspection.
Since the re-opening of the blocked roads in Mong Kok, the Police have arrested around 320 persons in the district, involving such offences as resisting arrest, disorderly conduct in a public place, possession of an offensive weapon, criminal damage, assault on a police officer, and obstructing a police officer in the execution of his duties. The Police are examining the evidence collected for investigating the liability to be borne by the persons involved.
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Recording personal background information of arrestees
It is an established practice of the Police to take statements against arrestees, including their background information. All statements shall be taken from arrestees on a voluntary basis. Such procedures for taking statements have been in place for a long time. Statements are taken by police officers from arrestees, who may alternatively choose to make their own written statements.
When handling the cases relating to the illegal occupation movement, the Police did not devise any so-called new Voluntary Personal Background Information form.
In collecting personal data from the persons involved, the Police are in strict compliance with the Personal Data (Privacy) Ordinance (Cap. 486). The data so collected are proportionate to the objective of prevention and detection of crimes, in line with actual needs and not excessive. Such data will be destroyed upon completion of investigation and legal proceedings in accordance with the established practice.
DR FERNANDO CHEUNG (in Cantonese): President, the Secretary mentioned in the main reply that among the protesters were a number of troublemakers and radicals, and their many acts have served to provoke police officers, stir up trouble, disturb the public peace or public order. On 15 October last year, I participated in an assembly. At that time, some 500 social workers assembled in a small park known as the Lockhart Road Playground, and we assembled there to protest against the Police for imposing extrajudicial punishment. However, when we marching towards the Police Headquarters nearby after the assembly, the Police have already displayed yellow flags and declared our assembly unlawful. We were not troublemakers but registered professional social workers, and our acts have not disturbed the public order and have nothing to do with public peace. We were there just to protest against the Police for imposing extrajudicial punishment. With regard to an assembly which involves no members of the public disturbing orders or the public peace, could the Secretary explain to this Council of the ordinance based on which the Police declared the said assembly unlawful. Subsequently in some similar situations (in both Mong LEGISLATIVE COUNCIL ─ 21 January 2015 4813
Kok and Causeway Bay), the Police have also declared some cordon areas and required the people in the cordon areas to produce their Identity Cards for registration purpose before they were allowed to leave. Could the Secretary inform us also of the ordinance based on which the Police did that?
SECRETARY FOR SECURITY (in Cantonese): President, according to the Public Order Ordinance, prior notice of the intention to organize a procession or assembly comprising more than a specified number of participants has to be given to the Police, assemblies with no prior notice to the Police are not in compliance with the relevant provision in the Ordinance. Hence, the warning given under such circumstances by the Police to the participants in the procession was in line with the law. Regarding the other questions raised by the Member, just now I have already explained clearly the reasons why the Police had to take actions when people were assembling unlawfully in Mong Kok and Causeway Bay. Such kind of so-called mobile occupation movement took place not only for one night but a long period of time, causing much nuisance and chaos. I believe the Hong Kong public could see it very clearly on television, and the nuisance caused to the shops there was also obvious to all.
It is the responsibility of the Police to safeguard the public peace and public order, and that is why in addition to giving advice and warnings, police officers also need to exercise their lawful authority to stop and detain a person, or require a person to produce proof of his identity when they reasonably suspect that person of committing any crime. The Police is still investigating the relevant unlawful assemblies, and we will certainly take appropriate law-enforcement actions if we have gathered enough evidence.
MR ALBERT CHAN (in Cantonese): President, first of all, I would like to advise the pan-democrat Members that when talking about the present matter, they should refrain from admitting they are assembling, as assembly is a criminal offence.
The Secretary has repeatedly emphasized and pointed out in his replies just now that the people assembled on the pavements in Mong Kok were taking part in unlawful assemblies. However, among the offences charged of the 320 arrestees 4814 LEGISLATIVE COUNCIL ─ 21 January 2015 as read out by the Secretary, none is related to taking part in unlawful assemblies. The Secretary also mentioned just now that it was in view of the unlawful assemblies in place that the police officers had to disperse the people taking part in such assemblies. I find this approach highly unprofessional. If police officers consider some people are taking part in unlawful assemblies, they should arrest those people rather than dispersing them. In fact, many years ago, unlawful assemblies were involved in many crimes committed by triad societies. It is in recent years that the Government has been abusing its power and charging people (including me) taking part in processions with this offence. I need to make a declaration, I have been charged with this offence before …
PRESIDENT (in Cantonese): Mr CHAN, please raise your supplementary question.
MR ALBERT CHAN (in Cantonese): … President, my supplementary question is: We can obviously see from evidence in many different aspects that both the approach and attitude adopted by the responsible police officers in handling the relevant issues are by no means professional. I have witnessed many police officers hitting the participants of processions with their batons to vent their anger; besides, we can also see from the Internet some Police Superintendents hitting participants of processions on their backs or on their heads …
PRESIDENT (in Cantonese): Mr CHAN, please raise the supplementary question.
MR ALBERT CHAN (in Cantonese): I wish to ask the Secretary if any review has been conducted in this connection. Despite the Secretary's claim that the police officers are so professional, when they handled such kinds of mass campaigns … It may be true that some of the participants are suspected of violating certain laws, but their approach to handle the matter still has much room for improvement. Will the authorities enhance the relevant training for police officers, particularly training in emotion control for higher ranking officers, so that they will not bring disgrace to the Police Force?
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SECRETARY FOR SECURITY (in Cantonese): Mr CHAN's supplementary question comprises a series of issues, perhaps I will deal with the last one first. The Police Force has always been attaching great importance to the training for police officers, and we will continue to put more effort in this area.
In handling the occupation movements, the front-line police officers have indeed exercised immense tolerance and self-control. Certainly, Mr CHAN may have his own view, but our community has also offered a lot of positive feedback from on the attitude of police officers in enforcing the law, as the Police have received an unprecedented large amount of supportive letters and emails. What is more, some members of the public have even come to our police stations to recommend us in person. These are but some examples. I believe that in Hong Kong, we can freely express our comments on the performance of the Police. Regardless of whether the comments are positive, negative, critical or supportive, the Police will listen to all of them modestly. After all, as a law-enforcement agency, the Police have to maintain the public order and public peace. On the whole, we are here to serve the public.
Mr Albert CHAN mentioned at the very beginning that I had not referred to the crime of taking part in an unauthorized assembly in the main reply. Indeed, I had not referred to that particular crime. Nevertheless, I urge Mr CHAN to take note of the words "such offences as" in the relevant sentence, which means "these are just a few examples". I was only citing some examples in my main reply, and if police officers are satisfied that there is sufficient evidence proving the arrestees' violation of certain laws upon investigating into the relevant cases, they will pass the relevant information to the Department of Justice to decide on the prosecution to be instituted.
MR ALBERT CHAN (in Cantonese): The Secretary has not answered my supplementary question. I said that as the Secretary had mentioned repeatedly in his replies that the persons doing shopping in Mong Kok were taking part in an unauthorized assembly …
PRESIDENT (in Cantonese): What is your supplementary question?
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MR ALBERT CHAN (in Cantonese): … But the relevant offence was not mentioned in the offences charged in prosecutions instituted. What I ask the Secretary is: The offence was not on the list or the relevant investigation is still in progress? The Secretary has not answered that at all …
PRESIDENT (in Cantonese): Are you asking the Secretary this question: Is it true that the authorities have not instituted any prosecution against the offence of "taking part in an unlawful assembly"?
MR ALBERT CHAN (in Cantonese): Right. Among the 320 arrestees, how many of them are arrested for taking part in an unlawful assembly?
PRESIDENT (in Cantonese): Secretary, do you have anything to add?
SECRETARY FOR SECURITY (in Cantonese): I am afraid I do not have in hand the specific figures. However, I believe that in dealing with such kinds of unlawful assemblies or persons suspected of having committed offences in this respect, the Police will consider instituting prosecutions on account of the relevant offence. Nevertheless, the prosecution must be instituted in accordance with the procedures prescribed. We cannot institute the prosecution right after the arrest, as we have to collect evidence first. Hence, we can see that after the arrest and recording of statements, the Police will usually permit the arrestees to "leave on bail".
MR IP KWOK-HIM (in Cantonese): President, the Secretary has mentioned clearly in his reply that some protesters have, on the pretext of shopping, deliberately created nuisance to shops by rummaging the goods and hindering the shops' business operation, and some shops even had to roll down their gates as a result. The relevant shop operators have reflected many times that they were very angry about that, but were compelled to stay silent for fear of inviting persistent harassment, many shop operators. While order could still be LEGISLATIVE COUNCIL ─ 21 January 2015 4817 maintained when police officers were in the vicinity, the impacts in the aftermath are still rather immense. I wish to ask the Secretary how he is going to ensure that shops will not be subject to this kind of nuisance again in the future.
Certainly, we can see that (and the main question has also mentioned that) when police officers asked the arrestees to produce their Identity Cards and provide other personal information during the inspection process, some people considered the police officers digging into their personal history and treating them very harshly as if they were members of triad societies. However, the residents in the districts I serve have relayed to me that they consider the Police being too polite to these people who had organized and allured people to participate in unlawful activities. The Police should arrest them directly, what is the purpose of making an appointment for the arrest? Moreover, how come they could be allowed to "kick aside the bail agreement" as they wish …
PRESIDENT (in Cantonese): Mr IP, you have raised several supplementary questions.
MR IP KWOK-HIM (in Cantonese): … How come they could do as they wish? Is the approach adopted by the Police to deal with these people different from the ways police officers handle other arrestees?
SECRETARY FOR SECURITY (in Cantonese): Regarding Mr IP's supplementary question, I will perhaps reply to the two main points first. Will Members please point out to me if I have missed anything, so that I can answer the missed-out part.
About the first main point, Mr IP pointed out that the affected shops were subject to nuisance and their goods were rummaged through, and objection was even caused to the shop attendants when they tried to roll down the gates expeditiously. I have seen such scenes on television, and I could feel the worries of the shops there. This is exactly the reason why the Police have attached great importance to the incidents concerned. As such, we have deployed ample police resources to maintain law and order during the most risky 4818 LEGISLATIVE COUNCIL ─ 21 January 2015 times and required the people taking part in such unlawful assemblies to leave expeditiously. If these people should have in any law-offending acts, we would certainly take decisive actions against them. Even till now, the Police is maintaining an appropriate amount of police resources at the places where most people frequent and places where mobile occupation will most probably be staged. Perhaps the media coverage in this respect is comparatively rather rare these days, the Police have never slacked off. Why so? We never slack off because we need to protect the residents of the relevant districts and maintain law and order.
As for the second main point, are we giving preferential treatment to the arrestees of the occupation movements? I hereby assure Mr IP that the Police adopts the same standard in dealing with different issues. We will not give these arrestees preferential treatment, nor will we adopt any measures to give them hard times. Why do we make arrest appointments? We make this arrangement because too many people are involved and we need to arrest them in an orderly manner.
The Police have a lot other procedures to go through after taking statements from the arrestees. Generally speaking, the Police will allow arrestees to leave on bail ― police bail ― while police officers continue with their investigation efforts. However, some arrestees may refuse to sign any agreement for release on bail. Instead, they will request the Police to either lay a charge against them and send them to the Court right away or allow them to leave. Our deliberation is very straightforward, and we need to handle each case in stringent compliance with the relevant procedures. When the relevant procedures and investigation work are not yet completed, we will not make any decision arbitrarily. Hence, I will not consider this as allowing them to "kick aside the bail agreement" as commonly referred to by the community. In my view, these people have refused to sign any agreement for release on bail pending the Police's investigatory work. Before letting these people go, the police officers have told them very clearly that the Police reserve the right to prosecute them. When we have collected sufficient evidence, we will arrest the persons concerned again and institute prosecution against them accordingly. Our work in this respect is still ongoing.
PRESIDENT (in Cantonese): This Council has spent 24 minutes 30 seconds on this question. Oral questions end here.
LEGISLATIVE COUNCIL ─ 21 January 2015 4819
WRITTEN ANSWERS TO QUESTIONS
Assistance Provided for Persons with Intellectual Disabilities
7. MR CHEUNG KWOK-CHE (in Chinese): President, the Special Topics Report No. 62 on social statistics released by the Census and Statistics Department at the end of December last year indicates that the total number of persons with intellectual disabilities (PIDs) in Hong Kong was in the region of 71 000 to 101 000. The problem concerning ageing of PIDs has been under discussion for more than a decade. The Rehabilitation Advisory Committee of the Labour and Welfare Bureau commenced a study on the trend of ageing of PIDs in March last year and completed the report concerned at the end of last year, but it has not yet published the report. In this connection, will the Government inform this Council:
(1) whether it will expeditiously publish in full the data obtained from the aforesaid study to let the public understand and grasp the situation of ageing of PIDs; if it will, of the details; if not, the reasons for that;
(2) as some members of the social welfare sector have noticed that PIDs show symptoms of deteriorating functional capacity when they are around 40 years old, whether the authorities will clearly define the degree to which PIDs' functional capacity has deteriorated for them to be treated as elderly PIDs; if they will, of the details; if not, the reasons for that;
(3) as the Government has never conducted a comprehensive study on the social support and services rendered to elderly PIDs and PIDs with deteriorating functional capacity, whether the Government will, in the form of case illustrations, study in depth the difficulties faced by and the needs of elderly PIDs and PIDs with deteriorating functional capacity, who reside in institutions and in the community respectively, as well as their carers; if it will, of the details; if not, the reasons for that;
(4) whether it will study the problems arising from the process of deteriorating functional capacity and the special physiological systems of PIDs (for example, the identification and prevention of 4820 LEGISLATIVE COUNCIL ─ 21 January 2015
diseases, inadequate medical services for the elderly, and so on); if it will, of the details; if not, the reasons for that;
(5) as some members of the social welfare sector have pointed out that at present there are quite a number of families of elderly tripletons or elderly doubletons (that is, families in which elderly PIDs or PIDs with deteriorating functional capacity live with their fathers and/or mothers), whether the authorities have conducted any in-depth studies on the number of such families, their caring and habitation patterns, the guardianship system, as well as the living and emotional support needed, so as to assess the need of such families for social support; if they have, of the details; if not, the reasons for that;
(6) as some members of the social welfare sector have pointed out that while the data involving cases of PIDs are being administered or kept by the Hospital Authority (HA), the Education Bureau and the Social Welfare Department (SWD) respectively at present, the lack of co-ordination among the institutions concerned has resulted in scattering of case data, whether the authorities will consider designating a government department to co-ordinate the administration of data concerning the cases of PIDs; if they will, of the details; if not, the reasons for that; and
(7) given that while the Government allocated an additional provision of about $10.6 million in 2014-2015 to strengthen the manpower of the 16 District Support Centres for Persons with Disabilities (DSCs), some members of the social welfare sector consider that this initiative is just a patchy fix as each DSC can only employ two additional social workers, coupled with the serious problem of ageing of PIDs at present, such DSCs, with their services, facilities, healthcare manpower, and so on, cannot provide one-stop community support services for PIDs and persons with other disabilities as well as their carers, whether the Government will review afresh the positioning and the contents of the services provided by DSCs; if it will, of the details; if not, the reasons for that?
LEGISLATIVE COUNCIL ─ 21 January 2015 4821
SECRETARY FOR LABOUR AND WELFARE (in Chinese): President, regarding the question raised by Mr CHEUNG Kwok-che, I have consulted the Constitutional and Mainland Affairs Bureau, the Education Bureau and the Food and Health Bureau. My reply is as follows:
(1) and (3)
The Working Group on Ageing of Persons with Intellectual Disabilities (the Working Group) under the Rehabilitation Advisory Committee commissioned the Hong Kong Polytechnic University to conduct a study on the ageing trend of PIDs (the study) in March 2014. The study, conducted in the form of a survey, collected from 230 service units under 29 rehabilitation service organizations the data of about 11 400 PIDs who are users of day training centres, residential care homes and employment support services. The findings of the survey will allow the Working Group to get hold of the basic data of ageing of persons with disabilities (including type of service the users used, their level of intellectual disability, age profile, conditions of disabilities, medical conditions, job training performance, nursing needs and caring needs, and so on) from a macro perspective and in a more extensive and comprehensive manner. This will facilitate understanding of the needs of ageing PIDs and planning of service provision and service delivery mode.
A task force under the Working Group is now analysing the data collected from the study. It will, after collating the data, meet with stakeholders and other interested parties and individuals to share the relevant data and collect their views for reference in preparing the study report and making recommendations to the Government. Analysis of the data collected is expected to be completed in the first half of 2015.
The Government will, having regard to the findings of the study and the views collected, duly consider whether it is necessary to conduct further study under other approaches as appropriate.
(2) Studies conducted by different countries in the past attempting to define ageing of PIDs and their average life expectancy did not provide any conclusive evidence. The medical field has not 4822 LEGISLATIVE COUNCIL ─ 21 January 2015
reached any consensus on this issue either. In fact, PIDs encompass a highly heterogeneous group with varying degrees of intellectual disabilities, functional capabilities and need complexities. There is no universal definition of ageing of PIDs.
Whilst persons with different disabilities require different rehabilitation services, persons with disability of the same category may also require different services having regard to their own capabilities and situations. In view of this, we have all along adopted a "people-oriented" approach when developing rehabilitation services in order to address the different needs of individuals, thereby facilitating full integration of persons with disabilities into the community.
(4) The multi-disciplinary psychiatric team of the HA provides integrated and continuous medical care and rehabilitative services to patients with intellectual disabilities having regard to their individual clinical needs. The scope of services includes medical and infirmary care, clinical assessment and diagnosis, functional training, treatment and community support services, which aim to enhance their quality of life, maximize their self-care abilities and improve their physical mobility. The HA will continue to review and monitor its service provision to ensure that its services are in keeping with the needs of patients.
(5) The SWD provides services for persons with disabilities (including PIDs) and their families through various service units (for example, integrated family service centres, medical social services units, DSCs, and parents/relatives resource centres for persons with disabilities). Social workers following up the cases will, having regard to the social support needs of the persons with disabilities and their families, arrange for them appropriate services such as casework counselling, community support services, day training services, residential care services and home care services, and so on, and refer them to the HA for clinical assessment and treatment where necessary. The social workers will also keep in view the progress of their use of services and adjust the service arrangements according to their needs. The SWD will continue to closely monitor and timely review the delivery of services.
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(6) Due to personal privacy considerations, centralized storage and co-ordination of data of PIDs are deemed inappropriate. At present, the HA, the Education Bureau and the SWD maintain close liaison to ensure delivery of well-suited services to users. If there is a need to transfer an individual's data (such as professional assessment reports and records) to other departments, prior consent of the person concerned will be obtained.
(7) The 16 DSCs in the territory provide rehabilitation training, nursing care, personal care services, social skills training, psychological treatments and personal development activities for persons with disabilities (including ageing PIDs) and their family members or carers. The DSCs also organize training programmes, education courses, talks, workshops, and so on, for the families or carers of persons with disabilities.
In 2014-2015, the Government strengthened the manpower of social workers in the DSCs so as to introduce a case management service approach for co-ordinating the services required by persons with disabilities and their families. The DSCs maintain liaison, communication and collaboration with stakeholders in their districts, and provide suitable services to cater for the needs of persons with disabilities, including referring them to home care service for persons with severe disabilities, integrated support service for persons with severe physical disabilities, transitional care and support centre for tetraplegic patients, community rehabilitation day centres and other relevant welfare services, with a view to providing service users with more comprehensive support.
The SWD will closely monitor the implementation of these services, review from time to time the service contents, and meet with the operators and service user groups to ensure that the services can fulfil the needs of users.
Odours and Hygiene Problems of Sewers in Tai Kok Tsui
8. MS CLAUDIA MO (in Chinese): President, recently, I have received complaints from residents of Metro Harbour View in Tai Kok Tsui as well as those in areas around Tai Kok Tsui Road and Chung Wui Street, claiming that 4824 LEGISLATIVE COUNCIL ─ 21 January 2015 the hygiene conditions of a number of sewers in the district are unsatisfactory, with odours emitting from the sewers from time to time. They are gravely concerned that the bacteria bred in the sewers will disperse into the air and then spread through the dense population, thereby posing threats to the residents' health. In this connection, will the Government inform this Council:
(1) whether the Drainage Services Department (DSD) has regularly taken effluent samples from the sewers in the aforesaid district for testing so as to identify the sources of the odours; if it has, of the test items included in such tests, the test results in the past three years (including the respective concentrations of various heavy metals, hydrogen sulphide, ammonia as well as various micro-organisms such as anaerobic bacteria contained in the effluent samples), and the follow-up actions taken;
(2) whether the Environmental Protection Department (EPD) has regularly taken samples of deposits and air from the sewers in the aforesaid district for testing so as to identify the sources of the odours and their components; if it has, of the test items included in such tests, the test results in the past three years (including the respective concentrations of various heavy metals, hydrogen sulphide, ammonia as well as various micro-organisms such as anaerobic bacteria contained in the deposit samples), and the follow-up actions taken; and
(3) whether the authorities will consider stepping up the cleaning of sewers in the aforesaid district so as to tackle the odours and hygiene problems?
SECRETARY FOR THE ENVIRONMENT (in Chinese): President, in Hong Kong, the sewerage system and the stormwater drainage system operate independently underground to enable separate treatment of sewage and rainwater. In general, the odour-emitting drains raised by the public are stormwater drains at the roadside. When these drains are blocked by accumulated waste or wastewater, the pollutants degrade in the drains and cause odour. Regarding the odour arising from the drains near Metro Harbour View and the area around Tai Kok Tsui Road and Chung Wui Street, the Food and Environmental Hygiene LEGISLATIVE COUNCIL ─ 21 January 2015 4825
Department (FEHD), the Highways Department (HyD), the DSD and the EPD have implemented a number of improvement measures in the area including the clearing of pollutants accumulated at nearby back lanes and roadside drains, reducing odour in the drains, controlling the illegal discharge of wastewater and scullery water into roadside drains, and so on. Since the stormwater drainage system is located underground, the risk of the public being infected through direct contact with the pollutants inside the drains is generally very low.
There are now a total of 199 public back lanes in the Mong Kok and Tai Kok Tsui area. For maintaining the cleanliness and hygiene of public places, the FEHD cleanses these back lanes on average once every two weeks to reduce waste accumulation and blockage to roadside gullies and sprays larvicidal oil at the gullies regularly to prevent breeding of mosquitoes and spreading of diseases. In addition, the FEHD, after consultation with the District Council, carried out a targeted cleansing operation to the street and roadside gullies at five back lanes last year (including the one near Chung Wui Street) to further improve the environmental hygiene of the Mong Kok and Tai Kok Tsui area.
The HyD conducts regular cleaning and maintenance to roadside gullies and stormwater drainage (road drainage systems) in Tai Kok Tsui and clears blockage found in the systems promptly. The HyD also inspects and cleans all road drainage systems in the area half-yearly; and for those in flooding blackspots, they are inspected and cleansed once every one to three months.
To combat illegal discharge of wastewater into roadside gullies by food premises, the FEHD conducts regular as well as surprise checks in the area and takes enforcement actions under the Public Cleansing and Prevention of Nuisances Regulation and Food Business Regulation. In 2014, the FEHD initiated a total of 21 prosecutions and issued seven fixed penalty notices against the offenders in the Yau Tsim Mong District. In addition, the EPD inspects food premises and construction sites in the area and takes enforcement actions under the Water Pollution Control Ordinance against the discharge of wastewater into communal drains. In 2014, the EPD initiated four related prosecutions in the Yau Tsim Mong District. During the inspections, the EPD also gave advice and distributed pamphlets to the operators of food premises, reminding them to comply with the environmental legislation and handle the discharge of wastewater properly.
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Sewage from the Tai Kok Tsui area is collected through a separate system of underground sewers for treatment at the DSD's sewage treatment works. The DSD inspects the sewers regularly and cleanses them when necessary to ensure normal operation and prevent blockage. In addition, the DSD reviews and analyses the condition of the sewerage system for blockage every year and devises suitable regular cleansing programmes. Currently, the DSD cleanses the sewerage system in Tai Kok Tsui three times a year and will step up cleansing for individual sewers according to their blockage conditions. Since we handle sewage and rainwater separately, and that sewage is collected by an independent system of sewers buried underground, the risk of the public being infected through direct contact with the sewage inside the sewers is generally very low. The DSD and the EPD have not taken samples of sewage, deposits or air from the sewers regularly for testing.
We will continue with the abovementioned measures and step up where necessary, the cleaning of roadside stormwater drains and the combat against illegal discharge of wastewater into the stormwater drains to improve the odour problem and safeguard the environmental hygiene of Tai Kok Tsui.
Permitting Mandated Refugees and Screened-in Torture Claimants to Take Employment in Hong Kong
9. MR DENNIS KWOK: President, mandated refugees and screened-in torture claimants (refugees and claimants) have no right to work in Hong Kong but the Director of Immigration (Director) may exercise discretion to permit such persons to take employment. Yet, some refugee groups have recently relayed to me their concerns that the Immigration Department (ImmD) takes unduly long time in processing applications from such persons for taking employment and the Director rarely grants such permission. In this connection, will the Government inform this Council:
(1) of the procedures that the Director follows, and the factors that he takes into consideration, in determining whether or not to permit refugees and claimants to take employment in Hong Kong, and the weight attributed to each of the factors; and
(2) of the average time taken by the ImmD to process the applications for taking employment in Hong Kong received from refugees and LEGISLATIVE COUNCIL ─ 21 January 2015 4827
claimants in 2014; whether the Director has plans to shorten the processing time; if so, of the specific changes to be implemented and the expected outcome; if not, the justifications for that?
SECRETARY FOR SECURITY: President, non-refoulement claimants whose claim has been substantiated by the ImmD or the Torture Claims Appeal Board (substantiated claimants) and refugees recognized by the United Nations High Commissioner for Refugees in Hong Kong (mandated refugees) have no right or permission to enter or remain in Hong Kong. They are accordingly prohibited from taking any employment in Hong Kong under the Immigration Ordinance (Cap. 115).
In February 2014, the Court of Final Appeal upheld in GA & Ors v. Director of Immigration [(2014) 17 HKCFAR 60] that substantiated claimants and mandated refugees have no constitutional or other legal rights to work in Hong Kong.
Notwithstanding the above, the Director may exercise his discretion exceptionally and on a case-by-case basis to consider an application for permission to take employment from a substantiated claimant or mandated refugee (applicant) who has no other choice but be stranded in Hong Kong for a substantial period of time pending departure (or resettlement) and the prospect of the applicant's departure (or resettlement) in the near future is slim.
Our replies to the two parts of the question are as follows:
(1) Upon receipt of an application from a substantiated claimant or mandated refugee for permission to take employment in Hong Kong, the Director will be prepared to consider the application further if he is satisfied that the applicant has no other choice but be stranded in Hong Kong for a substantial period of time pending departure (or resettlement) and the prospect of the applicant's departure (or resettlement) in the near future is slim. The Director will consider such an application on a discretionary and exceptional basis, having regard to individual case merits and the entire circumstances of the case, taking into consideration an array of factors such as details of the intended employment and the prospective employer, personal 4828 LEGISLATIVE COUNCIL ─ 21 January 2015
circumstances and health condition of the applicant, security concerns (if any) to the community, impact on the relevant local employment sector, impact on the maintenance of effective immigration control in Hong Kong, whether there is any record of the applicant's failure to co-operate with the authority concerned in the course of any departure (or resettlement) arrangements, and so on. The Director will also take into account any strong compassionate or humanitarian reasons or other special extenuating circumstances when making the decision.
In order to facilitate the Director's consideration of the application, applicants are required to submit their requests with relevant information of the intended employment and the prospective employer, personal circumstances and health condition, and so on, with supporting documents where applicable.
(2) All applications for permission to take employment from a substantiated claimant or mandated refugee will be handled by the ImmD as soon as practicable. The time required to assess and decide on an application depends on the complexity of individual applications and whether the applicant has submitted all the required information and supporting documents in a timely manner. Among the applications received in 2014, the ImmD was able to make a decision in two to five weeks after all the required information and supporting documents had been received from the applicants. Applicants will be reminded by the ImmD that any failure to submit the required information or supporting documents clearly set out in the ImmD's correspondences will inevitably lead to longer processing time.
Regulation of Tenancy Agreements in Respect of Private Residential Units Under Stamp Duty Ordinance
10. MISS ALICE MAK (in Chinese): President, some grass-roots organizations have recently relayed to me that most of the tenancy agreements, made between landlords leasing out sub-divisions of flat units (commonly known as "sub-divided units"), cubicle apartments and caged homes and their tenants, LEGISLATIVE COUNCIL ─ 21 January 2015 4829 have not been stamped by the Stamp Office of the Inland Revenue Department in accordance with the relevant requirements under the Stamp Duty Ordinance (Cap. 117) (SDO), and stamp duty has not been paid. As such, the interests of the tenants will be undermined when the landlords breach any terms of the tenancy agreements. In this connection, will the Government inform this Council:
(1) of the number of cases in which tenancy documents of leased residential properties were stamped and the relevant amount of revenue on stamp duty, in each of the past five years;
(2) whether the authorities initiated in the past five years civil proceedings against landlords or tenants of leased residential properties for non-payment of stamp duty for their tenancy documents; if they did, of the annual numbers of such cases and the total amounts of tax being recovered; if not, the reasons for that;
(3) whether the authorities enforced the law proactively in the past five years by conducting random checks on whether the landlords and tenants of leased residential properties had fulfilled their obligations to submit tenancy documents to the Stamp Office and pay stamp duty; if they did, of the details; if not, the reasons for that, and whether the authorities will consider conducting such random checks; and
(4) whether the authorities have taken measures to publicize among landlords and tenants of leased residential properties that unstamped tenancy documents might not be accepted as evidence by the court in civil proceedings, thus rendering it difficult for the landlords or tenants to recover through judicial proceedings the losses suffered as a result of the counter party's breach of terms of the tenancy documents; if they have, of the details of such measures; if not, the reasons for that, and whether the authorities will consider taking relevant measures?
SECRETARY FOR TRANSPORT AND HOUSING (in Chinese): President, under section 4 and Head 1(2) of the First Schedule of the SDO, all the executing parties of a lease (that is, landlords and tenants) are liable for stamping the lease 4830 LEGISLATIVE COUNCIL ─ 21 January 2015 with the stamp duty payable. The reply to the four-part question raised by Miss Alice MAK is as follows:
(1) The number of leases stamped by the Stamp Office and the amount of stamp duty involved during the past five years are at Annex. The Stamp Office's statistics does not classify the leased properties involved by categories of residential properties or non-residential properties.
(2) If any unstamped lease is found, the Stamp Office will demand payment of the stamp duty involved and the associated penalty for late stamping under section 9 of the SDO from the relevant landlord and tenant. In general, landlords or tenants will make payments as demanded by the Stamp Office. The Stamp Office had not instituted any legal proceedings to recover outstanding stamp duty or penalty in respect of leases in the past five years.
(3) A lease executed in respect of an immovable property in Hong Kong is chargeable with stamp duty under the SDO. In discharging its duties, the Stamp Office will, from time to time, come across information of leased properties. Should there be leases executed in respect of these properties, the Stamp Office will investigate to ensure that the leases are duly stamped.
(4) Under section 15 of the SDO, no instrument chargeable with stamp duty (including a lease) shall be received in evidence in civil proceedings or shall be acted upon, filed or registered by any public officer or body corporate unless such instrument is duly stamped. Therefore, it is of utmost importance for landlords and tenants to execute tenancy agreements and have the agreement stamped with stamp duty paid in order to secure their interests. The Inland Revenue Department has explained such requirement on its website, and in the stamping procedures and explanatory notes in respect of leases. In addition, the Government will, as stated in the Long Term Housing Strategy, continue to work with relevant organizations to enhance public education efforts and to promote good tenancy practices.
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Annex
Number of leases stamped by the Stamp Office and the amount of stamp duty involved during the past five years
Year Number of leases Amount of stamp duty ($) 2010 273 415 460 million 2011 283 957 470 million 2012 273 943 480 million 2013 283 975 540 million 2014 295 462 560 million
Notes:
(1) The above leases do not include duplicates and counterparts.
(2) The Stamp Office's statistics does not classify the leased properties involved by categories of residential properties or non-residential properties.
Measures to Prevent Accidents Arising from Window Cleaning
11. MR CHAN KIN-POR (in Chinese): President, it has been reported that in recent years, accidents have happened from time to time in which people sustained injuries or even died as a result of falling from heights when cleaning windows. The causes for such accidents include that people fell from heights because they had lost balance due to overstretching of their bodies from windows, or people fell from heights together with dilapidated windows which had been dislodged as the latter could not support their body weights. In this connection, will the Government inform this Council:
(1) whether it has compiled statistics on the number and resultant casualties of accidents in which people fell from heights when cleaning windows; if it has, of the statistics in the past five years; if not, whether it will collect such statistics in future;
(2) given that a number of private buildings are not included in the Mandatory Window Inspection Scheme (MWIS) at present, of the measures that the authorities have put in place to ensure window safety of such buildings;
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(3) of the procedures adopted by the authorities at present for inspecting and repairing windows of public rental housing (PRH) blocks; and the monitoring measures in place to ensure that the inspection procedures comply with the relevant safety requirements; and
(4) of the current publicity work through which people are reminded of the need to pay attention to safety when cleaning windows; whether the publicity channels include television announcements in the public interest, or posters posted in the lift lobbies of buildings; the amount of resources deployed by the Government for conducting the relevant publicity work in each of the past five years; whether it has plans to allocate more resources this year to conduct large-scale territory-wide publicity activities with a view to enhancing the coverage of the publicity work, or to create a cartoon character similar to the "Big Waster" in the Food Wise Hong Kong Campaign in order to enhance public awareness about safety in window cleaning in a lively manner; if it does, of the details; if not, the reasons for that?
SECRETARY FOR DEVELOPMENT (in Chinese): President, Mr CHAN's question touches on matters under the purview of different bureaux and departments. My reply to the four-part question, in consultation with the relevant bureaux and departments, is as follows:
(1) Relevant departments have not maintained statistics on accidents in which members of the public fell from heights when cleaning windows. According to the records of the Labour Department, between 2010 and 2014, there were four accidents in which employees fell from heights when cleaning windows, involving four deceased employees.
(2) The Buildings Department (BD) fully implemented the Mandatory Building Inspection Scheme and the MWIS on 30 June 2012 to tackle the problem of building neglect at source. According to the Buildings Ordinance (BO) (Cap. 123), MWIS applies to private buildings aged 10 years or above (except domestic buildings not exceeding three storeys). The BD may issue a statutory notice to the owners of these buildings, requiring them to appoint a qualified LEGISLATIVE COUNCIL ─ 21 January 2015 4833
person within a specified time frame to carry out a prescribed inspection and supervise the prescribed repair works found necessary of the windows of the building.
Building owners are responsible for properly maintaining and managing their properties. We encourage owners to carry out regular inspections and repairs of their windows as necessary on their own initiative to ensure safety. Even if a building is not included in MWIS, where the BD has identified dangerous or defective windows, it will take enforcement action under BO, including issuing a repair order to the owner requiring him to carry out repair works, and instigating prosecution against owners who have not complied with the repair orders. The BD, the Hong Kong Housing Society (HKHS) and the Urban Renewal Authority (URA) have also launched various schemes to provide financial and technical support to building owners in need to assist them in maintaining and repairing their properties including windows.
(3) The Hong Kong Housing Authority attaches great importance to building safety, including window safety, of its PRH flats. While MWIS does not cover PRH flats, the Total Maintenance Scheme of the Housing Department (HD) includes window inspection which is conducted by trained inspectors. If there is a need to repair the windows, the case will be referred to contractors registered under BO. The HD will also supervise the repair works to ensure its quality.
(4) The BD has launched television and radio Announcements of Public Interest (APIs) in respect of window safety, published a booklet Important Notes about Window Safety, and so on, to provide practical information about proper maintenance and repair of aluminium windows, minor works relating to windows and MWIS to the public for reference. The Important Notes about Window Safety booklet has been uploaded to the BD's website. The BD will regularly arrange the APIs to be broadcast on television, radio and public transport vehicles. It will also launch newspaper supplements and issue letters to owners' corporations (OCs) and mutual aid committees to remind building owners and occupiers to pay attention to safety when cleaning windows. Moreover, the BD 4834 LEGISLATIVE COUNCIL ─ 21 January 2015
will organize large-scale publicity events for members of the public such as "Building Safety Carnival" and "Building Safety Week" to enhance their understanding of the importance of building and window safety through diversified activities. To complement the launch of MWIS, the BD, in collaboration with the HKHS and the URA, will organize district briefing sessions for owners of target buildings throughout the territory to explain the details of the scheme. The BD will also attend residents' meetings and seminars arranged or organized by district organizations or OCs to publicize MWIS in the community and answer residents' enquiries. The BD will continue to promote window safety through different channels. The relevant work is part of the overall duties of the BD in promoting building safety and there is no breakdown of the expenditure for the related work. As regards whether publicity would be carried out by means of a cartoon character, the BD will adopt an open mind in considering the suggestion.
Concerning PRH, through various channels, the HD from time to time reminds tenants of the proper use of windows and draws their attention to the safety issues when cleaning windows, including posting up notices, holding estate activities, distributing newsletters, and so on. In order to prevent accidents, the HD also reminds tenants to immediately report any damages to windows in their units to the estate offices for repair.
Separately, the Occupational Safety and Health Council (OSHC) has issued publications relating to the work of domestic helpers, which covers safety measures for household window cleaning. The OSHC will also continue to organize regularly courses on working-at-height safety for household workers and domestic helpers and publicity activities to enhance their safety awareness of window cleaning.
Treatment of Animals in an Ecopark in Yuen Long
12. DR HELENA WONG (in Chinese): President, recently, there have been press reports that the animals in the Tai Tong Organic Ecopark (the Ecopark) in Yuen Long were inhumanly treated. For instance, a cow was forced to pull a LEGISLATIVE COUNCIL ─ 21 January 2015 4835 wooden cart carrying eight to 10 visitors, goats were tied up to a wire fencing to make it easier for visitors to feed them but with ropes that were too short for the goats to squat down, as well as wild boars were kept in a steel cage only 1 m tall. There were also injured animals in the park which had not received proper diagnosis and treatments. I have visited the park on two occasions to understand the situation. In this connection, will the Government inform this Council:
(1) whether it received complaints about cruelty to animals in the Ecopark in the past three years; if it did, of the number of complaints received each year;
(2) whether the relevant department deployed its staff, in the past three years, to the Ecopark to inspect how animals there were treated; if it did, of the number of inspections conducted each year, and whether there were instances of the person-in-charge of the Ecopark being found to have allegedly contravened the Prevention of Cruelty to Animals Ordinance (Cap. 169);
(3) whether it has, after the press coverage of the above situation, made recommendations to the person-in-charge of the Ecopark on improving the ways to treat animals; if it has, of the details; if not, the reasons for that; and
(4) given that visitors have to pay a fee for admission to the Ecopark to see, approach or feed the animals there, whether it has assessed if the person-in-charge of the Ecopark is required to obtain the relevant licence or permit under the Public Health (Animals and Birds) (Exhibitions) Regulations (Cap. 139F) (the Regulations); if the assessment result is in the affirmative, whether it has investigated if the facilities and activities in the Ecopark meet the requirements on the living environment and hygiene of animals prescribed under the Regulations; if it has not investigated, of the reasons for that?
SECRETARY FOR FOOD AND HEALTH (in Chinese): President, the Government has been striving to promote in the community a culture of care for animals with a view to protecting animal welfare. According to the Prevention of Cruelty to Animals Ordinance (Cap. 169), any person who cruelly treats an 4836 LEGISLATIVE COUNCIL ─ 21 January 2015 animal or causes it unnecessary suffering shall be liable on summary conviction to a fine of $200,000 and to imprisonment for three years.
My reply to the various parts of the question is as follows:
(1) The Agriculture, Fisheries and Conservation Department (AFCD) received one and two complaints in 2012 and 2013 respectively about alleged inhumane treatment of animals in the Ecopark in Yuen Long. In 2014, six complaints were received, of which five were received in December.
(2) The AFCD inspected the Ecopark in Yuen Long on 18, 19 and 17 occasions in 2012, 2013 and 2014 respectively and did not find any contravention of provisions in the Prevention of Cruelty to Animals Ordinance (the Ordinance). The AFCD received in December 2014 a complaint alleging that animals in the Ecopark had been treated inhumanely. The AFCD immediately sent officers to the park to conduct investigation. Since December 2014, the AFCD officers had conducted two inspections to the Ecopark and did not find any contravention of provisions in the Ordinance.
(3) As mentioned above, the AFCD, after inspecting the Ecopark, did not find any suspected cases of cruelty to animals which are in contravention of provisions in the Ordinance. Nevertheless, the AFCD officers had reminded the person-in-charge of the Ecopark that due attention should be given to animal welfare and hygiene management. For example, a suitable cart should be used and the number of passengers properly controlled in oxcart activities so as to avoid overloading and injuring the animals. Animals should be allowed enough free time. For leashed or captive animals, the leashes used should be long enough to enable the animals to turn around and squat down, and the enclosures should be high enough to allow enough space for the animals to stretch while standing. Adequate water should be provided on a timely basis and appropriate bedding material should also be supplied.
(4) Under the Regulations, any person who holds an exhibition of animals or birds is required to obtain a relevant licence or permit from the Director of Agriculture, Fisheries and Conservation. LEGISLATIVE COUNCIL ─ 21 January 2015 4837
"Exhibition of animals or birds" means an exhibition of animals or birds to which members of the public are admitted on payment of a fee or other money consideration. Any person who contravenes the relevant provisions shall be liable on conviction to a fine of $2,000.
As to whether a park engaged in exhibitions of animals or birds is required to obtain a licence or permit under the Regulations, it depends on whether its mode of operation falls within the relevant definition of the Regulations. The AFCD is following up the case and will take enforcement action as appropriate against any breach of the law.
Review of Scheme of Control Agreements
13. MR WONG KWOK-HING (in Chinese): President, in December last year, the Consumer Council published a report entitled "Searching for New Directions ― A Study of Hong Kong Electricity Market" (the report). The report has pointed out that as the Scheme of Control Agreements (SCAs), signed by the Government respectively with the Hongkong Electric Company, Limited (HKE) and the CLP Power Hong Kong Limited (CLP), will expire in 2018, the next two years will be critical for a review of the policy on the electricity market. On the other hand, there have been voices in society that it is necessary to review the current mode of regulation of the electricity market, step up the implementation of the clean energy policy, assist grass-roots families to cope with electricity expenses, and increase the energy efficiency of power generation, and so on. In this connection, will the Government inform this Council:
(1) as the report has pointed out that the current SCAs enable the two power companies to earn a high risk-free permitted profit and pass business risks on to the consumers to an undue degree, whether the Government has considered conducting a study on reducing the permitted profit concerned when it reviews the policy on the electricity market; if it has considered, of the details; if not, the reasons for that;
(2) as the report has pointed out that renewable energy (RE) currently accounts for only 1% to 3% in the electricity mix of the electricity supply in Hong Kong, whether the Government has considered 4838 LEGISLATIVE COUNCIL ─ 21 January 2015
requesting the two power companies to increase the proportion of RE in the electricity mix; if it has considered, of the details; if not, the reasons for that;
(3) as the report has pointed out that the existing plant margin of the two power companies has reached 40% to 45% on average, whether the Government will, when reviewing the policy on the electricity market, request the two power companies to reduce the plant margin to 25% as suggested by the report; if it will, of the details; if not, the reasons for that;
(4) whether it has installed RE (for example, solar energy) power generation facilities in the public facilities and housing in various districts (in particular the newly developed districts), so as to encourage members of the public to use clean energy and reduce the reliance on non-renewable energy; if it has, of the details; if not, the reasons for that; and
(5) whether it will introduce special measures (for example, provision of electricity charges subsidies to grass-roots households on a regular basis, and installation of separate electricity meters for households residing in sub-divisions of flat units, which are commonly known as sub-divided units, and so on) to alleviate the pressure of electricity expenses on grass-roots families; if it will, of the details; if not, the reasons for that?
SECRETARY FOR THE ENVIRONMENT (in Chinese): President, our reply to the various parts of the question is set out below:
(1) In formulating the energy policy for Hong Kong, the Government has all along been upholding the four policy objectives of safety, reliability, affordability and environmental performance. The current SCAs signed between the Government and the two power companies will expire in 2018. The Government is conducting a review of the future development and the regulatory framework of the electricity market upon the expiry of the SCAs. In conducting the review, we will ensure that electricity supply will meet the LEGISLATIVE COUNCIL ─ 21 January 2015 4839
energy policy objectives, and pay due regard to the goal to introduce competition to the electricity market. We will consider the views received during the public consultation on future fuel mix for electricity generation conducted earlier, as well as those from various sectors received during the earlier reviews such as the tariff reviews and the 2013 Mid-term Review of the SCAs, including the public's opinions relating to the current level of permitted rate of return. We plan to consult the public on the outcome of the review in the first half of this year.
(2) and (4)
Generally speaking, the generation of RE relies on natural resources, such as solar, wind and hydro power. However, the physical environment of Hong Kong has imposed a lot of constraints on the wide application of such RE. Also, the cost of electricity generation using RE is a few times higher than that of conventional electricity generation. This notwithstanding, the Government has been promoting the application and development of RE in respect of policy and public works where technically feasible and cost effective.
To promote the development of RE, the Government has provided economic incentives to the power companies under the SCAs, in terms of a higher permitted rate of return for their investment in RE facilities, and an incentive adjustment in the permitted return depending on the extent to which RE is used in electricity generation.
The HKE has put in place a solar power system at the Lamma Power Station, with a capacity of 1 000 kW. A wind turbine unit has also been installed at Tai Ling on Lamma Island, with an installed capacity of 800 kW. Besides, the CLP has installed RE generation system on Town Island, with a capacity of about 200 kW.
Regarding the application of RE, the Government has promulgated the technical circular on "Adoption of Energy Efficient Features and Renewable Energy Technologies in Government Projects and 4840 LEGISLATIVE COUNCIL ─ 21 January 2015
Installations", requiring government departments to consider the adoption of RE technologies (including solar power) in all new government buildings and major retrofitting projects in existing government buildings. The technical circular also sets out that for buildings with a footprint area greater than 1 000 sq m, photovoltaic panels should be installed where practicable with due consideration given to the shading effects caused by nearby buildings and structures. Besides, the Government promulgated a comprehensive target-based green performance framework for government buildings, which, inter alia, sets targets in adoption of RE for new government buildings. All new schools and educational buildings without air-conditioning should aim to have at least 0.5% of their electricity consumption to be provided by RE, where technically and financially viable. Other government buildings should also incorporate RE technologies as far as reasonably practicable.
Having regard to actual site conditions, the Government has been installing RE systems in various government building and public facilities, including government offices, departmental headquarters, fire stations, prisons, museums, art and cultural venues, parks, playgrounds, town halls, recreational centres, holiday villages, theatres, government quarters, hospitals, schools, sewage treatment plants and landfills, and so on. As at September 2014, more than 180 projects with RE facilities at government buildings and public facilities have been completed.
On the other hand, the Hong Kong Housing Authority (HA) has been installing grid-connected photovoltaic system in newly built public rental housing developments which are considered appropriate for installation since 2011. As at end 2014, the HA has installed photovoltaic system with a total capacity of around 280 kW in 21 residential buildings.
The Government has also been providing funding support to schools and non-governmental organizations (NGOs) to set up RE facilities such as solar panels, wind turbines and solar water heaters through the Environment and Conservation Fund. As at end of December LEGISLATIVE COUNCIL ─ 21 January 2015 4841
2014, a total of 337 projects have been provided with funding support for the installation of these facilities, including 309 projects at schools, six at camp sites and four at organic farms for public use, and 18 at service units of NGOs (such as elderly homes). Through demonstration of these cases in the community, the Government aims to encourage more residential estates and commercial and industrial buildings to follow suit, thereby further promoting the use of RE.
When we consult the public on the future development and regulatory framework of the electricity market later this year, we will also seek their views on the development and application of RE.
(3) In order to ensure the reliability of electricity supply, the power companies need to have sufficient reserve capacity for meeting increase in electricity demand, shutting down of the generating units during maintenance and emergencies, and so on. The actual reserve margin of the two power companies will vary as a result of addition of generating units and variation in electricity demand. For example, there will be a step jump in reserve capacity upon the commissioning of a new generating unit. And the electricity demand can often vary due to economy factor, weather, and so on.
With the support of independent energy consultants, the Government conducts stringent review of the two power companies' proposals on capital investments to ensure that these projects are necessary, and to avoid excessive, premature, unnecessary or unreasonable investments. Furthermore, to protect the consumers against any loss arising from premature commissioning of new generating units, the Mechanism for Treatment of Excess Generating Capacity in the SCAs requires that if the new generating units of the power companies cannot pass the test for excess generating capacity in the first two years upon commissioning, a portion of its mechanical and electrical equipment costs will not be counted as fixed assets for calculating the return for the power companies, until they pass the test.
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In the coming few years, with the scheduled retirement of some of the coal-fired generators of the power companies, it is estimated that the reserve margin of the power companies in 2018 will drop to around 20% to 30%.
(5) Overall, electricity tariffs in Hong Kong are lower than those of many cosmopolitan cities. Households in Hong Kong on average spend less than 2% of their expenditure on electricity supply. In the past few years, the two power companies have been offering discounts or rebates to low consumption consumers to reduce their tariff level. While the consumption level does not necessarily correlate with family income, majority of the low income customers would likely fall within the group of low consumption customers, who could pay lower electricity tariff under the above tariff arrangement. Various concessionary schemes are also run by the two power companies to provide concessionary tariffs to needy people such as the elderly and the disabled, in order to reduce their burden of electricity tariff. Details of the concessionary schemes are set out in the Annex. The CLP has also been working with District Councils, social and welfare organizations and green groups to launch a community programme to give grass-roots families energy efficient electrical appliances to provide them with material support while helping them to save energy and cut down their electricity expenditure.
In addition, the two power companies provide assistance to tenants living in sub-divided flats to install individual electricity meters. For example, the CLP has been working with different organizations to identify tenants of sub-divided units who have obtained landlords' consent for installation of meters, and install meters for their units without charges. The CLP also waives the deposit required when these tenants open electricity accounts. The HKE is also considering how to provide assistance to tenants living in sub-divided flats. We would continue to encourage the two power companies to provide assistance to these customers.
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Annex
Concessionary tariff schemes operated by the two power companies in 2015
CLP HKE Tariff for Low Customers with consumption Customers with consumption Consumption of not more than 400 units per of not more than 100 units in Consumers bimonthly bill are entitled to a month are entitled to receive an Energy Saving Rebate at a 5% Super Saver Discount. following rates: - 17.2 cents per unit for total consumption not more than 200 units per bimonthly bill; - 16.2 cents per unit for total consumption between 201 to 300 units per bimonthly bill; - 15.2 cents per unit for total consumption between 301 to 400 units per bimonthly bill.
Concessionary Customers aged 60 or above Customers under Tariff who live either alone or with Concessionary Tariff Scheme other similarly qualified for the Elderly/Disabled/ elderly, and who are relying Single-Parent Families/ on or entitled to Unemployed are entitled to Comprehensive Social receive 60% discount for the Security Assistance, are first 200 units of electricity entitled to apply for the consumed in a month plus the Concessionary Tariff for the exemption of the payment of Elderly. deposit and Minimum Charge. The Super Saver The approved applicant will Discount is also applicable to be offered half-price for the customers under the first 400 units of electricity Concessionary Tariff Scheme. consumed in two months plus an exemption of the minimum charge per bimonthly bill.
The Energy Saving Rebate for Residential Tariff is still applicable to these customers.
4844 LEGISLATIVE COUNCIL ─ 21 January 2015
Car Parks Under Hong Kong Housing Authority
14. MR TONY TSE (in Chinese): President, given the low occupancy rates of some parking spaces in the car parks under the Hong Kong Housing Authority (HA) in recent years, the HA is taking various measures to improve the utilization of the parking spaces concerned and is converting surplus car-park facilities into other uses. In this connection, will the Government inform this Council:
(1) of the respective average occupancy rates of the monthly parking spaces and hourly parking spaces in HA's car parks in each of the past five years;
(2) whether HA has set targets on the occupancy rates of the parking spaces in its car parks; if HA has, of the details; of the criteria or indicators based on which HA has set such targets; how the occupancy rates of parking spaces mentioned in part (1) compare with such targets and of the improvement measures;
(3) of the information on the 10 car parks, among all car parks under HA, which recorded the lowest overall occupancy rates of parking spaces in the past three years (set out in the table below);
Average Average Public Year in which occupancy Total number occupancy housing estate the car park rate of of parking rate of hourly where the car was monthly spaces parking park is located commissioned parking spaces spaces 1 2 … 10
(4) whether it has assessed the causes for the low occupancy rates of the parking spaces in the car parks mentioned in part (3); if it has assessed, of the outcome and whether it will take measures to boost the occupancy rates of parking spaces; if it has not assessed, the reasons for that and whether it will conduct such an assessment in future;
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(5) of HA's new plans to convert surplus car-park facilities into other uses, and set out, by district and by public housing estate, the number of parking spaces as well as the floor areas and the new uses involved; and
(6) whether HA will conduct a comprehensive review of the cost effectiveness of its plans to change the uses of car-park facilities, including the utilization of the newly added facilities; if HA will, of the details?
SECRETARY FOR TRANSPORT AND HOUSING (in Chinese): President, the primary objective of the HA is to formulate and implement public housing programmes to achieve the policy objective of providing public rental housing (PRH) for low-income families who cannot afford to rent private accommodation. The operation of the HA's commercial facilities aims to provide PRH residents with basic facilities and services that serve their daily needs. As residents' needs change over time, the HA will from time to time review the operation of its commercial facilities to meet the residents' needs.
As for the car-parking facility, the HA has been actively improving the efficiency in the utilization of such facilities in order to meet residents' evolving needs and to make effective use of resources. As at end of 2014, there are 130 carparks under HA, providing a total of about 28 200 parking spaces, amongst which about 25 300 are monthly parking spaces (about 90%) and the remaining 2 900 or so are let out to visitors on an hourly basis.
My reply to the six-part question raised by Mr Tony TSE is as follows:
(1) The occupancy rates of monthly parking spaces in the HA's carparks for the past five years are set out at Annex A. Regarding the hourly parking spaces, as the utilization rate varies greatly throughout different time slots in a day and between holidays, and so on, it is difficult to work out the overall occupancy rate. As such, the HA does not collect such statistics.
(2) The HA formulates a performance indicator for the occupancy rate of monthly parking spaces in its carparks for every year. The target for 2014-2015 is 82% or above. The indicator is set with reference to the occupancy rate of carparks in recent years, the number of 4846 LEGISLATIVE COUNCIL ─ 21 January 2015
newly built parking spaces and the projected economic situation in the coming year. The overall occupancy rate of monthly carparks has increased annually for the past five years. The letting position during this period was satisfactory, achieving the relevant performance indicators.
(3) Information on the 10 carparks which have the lowest average occupancy rate for the monthly parking spaces in the past three years is set out in Annex B. As mentioned above, the utilization rate of hourly parking spaces varies greatly throughout different time slots in a day and between holidays, and so on, the HA does not collect such statistics.
(4) The main reasons for the relatively low usage in the 10 carparks listed in Annex B include, carparks are located in remote areas of outlying islands and ageing population, such that the residents of the estates or courts concerned do not or rarely have driving habits and needs; some of the carparks cannot be let to non-resident users because of the restrictions in land leases or deeds of mutual covenants; and the surplus parking spaces in some carparks are not suitable for conversion into other uses to improve the utilization efficiency because of the constraints in the original design of the carparks (for example, limited height between floors).
As mentioned above, the HA will from time to time review the occupancy rate of and the demand for various types of parking spaces in individual carparks, adopt a flexible approach in letting and make conversion in response to changes in demand. For instance, surplus monthly parking spaces are converted into hourly parking spaces or the types of parking spaces that have a greater demand (such as changing surplus parking spaces for private cars to parking spaces for motorcycles, which are of greater demand).
Also, subject to the terms in the vesting orders and land leases of the estates/courts concerned, the HA will seek permissions and waivers from the Town Planning Board and the Lands Department for letting parking spaces to non-resident users in order to maximize the utilization efficiency of carparks and meet the evolving needs of carpark users so as to ensure the efficient use of resources.
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(5) The HA's Commercial Properties Committee has approved several carpark conversion projects since 2006. Those completed projects involved more than 900 parking spaces. After conversion, new spaces of more than 17 000 sq m (Internal Floor Area) were made available for lease to non-governmental organizations, institutions and commercial tenants, including the Speedpost Hub at Lei Yue Mun Estate Carpark in Yau Tong, welfare facilities at Shek Pai Wan Estate Carpark in Aberdeen, educational institution facilities at Nam Shan Estate Carpark in Shek Kip Mei and retail premises at Ping Shek Estate Carpark in Kwun Tong. These conversion projects are effective in addressing residents' needs for different facilities and services as well as improving the overall utilization of carpark facilities. The HA will continue to consider converting surplus parking spaces into other suitable uses, having regard to the actual situation of individual carparks.
(6) The conversion of surplus parking spaces into other uses, by the HA after review, improves the efficiency of resources utilization. The overall occupancy rate of the monthly parking spaces in the HA's carparks increased from 60% in end 2005 (before implementation of conversion projects) to an average of 87% in the first 11 months of 2014. All the converted premises were leased out for the provision of a variety of facilities and services, including welfare services by the abovementioned non-governmental organizations, educational facilities by local universities, and retail premises, and so on.
Annex A
Occupancy Rate of Monthly Parking Spaces in the HA's Carparks in the Past Five Years
Year Average Occupancy Rate (%) 2010 74 2011 78 2012 82 2013 85 2014* 87
Note:
* Including the average occupancy rate between January and November 2014
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Annex B
The 10 Carparks Which Have the Lowest Average Occupancy Rate for the Monthly Parking Spaces in the Past Three Years
Average Public housing occupancy rate of estate/court where Year of the Total number of monthly parking the carpark is carpark opening parking spaces spaces located (%) 1 Lung Tin Estate 1980 30 0 2 NganWan Estate 1988 8 0 3 Chai Wan Estate 2010 9 31 Tak Tin Estate 4 1991 10 40 (Tak Yan House) 5 Yee Tsui Court 1981 127 45 6 Cheung Wo Court 1984 340 48 7 Wah Fu (II) Estate 1970 542 54 8 Shan Tsui Court 1981 289 55 9 Cheung Shan Estate 1978 221 55 10 Wah Fu (I) Estate 1967 370 56
Assistance Provided to Human Rights Monitoring Groups
15. MS EMILY LAU (in Chinese): President, since 1996, Hong Kong Human Rights Monitor (HKHRM) has all along been sending observers to observe demonstrations that are of a more sensitive nature or higher risks. The observers make records of the situation on site in accordance with international standards, which will then be used for preparing reports, comments and recommendations, and they incorporate their observations into the human rights reports submitted by HKHRM to various human rights bodies of the United Nations. However, the Director of HKHRM (the Director) has recently pointed out that during their operation to disperse the road occupiers in the vicinity of Lung Wo Road on 15 October last year, the Police restricted the observers' activities and even treated them rudely. He has also pointed out that according to the General Comment No. 34 on Article 19 of the International Covenant on Civil and Political Rights (ICCPR) published by the United Nations Human LEGISLATIVE COUNCIL ─ 21 January 2015 4849
Rights Committee in 2011, it is normally incompatible with paragraph 3 of the article for a State party to restrict freedom of movement of journalists and human rights investigators within the State party (including to conflict-affected locations). In this connection, will the executive authorities inform this Council:
(1) as the Director has indicated that the Police did give a written undertaking to assist HKHRM observers in conducting their observations during demonstration and petition activities, of the relevant details; whether such written undertaking is still valid;
(2) whether the Police had, before the aforesaid dispersion operation, instructed the police officers responsible for the operation to assist the observers in their work; if the Police had, of the details; whether the authorities have received complaints about police officers obstructing the observers' work during the operation; and
(3) whether they have assessed if the Police had violated the aforesaid article of ICCPR in the dispersion operation; if they have not, of the reasons for that?
SECRETARY FOR SECURITY (in Chinese): President, the Police always handle public order events in a fair, just and impartial manner in accordance with the laws of Hong Kong. The enforcement policy of the Police is to endeavour to strike a balance by facilitating all lawful and peaceful public meetings and processions on the one hand, and on the other hand minimizing the impact of such activities on members of the public and road users, and ensuring public order and public safety.
Provisions of the ICCPR applicable to Hong Kong, including Article 19 on the freedom of opinion and expression and Article 21 on the right of peaceful assembly, have been incorporated into the Hong Kong Bill of Rights Ordinance (Cap. 383, Laws of Hong Kong). As stated in Article 19 of ICCPR and Article 16 of the Hong Kong Bill of Rights, the exercise of the right to freedom of expression carries with it special duties and responsibilities. It may therefore be subject to certain restrictions. In exercising the abovementioned rights, any person shall respect the rights of others and shall not compromise public order and public safety.
4850 LEGISLATIVE COUNCIL ─ 21 January 2015
In handling the confrontations on Lung Wo Road and its vicinity on 15 October 2014, the Police took public safety, public order and reopening of the blocked roads as their primary tasks. On that day, some radical protesters vehemently charged the police cordon lines, threw objects from the overpass at the carriageway where traffic was running or set up obstacles on the road, resulting in a very dangerous and chaotic situation. After repeated but futile advice and warning, the Police took decisive enforcement actions to disperse protesters in the unlawful assembly so as to stop their acts that went against public safety and public order.
As a matter of fact, since 2012, the statutory Independent Police Complaints Council (IPCC) has, on a number of occasions, sent its members to conduct on-site observations over large scale processions and to attend procession preparatory meetings between the organizers and the Police, so as to assist members of IPCC in considering complaint cases arising from such events and allow them to have a more comprehensive understanding of public views and those of concern groups on the Police's handling of large scale public order events. In handling major public order events, the Police are subject to the independent and impartial monitoring by IPCC. Such monitoring shall be conducted in a lawful manner and cause no obstruction to police operations. The Police make proper arrangements to facilitate such monitoring work.
The Administration's reply to Ms Emily LAU's question is as follows:
(1) The Police and the representatives of the HKHRM met in July 2011 to exchange views on the Police's handling of public order events in detail. The Police stated clearly at the meeting that when handling public order events, they had the responsibility to take measures to balance the freedom and rights of protestors as well as those of others. The representatives of the Police also remarked that the Police respected the work of the organization concerned and welcome independent and well balanced observation. The Police hoped that members of the organization concerned would carry with them valid working identification and indicate their identities to the police officers on the scene when observing Police's enforcement operations, and that they would take into account their personal safety and co-operate with police actions when conducting observations.
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(2) and (3)
The Police will not restrict the organization concerned from conducting their observations of large-scale public order events as long as they are lawful and do not obstruct police operations.
When an act posing danger to others is occurring or is about to occur in a large-scale public order event, the primary duty of the Police is to adopt lawful measures to maintain public order, ensure public safety and prevent injury to life and damage to property. In fact, emergencies always arise in a split-second amid confrontations and chaos, which may inflict casualties. In this connection, members of the organization concerned must, when conducting observations, take into account their own safety and wear easily-identifiable clothing while at the same time co-operate with the Police and take heed of on-scene police officers' instructions to avoid hindrance to their operations.
Any person or organization dissatisfied about the Police's enforcement operations may lodge a complaint, and the Complaints Against Police Office shall follow up on such a complaint under the statutory two-tier police complaints handling mechanism.
Support for Declining Industries
16. DR LAM TAI-FAI (in Chinese): President, in a consultation paper on the new agricultural policy published in December last year, the Government proposed that an area of about 70 to 80 hectares of private agricultural land in the New Territories be acquired with public money through land resumption pursuant to the Lands Resumption Ordinance (Cap. 124) for setting up a government-run Agri-Park. The farmland in the Agri-Park will be leased at market rates to farmers affected by government development projects for agricultural rehabilitation and to other interested farmers as well. The Government also proposed to establish a Sustainable Agricultural Development Fund (SADF) to subsidize scientific researches on agriculture. However, some members of the industrial sector have relayed to me that while the Government proactively implements policies in support of agricultural development, it has 4852 LEGISLATIVE COUNCIL ─ 21 January 2015 turned a blind eye to the gradual decline of local industries. They consider that such a practice is favouritism, with the needs of industries for sustainable development being ignored. In this connection, will the Government inform this Council:
(1) as the authorities have pointed out that the agricultural sector would decline further without active government intervention, and local industries are declining as well, of the reasons why the Government has not implemented measures to actively support the development of industries, for example, purchasing factory buildings and leasing them to manufacturers;
(2) of the current numbers and areas of farmland in the territory and, among them, the respective numbers and areas of fallow farmland and active farmland, with a breakdown by District Council (DC) districts;
(3) of the respective current numbers and areas of farmland in the territory owned by indigenous residents and non-indigenous residents as well as those owned in the name of a company and, among them, the respective numbers and areas of fallow farmland and active farmland, with a breakdown by DC districts;
(4) of the number of people engaged in farming in the territory in each of the past 10 years, and its percentage in the labour force;
(5) of the value of local agricultural output in each of the past 10 years, and its percentage share in the gross domestic product (GDP);
(6) whether it has made a forecast, with the implementation of the recommendations made in the aforesaid consultation document, of the number of people to be attracted to engage in farming as well as the added value to be contributed to GDP and its percentage in GDP; if it has, of the details; if not, the reasons for that;
(7) of the rationale and criteria for setting the area of the Agri-Park at about 70 to 80 hectares;
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(8) how the authorities will select the site for the Agri-Park among the many suitable agricultural lots available; whether they have assessed the locations of the lands which are currently most suitable for development as the Agri-Park; if they have, of the details, together with a list of such lands by DC districts; if not, the reasons for that;
(9) of the conditions, criteria and procedures for land resumption involved in setting up the Agri-Park as well as the amount of compensation per square foot;
(10) whether it has assessed the amount of public money needed for resumption of 70 to 80 hectares of land; if it has, of the details; if not, the reasons for that; whether it will set a ceiling on the expenditure and reduce the area of the Agri-Park when the estimated total amount of compensation exceeds the ceiling;
(11) whether it has assessed the number of years required for recovering the land resumption cost; if it has, of the details; if not, the reasons for that;
(12) of the estimated number of lessees in the first year of commissioning of the Agri-Park;
(13) whether it has assessed if the setting up of the Agri-Park will dampen the development of similar private agricultural projects and result in competition with the private sector for profits;
(14) as the authorities have indicated that farmers interested in operating in the Agri-Park will be subject to evaluation of their capability and capacity to meet the tenancy conditions in terms of production targets and technological requirements, of the details of the evaluation concerned as well as the conditions for meeting such targets and requirements;
(15) whether it has assessed if Hong Kong's current level of agrotechnology is adequate to support the implementation of applying advanced technology in farming in the Agri-Park;
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(16) whether it will request local universities to run courses on agricultural studies so as to nurture agriculture-related talents for promoting and implementing the application of advanced technology in farming; and
(17) whether it will lease the farmland in the Agri-Park to holiday farmers or amateur farmers; if it will, of the details; if not, the reasons for that?
SECRETARY FOR FOOD AND HEALTH (in Chinese): President, the local agricultural industry has been diminishing in the course of time as Hong Kong moves towards a predominantly urbanized and service-oriented economy. In recognition of the benefits of sustainable agriculture to society and the growing public aspirations for balanced development of Hong Kong, the Government sees a strong case for adopting a more proactive policy towards the modernization and sustainable development of local agriculture. This will allow Hong Kong to provide its own good quality agricultural produce on the one hand and promote the development of related industries on the other, bringing greater benefits to the community as a whole.
On 29 December 2014, the Government published a consultation document entitled "The New Agricultural Policy: Sustainable Agricultural Development in Hong Kong" to seek public views on the new policy. The consultation document put forward, among other things, a number of supportive measures which include (i) exploring the feasibility of establishing an Agricultural Park (Agri-Park); (ii) considering the establishment of a SADF; (iii) strengthening the existing support to help farmers move up the value chain, such as marketing of their agricultural produce and brand building; and (iv) promoting other auxiliary activities related to agriculture such as leisure farming and educational activities for students and the public.
The consultation period will end on 31 March 2015. The Government will take into account the feedback received, and formulate specific proposals and devise the implementation plan subject to the resources available and approval of the relevant authorities.
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My reply to the various parts of the question is as follows:
(1) The benefits that sustainable development of agriculture may bring to the community are multi-fold. In recent years, public perceptions about the future development of local agriculture have changed, and people generally agree that agricultural development could bring positive impacts to the sustainable development of Hong Kong. The new agricultural policy has been formulated in response to public calls as well as people's aspirations favouring the balanced development of Hong Kong in future.
On other industries, the Government has put in place many supportive measures, such as the SME Loan Guarantee Scheme, SME Export Marketing Fund, SME Development Fund, Dedicated Fund on Branding, Upgrading and Domestic Sales as well as the Support and Consultation Centre for SMEs of the Trade and Industry Department. These measures have been providing support to various sectors (including the traditional industries) in the areas of financing, communication and enhancement of competitiveness.
Given the limitations on land supply and manpower resources in Hong Kong, we consider that our traditional industries should progress towards high value-added or high technology, such as deploying resources to product development and design, brand promotion and management, and research and development. The Government is committed to rendering support in these areas, including the provision of software and hardware support to promote local innovation and technological development (such as the Hong Kong Science Park and the Innovation and Technology Fund); organization of various activities and provision of information for enhancing the trade's knowledge about brand development; and the promotion of "Hong Kong brands" and the provision of platforms for Hong Kong enterprises to showcase their products through the Hong Kong Trade Development Council.
(2) The size of active and fallow farmland over the territory by District Council districts in 2013 is listed below:
4856 LEGISLATIVE COUNCIL ─ 21 January 2015
Active Fallow Total area of District farmland farmland farmland (hectare) (hectare) (hectare) 1. Central & Western 0 0 0 2. Wan Chai 0 0 0 3. Eastern 0 0 0 4. Southern 4 15 19 5. Yau Tsim Mong 0 0 0 6. Sham Shui Po 0 0 0 7. Kowloon City 0 8 8 8. Wong Tai Sin 0 8 8 9. Kwun Tong 0 0 0 10. Tsuen Wan 20 94 114 11. Tuen Mun 69 91 160 12. Yuen Long 220 739 959 13. Kwai Tsing 2 17 19 14. Islands 35 427 462 15. North 286 1 260 1 546 16. Tai Po 61 541 602 17. Sai Kung 20 407 427 18. Sha Tin 12 187 199 Total 729 3 794 4 523
Note:
Source of information: AFCD's survey data
(3) The Government does not keep the information requested
(4) The number of workers engaged in farming in Hong Kong and its ratio to the total labour force for the period from 2005 to 2014 are listed below:
Number of workers* Year Ratio to total labour force^ engaged in farming 2005 3 200 0.1% 2006 4 300 0.1% 2007 4 700 0.1% 2008 4 300 0.1% LEGISLATIVE COUNCIL ─ 21 January 2015 4857
Number of workers* Year Ratio to total labour force^ engaged in farming 2009 4 300 0.1% 2010 4 300 0.1% 2011 4 200 0.1% 2012 4 100 0.1% 2013 4 000 0.1% 2014 3 900 0.1%
Notes:
* Source of information: AFCD
^ Source of information: Census and Statistics Department (C & SD)
(5) The gross production value of local agriculture and its contribution to GDP for the period from 2005 to 2014 are listed below:
Production value of local* Year Contribution to GDP agriculture ($ million) 2005 1,181 0.03% 2006 1,184 0.03% 2007 1,093 0.03% 2008 687 0.02% 2009 558 0.01% 2010 615 0.01% 2011 743 0.01% 2012 766 0.02% 2013 776 ―^ 2014 830 ―^
Notes:
* Including production value of crop and livestock
^ Information is not yet available from C & SD.
Source of information: C & SD
(6) The proposals put forward in the consultation document will help stabilize the supply of farmland, promote the use of advanced 4858 LEGISLATIVE COUNCIL ─ 21 January 2015
farming techniques and improve financial assistance, allowing farmers to adopt more modernized and diversified production methods with a view to strengthening the development of local agriculture. With the new policy and relevant measures in place, we believe that those who aspire to become farmers will join the industry and the overall productivity of local agriculture will be scaled up gradually.
Based on the proposed scale of the Agri-Park, it is estimated that the value of local agricultural produce will increase by about $200 million. Taking vegetables as the basis for estimation, the overall production capacity is expected to increase by about 25% (approximately 4 000 tonnes).
(7) The main objective of establishing an Agri-Park is to facilitate knowledge transfer in agricultural science and agro-business management for enhancing productivity, thereby increasing local agricultural production. The Agri-Park will serve as a base for experimenting with new agricultural practices for commercial production and promoting the application of advanced technology to agricultural uses, thereby encouraging other farms to develop and adopt modernized and diversified production methods. Moreover, eligible farmers displaced by development projects on Government land may re-establish their farms in the Agri-Park. According to our preliminary idea, the area of the Agri-Park will be in the range of 70 to 80 hectares (about one-tenth of the size of the farmland currently under active farming), which enables us to achieve economy of scale and ensure that the Agri-Park will be viable in meeting its objectives.
(8) The Government has set out in the consultation document the conceptual plan of setting up an Agri-Park. The Government will take into account the views of the relevant stakeholders, the public and the Legislative Council and further suggestions collected during the consultation period before deciding whether to proceed with its implementation and formulate an implementation plan. There is no concrete proposal for the potential site at present.
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As mentioned in the consultation document (paragraph 4.9), in identifying the potential site for the proposed Agri-Park, the Government is looking to farmland which is zoned "Agriculture" in existing statutory plans but largely remains fallow, and which would be basically ready for starting agricultural activities. The area should be relatively unspoiled, with soil and water quality favourable for agricultural purpose, and provided with the essential and operational agricultural infrastructure, such as access footpaths and irrigation channels. The site may consist of fallow farmland and some active farmland. To achieve economy of scale and the objectives of the Agri-Park, the site should be of sufficient size.
(9) to (11)
Much of the farmland in the territory is privately held and ownership is usually fragmented. As proposed by the Government in the consultation document (paragraph 4.14), if the initiative of setting up an Agri-Park in Hong Kong is to proceed, the lots concerned will be acquired through land resumption pursuant to the Lands Resumption Ordinance (Cap. 124).
If the Agri-Park is to be set up through the resumption of private land, the Government will offer ex-gratia or statutory compensation to the land owners in accordance with the existing policies and relevant legislation as applicable. The amount of compensation will be calculated by the relevant department on the basis of the applicable rate at the time of making the compensation and the relevant compensation zones. The compensation rate is regularly updated under an established mechanism. Land owners who do not agree with the amount of compensation may make their claims to the authorities concerned under the existing mechanism, including referring their cases to the Lands Tribunal for determination of statutory compensation.
The Government has outlined the conceptual plan for setting up the Agri-Park. Whether this will proceed as suggested, the size of it and whether the lots concerned will be acquired through the resumption of private land are issues that will be further considered after the consultation period. We will take into account the views 4860 LEGISLATIVE COUNCIL ─ 21 January 2015
received when finalizing the proposal. If this is implemented, the Government will seek funding approval by the Legislation Council in accordance with the established procedure.
(12) At present, the average size of a farm in Hong Kong is 0.2 hectare only. Based on this, the Agri-Park (of a size of 70 to 80 hectares) can accommodate several hundred farmers. As currently active farmers will be allowed to carry on farming in the Agri-Park and there will be a need to accommodate farmers affected by development projects, we estimate that around 100 tenants may operate in the Agri-Park in its first year.
(13) The Agri-Park is intended mainly for farmers engaged in crop farming and commercial production. It will serve as a base for experimenting with new agricultural practices for commercial production and promoting the application of advanced technology to agricultural uses, and for demonstration of feasible modes of modernized and diversified production. The Agriculture, Fisheries and Conservation Department (AFCD) will assist other farmers through experience sharing and knowledge transfer. The AFCD will help improve agricultural infrastructure and strengthen marketing and brand building for local agricultural produce, thereby bringing benefits to the farming community as a whole.
(14) According to our current proposal, the Agri-Park will be put under the management of the AFCD. The land will be leased to farmers who are interested in crop farming and commercial production. The AFCD will lay down terms and conditions, as well as the management and appropriate control measures in the tenancy agreements entered into with the tenants. For example, the AFCD may state in the tenancy agreements the agricultural activities that tenants should pursue. Tenants are required to present an annual production plan indicating the production method to be adopted and the crops to be grown. The AFCD will evaluate the tenant's capability and capacity to meet the tenancy conditions in terms of production targets and technological requirements, and on this basis, the tenants will have to participate in a competitive bid with other farmers intending to operate in the Agri-Park.
LEGISLATIVE COUNCIL ─ 21 January 2015 4861
On the other hand, the AFCD will also impose conditions in the tenancy agreements for the farmland, requiring farmers to achieve a reasonable production output. The AFCD will conduct regular inspections, provide technical support for those who are unable to achieve the target and record in detail the production condition for follow-up actions. For farmland left idle, the tenancy agreements concerned may be terminated or will not be renewed, or the size of the farmland will be reduced. The imposition of the relevant terms and condition and production targets is to ensure that the farmland of the Agri-Park is put to productive use, achieving the objective of setting up the Agri-Park in the first place, namely promoting and upgrading local agricultural production.
(15) There exists room for improvement in scientific research on agriculture in Hong Kong. Therefore, under the new policy, we have proposed establishing a SADF to support research on agriculture and manpower training, with an aim of implementing modern technological farming in the territory.
(16) The proposed SADF to be established under the new policy would provide financial support for tertiary institutions to conduct applied studies in the local context on such areas as farming systems, production management skills and primary pests in crops. Subsidies may also be provided from SADF for relevant farming skill training courses, obtaining assistance from specialist researchers to solve technical problems and train young professionals in farming as well as promoting the application of modern technology to agriculture in the territory.
(17) The main objective of establishing the Agri-Park is to facilitate knowledge transfer in agricultural science and agro-business management with a view to enhancing productivity, and to increase local agricultural production. The Agri-Park will also serve as a base for experimenting with new agricultural practices for commercial production and promoting applications of advanced technology to agricultural uses, thereby encouraging other farms to develop and adopt modern and diversified production methods. Therefore, the Government has no plan to lease the farmland in the Agri-Park to holiday farmers or amateur farmers.
4862 LEGISLATIVE COUNCIL ─ 21 January 2015
Nursing Manpower in Various Specialties of Public Hospitals
17. PROF JOSEPH LEE (in Chinese): President, some nursing staff of specialties have pointed out that under the rapid development of healthcare services, the nursing manpower planning for specialties has a direct impact on the quality of healthcare services. In this connection, will the Government inform this Council whether it knows:
(1) the current number of specialties in various public hospitals, with a breakdown by hospital cluster and name of hospital;
(2) the current number of nurse consultants in various specialties of public hospitals, with a breakdown by hospital cluster and name of hospital; of the duties of nurse consultants in various specialties;
(3) the respective current numbers of advanced practice nurses and nurse specialists in various specialties of public hospitals, with a breakdown by hospital cluster and name of hospital;
(4) whether the Hospital Authority (HA) has set ratios of nurse consultants to advanced practice nurses/nurse specialists for various specialties; if the HA has, of the details; if not; the reasons for that;
(5) whether the HA has formulated a policy of "one nurse consultant for each specialty", in order to maintain and enhance the effectiveness of nursing services; if the HA has, of the implementation of the policy; if not, the reasons for that;
(6) among the registered nurses currently employed by the HA, of the number and percentage of those who have received specialist training; whether the HA has plans to increase local and overseas specialist training opportunities to dovetail the development of nursing services; if the HA has such plans, of the details; if not, the reasons for that; and
(7) whether the HA has any concrete plan to improve the quality of nursing services; if the HA has such plans, of the details; if not, the reasons for that?
LEGISLATIVE COUNCIL ─ 21 January 2015 4863
SECRETARY FOR FOOD AND HEALTH (in Chinese): President, with an ageing population and advancement in medical technology, the HA has taken active measures to enhance the quality of nursing services.
My reply to the various parts of the question is as follows:
(1) General specialty services are provided under the cluster arrangement of the HA. Major specialty services provided by the clusters of the HA are listed as follows:
(1) Emergency Medicine (2) Anaesthesiology (3) Ear, Nose and Throat (4) Family Medicine (5) Medicine (6) Obstetrics and Gynaecology (7) Ophthalmology (8) Orthopaedics and Traumatology (9) Paediatrics (10) Pathology (11) Psychiatry (12) Radiology (13) Surgery
In general, classification of the specialty/sub-specialty services of the HA are based on the classification by the Hong Kong Academy of Medicine and respective Colleges. The arrangement of specialties and sub-specialties of each HA hospital may vary. Provision of certain sub-specialty services such as Cardio-thoracic Surgery and Oncology is centralized in a few hospital clusters. Through inter-cluster and inter-hospital support, patients can receive a comprehensive range of specialty services.
(2) and (3)
There are a total of 93 nurse consultants and 4 551 advanced practice nurses/nurse specialists/nursing officers/ward managers in the HA, providing nursing services in Medicine, Obstetrics and Gynaecology, 4864 LEGISLATIVE COUNCIL ─ 21 January 2015
Orthopaedics and Traumatology, Paediatrics, Psychiatry, Surgery, Emergency Medicine, Critical Care Medicine and other specialties. The breakdown for each hospital cluster is set out in Annex 1.
Nurse consultants have the following five major functions and duties in respect of specialist services:
(i) Expert practice: act as clinical care consultants, provide patient-oriented nursing services for patients with complex conditions and co-ordinate different specialties in the hospital;
(ii) Specialist service development: formulate specialty service development model, launch new service plans and strengthen the interface between hospitals and the community;
(iii) Specialty education: provide specialty education via the cluster network;
(iv) Continuous quality improvement planning: work out the plan for continuous improvement in the quality of nursing specialty services; and
(v) Specialty research: promote evidence-based nursing and put it into practice.
(4) and (5)
Apart from supporting the development of the nursing profession, the main reason for creating the post of nurse consultant is to improve the services of the HA through the enhanced nursing profession, so as to meet the increasing public demand for healthcare services.
In consider creating new positions of nurse consultant, besides considering actual needs for nursing services, the HA also needs to take into account opportunities for nurse consultants to play a leading role in clinical care and facilitate nursing specialty service development, as well as other factors such as strategic priorities of LEGISLATIVE COUNCIL ─ 21 January 2015 4865
medical services, service mode, service target, opinions of healthcare partners and patients, and sustainability of service requirements. Therefore, currently the HA has not adopted the policy of "one nurse consultant for each specialty", nor has it set the ratios of nurse consultant to advanced practice nurse/nurse specialist.
However, the HA will prudently review the actual service needs and consider the service mode and demand to keep improving the quality of nursing services. Additional posts of nurse consultant will also be created to cope with the strategic priorities in the annual plans of the HA for better healthcare services. Since 2011, the HA has employed an additional 86 nurse consultants.
(6) and (7)
The HA endeavours to facilitate the nursing specialty training to keep abreast with the development of healthcare services. Its Institute of Advanced Nursing Studies organizes 26 specialty training courses which provide about 1 100 places each year. As at 30 September 2014, a cumulative total of 5 032 registered nurses had received specialty training in the institute, accounting for about a quarter of the total number of nurses in the HA (excluding enrolled nurses, part-time employees and temporary staff).
In addition to nursing specialty training, the institute also organizes skill enhancement programmes for different specialties to augment the knowledge and skills of nurses. The programmes dovetail with the policy objectives and services of the HA, and also tie in with the development of nursing services. The institute organizes 270 to 300 enhancement programmes on specialty nursing care for about 9 000 to 11 000 participants every year.
Currently, nurses can also enrol in the specialty training programmes organized by tertiary institutions. To encourage continuous specialty training of nurses, the HA provides training subsidy for the nurses taking recognized specialty training programmes of tertiary institutions.
4866 LEGISLATIVE COUNCIL ─ 21 January 2015
In addition to the provision of local training opportunities, the HA has launched a corporate scholarship programme since 2009-2010 to sponsor the participation of advanced practice nurses and senior nurses in a four-week overseas training course on professional knowledge and skills. From 2010 to January 2015, a total of 522 nurses have received sponsorship for overseas training.
The HA attaches great importance to the specialty training of nurses, and will continue to review regularly the training needs of different specialties and formulate the direction for nursing specialty training, with a view to supporting the development of specialty services and enhancing the quality of nursing services.
Annex 1
Number of Nurse Consultants and Advanced Practice Nurses# in various specialties of the HA (as at 31 October 2014)
Number of Nurse Number of Advanced Cluster Specialty Consultants Practice Nurses# Hong Kong East Medicine 4 136 Obstetrics and 0 21 Gynaecology Orthopaedics and 1 19 Traumatology Paediatrics 0 20 Psychiatry 1 49 Surgery* 2 39 Emergency 0 28 Medicine Critical Care 1 20 Medicine Others 2 120 Total 11 452 LEGISLATIVE COUNCIL ─ 21 January 2015 4867
Number of Nurse Number of Advanced Cluster Specialty Consultants Practice Nurses# Hong Kong West Medicine 3 122 Obstetrics and 1 30 Gynaecology Orthopaedics and 0 19 Traumatology Paediatrics 2 41 Psychiatry 1 32 Surgery* 2 89 Emergency 0 13 Medicine Critical Care 1 17 Medicine Others 1 150 Total 11 513 Kowloon Central Medicine 2 153 Obstetrics and 1 38 Gynaecology Orthopaedics and 1 21 Traumatology Paediatrics 1 48 Psychiatry 1 47 Surgery* 3 64 Emergency 2 20 Medicine Critical Care 1 22 Medicine Others 2 224 Total 14 637 Kowloon East Medicine 2 155 Obstetrics and 0 24 Gynaecology Orthopaedics and 0 29 Traumatology Paediatrics 1 33 Psychiatry 1 29 4868 LEGISLATIVE COUNCIL ─ 21 January 2015
Number of Nurse Number of Advanced Cluster Specialty Consultants Practice Nurses# Surgery* 1 36 Emergency 0 26 Medicine Critical Care 0 26 Medicine Others 3 128 Total 8 486 Kowloon West Medicine 5 286 Obstetrics and 3 60 Gynaecology Orthopaedics and 0 47 Traumatology Paediatrics 1 65 Psychiatry 1 162 Surgery* 2 91 Emergency 1 68 Medicine Critical Care 2 49 Medicine Others 5 276 Total 20 1 104 New Territories East Medicine 4 196 Obstetrics and 1 46 Gynaecology Orthopaedics and 0 45 Traumatology Paediatrics 1 44 Psychiatry 1 63 Surgery* 3 62 Emergency 1 40 Medicine Critical Care 0 32 Medicine Others 5 213 Total 16 741 LEGISLATIVE COUNCIL ─ 21 January 2015 4869
Number of Nurse Number of Advanced Cluster Specialty Consultants Practice Nurses# New Territories West Medicine 3 126 Obstetrics and 1 32 Gynaecology Orthopaedics and 1 33 Traumatology Paediatrics 0 35 Psychiatry 1 125 Surgery* 3 41 Emergency 1 34 Medicine Critical Care 1 26 Medicine Others 2 166 Total 13 618
Notes:
# Including advanced practice nurses, specialist nurses, nursing officers and ward managers.
* Including cardio-thoracic surgery, surgery and neurosurgery.
An Accident Involving Drop of Banknotes from a Cash Transport Vehicle
18. MR NG LEUNG-SING (in Chinese): President, on 24 December 2014, a large quantity of banknotes were strewn across the road from three cash boxes fallen from a travelling cash transport vehicle. Some of them were picked up by passers-by. A number of people subsequently handed over to the Police the banknotes which they had picked up. However, as of the middle of this month, a considerable number of banknotes have still not been recovered. Some members of the public have pointed out that the incident reflects that the law-abiding awareness among some Hong Kong people is weak. In this connection, will the Government inform this Council:
(1) whether it has assessed if the equipment, arrangements and security measures currently employed by security companies at present for 4870 LEGISLATIVE COUNCIL ─ 21 January 2015
transporting large amounts of cash are in line with international standards; if it has, of the outcome; whether the authorities have provided security companies with any guidelines on safe transport of cash;
(2) whether it has investigated if the transport arrangements and the equipment employed by the security company concerned in the aforesaid incident have violated the provisions of the relevant legislation; if it has, of the outcome; whether the authorities will examine the need for reviewing and amending the relevant ordinances so as to impose more stringent requirements and monitoring; and
(3) whether the authorities will undertake promotional and educational work to enhance the law-abiding awareness and improve the qualities of citizens of Hong Kong people; if they will not, of the reasons for that?
SECRETARY FOR SECURITY (in Chinese): President, the Administration's consolidated reply to the three parts of the question is as follows:
The purpose of the Security and Guarding Services Ordinance (Cap. 460) (the Ordinance) is to ensure, through a licensing system, that the persons and companies providing security and guarding services are up to a certain standard, so as to assist the law-enforcement agencies in preventing and detecting crimes, and protecting the lives and property of the citizens.
Under the Ordinance, any company providing security services must hold a security company licence issued by the Security and Guarding Services Industry Authority (SGSIA). Pursuant to the Ordinance, SGSIA has specified the "Matters to which the Security and Guarding Services Industry Authority shall have regard when determining an application for a security company licence" (the Matters). The Matters set out the criteria and requirements to be met by a security company in relation to company background, staff training, insurance arrangements, security equipment and so forth. As far as Type II security company licence (the type of licence held by the security company involved in the incident mentioned in the question) for provision of armoured transportation services is concerned, the Matters contain detailed and stringent requirements on security transit vehicles. For instance, the vehicles must have ballistically LEGISLATIVE COUNCIL ─ 21 January 2015 4871 resistant cabs, fitted with alarms and sealed windows, and must be licensed and inspected in accordance with the Road Traffic Ordinance, and so on.
Upon receipt of an application for a security company licence, SGSIA will forward it to the Security Companies Inspection Unit (SCIU) of the Police for investigation of the applicant in accordance with the Matters. Upon completion of the investigation, SCIU will report the results to SGSIA for determining whether to approve the application.
SCIU will carry out annual inspections of licensed security companies to ensure compliance with the licensing requirements. In case of non-compliance of the licence conditions or sub-standard services, the Police may, depending on severity of the irregularities, issue warnings to or prosecute the company. In the absence of subsequent improvement, the Police will consider applying to SGSIA for revocation of its security company licence in accordance with the Ordinance.
The Police are investigating the incident mentioned in the question, including whether the security company has violated the Ordinance or any of the licence conditions. Meanwhile, the Crime Prevention Bureau of the Police has requested the company to take measures to avoid recurrence, and will provide recommendations to the company and other Type II licence holders on operation of the relevant security services.
Hong Kong people are generally law-abiding. Anyone who has picked up the banknotes in the incident should return them to the Police without delay. Failing to do so may constitute an offence of theft. So far, dozens of people have already returned the money involved to the Police. The Police will continue to gather evidence and trace the whereabouts of the money that is still missing.
Household Indebtedness
19. MR TANG KA-PIU (in Chinese): President, according to the statistics from the Hong Kong Monetary Authority (HKMA), the ratio of household indebtedness to the gross domestic product (household debt ratio) in Hong Kong has risen from 50.4% at the end of 2007 before the global financial crisis to 63.6% in the second quarter of 2014. In this connection, will the Government inform this Council:
4872 LEGISLATIVE COUNCIL ─ 21 January 2015
(1) of the latest household debt ratio and the methodology employed by HKMA in collecting data and compiling statistics on household loans;
(2) of the respective annual amounts of the various components of household loans in Hong Kong (namely, residential mortgages, credit card advances and other personal loans) and their percentages in the total amounts, the number of such loans, and their delinquency ratios, in each of the past three years; the specific components of other personal loans, as well as the respective amounts of such components and their percentages in the total amounts of other personal loans, the number of such loans, and their delinquency ratios;
(3) given that in reply to a question raised by a Member of this Council on 29 May 2013, the authorities indicated that the data on household loans included only loans from authorized institutions (AIs), whether such data include loans from licensed money lenders registered with the Money Lenders Registry; whether it knows the total amount of loans from non-AIs in the past three years; whether the authorities have assessed the impact of the loans from non-AIs on the household debt ratio;
(4) of the total amounts of personal loans granted in the past three years by money lending organizations subject to the monitoring of HKMA and the Hong Kong Police Force (HKPF) respectively;
(5) as some members of the public have criticized that the vetting and approval of personal loan applications is lenient at present and quite a number of money lending organizations are involved in unscrupulous money lending and debt collection practices, of the number of complaints involving such practices received by the authorities and the number of money lending organizations penalized for violation of the relevant legislation or codes of practice, in the past three years; whether HKMA and HKPF have regularly reviewed the licensing regime for money lending organizations, conducted inspections on them and conducted investigations into alleged contraventions by these organizations; and
LEGISLATIVE COUNCIL ─ 21 January 2015 4873
(6) given that some members of the financial sector have pointed out that the Federal Reserve Board of the United States is highly likely to increase the Fed Funds target rate within the current year and the Hong Kong dollar interest rates will rise with the US dollar interest rates, which will result in an economic downturn in Hong Kong, whether the authorities have assessed the impact of the increase in interest rates on local households' ability to repay their debts, and whether this will give rise to a large number of bankruptcy cases; if they have assessed, of the indicators or tools that are used; whether the authorities will consider introducing measures to dampen exceedingly lenient lending activities; if they will, of the details; if not, the reasons for that?
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Chinese): President,
(1) Household debt in Hong Kong amounted to HK$1,415.5 billion, or 64.2% of GDP, as of end-September 2014.
The household debt data are compiled by the HKMA based on prudential returns. Household debt covers the following three types of loans and advances to professional and private individuals:
(i) loans for the purchase of residential properties;
(ii) credit card advances; and
(iii) loans for other private purposes.
(2) The breakdown of household debt in Hong Kong and the respective amount and share of total household debt from end-2012 to end-September 2014 are set out in Table 1. The HKMA does not collect data on the number of such loans or advances.
Table 1: Breakdown of household debt in Hong Kong HK$ billion End-September (As a percentage of End-2012 End-2013 2014 total household debt) Loans for the purchase 914.6 950.2 1,002.0 of residential properties (74%) (72%) (71%) 4874 LEGISLATIVE COUNCIL ─ 21 January 2015
HK$ billion End-September (As a percentage of End-2012 End-2013 2014 total household debt) 104.0 110.0 108.3 Credit card advances (8%) (8%) (8%) Loans for other private 215.0 262.6 305.1 purposes (17%) (20%) (22%) 1,233.5 1,322.8 1,415.5 Total household debt (100%) (100%) (100%)
Note:
The above data only cover loans and advances drawn from AIs. Figures may not add up due to rounding.
Source: HKMA
The delinquency ratios for residential mortgage loans and credit card receivables (repayment overdue for over three months) from end-2012 to end-September 2014, as compiled by the HKMA based on the Survey on Residential Mortgage Lending and the Credit Card Lending Survey, are set out in Table 2. The HKMA does not collect data on the specific components of loans for other private purposes.
Table 2: Delinquency ratios for residential mortgage loans and credit card receivables End- As a percentage of total End-2012 End-2013 September outstanding amount 2014 Repayment overdue for 0.02% 0.02% 0.02% more than Residential three months mortgage Repayment loans overdue for 0.01% 0.01% 0.01% more than six months LEGISLATIVE COUNCIL ─ 21 January 2015 4875
End- As a percentage of total End-2012 End-2013 September outstanding amount 2014 Repayment Credit card overdue for 0.20% 0.20% 0.22% receivables more than 90 days
Source: HKMA
(3) and (4)
The household debt data compiled by the HKMA only cover loans and advances extended by AIs. Please refer to Table 1 of the reply for part (2) for the figures of each type of personal lending by AIs in the past three years. We do not have the total amount of personal loans granted by licensed money lenders under the Money Lenders Ordinance.
(5) The HKMA supervises the marketing activities, approval process of lending products and debt collection activities of AIs. The HKMA's Supervisory Policy Manual (SPM) on credit approval requires AIs to establish prudent credit approval process to ensure that credit facilities are granted only to credit-worthy customers meeting the prescribed credit acceptance criteria. The Code of Banking Practice (Code) requires AIs to exercise care and restraint when promoting lending products. They should ensure that all advertising and promotional materials are fair and reasonable, do not contain misleading information, and comply with all relevant legislation, codes and rules. In addition, AIs' debt collection practices should be reasonable. The Code includes stringent requirements with respect to debt collection activities of agencies engaged by AIs. In particular, the Code requires that debt collection agencies should act within the law. They must not resort to intimidation or violence, either verbal or physical, against any person in their debt recovery actions, and must not employ harassment or improper debt collection tactics. The HKMA monitors AIs' compliance with the abovementioned requirements of the SPM and the Code through on-site and off-site supervisory 4876 LEGISLATIVE COUNCIL ─ 21 January 2015
processes, and did not identify major non-compliance issue in the past few years.
The number of complaints received by the HKMA in relation to AIs' credit approval and debt collection on personal loans for the past three years are as follows:
Table 3: Complaint figures of AIs' credit approval and debt collection on personal loans Number of complaints in Number of complaints in relation to AIs' credit relation to AIs' debt approval on personal loans collection on personal loans 2012 8 34 2013 5 24 2014 5 25
Source: HKMA
As regards money lenders under the Money Lenders Ordinance, on receipt of any report of alleged unlawful business practices by a money lender, the Police will take appropriate enforcement action, having regard to the individual circumstances of each case and the evidence obtained. Between January 2012 and September 2014, 41 persons were prosecuted under the Money Lenders Ordinance. The cases involved carrying on business as a money lender without a licence, lending money at an excessive interest rate or contravening the restriction on money-lending advertisements, and so on. Of the persons prosecuted, 21 persons were convicted. In addition, the Licensing Court, in determination of an application for money lender licence (including an application for renewal), will consider whether the Registrar of Money Lenders (that is, the Registrar of Companies) or the Commissioner of Police objects to the application. The Police will consider all relevant factors, including the complaint records of the money lenders, when deciding whether to object to an application.
As regards debt collection activities, if a debt collection agency employed by any bank, licensed money lender or other financial institution is collecting debts by alleged improper or illegal means, LEGISLATIVE COUNCIL ─ 21 January 2015 4877
the Police will, having regard to circumstances of each case, follow up as appropriate, including notifying the regulatory authority concerned, and taking corresponding enforcement action.
(6) To ensure AIs managing properly their risks and prevent borrowers from excessive borrowing, the HKMA provides prudential supervisory guidance to AIs from time to time.
For property mortgage lending, the HKMA has introduced six rounds of countercyclical measures since October 2009. Among the measures, AIs are required to tighten the maximum debt servicing ratio (DSR) of property mortgage applicants, and to conduct stress testing on the repayment ability of the applicants based on the assumption of an interest rate hike of three percentage points to ensure their repayment ability even when there is an upward adjustment in interest rate. The HKMA also introduced the sharing of positive mortgage data in 2011 to help AIs strengthen their assessment of borrowers' repayment ability, and alleviate the risks arising from the excessive borrowing by the borrowers.
For personal lending, the HKMA issued a guideline in January 2014 requiring AIs to establish maximum DSR limits, refrain from offering personal loans with long tenors, establish maximum portfolio limit for personal loans, and conduct stress testing on personal loan portfolios.
The Official Receiver's Office will also continue to keep in view the number of new bankruptcy cases.
Impact of Conversion of Sites in Tseung Kwan O to Public Housing Sites
20. MR JAMES TO (in Chinese): President, it has been reported that the Government plans to convert nine "Green Belt" (GB) or "Government, Institution or Community" (G/IC) sites in Tseung Kwan O to public housing sites. Some Tseung Kwan O residents have pointed out that, as the current population in the district has already exceeded 380 000, the completion of these public housing projects as well as the successive completion of a large number of private housing units in Tseung Kwan O Town Centre and near LOHAS Park Station on 4878 LEGISLATIVE COUNCIL ─ 21 January 2015 the MTR Tseung Kwan O Line (TKL) in the next few years will overload the existing infrastructure in Tseung Kwan O. In this connection, will the Government inform this Council:
(1) of the reasons for the authorities to adjust downward the planned population of Tseung Kwan O from 480 000 to 450 000 in 2005; the population to be brought by the proposed public housing to Tseung Kwan O, and whether that figure has been included in the planned population for Tseung Kwan O;
(2) among the nine sites mentioned above, of the original planned uses of the "G/IC" sites; if the original planned uses include community facilities, whether the Government has assessed the impact of converting these sites to public housing sites on Tseung Kwan O residents, and whether it has plans to find other sites to build the community facilities concerned;
(3) among the nine sites mentioned above, whether the "GB" sites are located in the vicinity of Clear Water Bay Country Park; if so, whether the Government has assessed if the public housing proposed to be built will damage the ecology of the Country Park;
(4) whether it has conducted any environmental impact assessment study to examine if the public housing proposed to be built will aggravate the ventilation problem caused by wall effect in Tseung Kwan O; if it has not, of the reasons for that;
(5) whether it has assessed if the existing transport infrastructure facilities in Tseung Kwan O can cope with the transport demand of the population to be brought about upon the intake of the public housing proposed to be built; if it has not, whether it has plans to build additional roads and strengthen public transport services;
(6) regarding the roads in Tseung Kwan O listed in the table below, of their (i) designed hourly vehicular flow, (ii) current hourly vehicular flow, and (iii) expected hourly vehicular flow upon the intake of the aforesaid public housing; and
LEGISLATIVE COUNCIL ─ 21 January 2015 4879
Main roads (i) (ii) (iii) Tseung Kwan O Tunnel Po Lam Road North Clear Water Bay Road Tseung Kwan O-Lam Tin Tunnel Total
(7) regarding the MTR TKL, of its (i) designed hourly capacity during peak hours, (ii) current hourly passenger throughput during peak hours, and (iii) expected hourly passenger throughput during peak hours upon the intake of the aforesaid public housing?
SECRETARY FOR DEVELOPMENT (in Chinese): President, to meet the total housing supply target of 480 000 units in the coming 10 years (that is, from 2015-2016 to 2024-2025), the Government has adopted a multi-pronged approach to increase the housing land supply, including optimizing the use of built-up land in the existing urban areas and new towns and land in the vicinity, as well as pursuing large-scale land use planning and development projects. In terms of short-to-medium-term housing land supply, the Government has been carrying out various land use reviews, including reviews on the "G/IC" sites and other government uses land, Government land currently vacant, under Short Term Tenancies or other temporary uses, as well as reviews on "GB" sites. As mentioned in the Policy Address, via the land use reviews, the Government has identified about 150 potential housing sites that could be made available for residential development in the coming five years (that is, from 2014-2015 to 2018-2019) with a capacity of providing over 210 000 public and private units, subject to timely amendments to their respective statutory plans for change of land use and/or increase in development intensity. Among the 150 sites, 12 are located at the Sai Kung District, including nine sites located at Tseung Kwan O which are currently zoned "GB", of which two sites also cover parts of "G/IC" zoned areas. All nine sites are proposed for public housing development.
When identifying the above potential housing sites, the Government has considered and balanced the societal needs and local impacts, and will continue to reduce the relevant impacts to an acceptable level. Relevant departments are now conducting various technical assessments and studies on the proposed public housing development in accordance with the established mechanisms and 4880 LEGISLATIVE COUNCIL ─ 21 January 2015 standards, including the impacts brought by the proposed developments on the traffic, infrastructure, environment, visual, air ventilation and other areas, as well as the provision of community facilities. The Government will make reference to the relevant information and further determine the proposed development parameters of individual sites, including the plot ratios, site areas and estimated numbers of flats to be built, and so on. Upon completion of the related technical assessments and development proposals, the Government will consult relevant stakeholders on the proposed amendments to statutory plans. The Town Planning Board (TPB) will also proceed with the land use rezoning and/or planning applications accordingly, including inviting the public for representations and/or comments.
Regarding each part of the question, our reply in consultation with the relevant bureaux and departments is as follows:
(1) The Outline Zoning Plan (OZP) shows the land uses and major infrastructures (such as road systems) of the specific area covered by the plan, in which the planned population is the projected population capacity arising from the planned land uses. In formulating or revising the OZP, the Government will conduct technical assessments and studies, and adjust the population projection according to the changes in land uses. During the process, the Government will make reference to the Hong Kong Planning Standards and Guidelines (HKPSG) and the latest demographic data, and will also examine whether there is a need to adjust the land reservation for supporting facilities based on the population changes.
Regarding the Draft Tseung Kwan O OZP, the Government commenced the "Feasibility Study on Further Development of Tseung Kwan O" in 2002 and completed the Study in 2005. Based on the proposed amendments arising from the Study, the planned population of the Draft Tseung Kwan O OZP was revised from 480 000 to 450 000 by the TPB in 2008, which mainly reflected the projected population of the planned land uses for the district at the time.
Additional population intake will be brought by the proposed public housing developments at the Tseung Kwan O sites. The Government is carrying out the relevant technical assessments and LEGISLATIVE COUNCIL ─ 21 January 2015 4881
studies, and the new population figures are yet to be confirmed. In any event, the concerned departments will closely monitor the local needs for various facilities and make reference to the relevant requirements under HKPSG, so as to ensure that the infrastructural and community facilities to be provided could meet the local needs and population growth.
(2) Of the nine proposed housing sites in Tseung Kwan O, two cover parts of "G/IC" zones, in which bus/minibus termini and Government land are currently located. When changing the land use of the relevant sites, the Government will consider reprovisioning the affected facilities as appropriate. At the same time, the Government will consider providing community facilities within the proposed housing sites so as to cater for the additional population needs.
(3) All nine "GB" sites proposed to be rezoned for housing developments in Tseung Kwan O are not in the vicinity of country parks. The proposed developments will not affect country parks.
(4) The Government is carrying out the technical assessments and studies for the proposed public housing developments, including their impacts on the surrounding environment and air ventilation. Necessary improvement measures will also be recommended.
(5) For the proposed housing developments in Tseung Kwan O, the Government has conducted preliminary traffic assessments for the major roads in the district. The initial findings reveal that with the current planning of transport infrastructures in Tseung Kwan O, the major roads connecting the Tseung Kwan O District with East Kowloon will be able to meet the traffic demand brought about by the proposed housing developments. Meanwhile, the Government is engaging a consultant to study the local traffic impact of the new housing developments, as well as the associated traffic improvement measures. The study is anticipated to commence early this year.
(6) According to the information of the Civil Engineering and Development Department (CEDD), the design capacities per hour, present volume/capacity (v/c) ratios and preliminary v/c ratios after 4882 LEGISLATIVE COUNCIL ─ 21 January 2015
the proposed additional public housing developments of the respective roads in Tseung Kwan O, are as follows:
Preliminary traffic Capacity assessment in Present v/c Traffic flow per hour Peak respect of Roads ratio direction (Passenger hours additional (2014) Car Unit) housing developments (v/c ratio) Tseung Kwan Tseung Kwan 3 600 am 0.83 0.76 O Tunnel O bound East Kowloon 3 600 am 1.13 1.07 bound Po Lam Road Tseung Kwan Pending 1 000 am 0.6 North O bound further study East Kowloon Pending 2 000 am 0.5 bound further study Clear Water East Kowloon Pending 1 000 am 0.9 Bay Road bound further study Tseung Kwan Pending 1 000 am 0.9 O bound further study Tseung Kwan O- Tseung Kwan Not 3 600 am 0.67 Lam Tin Tunnel O bound applicable (Under East Kowloon Not 3 600 am 0.87 Planning) bound applicable
Notes:
(1) The v/c ratio is an indicator which reflects the performance of a road. A v/c ratio equals to or less than 1.0 means that a road has sufficient capacity to cope with the volume of vehicular traffic under consideration and the resultant traffic will flow smoothly. A v/c ratio between 1.0 and 1.2 indicates the onset of congestion; and that above 1.2 indicates more serious congestion with speed deteriorating progressively with further increase in traffic.
(2) The v/c ratios and the vehicle composition during peak hours of these road sections differ slightly. As such, a separate v/c ratio is used as the indicator for each road section in general transportation analysis.
(7) According to the information provided by the MTR Corporation Limited (MTRCL), the design capacity of MTR TKL per hour per direction (calculated on the basis of accommodating six persons (standing) per square metre (ppsm)) is 85 000. However, in actual LEGISLATIVE COUNCIL ─ 21 January 2015 4883
railway operation, such design capacity is limited by various factors (for example, platform screen doors and automatic platform gates increase the dwell time of trains at each platform by about 10 seconds). The maximum carrying capacity of TKL when train frequency is maximized (under 6 ppsm) can thus only reach 67 500. In December 2014, the patronage of TKL per hour per direction during morning peak hours for the critical link (that is, from Yau Tong Station to Quarry Bay Station) was about 46 000.
The MTRCL will continue to closely monitor the passenger demand of TKL. In the long run, the MTRCL has begun to upgrade the signalling system for Tsuen Wan Line, Island Line, Kwun Tong Line and TKL, and this upgrading is expected to be completed from 2018 to 2022. With the completion of the upgrading of signalling system, the carrying capacity can be increased by around 10%.
As to the estimated patronage per hour during peak hours after the proposed public housing developments, the CEDD will conduct relevant assessments and studies, and the relevant figures are yet to be confirmed.
Moreover, at a strategic level, the East Kowloon Line proposed under the "Railway Development Strategy 2014" can enhance the overall network robustness by offering an alternative railway route for trips between the Tseung Kwan O area and Kowloon, and by serving as a parallel line to the existing Kwun Tong Line.
Broadening Opportunities for Local Students to Receive Higher Education
21. DR KENNETH CHAN (in Chinese): President, under the existing policy, institutions funded by the University Grants Committee (UGC) may set aside up to 4% within the UGC-funded places and up to 16% outside the UGC-funded places for admission of non-local students to their UGC-funded sub-degree, undergraduate and taught postgraduate programmes (hereinafter referred as "the 4%-in-16%-out policy"). It has been reported that in order to address public concerns, the Chief Executive in Council approved in December last year the recommendation to change the 4%-in-16%-out policy to a 20%-out policy 4884 LEGISLATIVE COUNCIL ─ 21 January 2015 starting from the 2016-2017 academic year, so that all the UGC-funded places at institutions will be utilized for admission of local students. Moreover, on full implementation of various measures of the Government to support students in proceeding to post-secondary education, and given the continuous decline in the number of secondary school leavers, the Government envisages that by the 2016-2017 academic year, there will be sufficient publicly-funded and self-financing first-year-first-degree (FYFD) places for all secondary school leavers meeting minimum requirements for university admission. The Government has also indicated that it will conduct a review on the tuition fees of universities. In this connection, will the Government inform this Council:
(1) whether it knows the respective numbers of non-local students admitted by various UGC-funded institutions to UGC-funded FYFD programmes in each of the years since the implementation of the 4%-in-16%-out policy;
(2) whether it knows the specific timetable of the UGC for implementing the 20%-out policy, including whether the policy will be implemented by phases;
(3) whether the Government will consider increasing the number of UGC-funded FYFD places after the implementation of the 20%-out policy by the UGC; if it will, of the details;
(4) whether the Government will study ways to cope with the impact of the decline in the number of secondary school leavers on UGC-funded or self-financing sub-degree programmes (such as tertiary institutions reducing the places of UGC-funded or self-financing sub-degree programmes or even ceasing the operation of sub-degree programmes as a result of declining student population); if it will, of the details of the study; if not, the reasons for that; and
(5) of the specific work plan and timetable of the Government for reviewing the tuition fees of universities; whether the Government will consult the public on the tuition fees review together with university places; if it will, of its plan and timetable; if not, the reasons for that?
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SECRETARY FOR EDUCATION (in Chinese): President,
(1) Under the existing policy, UGC-funded institutions may admit non-local students to their UGC-funded sub-degree, undergraduate and taught postgraduate programmes up to a level equivalent to 20% of the approved UGC-funded student number. This 20% comprises up to 4% within and up to 16% outside the UGC-funded number (that is, by over-enrolment with no additional recurrent funding from the UGC) (hereinafter referred as "the '4-in-16-out' policy"). This policy aims to attract students of high calibre outside Hong Kong to study in the city and promote internationalization of institutions, which can also benefit local students.
Since the implementation of the "4-in-16-out" policy in the 2008-2009 academic year, there has been a steady increase in the number of non-local students admitted to UGC-funded FYFD programmes offered by UGC-funded institutions, from a total of 1 666 (equivalent to 11.4% of the approved places) in the 2008-2009 academic year to 2 560 (equivalent to 17.1% of the approved places) in the 2014-2015 academic year. Details are set out at the Annex.
(2) The Chief Executive in Council has recently approved the recommendation of migrating from the "4-in-16-out" policy to a "20-out" policy, under which all new non-local students in sub-degree, undergraduate and taught postgraduate programmes should be admitted through over-enrolment outside the approved UGC-funded student number targets, capped at a level equivalent to 20% of the approved UGC-funded student number targets for these programmes, by study level. The new "20-out" policy will be implemented starting from the 2016-2017 academic year. The UGC is consulting its funded institutions on the implementation details for this policy.
(3) All along, the Government has been striving to provide secondary school leavers with flexible and diversified articulation pathways with multiple entry and exit points through promoting the quality and sustainable development of the publicly-funded and self-financing post-secondary education sectors. Through the development of both sectors, about 38% of our young people in the relevant cohort now have access to degree-level education. Even if we count publicly-funded undergraduate programmes only, the 4886 LEGISLATIVE COUNCIL ─ 21 January 2015
cohort participation rate was nearly 23% in the 2013-2014 academic year. In view of the continuous decline expected in the number of local secondary school leavers from about 62 000 in 2014 to 42 700 in 2022, the Government has been exercising prudence in its planning for the provision of subsidized higher education opportunities, with due emphasis on both quality and quantity. In his 2014 Policy Address, the Chief Executive announced a series of initiatives to provide school leavers with broader and more diversified articulation pathways. On full implementation of these measures, and given the declining student population, we envisage that there will be sufficient publicly-funded and self-financing FYFD places for all secondary school leavers meeting minimum entrance requirements for university admission by the 2016-2017 academic year, assuming the performance of secondary school leavers is maintained at a comparable level. In this connection, the Government has no intention to further increase the provision of UGC-funded FYFD places at this juncture.
(4) Looking ahead, we anticipate a declining population in the relevant age cohort for post-secondary education. While the Government is committed to providing our young people with flexible and diversified study pathways with multiple entry and exit points, we believe it is time to consolidate the sub-degree sector by enhancing the programmes in both quality and quantity. The Committee on Self-financing Post-secondary Education established in April 2012 serves as an effective platform for discussing among the sector macro and strategic issues, including the supply and demand of places for post-secondary education to facilitate institutions in making appropriate adjustments to their programmes and number of places.
Implementation and incremental enhancement of polices is a cyclic process. Regarding quality, we firmly believe that only quality programmes could ensure sustainable development. Institutions are aware that they must improve the quality of teaching and learning and promote the development of professional and vocational training with due regard for the long-term manpower needs of the community, so as to ensure employers' recognition of the quality of graduates and the qualifications that programmes lead to. Regarding quantity, the Education Bureau has been maintaining communication with the sector. In the light of the declining LEGISLATIVE COUNCIL ─ 21 January 2015 4887
secondary student population in the coming years, we have on a number of occasions discussed with institutions the strategies and issues relating to the consolidation of the sub-degree sector, and reminded them to exercise prudence in launching new programmes, taking into consideration the availability of similar programmes and the demand for the programmes to be offered.
(5) The indicative tuition fee level for local students has been maintained at the current level since the 1997-1998 academic year. It is the Government's decision that the indicative tuition fee level for local students will continue to be maintained in the 2015-2016 academic year, and this has formed the basis for calculating the recurrent grants for UGC-funded institutions for the academic year concerned. We will take into account the experience of implementing the new academic structure in the 2012-2013 to 2014-2015 triennium before embarking on any review of the tuition fee level, and there is no specific timetable drawn up at this moment.
Annex
Number of non-local students admitted to UGC-funded FYFD programmes from the 2008-2009 to the 2014-2015 academic years
full-time-equivalent
Actual intake Approved Number of non-local student students as a Academic year Institutions Non-local number percentage of the students targets approved student number target 2008-2009 CityU 2 212 228 10.3% HKBU 1 294 149 11.5% LU 691 60 8.7% CUHK 2 946 288 9.8% HKIEd 453 48 9.1% PolyU 2 311 322 13.9% HKUST 1 846 270 14.6% HKU 2 747 301 11.0% Total 14 500 1 666 11.4% 4888 LEGISLATIVE COUNCIL ─ 21 January 2015
Actual intake Approved Number of non-local student students as a Academic year Institutions Non-local number percentage of the students targets approved student number target 2009-2010 CityU 2 162 211 9.8% HKBU 1 261 161 12.8% LU 659 56 8.5% CUHK 2 997 314 10.5% HKIEd 468 50 9.3% PolyU 2 297 263 11.4% HKUST 1 847 211 11.4% HKU 2 809 385 13.7% Total 14 500 1 651 11.3% 2010-2011 CityU 2 162 240 11.1% HKBU 1 261 147 11.7% LU 600 49 8.2% CUHK 3 014 337 11.2% HKIEd 568 56 8.8% PolyU 2 304 299 13.0% HKUST 1 855 272 14.7% HKU 2 816 459 16.3% Total 14 580 1 859 12.7% 2011-2012 CityU 2 162 239 11.1% HKBU 1 261 149 11.8% LU 580 38 6.6% CUHK 3 025 378 12.5% HKIEd 610 56 8.2% PolyU 2 306 316 13.7% HKUST 1 857 319 17.2% HKU 2 819 509 18.1% Total 14 620 2 004 13.6% LEGISLATIVE COUNCIL ─ 21 January 2015 4889
Actual intake Approved Number of non-local student students as a Academic year Institutions Non-local number percentage of the students targets approved student number target 2012- 3-year CityU 2 111 246 11.7% 2013^ programmes HKBU 1 266 161 12.7% LU 553 7 1.3% CUHK 3 159 372 11.8% HKIEd 621 2 0.3% PolyU 2 460 333 13.5% HKUST 1 888 331 17.5% HKU 2 942 554 18.8% Total 15 000 2 006 13.4% 4-year CityU 2 095 272 13.0% programmes HKBU 1 223 191 15.6% LU 553 49 8.9% CUHK 3 247 400 12.3% HKIEd 621 58 9.3% PolyU 2 337 306 13.1% HKUST 1 901 236 12.4% HKU 3 023 586 19.4% Total 15 000 2 098 14.0% Total CityU 4 206 518 12.3% HKBU 2 489 352 14.1% LU 1 106 56 5.1% CUHK 6 406 772 12.1% HKIEd 1 242 60 4.8% PolyU 4 797 639 13.3% HKUST 3 789 567 15.0% HKU 5 965 1 140 19.1% Total 30 000 4 104 13.7% 4890 LEGISLATIVE COUNCIL ─ 21 January 2015
Actual intake Approved Number of non-local student students as a Academic year Institutions Non-local number percentage of the students targets approved student number target 2013-2014 CityU 2 095 354 16.9% HKBU 1 223 191 15.6% LU 553 43 7.8% CUHK 3 247 479 14.8% HKIEd 621 83 13.4% PolyU 2 337 385 16.5% HKUST 1 901 378 19.9% HKU 3 023 533 17.6% Total 15 000 2 446 16.3% 2014-2015# CityU 2 095 354 16.9% HKBU 1 223 203 16.6% LU 553 41 7.4% CUHK 3 247 474 14.6% HKIEd 621 83 13.4% PolyU 2 337 420 18.0% HKUST 1 901 372 19.6% HKU 3 023 613 20.3% Total 15 000 2 560 17.1%
Notes:
Under the existing policy, the number of non-local students admitted to undergraduate programmes is capped at a level equivalent to 20% of the approved UGC-funded student number targets. It should be noted that the 20% quota applies to the total number of students in undergraduate programmes rather than the student intake in a particular academic year.
^ To tie in with the implementation of the new academic structure, institutions admitted two cohorts of students in the 2012-2013 academic year.
# Actual intake figures for the 2014-2015 academic year are provisional.
LEGISLATIVE COUNCIL ─ 21 January 2015 4891
Abbreviations： CityU City University of Hong Kong HKBU Hong Kong Baptist University LU Lingnan University CUHK The Chinese University of Hong Kong HKIEd The Hong Kong Institute of Education PolyU The Hong Kong Polytechnic University HKUST The Hong Kong University of Science and Technology HKU University of Hong Kong
Colorectal Cancer Screening Pilot Programme
22. MR PAUL TSE (in Chinese): President, at the end of this year the earliest, the Government will launch the Colorectal Cancer (CRC) Screening Pilot Programme (the Programme), which will cost $420 million, to subsidize people of specific age groups for CRC screening. It has been reported that the authorities intend to outsource colonoscopy services to private healthcare institutions and will conduct a survey on the relevant market fees in the first quarter of this year to determine the amount of subsidy. However, the media have found that, prior to the market survey conducted by the Government, three private hospitals have already raised their fees for colonoscopy services, with one of them raising its fees by almost 30%. Some patient groups are worried that such increases would have impact on the result of the market survey, push up public expenditure and unreasonably increase the gains of private hospitals. In this connection, will the Government inform this Council:
(1) whether it has approached the private hospitals to gain an understanding about the reasons to substantially raise the fees for colonoscopy services before taking up the outsourcing services;
(2) whether it has assessed the impacts of the fees for colonoscopy services having been raised substantially by private hospitals on the estimated expenditure, number of beneficiaries and the overall effectiveness of the Programme; and
(3) whether the authorities will introduce competition by allowing eligible private clinics or medical centres to take part in the 4892 LEGISLATIVE COUNCIL ─ 21 January 2015
Programme when they outsource the colonoscopy services; of the other measures to be put in place by the authorities so that the Programme may benefit more members of the public?
SECRETARY FOR FOOD AND HEALTH (in Chinese): President, in 2012, CRC became the second most common cancer, after lung cancer, in Hong Kong. There were 4 563 newly diagnosed CRC cases in that year, accounting for 16.4% of all new cancer cases. In 2013, CRC was the second most common cause of cancer death, resulting in a total of 1 981 registered deaths and accounting for 14.6% of all cancer deaths. As the risk of CRC increases significantly from age 50, persons aged 50 to 75 should discuss with their doctor and consider screening for CRC.
In view of a growing and ageing population, the number of new CRC cases and related healthcare burden are expected to continue to increase in future. In the light of the above, the Government announced in the 2014 Policy Address and the 2014-2015 Budget that it would allocate funding of around $420 million in the five years starting from 2014-2015 for the study and implementation of a pilot programme to subsidize CRC screening for specific age groups.
Regarding the three parts of the question, my consolidated reply is as follows:
The Department of Health (DH), with support from the Hospital Authority (HA), established in January 2014 a multi-disciplinary taskforce (the taskforce) with a number of representatives from the medical sector to embark upon the study and planning of the Colorectal Cancer Screening Pilot Programme (the Pilot Programme). The taskforce comprises representatives from the HA, relevant Academy Colleges, medical associations, primary care doctors, academia and non-governmental organization. The taskforce is responsible for tasks pertaining to the planning, implementation, publicity and evaluation of the Pilot Programme, including determination of inclusion criteria for participation in the Pilot Programme, method of screening, funding model, and operational logistics, and so on.
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The taskforce has identified faecal immunochemical test (FIT) as the screening method for use in the Pilot Programme. Primary care doctors will issue FIT tubes to participants. Where participants whose stool samples are found to contain minute amounts of blood, they will be referred by their primary care doctors for colonoscopy by specialists enrolled on a public-private partnership basis. Colonoscopists who are interested in participating in the Pilot Programme must meet requirements set out in terms of qualification, premises and facilities, as well as service quality and standard. The colonoscopy would not be confined to hospitals or medical centres. In the planning process, the DH has maintained close communication with various stakeholders in the medical field to enlist their active support and participation in the Pilot Programme.
To encourage eligible citizens to actively participate in the Pilot Programme and complete the screening process, apart from subsidizing FIT, the Administration will provide subsidy to participants found to have positive FIT results for undertaking colonoscopy. The amount and details of subsidy will be determined by taking into consideration market practice, experience of existing subsidy schemes as well as issues that relate to fairness and equity, affordability and accessibility. To obtain a better understanding of the market situation and price information of colonoscopy services, the DH and the HA commissioned a market survey between July and August 2014. Moreover, the Hong Kong Medical Association conducted the Doctors' Fee Survey around the same time and these findings will serve as useful reference for the Administration when considering the details of the subsidy. The findings of the above studies reveal that there is adequate supply of service providers to cope with the demand generated from the Pilot Programme.
The Pilot Programme aims at gathering local experience of the CRC screening services and collecting relevant data to generate evidence and recommendations, thus facilitating the Administration to consider whether and how best CRC screening may be provided to the wider population in the future. We are working on a publicity strategy to promote the Pilot Programme with the aim of increasing participation among eligible individuals and healthcare professionals.
4894 LEGISLATIVE COUNCIL ─ 21 January 2015
BILLS
Second Reading of Bills
Resumption of Second Reading Debate on Bills
PRESIDENT (in Cantonese): Bills. We now resume the Second Reading debate on the Mandatory Provident Fund Schemes (Amendment) Bill 2014.
MANDATORY PROVIDENT FUND SCHEMES (AMENDMENT) BILL 2014
Resumption of debate on Second Reading which was moved on 2 July 2014
PRESIDENT (in Cantonese): Mr CHAN Kin-por, Chairman of the Bills Committee on the above Bill, will address the Council on the Committee's Report.
MR CHAN KIN-POR (in Cantonese): In my capacity as Chairman of the Bills Committee on Mandatory Provident Fund Schemes (Amendment) Bill 2014 (Bills Committee), I would like to report on the deliberations of the Bills Committee.
The Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bill) seeks to amend the Mandatory Provident Fund Schemes Ordinance to allow withdrawal of Mandatory Provident Fund (MPF) accrued benefits by instalments upon a scheme member's retirement or early retirement, to add terminal illness as a ground for making early withdrawal of accrued benefits, to improve the information disclosure and prosecution arrangements, and so on. The Bill also proposes to revise the approval process of a new MPF constituent fund and to streamline the administrative and communication procedures, so as to drive down the MPF fees and to enhance the MPF schemes.
(THE PRESIDENT'S DEPUTY, MR ANDREW LEUNG, took the Chair)
LEGISLATIVE COUNCIL ─ 21 January 2015 4895
The Bills Committee supports the proposal which allows phased withdrawal of MPF accrued benefits, so as to provide scheme members with more flexible options in withdrawing accrued benefits. As MPF trustees' administrative costs increase with the number of withdrawals, members propose to reduce the number of free withdrawals from at least 12 times a year to no more than four times a year or to set a minimum amount for each withdrawal, so as to maintain the administrative and operational efficiency of the MPF System. Having considered the comments of the Bills Committee, the Administration has agreed to revising the proposal to require MPF trustees to handle a minimum of four free withdrawal requests made by a scheme member in a year while no minimum withdrawal amount will be specified. The authorities have promised a review in future to ascertain whether the new arrangements would satisfy scheme members' need. Members in general also support the addition of terminal illness as a ground for early withdrawal of accrued benefits. Some members have expressed disagreement to defining terminal illness as a remaining life expectancy of 12 months or less. They hold that certification by a registered medical practitioner or a registered Chinese medicine practitioner that a scheme member suffers from a terminal illness should suffice to justify the early withdrawal. The Administration has indicated that it is necessary to make available an easy-to-understand and objective definition of terminal illness, so as to provide medical practitioners with an objective assessment mechanism, to facilitate easy operation of claim procedures and to help prevent abuse. The authorities have explained that the proposed definition is the outcome of the 2011-2012 public consultation and the subsequent discussion with medical professional bodies, together with the reference made to the arrangement adopted in the Australian Superannuation System.
Moreover, some members have suggested allowing scheme members who are certified to have critical illness to make early withdrawal of accrued benefits, in order to help them pay medical expenses or meet other financial needs. The authorities have advised that critical illness is not necessarily fatal and critically ill scheme members who recover after treatment will still require retirement protection. Allowing early withdrawal of accrued benefits by critically ill scheme members will reduce the amount available for meeting retirement needs in future and this contradicts the policy objective of the MPF System. Hence, the authorities consider it inadvisable to add critical illness as a ground for early withdrawal of accrued benefits.
4896 LEGISLATIVE COUNCIL ─ 21 January 2015
Members generally support the Bill's proposal to promote the use of electronic means of communication between trustees and scheme members. But some members are concerned that the full implementation of electronic communication may prejudice scheme members' right to information. Members consider that scheme members should be allowed to opt for non-electronic means to manage their MPF accounts and suggested the authorities take appropriate measures to prevent trustees from charging scheme members for using paper correspondence.
The authorities have indicated that scheme members may still opt for non-electronic means of communication. Although the Mandatory Provident Fund Schemes Ordinance contains no provisions which prohibit trustees from charging members administrative fees for the use of paper correspondence, none of the current 38 MPF registered schemes impose any charges on scheme members for provision of required documents. Furthermore, all fees have to be specified in the fee table of the offering document.
In order to reduce trustees' compliance burden, some members urge the Administration to review and simplify the dual approval process which requires new constituent funds to secure approval from both the Mandatory Provident Fund Schemes Authority (MPFA) and the Securities and Futures Commission (SFC), so as to expedite the approval process and reduce trustees' administrative costs to help drive down MPF fees.
The authorities have explained that these two regulators have clear delineation of work. The MPFA and the SFC are going to hold regular meetings to discuss issues of common interest. The MPFA will also continue to liaise with the sector and review the current arrangement from time to time to ensure an efficient approval process.
The Bills Committee raises no objection to the other proposals in the Bill. Those proposals include clarifying the definition of the terms such as "permanently ceased employment or self-employment" and "departs Hong Kong permanently", empowering the MPFA to refuse application for a new constituent fund which is not "in scheme members' interests", revising the information disclosure arrangements in secrecy provisions, and extending the time limit to institute criminal proceedings under the legislation from six months to three years after the commission of the offence.
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In response to members' request, the Administration and the MPFA have undertaken to step up public education and publicity efforts to help people understand the salient features of the Bill and the new arrangement after the passage of the Bill.
The Bills Committee raises no objection to the Committee stage amendments (CSAs) proposed by the Administration.
Deputy President, below are my comments on the Bill.
I support the Bill and the CSAs moved by the authorities. The most remarkable amendment is on the phased withdrawal of MPF accrued benefits. This proposed amendment allows scheme members to withdraw MPF accrued benefits by instalments upon their retirement or early retirement. Under this amendment, scheme members can withdraw accrued benefits with more flexibility and the amendment helps them formulate retirement plans and perform financial management more effectively.
The original intent of the Bill is to require trustees to process, free-of-charge, at least 12 requests for accrued benefit withdrawal from a scheme member in a year. However, both the sector and the public are concerned that the increased number of withdrawals will directly bring about a rise in administrative costs. Indeed, the processing of each application for benefit withdrawal involves a number of administrative procedures such as the verification of application form, examination of documents, exchange of correspondences, release of cheque, and so on, resulting in high administrative and staff costs. At present, each scheme member can only make one withdrawal after retirement. If the number of free withdrawals is increased to at least 12 times a year, each member can make such a request for as much as 120 times in 10 years and this will certainly drive up the administrative costs.
Therefore, the sector proposes to revise this provision and reduce the number of free withdrawals of incurred benefits from at least 12 times to at least four times a year, so as to maintain the administrative and operational efficiency of the MPF sector. This proposal has gained the Government's endorsement so that the trustees can reduce the costs that will be incurred in processing the benefit withdrawal requests and help keeping the overall administrative costs 4898 LEGISLATIVE COUNCIL ─ 21 January 2015 under control. At the same time, I believe that with the passage of the Bill, the Government will continue to strive for a balance between enhancing the flexibility of the scheme and controlling its costs.
Furthermore, I also support the other CSAs proposed by the authorities. I hope that with the passage of the Bill, the MPF System in Hong Kong can be further enhanced. Apart from this Bill, I would also like to see the authorities continue strengthening the other measures which bring improvements to the MPF System, such as automation and digitization of administrative procedures, consolidation of schemes and facilitating scheme members' consolidation of accounts, so as to realize the objectives of driving down the costs and administration fees of the schemes, as well as streamlining the procedures.
With these remarks, I support the Bill and the CSAs proposed by the Administration.
Thank you, Deputy President.
MR WONG TING-KWONG (in Cantonese): Deputy President, first of all, I wish to declare my interest. I am the Chairman of the MPF Schemes Advisory Committee of the Mandatory Provident Fund Schemes Authority (MPFA).
The problem of population ageing in Hong Kong has become increasingly serious and there is growing concern in society for retirement protection. As one of the pillars for retirement protection, the Mandatory Provident Fund (MPF) schemes should be reviewed and improved appropriately in the light of actual social conditions and public aspirations. The proposals in the Bill, which include the provision of more flexible arrangement for withdrawing incurred benefits, the addition of new ground for early withdrawal of incurred benefits, the clarification on the approval criterion for new MPF constituent fund, the streamlining of compliance requirements to help drive down fees and the improvement on information disclosure and prosecution procedures are all made to enhance the MPF System, with a view to strengthening the protection of scheme members' interests. I support all these proposals.
During the deliberations of the Bills Committee, members' discussions and public concerns have focused on a few proposals. I would like to talk about them here.
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First, one of the proposals seeks to allow scheme members to withdraw MPF accrued benefits by instalments upon retirement or early retirement. This arrangement provides additional options for scheme members, gives them more flexibility in considering the withdrawal of incurred benefits in the MPF and hopefully help them meet their retirement needs better. However, some members have expressed their concern about the proposal which seeks to require trustees to process, free-of-charge, at least 12 requests for accrued benefit withdrawal in a year without specifying the minimum withdrawal amount. More phased withdrawals of accrued benefits will mean a heavier burden on the trustees' operational costs. The costs concerned may have to be borne by all scheme members and this is in breach of the authorities' work direction in reducing MPF fees. Having considered the views of the members, the sector and organizations, the Government has finally proposed a Committee stage amendment to reduce the number of free withdrawal of accrued benefits to a minimum of four times a year without specifying the minimum amount of each withdrawal. In my opinion, the relevant amendment helps trustees keep its administrative costs under control and reduce the chance that scheme members will have to bear the relevant costs. It is a reasonable balance between facilitating scheme members' withdrawal of benefits and maintaining the administrative and cost efficiency of the MPF schemes. It is also proposed in the Bill a new provision to prohibit the charging of any fee, imposing of fines on scheme members or deducting any payment from scheme members' accounts for matters related to the withdrawal of incurred benefits. Upon the implementation of the phased withdrawal arrangement, trustees will revise the offering documents to stipulate the fees for withdrawals of accrued benefits subsequent to the free-of-charge withdrawals. The MPFA will be responsible for approving the offering documents and the subsequent amendments. I hope that the authorities will closely monitor the above operations in the future to ensure that both the operations and charges are transparent and in the interest of scheme members. It is also hoped that the arrangement will be reviewed after it has been implemented for a period of time.
Deputy President, the Bill has further suggested adding terminal illness as an additional ground for withdrawal of accrued benefits. I support this proposal as retirement protection will be meaningless for scheme members who unfortunately have a limited life expectancy. It is pragmatic to allow them to make early withdrawal of benefits. Some people have said half-jokingly that one of the most painful experience in life is "having money left behind in the 4900 LEGISLATIVE COUNCIL ─ 21 January 2015 bank after one passed away". This proposal has generally gained support from members and organizations. It is more controversial, however, for the proposal to define "terminal illness" as a remaining life expectancy of 12 months or less. Some organizations have criticized this proposal as harsh and inconsiderate. They consider certification by registered medical practitioners or registered Chinese medical practitioners that a scheme member suffers from a terminal illness should suffice. Separately, it is suggested that "critical illness" be included as a ground for early withdrawal of accrued benefits. In my opinion, the definition of "terminal illness" serves as an objective criterion for medical practitioners to follow and helps prevent scheme members from abusing this ground to make early withdrawal of accrued benefits. The inclusion of "critical illness" as the ground for early withdrawal is however inappropriate to me. Some "critical illnesses" are not fatal and scheme members who are critically ill may make use of public health services for treatment and recover afterwards. Allowing them to make early withdrawal of accrued benefits to pay for medical expenses or meet other needs will greatly reduce the money available at their disposal after retirement. Hence, for the sake of their living in future, it is necessary to ensure that MPF can provide them with adequate protection.
MPF has long been criticized for the high level of fees it charges. Regarding this problem, a number of proposals have been suggested in the Bill with a view to driving down the fees. It is suggested that approval should be granted to new constituent funds only if they are in the interests of scheme members, the administrative procedures be streamlined, overlapping or unnecessary certifying documents be abolished, and the use of electronic means of communication be promoted to reduce trustees' service costs. I support all these proposals. In fact, over the years, whenever MPF is discussed in the Legislative Council, we will hear such criticisms as MPF "charges are high but returns are low and it fails to provide adequate retirement protection". However, no system is perfect and hence we have to conduct review on its effectiveness regularly. With due considerations to the well-being of society, improvements should be made proactively to address the shortcomings of the system. The MPFA has implemented previously a number of improvement measures on the MPF System in response to criticisms raised by members of the public. These include the implementation of the Employee Choice Arrangement or "semi-portability", the promotion of personal account consolidation, facilitating trustees to merge funds which are low in efficiency and small in scale, and the introduction of the Fees Comparative Platform, the Low Fee Fund List, and so on. LEGISLATIVE COUNCIL ─ 21 January 2015 4901
The proportion of MPF fees has also declined for about 20%, from 2.1% in December 2007 to 1.65% in December 2014, though I think there is still room for further reduction. The perfection of a system, however, cannot be achieved overnight. The MPFA has been making continuous improvements and a study on "full portability" is underway. The establishment of a core fund is being considered to provide a default fund with uniform and capped fees to help scheme members who have not indicated their preferences to make investments at risks appropriate to their stages of life. At the same time, it is hoped that the measures can promote competition among other funds, help drive down the fees and strengthen the retirement protection function of MPF.
Deputy President, I would also like to mention in passing that apart from the MPF System, other retirement protection pillars do exist in Hong Kong. The Policy Address announced last week the earmarking of $50 billion to prepare for people's retirement needs. In my opinion, the proposed retirement protection should aim at helping the needy. If we restrict the rich and those who continuously receive sizable incomes after retirement from enjoying the proposed retirement protection, we are in fact making good use of resources. I hope that when the authorities conduct a consultation in future, there will be a comprehensive and pragmatic discussion and a consensus can be reached in society early, with a view to devising a retirement protection proposal which can strike a balance among the interests of different social sectors.
Lastly, I urge the authorities to enhance publicity efforts on the new arrangements under the relevant proposals after the passage of the Bill. They should also try to understand from time to time the difficulties faced by the trustees in implementing the relevant proposals in order to provide timely guidelines to facilitate smooth implementation and operation of the new measures.
With these remarks, Deputy President, I support the Bill and the Committee stage amendments moved by the Government.
MR WONG KWOK-HING (in Cantonese): Deputy President, the purpose of the Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bill) is to introduce certain improvements and amendments to the Mandatory Provident Fund (MPF) System before it enters the 15th year of its implementation.
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We certainly welcome and support the relevant improvements and amendments. It is likely that employees who want to withdraw their accrued benefits will be affected by the prevailing economic cycle. If employees withdraw their accrued benefits in one go when the economy is thriving, they may possibly benefit. But it may not be good for them to do so at the time of economic downturn, or when the prevailing economic cycle is unfavourable. The Bill proposes to allow employees to withdraw their accrued benefits four times in a year so as to prevent them from suffering unexpected loss. This commands our approval and support.
However, we do not think that this mere step of the authorities to improve the MPF System is sufficient. This minor repair cannot allay the long-standing discontent of all Hong Kong employees who have participated in the MPF System, nor can it answer their demand for improving the MPF System. Therefore, I hope that the Secretary will not just stop at the amendments under the Bill. I also hope that the Secretary can explain what the next amendments to the MPF System will be.
Deputy President, today, I bring this piggy bank to this Chamber again, so as to show everybody a major loophole in the existing MPF System. This is not the first time that I bring this piggy bank to this Council. Secretary, this piggy bank carries the slogan for the MPF: "MPF for the future". But it is defective, as there is a hole on its bottom. It is symbolic of "money coming in from the top goes out at the bottom to employers". Everybody can see that the money I keep depositing into this piggy bank has seeped out of it unceasingly. Why?
The MPF is intended to be a channel for employees to save up money for their retirement in future. MPF contributions comprise those from both employees and employers to allow the former to meet their living needs in their retirement and twilight years. Under the existing MPF system, however, accrued benefits can be used to offset long-service and severance payments. The leak at the bottom of this piggy bank symbolizes this offsetting arrangement. Due to the presence of this loophole, employees' accrued benefits keep going into employers' pockets, which is the greatest criticism and discontent of employees. In my view, if the Government is really determined to deal with the retirement protection for employees, it should at least plug this loophole by abolishing the offsetting arrangement. Under the existing MPF System, employers can use accrued benefits to offset long-service and severance payments arising from layoffs, contract termination and business closure. This is the biggest problem.
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Deputy President, over the past five years, $28.46 billion of accrued benefits has been withdrawn, in which $10.6 billion has been used for offsetting purpose. This accounts for around two thirds of the accrued benefits that have been withdrawn over the same period. This amount is very substantial, and it has reflected the gravity of the situation. Therefore, the Hong Kong Federation of Trade Unions (FTU) strongly urges the Government to stop undertaking any more minor repairs. If the Government is really determined to resolve the problems associated with population ageing and employees' retirement protection in Hong Kong, I hope it can expeditiously introduce legislative amendments on abolishing the unreasonable arrangement of using accrued benefits to offset long-service and severance payments.
Deputy President, this unreasonable arrangement fits particularly well into the non-long-term employment system. By "non-long-term employment system", I am talking about those contract staff, outsourced staff and temporary staff. To them, their MPF accrued benefits are not at their disposal. Upon the expiry of their employment contracts, such employees will be stripped of the accrued benefits to which they are entitled. This arrangement is very unreasonable indeed.
Deputy President, Chief Executive Mr LEUNG Chun-ying says in point 16 in his election manifesto that "[w]e will adopt measures to progressively reduce the proportion of accrued benefits attributed to employer's contribution in the MPF account that can be applied by the employer to offset long-service or severance payments". Deputy President, the Secretary is one of the accountability officials under the Chief Executive's leadership. He is obliged to realize the Chief Executive's election undertaking, right? The Secretary cannot possibly brush aside the Chief Executive's undertaking to all Hong Kong people in his election manifesto, as he has the obligation. Regarding the question of how to materialize Mr LEUNG Chun-ying's undertaking in his election manifesto ― the undertaking I quoted just now ― I hope Secretary Prof CHAN can submit a policy paper with a legislative amendment timetable as early as possible to respond to people's demand.
Nearly three years of the present Government's term have passed, and the remainder of its term is not long. As everybody is aware, certain procedures are required for amending the law, and the Government must compile a policy paper for public consultation. The Legislative Council must also form a Bills Committee to scrutinize the bill. To complete this process, a period of nearly 4904 LEGISLATIVE COUNCIL ─ 21 January 2015 two or three years is required. Secretary, the time remaining in the tenure of the present Government is very tight. He cannot afford to turn a blind eye to the relevant issue and ignore it all together. I hope he can give us a reply.
Deputy President, legislating for paternity leave is a successful experience. Initially, the Government had much reservation about the FTU's demand for enacting legislation on paid paternity leave, as it faced pressure mainly from employers. We knew that this issue was indeed controversial, and various stakeholders were also involved. But the previous Chief Executive Mr Donald TSANG decided on the trial implementation of paternity leave in the Civil Service first. After a period of trial implementation, the present Government has taken a further step during its term, the step of legislating for paid paternity leave. This is a successful experience of striving for a breakthrough as early as possible in improving employees' benefits. Therefore, we strongly request the Government to expeditiously abolish the arrangement of using accrued benefits to offset severance and long-service payments, and to consider the idea of implementing the abolition for civil servants and contract staff (including outsourced staff) of the Government first.
Deputy President, our proposal is not without any grounds. At present, there are around 160 000 civil servants, some 12 000 of whom are contract employees. According to government information, around 7 000 of the contract employees have been continuously employed for over two years. Under the existing system, their accrued benefits will be used for offsetting purpose at the termination of their employment resulting from the expiry of their employment contracts. In fact, this arrangement has already been criticized by civil servants and government employees providing public services as "unequal pay for work of equal value". It has aroused their grievances and undermine their morale.
In that case, can the Government abolish the offsetting arrangement for government employees first? The reason is that no labour conflict will be involved, and the Government need not amend the law either. The Government can make the amendment simply by issuing Executive Orders. Why should the Government refuse to consider this idea? Why should the Government refuse to materialize this idea? There is already the successful experience of legislating for paternity leave. Why can the Government not implement this to its employees as a start?
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The Government Employees Association affiliated with the FTU conducted a survey during the period from October to December last year and interviewed around 300 serving civil servants. Around 50% of the respondents had already served in the Government for over five years in a row prior to the survey. Among these respondents, 75% were contract employees. When interviewed, they expressed strong support for abolishing the offsetting arrangement and put forth the keen demand that the Government should implement it for government employees first. Therefore, I sincerely hope that the present SAR Government can take the lead to set up a role model as a scrupulous employer.
There is no need for the Government to undergo any cumbersome legislative amendment procedures, or to get through the Labour Advisory Board. Nor will severe conflicts arise between employees and employers. The question of whether to implement the abolition hinges on the intention of the Government. Therefore, I sincerely hope that the Government can conduct studies immediately after the passage of the Bill, and set up a role model as a scrupulous employer by abolishing the practice of using accrued benefits to offset severance and long-service payments for contract and outsourced staff of the Government. I hope that the Secretary can give a reply today on this matter.
I have repeatedly raised this issue at the meetings of the Legislative Council Panel on Public Service. The Secretary for the Civil Service has also replied that he will revise the current practice if the relevant law is amended. I wish to point out that no legislative amendment is required. The question of whether to implement the abolition depends on the Government's willingness to launch any administrative measures or make any administrative decision, and also its determination. I hope that Secretary Prof CHAN, the Secretary in charge of the MPF, can make this historical stride and give us a ground-breaking reply on the abolition of the offsetting mechanism (The buzzer sounded) …
DEPUTY PRESIDENT (in Cantonese): Mr WONG, your speaking time is up.
MR WONG KWOK-HING (in Cantonese): Thank you, Deputy President.
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MR POON SIU-PING (in Cantonese): Deputy President, I first declare that I am a member on the Management Board of the Mandatory Provident Fund Schemes Authority (MPFA).
The unsatisfactory operation of the existing Mandatory Provident Fund Schemes Ordinance (the Ordinance) has aroused people's strong views on the Mandatory Provident Fund (MPF). This time around, the Government proposes to amend the Ordinance so as to improve the operation of the MPF System. Despite the great discrepancies between the relevant improvements and people's expectations, they nonetheless deserve our support in principle.
In order to truly improve the operation of the MPF System, rectification is necessary in several areas. This includes the abolition of the offsetting mechanism for MPF accrued benefits to avoid further diminishing of the already meagre accrued benefits after offsetting; the reduction of administrative fees to ensure that the accrued benefits of capital preservation funds can catch up with cumulative inflation, and also to make capital preservation funds truly capable of preserving capital; and, the formulation of MPF arrangements for homemakers. However, the above measures aiming at improving the operation of the MPF System and providing protection to employees' retirement life are all excluded from the Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bill).
During the scrutiny of the Bill, some members put forth the idea of setting up a public trustee as a means to ensure stable MPF returns. But sadly, the Government rejected this idea on the grounds that it was not in line with the MPFA's statutory functions and would not be able to achieve economies of scale. Even though the Bill contains certain amendment proposals, I think that they are still far from satisfactory.
It is the Government's intention to amend the Bill's proposal on allowing scheme members to withdraw their accrued benefits free-of-charge from no less than 12 times to four times in a year at the Committee stage. While members of the Bills Committee on Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bills Committee) have divergent views on this proposal, I myself have reservations about the Government's amendment proposal. I do not agree to undermine people's legitimate rights on the ground that "administrative costs may increase". Similarly, neither should people's interests be sacrificed for the sake of lowering MPF administrative costs and enhancing efficiency. If the LEGISLATIVE COUNCIL ─ 21 January 2015 4907
Government's amendment is passed, the Government should expeditiously conduct a review to ascertain whether it is feasible to reinstate the arrangement of withdrawing accrued benefits 12 times free-of-charge.
Another focus of the Bill is to allow scheme members with terminal illnesses to withdraw their accrued benefits earlier. The Bill proposes that a scheme member may withdraw his accrued benefits earlier as long as he is certified by a registered medical practitioner or Chinese medicine practitioner (CMP) as suffering from a terminal illness and having a remaining life expectancy of 12 months only. But what will happen if the registered medical practitioner or CMP opines that he can only live for one and a half or two years more? In this connection, some members of the Bills Committee proposed that suffering from critical illnesses could also be a ground for the early withdrawal of accrued benefits, and the stringent requirement proposed in the Bill ― a remaining life expectancy of 12 months only ― should not be the sole criterion. In my view, all these issues can be discussed.
As the saying goes, "One should seek medical treatment for his illness before it intensifies". If a medical practitioner or CMP has certified that a patient is suffering from a critical illness, I cannot see any reason why the Government should bar him from using his MPF accrued benefits for medical treatment purpose. I hope that after the passage of the Bill, the Government can review the restriction about a remaining life expectancy of 12 months. Can a scheme member suffering from a critical illness use a certain proportion of his MPF accrued benefits earlier to meet the necessary medical expenses even if his remaining life expectancy exceeds 12 months?
Deputy President, I wish to say in the last part of my speech that I welcome the Bill's proposal on extending the time bar for prosecuting employers in breach of the Ordinance from six months to three years after the offence has been committed. In theory, with a longer prosecution time bar, it will be more effective to penalize those employers in contravention of the Ordinance. Therefore, I think the prosecution time bar should span a longer period rather than a short one. I hope that the Government still has the opportunity to conduct a review on the possibility of relaxing the prosecution time bar in the future.
Deputy President, I so submit.
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MR LEUNG YIU-CHUNG (in Cantonese): Deputy President, there are about eight amendments to the Mandatory Provident Fund (MPF) under the Bill this time, and others are consequential in nature. The Government kept emphasizing that these are major amendments and it has made a lot of efforts, without which it would not be able to put forth these amendments. Deputy President, should we consider only from the perspective of the MPF, the picture may be just as the Government described, yet we should bear in mind what was the original purpose of setting up the MPF. If the MPF is established to address the retirement needs of Hong Kong people, these amendments are indeed insignificant. These amendments, purely nominal in nature, are just minor rectifications and will not help much as to the overall population ageing in Hong Kong and the retirement problem faced by Hong Kong people.
Deputy President, why do I make such a comment? As everyone is aware, the protection coverage of the MPF is very narrow. Its protection coverage for women is particularly narrow. Those women who have never had a job are completely outside the protection coverage of the MPF. When these women get old, they will have no retirement support at all, and therefore they can only ask others ― probably their spouse, children or the Government ― for money. The MPF is completely meaningless to them. Some may comment that it is reasonable to exclude these jobless women from the protection coverage. In fact, the chronically ill and the long-term unemployed are outside the protection coverage of MPF too. Deputy President, let us first put aside the jobless, how about the working people? Even if one has a job, he or she is not necessarily protected by the MPF. For instance, domestic helpers have all along been excluded from the protection coverage of the MPF, they will not get any protection when they retire. I have been urging the Government to address these problems, but the Government overlooked the major principles and only focused on making minor amendments. This is indeed upsetting.
Other than the abovementioned persons who are not entitled to MPF protection, in fact, retirees do not enjoy genuine protection under the existing coverage of the MPF. For example, just now a Member pointed out that the arrangement of offsetting long-service payments and severance payments against MPF accrued benefits will reduce the amount of pension. Deputy President, I do not know if you have paid heed to what long-service payment and severance payment are. The long-service payment was originally devised to reward employees who have provided long service to the company, or to put it in the other way round, employers offer its employees the protection of long-service payment in order to encourage them to provide long service to the company. LEGISLATIVE COUNCIL ─ 21 January 2015 4909
Hence the provision of long-service payment to employees has nothing to do with retirement. So is severance payment. What is severance payment? When an organization or a division of it closes down, severance payments are made to its employees in considering that those employees may be out of work for a period of time. Therefore the provision of severance payment has nothing to do with retirement protection.
Regrettably, the Government has made the arrangement forcibly to offset severance payments and long-service payments against MPF accrued benefits. As a result, some employees only receive a small amount of long-service payment or severance payment when they retire. Hence they cannot rely on such a small amount as retirement protection. I have been urging the Government to address this issue, but the Government did not take any action. What issues does the Bill seek to address? The Bill seeks to address some minute issues, though under the existing MPF mechanism, these issues also need to be addressed. For example, it seeks to allow certain patients early withdrawal of accrued benefits. Deputy President, literally speaking, the critically ill are only allowed to withdraw the accrued benefits on the verge of death. What a pity it is! Now it is proposed that patients with a remaining life expectancy of 12 months should be allowed early withdrawal of accrued benefits. Application for early withdrawal of accrued benefits on the ground of terminal illness is not acceptable either, since only patients with a remaining life expectancy of 12 months will be allowed to do so. Deputy President, is this requirement too cruel? Everyone knows that in most cases, the terminally ill need more money in the final stage of their life for purchasing drugs with efficacy for treatment purpose, yet the Government prevents them to do so. In other words, instead of wishing them a longer life, the Government wishes them a shorter life. Is this practice too evil-minded? No retiree would look forward to an early death. The retirees only wish to have some money to spend at their old age. If it is impossible for them to live a happy life in their twilight years, what is the point in having the MPF? Thus I find the definition relating to a remaining life expectancy of 12 months very upsetting.
Moreover, regarding the withdrawal of accrued benefits, originally scheme members can request for withdrawal free-of-charge 12 times a year, but now the Government proposes to revise that to four times. I have a question in mind: What is the function of the original arrangement that allows scheme members to withdraw benefits free-of-charge 12 times a year? This arrangement was formulated to ensure that retirees can withdraw benefits on a regular basis, so that they can gradually spend their pensions over a long period of time. The current 4910 LEGISLATIVE COUNCIL ─ 21 January 2015 proposal of revising that to four times with no limit on the minimum withdrawal amount sounds very generous, but what is the use of it? The original arrangement was designed to facilitate retirees to withdraw money from their pensions monthly so that they can spend it gradually, which is in line with the concept of retirement. Now the Government proposes to revise the number of free withdrawals to at least four times a year, but what if all the money has been withdrawn and used up after four times of withdrawal? Will it exemplify that the concept upheld by the authority is futile? The objective and function of the MPF is to help Hong Kong people accrue more money for them to spend gradually in the future to maintain their living. But this is not the case now. The Government wants to amend it, but what is the use of it? This time the Secretary said he would like to simplify administration work in order to lower administrative fees; yet this is only a hope which is not concrete. What is the use of that?
Deputy President, after all these elaborations, the proposed amendments this time are really minor rectifications that fail to respond to the genuine function and meaning of the MPF when it was first set up by the Government. Nonetheless, the Government is glad to do this kind of work. Over the last decade or so, the Government has kept making amendments to some minor provisions of the Ordinance. It tables amendments to the Legislative Council every one or two years in order to tell us that it is also the hope of the Government to perfect the MPF System and let the people live a stable life after retirement. Despite the minor amendments it proposes from time to time, the Government fails to really address the problems. On the contrary, my opinion is that if the authority keeps trimming the minor provisions, it would create more barriers for the implementation of universal pension in the future. The Government will have many excuses. It can argue that the existing MPF System is already very good and comprehensive and there is no point in studying other retirement systems. The MPF is already a crucial pillar which is very steady and stable, thus it is not necessary to study other retirement systems. I am afraid my worries would come true.
In fact, we can see that this year's Policy Address follows the same tactic. The Government said in the light of the many dissensions in society, consultations and surveys will be conducted later on in order to gauge the views of the general public. I agree with this point, but what is one of the dissensions about? It is about the existence of the MPF System because the Government keep talking about the three or four pillars, and one of the pillars is the MPF System. Having this supporting pillar, there is no need for us to look into other LEGISLATIVE COUNCIL ─ 21 January 2015 4911 retirement protection systems. In our view, this is the biggest problem for now. I do not mean that we would try to rot the current MPF System deliberately, but now the Government only make minor amendments instead of genuinely addressing the problem, this is certainly not a solution to the territory-wide problem of Hong Kong's ageing population. Deputy President, as I mentioned just now, many people are still outside the protection coverage of the MPF. For instance, the jobless women, the chronically ill, the long-term unemployed persons and those working as domestic helper are not eligible to join the MPF System, and they are not entitled to receive pension money regularly to meet the needs of their twilight years. Hence, I find today's amendments not that meaningful. Can the Government be more practical and really consider setting up a universal pension scheme, so that all Hong Kong people can have a stable and worry-free retirement?
Most importantly, as many women keep relaying to us, they have no idea of what they are supposed to do now. They have kids soon after getting married, then they are busy with taking care of the kids. When the kids have grown up, it will be very difficult for them to find a job as they are in their middle age and hardly have any working experience. They can only rely on their husband. When they get even older, their children have their own jobs, most of which are not well-paid jobs, and they have their own families to take care. At this stage, the husbands of these women may probably be jobless due to old age. Their entitlement to the MPF from previous employments makes them slightly better than their wives, who have nothing. In that case, what are these women supposed to do? May the Secretary tell me how to resolve this problem? We have been talking about this problem for many years since the establishment of the MPF System in 2000, but the Government is still looking without seeing and hearing without listening. It has been disregarding these problems and left them unresolved. Strange though, the Government seems to be very enthusiastic. It has expressed concern on the issue of population ageing and indicated that it will pay heed to the problem. I hope the Government can do something else other than saying empty words. It should come up with something concrete and tell us what it intends to do to address the needs of this group of people, and what assistance will be offered to them to solve the problems they will face in their twilight years.
Deputy President, I so submit.
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MR SIN CHUNG-KAI (in Cantonese): Deputy President, the subject matter we are now discussing is the Mandatory Provident Fund Schemes (Amendment) Bill 2014. The Mandatory Provident Fund (MPF) System has been in operation for 14 years since its inception on 1 December 2000. According to the Government's policy paper, the MPF System is set up as an employee retirement protection instrument, which is the second pillar of the Old Age Protection Five-Pillar Approach envisioned by the World Bank. The actual operation of the MPF System over the past 14 years has clearly shown us that the return of the MPF schemes could hardly provide sufficient retirement protection for the scheme members. Early this month, a press report pointed out that the rate of return of MPF investments was lagging behind the inflation rate, as the overall rate of MPF investment return for the past year stood at a mere 1.53%, the worst rate recorded after 2011. Compared to 2014's inflation rate of 4.3% as estimated by the Government, the rate of investment returns of wage earners' contributions to the MPF is lagging far behind. What an eyesore it is!
On the other hand, the administrative and management fees charged by MPF schemes are extremely high and nibbling up the accrued benefits of people's contributions. Indeed, this has been a source of complaints for a long time. The Mandatory Provident Fund Schemes (Amendment) Bill 2014 submitted by the Government this time only serves to give the MPF System some minor remedies by allowing withdrawal of accrued benefits by instalments upon a scheme member's retirement or early retirement. It is certainly a better arrangement to allow withdrawal of accrued benefits by instalments, and particular so in recent years as the investment markets across the world have been fluctuating greatly. If an employee retires at a time when the market situation is at its worst, that employee has only two choices under the existing arrangement. One of the choices is to withdraw all the accrued benefits from his MPF account in one go and suffer losses because he will be redeeming the fund units at low prices; otherwise, the retiring employee will have to wait until the market improves to withdraw the accrued benefits. If the employee concerned does not have enough savings, he will have problem covering the daily expenses upon retirement. Indeed, both choices will impact on the employee's retirement life.
Regarding the statutory number of free-of-charge withdrawals, the Government's original proposal in the Bill was to require a trustee to handle scheme members' requests for withdrawal free-of-charge 12 times a year, but upon taking into account the comments of the industry on this arrangement, the arrangement was subsequently amended to four free-of-charge withdrawals a LEGISLATIVE COUNCIL ─ 21 January 2015 4913 year. Should the maximum number of free-of-charge withdrawals be pitched at four times or 12 times a year? Certainly, more free-of-charge withdrawals would be better for the employees. However, this question actually involves some mathematics. If people are allowed to withdraw their benefits by instalments, the majority of them will have their accrued benefits fully withdrawn very soon. But then, even if the maximum number is pitched at four times, will that make any significant difference? We have given some thoughts to this issue, but the Bills Committee did not discuss it in great detail. Moreover, the Government promptly accepted the counter-proposal raised by an individual Member in this respect. I really do not understand why the Government reduces the arrangement to four times a year without carrying out any extensive consultation. As such, regarding the relevant amendment proposed by the Government to this Amendment Bill, which seeks to reduce the 12 free-of-charge withdrawals set out in the Bill to four times, I consider the change so introduced uncalled for. We support the proposal of 12 times a year that the Government submitted to the Bills Committee initially, and so we will not agree with the Committee stage amendment proposed by the Government in this respect.
A rather controversial issue raised in this Amendment Bill is the proposal to add "terminal illness" as a ground for applying to make early withdrawal. The rationale behind this proposal is that as the dying scheme member is approaching the end of his life, he should be allowed greater flexibility. Nevertheless, this proposal has given rise to much controversy. The Bills Committee has spent much time arguing over the issue and I have also raised my points a number of times. According to the arrangement proposed by the Government, the scheme member concerned is required to produce certification issued by a registered medical practitioner or registered Chinese medicine practitioner certifying that his remaining life expectancy is 12 months or less. Perhaps Dr KWOK may explain to us later whether a scientific assessment can be made in this respect. In other words, the Government is shifting the responsibility to the registered medical doctors to certify whether the remaining life expectancy of the person concerned is more than 12 months. I am not a medical practitioner, and hence I am in no position to comment on this. But then, can we say objectively that such an assessment is not much different from "wild guessing"?
Actually, for some types of illnesses, the patient's remaining life expectancy can be assessed in a comparatively more objective manner. Terminal Cancer and Stage IV Cancer are some examples. However, it is not 4914 LEGISLATIVE COUNCIL ─ 21 January 2015 surprising that the remaining life expectancy of some patients with Stage IV Cancer can last several years. But then, the proposal is that only patients' with a remaining life expectancy of less than 12 months are allowed early withdrawal. Why should patients with Terminal Cancer not be allowed early withdrawal, bearing in mind that their cancer has reached the terminal stage? As far as this arrangement is concerned, I am not pleased with the Government's response. Given that the amendment proposed by the Government this time only mentions about 12 months, this can be considered as a kind of concession. So, this is also in line with the "pocket-it-first" principle.
The Government seems to have done something to enable patients with critical illnesses to apply for early withdrawal of their accrued benefits, but nothing substantial has really been done to benefit them in reality. In my view, this new arrangement only seems to be an improvement but has not really brought about any genuine improvement at all. Even if the patient can find a doctor to certify that his remaining life expectancy is less than 12 months, it is still a very harsh arrangement to require the patients to obtain such certification by registered medical practitioners before they can withdraw their accrued benefits from the Mandatory Provident Fund Schemes Authority (MPFA). Certainly, if the Government insists on its way, we cannot but accept what is offered to us. Nevertheless, I still hope that when the Government reviews the arrangement in future, it will provide a list of critical illnesses, including Terminal Cancer and other illnesses, so that more people can be benefited. Actually, I have already raised this point in the Bills Committee.
For a patient with Terminal Cancer, the illness I referred to just now, he will normally spend the money he has to treat his illness, and it would be so nice if he could be cured completely. It is certainly a joyous result if he has the money to treat the illness and save his life. We hold that in order to alleviate the psychological impact on the scheme member and his family members as far as possible, the authorities should adopt a remaining life expectancy of 12 months or less as an index and consider adding "critical illness" as a ground for applying to make early withdrawal. One example of such eligible illnesses is the case I referred to just now: Terminal Cancer. As the scheme member concerned may not be able to work after the illness gets serious, if he can withdraw his accrued benefits, he will have money to cover his daily expenses or medical expenses.
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As regards the definition of critical illness, the Government may consider adding a list of "critical illnesses" as a schedule under the relevant subsidiary legislation. Certainly, the medical sector may advice the Government on the illnesses to be included in the list of critical illnesses. Actually, I have raised this idea a number of times in the Bills Committee, but the Government did not accede to it. I hope the Secretary will take it into consideration again in the future.
The Bill has also proposed a number of other amendments, including clarifying the terms "permanently ceased employment or self-employment" and "departs from Hong Kong permanently", providing a legal basis for MPFA to refuse to approve a constituent fund of registered schemes, revising the information disclosure arrangements in secrecy provisions, and so on. These are all technical amendments with no significant implications on the general objective.
The general public has coined a name ― out of folk wisdom ― for the MPF, and that is "Mandatory Pressed Fund". This name refers to the fact that while employees are pressed by law to make mandatory contributions, the rates of return of the MPF constituent funds are on the low side, so much so that they simply cannot feel that the contributions can be of any genuine help to their retirement life. Besides, while their accrued benefits are affected by the market situation, a part of the value will be taken away as the unreasonably high management fees. At present, the aggregate net asset values of all MPF schemes amount to some $540 billion, probably close to $550 billion. As at end December 2014, the average administrative cost of the constituent funds is 1.65%. Mr WONG Ting-kwong has also referred to these figures earlier on. From these figures we can see that the fees charged by the trustees and fund managers amount to $9 billion a year. In other words, the MPF is giving the fund managers or trustees $9 billion a year. Instead of providing contributors with concrete benefits, the MPF is providing managers with low-risk income in the form of management fees. As such, the Secretary really has to do something with this handsome income of $9 billion.
According to the figures released by the MPF Fee Comparative Platform at the end of last year, the highest Fund Expense Ratio among the MPF constituent funds in the market is 3.92%, and the fund concerned is a guaranteed fund. To put it in a simple way, the rate of return is close to a negative interest rate, quite 4916 LEGISLATIVE COUNCIL ─ 21 January 2015 similar to the German bonds which offer negative yields. By comparing the fees charged by similar funds, we can see that the lowest Fund Expense Ratio is 1.3%, a difference of 2.62% between the highest and the lowest. Earlier on, the Government has given hints about the MPF Schemes Advisory Committee putting forward for consideration a proposal to introduce a Core Fund. In addition to huge management fees, the great number of constituent funds available is also an issue. The availability of too many choices is also one factor contributing to the huge administrative costs.
At present, in the face of 458 constituent funds, employees with no investment knowledge will have a hard time deciding which funds to choose. To these employees, too many choices is a problem rather than a help, because it is by no means easy to choose a fund that suits one's investment preference. To put it simply, if we distribute $500 billion-odd among 400-odd constituent funds, each fund may perhaps be allocated $1 billion-odd, and the yield will be comparatively lower. For those employees with no investment experience, they may choose some guaranteed funds which offer a guaranteed rate of return. However, another guarantee such funds offer is that the fees they charge will definitely be very high, so much so that the return may not be able to cover the fees charged. In the end, they may be enduring a negative interest rate, which means the accrued value of their contributions will keep diminishing.
As such, the MPFA proposed last year the introduction of a "core fund" for employees who do not have preference or do not wish to make any investment choices. This will be the default choice and the management fee is expected to be capped at 0.75% or even lower. Over the medium term, the Fund Expense Ratio should be less than 1%. The "core fund" will comprise investments in some conventional stocks or bonds, and the risk profile will be changing in line with the relevant employee's age, so that the risk will be reduced automatically when the employee is approaching the age eligible for withdrawing the benefits. Hence, the "core fund" should be the first step towards a mandatory retirement protection system. The objective of the MPF System is to provide retirement protection for the people of Hong Kong, and under this premise, government supervision is a necessary part of the system. The supervisory authorities should do away with its laissez-faire approach from now on. Otherwise, the service providers in the market will keep introducing different types of funds and thereby making it even more difficult for MPF scheme members to make their choices.
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At present, as different MPF schemes offer different default funds, the investment returns of scheme members investing in different default funds may differ greatly, thereby exposing them to undue risks. In order to achieve the objective of making the MPF "one of the pillars of the multi-pillar retirement protection model", we hold that the Government should step up the regulation on default funds, including requiring the funds to specify clearly their investment modes and make default choices in accordance with the scheme members' ages, incomes, assets, liabilities and risk exposure.
We suggest the authorities set up a public trustee. At present, as the MPF schemes are managed by private operations and led by the market, the basic needs of employees upon retirement are not safeguarded. The International Organization of Pension Supervisors has conducted a study on 17 countries in the world which have similar retirement schemes, and Hong Kong's Fund Expense Ratio is the third highest. Moreover, as the total market share of the five largest trustees amount to 72.3%, they have to a certain extent monopolized the market and become the major obstacle to fee reduction. The Democratic Party has all along been urging the Government to set up a central trustee and to provide the public with default investment choices charging affordable fees, so as to benefit the retirees genuinely.
In order to reduce the operating cost of the "core fund", the Government should consider setting up a statutory body independent of the Government to act as a public trustee responsible for operating the "core fund". As for the operating mode, reference can be made to the National Employment Savings Trust (NEST) set up in the United Kingdom in 2012. The NEST got loans from the government as its initial funding but the fees charged by the funds have eventually enabled it to become self-sufficient. The NEST is highly efficient, as the fees charged by the funds are around 0.5%. I hope the Government will consider carrying out a study in this respect.
I so submit.
DR KWOK KA-KI (in Cantonese): Deputy President, I feel somewhat uncomfortable about the Mandatory Provident Fund Schemes (Amendment) Bill 2014 we discuss today.
4918 LEGISLATIVE COUNCIL ─ 21 January 2015
Deputy President, as the Secretary comes from the financial sector, he should therefore know it very well that all funds and financial products involve a certain degree of risk and investors must pay transaction fees and the so-called administrative costs for such products. However, the Mandatory Provident Fund (MPF) schemes we have chosen as our retirement protection schemes or the schemes we hope to be able to "support the elderly in their golden years" lack adequate monitoring and support.
I believe the Bill before us today is introduced by the Government to amend the improper practices and inadequacies of the MPF System that have been identified since its inception in 2000 up till 2014. We consider such an attempt a move to "mend the hole". But then, can the passage of this Bill help the MPF System achieve its objective? If we study the entire Bill in great detail, we will see that the objective could not be achieved even if all the amendments before us today were passed, and the 3 million-odd wage earners in Hong Kong would be greatly disappointed as a result.
As we all know, the history of the MPF System can be traced back to the 1980s, the pre-reunification era. After repeated discussions in the community, the Government finally introduced in 1986 a consultation paper on the implications of establishing a central provident fund in Hong Kong. In 1987, the then Hong Kong Governor David WILSON announced that the central provident fund would not be established. In 1993, the then Hong Kong Governor Christopher PATTEN proposed in his police address the establishment of an Old Age Pension Scheme. What happened in the end? The Chinese representatives to the Sino-British Joint Liaison Group fervently criticized the Scheme and claimed that the Scheme would lead Hong Kong into a car crash with fatalities. Today, when we look back on those days, we still think that such criticisms were rather biased, and the outcome is quite a distress for today's underprivileged groups. The said Scheme could have provided millions of people, particularly the underprivileged and grass-roots wage earners, with the opportunity to enjoy a peaceful retirement life, but it was repealed in 1993 due to political pressure. Then, in 1995, the Government commenced a study on the MPF System we have today; in 1998, the then Provisional Legislative Council introduced the MPF System which eventually entered into operation in December 2000.
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The MPF System has been in operation for almost 15 years, and I believe the majority of the Hong Kong people participating in the MPF schemes feel rather disappointed and regretful. If the MPF can really ensure the opportunity of a peaceful retirement life for the majority of our wage earners, we do not need to put forward these days the controversial proposal of implementing a universal retirement protection system. We are now urging the Government to implement a universal retirement protection system simply because this MPF System can hardly achieve its intended purposes, which is to safeguard people's retirement life. We have seen with our eyes how employers used the accrued benefits to offset severance payments, and we have also seen how the MPF schemes generate lucrative income for the investment fund industry and financial sector, as the so-called operating profits and costs of over $9 billion a year are indeed drawn from the hard-earned money of the already impoverished wage earners.
The International Organization of Pension Supervisors has conducted a study to compare the personal provident fund systems implemented in 21 countries and regions across the world. According to the study results, the average administrative cost charged in Hong Kong is 1.79%, just a bit lower than those of some places seemingly not comparable to Hong Kong, including Turkey, the Czech Republic and Serbia. For most of the remaining countries which are more advanced, their administrative costs are largely less than 1%.
The Hong Kong Council of Social Service has conducted an MPF study in 2013. According to the study, if an MPF contributor earns $10,000 a month and the rate of return of his MPF investments is 5%, the accrued benefits for a contribution of 45 years before deduction of the fees charged by the funds will be $2.03 million. However, if calculated with the existing average rate of return of 1.74%, the accrued benefits will only be $1.24 million, which is about 61% of the original accrued benefits. So, Deputy President, and the Secretary, this is the achievement of the MPF System introduced by the Government. I really have no idea how this system can respond to the people of Hong Kong who have worked so hard all their lives, bearing in mind that 40% of their hard-earned money has been stolen, even under government protection.
At present, we have a large number of MPF constituent funds to choose from, but the rates of return of these 400-odd funds are barely satisfactory. Indeed, as the funds are mostly of limited scale, the administrative cost of each fund is rather high. Even though the Government is now determined to 4920 LEGISLATIVE COUNCIL ─ 21 January 2015 introduce some core funds, I am afraid the existing situation will not be improved significantly. After all, business is business, the MPF System is a lucrative source of income for the investment fund industry. Given that the Government does not have in place any legislation capable of monitoring the situation, it can only pretend that it is doing something. How can such a lucrative source of income be taken away so easily?
Deputy President, what is more disappointing is that the Government has been turning a blind eye to this situation. Instead, it just puts forward some measures which cannot make any real improvement to the system at all. I do not wish to waste time speaking on the wider issue of a universal retirement protection system, as it is indeed not the Secretary's responsibility to respond to this issue. Actually, we are not forcing this idea on the Government, as LEUNG Chun-ying had already brought this up before assuming office. He said he would handle this within his term of office. However, as we have seen him defaulting on his various pledges, I believe this universal retirement protection system will just be another empty promise.
Let us come back to the amendments before us today. The first amendment is to allow members of the public to withdraw their accrued benefits by instalments upon reaching the age of 65. The original amendment of the Government was to allow 12 withdrawals a year, but as some Members have referred to earlier on, due to the pressure from certain sectors, the number of withdrawals has now been reduced to four. I am really baffled. If the Government thinks that one of the roles of the MPF System is to serve as or partly as a kind of retirement protection, how come it will forbid the retirees from withdrawing their own money by instalments? If this is a mature system, how come it is so hard for the Government to implement this arrangement? Why did the Government choose to change the relevant amendment into the unpopular arrangement of "four times a year" just because of the pressure from some sectors and stakeholders? If the retirees who have worked hard for decades are forced to withdraw their accrued benefits in one go or at short intervals within a year, they may fear that they will be forced to withdraw a large sum of money each time, which may deprive them of sufficient retirement protection. So, this is the point we feel uncomfortable with. Some Members have already opined that they had reservation about this arrangement, but the Government simply turned a deaf ear to us.
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The second amendment I want to talk about is the addition of "terminal illness" as a ground for the application of making early withdrawal. This additional ground bears a footnote, as the relevant scheme member is required to produce certification showing that his remaining life expectancy is just 12 months. Deputy President, even though I am a medical practitioner, I do not know how to tell people's fortune or boldly judge that a patient's remaining life expectancy will certainly be less than 12 months. Moreover, such a requirement is too unreasonable. The accrued benefits in an employee's MPF account are his savings, just like the money in our savings accounts. The only difference is that the employee concerned is suffering from terminal illness, and he needs the money to do something, including fulfilling some of his wishes, leaving the only asset he has to his family, treating his illness or improving his health condition. However, the amendment has added a very unsympathetic and unreasonable time limit of 12 months. In my view, such a requirement will leave all patients concerned feeling more distressful or thoroughly wretched. A patient with terminal illness has to beg his doctor to certify that he will certainly die within 12 months, or the Government will not allow him to use the money he has been saving up hard for decades. What kind of Government is this?
As the Secretary is comparatively much better off, he may not have any idea the difficulties many patients with terminal cancer have to overcome in their fights to remain alive. At present, many of the life-saving drugs under the Hospital Authority are not to be paid for by the Government. The Authority has a Drug Formulary setting out the useful and expensive drugs that are not to be paid for by the Government but by the patients themselves. What is more, it is only after years of fervent demand and the death of many patients that the committee of experts will include a drug, one by one in respect of each type of illness, into the Formulary. Worse still, the Drug Formulary is always lagging far behind, as it takes a long time for any effective new drug to be included in the Formulary. As result, many patients with terminal illnesses have to use their own savings to buy the drugs they need. However, if they can buy the drugs, their remaining life expectancy may be longer than 12 months. Moreover, if the patients have difficulty buying their own drugs now, they will have more difficulties in the future. If they hope to rely on the Government instead of buying their own drugs, they will certainly feel disappointed, as the so-called Samaritan Fund will not provide financial assistance for them so easily. They have to go through a prolonged and complicated asset vetting and income vetting 4922 LEGISLATIVE COUNCIL ─ 21 January 2015 procedure before they can get the financial assistance. It is already unfortunate enough for one to have terminal illness. Why does the Government have to make things difficult for people who are approaching the end of their life?
Even though the MPF System will have some improvement upon the passage of the Amendment Bill, many wage earners will still find the MPF System an abyss. Certainly, to the financial trades that live on speculative buying and selling, the MPF System is a lucrative source of income they will never want to part with. As such, even though the Civic Party has suggested the Government to use one-half of the asset value to implement a universal retirement protection system, the Government simply turns a deaf ear to us. The reason is simple: The Government and the relevant sectors will never want to part with this lucrative source of income. For what reason on earth will they return the close to $10 billion accrued benefits to the employees? However, we must not forget that all such accrued benefits are the hard-earned income of the employees. If the Secretary keeps refusing to reform the MPF System and joins the Government to say no to the implementation of a universal retirement protection system, I am sure the majority of the grass-roots wage earners in Hong Kong will have no retirement protection at all.
I am not saying that the Civic Party does not support some of the amendments. We just cannot agree with the amendments proposed by the Government against the employees' interests, including the amendment which reduces the number of withdrawals per year from 12 times to four times (The buzzer sounded) …
DEPUTY PRESIDENT (in Cantonese): Dr KWOK, your speaking time is up.
DR KWOK KA-KI (in Cantonese): … And we also hope that the definition of terminal illness will be amended.
DEPUTY PRESIDENT (in Cantonese): Dr KWOK, please stop speaking.
LEGISLATIVE COUNCIL ─ 21 January 2015 4923
MR TANG KA-PIU (in Cantonese): In regard to this Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bill) today, to my understanding, since the launch of Mandatory Provident Fund (MPF) schemes, the Ordinance concerned has been submitted to the Legislative Council for various kinds of amendments nearly once every two years. Does this give us the impression that the Ordinance keeps abreast with time or that the Ordinance has too many wounds or cracks and therefore a lot of plasters are needed to patch them?
Of course, the heaviest burden, whether politically or institutionally, arises from the offsetting arrangement. Therefore, as a lot of Members said, this amendment is only minimal, and we absolutely agree with this comment. No matter how well it is done, as long as the MPF is allowed to offset severance payment and long-service payment, to the employees in general, the MPF is basically unreliable. We feel that the MPF is saving up for employers.
When amendments to the MPF System are proposed, such as adjusting the MPF contribution ceiling upward or making it easier to withdraw money from the MPF, the public or the grassroots, and even the employees in general, will be thinking of ways to get back the money as soon as possible. The Government, however, will keep thinking that if people are allowed to get back the money so easily, the function of the MPF for retirement protection will fail. This is the point where contradiction arises. The employees in general do not believe that the MPF can really perform its function of retirement protection. As Mr WONG Kwok-hing has just mentioned, the leaking piggy bank refers exactly to the issue of the offsetting arrangement.
Of course, the content of this Bill does not involve the offsetting arrangement, with which we feel very disappointed. The only point that can be affirmed is that ― this is not an affirmation to the Financial Services and the Treasury Bureau, but to the Mandatory Provident Fund Schemes Authority (MPFA) ― as the MPF statistics are published quarterly, the amount of money used to offset severance payment and long-service payment in each quarter is also made public, so that the general public, including us, can monitor it. This can be regarded as having made a little progress. However, this is not enough. Will the authorities endeavor to implement the policy? Chief Secretary Mrs Carrie LAM is very clear in saying that the Secretary specifically tasked to deal with the realization of the political platform of Mr LEUNG Chun-ying, the Chief 4924 LEGISLATIVE COUNCIL ─ 21 January 2015
Executive, in regard to gradually reducing the offsetting ratio of severance and long-service payments is Secretary K C CHAN, and then Secretary Matthew CHEUNG. Therefore, we hope that you can give us an account of it.
Concerning the Ordinance, the amendments proposed this time cover essentially a few parts. The first part is about withdrawing the benefits by phases so that the entire MPF System can be more flexible and can really become a more desirable retirement system under which we can have a sum of steady income every month. We welcome this part.
If it is a lump-sum withdrawal, a few problems will appear. First, if the employee withdraws his benefits in a lump sum while he has no financial discipline and does not know how to manage his finance well, he will spend all his money very soon. Second, if it happens that when I withdraw the money, or when I have to withdraw the money due to some reasons, the economic situation at that time may be coincidentally poor while the performance of the fund that I purchased is also not very well, I will have no other alternative but to withdraw all the money. Third, on the contrary, if I can withdraw a steady sum of money by instalments, it will be easier for me to plan my retirement life and enjoy protection.
Of course, we think the most desirable way is to allow withdrawal by 12 instalments annually. However, should it be four times or 12 times? In the course of deliberation, we were a little disappointed. Although the Government heard the voices from various sectors, it did not provide figures through them. What figures should be provided? If withdrawal is made in four times, how much will the cost be increased actually? If withdrawal is made in 12 times, how much will the cost be increased? The Bureau has mentioned that some trustees are offering services of free withdrawal by instalments. While these companies allow withdrawal by instalments, how effective is such service? Has the cost been increased? The Government has given no information to us at all.
Therefore, we think that ultimately, the best way is to allow withdrawal by 12 instalments. The other reason is that with the MPF pool being pumped up, we believe that after a decade or so, many trustees will tailor-make some annuity schemes for 200 000 to 300 000 retirees at that time, with a view to keeping the sum of money for investment and for better financial management. Hence, if LEGISLATIVE COUNCIL ─ 21 January 2015 4925 the benefits can be withdrawn by 12 times annually, this will lay a policy foundation for an annuity system. This is the view of the Hong Kong Federation of Trade Unions (FTU).
There is an interesting area about the MPF: You contribute while I keep guard. Many employees have asked us how they can get back the MPF contributions earlier, as they do not trust the MPF System. Judging from the nominal figures, the performance of the MPF is not promising indeed. The overall average rate of return last year is just over 1%. In fact, I am very concerned about the MPF and find that its problems lie in too many funds, exorbitant fees and charges and unstable return.
I compare the 500-odd funds every year. Secretary, you are an expert in the financial sector or in finance and economics. I doubt whether you know how to choose. To a middle-class professional employee, not to mention the grassroots, I think he does not know how to choose either. The reason behind it is that, as the colleagues have said, the scale of each fund is very small. The charges will be high due to the small scale. The fund managers or trustees, however, can surely collect the charges. No matter whether the funds make a profit or a loss, they can still get a percentage of the asset values as their charges or profits. Thus it is all the same for them. They just set up some new funds or see whether there are some funds worth trying because the ones who suffer are the employees, not the fund managers or trustees themselves.
Hence employees do not trust the MPF System indeed. In this amendment proposed by the Government, a new requirement is that the criterion of "in scheme members' interests" should be adopted in the approval of constituent funds. In the original Ordinance, the requirement "in scheme members' interests" has not been written down. As such, in whose interests should it be?
As some Members said earlier, and I also know how to calculate, we deeply believe that in 2015 or 2016, the overall administrative charges of MPF will exceed $10 billion per year. Compared with only over $4 billion six or seven years ago, why can such charges soar to $10 billion after a few years' time? Will the salary of each employee performing the administrative work of the MPF be doubled? Will the rental be increased by 100%? Or is it only because the profits or exorbitant profits are doubled?
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As regards these fixed costs, we all know that the operation is now computerized. Why will the overall MPF charges be increased from over $4 billion to nearly $10 billion in a few years' time? They will exceed $10 billion very soon.
Therefore, such minimal amendments cannot give us confidence. Regarding the adoption of the criterion "in scheme members' interests" in the approval of constituent funds, I really want the Secretary to explain the difference between having this provision in the Ordinance and otherwise. The situation we actually see is that the MPF companies seem to be designing and managing the funds not in the employees' interests. Hence, we feel that it is more suitable for the authorities to add this provision in the Ordinance. However, the authorities really have to explain what the present situation really is in the absence of this provision.
Of course, we also have to reveal the fact that the number of funds has increased from 200-odd when the MPF was established to 500-odd today. In a period of some 10 years, the number of funds has increased by 100%. I hope the authorities can conduct a comprehensive review on whether this is good or bad to the entire system. When we reveal the problem, we notice that the number of registered MPF schemes has decreased from 40 to 38, while the number of constituent funds has also decreased from 550 to 537 in the recent year. The number of funds has actually diminished. Thus, throughout a very long period of time in the past, it seemed that no one could manage these companies under the MPF System.
Regarding how to withdraw the accrued benefits as soon as possible, the issue under discussion is that a judgment is needed from a medical practitioner on whether the life expectancy of a patient will be less than 12 months. Many medical practitioners have been required to make a judgment in this aspect. In fact, there is already an existing provision that when it is assessed by a medical practitioner that the employee suffers permanent disability, the employee is entitled to early withdrawal of MPF benefits. However, we know that many employees always meet with a refusal. When an employee, who may be over 40 years old, is injured in a serious industrial accident or car accident, or suffer from serious illness, and asks the specialists in government hospitals to fill in the information concerned, many specialists are unwilling to do so. Why? It is because the specialists are worried about the professional obligation after filling in the information. They are worried that an employee will claim compensation LEGISLATIVE COUNCIL ─ 21 January 2015 4927 with the specialist's signature and say, "Look, this specialist said that I suffer permanent disability." In regard to this kind of moral or professional obligation, many medical practitioners are scrupulous in their consideration.
Hence, there is an additional provision in this amendment. How much does it help the employees? This is our doubt. A Member suggests referring to the list of critical illnesses of insurance companies as a ground of withdrawal. This may be beneficial to the employees who suffer from critical illnesses, as they can withdraw the MPF contributions for medical treatment. However, when we think prudently ― we also have to think thoroughly indeed ― under the welfare assistance schemes or the Samaritan Fund of the Social Welfare Department, the definition of assets being assessed includes some disposable assets. One example is that if the grounds for early withdrawal of accrued benefits from the MPF include having contracted a disease on the list of critical illnesses, while the employee, who has not withdrawn the MPF benefits, wants to apply for the Samaritan Fund in order to purchase the medicine for treating that critical illness, the secretariat of the Fund may say to him, "You are advised to withdraw all your MPF benefits first, as you are entitled to do so under the existing legislation." That employee may be unable to apply for the Samaritan Fund then.
Faced with this dilemma, I think the MPFA or various organizations which are concerned of the MPF operation should have more study on the issue. We expect that the MPFA and the Financial Services and the Treasury Bureau can continue to redress this issue, and this will be welcomed by us.
I have mentioned earlier that employees can have early withdrawal of the MPF benefits on the ground of permanent disability. In fact, there have been a lot of refusal cases. Many medical practitioners are unwilling to sign the paper as they are unwilling to shoulder the moral or professional obligation involved. On the contrary, I would guess that allowing early withdrawal of the MPF benefits by patients with terminal illness is to avoid the situation where the MPF benefits of the employee concerned, whose illness is really critical and may terminate his life anytime, may become his legacy and this may trouble his family members again. If this is really the intention, I would ask the authorities to clarify this. I would also ask the authorities to co-ordinate with different departments, including the Home Affairs Department and the Probate Registry of the High Court, so that this policy objective can be genuinely attained.
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In this amendment, there is an item about which not all colleagues will be concerned, and that is the disclosure arrangements in secrecy provisions. This, of course, is to respond to the requirement of international tax authorities on information exchange, which seems unrelated to local employees. However, during deliberation in the Bills Committee, we kept on asking why the authorities always said no information could be obtained when responding to the request of the Legislative Council Members on the platform of the Legislative Council for obtaining information on the MPF. How much power does the MPFA have in obtaining information from the trustees? I have been a Legislative Council Member for two years. On 20 February 2013 and 24 April 2013, I respectively put forward two Written Questions about the number and age groups of people receiving the MPF benefits due to retirement, as well as the average return of the accounts. The replies from the authorities were very concise. They said that according to the Ordinance, these figures were not covered in the information that the authorities could obtain from trustees, and thus they were unable to answer. Is the power of the authorities in obtaining information from the trustees so limited, or are the authorities not using their entrusted power and not obtaining information to respond to the enquiries from the Legislative Council on the policy or the information concerned? I believe that the authorities have to review this in detail. Are the authorities not using their entrusted power, or they have no power to obtain information from the trustees concerning the operation of the MPF?
The FTU agrees with the contents and spirit of the amendments, as they have really amended the Ordinance, though it is only minimal. Regarding the core fund, I hereby appeal that the concept of public trustee should be introduced into the core fund. We can see that even a group of teachers can form a committee to monitor their own MPF accounts. They have 5% of return every year and the administrative charges are also as low as only 0.5%. Why can they have such a good result? It is because they have a committee to give pressure to the administrative officers and asset managers, and to keep the charges low. If the authorities entrust the core fund to the 15 trustees, this is only transferring the fund from the left hand to the right hand, and there will not be any monitoring effects.
I so submit.
LEGISLATIVE COUNCIL ─ 21 January 2015 4929
MR LEE CHEUK-YAN (in Cantonese): Deputy President, after a period of time, our Council will discuss the Mandatory Provident Fund (MPF) again. Frankly speaking, what we discuss are only minor issues with minimal significance. The problems of the MPF are just too numerous to record. They are really too many. Over the past 15 years, from the first day till now, we have been talking about these problems over and over again, but they can never be solved. After discussion every time, the Government would say that improvement would follow. However, these improvements are negligible and insignificant. They can be regarded as some insipid food ― something one is reluctant to discard though it is tasteless. At present, this amendment is another insipid food, which can do nothing to resolve the MPF problems that we have pointed out many times over the years. Every time when the Secretary comes here, we will list the problems to him but there has never been any response. Bits and pieces of measures would then follow. Last time, the Employee Choice Arrangement (ECA) was introduced. This time, people with critical illnesses are allowed to withdraw their MPF benefits, while retirees can join the annuity system. Next time, it may be the introduction of core fund. Afterwards, we do not know what minor items would be added. It is very trivial every time.
However, the Government has not resolved the most serious problem and the basic loophole of the MPF. In fact, there are a few loopholes which are being seriously criticized. First, the administrative charges are too high. The money saved up by employees with toil and moil has all become the profits of trustees and fund managers. Employees will feel grieved after seeing the recent figure which shows that the MPF return cannot catch up with the inflation rate. This year is the third worst one over the past 10 years, although it is not the worst year as the performance of the two previous years was even worse. What is this third worst year like? During the past year, the average rate of return was 1.53%, but the inflation rate was 3.4%. Their difference was nearly 100%. The return was nibbled away by inflation. But why is the level of return so low? In fact, it is due not only to the encroachment by inflation but also to exorbitant charges. The average rate of charges has already reached 1.7%. That means the rate of return needs to exceed 3% in order to break even, so to speak. Otherwise, it will basically lag behind inflation and fail to catch up with the overall needs of daily life. We see that the figure is so low all because it has been nibbled away by administrative charges.
After the authorities have introduced the ECA, the average rate of administrative charges has only been reduced from 1.74% to 1.65%. This is miserable indeed. Back then, the Administration persuaded us by saying that 4930 LEGISLATIVE COUNCIL ─ 21 January 2015 there would be competition after the introduction of the ECA because when everyone did their best to attract customers to switch to different trustees, the administrative charges would thus be reduced. However, the fact is that the administrative charges cannot be reduced, and they are still very high. Hence, the money saved up with toil and moil by employees has all gone to the trustees and fund managers. You only need some simple calculation to find that the situation is very terrifying. The total amount of charges is as high as $8.4 billion. When the amount of charges is $8.4 billion and there are 2.7 million employees, the average charges on each employee amount to $3,000. Under this computation, when an employee has to pay $3,000 on average, what else can be left? Thus, a large portion of the MPF being nibbled away now has in fact spent on these administrative charges. Someone has made the following calculation: If an employee retires after working for 40 years, nearly 40% of his MPF benefits would have been spent on the administrative charges. After deduction of the charges for fund managers, the remaining 60% of the benefits will belong to him. That is it.
If the encroachment has come to this extent, all employees in Hong Kong will eventually ask: For whom is the MPF set up? Is it for our retirement? Or is it for the finance industry? When we look at it now, we can draw a very simple conclusion. In fact, it is for the finance industry, while our retirement is only the secondary consideration.
After we look at one more thing, we will have a stronger feeling that retirement of employees is only the secondary consideration, which is less important: the offsetting arrangement of MPF benefits and severance payment. They can be offset now. I remember very clearly that whenever the Government mentions critical illness, it always says ― Members can look at the present amendment ― the contributor can only get back his MPF benefits when he is about to die from illness. He can get back his MPF benefits only after a medical practitioner has signed the paper to certify that his life will end in one year. We will then ask whether it can be less strict. Can there be more flexibility so that an employee is able to get back the benefits when he has got critical illness? When the contributors have cancer, they are already very miserable. Even if they can live for five years or 10 years after they have cancer, they will be unable to work. Can they get back their contributions? The Government says no, as the money has to be saved for their retirement protection. The Government has the employees' interests in its consideration and thus does not allow them to have early withdrawal of the MPF benefits. This sounds nice. But on the contrary, the severance payment that the employer has to pay when he sacks the employee LEGISLATIVE COUNCIL ─ 21 January 2015 4931 can be offset against the MPF contributions. What is the logic? The Government always protects the interests of the commercial sector but disregards the interests of employees. It always pretends that it has reasoning and says that this is for the sake of employees so that they can get back the benefits only when they retire. Nevertheless, why does it not consider employees' interests when the employees are sacked by the employers?
Mr WONG Kwok-hing said just now the Secretary has the responsibility. But I know that the Secretary has no responsibility at all. Why? It is because I know that he actually cannot make the decision. The entire policy is already stated in Mr LEUNG Chun-ying's political platform, but it has not been implemented and has been defaulted, unless the Secretary will tell me later that this is not the fact and the authorities will not break the promise. However, it has already been one whole year. After listening to the policy address last year, I thought it could be implemented. But after the employers' representatives from the Labour Advisory Board (LAB) had discussed with the Chief Executive in the Government House, the measures were gone immediately. It is not surprising that the Chief Executive said that he would not pay attention to the policies concerning the people with income level under $14,000. If there is universal suffrage, the policy will incline towards those with income level under $14,000. This is what we have expected. There is no universal suffrage at present, and therefore there is no such an inclination. More than not inclining towards them, it does not care about them. Under the circumstances, the severance payments of our employees are all being offset.
I have already mentioned a figure. Over the past five years, $28 billion from the MPF has been withdrawn. Among this money, $10.6 billion has been used for offsetting. In other words, one third of the MPF has been offset. When the MPF is reduced by one third, this means that when the employees retire, they will have much less money in their accounts. What should they do when they retire? The Secretary has not considered or handled these questions. He then proposes such minimal amendments. The other acrimonious condition is that a medical practitioner is needed to certify in writing that the patient can only live for one year. Does that Government have to be so acrimonious? This is a trivial act from the Government which cannot really help the people concerned. And the Government is doing it in such a way. As to the policies that can really help the people, the Government does not implement them. That is why the entire MPF System is being criticized.
4932 LEGISLATIVE COUNCIL ─ 21 January 2015
As everyone knows, we have been fighting for universal retirement protection. In the Policy Address this year, it is mentioned that $50 billion will be earmarked for retirement protection purpose. But it is surprising that in allocating $50 billion, the Government clearly says that it does not support the idea of universal protection or making contributions. Then, what is the $50 billion earmarked by the Government for? The fund is not genuinely allocated but kept in the drawer only. This is not a genuine allocation of funding. The sum is being kept in the drawer so that the Government can take it back at any time. The $50 billion earmarked for medical protection last time has also been taken back. Now the Government shows to the public that it has earmarked $50 billion. But this is just empty talk and is so-called paying lip service ― for lip service, I do not know how to translate the term into Chinese. It may be rendered as "口唇服務", but that does not seem so pleasant ― lip service is what the Government is now providing. It only tells us that $50 billion has been earmarked for retirement protection purpose. Does it really have to be like that?
What should be the subsequent reform? The meaning of a core fund is not substantial, unless with the concept of public trustee. We always think that the best way for the Government to resolve the problem of administrative charges is that the Government acts as a public trustee. It will then compete with that group of banks and insurance companies. It offers very low administrative charges, and the public can choose an MPF-linked product. If members of the public have chosen the product of the Exchange Fund, the $2,000 billion-odd investment of the Exchange Fund will also help in the MPF investment. If there is a public trustee plus the product option of the Exchange Fund, the Government can really reduce the administrative charges.
However, it is sure that the Government is not willing to do this. If it is willing, it will say that this measure will be implemented and will not talk about the core fund. Concerning the core fund, it is only because there are many unattended accounts at present. They can still exist at the present moment. In future, these unattended accounts will all be allocated in the core fund. If members of the public do not make a choice, these accounts will be allocated in the core fund. This measure is not bad, but is still minimal and cannot resolve the problem. Thus, the Government has not resolved the most important problem at all.
LEGISLATIVE COUNCIL ─ 21 January 2015 4933
This amendment does not mean much. It is very acrimonious too because only those who have had critical illnesses and will live for no more than one year can get back their MPF contributions. I have already asked the Secretariat and the President for separate voting on a certain part of the Bill. Which part is that? One part of the Bill says that the retirees are allowed to get back the so-called annuity. They can withdraw the benefits by monthly instalments and need not withdraw the benefits in one go. They can then keep the money under their beds or take the money for investment. However, they may suffer losses while the return cannot catch up with inflation. The Government now provides them with one more option. Their contributions can be saved in the account as before, and then every month … We hope that monthly withdrawal is allowed. For unknown reasons, however, in the course of discussion, the Government said that the administrative charges were too high, and the number of free withdrawals would be reduced from 12 to four per year. I have to state clearly that the withdrawal service is free, and the administrative charges are therefore unrelated to the retirees.
The administrative charges refer to the administrative charges of the whole pool. Surely I know that the administrative charges of the big pool have problems. At a Bills Committee meeting that time, I also mentioned, "After all, the wool still comes from the sheep." However, if the Government allows the elderly and the retirees to have 12 free withdrawals per year, they will at least have a better option. The Government now forces them to withdraw only four times instead of 12 times per year. Some elderly people really want to feel like being paid with salary every month but the Government does not provide this option. If they withdraw 12 times per year, the Government will have to ask them for administrative charges. Why does it play tricks on the elderly?
What we always request is that the Government should provide 12 free withdrawal arrangements per year, as in the original plan. Some Members of the Bills Committee say that they have listened to the views of their sectors and some of the Members ― those elected from functional constituencies, will of course put forward the views of their respective sectors. However, we think that it is unreasonable to do so. Hence, we hope that Members can vote against the proposal for changing the number of free withdrawals from 12 to four in due course. Concerning the amendment on clause 25 later, I will speak and raise this point again. I hope that Members can pay attention to this and vote against it together.
4934 LEGISLATIVE COUNCIL ─ 21 January 2015
Of course, it is all the same for the Government, as the original plan of the Government was to provide 12 free withdrawals. I hope that when the Government speaks later, it will ask Members to support providing 12 free withdrawals. In fact, this is a more reasonable arrangement. With the arrangement of 12 free withdrawals, the elderly will have one more option which is similar to receiving monthly salary. This is also the original reason and intention.
Of course, someone will say that this will increase the overall administrative charges. In fact, whatever you do, the administrative charges will also increase. Do you think that the administrative charges of MPF companies are transparent? Do you think that when 0.1% of charges are increased in that place, 0.1% of charges are really increased in that place? In fact, when 0.1% of charges are increased in this place, 0.5% of charges can also be increased in that place, as both are unrelated. These companies are doing business. If they have to reduce the charges, they will naturally do so. When they face competition or restrictions, they will naturally reduce the charges. If the Government does not impose any restriction and does not have oligarch competition with them, these companies will never need to reduce the charges. The present situation is like that. The companies have not reduced the charges, and they are still collecting exorbitant charges.
Therefore, if the MPF companies have to reduce administrative charges, they will naturally do so. The Government takes administrative charges as the reason and says that the overall administrative charges of the big pool will increase. Surely I know that and they will always pass the charges onto others. But the question is that after the charges have been passed on, everyone in the big pool needs to bear the charges. Nevertheless, if there is competition, the companies concerned will be forced to reduce charges and the amount of the charges will basically be insignificant. Nonetheless, if the companies do not reduce the charges, even if the Government has saved a sum of money for them, the companies can still collect exorbitant administrative charges, as both are unrelated.
I hope that Members can pay attention to this amendment on which we will vote in due course. The Labour Party is strongly against it. The Labour Party also requests the Government not to propose minor changes to the MPF System in each amendment, but to really give a thorough overhaul to the system instead. The Government should also introduce the universal retirement protection system. Thank you, Deputy President.
LEGISLATIVE COUNCIL ─ 21 January 2015 4935
DEPUTY PRESIDENT (in Cantonese): Does any other Member wish to speak?
MS CYD HO (in Cantonese): Deputy President, the MPF is indeed not the retirement system that Hong Kong people hope most earnestly for. We hope most earnestly for a universal retirement protection scheme. The MPF only allows working or self-employed persons to make contributions, while the disabled and housewives are not entitled to any retirement protection. All along, we have expressed strong criticism on this but the Government has done nothing to follow up the issue of universal retirement protection, particularly the retirement protection for housewives.
It was not until this year's Policy Address that the Government followed the public calls and reacted a little by proposing to earmark $50 billion. However, as indicated in the speeches given by a number of officials, including the Secretary, all of them disapprove of universal retirement protection and do not find it feasible. If the majority of our officials do not work on this whole-heartedly, earmarking $50 billion is only a move to pacify the public. I am not sure whether the Government's proposal to earmark $50 billion can prevent "Long Hair" from staging another round of filibuster this year. Last year, he vowed that he would not stage any filibuster if the Government earmarked $50 billion as the start-up fund for universal retirement protection. Nonetheless, if the Government takes out the money from the "big drawer" but then puts the issue aside, it would probably end up like the healthcare insurance scheme, which was taken back later on. We will not accept this proposal as it will not help promoting the policy of universal retirement protection.
Another issue is about the administrative fee. Although the percentage of administrative fee has been lowered from 2.1% to 1.68%, as Members pointed out just now, the finance sector and fund managers are the biggest beneficiaries under the entire MPF System. Will the contributions made by wage earners until their retirement really provide adequate protection? Many low-income wage earners find that the MPF does not provide sufficient protection for them. In particular, certain unscrupulous employers may shun the contributions and responsibilities on their part. In that case, under the offsetting arrangement of the MPF, even though the employees concerned have not yet retired, the accrued benefits earmarked for their use after retirement will be used to offset the payments from the employer, whereas the employees will not be compensated. Hence, the offsetting practice should be reviewed right away in order to abolish the offsetting function.
4936 LEGISLATIVE COUNCIL ─ 21 January 2015
It is a shame that the offsetting arrangement is totally to the employers' advantage. If employees and wage earners want to withdraw their accrued benefits in case of emergency, only those suffering from terminal illness with remaining life expectancy of less than 12 months and able to produce relevant certification by a registered medical practitioner will be allowed to do so. Moreover, under the pressure from the trade, the original arrangement allowing scheme members to withdraw benefits free-of-charge 12 times a year is now revised to only four times a year. The Government will abolish the limit on the withdrawal amount on the ground that revising the number of free withdrawal from 12 to four would prompt scheme members to withdraw a bigger amount instead of only $5,000 each time. This argument is reasonable, but the whole thing does not make any sense.
It also came to my attention that to boost the property market, the Government and the trade once suggested that we may follow the practice of Singapore by allowing early withdrawal of benefits for making down payment for the purchase of property. This shows that Members representing the business sector and the Government are willing to do whatever it takes to save the property market. Employees, however, are not allowed to withdraw accrued benefits for emergency purpose unless they are on the verge of death with remaining life expectancy of less than 12 months and can produce relevant certification by a registered medical practitioner. Why can we not give employees the flexibility to use the accrued benefits, which are actually the money in their pocket, to meet the needs of their family and other needs in life? In particular, many terminal illnesses are curable if the patients receive treatment at an early stage. Is that one should only be allowed to withdraw his accrued benefits when he is virtually on the verge of death? This is indeed a very inhumane and ruthless policy decision.
In addition, Deputy President, I would like to talk about another detail ― the time limit for initiating prosecution against non-payment of MPF contributions by an employer. None of our colleagues has touched upon this point so far. Currently, prosecution against non-payment of MPF contributions by an employer must be initiated within six months. Any complaint raised beyond this time bar will be disregarded. On the public hearing, Mr POON Siu-ping and his colleagues suggested that the prosecution time bar should be further extended to beyond three years to allow more time for the wage earners concerned to seek help for taking enforcement actions against the non-compliant LEGISLATIVE COUNCIL ─ 21 January 2015 4937 employer. Hong Kong Confederation of Trade Unions would like to further extend the prosecution time bar to six years after the commission of the offence to tie in with the time limit for bringing up a civil claim.
The Government insisted that the prosecution time bar of six months should remain intact as it is inappropriate to make direct comparison between the time bars for civil litigation and criminal prosecution. The wage earners already feel very miserable ― wages in arrears involve a big sum of money and are usually followed by unemployment, coupled with the ordeal of following up and sorting out the entanglements with their ex-employers at the Labour Department. They still have the capacity to do all these before securing a new job, but once they have got a new job, they would find it difficult and stressful to juggle with all these, particularly in the absence of relevant legal aid to recover the wages in arrears. In some cases, the employer has fully paid the wages but left its MPF contributions outstanding. Employer's and employee's MPF contributions account for only 10% of the wages in arrears, which is a relatively small amount of money. However, an employer who have hired a number of employees can easily be lured to owe each employee some $3,000. For the employee, however, it may not worth all the efforts to recover MPF contributions of just several thousand dollars. If the employee needs to seek help from the Labour Department or even attend court proceedings, the new employer may dismiss him due to his frequent leaves. It is therefore unfair to require an employee to recover the MPF contributions within six months, as the time he or she spends on doing so may not be necessarily in proportion with the outstanding contributions recovered.
Hence, I urge the Government to, first of all, continue to review many of the details. The Government should expeditiously review a number of areas, for example, the administrative fee for fund managers; whether the Government should provide a central investment option so that wage earners can be spared over 40% of their benefits for fund managers by choosing the investment option taken by the Government or Monetary Authority; and the prosecution time limit with respect to non-payment of MPF contributions by employers. Of course, we further hope that the MPF is only one of the so-called three pillars of retirement. We look forward to the implementation of universal retirement protection in the near future, which will turn the MPF contributions into something extra and nice to have. What I mean is, those who are able to make more contributions can get more through the MPF. That said, all people of Hong Kong should be provided basic retirement protection. Thank you, Deputy President.
4938 LEGISLATIVE COUNCIL ─ 21 January 2015
MR WONG YUK-MAN (in Cantonese): Deputy President, since the implementation of the Mandatory Provident Fund (MPF) System in 2000, it has all along met with objection in the community. The rate of return of MPF products in general has been barely satisfactory and some have even been persistently running at a deficit. Worse still, the administrative costs have been on the high side and the Government has disguisedly worked in collusion with the fund sector to rob the people of their hard-earned money. It is precisely Rafael HUI, the former Secretary for Financial Services (that is, the predecessor of the Secretary), who spared no effort to promote the MPF System back in those years and he even feathered his own nest subsequently with a lucrative post he created and became the first Managing Director of the Mandatory Provident Fund Schemes Authority (MPFA), earning an annual salary of several million dollars. It has been revealed at the hearing of the court case earlier that there are in fact all kinds of connection between the Government and the business sector. The first Managing Director of MPFA, who has become a notorious corrupt official overnight, was finally convicted by the Court and this has inevitably led us into associating the conviction with the many unreasonable practices under the MPF System.
What is most detestable about the MPF System is the Government's repeated attempts to use it as an excuse to delay and reject the implementation of universal retirement protection, without regard to the fact that the target of the MPF System is the employed population and it should in no way be mixed up with universal retirement protection. However, judging from the Policy Address this year, it seems that the Government has already shut the door on universal retirement protection and the same old tune is played once again to reiterate that any retirement protection options that are non-means-tested with universal and uniform payment level would lead to laying off of employees and all sorts of social problems. Nevertheless, could it be the case that the Government has only come to realize today that someone has to pay for the implementation of universal retirement protection? The Government has often rhetorically asked us the question of where the money comes from and we all know that there should of course be someone paying for the expenses, but the questions are: Who pays and how is the payment made? In fact, the same questions also apply to the MPF System since there is no way for us to avoid the payment of MPF contributions.
LEGISLATIVE COUNCIL ─ 21 January 2015 4939
Therefore, the question of "Who pays?" shows that the Government is reluctant to pay and has thus prompted such a query and indicated that the policy would impose pressure on government finance. For the MPF System, however, things are totally different. The Government is benefited at least by the creation of a large number of posts, including the post of Managing Director with an annual salary of several million dollars and many other senior management posts, each with an annual salary of over a million dollars. These are also funded by taxpayers' money, which the Government is reluctant to spend on the contributions it should commit for the implementation of universal retirement protection. However, in order to have the MPF System implemented, millions of dollars have been spent every year on the remunerations for the Managing Director and many other senior officers of the MPFA, followed by the rhetorical question of where to get the money.
At a meeting of the Legislative Council Subcommittee on Poverty, when we were briefed by Prof Nelson CHOW on the study on retirement protection to be undertaken by his research team, I remember I uttered some words to Prof CHOW. I asked Prof CHOW, who is a retired professor of sociology with an ultra-conservative stance, why he should bother to take the trouble and accept the appointment made by LEUNG Chun-ying to conduct this study on retirement protection, as he was a Chair Professor of the University of Hong Kong, a person of virtue and prestige on a high pedestal? Now, after a thorough research which has taken such a long time, a report is finally released with recommendations made for the implementation of a non-means-tested option under which all elderly people aged 65 or above would be eligible for "demo-grant". It is also recommended that a demo-grant contribution system may be put in place but the financial commitment from the Government is a must. Yet, the Government has finally shut the door on Prof CHOW's recommendations, which have formally been sentenced to death in the Policy Address.
We have asked Matthew CHEUNG earlier before the delivery of the Policy Address why the Commission on Poverty had not commenced discussion on the recommendations made by Prof CHOW. He replied evasively, putting the blame on the Occupy movement and putting up all sorts of excuse. However, he can brook no denial now because it has already been stated directly and clearly in the Policy Address that this could not be done. Thus, we can actually throw the report released by Prof CHOW on the Future Development of Retirement Protection in Hong Kong away into the rubbish bin. This is gross humiliation 4940 LEGISLATIVE COUNCIL ─ 21 January 2015 and an insult to Prof CHOW, who has also admitted that the Government had shut the door on and queried his recommendations. He could neither understand why the Government had to conduct a consultation again on retirement protection nor realize what exactly was left to consult. This professor of sociology has written quite a number of articles during all these years. His teaching has benefited many people and he is very much concerned about the issue of retirement protection in Hong Kong, but he is now subject to such humiliation by this group of government officials and "689".
The so-called consultation is of course a trick only and an excuse for the Government to procrastinate. It is pointed out in the Policy Address that as both employers and employees resist additional contributions or additional taxation, it is therefore not optimistic that a consensus on retirement protection financing arrangements can be reached. Could it be the case that a consensus had been reached in the community back in those years when the MPF System was first implemented? Was there no controversy in the community then? Are employers and employees more than willing to make 5% MPF contribution every month? They just have no alternative because according to the law, anyone who does not make the contribution commits an offence. Proposals requiring additional contributions or additional taxation from wage earners, thus adding to their already heavy burden would of course not be welcomed but if such contributions or taxation are meant to substitute the MPF contribution, things would be different.
If these are meant to substitute the MPF contribution, the MPF System would be abolished and turned into a demogrant system under which contributions would be required from both employers and employees, while the Government would also make its financial commitment to meet part of the expenses. Therefore, let "Long Hair" be careful this time and not be tricked once again into thinking that there is no need to stage a filibuster since $50 billion has been earmarked. The $50 billion earmarked is just an illusion. It may be spent on healthcare financing but withdrawn in the end despite all the efforts. The $50 billion earmarked may also be spent on such areas as Comprehensive Social Security Assistance, Old Age Living Allowance and "fruit grant" in the future for complementarity. I wish I were wrong. The amount earmarked is obviously not for the purpose of retirement protection and therefore we should not be tricked.
LEGISLATIVE COUNCIL ─ 21 January 2015 4941
The implementation of the MPF System is already an established fact. It is the Government's habit of using some communist jargons to say that efforts are "enhancement" to the MPF System but I would only described such attempts as "improvements". In fact, these measures can hardly be regarded as improvements but should more accurately be referred as steps to "remove the evil". Thus, such measures will not have my support no matter whether they are described as "improvements", "reform" or efforts to "remove the evil" since the intention behind the exercise is to maintain the MPF System for decorative purpose, is it not? I therefore have to make it clear to everyone right from the very beginning that I will definitely vote against the proposed legislative amendments.
The implementation of the MPF System is already an established fact and as it involves complicated legal issues and a huge amount of money, it would not be easy to have it scrapped and make a new start. During the deliberation of the provisions which seek to drive down MPF fees, Mr LEUNG Kwok-hung has suggested that the Hong Kong Monetary Authority (HKMA) be entrusted as a public trustee to manage MPF schemes and set up a fund, similar to the Exchange Fund, that charges a low fee and offers a stable return to scheme members. Although the Government has asserted that the suggestion is not feasible, I think the proposal may well be considered, especially with the Employee Choice Arrangement of the MPF introduced earlier. The idea would become practicable and feasible and might shift to a system of universal retirement protection in time. However, the Government would not be willing to accede to the request.
I have given it detailed thought and conclude that in this Council, instead of causing damage only, there would also be constructive ideas from us but the Administration is reluctant to accept. I have no alternative but to criticize the Secretary since he does not accept our kind advice. Sometimes I doubt about the role that I can play in this Council. Things have been thrown, filibusters have been staged and I have even broken out into curses; so what else is left for me to do? Streets have been occupied for 79 days but the Administration still refuses to give in; so what else can we do?
The Government has, on the pretext that someone is advocating independence of Hong Kong, taken the opportunity to propose the introduction of the National Security Act into Hong Kong. They have only such ideas in their mind but I am sure the Government will eventually suffer from its own sins. I have pointed my finger at Rimsky YUEN the other day and told him not to smug 4942 LEGISLATIVE COUNCIL ─ 21 January 2015 since he would come to a pathetic end. He would not be able to outlive Joshua WONG, who is so much younger than he is. The Government has openly made itself an enemy of one whole generation of young people on the one hand, and made itself an enemy openly again on the other of those at my age, who are in the closing years of their lives and are about to retire. By making himself an enemy of two generations of people, it would really be no use for K C CHAN's boss to go on dwelling in this world. He has now even engaged himself in the founding of the Hong Kong Army Cadets Association, reflecting that he is really no well-doer but has found much pleasure in doing things that would suppress the political rights we enjoy, ride tyrannically on our backs and tighten up our freedom of speech. We have been asking for the implementation of universal retirement protection for "N years" but the Administration has only responded by making minor improvements to the MPF System. What is the good of him to go on living in this world? K C CHAN, I am not talking about you, but your boss.
They are all earning high salaries and considering themselves good officials, pleading repeatedly that there is no resource available. However, they dare not say that they cannot make bricks without straw, since there is over $700 billion in the Treasury in addition to the Exchange Fund of $2,000 to $3,000 billion. Though it is common for infrastructural works to record an over-expenditure of hundreds of billion dollars, the Government will cry in agony when it has to spend a few billion dollars more for the elderly. Deputy President, what kind of government is this? It would be good enough to base my arguments only on common sense and leave all those technical issues alone, though I have a lot of materials at hand to refute the Government's argument clause by clause. These might as well be left to the deliberation at the later stage when my points can be elaborated in detail. I am not feeling well and do not have a good voice today but what they have done is really annoying.
If the HKMA can be directed by the Financial Secretary to manage the Housing Reserve, why it cannot be asked to manage the MPF fund? It is provided in section 5A(2)(b) of the Exchange Fund Ordinance that the Monetary Authority shall perform such functions as the Financial Secretary may direct. If legislative amendments are required to expand the HKMA's functions under the Exchange Fund Ordinance to provide for the legal basis for the above suggestion, what resistance will the Government encounter if it is determined to do so? The reason is very simple, that is, it only chooses to do the easiest. HKMA's investment concept tends to be conservative but, buddy, the investment made can LEGISLATIVE COUNCIL ─ 21 January 2015 4943 at least break even. Increasing the amount of money managed by the HKMA may, theoretically speaking, have a positive effect on maintaining the stability of local currency, our banking and monetary system as well as the HKMA's execution of its other statutory functions since it is entrusted with an additional amount of money, right?
So much money has been spent on the establishment of the MPFA, but such matters are left unattended. For an organization engaging in fund management, what is the difference between managing a fund of $1,000 billion and over $1,000 billion? The HKMA has been responsible for managing the investment of the assets of the Exchange Fund and entrusting it with the management of the MPF fund would first of all reduce the administrative costs and save us from the ruthless extortion of all kinds of charges. Moreover, the MPFA can be dissolved to achieve a saving of several million dollars a year. Is it practicable? I think it is but the Administration will definitely disagree.
It will not make much difference in the workload involved for the HKMA to manage a fund of $1,000 billion or $1,500 billion and entrusting it with the management of the MPF fund would also address public concern about having a bunch of good-for-nothing officers in the MPFA, such as the Managing Director with an annual salary of several million dollars and other senior officers who are earning an annual salary of over a million dollars. No wonder everyone is rushing to enrol in the courses which Prof K C CHAN has taught and no one is interested in courses like History, Chinese Language and Social Sciences, since graduates of the former would be able to make a fortune, just like K C CHAN and many other notable examples. When everyone working in financial institutions is remunerated with several million dollars a year, courses in other disciplines such as Humanities and Social Sciences might as well be brought to a close. The attitude of the Government is after all very clear, that is, it would not take up what should be done but on the contrary, would strive to achieve what should not be done.
In order to have a constructive discussion, let us continue with our deliberation. The specific idea is for the HKMA to introduce in the market an MPF scheme which offers a stable investment return. As a matter of fact, I have all along objected to the implementation of the MPF System but since the discussion of the subject has already commenced, there is no harm "bragging" with Prof CHAN. I would like to have a cut in the administrative costs but you would not bother to address my concern and would only strive to maintain the 4944 LEGISLATIVE COUNCIL ─ 21 January 2015
MPF System. In fact, I would not be able to overthrow the MPF System for in this Council, there are only a few Members present here who share my views, since those of the pro-establishment camp would definitely support the Government blindly while those representing the wage earners would question the legislative amendments under discussion. I will talk about the specific provisions on critical illness later since there will be ample time for this when Committee stage amendments are discussed.
Assuming that on the basis of the MPF System in place, an attempt is made to entrust the HKMA with the management of the MPF fund in order to have a cut in the administrative costs and have the MPFA dissolved, the HKMA would be able to introduce in the market an MPF scheme which offers a relatively stable investment return that can at least break even. It does not matter whether the scheme is profitable as wage earners are at least exempted from paying the administrative fees and the general public is provided with an additional choice. With the weeding out of inferior products under the Employee Choice Arrangement of the MPF, people will switch to funds which charge lower fees but offer better investment return, thus enjoying a greater flexibility. Therefore, in order to survive the competition, improvements have to be made to the 460 MPF constituent funds in the market, if such improvements do exist. When the MPF products managed by the HKMA have taken up a considerable market share, there would be a chance for the scheme to shift with less resistance encountered to a system of universal retirement protection. Prof CHAN, this is our wishful thinking but again, although much has been said, you will definitely decline to accept our views. (The buzzer sounded)
DEPUTY PRESIDENT (in Cantonese): Mr WONG, speaking time is up.
MR LEUNG KWOK-HUNG (in Cantonese): Deputy President, grumbles abound, the mandatory provident fund (MPF) System has to be revised again now. Why grumbles abound? The situation is in fact more or less the same as that of the present political reform. At that time, the British Hong Kong Government was preparing to leave Hong Kong. As many labour organizations or grass-roots organizations were faced with the problem of workers retiring without protection, they asked the British Hong Kong Government to formulate a policy. I remember Miss CHAN Yuen-han was then elected a Member of the LEGISLATIVE COUNCIL ─ 21 January 2015 4945
Legislative Council. She said even if it was a rotten orange, she had to pocket it first. If we count from then, it has been almost two decades now. Of course, the Mandatory Provident Fund Schemes Ordinance was only passed afterwards.
(THE PRESIDENT resumed the Chair)
What is meant by "ingrained habits cannot be cast off overnight"? What does "half a loaf is better than no bread" mean? What is "pocket it for now"? What is "seize the opportunity"? These much-used pet phrases of the LEUNG Chun-ying team can all be used in this discussion. In those days, they also said that if the people did not pocket it first, they would be left with nothing. As a reform of the system, this is already a big improvement. To LI Fei and ZHANG Rongshun, these words have been used so much that they have lost their function in Chinese. It is the same as that sentence by our first Chief Executive: "Mr CHAN, may I have your surname?" How could he have said this? It showed that his Chinese was really bad, and he was fatuous and indifferent.
President, you were lucky then for not having been elected a Member of the Legislative Council. You did not have to witness this farce. The British Hong Kong Government considered that it could give the Hong Kong people more as it was the last government. To put it bluntly, what had it to do with them? However, some people said there was still no consensus as the rich said this was not feasible. Moreover, history is really a cycle. At that time, there was this bad guy called CHEN Zuoer. He claimed that if there was too much social welfare benefit, the car would crash and there would be fatalities. If that was the case, why did he allow his daughter to come to Hong Kong and work at the Ocean Park? KWONG Ki-chi was only a bureaucrat then. Professor, you were not a government official back then. A simple retort by him already made him almost a hero.
This system is really too bad. Let me tell you, at that time, the rich and the communist party bureaucrats who were about to govern Hong Kong said this was not feasible because they were afraid that Hong Kong's social welfare might be too good. Even if the wicked British Hong Kong Government intended to give the Hong Kong people some consolation prize before leaving, the proposal was vetoed. As a result, there was this comment by Miss CHAN Yuen-han that even if it was a rotten orange, she had to pocket it first.
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President, this is life. The farce we had two decades ago is replayed today. The Government again asked us to pocket it for now, or we would be left with nothing. They said if Hong Kong was too democratic, it would easily give rise to national security problem. The mindsets of all villains are paradoxical. President, I have to filibuster. I believe this year will also see filibustering for social security and retirement for the elderly. LEUNG Chun-ying is really rotten to the core. He claimed he would set aside $50 billion as this was what I demanded. He is such a man that he takes what he has said as what he has done. Being paradoxical is the worst. He should either do it or leave it. On the one hand, he said that he would set aside $50 billion, but soon afterwards, he pointed out in the Policy Address that there was no consensus in society with regard to increasing the contributions by the employers or the employees. In other words, he did not want to do it.
President, is there something we would take action only after arriving at a consensus? Buddy, very often than not, when you expel me from the Chamber and stop me from coming back, there is no consensus. At least, I do not think that you should do this. Why do you expel me then? Do you consider that we should follow LEUNG Chun-ying's way of shirking responsibility in this Chamber, that is, arriving at a consensus before taking action? If so, when you expel me in the future, I can just stay on until I manage to hurl things at LEUNG Chun-ying. So, it is really unnecessary to say this. If we take the above as an example, you, President, has the authority because in the lawsuit between you and me, you claimed you were empowered by the Basic Law to run the Council. Thus, it has nothing to do with me as to when or why you cut short the filibuster.
For the government run by LEUNG Chun-ying, it comes down to a government, and even if he was elected by 1 200 people, he is duty-bound to implement measures to address the retirement issue. In particular, during election, although he did not make it clear that he would dig a garden without approval ― of course he would not put that down in his manifesto ― or one plus one gives zero, he clearly stated that he would address the retirement problem of the elderly people of Hong Kong. Also, he said a sum of money would be set aside in due course. President, now, he intends to set aside $50 billion but makes it clear that there will be no universal retirement protection. Is he lunatic or too sly, or has he been deceived by his subordinates?
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President, as a government, it has to implement policies, unless it has totally no ideas. LEUNG Chun-ying always mentions the need "to be appropriately proactive, and to overcome the difficulties". This is another meaningless sentence in Chinese. I would like to ask LEUNG Chun-ying: If he has to be appropriately proactive, should the Government step in? If the administrative fee is to be revised, or if the employers and the employees have to contribute more in certain aspects, should legislation be introduced to that effect? Secretary Prof K C CHAN, what does it mean for you to come here today to propose these minor amendments?
There is still something good with ATV, as the station will replay old news. They are also available on TVB. There was this person whose name was David FORD. President, I believe you know him too. He was then Hong Kong's Chief Secretary, as the title of Chief Secretary for Administration was non-existent at that time. Back then, Anson CHAN sat behind him, and Henry TANG was also very skinny. He made it very clear then that for retirement protection to be put in place, the most important thing was that there would be business for the business sector. In other words, the well-being of corporations engaged in this kind of business should come before the well-being of the retirees in Hong Kong. If it was not favourable to the market, nothing, or just a little, should be done.
The entire design of the MPF is making trouble out of nothing. In other countries, it may not be necessary to enact legislation to enable the intermediaries to take so much advantage. Frankly, it bares the corruption of coterie election or the appointment system. Rafael HUI was the first Managing Director of the Mandatory Provident Fund Schemes Authority. He played a part in the establishment of the Authority and had accepted advantages. He left the government to join the Authority. The mission of the Authority is to safeguard the large corporations engaged in MPF business.
President, LEUNG Chun-ying always intends to establish Policy Bureaux of one kind or another. He strongly advocates the setting up of the "Infliction and Technology Bureau". You may say that he is best at doing this. When pay increase for civil servants and the Low-income Working Family Allowance Scheme hit a snag, he insisted that he should stick to principles, and should not bring forward these two proposals of which the public would like to see early approval. Although not controversial and the pro-establishment Members have dreamed to support, they could not be brought forward because of principles. 4948 LEGISLATIVE COUNCIL ─ 21 January 2015
Nonetheless, where have the principles gone now? President, are you aware that he has to reschedule the order for scrutiny? Thanks to the "Infliction and Technology Bureau", the order can now be rescheduled, and everything else has to give way. Only this approach is in the interest of all. What is he other than a crafty villain? I just cannot imagine how shameful the pro-establishment Members will be. It was only last week that they gnashed their teeth and said the Government could not reschedule the order because of our filibuster, as there were rules and regulations to follow. They also said that if the "filibustering camp" and the opposition camp failed to submit, they were the culprits. Secretary, you may not have been involved, but why then is the order being rescheduled now?
There is another story. Telling such filthy stories alone in this Chamber is revolting. The "Infliction and Technology Bureau" has been approved, then, he came up with the Financial Services Development Council (FSDC). No wonder Mr WONG Yuk-man has to rebuke you earlier. What is the work of this FSDC? If he really has to do something, why does he not create something invincible to do the business of running the MPF for the Hong Kong people? It can then write off the MPF and re-inject the money into the future accounts for universal retirement protection, or return the money to the employees or earn interest. However, while it is a must to implement universal retirement protection, by simply saying that he could not see that a consensus had been reached, LEUNG Chun-ying just set aside $50 billion and did nothing. What will this $50 billion be used for? Just as the Secretary may tell his subordinates, he will fork out $5,000 as he has been promoted and has made a fortune out of speculation on stocks. However, the money is not to be spent on meals, going to the cinema or doing anything. Why then does he fork out $5,000? Is it to be spent on toilet rolls?
This is an officialdom tactic to show that the money has been made available. Thus, President, please give me a reason for not staging a filibuster again. We need to deal with this demon called LEUNG Chun-ying seriously for his bullying us in this way. He has really gone too far and insulted people of good culture. Prof Nelson CHOW has been fooled around as a monkey by this group of monkeys. He can be a monkey himself, but please do not treat others as monkeys too. How could he insult people of good culture? I have pity with this senior who came all the way to consult my opinion. Can he be regarded as a human being? Since his suggestions are not listened to, why should he be bothered then? LEUNG is just too lazy to retort. He should have retorted LEGISLATIVE COUNCIL ─ 21 January 2015 4949 instead of giving the excuse that there is no consensus. It is a known fact that a consensus is absent. Can this be taken as a reason? He should hit back at Prof Nelson CHOW and criticize him. Is LEUNG Chun-ying not fond of making strong criticisms? Can he still be regarded as a human being? He simply dare not retort but resorts to saying that consensus has yet been reached. Even if a consensus is non-existent, is it necessary to take a year?
President, this is LEUNG Chun-ying. He always makes trouble out of nothing. Secretary Prof K C CHAN, I will not blame you as you have yet to come to that grade. Take a look at his Policy Address. He already talked about independence for Hong Kong in paragraph 10. Had this LEUNG Chun-ying not given himself away? It is impossible to finish reading this paragraph 10. In February 2013, he came to notice that they had published an article. In 2014, he again noticed that the article was broadened into a book. Nonetheless, he did not point it out in 2013 or 2014. Fine. He said nothing in February, and remained silent in October 2014. Buddy, this is a major incident which he had to include in his Policy Address but he made no mention of it. What is this if he is not giving himself away?
What is the reason? This is because I hurled an "honest red bean bun" at him when he came to the Legislative Council. He knew very well that he should explain at an appropriate time and on an appropriate occasion what he called external forces meddling in the colour revolution. If he was to explain at an appropriate time and on an appropriate occasion, what would be a better opportunity than when he came to the Legislative Council? As regards corruption, need he explain on an appropriate occasion and at an appropriate time as well? So, he made trouble out of nothing and used this as an excuse. Buddy, in 2014, the Umbrella Movement raged like a storm. Numerous young people and students of the University of Hong Kong took part. Why did he not make this comment then? He made no mention of it as late as October. As there was nothing to say when he came to explain in the Legislative Council, he brought up this issue. This is typical of LEUNG Chun-ying.
Yuk-man was wrong. He should not have said that a living LEUNG Chun-ying is useless. Rather, even if he is dead, he can be to no avail because he lies too much and offers too much advice. When he dies, it is important not to bury him to avoid poisoning the soil.
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MR WU CHI-WAI (in Cantonese): President, while running the Chief Executive election, LEUNG Chun-ying proposed that "[w]e will adopt measures to progressively reduce the proportion of accrued benefits attributed to employer's contribution in the MPF account that can be applied by the employer to offset long-service or severance payments". This is LEUNG Chun-ying's election undertaking. But we cannot see any relevant amendments in the Mandatory Provident Fund Schemes (Amendment) Bill 2014.
In fact, since the setting up of the Mandatory Provident Fund (MPF) System, everybody … The MPF System was set up by the Government as a pillar for providing retirement protection. But years back, in order to secure the passage of the Mandatory Provident Fund Schemes Bill, the Government introduced certain amendments to the Bill, including allowing employers to use accrued benefits to offset certain employees' benefits. As a result, the MPF, which is intended to be a pillar for providing protection to employees' retirement life, has been turned into a hodgepodge.
Over the past 10 years or so, nearly $20 billion of accrued benefits has been spent on offsetting severance payments. Members can see that when viewed against the total of $500 billion, the $20 billion which has been spent on offsetting the employees' benefit of severance payments is indeed a very substantial amount, as it represents nearly 5% of the total. In fact, it is absolutely not easy for one to find any year with an MPF investment return rate of 5% from the past decade.
The investment return rate, the actual performance and high administrative fees of the MPF have given many employees a feeling that the MPF is a tool for "nourishing" MPF trustees, rather than a pillar for providing protection to their retirement life. For this reason, I think that the Mandatory Provident Fund Schemes Authority (MPFA) or the Government should conduct a serious review to ascertain if the MPF is still able to fulfil its original intent and function as a pillar for providing protection to employees' retirement life.
The authorities have always emphasized that employees should focus on the long-term rather than short-term returns and performance of the MPF in order to determine whether the MPF can function as a pillar for providing protection to employees' retirement life. If this can really stand, then employees should not be provided with several hundred MPF fund options, as this will cause confusion. Besides, MPF trustees always say to employees in their promotional materials, LEGISLATIVE COUNCIL ─ 21 January 2015 4951
"Your MPF investments with another company have not yielded any satisfactory rates of return. You had better transfer them to our company, as the rate of return will be better." But they will add, "Past performance is not an indicator of future performance." This is like gambling with dice, meaning that even if I lost money yesterday, it does not mean that I cannot win any money tomorrow. In fact, the MPFA or the Government should be able to understand that the provision of more fund options will produce the objective effects of pushing up MPF administrative costs, causing regulatory difficulties, and plunging employees into selection difficulties.
We will be able to see the gravity of the situation upon comparison. The funds ― the reserves of Hong Kong ― managed by the Hong Kong Monetary Authority (HKMA) amount to over $1,000 billion. According to the HKMA's annual report, the various administrative expenses of the HKMA add up to some $4 billion, $1.3 billion of which is fund management expenses. This means that even if I have to give Norman CHAN huge salaries … Well, administrative expenses account for merely 0.4%. As pointed out by some colleagues just now, the lowest percentage of MPF management fees is 1.3%, whereas the highest is 3.6%. Let us not forget that over the past 10 years, the average annual return rate of the HKMA is over 4%. If the computation covers the period beginning from the time since its establishment, its average annual return rate even exceeds 5%.
May I ask the Secretary if he can tell Hong Kong people the number of MPF funds that can yield an annual return rate of over 5%? Certainly, you will say that I can get the answer simply by looking at that platform, but then I must tell you that even those employees as aggressive as we are who have decisively invested their MPFs in aggressive funds are still unable to obtain an annual return rate of 5%.
While the MPF is no match for the HKMA in the annual return rate, MPF administrative fees are far higher than the HKMA's administrative expenses. In that case, how can the authorities possibly face those employees who have made MPF contributions with their hard-earned money without any sense of guilt? Up until today, the Government is still reluctant to review the functions of the MPF. It has only kept making minor repairs and asking employees to continue to make contributions, continue to believe the Government, and continue to believe that their MPF accrued benefits can really protect their retirement life. Certainly, the MPF System is indeed one of the pillars for providing retirement protection, but 4952 LEGISLATIVE COUNCIL ─ 21 January 2015 then I have no idea about how much longer it can hang on. One year? Two years? Or three years? If this pillar is so very fragile, how can it fulfil the function of providing protection to our retirement life?
On the MPF issue, I think that if the Government is still reluctant to conduct a comprehensive review to ascertain whether the MPF can still fulfil its original intent and function as a pillar for providing protection to people's retirement life … Besides, on the one hand, the Government wants the MPF to function as a pillar for providing protection to people's retirement life; but on the other hand, it has not set any performance standards for MPF trustees. In view of their existing performance, I wonder if we can still have any protection for our retirement life at all. Shouldn't the authorities impose a minimum standard on MPF investment returns, one which is comparable to the investment return standard for the HKMA?
In case the relevant basic statistics are not available, even if we undertake reviews and minor repairs of the MPF System when we have time, this honestly will not be of any help to resolving certain issues of greater importance, such as the failure of the MPF to function as a sturdy pillar for providing protection to employees' retirement life. There is little wonder that in the eyes of our colleagues, the Government merely regards the MPF as a "safeguard" enabling it to dodge the issues of universal retirement protection and retirement protection, and even dismiss universal retirement protection as something dreadful.
Actually, the MPF is dreadful too. Employees must make MPF contributions, so must employers. But if the MPF System fails to fulfil its original intent, it cannot realize its most fundamental … Will the Government conduct a serious and thorough review for the purpose of ascertaining if the MPF can fulfil its original intent and function as a pillar for providing protection to employees' retirement life? Can the Secretary tell us the yearly basic performance standards for MPF trustees in order to fulfil the original intent of the MPF System to provide protection to employees' retirement life? In my view, the minimum standard should be that the rate of investment returns must run ahead of inflation. Economics textbooks tell us that if the rate of investment returns falls behind inflation, our real purchasing power will shrink. In that case, how can the Government possibly convince us that the MPF System is a sturdy pillar which can provide protection to our retirement life? I hope the Secretary can enlighten me in this regard.
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In addition, I also hope that the Secretary can explain his views on setting a minimum MPF return rate in his reply later on. In the case of the HKMA, for example, the Financial Secretary has laid down certain criteria for assessing its performance. Will Secretary Prof K C CHAN formulate any performance standards for MPF trustees to motivate them to work harder in the same direction, rather than allowing them to charge exorbitant management fees all the same regardless of their investment performance, just like what is happening now? MPF trustees with poor performance will not be disciplined. And, if their performance fails to fulfil the original intent of the MPF, they will not be disciplined either. Eventually, only employees will suffer.
What is more, the two distinct concepts of retirement protection and labour rights have been mixed up under the MPF offsetting mechanism. Employees must rely on the MPF for retirement protection ― Well, the performance of MPF investments is quite another matter in the present context. But all along, the Government has been reluctant to review the offsetting mechanism, to speak less of conceiving ways to "progressively reduce the proportion of accrued benefits attributed to employer's contribution in the MPF account that can be applied by the employer to offset long-service or severance payments", as promised by LEUNG Chun-ying when he stood in the Chief Executive election.
The Government should at least set up a mechanism. In the case of minimum wage, for example, the Government will conduct a review of the minimum wage once every two years, because this has been stipulated in law. And, there is also a mechanism to follow. Regardless of the Government's wishes, it must conduct a review all the same. There is certainly no free lunch in this world, in the sense that the review outcome may well lead to increases in operating costs. Speaking of labour rights, I believe everybody will agree that employers are absolutely duty-bound to make severance and long-service payments pursuant to our labour legislation. And, another duty of employers is to make MPF contributions for their employees, so as to provide them with retirement protection. Why should the Government mix up the two concepts and continue to allow the use of nearly 5% of the accumulating accrued benefits for the purpose of offsetting severance and long-service payments?
In my view, the Government's dereliction of duty has aroused employees' discontent with the MPF System. If the MPF is unable to protect employees' retirement life, and if their MPF contributions are used to "support" fund managers or turned into administrative fees for MPF trustees, they will 4954 LEGISLATIVE COUNCIL ─ 21 January 2015 understandably feel indignant, will they not? When they feel indignant, they will have grievances, and they will naturally direct their grievances at LEUNG Chun-ying, as he made his promise long ago but has shown no intention whatsoever to keep faith with people. It was LEUNG Chun-ying who undertook that he would attempt to reduce the proportion of accrued benefits used for offsetting purpose.
Today, only Secretary Prof K C CHAN is present. I think he can hardly give us a reply on this matter. But I want to ask if he can enquire with Secretary Matthew CHEUNG later on about whether he can do something in this regard to protect employees' rights under the MPF System, lest the MPF, which is meant as an arrangement for providing retirement protection to employees, may degenerate into an avenue for employers to evade their responsibilities. Only doing so can clarify the relationship between employees and employers, rationalize the MPF System, and enable discontented employees to breathe a sigh of relief as they will think that the Government is at least aware of the problem and is willing to take steps in an attempt to resolve it.
I hope the Secretary can tell employees later on that it is possible to review the offsetting mechanism, and also the basic performance standards for MPF trustees in order to ensure protection for employees' retirement life and enable them to make informed choices.
Thank you, President.
MR KENNETH LEUNG (in Cantonese): President, the Mandatory Provident Fund (MPF) scheme has indeed undergone a number of revisions since it gained passage and was implemented in December 2000. Today, we are going to discuss the Mandatory Provident Fund (MPF) Schemes (Amendment) Bill 2014. President, regarding the MPF System in Hong Kong, I would say it is "inherently inadequate and subsequently maladministered". Why do I say that it is "inherently inadequate"? Let us look back at the year 2000. Back then, the SAR Government pushed through in a hurry this MPF scheme which modelled on the Australian Superannuation Fund. However, if we look at the taxation system, economic development and population structure of Australia, I have no clue why Hong Kong has to follow such a complicated system.
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The MPF has been implemented for 15 years. Please bear in mind that ― just like what has been mentioned by many colleagues in this Council ― the major role of the MPF is to serve as one of the most crucial retirement protection pillars to all wage earners. Of course, upon the passage of the Mandatory Provident Fund Schemes Ordinance, the SAR Government has also pointed out that the implementation of the MPF System can help Hong Kong become an international fund management centre. This indeed is true but it is only a secondary objective. We should not forget that the most important role of the MPF is to serve as one of the major retirement protection pillars to wage earners. It is not a provider of pocket money for the retired but a major pillar of livelihood.
President, let us look at the major amendment directions presented in today's Committee stage amendments (CSAs). First, scheme members can withdraw accrued benefits in instalments upon retirement. Another major reform direction is to allow terminally ill patients to make early withdrawal of accrued benefits. Finally, the last direction is to extend the relevant prosecution time bar from six months to three years. Provisions similar to the above are found in other semi-public or private MPF Systems in many places around the globe. These reforms are in the right direction. However, the CSAs proposed are all petty in nature and they are merely minor corrections and revisions. President, as we see structural problems in the retirement protection system, I do believe a drastic overhaul is needed. Today is not an occasion for discussing universal retirement protection, we are after all going to discuss the MPF per se. Therefore, I will first comment on the structural problems of this MPF "monster".
As many of you have said earlier, the MPF scheme successfully gained passage back then only because it was a compromise. In what sense was it a compromise? And how did the mechanism come up at that time to let the MPF contribution paid by the employer offset long-service payment and severance payment? First, severance payment is a compensation made to employees who have worked for the same employer for 24 months but are dismissed by reasons such as redundancy. The amount of this compensation is directly related to the employee's level of pay and duration of service and it is capped at a maximum. Long-service payment, on the other hand, is the compensation made to employees who have worked for five continuous years for the same employers, and when they leave their jobs for reasons other than severance.
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President, severance payment and long-service payment share the same calculation method. When an employee leaves his job, if by law he is entitled to severance payment, he is not entitled to long-service payment. The two payments are therefore mutually exclusive. The sum of money concerned is in fact a kind of compensation made to the employee, either for the loss of job resulting from redundancy, or for his loyalty to the employer since he has worked for five continuous years. The function of these two payments is totally different from that of the MPF which is a kind of retirement protection.
However, looking back at the backdrop against which MPF gained passage, we can see that this offsetting mechanism was in fact a compromise reached between the employers and the employees. This compromise has now given rise to a rather crucial issue: When trying to revise and improve the entire MPF structure, we run into the problem of "full portability". When employers' benefits form part of the MPF accrued benefits and if the offsetting mechanism remains intact, the "full portability" of MPF ― allowing employees the right to choose service providers for all their accrued benefits ― a makeover which is beneficial to the employees can hardly be implemented. I have said it can "hardly be implemented" to mean that while implementation is possible, the relevant administrative fees will be driven up excessively by the logistics involved, if the offsetting mechanism remains fully or partially in place.
Hence, I agree with many colleagues in this Council that the offsetting mechanism should be the first item for discussion when a review is conducted in future. First, why should we put in place such an offsetting mechanism when termination payment is totally unrelated to retirement protection? The presence of the offsetting mechanism also makes it hard for the "full portability" overhaul to be implemented. Furthermore, the second item that requires improvement is the transparency of the MPF fees. Insurance industry practitioners will of course say that they never let their clients know how much administrative fees will be collected in a policy, as this is a commercial secret. However, after putting money into a certain fund for a year, questions like how much the fund has taken as management fees or what is the bid-offer spread ― a wage earner like me would wish to … Even when I read the annual statement of my MPF scheme, I remain in the dark about the actual amount of fees which has been deducted. The bill provides only the percentages given to the administrator or the investment manager. I hope the Secretary can ponder if there is a simpler way to let each scheme member better understand how much has actually been spent on acquiring units in investment portfolio in that particular year, and how LEGISLATIVE COUNCIL ─ 21 January 2015 4957 much has been paid to various service providers, in the contribution he made ― say $12,000 ― in the year. This is very important, as the percentages provided make little sense to me, and to a lot of wage earners or non-professional investors.
President, thirdly, I would like to talk about the core fund. I understand that one or more core funds will soon be set up so that those who find it difficult to choose the right investment portfolios can put their contributions in the core fund. However, the positioning and the constituent funds of the core fund remain elusive. The most important objective of a core fund is to provide an investment haven for inexperienced scheme members and let them reap some returns with their investment decision. However, the economy of scale will be lost if too many trustees or investment managers take care of a core fund. In other words, if the Government lets 20 people run the core fund, each of them will only get a very limited number of units. But if the Government allows just one or two people to run the fund, an oligopoly will be formed and wage earners are not going to have choices ― but of course they are not really eager to make choices. Therefore, questions such as how to determine the positioning of core funds, any guaranteed minimum return, and the number of core fund investment managers are important questions to ask. Furthermore, the positioning of the core fund management fee level and the existence or otherwise of a ceiling or cap on the percentage of management fees are also important. Indeed, apart from the core fund, we can still choose from a number of other investment funds. I reckon that in future, it will be a trend and it will be essential for a number of inexpensive investment funds to co-exist with the core fund, which is passively managed charging probably less than 0.5% as management fees, to be made available to wage earners, so that they can enjoy stable and long-term growth in investment return.
Meanwhile, I would like to talk about some long-term developments. Though some people would rather abandon the MPF System altogether, in my opinion, the system is going to stay at the present stage, or at least in the next couple of years or even in a considerable number of years to come. Hence, what is crucial is how to give the system a drastic overhaul. We now have 39 schemes and 19 trustees in the market. But, President, how many of us are participating in the MPF schemes now? In fact, I hope that in future ― we are in a free market after all ― under the forces of natural elimination and selection, these 39 schemes will undergo consolidation on their own initiatives in the long run, so that only 10 to 20 schemes, each with not too many multifarious funds, are available in the end. Then, non-professional investors and wage earners will not 4958 LEGISLATIVE COUNCIL ─ 21 January 2015 be dazzled over the great variety of choices. To me, 39 schemes and 19 trustees are far too many as we are overwhelmed by the sheer quantity to be able to make good decisions.
Moreover, the MPF administrative fees currently charged on us are very expensive, although they are supposedly reducible with computerization and paperless operation. A research report completed by Ernst & Young two years ago on MPF fees and structure has revealed that administrative fees did make up a very high percentage, actually more than half, of the total fees. In the long run, I would like to suggest that ― maybe the sector will be unhappy to hear this, especially those in administration jobs ― while both trustees and fund investment managers are responsible for the private funds, maybe we could separately set up a centralized administrative platform for MPF in the long run. This platform can provide convenience to all of us. No matter which scheme and which trustee a member patronizes, his information and all the buying and selling will be taken care by this centralized platform. Has the Government estimated how much administrative fees will be saved if we use this centralized platform? Of course, some MPF administrators are going to think that the suggestion will throw them out of their jobs. But all suggestions are going to make an impact to someone's livelihood anyway. I also believe that the impact brought about by this suggestion will be slight as these professionals can alternatively work as fund managers, trustees or in other financial sectors, if they lose their administration jobs. In fact, I have put forward this idea of centralized administration platform to the Secretary in many instances. I hope that he can really listen to the suggestion this time and consider carefully how to make sweeping changes to improve the MPF schemes.
President, I so submit.
MR JAMES TIEN (in Cantonese): President, under the mechanism of a modern society, besides a government which rules a place or levies taxes, the remaining thing is nothing more than the relationship between the employers and employees.
When the Mandatory Provident Fund (MPF) schemes were founded, the President and I were already in this Council, while the few Members who have spoken just now are newcomers. At that time, I was representing the commercial functional constituency as a member of the Hong Kong General Chamber of Commerce, and many of the representatives in the commercial sector LEGISLATIVE COUNCIL ─ 21 January 2015 4959 asked, "As we have employed a bunch of employees, what is the relationship between us and them? Is it merely a boss-employee relationship?" That is to say, I give you a high pay, and you are willing to work for me now. When you have some other jobs, be it a promotion or another job, it has nothing to do with me. Will the employer-employee relationship an eternal one? If not, why should the retirement issue of the employee who I recruited become an issue for me, the employer? Why should it not become the personal issue of the wage earner or the issue of the Government? Why should the wage earner not try to save up as much money as possible by himself?
One day, if someone is in a dire situation and has to rely on the so-called public assistance or cheap public rental housing, we should let the Government take care of him. But where does the money the Government needs to take care of him come from? Actually, it comes from the employers as well as employees. Part of it comes from the profits tax paid by the boss, which is the money from the profits made by the company. The other part comes from the salaries tax paid by the employee. For that reason, that sum of money actually comes from the employers as well as the employees.
In those days, the Liberal Party had reservations about the Government's proposal to set up the MPF scheme, as many companies had set up their own retirement protection schemes for their employees. The employers and employees each would make a 5% contribution (5% of the salary of the employees) under the so-called ORSO provident fund scheme. A number of large-scale enterprises would increase their contribution to 10% after 10 years, while the employees only needed to contribute 5%; or after 20 years, for the purpose of retaining their employees with higher seniority, some employers would increase the employers' contribution to 15%. We think that the operation in those years was quite smooth. But at that time, many small and medium enterprises (SMEs), import and export companies or Hong Kong-style teahouses represented by Mr Tommy CHEUNG could not afford this mode of operation. The only thing they could do was to pay the highest salaries in order to recruit employees, and to state that if employees quit, they had to take care of themselves as the employees would have nothing to do with the boss. The MPF schemes were founded in those circumstances, and the commercial sector was rather doubtful. Since a company already has its own ORSO, as the employers, we have to contact many financial institutions to do the investment. Our rates of return were definitely higher than the current MPF schemes, but in those years, we had not anticipated that the performance of the MPF was as poor as this. Of 4960 LEGISLATIVE COUNCIL ─ 21 January 2015 course, the most anxious person was Mr Rafael HUI. He was the then Secretary for Financial Services. He kept saying that the schemes were perfect, but at that time I was very dubious about it. Of course, according to the recent fact, we know that he is far from an astute person in managing his own finance. Later he assumed the post of Managing Director of the Mandatory Provident Fund Schemes Authority, which was subsequently founded later. No wonder the corporations under him could not make any profit at all. I believe all bosses and employers are disappointed by this, and I also hope that the 5% contributed by us could make some profits, no matter who is responsible for the operation, so that the employees' pool of money will grow bigger. But how would one expect that they perform so poorly?
Another thing which prompts me to stand up and speak is the so-called offsetting mechanism. Members should consider the matter from the perspective of an employer. When an employee works for me, I have to take care of his retirement by making a sum of contribution, and that is just something one-off. However, why should I provide double benefit for him? Of course, labour representatives would say that is double protection. On the one hand, I have to make the MPF contribution. In fact, the purpose of the MPF is to save up money for your retirement use. On the other hand, the long-service payment is also for your retirement use. Can it be said that you will retire twice? The 5% contribution for your retirement is put in the MPF account, and then my company has to pay you another sum of money; this is not logical at all. Therefore, the Government stated at that time that the 5% MPF contribution made by employers might offset the long-service payment, but the offset mechanism did not apply to the employees' portion. Thus not all the contributions are offset. This approach is reasonable. Otherwise, as the employer, when I have to hire employees to work for me, I have to contribute 5% of his salary for his retirement, but after 30 years, when he quits, I have to make the long-service payment by paying him another sum of money. To most SMEs, will this become double protection? Why should he be paid twice upon retirement? For that reason, this is not viewing the matter from the angle of offsetting the two. The employees' benefit they deserved is not deprived because one thing is abolished. We consider it a more balanced way to say that the benefit they deserved should be a one-off retirement benefit paid to them, instead of paying him the MPF as well as the severance pay. As to severance pay, it is another story. If you dismiss him, you have to pay that sum of money. This sum of money is counted in any case.
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As to the portability of the contribution under the current law, employers are rather disgruntled about it. Of the 10% contribution made by the employer and employee, why the employer can only choose a certain institution while the product to be invested is selected by the employee? If the products chosen by the employee are all high-yield products, the risk will naturally be higher. However, why should the employer make up for the losses when there is a deficit? It is not reasonable. Since the employer has no say in the selection of the scheme, when the employee chooses a more aggressive scheme which is subject to huge fluctuation, if it rises, of course the profit will go to the pocket of the employee and everyone should be happy about it. In case there are losses, why should the employer subsidize the part contributed by the employer, while the part contributed by the employee need not be filled up by the employee? The losses on the employee's part is incurred because of the employee himself. For that reason, in order to protect themselves from making any subsidy due to a loss, most employers will look for the safest bank to do the investment. All the schemes run by large-scale banks, the safest banks, are not cheap in terms of fees. Even if they could provide three to four types of products, their rates of return would be rather low. If we make the investment by ourselves, the rate of return will definitely be better than theirs. But of course, the risk we have to take is higher, because there is no free lunch in this world. How can we find something with high rate of return but low in risk in this world? If so, everybody is getting rich. In any case, anything profitable is of higher risk while things that are not so profitable are of lower risk.
Therefore, nowadays, if we have to change the offsetting mechanism, it is really something like every family has a skeleton in the closet. The employees would not be happy, and neither would the employers. After listening to so many speeches, I think a more pragmatic suggestion, which is very difficult but the Secretary should look into it, is that we should find ways to drive down the MPF fees and increase the transparency. As to the products, if the employee chooses the more aggressive ones, he should decide on the product and the bank. As to the provision that the employer should make up for the loss when a deficit incurs, if the employer is required to make up for the loss, the employer will definitely choose the safest product for the employee. To a wage earner, however, that sum of money is definitely inadequate for his retirement.
Of course, President, the hottest topic now is universal retirement protection. A new problem has been stirred up in the heap of matters. As the MPF performs so poorly, people find that the pension is basically inadequate for their retirement. If we look at the legislative intent at that time, it was absolutely 4962 LEGISLATIVE COUNCIL ─ 21 January 2015 not saying that the MPF would be adequate for one's retirement. The original intent is that it would make up for one third of the money you need for your retirement. One third comes from the MPF, and the remaining … Of course, if we look back at the original legislative intent, many Members will consider it unreasonable. Where will the remaining protection come from? One third of the money comes from your children who support you, and one third comes from your own savings. The notion that one third comes from MPF was a notion of that time. Of course, people think that as young people are shouldering heavy burdens now, we should not expect them to make up for one third of the money needed by a retiree.
In this circumstance, I doubt whether the entire retirement scheme should comprises the MPF and the universal retirement protection. I think this is the same question which requires a more detailed discussion in society so as to strike a balance between the obligations of the employers and the protection that employees deserve. Of course, as a final point, it depends on the $50 billion of retirement protection earmarked by the Government now, that is, whether the Government will make use of the interest, or the principal can also be used, as that sum of money is also provided by employers and employees. Thank you President.
PRESIDENT (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to reply. The debate will come to a close after the Secretary has replied.
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, first of all, I wish to extend my heartfelt gratitude to the chairman of the Bills Committee on Mandatory Provident Fund Schemes (Amendment) Bill 2014, its members, Secretariat staff and legal adviser serving the Bills Committee for their efforts to facilitate the scrutiny of the Bill to be completed smoothly. I also wish to thank various deputations and individuals for providing their views to the Bills Committee.
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The Bills Committee held a total of six meetings to discuss the policy intent and provisions of the Bill in detail. It also provided its valuable recommendations. The Government has made certain amendments after studying such recommendations and the amendments were put forward to the Bills Committee subsequently. I will move the relevant Committee stage amendments later on.
The Mandatory Provident Fund (MPF) System, incepted in December 2000, has been in operation for 14 years. This system usually takes 30 to 40 years to reach its maturity in development. For that reason, the Government and the Mandatory Provident Fund Schemes Authority (MPFA) have all along been promoting improvement measures in the light of operational experience, stakeholders' comments and market developments, so as to further protect the interest of MPF scheme members and to strengthen the MPF System as one of the pillars of the retirement protection system.
After the deduction of administrative and management fees, the annualized internal rate of return of MPF investments is 4.2% from late 2000 to November 2014. For comparison purpose, the Consumer Price Index growth during the same period was 1.8%. The Bill seeks to amend the Mandatory Provident Fund Schemes Ordinance (MPFSO), its subsidiary legislation and the Occupational Retirement Schemes Ordinance (ORSO), so as to provide scheme members with greater flexibility in withdrawing their accrued benefits, reducing the compliance burden on trustees, with a view to making room for further reduction of the MPF fees.
The Bill proposes to allow a scheme member to withdraw the MPF accrued benefits by instalments, or in a lump sum, upon the member's retirement or early retirement. The MPFA launched a three-month public consultation on withdrawal of the MPF accrued benefits in December 2011. The proposal was widely supported by members of the public.
The Bills Committee has conducted an in-depth discussion on the detail phased withdrawal arrangement of accrued benefits. It was mainly about the requirement that the trustee should not levy a charge on the minimum number of phased withdrawals of accrued benefits, and whether a minimum amount should be set for each withdrawal. With due regard to the Bills Committee's deliberations, the industry's and relevant organization's feedback, such as the 4964 LEGISLATIVE COUNCIL ─ 21 January 2015 views of the Consumer Council, we propose to move an amendment to stipulate that if an MPF scheme member opts a phased withdrawal of his accrued benefits, the trustee should not impose charge on the scheme member for the first four withdrawals in one year. Our major consideration is that any withdrawal arrangement should strike a reasonable balance between providing scheme members with greater flexibility in withdrawing accrued benefits and maintaining administrative efficiency and cost effectiveness of the MPF System. As I have explained repeatedly, maintaining a relatively simple and effective framework for withdrawal of accrued benefits is crucial to reducing the administrative cost of the MPF schemes. In response to recommendations of the Bills Committee, the MPFA will review the situation after the implementation of the arrangement for the phased withdrawal of accrued benefits, including the mode of withdrawal, so as to ensure that the new arrangement can meet the need of MPF scheme members. The Bills Committee has no objection to the amendment.
Furthermore, currently scheme members are allowed to make early withdrawal of accrued benefits on grounds of early retirement, permanent departure from Hong Kong, death and total incapacity or small balance account. The Bill also proposes to add "terminal illness" as a ground for the application of making early withdrawal. A terminal illness is defined as the illness suffered by a scheme member that will reduce the member's life expectancy to 12 months or less as certified by a registered medical practitioner or registered Chinese medicine practitioner. The proposal on the life expectancy of 12 months is the result of a public consultation and subsequent discussion with the medical professional bodies, as well as reference to overseas practice. A clear-cut time limit will provide medical personnel a definitive guideline in whether the certification should be issued, while the objective definition will facilitate a straightforward and operationally efficient claim procedure.
To tie in with the early withdrawal arrangement of accrued benefits, the Bill also amends the Inland Revenue Ordinance such that the accrued benefits withdrawn by instalments or on the ground of terminal illness will be exempted from the calculation of salaries tax.
The Government and MPFA have all along been endeavouring to drive down MPF fees. The Bill proposes to provide MPFA with an express legal basis to refuse the approval of a constituent fund if the MPFA is not satisfied that LEGISLATIVE COUNCIL ─ 21 January 2015 4965 the fund is in scheme members' interests, so as to tighten approval of new funds. The Bill proposes to specify the approval criteria in the MPFSO, which is an explicit legal basis provided with MPFA to ensure that a proposed constituent fund is in scheme members' interests. As proliferation of constituent funds might render the individual fund size too small to achieve economies of scale and would not be conducive to fee reduction, the MPFA has made an announcement to the industry in 2011 elaborating on the adoption of the criterion of "in scheme members' interests". The proposed amendment is merely making an explicit provision of the criterion in the Bill.
The reduction of compliance burden on trustees will help the reduction of administrative costs by simplifying operational processes, removing overlapping or unnecessary certification requirements and facilitating the use of electronic means of communication such as the Notice of Acceptance and Membership Certificate.
Having made reference to the enforcement experience of the MPFA, the Bill also includes certain technical amendments, such as extending the prosecution time bar for offences to facilitate effective enforcement by MPFA and amending some provisions which are not clear. Lastly, the Bill seeks to update the secrecy provisions to allow MPF trustees and ORSO administrators to disclose scheme members' financial information to foreign tax authorities, subject to specified conditions, to facilitate compliance with international tax reporting obligations to enhance tax transparency or combat tax evasion. In response to the views of deputations, we will propose an amendment concerning the disclosure of information by spelling out clearly the criteria that should be considered before MPFA gives the consent to disclosure. Members of the Bills Committee have no objection to the amendment.
During the debate just now, a number of Members have aired their views on the long-term development of the MPF as well as the way forward for the reform. In this regard, I wish to point out that we have also agreed all along that there are recognized problems in the MPF System concerning "high fees" and "difficulty in making choices". The Government and the MPFA propose to introduce a core fund as the default fund of all MPF schemes, so as to ensure that scheme members may be able to choose to invest in a fund which is subject to a fee control mechanism while it can also satisfy the strategic requirement for 4966 LEGISLATIVE COUNCIL ─ 21 January 2015 long-term retirement investment. We anticipate that the core fund will become the standardized fund which will prompt competition among other funds, thereby further reducing the fees.
A public consultation on the "core fund" was launched from 24 June to 30 September in 2014 and we have received 266 submissions. The MPFA is collating the view received. Most of the respondents supported the proposal made in the consultation papers, including a fee control mechanism. The industry has also raised various views on the investment combination and mode. The MPFA is currently conducting further discussion with the industry regarding the details of the formulation of the "core fund". We are determined to implement the "core fund" and the fee control mechanism. Depending on the legislative progress, our target is to introduce the "core fund" in 2016.
Lastly, I beg Members to support the Bill and all the amendments. President, I so submit.
PRESIDENT (in Cantonese): I now put the question to you and that is: That the Mandatory Provident Fund Schemes (Amendment) Bill 2014 be read the Second time. Will those in favour please raise their hands?
(Members raised their hands)
PRESIDENT (in Cantonese): Those against please raise their hands.
(No hands raised)
PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Mandatory Provident Fund Schemes (Amendment) Bill 2014.
Council went into Committee.
LEGISLATIVE COUNCIL ─ 21 January 2015 4967
Committee Stage
CHAIRMAN (in Cantonese): Committee stage. Council is now in Committee.
MANDATORY PROVIDENT FUND SCHEMES (AMENDMENT) BILL 2014
CHAIRMAN (in Cantonese): Members may refer to Appendix I to the Script for the debate and voting arrangements for the Bill.
CHAIRMAN (in Cantonese): I will first deal with the clauses with no amendment. I now propose the question to you and that is: That the following clauses stand part of the Mandatory Provident Fund Schemes (Amendment) Bill 2014.
CLERK (in Cantonese): Clauses 1 to 6, 8, 9, 10, 12 to 21, 23, 24, 26 to 48, 50, 52, 53, 54, 56 and 57.
CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the clauses read out just now stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
4968 LEGISLATIVE COUNCIL ─ 21 January 2015
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Clauses 7, 11, 22, 25, 49, 51 and 55.
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move the amendments to clauses 7, 11, 22, 25, 49, 51 and 55, as set out in the paper circularized to Members.
Proposed amendments
Clause 7 (see Annex I)
Clause 11 (see Annex I)
Clause 22 (see Annex I)
Clause 25 (see Annex I)
Clause 49 (see Annex I)
Clause 51 (see Annex I)
Clause 55 (see Annex I)
CHAIRMAN (in Cantonese): Does any Member wish to speak?
MR LEE CHEUK-YAN (in Cantonese): Chairman, I rise to speak to request independent voting on the amendment to clause 25, as we oppose the amendment.
We do so because the Government's Bill originally proposes to allow scheme members to withdraw their accrued benefits 12 times in a year free-of-charge. Members can imagine that elderly people actually want to regularly … Members all know that elderly people generally prefer withdrawing LEGISLATIVE COUNCIL ─ 21 January 2015 4969 their accrued benefits regularly every month for a fixed amount, such as $4,000. In that case, he will withdraw $4,000 of his accrued benefits every month for 12 months in a year.
But they cannot do so now. Initially, he can withdraw his accrued benefits monthly free-of-charge every year. But if the amendment is passed, he can only do so four times a year. This means that he cannot withdraw his accrued benefits regularly every month as if he were receiving his salary even if he so wishes. Computed on the basis of withdrawing $4,000 of accrued benefits a month under the original proposal and making four withdrawals a year, he will have to withdraw $12,000 each time. But he may think that this mode lacks regularity as he may overspend or underspend with the large amount.
Why do the authorities refuse to give elderly people or retirees the option of monthly withdrawal? Their only justification is about administrative costs. Let me first clarify that retirees can still withdraw their accrued benefits free-of-charge, and by "administrative costs", I mean the overall administrative costs. As Members said just now, the overall administrative costs now stand at 1.7% of the total costs on average. In fact, this is already outrageously high. As the saying goes, "The wool comes from the sheep." The additional administrative costs will eventually be shifted to other employees with MPF accounts. However, if we want to avoid this situation, cutting the feet to fit the shoes is not the proper approach. Instead, we should enact legislation to exercise control, or introduce competition, in a bid to lower administrative costs. As I have always emphasized, another alternative is to set up a government-run public MPF trustee as an option for employees, so as to lower administrative costs. This is what a proactive way should be like.
This time, the Government merely considers the issue that the original proposal may drive up the administrative costs of MPF funds. Now, the Government only thinks that the administrative costs of large consortia will rise and therefore the choices for retirees should be reduced. May I ask if Members are solely concerned about the administrative costs of large consortia and retirees' choices are out of the question?
This is precisely the reason why I request for independent voting on the amendment. By supporting me and opposing the Government's amendment, Members can return the right of choices to retirees. I leave the decision to all of 4970 LEGISLATIVE COUNCIL ─ 21 January 2015 you, and I hope that Members can support me. If I were in the pro-establishment camp ― I seldom say something like this ― if I were in the pro-establishment camp, I would take account of the fact that the Government actually proposed 12 times of withdrawal at the outset. Members should be able to give thoughts to this matter independently.
Thank you, Chairman.
MR CHAN KIN-POR (in Cantonese): Chairman, the proposal to allow employees to withdraw the accrued benefits of their Mandatory Provident Funds (MPF) in instalments actually aims to avoid the current situation marked by either a full withdrawal or non-withdrawal of accrued benefits by scheme members.
The purpose of this proposal is to give scheme members more choices. When the prevailing investment environment is in poor shape, and if it so happens that they are in need of money, they can withdraw part of their accrued benefits first and wait until the investment environment improves before withdrawing the remaining accrued benefits. This proposal aims to give scheme members more choices so that they may withdraw their accrued benefits at an appropriate time. It does not aim to let them withdraw their accrued benefits whenever they need to, like withdrawing money from an automatic teller machine (ATM) as mentioned by some Members.
Mr LEE Cheuk-yan said a moment ago ― unfortunately, I must tell him the reality ― that elderly people preferred regularity. The reality is that the withdrawal of accrued benefits is not as simple as withdrawing money from an ATM or at a bank's counter where one needs only to fill in a form. First, a scheme member must fill in an application form. If his application is approved, he will have to sell his fund units. After his fund units have been converted into cash value, he will be issued a cheque. He can receive the money only after the completion of this process probably spanning one or two weeks. Is it our intention to torment elderly people by requiring them to fill in application forms and undergo this procedure every month?
Members must come to think about this. If the procedure is really as simple as what Mr LEE Cheuk-yan described just now, he may really deserve our support. But the reality is that it is not that simple. Therefore, I hope LEGISLATIVE COUNCIL ─ 21 January 2015 4971
Members … Mr LEE Cheuk-yan can actually call on Members himself not to give him any support, as the reality is not the same as his depiction. This is about how elderly people will be tormented.
Members must likewise consider other aspects. At present, a scheme member can only withdraw his accrued benefits once every year ― it should be "once in his lifetime". He can do so when he retires at the age of 65. At that time, he can opt for the withdrawal or otherwise of his accrued benefits. If he decides to withdraw his accrued benefits, he will need to fill in an application form indicating the fund units he intends to sell. And, after the fund units have been converted into cash value, he will be issued a cheque. He may collect the cheque in person, or have the money deposited into his designated bank account. He must undergo this procedure.
What will happen if Members do not support the Government's amendment proposal and instead insist on adopting the original arrangement of 12 times of withdrawal? A scheme member can withdraw his accrued benefits 12 times in a year. Presuming that the average life expectancy of Hong Kong people is 80 years, a scheme member retiring at the age of 65 will still have 15 years to go before reaching 80 years old. The multiplication of the two figures will give us 180, meaning that he can withdraw his accrued benefits 180 times. In that way, the number of withdrawals available to a scheme member within his lifetime will increase substantially from one to 180. Everybody can be sure that the costs will likewise increase substantially.
On the one hand, we have been criticizing the MPF for its exorbitant administrative fees and demanding costs reduction. On the other hand, while we are well aware during the legislative process that more flexibility will mean higher costs, we still insist on enhancing flexibility all the same. In that case, are we actually intensifying the problem despite our good intention? Will this do any good to the system? Therefore, I hope that before making their decisions, Members can consider carefully whether they really want to take the risk of substantially increasing administrative costs. In case the overall administrative costs have increased, it will be difficult to reduce them afterwards. If this really happens, I wonder if elderly people and scheme members will benefit or suffer.
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I have the deepest feeling about one thing. At a meeting of the Bills Committee on Mandatory Provident Fund Schemes (Amendment) Bill 2014 (the Bills Committee), Mr LEE Cheuk-yan ― his attendance at the Bills Committee's meetings was not high ― raised his doubt directly, saying that the Government's proposal of allowing a scheme member to withdraw his accrued benefits 12 times a year would likewise lead to the shifting of additional costs to MPF schemes, which would eventually drive up the overall costs. I believe the Government has put forth this amendment proposal in the belief that he supports amending the number of withdrawals to four times.
In fact, when the Government first put forward this amendment proposal, no member of the Bills Committee raised any opposition. Many members attending the relevant meeting came from the pan-democratic camp, and there were also members representing other interests. At that time, no member raised any objection except some members who asked whether the authorities had conducted any statistical analysis, and why they made the amendment so casually. At that time, no member raised any opposition, and in fact, no amendment was proposed by any member either. Therefore, I am really shocked by the Member who has just risen to request independent voting on the amendment concerned and raise his opposition at this moment. And I do not think this is advisable either. Why? The reason is that I do not have any opportunity to give detailed explanations to Members from the pan-democratic camp on the underlying rationale. In fact, the industry is well aware that the Government's amendment proposal will really increase the costs, and the additional costs will inevitably be shifted to scheme members at the end of the day. Besides, I do not think that many people will make use of this arrangement, nor do I consider the arrangement necessary. But I must point out that if this arrangement is really implemented, this possibility will arise, and the Government will be unable to stay focused.
Moreover, the Government could have proposed setting a minimum withdrawal amount because theoretically, a scheme member can withdraw $1 or $2 of his accrued benefits. But after the Government proposed to reduce the number of withdrawals from 12 to four, members thought that a minimum withdrawal amount would not be necessary any more. I would say the arrangement proposed by the Member now will really cause problems to the entire system.
LEGISLATIVE COUNCIL ─ 21 January 2015 4973
I have talked about all this out of my sincere concern about the good of the system rather than that of the operators. The legislative measure proposed by the Government actually aims to streamline the system and to avoid any costs increases. Its intention is to do good to elderly people. We do not want to torment them, still less do we want to disseminate the erroneous message to them that the withdrawal of accrued benefits is as simple as withdrawing money at an ATM. The withdrawal of accrued benefits is not that simple, as it requires the completion of an application form, the granting of approval, the verification of particulars, and also the conversion of fund units into cash. Moreover, certain risks are also involved. As conversion will be conducted every month, there are bound to be errors in the process, and such errors will cause financial loss. In addition, will flexibility drastically enhance in tandem with the definite increases in costs? I believe the answer is in the negative.
I hope Members can give prudent thoughts to the matter before making their decisions. Thank you, Chairman.
CHAIRMAN (in Cantonese): Does any other Member wish to speak?
MR SIN CHUNG-KAI (in Cantonese): Chairman, I also want to talk about this issue. I did not raise any opinions during the deliberation of the Bills Committee. Of course, my consideration at that time was that this was rather academic because the present 1.65% ― that is, given such high administrative fee, when it was time to withdraw the money, anyone could and would do so as soon as possible. Mr LEE Cheuk-yan said that there could be 12 withdrawals each year, but would anyone really queue up 12 times to withdraw the money? I believe there will be none. If the money is left in the relevant account, it will deplete by 1.65% in the first year, and by another 1.65% in the second year. Very soon, nothing will be left. To put it objectively, as the administrative fee itself is so high, it is obviously a case of negative interest rate.
However, if it is reduced to four withdrawals, will it be of great help to the retired employees? Not really. This is because to the wage earners, four withdrawals are still too many as they will withdraw it in one go. That said, why do I still consider that we should lay down 12 withdrawals in the legislation? In reality, since the administrative fee stands at 1.65%, when they can withdraw 4974 LEGISLATIVE COUNCIL ─ 21 January 2015 the money on retirement, people will prefer putting the money in bank accounts instead of the MPF accounts which is better, without having to incur the 1.65% deduction annually. Thus, this is an academic issue.
Nonetheless, there is nothing undesirable if the law allows them to withdraw the money 12 times a year. The reason is that if the Government can really introduce a centralized "core fund" one day, bringing the administrative fee down to 0.75% or 0.5%, they will be free to choose in a free market. What will those retired employees do? This may facilitate the establishment of an annuity system or provide incentives, as only one form has to be filled each month. Mr CHAN Kin-por, they just fill in a form and can make monthly withdrawals, and the process is automated. Banks should do this and the operators should do this. The retirees should only have to fill in a form and be able to withdraw $2,000 or $3,000 each month, until they reach a certain age.
Therefore, it was right in the beginning for the authorities to put down in the legislation 12 withdrawals every year. Yet, for reasons unknown, you immediately caved in when some Members made their comments. From an objective perspective, even for 12 withdrawals a year, I do not think that MPF contributors will leave the money in their accounts. They would rather take it out to speculate in stocks, or buy some relatively conservative stocks which will yield interest of a few percent. This will be better than having the money being nibbled away gradually. Thus, I consider the legislation itself as ― I will have to look at the legislation. Just as Mr CHAN Kin-por said, it depends on whether the legislation is sound. If 12 withdrawals each year is sound, MPF contributors will be induced to take their time and make monthly withdrawals in the future. Even if it is not like getting their monthly pay from the ATM, this will be a more ideal system for them to really use the money for retirement. In objective terms, if the money is withdrawn in one go, it may have been exhausted in two years. Thereafter, they have to rely on monthly Comprehensive Social Security Assistance. Under such circumstances, monthly withdrawals can help them maintain a better habit. I believe Prof CHAN may have to explain why 12 withdrawals have to be changed to four. The only reason for changing it to four is that some people in the sector have raised objection.
Moreover, I also want to tell Mr CHAN Kin-por that even if there are 12 withdrawals, there is no need to worry since no one will choose that option. When they can withdraw the money, everyone will do so immediately. They will think that four withdrawals a year are too many. Yet, if we go back to the LEGISLATIVE COUNCIL ─ 21 January 2015 4975 system, why is it not 12 withdrawals? Apart from your so-called reason, that is, operation cost, the objective reason is that the contributors are driven away and they make the withdrawal quickly due to the high operation cost. They do not want to leave the money with you. So, if you let them make 12 withdrawals and leave the money in the accounts, the operators can charge 1.65% administrative fee annually. I do not see why you do not do this. Maybe you are too kind, and call on the contributors to quickly withdraw the money when they still have it, instead of leaving it with the trustee. Why do you not come up with ways to leave it in your account? This is an objective scenario. If there are four withdrawals each year, I will also take it away quickly every time. That said, Chairman, I consider that this is an academic issue because given this basis of 1.65%, I believe the majority of the contributors will make a complete withdrawal when they can take their money out.
MR CHAN KIN-POR (in Cantonese): Chairman, I thank Mr SIN Chung-kai for telling me that I do not have to worry. But then, I am surprised to hear him insisting on having the 12 withdrawals arrangement after opining that "four withdrawals are more than enough". I cannot follow his logic.
Besides, Mr SIN Chung-kai has also mentioned about the core fund and remarked that the various fees charged by the core fund should not be more than 1%. In this connection, I wonder if Mr SIN Chung-kai is aware there are dozens of funds the fees of which are less than 1%. We having dozens of funds pitching their fees at less than 1%, but people do not choose such funds. Why is that so? This is because people focus their attention on the returns, as the rate of return is the most important consideration. What is the problem with the high administrative costs? The most important point is the positive returns of the funds. Hence, I hope he will figure out these facts before arguing with me.
Moreover, I also think they have not figured out this one point. The Government has offered the people two choices. One is reducing the number of withdrawals from 12 times to four times, and the other is specifying a minimum withdrawal amount. What is the ground on which the Government has based in persuading the fund investment and fund administration trades to give way? This is what the Government said to us: "As the authorities have reduced the number of withdrawal from 12 times to four times in respond to your request, you should not insist on specifying a minimum withdrawal amount." This is the 4976 LEGISLATIVE COUNCIL ─ 21 January 2015
Government's rationale, and people have accepted the reduction from 12 times to four times. But then, all of a sudden, Mr SIN Chung-kai says he opposes this arrangement. The biggest trouble is that he has not made clear his point in the Bills Committee. If he had said clearly that he did not agree with the arrangement, I would certainly have mobilized members of the trades to explain the case to the Democratic Party. He should let people have the chance to explain the case if he really wants to understand, but he has never given us any chance to. If any pro-democrat Members indicate their objection, I will certainly mobilize members of the trades to discuss with them.
The funds-related trades have now agreed to give way, even though the relevant proposal is not the best. Nevertheless, as the Government has at least listened to some of our views, the proposal is worthy of our support. I understand that some people consider the pro-democrat Members as the opposition, but I still believe and hold that some of them are rational Members. Nevertheless, their objection to such a reasonable arrangement to help the trades to survive really drives me mad. How do they represent the business sector? What they have said will indeed impair gravely the status of Hong Kong as an asset management centre. It was because the trustees and funds all believed in this point that they had … I have already remarked in the Bills Committee that this arrangement is good enough as everybody is happy with the Government's proposal and no objection has been raised. As he has said earlier on that there should not be any cause for concern, and that four times should be enough or even more than enough, why must he oppose this arrangement? Hence, I really cannot understand why Mr SIN Chung-kai has to insist on doing such things. If he keeps mentioning my name, I have no choice but to respond to his remarks.
MR LEE CHEUK-YAN (in Cantonese): … So I have to mention your name so that you can continue making responses, right? Well, Mr CHAN Kin-por has said just now that he wants to invite practitioners in the fund industry to talk to us. Conversely, I really would like to talk to them too. Why is the performance of MPF outdone by inflation? As the fund industry is charging excessive administrative fees, the return rate is only 1.53%, far behind the inflation rate of approximately 3%. Why is that so? It is all because the profits have been taken by the fund industry. Just now he has said he wants to spare the elderly the trouble of filling in the forms 12 times. But why must they do so 12 times? Why can they not just give one instruction for the 12 withdrawals? LEGISLATIVE COUNCIL ─ 21 January 2015 4977
Why can they not just visit the trustee once to indicate their intention to make withdrawal once a month in the forthcoming year? Why can they not do so? Is it a practice of the fund industry that instructions have to be made in 12 visits, once every month? Why can they not make an instruction in advance for the next 12 withdrawals?
We always say the MPF system is set up as we hope for retirement protection. One of the factors contributing to retirement protection is a stable life. We are therefore striving for a universal retirement fund. As no universal retirement fund has been set up yet, we hope to change the MPF system, which allows only one single withdrawal at present, to an annuity system. What is an annuity system? Such kind of products are now available in the market but they are very expensive. Can we not make some co-ordination to turn employees' contributions into something like a salary to be released on a monthly basis in future? This will save them the trouble of managing those hundreds of thousand dollars. If they make investments with the money, they may lose in the process. If they deposit the money in the bank, the savings will be nibbled away by inflation. What is the use of such kind of retirement fund which leaves the elderly or the retired employees feeling absolutely insecure? Why do we not put in place an annuity system? Okay, let us not talk about the annuity system at the moment. But now we cannot even let the people make 12 withdrawals a year and get their income on a month basis. I do not know the fund … As "the wool comes from the sheep", it should be fine when we pay more administrative fees by then. In fact, when you put everything under the administrative fees item, we have absolutely no idea how much you have earned from us. It will be wonderful if the entire fund industry is coming to corner us. I would really like to talk to them, to understand how much they have earned, to know how much profit the fund industry has made.
In theory, MPF administrative fees will keep decreasing as the fund they manage increases in size. The hundreds of billion dollars they earn every year will grow into thousands of billion dollars in 10 years. With the growth of the fund size, the administrative fees should drop as the economy of scale will lead to a reduction in administrative fees. However, it is only lowering from 2.1% to 1.7% and the decline is far too small. I really hope that the fund industry can tell us the amount of profits they have made. It is not really financial management; Hong Kong is in fact an asset management centre. The employees 4978 LEGISLATIVE COUNCIL ─ 21 January 2015 in Hong Kong are for you to piggyback on, for you fund managers to earn administrative fees. The employees feed such a group to enable them to perform other asset management. These fund managers actually take all the advantages and interests. Now I propose some small changes, very petty, but then everybody disagrees, saying that the administrative fees involved are too high.
I have to reiterate that the high administrative fees are actually a problem of the fund industry. We have all along been demanding for a reduction of such fees. I hope this will not be used as an excuse to assume that administrative fees are to be driven up by the 12 withdrawals made in a year. Honestly, how many people would opt for 12 withdrawals a year? Just like what Mr SIN Chung-kai has said a moment ago, many would not make this option as they would not trust the MPF system. You are lucky to have us continue putting our money in MPF. I am actually focusing on the system. We think that in the long run, the elderly should be allowed to withdraw money on a monthly basis instead of releasing the retirement fund to them in lump sum. It may do them a disservice if they have difficulties managing the money.
MR CHAN KIN-POR (in Cantonese): Chairman, I will surely arrange a meeting with representatives of trust companies and the fund sector so that an explanation would be made to Mr LEE Cheuk-yan and Mr SIN Chung-kai. They would be in a better position to make an informed decision only when they have grasped the facts. Just now Mr LEE Cheuk-yan said repeatedly that there would not be much left in the investment return of over 3% after deduction of the administrative fee but I would like to call on Mr LEE Cheuk-yan to get the facts straight. The investment return of over 3% is actually the net return after deduction of all costs, that is, the average rate of return after deduction of all costs. This is the point I would like to clarify to him.
What?
CHAIRMAN (in Cantonese): Members should not speak to each other in their seats.
LEGISLATIVE COUNCIL ─ 21 January 2015 4979
MR CHAN KIN-POR (in Cantonese): It is definitely not 1.5%. If I can provide him with the figures, would he promise to grant me his support?
Besides, if he really cares about the well-being of the elderly, he should never advise them to handle their retirement payments as in the case of annuity. As I have said, fund units have to be sold every time before the accrued benefits under the Scheme can be cashed and withdrawn. However, the ups and downs in an economic cycle are highly unpredictable and in the event of an economic downturn, should they be asked to turn a blind eye to the actual situation and request for withdrawal every month as usual? Should they be asked to fill out 12 request forms, one for each month, in advance regardless of the reality? This might in fact not be in their best interest to do so.
I hope he can understand that the whole thing is not as easy as it seems. There are always Members questioning the reason for not being able to do so but it actually involves a lot of difficulties when the idea is put into practice. Buddy, things are always very much easier said than done. We should appreciate and understand the many difficulties people are facing in implementing the measures proposed and refrain from making random promises, which is very wrong indeed.
Therefore, I will arrange those in the relevant sectors to meet with Members and as a matter of fact, a set of presentation materials has been prepared jointly by me and those in the relevant sectors to explain to the public that the Mandatory Provident Fund Scheme, despite its shortcomings, is not really that bad as suggested by some people. Many people are happy to see that the Government has put in place a certain kind of provident fund scheme, which has already been in operation for over 10 years. I have been told by some retired workers that thanks to the Scheme, they have at least hundreds of thousands dollars at hand, which have earned them some respect from their children. These are the feelings shared by many people in Hong Kong.
It is thus inappropriate to have the Scheme denounced as worthless. A set of presentation materials has been prepared by those in the relevant sectors to explain everything one by one. Although the set of materials is ready for release, we are now in the process of fine-tuning its contents as I would like to 4980 LEGISLATIVE COUNCIL ─ 21 January 2015 include as much information as possible. It is hoped that Members would listen attentively during the presentation to be given later and feel free to raise their questions so that all of their queries would be addressed properly.
Thank you, Chairman.
MR SIN CHUNG-KAI (in Cantonese): Chairman, as I mentioned earlier, part of the contents can respond to the question from Mr LEE Cheuk-yan concerning the amount of profits. If $550 billion is multiplied by 1.65%, it is about $9 billion. Concerning the question of profits, this can be calculated ― I am not sure whether the Secretary will look at it this way ― after this $9 billion is divided by the number of trustees, you can calculate the amount of profits. This is a question.
I now respond to the question whether four times are still too many. I have to explain the logic briefly. Since the Mandatory Provident Fund (MPF) fees and charges have been reduced from the original 2.1% to the present level of 1.65% to 1.7%, and the money that you put in the MPF will be deducted by 1.65% to 1.7% annually, when a member of the public has the opportunity to withdraw money from the MPF, he will of course put the money back into his own pocket. It is impractical to deposit money in the bank savings account, as we can only get negative percentage of interest. Hence, it is said that four times are still too many, because the operation cost, that is the so-called administrative cost, or the overall cost of MPF is high.
As I said earlier, the administrative cost is not the most important factor. The most important factor is to look at the overall rate of return. Of course, there may be an average rate of return in a period of 10-odd years. However, the rate of return is not so good last year. According to the news coverage ― I hope that the Bureau will provide the latest figures ― the inflation rate is 4.3% in 2014, while the rate of return last year seemed to be 1.53%. As I said earlier, this is lower than the inflation rate.
Chairman, in my opinion, the main difference between 12 times and four times is the provision of a choice to scheme members, whereby the scheme members have the right to choose. The question is that if there are only four times, the choice will fall into the hands of the trustees or the companies. This LEGISLATIVE COUNCIL ─ 21 January 2015 4981 will depend on whether the rights and interests of scheme members are reckoned to be more important, or whether it is the fund … In terms of the cost, if the cost is not lowered, when a scheme member has the right to withdraw his benefits, he will not put his money in the MPF.
MR LEE CHEUK-YAN (in Cantonese): Chairman, why did I speak in my seat just now? This is because the figure he referred to was incorrect, as he claimed that the rate of return of the Mandatory Provident Fund (MPF) investments stood above 3%. Actually, Mr SIN Chung-kai has made it clear earlier on that upon deducting all the expenses, the rate of return of MPF investments only stood slightly above 1%, while the inflation rate was more than 3%. Hence, in order to "defeat" inflation, the rate of investment return should be around 5.1% after deduction of various costs. The rate of return should stand above 5% to surpass the inflation rate. So, we can see how poor employees are. Their MPF investments are eaten up by not only the various costs but also inflation. This is indeed double deduction. This is the problem with the MPF system as a form of retirement protection for our wage earners.
I would certainly be happy to see him inviting a number of members of the fund-related trades to discuss with us, as we form our opinions with reasons and figures. We can all see that the various costs and fees of MPF schemes amount to $8.4 billion a year. This sum of $8.4 billion is borne by 2.7 million employees, which means that they have to pay $3,000 a year each. Do Members not consider this a huge sum? Each person has to bear $3,000 a year, and yet some employees' contributions may be quite limited, as the lower-income employees do not have to contribute much to the schemes. For an employee who contribute $1,000 a month including his employer's share, which means that the $1,000 comprises the contribution of both the employer and employee and represents, in total, 10% of his monthly income … In other words, out of the $12,000 annual contribution, $3,000 will be paid to the fund managers. Certainly, this is just an average figure, for employees contributing less to the MPF funds, say only $12,000, the administrative costs they need to pay will be less. Nevertheless, on average, the administrative personnel are getting $3,000 from each wage earner. Just imagine, if each wage earner has to pay someone $3,000, that person should really be able to offer many different services.
4982 LEGISLATIVE COUNCIL ─ 21 January 2015
One last point I would like to make is that he seems to be very much opposed to the annuity system. According to his concept, each withdrawal will inevitably involve a transaction. But then, why do we not give thoughts to this: we should have in place a product entitled "annuity". I thought the insurance sector would know about this, I thought they knew about the product "annuity". Unlike what he has said earlier, this annuity product does not involve a transaction or investment when a withdrawal is made. Instead, it has a plan to manage the fund and allow employees to receive annuity. Is this not a good idea? I have pointed out to Anna WU, the Chairman of the Mandatory Provident Fund Schemes Authority, that the MPF system should develop annuity products, so as to provide employees with one more option. If an employee's MPF account operates in the form of annuity, he will know how much he can get each month after 20 years. Why should we not try this idea out? She said the proposal was good and worthy of consideration. But then, I did not know the sector was so opposed to the annuity. Perhaps a lot of transaction cost will be involved, but I still think we should take this product into consideration.
MR CHAN KIN-POR (in Cantonese): Chairman, may I put forward a request? I truly believe that Mr LEE Cheuk-yan's elaboration is wrong. The approximate average rate of return for funds under the Mandatory Provident Fund Scheme over a 10-year period is over 3%, while the average inflation rate over the same period is over 1%. He has confused the two and drawn a completely different conclusion. By saying that the average rate of return for funds under the Scheme is over 1% while the average inflation rate is over 3%, he has concluded that the investment return failed to catch up with inflation but this is a misinterpretation of the basic facts. I wonder if it is possible for the Secretary to provide us with the relevant figures in this respect.
CHAIRMAN (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, since Mr CHAN Kin-por has requested, I will clarify. Actually, I have quoted the pertinent figures in my earlier speech: From the year LEGISLATIVE COUNCIL ─ 21 January 2015 4983
2000 to November 2014, the average return of MPF upon deduction of fees was 4.2%, while inflation stood at 1.8%.
I would like to comment on this amendment. I wish to reiterate that it is after careful consideration of the opinions of the Bills Committee, the industry and the related organizations (such as the Consumer Council), and after referring to the findings of the public consultation that the Government is tabling this amendment. As we are aware, compared to the existing arrangement of only allowing scheme members to withdraw all accrued benefits in one go on retirement, the amendment has enhanced the flexibility in this respect. At the same time, it has also maintained the efficiency and cost-effectiveness of the entire regime. The new arrangement will facilitate scheme members in managing their savings for retirement to meet their living needs upon retirement.
Increasing the number of withdrawals will push up administrative cost, and the extra cost may have to be shouldered by members of all schemes. Thus, we reiterate the need to maintain a relatively simple and effective framework for the withdrawal of accrued benefits to lower the administrative cost as far as possible.
Let me reiterate again: The Mandatory Provident Fund Schemes Authority will closely monitor the operation of the new arrangement and the trustee fees. It will continue to optimize this regime and further protect the interests of the scheme members.
MR CHAN KIN-POR (in Cantonese): Chairman, the Secretary has made a clarification and I hope Mr LEE Cheuk-yan can understand that the 10-year average return of MPF actually was some 4% after administrative fees, while the inflation rate during the same period was some 1%. Therefore, the return of MPF was definitely higher than the inflation rate and it is quite a good system.
Moreover, I would like to briefly explain the concept of annuity. Under an annuity system, an insurance company takes a sum of money from its client and, after calculation, inform him the amount he is going to receive on a monthly basis. Policy holders will be spared from the exchange risk involved as it will be borne by the insurance company. I hope he can understand that this is different from the MPF system in which scheme members bear the risks involved in exchange or in fund resale. The two are different and cannot be understood in the same way. I absolutely support the annuity system but different products are meant for different people.
4984 LEGISLATIVE COUNCIL ─ 21 January 2015
MR LEE CHEUK-YAN (in Cantonese): Chairman, a colleague has said earlier that I was quoting figures from the past 10 years. I must make a clarification on this lest people are going to think that the figures I cited in my speech were wrong. What I have quoted were the statistics for the past one year, in 2014 in other words. Recent press reports have also indicated the annual return of the MPF was merely some 1% while the inflation rate exceeded 3%. So, what I have said did not refer to the situation in the last 10 years but what he has said was the performance of MPF in the previous decade. In fact, we all know that the performance of MPF has been on a roller coaster in the last decade. The low return rate facing us now is in fact the third such occurrence over the last 10 years. Therefore, a person will suffer miserably if he unfortunately has to cease investment during a low return period. If he has to withdraw the contribution in the year with the lowest return, he is going to lose his hard-earned money heavily, as much of it will go down the drain.
Of course, the system currently proposed does not require people to make an immediate withdrawal ― I would like to explain this further to the people ― the advantage with deferred withdrawal is that if the return is particularly low in a certain year, you may like not to make a withdrawal, but perhaps opt for 12 free withdrawals like what we have mentioned a moment ago, wait for a better return period before selling the fund finally. Hence, the arrangement allows flexibility and we of course are going to support it as this is the objective of the whole plan. But, I would like to clarify that the figures I quoted just now referred to the situation over the past one year.
MR CHAN KIN-POR (in Cantonese): Chairman, since investments, especially the MPF investments, involve long-term arrangements, I think we should focus on their performance in the long run rather than over one or two years only. In my view, if we can base on an average figure for the past 10 years, our depiction of the MPF can be more accurate, and our judgment can likewise be fairer.
CHAIRMAN (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
LEGISLATIVE COUNCIL ─ 21 January 2015 4985
CHAIRMAN (in Cantonese): Secretary for Financial Services and the Treasury, do you need to speak again?
(The Secretary for Financial Services and the Treasury indicated that he did not need to speak)
CHAIRMAN (in Cantonese): As a Member has requested independent voting on the amendment to clause 25, we will first proceed to vote on the amendments to clauses 7, 11, 22, 49, 51 and 55.
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by the Secretary for Financial Services and the Treasury to clauses 7, 11, 22, 49, 51 and 55 be passed. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the amendments passed.
CLERK (in Cantonese): Clauses 7, 11, 22, 49, 51 and 55 as amended.
CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 7, 11, 22, 49, 51 and 55 as amended stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
4986 LEGISLATIVE COUNCIL ─ 21 January 2015
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendment moved by the Secretary for Financial Services and the Treasury to clause 25 be passed. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(Members raised their hands)
Mr LEE Cheuk-yan rose to claim a division.
CHAIRMAN (in Cantonese): Mr LEE Cheuk-yan has claimed a division. The division bell will ring for five minutes.
CHAIRMAN (in Cantonese): Will Members please proceed to vote.
CHAIRMAN (in Cantonese): Will Members please check their votes. If there are no queries, voting shall now stop and the result will be displayed.
Mr CHAN Kam-lam, Mr TAM Yiu-chung, Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Vincent FANG, Prof Joseph LEE, Mr Jeffrey LAM, Mr Andrew LEUNG, Mr WONG Ting-kwong, Mr CHAN Hak-kan, Mr CHAN Kin-por, Dr Priscilla LEUNG, Dr LEUNG Ka-lau, Mr IP Kwok-him, Mrs Regina IP, LEGISLATIVE COUNCIL ─ 21 January 2015 4987
Mr Michael TIEN, Mr James TIEN, Mr NG Leung-sing, Mr Steven HO, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Mr Christopher CHEUNG, Dr Elizabeth QUAT, Mr Martin LIAO, Dr CHIANG Lai-wan, Ir Dr LO Wai-kwok, Mr CHUNG Kwok-pan and Mr Tony TSE voted for the amendment.
Mr Albert HO, Mr LEE Cheuk-yan, Mr James TO, Mr LEUNG Yiu-chung, Ms Emily LAU, Mr Frederick FUNG, Mr WONG Kwok-hing, Mr Ronny TONG, Ms Cyd HO, Mr WONG Kwok-kin, Mr Alan LEONG, Mr LEUNG Kwok-hung, Mr Albert CHAN, Ms Claudia MO, Mr WU Chi-wai, Mr Gary FAN, Mr Charles Peter MOK, Mr CHAN Chi-chuen, Dr Kenneth CHAN, Mr Kenneth LEUNG, Miss Alice MAK, Dr KWOK Ka-ki, Mr KWOK Wai-keung, Mr Dennis KWOK, Dr Fernando CHEUNG, Mr SIN Chung-kai, Dr Helena WONG, Mr IP Kin-yuen and Mr POON Siu-ping voted against the amendment.
THE CHAIRMAN, Mr Jasper TSANG, did not cast any vote.
THE CHAIRMAN announced that there were 61 Members present, 31 were in favour of the amendment and 29 against it. Since the question was agreed by a majority of the Members present, he therefore declared that the amendment was passed.
(A number of Members talked aloud)
CHAIRMAN (in Cantonese): Will Members please keep quiet.
CLERK (in Cantonese): Clause 25 as amended.
CHAIRMAN (in Cantonese): I now put the question to you and that is: That clause 25 as amended stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
4988 LEGISLATIVE COUNCIL ─ 21 January 2015
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): New clause 26A Section 42AA added
New clause 27A Section 67A added
New part heading Part 8 before new clause 58 Transitional and Savings
New clause 58 Transitional and savings.
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move the Second Reading of the new clauses and new part heading read out just now. The relevant content has been set out in the paper circulated to Members.
The new clauses, as transitional and savings provisions, help to elaborate the applicability and operation of the relevant provisions before and after the commencement.
The new clauses will not cause any change to the content of the Bill. The Bills Committee raises no objection to the addition of the new clauses.
I urge Members to support the passage of adding the relevant clauses. Chairman, I so submit.
CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the new clauses 26A, 27A and 58, and new part heading before new clause 58 be read the Second time.
LEGISLATIVE COUNCIL ─ 21 January 2015 4989
CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): New clauses 26A, 27A and 58, and new part heading before new clause 58.
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Chairman, I move that the new clauses and new part heading read out just now be added to the Bill.
Proposed additions
New clause 26A (see Annex I)
New clause 27A (see Annex I)
New clause 58 (see Annex I)
New part heading before new clause 58 (see Annex I)
4990 LEGISLATIVE COUNCIL ─ 21 January 2015
CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the new clauses 26A, 27A and 58, and new part heading before new clause 58 be added to the Bill.
CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CHAIRMAN (in Cantonese): Council now resumes.
Council then resumed.
Third Reading of Bills
PRESIDENT (in Cantonese): Bill: Third Reading.
MANDATORY PROVIDENT FUND SCHEMES (AMENDMENT) BILL 2014
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, the
Mandatory Provident Fund Schemes (Amendment) Bill 2014 has passed through Committee with amendments. I move that this Bill be read the Third time and do pass.
LEGISLATIVE COUNCIL ─ 21 January 2015 4991
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Mandatory Provident Fund Schemes (Amendment) Bill 2014 be read the Third time and do pass.
Does any Member wish to speak?
(No Member indicated a wish to speak)
PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
PRESIDENT (in Cantonese): Those against please raise their hands.
(No hands raised)
PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Mandatory Provident Fund Schemes (Amendment) Bill 2014.
Resumption of Second Reading Debate on Bills
PRESIDENT (in Cantonese): We now resume the Second Reading debate on the Pharmacy and Poisons (Amendment) Bill 2014.
PHARMACY AND POISONS (AMENDMENT) BILL 2014
Resumption of debate on Second Reading which was moved on 26 March 2014
PRESIDENT (in Cantonese): Prof Joseph LEE, Chairman of the Bills Committee on the above Bill, will address the Council on the Committee's Report.
4992 LEGISLATIVE COUNCIL ─ 21 January 2015
PROF JOSEPH LEE (in Cantonese): President, in my capacity as the Chairman of the Bills Committee on Pharmacy and Poisons (Amendment) Bill 2014 (the Bills Committee), I now report on the major deliberations of the Bills Committee.
The Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) seeks to amend the Pharmacy and Poisons Ordinance and the relevant subsidiary legislation to implement certain amendment proposals put forth by the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) in 2009, so as to enhance the monitoring of pharmaceutical products. The Bills Committee has held nine meetings all together to discuss the Bill with the Administration and to receive deputations' views. In the following part of my speech, I will report concisely on those issues of particular concern to members.
The first issue concerns the empowerment of the Pharmacy and Poisons Board (the Board) to promulgate various codes. The Bills Committee noted the Bill's proposal of empowering the Board to promulgate the relevant code of conduct and codes of practice (CoPs) for providing guidance to registered pharmacists and drug traders. Non-compliance by registered pharmacists or drug traders may lead to disciplinary actions. Holding the view that the proposal would provide the Board with too much power, some members were also concerned about whether the authorities were trying to circumvent the scrutiny of the Legislative Council by implementing the requirements through administrative means.
The Administration replied that at present, three individual sets of Codes of Ethics were promulgated by the pharmacist associations to govern the professional conduct of their members. While the Board already introduced the Code of Practice for Authorized Seller of Poisons in 1997, it carried no legal status. There were currently no CoPs for other drug traders. Therefore, the authorities considered it necessary to empower the Board through the Bill with the flexibility to draw up and revise the relevant codes with regard to local circumstances and changes. The authorities opined that this was an appropriate arrangement, adding that the Board already carried out sufficient consultation with the industry when formulating or revising the relevant codes.
The second issue concerns the proposed requirement of placing drug orders in written form. Members were concerned about the possible impact on the trade caused by the authorities' proposal on adding the requirement to place drug LEGISLATIVE COUNCIL ─ 21 January 2015 4993 orders in written form to the relevant CoPs for licensed drug traders. The Bills Committee noted that while the proposal was supported by patient groups and licensed drug traders, the Hong Kong Doctors Union all along held strong opposing view to the requirement. A member opined that the keeping of the drug suppliers' delivery notes by the medical clinics could serve the same purpose of tracing the source of drugs.
The authorities replied that the Hong Kong Medical Association already recommended in its Good Dispensing Practice Manual that the ordering of drugs should be made in writing via post or fax by the doctor concerned, and that the written orders should be kept for verification upon delivery of the drugs and for future reference. The authorities proposed that in addition to mail and fax, various kinds of retainable electronic records such as emails and textual messages were also acceptable means of placing drug orders in written form. To facilitate the trade to adapt to the requirement, the requirement would be implemented by phases. Many drug suppliers already designed standard procurement forms to save their clients' efforts. Drug distributors likewise said that a written order as compared to a verbal order would not cause a delay in the delivery of drugs.
The third issue concerns the qualification requirement of authorized persons (APs). The Bills Committee noted that any person who was not a registered pharmacist could act as an AP of a licensed manufacturer if he held a qualification awarded on completion of a course recognized by the Pharmacy and Poisons (Manufacturers Licensing) Committee and had three or more years of experience in the pharmaceutical product manufacturing or quality control in compliance with the Good Manufacturing Practice Guide. The Bills Committee had detailed discussions on how the competence of APs could be ensured.
The Administration stressed that given the diversified and complicated nature of the manufacturing of pharmaceutical products, various scientific considerations were involved in the course of manufacturing. Hence, the qualification requirements for APs also needed to be diversified, but being a registered pharmacist remained to be one of the qualifications required for registration as an AP. The proposal was in line with international practice, such as the relevant requirement of the European Union.
The fourth issue is about the regulatory framework for registered pharmacists. Some members were of the view that the regulatory power of the Board, which covered pharmaceutical products, drug traders and pharmacists, 4994 LEGISLATIVE COUNCIL ─ 21 January 2015 was too extensive. Holding the view that the standard of practice and professional conduct of registered pharmacists should best be left to self-regulation by the profession, they requested the Administration to establish a separate statutory body to take over the existing function of the Board for regulating registered pharmacists.
The Administration explained that the main purpose of the Bill was to implement certain recommendations put forth by the Review Committee. The Government already set up a Steering Committee on Strategic Review on Healthcare Manpower Planning and Professional Development (the Steering Committee) to formulate recommendations on, among others, the long-term professional development of the 13 healthcare professions subject to statutory regulation. The Pharmacists Sub-group under the Steering Committee would study the suggestion for establishing a separate regulatory body for registered pharmacists in due course.
The Bills Committee has also held thorough discussions on the following issues: The definition of authorized seller of poisons; the definitions of pharmaceutical product and medicine; the proposal on recovering conviction-related expenses from convicted drug traders; amendments to the Good Manufacturing Practice Guide; public inspection of various registers and codes free-of-charge; and the proposed requirement of keeping samples of finished pharmaceutical products. As the discussion contents have been set out in the Bills Committee's report, I am not prepared to go into the details.
President, the Bills Committee has no objection to the Administration's Committee stage amendments later on.
President, the following are my own views on the Bill.
President, having heard how I stammered when reading out my speech just now, you may already know that the Bill is highly technical and complicated.
As I said a moment ago, the Bill actually originates from the incident involving "mouldy medicine" back in 2009. Subsequently, the Review Committee was set up and it put forth 75 recommendations, 16 of which involve legislative amendment. The original intent of the authorities is commendable, but some legislative amendment proposals have touched on certain sensitive issues and practical operation of the industry. For example, as I said just now, it LEGISLATIVE COUNCIL ─ 21 January 2015 4995 was originally a common practice of the industry to place orders for drugs over the phone, but after the law is amended, written records must be kept. Some practitioners in the industry pointed out during the discussion that this new practice was relatively complicated. Because of the divergent views, the number meetings of the Bills Committee increased substantially.
As I represent the industry, I am obligated to relay another concern of theirs. The Bill seeks to implement 16 legislative amendment proposals in the report of the Review Committee set up in 2009. However, it has not responded to a long-standing concern of the industry about setting up respective regulatory frameworks for registered pharmacists and drugs.
Over the last couple of decades, the industry has repeatedly complained that the Board regulates both drugs and registered pharmacists, and the regulatory regime itself is very complicated. I hope that the Steering Committee can examine in its future review the view that separate regulatory frameworks should be set up for registered pharmacists and drugs respectively, and they should not be complicated as the present regime, in order to honour the Secretary's undertaking given at the meeting of the Bills Committee. This is also a consensus of the industry. I hope the Government can honour its undertaking and materialize this proposal.
As a number of amendments are technical in nature, I am not going to explain in detail.
I hope Members can support the Bill. Thank you, President.
MR CHAN HAN-PAN (in Cantonese): President, the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) tabled by the Government aims at strengthening the existing regulation of drug safety in Hong Kong, and to establish a more comprehensive regime for the regulation of medicine for Hong Kong. The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) considers that the Bill is conducive to upgrading the level of Hong Kong's pharmaceutical industry and safeguarding the safety of people when they have to use medicine. In this connection, the DAB supports the Bill.
Just as the Chairman of the Bills Committee said earlier, the Bill stemmed from a number of medicine-related accidents which happened in Hong Kong during 2009, such as the Europharm incident that led to the death of eight 4996 LEGISLATIVE COUNCIL ─ 21 January 2015 patients. In March 2009, the Government set up the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) which put forth 75 recommendations on improvements. The authorities accepted the Review Committee's recommendations, but some of them require legislative amendments before they could be implemented. Thus, the Government tabled the Bill. It focuses mainly on the five areas which I will discuss as follows.
First, some organizations have asked the Government to set up an independent authority to monitor pharmacists. As the Chairman of the Bills Committee said earlier, they do so because at present the Pharmacy and Poisons Board (the Board) seems to be deciding the fate of all practising pharmacists as it alone is responsible for all the functions of licensing, drawing up codes of practice and law enforcement. This is not an appropriate regime. Some organizations even doubt that basically Hong Kong's relevant regime at present does not aim at drug safety but at facilitating law enforcement instead.
In response to the above opinion, the Government explained to the Chairman of the Bills Committee in May 2014 that the recommendation would be followed up by the Pharmacists Sub-group under the Steering Committee on Strategic Review on Healthcare Manpower Planning and Professional Development (the Steering Committee). The Government also stressed repeatedly that the purpose of this amendment was to implement the improvement recommendations put forward by the Steering Committee. It said that the legislative progress should not be affected by other issues. We accepted this explanation.
Second, the Bill empowers the Board to issue codes of practice or code of conduct. However, some organizations oppose the practice that codes are to be promulgated by the Board as they think that the Board can revise the codes at any time without having to go through the legislative procedure of the Legislative Council. Moreover, they say that members on the Board are not representative enough. They think that representatives of the industry should be included to ensure that the industry will be more extensively consulted on the codes to be issued by the Board.
The Government also points out that it is common practice at the moment for the authorities concerned to be empowered by legislation to issue codes of practice. For example, the Broadcasting Ordinance provides for similar LEGISLATIVE COUNCIL ─ 21 January 2015 4997 arrangement. The Government reiterates over and again that the Board should ensure its independence, and the inclusion of too many stakeholders would be unfavourable to the establishment of the regime. At present, 11 members sit on the Board, including two pharmacy professors nominated by universities, and the industry can also nominate three pharmacists. Furthermore, the Government says that currently, consultation conducted during the drawing up of codes is very extensive, the related information can also be accessed by the public, and participants include 40 organizations from different sectors. In general, the DAB agrees that members on the Board are representative, but at the same time, we hope that there can be voices representing the business environment on the Board for the SMEs to express their opinions.
Third, the Bill also states that licensed manufacturers must employ at least one "authorized person" (AP). The purpose of this is to enhance the regulation of drug manufacturing so as to ensure that each batch of pharmaceutical products manufactured by the manufacturer is in compliance with the GMP Guidelines. However, some organizations say that if the Bill is passed, the function of gatekeeping on drug manufacturing will be shifted from the registered pharmacists to people holding relevant degrees, as if Hong Kong were taking its own initiative to lower its monitoring level for drug manufacturing.
In response, the Government points out that given the complexity in drug production, the process of drug manufacturing involves various scientific considerations. Registered pharmacists, whose expertise is very often of a broader nature, may not be able to understand the details of the entire drug manufacturing process. This has given rise to the AP system. For the purpose of this system, reference has been made to the pertinent rules of the European Union, which provide that people with the qualification of relevant scientific subjects and relevant qualifications can act as APs. Thus, the authorities consider that the newly revised AP system is sufficient to ensure the quality of the products of local drug companies. The system can also enable Hong Kong to implement GMP more effectively.
Fourth, the law requires that all poisons in Part I of the Poisons List stored in retail outlets be kept in locked containers and placed in areas not accessible to customers, with the keys kept by registered pharmacists. Some organizations worry that if the keys are placed in the hands of employed pharmacists, this may cause a conflict in roles with the owners when interests are involved. 4998 LEGISLATIVE COUNCIL ─ 21 January 2015
Furthermore, since the right to own regulated drugs rests with the employers instead of the employees, such a practice is like stripping the owners of these goods of some of their ownership right.
In fact, no changes have ever been made to this provision. In response, the Government has also pointed out that authorized sellers of poisons have the statutory responsibility to ensure that all drugs in Part I of the Poisons List will only be sold by registered pharmacists or in their presence under their supervision. Therefore, when the seller breaches the condition of registration, the employed pharmacist will not be held responsible. Moreover, if the seller/owner has to use the poisons, he can also ask the registered pharmacist concerned to open the container. As such, this restriction will not constitute an act of stripping someone of his assets. At the same time, when the Bill was about to come under the scrutiny of the Bills Committee, the DAB had over and again come into contact with the industry to study the issue regarding the premises of the authorized sellers of poisons. The Government regulates the premises by way of codes of practice, which is not restricted by the Bill.
Last, I would like to mention that based on the recommendations of the Review Committee, the purpose of including in the codes of practice the requirement that licensed drug traders can only accept the placing of drug orders in written form is to establish a complete set of transaction record for drugs. This will facilitate the tracing of the source of drugs and minimize errors in the ordering of drugs. The public will thus be provided with the best protection. Moreover, the placing of orders in written form can also help crack down on illegal drug sales. At the same time, the Government has also taken into consideration the industry's concern about ordering drugs in written form. It has therefore allowed the use of emails, fax and mail as acceptable means to place drug orders in written form.
Overall speaking, the main purpose of the Bill is to enhance the level and requirement of Hong Kong's pharmaceutical industry so as to assist the Government to regulate the industry more effectively and safeguard the safety of the public in the use of medicine. After balancing the interests of the drug manufacturing industry, the sales industry and the public, the DAB supports the motion.
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MISS ALICE MAK (in Cantonese): President, I speak in support of the passage of the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) and the amendments proposed by the Administration.
First of all, I have to thank Prof Joseph LEE, Chairman of the Bills Committee, for his guidance and co-ordination in the course of deliberation of the Bill during these eight months. My thanks go also to the officials of the Administration for their efforts and co-operation, so that this very important amendment to the Ordinance concerning patient safety in the use of medicine can be smoothly accomplished eventually. I hope that the Bill and the related amendments can be passed smoothly in due course so that the patients and the organizations showing concern to patients' rights and interests can heave a sigh of relief.
As mentioned by Prof Joseph LEE or Mr CHAN Han-pan earlier, many people who are concerned about this amendment to the Ordinance would know that this amendment is originated from a series of incidents involving the safety of pharmaceutical products in 2009, in which tens of thousands of patients were affected and a number of deaths among them were resulted directly or indirectly. In order to prevent reoccurrence of similar incidents, the authorities have set up the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) to conduct a comprehensive review on the existing regime for regulating pharmaceutical products and recommend improvement measures. This amendment to the Ordinance is based on the 75 recommendations on improvement measures made in a report by the Review Committee, and among them, 16 recommendations require amendments to the existing legislation. Hence basically, the amendment proposed this time is well-founded. This can also provide better protection to the public and patient safety in the use of medicine.
During the long deliberation process, we have held public hearings and listened to the views of many different stakeholders through various channels. We have meetings with a lot of groups and organizations, including organizations formed by pharmacists, representatives of trade associations, and patient groups. Among them, representatives of the pharmaceutical sector are especially concerned about the amendment to empower the Pharmacy and Poisons Board (the Board) to promulgate corresponding code of conduct and codes of practice, as they think that this amendment will provide the Board with too much power. The Bills Committee has thus spent a long period of time discussing the views 5000 LEGISLATIVE COUNCIL ─ 21 January 2015 concerned. For instance, regarding the proposal that placing drug orders in written form should be added to the relevant codes of practice, we have spent a few months discussing back and forth.
I actually very much support the proposal that drug orders should be made in written form. Of course, we also understand that the proposal concerned will bring inconvenience to the drug traders or private doctors, particularly when this may change their daily operational pattern. However, we have to point out that when compared to the inconvenience to the drug traders or private doctors, safety of patients and the public in the use of medicine must be given top priority. In fact, the proposed requirement will prevent errors from spoken communication between drug traders and purchasers. This can greatly reduce the possibility of errors in the use of medicine and can step up protection of patient safety in the use of medicine.
On the other hand, when an unfortunate drug incident happens, especially when the patients are affected by errors in dispensing of drugs, the requirement that drug orders should be placed in written form will become the most effective tracing mechanism as we can know which party has made a mistake. With the black and white written evidence, the persons concerned cannot shirk their responsibility while the patients can also ascertain where the responsibility lies. Therefore, under the major principle that patients' safety in the use of medicine should be ensured, I support that the requirement to place drug orders in written form be added to the relevant codes of practice.
Of course, apart from the requirement that drug orders be placed in written form, or the code of conduct and codes of practice, the organizations and other Members have also brought out many different areas of concern such as the definition of pharmaceutical products, recovery of conviction-related expenses and qualification requirement of authorized persons. On these areas, we have spent a lot of time to discuss. During the course of deliberation, an organization even indicated the wish to shelve the deliberation of the Bill. This has actually reflected to a certain extent that there is still room for improvement in the communication between the authorities and the pharmaceutical sector, as well as in the preliminary stage of consultation work on drafting of the Bill. In fact, since the completion of the report by the Review Committee in 2009 till now, from drafting of the entire Bill to the deliberation process at the later stage, our LEGISLATIVE COUNCIL ─ 21 January 2015 5001 feeling is that this has been procrastinated for too long. The long period of time taken, coupled with the imperfect communication work, has naturally aggravated the sector's worries and created much repercussion from the sector.
We have particularly noticed that the pharmaceutical sector (especially the Hong Kong Pharmacists Union) has many different views towards the Bill as many amendments in the Bill involve the professional development of pharmacists and their daily operation in future. We understand this. In fact, in the course of deliberation, representatives of pharmacists have actively expressed the opinions of the sector to our colleagues and Members, and have, in the capacity of professionals, provided a lot of useful opinions and information. These have made much contribution to the deliberation of the Bill.
Apart from the pharmaceutical sector, on the other hand, a number of patient groups have relayed to us their hope for the Bills Committee to complete deliberation and passage of the Bill as soon as possible, so as to step up protection of patient safety in the use of medicine and prevent procrastination. Nevertheless, we cannot finish the deliberation casually with an attitude that aims at rounding up the matters in the quickest way. After all, part of the proposals in the amendments will surely affect the long-term development of the pharmaceutical sector. Hence, although the deliberation process is slow, I believe not a few Members also think that we are shouldering a heavy responsibility in the development of the pharmaceutical sector and patient safety in the use of medicine.
Although there may be inadequacy in the preliminary consultation work, we believe that in the course of deliberation on the Bill, the government officials have already put in great efforts in co-ordinating the views of various sectors and dealing with those views seriously. For instance, the Review Committee has suggested requiring the authorized dealer of poisons (that is drug retail shop such as pharmacy) to have a registered pharmacist at the scene at any time of the business hours. In fact, the sector is strongly against this suggestion because the manpower supply of pharmacists in Hong Kong is very limited and the requirement concerned cannot be implemented. The authorities have eventually accepted the opinions concerned and given up the incorporation of the suggestion concerned in the Bill at this stage. In this regard, we see that the officials are not hard-selling. They also want to accomplish the task and work on the regulation of drug safety. Of course, another opinion is that the Government has given in 5002 LEGISLATIVE COUNCIL ─ 21 January 2015 to the sector. We hope the Administration can, after the passage of the Bill, review the development of the sector and review the regulations concerned in due course from the perspective of patient safety.
In the future, we will keep showing concern for drug safety and the long-term development of the pharmaceutical sector. We hope that the departments concerned can maintain its attitude in responding to the sector seriously. The most important issue in future is to strengthen communication with the sector, particularly when the code of conduct and codes of practice have to be formulated and amended, and even when the composition of the Authority is to be reviewed in future, as there will surely be divergent views. I hope that the Bureau can then consult the sector earlier, communicate and co-ordinate with the sector seriously to allay its concerns with the best efforts, with a view to assisting the pharmaceutical sector to have a sustainable and healthy development, and working together to enhance drug safety in Hong Kong.
With these remarks, I support the passage of the Bill.
DR LEUNG KA-LAU (in Cantonese): President, as Members are repeatedly talking about the issue of placing drug orders in written form, I would also like to say a few words about it. During the scrutiny of the Bill by the Bills Committee, we had a lot of arguments about the requirement that drug orders should be placed in written form and much time had been spent on the discussion of the measure but frankly speaking, I do not quite understand why we had to dwell on such a lengthy argument.
First of all, the requirement that drug orders should be placed in written form does not target at doctors. Instead, it targets at drug traders, who are required to obtain orders in writing issued by doctors. Second, the requirement has not been included in the Bill at all but is said to be a measure to be stipulated in the relevant codes of practice for the compliance by drug traders. Therefore, despite this endless argument, neither those in favour nor those against the proposal were able to introduce any amendment during deliberation of the Bill to alter the practice of placing drug orders in written form. Subsequently, if the Government considers it not necessary to do so and drug traders are not required by the Pharmacy and Poisons Board to obtain orders in writing, there will not be LEGISLATIVE COUNCIL ─ 21 January 2015 5003 the need to place drug orders in written form. Such being the case, I do not know why the requirement should become a matter of dispute over and over again during the deliberations on the Bill.
As for whether drug safety would be enhanced with the requirement that drug orders should be placed in written form, we have to make a few points clear. A doctors' association is strongly against the proposal but another one, on the contrary, very much supports the idea. I have liaised with both parties and told the one against the proposal that it would be very convenient to place drug orders in written form since this could be done by fax or by other accepted means. As a matter of fact, I am not sure if drug orders from my medical clinic are placed in written form since the job has been taken care of by nurses and a doctor's signature is not required, except a confirmation by affixing a stamp of the clinic. I have also asked the party in favour of the proposal for the reason why it supports the idea and whether drug safety would really be enhanced. However, it could not cite any specific example to illustrate its views because the quantity of drugs actually delivered to medical clinics could be different from that listed on the original orders, though they may be placed in written form. The discrepancy may be attributed to insufficient stock for the drugs ordered and the actual quantity of drugs delivered will thus be set out in the delivery notes, which have to be signed, received and stamped when drugs are delivered to the relevant medical clinics. If there are any irregularities, it would not be possible to trace the origin of the problem by referring only to the written drug orders.
About combating illegal drug dealing, it seems that focus is on the possibility that the drugs ordered may be missing or being resold in private. Nevertheless, the actual quantity of drugs delivered and received has already been confirmed in the relevant delivery notes, which should serve as the most accurate records and it seems that the quantity as set out on drug orders should have nothing to do with the problem.
I do not know if the Government has made concession to such concerns or it has always been its intention to, by requiring the placing of drug orders "in written form", allow the ordering of drugs by fax and by written forms. Yet, if the figure "5.0" marked on an order form has turned out to be "50" on its faxed copy due to a faded decimal point in the figure, will drug safety be affected? What I am talking about is not the possibility of enhancing drug safety but whether drug safety will be affected. It appears to me that the answer should be 5004 LEGISLATIVE COUNCIL ─ 21 January 2015 in the negative because for things marked on a faxed copy, it is very easy for us to get them wrong. If drug orders are placed verbally, audio recordings of the process can be made as in the case of our speeches delivered in this Council, which are also not in written form but are audio recorded. Thus, why would there be any ambiguity? Therefore, the discussion on the placing of drug orders in written form, including what I have said, is in fact a waste of time.
Thank you, President.
DR KWOK KA-KI (in Cantonese): President, the Civic Party supports the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill).
In regard to this Bill, I can only say that this comes too late. Hong Kong people should still remember that in 2009, a series of incidents involving unsafe and unregistered drug manufacturers happened. They included fungal contamination of diuretic drug manufactured by Vickmans Laboratories Limited, pharmaceutical products supplied by Luen Cheong Hong Limited not matching with the declaration in label, two cases of sale of unregistered pharmaceutical products by Novartis Pharmaceuticals Limited, the sale of unlicensed packaging of pharmaceutical products by Unipharm Trading Company, sale of five types of unregistered pharmaceutical products by Main Life Corporation Limited, failure to recall drugs which had failed stability testing by Marching Pharmaceutical Limited, the sale of some fungal contaminated pharmaceutical products by the Europharm Laboratories Limited, the sale of unregistered pharmaceutical products by the Mentholatum Company, the supply of unregistered pharmaceutical products to the Hospital Authority by Christo Pharmaceuticals Limited, and the sale of unregistered pharmaceutical products by Deltapharm Limited. But this is only the tip of an iceberg.
Secondly, many people know and the media frequently report that at present, when an ordinary citizen walks into a pharmacy in the street and tells the dispenser ― I believe that many dispensers are not pharmacists ― some symptoms but without a doctor's prescription, the dispenser can easily provide the citizen with dangerous drugs of Category 1. Some people actually should not take these medicines. They may have serious allergic reactions to some medicines; or these patients may already have some latent diseases, including diabetes, high blood pressure, nephrosis or others; or these patients may have LEGISLATIVE COUNCIL ─ 21 January 2015 5005 taken other medicine. They will have to bear great risk when taking such medicine whose sale is not subject to regulation, and tragedies may even emerge. Therefore, in correspondence to some incidents involving pharmaceutical products since 2009 and even before 2009, or to the continuous sale of some dangerous drugs by the pharmacies, the Government ― as we all know, some young people can purchase cough syrup, tranquilizers, and even psychiatric drugs in the pharmacies in the street. This is very common.
Can the Government plug the loopholes in its insufficient supervision of drugs? Although I support this amendment, I do not have enough confidence. It is obvious that this amendment alone cannot make any change to the incidents already happened, especially the situations happening in pharmacies. More than once, we have requested that the Government should step up supervision on pharmacies in the community, including stepping up inspection and sting operations, taking sufficient prosecutions, or requiring some pharmacies to have on-site pharmacists during their business hours, to ensure safety in drug dispensing. In fact, these are not new ideas. In the Bills Committee, some related organizations have also been asked to provide their views.
I notice that the Schools of Pharmacy of the two universities share the same view with the Civic Party. We reckon that the Government should step up monitoring, require community pharmacies to have on-site pharmacists, and regulate dangerous drugs. However, it is a pity that this has not been attained yet, as we can see in this Bill. I hope that the Secretary can explain in his speech later on why the Government does not do that, and if it is not the right time now, when it will take action.
There are four parts in this amendment, including overall regulation, regulating manufacturers, regulating importers and wholesalers, as well as regulating retailers. In overall regulation, the Bill has made reference to the definitions set by the European Union to amend the definitions of pharmaceutical product and medicine in the Pharmacy and Poisons Ordinance. As such, the term covers the "combination of substances presented as having properties for treating or preventing disease in human beings or animals". The Good Manufacturing Practice (GMP) standard of the World Health Organization that we now adopt is rather outdated. If we refer to the standard of the European Union, which is higher than ours, we will think there are chances to enhance the 5006 LEGISLATIVE COUNCIL ─ 21 January 2015 level of pharmaceutical sector in Hong Kong and protection to the public. Besides, this change also enables us to gear our medical system into those of other places in the world and enhance the standard in medicine.
The Bill also empowers the Pharmacy and Poisons Board to promulgate corresponding code of conduct and codes of practice to the manufacturers, importers, exporters, wholesalers and retailers concerned. However, I am worried about this. After looking at the past enforcement level and efforts of the Department of Health, I am a little worried whether there will be sufficient manpower and resources for enforcement after the Bill has been passed. When we asked the Government in the Legislative Council about the enforcement situations concerning the Dangerous Drugs Ordinance or the Pharmacy and Poisons Ordinance, the figures we got, including the level of inspection and the figures on sting operations, were worrying indeed. In fact, they have not been increased substantially over the years. We have also asked the Administration ― not the incumbent Secretary, but the previous two Secretaries ― whether the manpower for inspection was insufficient. The Government did not give a direct response after stalling for a long time. I believe that the Legislative Council will not be so stingy with these resources, and will definitely agree to increase resources for carrying out inspection work, so as to provide some protection to the majority of the general public in Hong Kong, especially those who have to rely on primary medical care.
This Bill has enhanced the professional standards of the practitioners. And the Government has undertaken ― I have no idea when it will realize the undertaking ― to turn the independent institution regulating registered pharmacists into an independent statutory institution, and to consider increasing its accountability and democratic composition. We agree with this. In fact, many organizations which came to the Legislative Council to air their views also said that they were unsatisfied with the existing regulation system which lacked participation from front-line pharmacists. They also saw that many suggestions from the Government did not reflect the views of their profession.
As in the case of many statutory institutions, the Government does not open more channels for the profession. For instance, the Government still insists not to open for all members of the Medical Council of Hong Kong (MCHK) to be chosen from medical practitioners. Over the years, the LEGISLATIVE COUNCIL ─ 21 January 2015 5007
Government has been criticized for arranging some people who always agree with the authorities into the MCHK, and this cannot demonstrate autonomy of the profession.
In regulating manufacturers, a registration system for authorized persons has been introduced. It is also provided that each licensed manufacturer has to employ at least one authorized person to ensure the quality of the products. This has also aroused much controversy because this proposal will extend the range of authorized persons from registered pharmacists to the professionals in experimental physics, organic chemistry, microbiology and toxicology.
In this regard, we understand that many pharmacists have shown concern about this change. They are worried that this kind of opening will lower the standard of the authorized person, or even of the entire registration system or the system regulating manufacturers. Although the Government explained that this arrangement was in line with the regulation in Article 53(2) of Directive 2001/82/EC of the European Union, it could not allay the worries and queries of the organizations which had participated in the discussion and provided their opinions at the meetings of the Bills Committee. I believe that when the Government approves these authorized persons, especially the first batch of them, it should impose more stringent requirements. Besides, when formulating and actually introducing the system of authorized persons, it should have a mechanism, for example a review mechanism, so that registered pharmacists have the chance to know whether these authorized persons are in line with the needs of the present registration system.
Concerning the regulation on importers, exporters and wholesalers, the Bill requires a licensing control on non-toxic pharmaceutical products. I agree with this because there has been an increase in the number of pharmacies, importers and wholesalers importing pharmaceutical products from different countries, pharmaceutical companies and brands. If the regulation of the Ordinance can extend to non-toxic pharmaceutical products, there is a chance to step up monitoring of the standard and level of these pharmaceutical products, particularly when many non-toxic pharmaceutical products can be purchased in some community pharmacies without doctors' prescriptions. Hence, if the regulation level can be enhanced, drug management can be further strengthened.
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In regard to the requirement that the wholesale records of the poisons listed in Part I of the Pharmacy and Poisons Regulations should be extended to all pharmaceutical products, including toxic and non-toxic pharmaceutical products, in case there are incidents in the future, especially those involving drug prescription, it will be easier and more likely to have these products recovered. These situations actually happened in 2009. In 2009, as Members can still remember, some unregistered or unsafe pharmaceutical products were involved. The mass media, patients and doctors were needed, during a long period of time, to continuously track down the information themselves and ask the dealers concerned before they could find out the source of the incident. We are worried that during this process, before the pharmaceutical products are recovered, many patients will continue to take some unqualified and even contaminated products, which is undesirable. In this part, I hope that the requirement on drug management, especially on non-toxic pharmaceutical products, can be enhanced.
(THE PRESIDENT'S DEPUTY, MR ANDREW LEUNG, took the Chair)
In the regulation on the retail level, the requirement on the storage of the poisons listed in Schedule 1 of the Pharmacy and Poisons Ordinance will be extended to cover all the poisons listed in Part I of the Pharmacy and Poisons Regulations. The poisons will have to be stored in locked containers and the containers have to be kept by registered pharmacists in order to strengthen regulation. In my opinion, this is necessary. However, the Government has not made a corresponding requirement to the effect that all pharmaceutical products must be handled by on-site qualified pharmacists. Thus I wonder whether the above measure can solve the problem. Some pharmacists have pointed out more than once that although they are key holders, no one can fully guarantee that the pharmacy owners or other people will not take these products out in their absence. We have to understand that although the responsibility lies in the pharmacists and they will be subject to disciplinary punishment at any time, other people have the right to sell these products. Hence the Government has the responsibility and the need to follow up along this direction after the passage of this Bill.
Finally, in regard to whether drug orders should be placed in written form, under the existing regulation standard, it is difficult to oppose the requirement that orders must be placed in written form. The Government, in particular, has LEGISLATIVE COUNCIL ─ 21 January 2015 5009 pointed out more than once that the meaning of "written form" also covers faxes or some electronic messages, and even the WhatsApp messages that we often use are acceptable. Therefore concerning this point, I think there should not be too much controversy. I hope that after the passage of this Bill, the Government can continue to work towards this direction in order to enhance the drug management standard of Hong Kong.
I so submit. Thank you, Deputy President.
MR VINCENT FANG (in Cantonese): Deputy President, I speak to object to the resumption of Second Reading of the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill). Nevertheless, I hope that patient associations, patients and drug users would understand that I am not against proper regulation on the sale of controlled medicine. I only hope that adequate legal protection would be accorded to drug users. The current legislative exercise has once again confirmed the following three points. Firstly, legislative exercise is taken forward for the sake of legislating and the legislation introduced cannot reflect the legislative intent at all. Secondly, the Government has failed to consult the stakeholders adequately before the introduction and during the scrutiny of the Bill, and has acted arbitrarily without accepting the reasonable views expressed by the stakeholders. Thirdly, executive directives have overridden the law. By objecting to the resumption of Second Reading of the Bill, I only hope that the Administration would fine-tune the drafting of the legislation before introducing it into the Legislative Council.
As a matter of fact, the three points mentioned above apply not only to the current legislative exercise. In many legislative exercises taken forward with desirable legislative intents in the past, the relevant bills finally introduced often failed to reflect the original intents, resulting in the law regulating non-offending stakeholders while the offenders could remain at large instead.
At this point, I have to recapitulate the background for the formulation of the Bill. According to the Administration, the introduction of the legislation was triggered by a number of incidents that took place in Hong Kong in early 2009 in which pharmaceutical products were involved. Such incidents included the irregularities identified in the production process of a western drugs manufacturer and I agree this is an area which requires more stringent regulation. However, a more important and direct cause should be the mistakes made by a drug dispenser 5010 LEGISLATIVE COUNCIL ─ 21 January 2015 of a private medical clinic. As the mistakes were not known to the doctor of the clinic, patients were given the wrong medicine for quite a long time and thus leading to deaths. Subsequently, the Government set up the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) in March 2009 to conduct a comprehensive review on the existing regime for the regulation of pharmaceutical products. In its report released in December of the same year, the Review Committee made a total of 75 recommendations but no follow-up actions were taken then.
Four years later, the Secretary suddenly briefed the Panel on Health Services (the Panel) of this Council in November 2013 on the legislative amendments to be introduced and said that the relevant stakeholders had been consulted and apart from some individual proposals such as the requirement that drug orders placed by doctors and pharmacies should be made in written form, support from the stakeholders had been obtained for other proposals and a bill would be introduced into this Council in early 2014. However, during those four years, no suggestion whatsoever were put forward by the Panel on the issues concerned; nor had any discussion been held on the legislative intent of the Government as well as the issues concerning the legislative exercise. The Administration, however, indicated the introduction of a bill immediately after the issues were brought up. Nevertheless, a number of organizations other than doctors' associations, pharmacists and those from the various links in the drug supply chain including import traders, wholesalers and retailers have all relayed to me their reservations about the legislative amendments, saying that some of the proposals were not practicable at all.
A simple example is the requirement on the presence of a registered pharmacist whenever an Authorized Seller of Poisons (ASP) is open for business for the selling of controlled medicine. It is also proposed that the key to a registered premise (that is, a pharmacy) should be kept by a registered pharmacist and the pharmacy concerned should be closed for business when the registered pharmacist is absent. Such being the case, sale of products other than controlled medicine such as milk powder, diapers, and so on, is also prohibited. However, although many ASPs have engaged the services of pharmacists in accordance with the statutory requirements, the problem is that they are only required to work for eight to nine hours per day while pharmacies are usually open for business for up to 12 hours a day. A more serious problem is the dire shortage of pharmacists which makes it difficult to meet the demand of over 500 pharmacies currently in business in Hong Kong. As the shortage rate is as high as 50% or LEGISLATIVE COUNCIL ─ 21 January 2015 5011 above, many pharmacies can only engage the services of pharmacists on a half shift basis. I wonder how they can operate their business under the new requirement.
According to those in the industry, such difficulties have been relayed to the Administration but their views have only been noted but not accepted at all. In the manner of a famous saying among the legal profession lately which goes, "hearing but not listening", the views have been heard but not taken on board and the Government is determined to stick to its original proposal. I have therefore asked for a public hearing to receive public views and it is even more ridiculous to find out that deputations invited by the Government to express support to the legislative exercise have also admitted at the meeting that there is a shortage of pharmacists in Hong Kong and some of these deputations are academics and pharmacists working in government hospitals. Queries have also been raised by them about the composition of the Pharmacy and Poisons Board of Hong Kong (the Board) in which greater power would be vested under the Bill since they consider that the representativeness of the Board is not broad enough. They have also pointed out that when the Board was asked to conduct a review on the codes of practice for ASP, the Administration never informed its members that the review was meant to tie in with the legislative amendments in the Bill.
Although the Administration has indicated that the relevant organizations would be consulted again before the Bill was introduced into this Council, that was only window dressing. The Government even asked if we could have the Bill passed with the requirement that the key to a registered premise should be kept by a registered pharmacist suspended for the time being until there were adequate pharmacists in Hong Kong. Dear colleagues, have you ever heard of such a ridiculous legislative proposal? Who can guarantee when there will be enough pharmacists in Hong Kong?
When the blue bill was finally introduced into this Council, the Government had only deleted the requirement on the keeping of keys to registered premises of ASPs while all other proposals remained unchanged. As for the incident of wrongly dispensed medicine in a private medical clinic which triggered the review by the Review Committee, nothing has been done in the Bill to address the problem. So, what exactly is the original legislative intent of the Bill? I therefore consider that the Bill has failed to reflect the legislative intent and allows offenders to remain at large.
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Furthermore, if those in the industry had not approached and met with me out of concern for their livelihood and asked for a public hearing to receive public view, the Bill might probably be introduced into this Council without any revision. So what is the difference between the entire legislative process and a black-box operation? Moreover, once the drafting of a blue bill has been completed, it would be very difficult to make any subsequent amendment and I wonder if this is due to the resistance of the Department of Justice or government officials who do not want to lose face by making amendments to the bill introduced. We have to bear in mind that apart from meeting social needs, plugging loopholes and curbing unlawful activities, the enactment of legislation also has the purpose of providing statutory protection to the rights and interests of all stakeholders in a fair, just and balanced manner without inclination to any party.
Why do I comment that executive directives have overridden the law? According to the Bill of which the Second Reading is resumed today, new powers would be granted to the Board, which is responsible for formulating and amending the codes of practice for ASP. Such powers include introducing amendments to the codes from time to time, taking enforcement actions against offenders, adjudicating and taking disciplinary actions against offending and non-compliance cases. However, as I have said earlier, a review on the codes of practice for ASP was conducted and completed by the Board last year to tie in with the legislative exercise. During deliberation of the Bill by the Bills Committee, I asked for the submission of the draft codes of practice to the Panel or the Bills Committee for scrutiny but the request was rejected. Nevertheless, those in the industry were given to understand that the codes of practice would come into effect on 2 January 2015, even before the deliberation on the Bill is completed. Is this not a case of executive directives overriding the law? The Secretary would of course argue that the codes of practice have all along been implemented but I believe fellow colleagues would have a pretty good idea of whether the codes have overridden the law.
The Bill has entered the final stage of its legislative process today and I do not think I would be able to prevent the passage of this Bill with my individual effort or the five votes from the Liberal Party. Moreover, the Bill also contains some very good points such as the proposal to extend the validity of clinical trial certificates from not exceeding two years to not exceeding five years in Schedule 1, which will accord convenience to drug manufacturers and benefit patients by shortening the time to be taken for introducing new drugs into the market and it is LEGISLATIVE COUNCIL ─ 21 January 2015 5013 believed that support from fellow colleagues would very likely be solicited. However, I would like to put on record the several points mentioned above and I also hope that the Secretary would take them into consideration.
Deputy President, with so many stakeholders involved, the Bills Committee still managed to complete the deliberation on the Bill within such a brief period of time and I think the main reason lies in the need to complete the legislative process as soon as possible to tie in with the commencement date of the codes of practice. However, many problems in the Bill have actually remained unresolved and I therefore consider the Bill not yet ready for resumption of Second Reading. Thus, apart from objecting to the resumption of Second Reading of the Bill, I will not cast any vote on the amendments to be proposed by the Administration.
I so submit. Thank you, Deputy President.
MR WONG YUK-MAN (in Cantonese): Deputy President, in view of the safety incident involving pharmaceutical products which happened in Hong Kong in early 2009, the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) was established in March 2009 to conduct a comprehensive review of the existing regime for the regulation of pharmaceutical products. The Review Committee released its report in December 2009, recommending a total of 75 improvement measures.
The Pharmacy and Poisons (Amendment) Bill 2014 is proposing to make amendments to the Pharmacy and Poisons Ordinance, the Pharmacy and Poisons Regulations and the Poisons List Regulations so as to implement certain recommendations made by the Review Committee in the report. Regarding the enhancement of safety of pharmaceutical products and the protection of public health, we support the Bill. However, I must point out that at this Second Reading stage, half or even up to 80% of the organizations still oppose certain parts of the Bill in principle. Mr FANG has mentioned a lot earlier. Some parts are of course quite controversial. I believe the Secretary knows very well that the part which is particularly controversial involves the requirement for the placing of drug orders in written form.
According to paragraph 17 of the Report of the Bills Committee, the Government proposed that the requirement to place drug orders in written form, as recommended by the Review Committee, be added to the relevant codes of 5014 LEGISLATIVE COUNCIL ─ 21 January 2015 practice for licensed drug traders. Under the proposed requirement, drug traders have to obtain orders in writing issued by their purchasers (for example, private doctors) before the completion of a sale of the drugs covered by the requirement, and arrange the delivery of the drugs accordingly. We understand that the proposed requirement will safeguard against errors from spoken communication and help establish a complete set of movement records of drugs to better protect patient safety in the use of medicine. Nonetheless, many organizations oppose the Bill in principle, especially the part on placing drug orders in written form. So, the Government really cannot be complacent. Although the Bill will be passed in the Legislative Council today, I hope that the Secretary or the relevant authorities of the Government can consider the industry's views.
A few months ago, the President of the Hong Kong Doctors Union pointed out that the majority of its members and patients strongly opposed having the placing of drug orders in written form as the only means because this would lead to a delay for the patients to get the right medicine which would affect the health of patients. I will not go into specific details here. Despite the fact that numerous professional organizations had expressed opposing views to the Bills Committee, the Government still said in its document that the majority of the organizations agreed with the recommendation. This is really inconceivable. In fact, at present, most doctors are used to ordering drugs by telephone because they can communicate with the drug companies directly in this way. If suitable drugs are not available, they can place their orders with another drug company. The new legislation requires that doctors must order their drugs through methods such as emails and fax. This new measure however can easily result in delays in order, thus undermining the interests of patients. Moreover, right now, most drug companies are equipped with telephone recording which means that there will not be cases of having no record to go by. Thus, the new requirement is deemed unnecessary.
The Hong Kong Doctors Union was not alone. The Hong Kong Pharmacists Union also opposed the recommendation strongly. At the moment, 25 drug companies in Hong Kong meet the GMP qualification. They should follow the procedure to obtain the signed authorization of the authorized person (AP) they employ before they can sell drug products, and the AP must be a registered pharmacist. If the new legal proposal as amended is passed, all non-professionals or the general staff of the drug company can act as APs after receiving short-term training. From paragraph 30 of the Report of the Bills LEGISLATIVE COUNCIL ─ 21 January 2015 5015
Committee, we can see that according to the qualification requirement for registration as an AP, any person, who is not a registered pharmacist, can act as an AP if he/she holds a qualification awarded on completion of a course recognized by the Pharmacy and Poisons (Manufacturers Licensing) Committee and has three or more years of experience in pharmaceutical product manufacturing or quality control in compliance with the GMP Guide. However, the ultimate defense line of approval should be kept by registered pharmacists.
Today, the Bill has entered its Second Reading stage. At a meeting of the Bills Committee, I asked the Government why the authorities could still table the Bill when the views of the two major unions of the medical sector differed in principle with the proposals contained in the Bill. This again demonstrates that the Government has to cut the Gordian knot, as Mr Vincent FANG said earlier. This also shows that the Government has all along been doing things arbitrarily. It has failed to address the divergence within the industry, or table the Bill after addressing the divergence.
Empowering the Pharmacy and Poisons Board (the Board) to promulgate the code of conduct and codes of practice is also a relatively more controversial part. I am more concerned about whether the power of the Board will be excessive. The Bill empowers the Board to formulate, revise and implement the code of conduct and codes of practice, and to make rulings and award penalties. In the past, when the authorities responded to issues raised by representative organizations or individuals, they practically could not explain whether the power of the Board was excessive. They simply kept reiterating that members should not delay the implementation of the Bill on the pretext that discussion on this matter was going on.
The proposed amendment almost grants the Board unlimited power, enabling it to impose licensing conditions, revoke or suspend licences, or issue warning letters to licensees who have breached the code of conduct or licensing conditions, or committed offences pertaining to drugs. Furthermore, on receipt of complaints, even in the absence of concrete evidence, the Board can revoke or suspend a licence, and can do so with immediate effect even though an appeal has been launched, without having to wait for the result of the appeal. Is it not obvious that the Board enjoys both the legislative and judicial functions? Thus, we consider that the regulation of people and medicine should be separated.
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Finally, the Bill provides that if a person is convicted of an offence under the Ordinance, the Government may recover from the person the costs and expenses it has incurred in relation to the collection, analysis or examination of a poison, pharmaceutical product or any other substance for the purpose of the pertinent criminal proceedings. To the drug industry, this is but double penalty. This proposal is totally inconsistent with the legal punishment for other illegal acts, and is a stark violation of the principle of fairness. Even for some people convicted of drug offences, they do not have to pay the Government for the testing of drugs. Moreover, since existing legislation has already laid down the punishment for those offences, the proposals of the Bill will only give rise to the problem of double punishment. I hope that the Government will not consider the cost of a case. It should look to fairness as its principle and strike a balance, rather than make a choice and neglect the importance of fairness.
There are many aspects of the Bill which do not have the blessing of the industry. The voice of opposition is very strong. Nonetheless, it is really necessary to pass the Bill for the enhancement of the safety of pharmaceutical products and the protection of public health. I must reiterate that before consideration is made to amend the Bill, the Government should make more efforts to win more support from the industry. Even if the Bill is passed, the authorities should conduct a review at the appropriate time and communicate more with the industry since almost all present provisions are targeted at the operation of the industry. Otherwise, even if the Bill is passed, it may not achieve the effect as desired when the Ordinance was enacted or amended. Worse still, it may backfire.
With these remarks, Deputy President, I support the resumption of the Second Reading of the Pharmacy and Poisons (Amendment) Bill 2014.
DEPUTY PRESIDENT (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
DEPUTY PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Food and Health to reply. The debate will come to a close after the Secretary has replied.
LEGISLATIVE COUNCIL ─ 21 January 2015 5017
SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, First of all, I would like to express my gratitude to the Chairman of the Bills Committee, Prof Joseph LEE, all members of the Bills Committee and colleagues of the Legislative Council Secretariat for their efforts which have made the completion of the scrutiny of the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) possible.
The Bill was introduced into the Legislative Council in March last year and the Bills Committee has held nine meetings to study the Bill. The Bill seeks mainly to amend the Pharmacy and Poisons Ordinance (the Ordinance) to implement a total of 75 recommendations on improvement measures made by the Review Committee on the Regulation of Pharmaceutical Products in Hong Kong (the Review Committee) in December 2009 on the regulatory regime of pharmaceutical products with a view to enhancing the coverage and depth of the regulatory measures, thus avoiding the recurrence of similar incidents concerning pharmaceutical products.
We have accepted the recommendations of the Review Committee and they are being implemented progressively. Among the 75 recommendations, the implementation of 16 recommendations require amendments to be made to the Ordinance and its subsidiary legislation. Therefore, we have commissioned a consultant to conduct a Regulatory Impact Assessment (RIA) and having considered the RIA results and views expressed by stakeholders, we have decided to implement most of the 16 recommendations for the purpose of effectively enhancing the regulatory regime while minimizing the impact to the relevant parties. As for the remaining recommendations, we would continue to monitor the situation proactively and formulate the relevant measures timely. Apart from implementing certain recommendations of the Review Committee, as certain provisions of the Ordinance and its subsidiary legislation have become outdated, we have also taken the opportunity to propose certain legislative amendments to bring these provisions into line with the prevailing regulatory framework in order to address social needs.
Legislative amendments are proposed in the Bill to cover various important parts of the supply chain of pharmaceutical products, that is, manufacturing, distribution, retail, market supervision, and so on, to enhance the regulatory regime with a view to ensuring drug safety of the public. As the supply chain of pharmaceutical products covers different sectors and involves complicated details in drug supervision, we are very thankful to members of the Bills Committee for 5018 LEGISLATIVE COUNCIL ─ 21 January 2015 receiving very carefully the detailed information and explanation provided on the rationale behind as well as the purpose and effects of each suggestion, and striking a balance cautiously between ensuring drug safety of the public and minimizing the impact to the relevant sectors. After nine meetings have been held to study the Bill, I am very pleased to learn that the Bills Committee has expressed support for the legislative amendments proposed in the Bill and the Committee stage amendments (CSAs) proposed by the Administration to the Bill, which are mainly technical or textual in nature. I will now briefly introduce the major amendments proposed in the Bill as follows.
First of all, to align with the registration requirement set out in the Guidance Notes on Registration of Pharmaceutical Products/Substances published by the Department of Health and the international practice, it is proposed in the Bill to revise the definition of "pharmaceutical product" in section 2(1) of the Ordinance in order to cover also a substance or combination of substances presented as having properties for treating or preventing disease in human beings or animals for better consumer protection.
Pursuant to the proposed new section 4B of the Ordinance, the Pharmacy and Poisons Board (the Board) is empowered to promulgate corresponding codes of conduct (CoC) and codes of practice (CoPs) in order to provide practical guidance and enhance monitoring for the conduct of the activities of registered pharmacists, different licensed traders and traders subject to registration requirement (including manufacturers, wholesalers and retailers). We have also taken this opportunity to update and clarify the provisions governing the issuance, suspension and revocation of various licences issued under or registrations maintained by the Ordinance and the Pharmacy and Poisons Regulations (the Regulations) so as to ensure that the Board and its executive committees are empowered to issue, suspend and revoke various licences. During discussion by the Bills Committee on the proposal concerning CoC and CoPs, we have explained to members in detail that mechanism has been put in place by the Board to adequately consult the stakeholders concerned when the relevant CoC and CoPs are formulated or revised.
Regarding the issues raised by some Members just now on the consultation and the formulation of the relevant CoC and CoPs, I would like to make a response here. As I have said just now, the relevant stakeholders would be adequately consulted by the Board when the relevant CoC and CoPs are formulated or revised. Since January 2012, the Board has set up different LEGISLATIVE COUNCIL ─ 21 January 2015 5019 working groups comprising trade representatives and stakeholders as members to provide comments on the formulation or revision of the relevant CoC and CoPs. For example, in revising the CoP for Authorized Sellers of Poisons (ASPs), the Board set up a working group in January 2012. It comprises representatives of trade associations, associations of drug stores, individual drug stores and pharmacists as members, and public consultation was conducted in July to December 2012 to collect more views from registered pharmacists, medical practitioners, dentists, various associations of pharmaceutical industry, other stakeholders and consumers. Consultative meetings were also held by the Administration in August and September 2012 with stakeholders and members of trade associations. Views collected were analysed before revision was made to the draft CoP and the whole process was open and transparent.
Furthermore, as proposed under clause 6 of the Bill, the Board must identify in the Gazette the code or part revised and specify the date on which the revision is to take effect. Letters would also be issued by the Board to notify the licence holders concerned of the promulgation or revision of the code.
The proposal to empower the Board to issue CoC and CoPs is similar to section 26 of the Supplementary Medical Professions Ordinance (Cap. 359). As a matter of fact, some existing Ordinances also empower the relevant authorities to issue CoPs, such as section 3 of the Broadcasting Ordinance (Cap. 562) and section 67 of the Insurance Companies Ordinance (Cap. 41). Under such circumstances, the proposal to empower the Board to revise or draft CoC and CoPs is actually based on the experience of other supervisory organizations.
Besides, Members have also expressed some views and concerns over the establishment of a separate statutory body to take over the function of the Board for regulating registered pharmacists. I would like to reiterate that the Bills Committee has noted and pointed out to the House Committee that this is not the purpose of the Amendment Bill which seeks clearly to, as I mentioned earlier, implement the improvement measures put forth by the Review Committee for enhancing the pharmaceutical industry. Nonetheless, the proposal has been referred to the Pharmacists Sub-group under the Steering Committee on Strategic Review on Healthcare Manpower Planning and Professional Development for follow-up discussion. The Sub-group has already met on 16 December 2014 and we will maintain communication with the pharmacy profession while further views from those in the industry are also welcome.
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Regarding the regulation on manufacturers, it is proposed in the Bill to revise the definition of "manufacture" in section 2(1) of the Ordinance to explicitly include packaging and secondary packaging so that the relevant manufacturing process should only be carried out by a licensed manufacturer who complies with the Good Manufacturing Practice (GMP) requirements. In the meantime, certain secondary packaging activities which do not affect the safety, efficacy and quality of the products will be exempted to minimize the impact to the trade.
In order to bring perfection to the regulation on the manufacturing process, the Bill proposes to revise regulations 31, 33 and 35 of the Regulations to require manufacturers to ensure that the registrable particulars of the finished products correspond exactly with the registered particulars of the products and to label the container of each pharmaceutical product with batch number and expiry date, and all the relevant manufacturing records should be completed at the time when the manufacturing process is being carried out. Regulation 33 requires drug manufacturers to keep a sample for checking in respect of each batch of finished products and some members of the Bills Committee have opined that keeping samples of expensive drugs is costly and requested the Administration to address the concern in this regard. We have therefore agreed to move CSAs to amend the proposed revised regulation 33 to provide certain flexibility for manufacturers in maintaining sample of finished products if certain conditions are satisfied. We will explain in greater detail later when we move and speak on the CSAs.
Having considered the GMP requirements and the Review Committee's recommendation to enhance the quality of pharmaceutical products manufactured by licensed manufacturers, we propose in the Bill the addition of new regulations 30A to 30F to the Regulations to require each licensed manufacturer to employ at least one Authorized Person (AP) who is to be responsible for the quality of pharmaceutical products; set out the qualification requirements of AP; require the Board to maintain a register of AP; and require the Board to remove any AP from the register should the AP be found incompetent to perform the role of an AP. Some in the industry and the Bills Committee have expressed concern about the qualification requirements of AP and we have therefore clarified to the Bills Committee that the qualification requirements proposed under the Bill seek not to relax the qualification required to become an AP but to upgrade the manufacturing standards of pharmaceutical products in Hong Kong so as to align with the existing requirements of the European Union. This will bring the LEGISLATIVE COUNCIL ─ 21 January 2015 5021 industry in line with international standards, take into foreign experts in the manufacturing of pharmaceutical products, thereby enhancing the standards of local GMP manufacturers.
With regard to enhancing the regulation of the import, export and wholesale of pharmaceutical products, on the recommendation of the Review Committee, we have proposed in the Bill to amend regulations 25 and 26 of the Regulations to expand the licensing control on sale or supply of poisons by way of wholesale dealing to cover pharmaceutical products because pharmaceutical products classified as non-poisons, though less dangerous, could also endanger patients' health if such products are not stored and handled properly. Thus, a new wholesale dealer licence will cover both poisons and pharmaceutical products classified as non-poisons and will replace the existing licence for wholesale poisons. Besides, to enhance traceability and facilitate recall of pharmaceutical products if necessary, it is also proposed in the Bill to amend regulation 28 of the Regulations to require wholesalers to keep transaction records for all pharmaceutical products. The records should include additional details such as registered pack size and batch number of products. It is also proposed that section 28A of the Ordinance be amended under the Bill to replace the existing registration system for importers and exporters of pharmaceutical products with a licensing regime for wholesale dealers so that import, export and wholesale dealers will be subject to the same licencing control and inspection mechanism.
To ensure proper storage of poisons by retailers, the Bill proposes to amend regulation 19 of the Regulations to the effect that the scope of control over the storage of poisons by ASPs under the requirements and specifications prescribed in the regulation is changed from substances included in the First Schedule to the Regulations to all poisons included in Part I of the Poisons List. In the meantime, we have also proposed to amend the definition of ASP in sections 2(1) and 11(1) of the Ordinance to reflect the usage of the term in the legislation as an entity that carries on a business of retail sales of poisons. In this connection, we have explained to the Bills Committee that this is purely a technical amendment and will not impose any additional liability on anyone including a registered pharmacist who is an employee of an ASP.
Besides, to increase the deterrent effect, we have also proposed the addition of new section 34A to the Ordinance to empower the Court to order recovery of all expenses incidental to the taking, examination and analyses of any sample of pharmaceutical products incurred by the Administration in respect of which the 5022 LEGISLATIVE COUNCIL ─ 21 January 2015 conviction is based from the defendant. In line with the concept on recovery of costs, the amount to be granted should be compensatory in nature. In order to correctly reflect this intention, we will move CSAs later to specify that the costs payable under the new section will be recovered "as a civil debt" but not "as a fine" as proposed in the Bill.
In response to the recommendation made by the Review Committee to expedite the registration of pharmaceutical products, the Bill proposes to repeal the Poisons List Regulations and, pursuant to new regulation 2A of the Regulations, migrate its contents to Schedule 10 of the Regulations so as to consolidate and streamline the classification and control of pharmaceutical products. We have also proposed the addition of section 29(1B) to the Ordinance so that further amendments to the relevant Schedules to the Regulations should be made by means of negative vetting by the Legislative Council in order to expedite the imposition of suitable control on pharmaceutical products and poisons.
In addition, we have accepted the recommendation of the Review Committee and proposed amendments to regulation 15 of the Regulations to replace the text "Poison 毒 藥" by "Prescription drug 處方藥物" or "Drug under supervised sale 監督售賣藥物" depending on the sale restriction so as to avoid confusion that the pharmaceutical products might be harmful and unsuitable for use or consumption.
Apart from this, in view of the Review Committee's concern about the current two-year validity of the clinical trial certificate which is often too short for the completion of a clinical trial, we propose to amend regulation 36B of the Regulations to extend the validity of clinical trial certificate to not more than five years so that researchers may concentrate on clinical trial tests, thereby helping to enhance the capacity of drug research and development in Hong Kong. Nevertheless, the Government will continue to implement stringent vetting and monitoring on clinical trials to ensure safety of such tests.
Concerns have been expressed by many Members about the proposed requirement of placing drug orders in written form and let me say a few words on the issue here. First of all, I would like to clarify that the proposed requirement, as pointed out by some Members, is not one of the legislative proposals contained in the Bill. The requirement that drug orders should be placed in written form is one of the recommendations made by the Review Committee and will be added to LEGISLATIVE COUNCIL ─ 21 January 2015 5023 the CoPs of relevant licensed traders. This is part of the interlinking measures and an important step to avoid incidents concerning pharmaceutical products. There will be a higher risk for drug orders placed verbally to be taken wrongly and placing drug orders in written form is an effective way to control the risk. A complete set of drug transaction records will also be built up with the implementation of the requirement, thus facilitating the tracing of source of drugs and minimizing errors in the placing/accepting order, delivery and receipt of drugs so as to offer the best protection for the general public. In the Good Dispensing Practice Manual issued in 2007, the Hong Kong Medical Association has reminded the relevant medical personnel that the ordering of drugs from suppliers should be made in writing and the written orders should be kept for verification upon delivery of the drugs and for future reference. As recommended by the Medical Council of Hong Kong in the Code of Professional Conduct, all practising doctors should comply with the Good Dispensing Practice Manual. The proposed requirement of placing drug orders in written form is also well supported by many professional organizations and stakeholders including pharmacists and patients who have expressed keen concerns about various medical issues.
In fact, in the "Good Distribution Practice of medicinal products for human use" distributed by the European Commission in November 2013, it is pointed out that good documentation constitutes an essential part of the quality system, and that written documentation should prevent errors from spoken communication and permit the tracking of relevant operations during the distribution of medicinal products. Besides, it is also specified in the "Good Distribution Practice for Pharmaceutical Products" issued by the World Health Organization that written instructions and records which document all activities relating to the distribution of pharmaceutical products should be available.
On the implementation side, we would like to reiterate that as pointed out by many Members just now, drug orders placed in written form are not limited to those placed in conventional paper form or by fax, but will also cover various kinds of retainable electronic records such as emails, textual messages or instant messages such as WhatsApp. The requirement will also be implemented by phases according to the risk level of drugs. For instance, in the initial stage of implementation, the requirement would only apply to dangerous drugs, antibiotics and drugs in Part I of the new Schedule 10 to the Regulations. The Board will later consider extending the requirement to drugs with lower risk, such as drugs in Part II of the new Schedule 10 and drugs not included in the Schedule.
5024 LEGISLATIVE COUNCIL ─ 21 January 2015
Deputy President, Members, as mentioned in the introduction above, the legislative amendments proposed in the Bill seek to enhance the regulation of pharmaceutical products in Hong Kong. As pointed out by a number of Members, during the course of the legislative exercise, the Bill is fraught with controversies since it involves the interests of various stakeholders in the trade. Some Members have also commented just now that after the publication of the Review Committee's recommendations, it seemed that nothing had been done in the interim to follow up on the issue. In this connection, I have to point out that the Legislative Council Panel on Health Services (the Panel) have been briefed on the above proposed legislative amendments to the Ordinance and its subsidiary legislation at its meeting held on 18 November 2013. The Panel also held two special meetings respectively on 10 December 2013 and 10 February 2014 to collect deputations' views towards and further discuss the proposed legislative amendments. Members of the Panel and the deputations attending the special meetings were generally supportive of the proposed legislative amendments.
I would like to reiterate once again that the current legislative exercise is not a holistic proposal to tackle the overall procedures for the distribution of drugs in Hong Kong, and neither is it a holistic proposal for the overall regulation of pharmaceutical products. It is introduced to give effect to some of the Review Committee's improvement measures which require amendments to be made to the existing legislation, while most of the remaining measures which do not require legislative amendments to be made have been accepted and implemented progressively.
With regard to dissenting views from the industry, I have pointed out earlier that some of the legislative proposals would of course lead to an increase in workload for the operation procedures of some members in the sector but having considered the comparative importance of different needs, I am of the view that patients' interests should be put first instead of the convenience of those in the trade, and the latter should not be taken as the determining factor and let sectoral interests override the well-being of patients.
Some members have also expressed concern about the stepping up of enforcement against contraventions but I would also like to emphasize that this is not within the scope of the legislative amendments. The Department of Health has always strived to step up its enforcement against contraventions and would consider allocating more resources when necessary to operate in co-ordination with its enforcement efforts.
LEGISLATIVE COUNCIL ─ 21 January 2015 5025
As mentioned just now, the amendments proposed in the whole legislative exercise seek mainly to enhance the regulation of pharmaceutical products in Hong Kong and in the course of drafting the Bill, the relevant stakeholders have been adequately consulted. Although the legislative amendments proposed could not meet up with the expectation of some Members to fully satisfy the aspirations of all stakeholders, appropriate adjustments have been made in response to the concerns expressed by those in the trade. We would like to thank the Bills Committee for supporting the amendments proposed in the Bill. Besides, quite a number of organizations and individuals have repeatedly expressed their support for the passage of the Bill for the enhancement of the regulation of pharmaceutical products and the trade so that patients' interests and public health would be timely protected. Members are thus sincerely urged to support the passage of the Bill.
Thank you, Deputy President.
DEPUTY PRESIDENT (in Cantonese): I now put the question to you and that is: That the Pharmacy and Poisons (Amendment) Bill 2014 be read the Second time. Will those in favour please raise their hands?
(Members raised their hands)
DEPUTY PRESIDENT (in Cantonese): Those against please raise their hands.
(No hands raised)
DEPUTY PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Pharmacy and Poisons (Amendment) Bill 2014.
Council went into Committee.
5026 LEGISLATIVE COUNCIL ─ 21 January 2015
Committee Stage
DEPUTY CHAIRMAN (in Cantonese): Committee stage. Council is now in Committee.
PHARMACY AND POISONS (AMENDMENT) BILL 2014
DEPUTY CHAIRMAN (in Cantonese): Members may refer to Appendix II to the Script for the debate and voting arrangements for the Bill.
DEPUTY CHAIRMAN (in Cantonese): I will first deal with the clauses with no amendment. I now propose the question to you and that is: That the following clauses stand part of the Pharmacy and Poisons (Amendment) Bill 2014.
CLERK (in Cantonese): Clauses 1 to 5, 8, 9, 11, 14, 16 to 19, 21, 22, 27, 28, 29, 31 to 42, 44, 45, 47, 48, 50, 51, 53, 54, 56, 57, 60, 61, 63, 64, 68, 69, 71 and 72.
DEPUTY CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
DEPUTY CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 1 to 5, 8, 9, 11, 14, 16 to 19, 21, 22, 27, 28, 29, 31 to 42, 44, 45, 47, 48, 50, 51, 53, 54, 56, 57, 60, 61, 63, 64, 68, 69, 71 and 72 stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
DEPUTY CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
LEGISLATIVE COUNCIL ─ 21 January 2015 5027
DEPUTY CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Clauses 6, 7, 10, 12, 13, 15, 20, 23 to 26, 30, 43, 46, 49, 52, 55, 58, 59, 62, 65, 66, 67 and 70.
SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy Chairman, I move the amendments to the clauses read out just now. The content of the amendments is set out in the paper circulated to Members. Most of the amendments are technical or textual amendments. For example, we propose textual amendments to clauses 12, 20, 23, 26 and 62 for aligning the wordings in the Chinese text with that of the English text. In addition, according to the latest principles on law drafting, we propose to substitute "床" with the radical "" by "牀" with the radical "爿" in clauses 23, 58 and 59.
(THE CHAIRMAN resumed the Chair)
Our proposed amendments to the relevant schedules of clauses 65, 66, 67 and 70 are mainly textual amendments to revise the headings and numbers, and the amendments proposed subsequent to the passage of the Poisons List (Amendment) Regulation 2014 and the Poisons List (Amendment) (No. 2) Regulation 2014 by the Legislative Council according to the existing legislation during the scrutiny of the Pharmacy and Poisons (Amendment) Bill 2014 (the Bill) by the Bills Committee; such amendments, including, among others, the 11 substances to be added to Division A of Part I of the Poisons List set out in the Schedule of the Poisons List Regulations will be added to the new Schedule 10 of the Pharmacy and Poisons Regulations instead as proposed in the Bill.
In addition, our proposed amendments to clauses 6, 7, 49 and 50 will enable the Pharmacy and Poisons Board or the secretary to the Board to make the relevant registers and guidelines available for inspection by the public through appropriate means and state the functions of the relevant registers to ensure compliance with the data protection principles as set out in Schedule 1 of the Personal Data (Privacy) Ordinance (Cap. 486). On the other hand, the 5028 LEGISLATIVE COUNCIL ─ 21 January 2015 amendments to clauses 20(7), 25(1), 46(5) and 52 stipulate the circumstances under which an appeal can be lodged with the Pharmacy and Poisons Appeal Tribunal.
As for the two amendments I referred to in the Second Reading debate, the first one relating to clause 30 of the Bill proposes to add the new section 34A in the Pharmacy and Poisons Ordinance, which empowers the Court to order recovering from the defendant any costs incurred in relation to the collection, examination or analysis of any sample of pharmaceutical product for the purpose of convicting an offence. Given that the expenses are compensatory in nature, to reflect that intention, we will move amendments in order to make the sum ordered to be paid under the new section 34A of the Pharmacy and Poisons Ordinance is recoverable as a civil debt. Moreover, to avoid doubt, a new subsection (3) will be added to stipulate that the new section 34A does not affect any power conferred on the Court under the Costs in Criminal Cases Ordinance (Cap. 492) to order payment of costs with respect to the conviction of criminal cases according to the Pharmacy and Poisons Ordinance, and that the relevant provisions of the Costs in Criminal Cases Ordinance and its subsidiary legislation will still be applicable to the issues in this respect.
Another amendment I referred to in the Second Reading debate seeks to amend section 55 of the Bill. The proposed revised regulation 33 of the Pharmacy and Poisons Regulations requires licensed manufacturers to ensure that the registrable particulars of each batch of pharmaceutical products in a finished form correspond exactly with the registered particulars of the products. It also revises the period for which the control sample of finished pharmaceutical products is to be kept. On a meeting of the Bills Committee, Mr WONG Ting-kwong expressed concern over drug manufacturers' practice to keep samples of expensive drugs. He pointed out that the high cost involved is detrimental to the operation of the trade and would lead to wastage. After prudent consideration, we believe that some adjustments can be made to provide certain flexibility for licensed manufacturers in maintaining sample of finished products if the pre-condition to ensure the pharmaceutical safety of the public can be met. We therefore move to amend clause 55 of the Bill, if the pharmaceutical products are enclosed in a primary container that they have direct contact with during the process of manufacture, and the process of manufacture of the batch of products concerned only involves adding a package insert, replacing a package insert and/or affixing a label to any labelled container of the products, the manufacturer concerned has no need to retain actual control sample as required by LEGISLATIVE COUNCIL ─ 21 January 2015 5029 regulation 33 of the Pharmacy and Poisons Regulations. The manufacturer is only required to retain the package insert, the package insert replaced or the label affixed of the batch of products concerned.
The Bills Committee raised no objection to our proposed amendments. I hope Members will support the relevant amendments. Thank you, Chairman.
Proposed amendments
Clause 6 (see Annex II)
Clause 7 (see Annex II)
Clause 10 (see Annex II)
Clause 12 (see Annex II)
Clause 13 (see Annex II)
Clause 15 (see Annex II)
Clause 20 (see Annex II)
Clause 23 (see Annex II)
Clause 24 (see Annex II)
Clause 25 (see Annex II)
Clause 26 (see Annex II)
Clause 30 (see Annex II)
Clause 43 (see Annex II)
Clause 46 (see Annex II)
Clause 49 (see Annex II)
5030 LEGISLATIVE COUNCIL ─ 21 January 2015
Clause 52 (see Annex II)
Clause 55 (see Annex II)
Clause 58 (see Annex II)
Clause 59 (see Annex II)
Clause 62 (see Annex II)
Clause 65 (see Annex II)
Clause 66 (see Annex II)
Clause 67 (see Annex II)
Clause 70 (see Annex II)
CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the amendments moved by the Secretary for Food and Health be passed. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the amendments passed.
LEGISLATIVE COUNCIL ─ 21 January 2015 5031
CLERK (in Cantonese): Clauses 6, 7, 10, 12, 13, 15, 20, 23 to 26, 30, 43, 46, 49, 52, 55, 58, 59, 62, 65, 66, 67 and 70 as amended.
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the clauses read out just now as amended stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): New clause 63A Regulation 40 amended (penalties).
SECRETARY FOR FOOD AND HEALTH (in Cantonese): Chairman, I move the Second Reading of the new clause 63A. The content of the amendment is set out in the paper circulated to Members.
The new clause proposes to amend regulation 40 of the Pharmacy and Poisons Regulations in a bid to align with the amendments relating to clause 55 of the Bill passed by Members just now, that is, to revise regulation 33 of the Pharmacy and Poisons Regulations in order to give waiver to manufacturers in maintaining sample of drug products if certain conditions can be met. Thus it is necessary for us to revise regulation 40 of the Pharmacy and Poisons Regulations accordingly in order to stipulate the penalties in case of contravention of the waiver conditions provided under the amended regulation 33 of the Pharmacy and Poisons Regulations. Given that there is no change to the penalties of the original provision except this one, the new clause is therefore a corresponding technical amendment.
5032 LEGISLATIVE COUNCIL ─ 21 January 2015
Chairman, the abovementioned new clause has obtained support from the Bills Committee, I hope Members will support the abovementioned new clause.
CHAIRMAN (in Cantonese): I now propose the question to you and that is: That new clause 63A be read the Second time.
CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): New clause 63A.
SECRETARY FOR FOOD AND HEALTH (in Cantonese): Chairman, I move that new clause 63A be added to the Bill.
Proposed addition
New clause 63A (see Annex II)
LEGISLATIVE COUNCIL ─ 21 January 2015 5033
CHAIRMAN (in Cantonese): I now propose the question to you and that is: That new clause 63A be added to the Bill.
CHAIRMAN (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Schedule.
CHAIRMAN (in Cantonese): Does any Member wish to speak?
(No Member indicated a wish to speak)
CHAIRMAN (in Cantonese): I now put the question to you and that is: That the Schedule stand part of the Bill. Will those in favour please raise their hands?
(Members raised their hands)
CHAIRMAN (in Cantonese): Those against please raise their hands.
(No hands raised)
5034 LEGISLATIVE COUNCIL ─ 21 January 2015
CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CHAIRMAN (in Cantonese): Council now resumes.
Council then resumed.
Third Reading of Bills
PRESIDENT (in Cantonese): Bill: Third Reading.
PHARMACY AND POISONS (AMENDMENT) BILL 2014
SECRETARY FOR FOOD AND HEALTH (in Cantonese): President, the
Pharmacy and Poisons (Amendment) Bill 2014 has passed through Committee with amendments. I move that this Bill be read the Third time and do pass.
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Pharmacy and Poisons (Amendment) Bill 2014 be read the Third time and do pass.
Does any Member wish to speak?
(No Member indicated a wish to speak)
PRESIDENT (in Cantonese): I now put the question to you as stated. Will those in favour please raise their hands?
(Members raised their hands)
LEGISLATIVE COUNCIL ─ 21 January 2015 5035
PRESIDENT (in Cantonese): Those against please raise their hands.
(No hands raised)
PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present. I declare the motion passed.
CLERK (in Cantonese): Pharmacy and Poisons (Amendment) Bill 2014.
MEMBERS' MOTIONS
PRESIDENT (in Cantonese): Members' motions. Mr Andrew LEUNG will move a motion under Rule 49E(2) of the Rules of Procedure to take note of the Electronic Transactions Ordinance (Amendment of Schedule 1) Order 2014, which was included in Report No. 10/14-15 of the House Committee laid on the Table of this Council.
According to the relevant debating procedure, I will first call upon Mr Andrew LEUNG, who is also the chairman of the subcommittee formed to scrutinize the relevant item of subsidiary legislation, to speak and move the motion. After Mr Andrew LEUNG has spoken, I will call upon other Members to speak. Each Member (including the mover of the motion) may only speak once and may speak for up to 15 minutes. Finally, I will call upon the public officer to speak. The debate will come to a close after the public officer has spoken, and the motion will not be put to vote.
Members who wish to speak on the motion will please press the "Request to speak" button.
I now call upon Mr Andrew LEUNG to speak and move the motion.
MOTION UNDER RULE 49E(2) OF THE RULES OF PROCEDURE
MR ANDREW LEUNG (in Cantonese): President, in my capacity as Chairman of the House Committee, I move the motion, as printed on the Agenda, under Rule 49E(2) of the Rules of Procedure to allow Members to have a debate on the 5036 LEGISLATIVE COUNCIL ─ 21 January 2015
Electronic Transactions Ordinance (Amendment of Schedule 1) Order 2014 which was included in Report No. 10/14-15 of the House Committee on Consideration of Subsidiary Legislation and Other Instruments.
Now, in my capacity as Chairman of the Subcommittee on Electronic Transactions Ordinance (Amendment of Schedule 1) Order 2014, I report on the deliberations of the Subcommittee.
The Subcommittee held a meeting with the Administration to scrutinize the Amendment Order. This subsidiary legislation seeks to amend section 13 of Schedule 1 of the Electronic Transactions Ordinance to enable e-cheques to be transacted and cleared electronically, but this arrangement is confined to non-negotiable cheques. The Subcommittee supports the Administration's legislative proposal in principle, so as to allow e-cheque to carry the same statutory effect as paper cheque.
Some Subcommittee members have expressed concern that implementing e-cheque might lead to redundancy in the banking sector. Besides, in view of the prevalence of Internet hacking activities, some members held that the authorities should put in place stringent measures to ensure the security of the process. In response, the Administration pointed out that as revealed in the findings from consultation with the industry, redundancy was not anticipated because the manpower saved could be deployed to other business areas for service improvement purposes. According to the Administration, e-cheque will be much safer than the traditional paper cheque because the authorities will make use of encryption, digital signature and public key infrastructure technology to achieve the effect that any attempt to tamper an e-cheque will make it invalid.
As regards the technical standard of e-cheques, the Subcommittee noted that the Hong Kong Interbank Clearing Limited would specify the requirements, including the file format and standard of e-cheque, in the Clearing House Rules. The Administration has undertaken that it would continue to explore the possibility of improving the operation of paper cheque and its electronic counterpart, including real-time crediting and the cross-border use of e-cheque, after the launch of e-cheque in end of the year.
Some members have expressed concern that members of the public might be forced to accept e-cheque as a means of payment. In response, the Administration pointed out that if any members of the public chose not to accept LEGISLATIVE COUNCIL ─ 21 January 2015 5037 e-cheques, they should not give consent or their email addresses to the prospective payer, as payers would need such information to issue e-cheques. Prior to the launch of e-cheque, the Hong Kong Monetary Authority (HKMA) and participating banks would also conduct a series of promotional and educational activities geared towards a wide audience. As a start, the use of e-cheque would be launched within Hong Kong only. As regards the future development, the Administration would explore the potential of e-cheque application in international transaction.
President, the following are my personal views.
First of all, I need to declare that I am an independent non-executive director of a local bank.
E-cheque is a completely new concept. After this subsidiary legislation is passed in this council today, Hong Kong will be the first to implement e-cheque in the world. At present, it costs some $14 to $15 for the bank to handle a cheque, and if e-cheques are used in some of the transactions, a great deal of administrative cost can be saved, thereby enabling the local banks to lower their costs. As such, the banking industry was the first to suggest the Government explore into the use of e-cheque.
When this subsidiary legislation was under scrutiny by the Subcommittee, all of us worried whether the conventional cheques being used at present would all be replaced by e-cheques, as an end-user of e-cheques should be computer literate to a certain extent. I am pleased to say that the government officials have pointed out explicitly to the Subcommittee that the conventional cheques would still be in use after the implementation of e-cheques. Upon receipt of e-cheques, we can deposit the e-cheques to our accounts via Internet banking services instead of taking the cheques to the bank. This arrangement will bring much convenience to members of the public who are familiar with Internet banking services on the one hand, and enable enterprises to save on the time and manpower resources required to present the cheques to the banks on the other. I believe this would be good news to the small to medium enterprises. If the general public choose to receive e-cheques, their e-cheques can be presented either through the Internet banking platform of any local banks or the centralized presentment portal operated by the Hong Kong Interbank Clearing Limited for free. The payer can send the e-cheques via email, thus enabling both the payer 5038 LEGISLATIVE COUNCIL ─ 21 January 2015 and the payee to save time. For those members of the public who are not familiar with Internet banking services, the staff members of their local banks will help them handle the e-cheques they receive.
Security is one of my major concerns about e-cheques. In this connection, the Administration has stressed that it will make use of encryption, digital signature and public key infrastructure technology to achieve the effect that any attempt to tamper an e-cheque will make it invalid. However, as technologies develop and advance rapidly, I hope the Government and the banking sector will keep a close watch on the latest technological development and introduce new technologies where necessary, so that we can use e-cheques with an easy mind.
President, as Hong Kong will be the first in the world to implement e-cheques, some Members have queried at the Subcommittee meeting why Hong Kong dares to take the lead in this respect when many European countries and the United States which use a lot more cheques than us have yet to implement e-cheques. Personally, I support Hong Kong in exploring and implementing the use of e-cheques. Given that the banking sector has put forward this proposal and has collaborated with the HKMA to develop a system to safeguard the security of e-cheques, I hope this brand new banking service can enable Hong Kong's banking services to become more convenient and efficient on the one hand, and set a good example for the banking sector in the world on the other. In future, I hope the e-cheque can extend its coverage outside Hong Kong and make cross-border use of e-cheque a reality. In that way, we can make cross-border payments more conveniently.
Since the amendment to the subsidiary legislation this time has no effect on the Bills of Exchange Ordinance, even though the e-cheques can be deposited to the payee's accounts immediately, they payees have to wait until the second working day to use the relevant sum as in the case of conventional cheques. The purpose of making such an arrangement in the past is to allow time for the banks to verify the cheque and confirm whether the payer have enough money in the relevant account before paying the payee's bank the relevant sum on behalf of the payer. With the use of various security technologies, nevertheless, e-cheques should be able to save banks much time and manpower resources in principle. As such, the authorities should move one step forward and make it possible for the e-cheques to be deposited, transferred and cashed immediately. I hope the Administration and the banking sector will conduct a review shortly after the LEGISLATIVE COUNCIL ─ 21 January 2015 5039 implementation of e-cheques and expeditiously put forward proposals to amend the relevant legislation, so as to bring further convenience to the public and enterprises.
President, we all have an Octopus Card in our pockets, and this Octopus Card is a payment system developed by Hong Kong. This extensively used payment system has amazed many places across the world so much that they are following Hong Kong's example one after another to introduce a similar system themselves. I hope the e-cheque will achieve the same result: first implement in Hong Kong and then extend to many other countries in the future. I so submit.
Mr Andrew LEUNG moved the following motion:
"That this Council takes note of Report No. 10/14-15 of the House Committee laid on the Table of the Council on 21 January 2015 in relation to the subsidiary legislation and instrument(s) as listed below:
Item Number Title of Subsidiary Legislation or Instrument
(1) Electronic Transactions Ordinance (Amendment of Schedule 1) Order 2014 (L.N. 141/2014)."
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr Andrew LEUNG be passed.
MR CHARLES PETER MOK (in Cantonese): President, the Financial Secretary announced in the 2014-2015 Budget that e-cheque service would soon be introduced. Today is 21 January 2015. Being one of the many measures announced in the Policy Address or the Budget, its passage by the Legislative Council can be said to be swift. Why is it so? I think the most important reason may be that the transaction cost of the existing conventional paper cheques is really high. According to the Hong Kong Monetary Authority (HKMA), banks have to spend $1.7 billion on this annually. If the banks can save so much money, they would of course want to implement this as soon as possible.
5040 LEGISLATIVE COUNCIL ─ 21 January 2015
President, as a member of the technology sector, I welcome this development. I come from the sector, and I have witnessed the emergence of many novel and good technologies. However, whether they can be successfully applied or become popular very often hinges on practical issues, such as the capability of keeping abreast of the times in terms of implementation, operation and law, and how closely they can meet the needs of the clients. This proposal of course is about applying the Ordinance to cheques, but only limited to non-negotiable cheques. Bank clients have to pass a two-factor authentication before they can issue e-cheques, that is, the payer will have to make a digital signature for verification by the bank. The paying bank can further verify the e-cheque against the internal record of issued cheques to avoid the same cheque from being deposited twice by the payee. The implementation of e-cheque will surely enhance the efficiency of bank transactions and provide convenience for overseas clients who cannot cash the cheques in person. It can also be of assistance to some SMEs which still have to deliver cheques manually.
From the perspective of bank operation, e-cheque in fact is just a corresponding version of paper cheque, so, it is of utmost importance to ensure similar experience for clients. In order to issue an e-cheque to a payee, one must have a digital certificate issued by the same certification authority recognized under the Electronic Transactions Ordinance, or the payee's bank can apply on his behalf and keep the digital certificate. Nonetheless, in the last decade or so, the digital certificates introduced by the Government actually have not been widely applied. Some experience in this respect can be said to be "classic". I can come to this later.
As regards client experience, I can deposit a paper cheque to a bank at present, and in the future, I can deposit the cheque in the capacity of the payee through an online banking platform or the centralized presentment portal. In terms of operation, in the future, if someone does not want to accept an e-cheque ― just as Mr Andrew LEUNG said earlier ― he would have to tell the person issuing the cheque not to give him an e-cheque, or like what the Secretary said in replying to our questions, not to provide the payer with an email address. However, to many people or SMEs, individual or company email addresses are not for the purpose of receiving e-cheques. What if the other party already has our email address and send us everything indiscriminately? The authorities said that the cheque will expire and become void if it is not deposited within six months of issuance. Obviously, confusion to a certain extent may arise then. LEGISLATIVE COUNCIL ─ 21 January 2015 5041
If the payer has to seek the consent of the payee every time before he can issue an e-cheque, the process involved may make some consider that e-cheques are not as attractive as the conventional ones.
Of course, such inconvenience is unavoidable in the beginning, but it should not be an excuse or a reason for us to stick to the conventional way, with no intention to change. We should still accept the application of these new technologies. However, it is obvious that the future support and education provided by the HKMA and banks to the public will be very important. Such efforts include branch services of banks, telephone or even online customer service. Yet, if the banks are again asking the clients to wait, I am afraid the people and the SMEs will not switch to e-cheques readily. If so, banks will not be able to make savings. Therefore, will banks transfer these benefits to their clients in order to cut cost? I believe this warrants the serious consideration of banks.
Earlier, I said digital certificates are "classic". The Government outsourced the digital certificate service in 2007. In 2007, only 14 000-odd digital certificates were issued, and the number gradually rose to more than 21 000 in 2013-2014, while around 20 000 to 30 000 corporate certificates are issued annually. According to information furnished to us by the Government at the Subcommittee meeting, when compared with the number of territory-wide online personal banking accounts which stood at 9.1 million at the end of June 2014 and over 820 000 online banking accounts for enterprises, it can be seen that digital certificates account for less than 1% of online banking accounts. In other words, in terms of current figures, I am afraid very few have digital certificates for e-cheque payers.
Why did I say digital certificates are "classic"? This is because when it was introduced in 2000, my computer no longer had a floppy drive, but I was given a floppy; when even the CD drive was gone, I was given a CD. My eyebrows were really raised by the Hongkong Post. Now, they of course use the USB. Between 2000 and 2006, hundreds of thousands of digital certificates were issued because smart ID cards were issued then and the people could choose to have the digital certificates installed for free in the ID card chip. As a result, the figure seemed to be high but in fact, not many people installed or used it.
Why is digital certificate not installed and used? First, judging from the government services using digital certificates, it can be seen that only a very small number of people use it. Last February, I asked the Government a written 5042 LEGISLATIVE COUNCIL ─ 21 January 2015 question and in its reply, the Government said of its massive size and numerous services, only 41 services used digital certificates, and among them, some saw a greater usage. For instance, in 2013, the import and export declaration system and the Road Cargo System of the Hong Kong Customs and Excise Department recorded over 19 million and 40 million usages. There are also some encouraging examples in commercial application, but personal application by the public is dismal. Let me cite an example. For the application of renewal of full driving licences at the Transport Department, for the three years from 2011 to 2013, the respective numbers for the use of digital certificate service were 36, 37 and 34. The figures can be said to be miserable. Moreover, the Department of Health runs four digital certificate services, namely the registration for importer/exporter of pharmaceutical products, the application for authorized seller licences for drugs, the application for seller licences for listed drugs, and the application for wholesale licences of dangerous drugs. Between 2011 and 2013, no digital certificates were used for these four services. As for two other services, also of the Department of Health, they began to use digital certificates in 2013, and each service recorded one usage only.
I cited this example of digital certificate to make two points. First, if we are to make e-cheque popular, we have to get people issue and accept it in the first place. When people are willing to issue e-cheques, it means that they are willing to pay by e-cheques and digital certificates have to be much more popular than they are now. Nonetheless, given their track record, we sometimes have to worry and cannot be very confident.
What will banks, the HKMA and the Government do to promote not only e-cheques, but also digital certificates? In recent years, tens of thousands of personal digital certificates have been issued annually. If you take an application form from a bank, you can see that it is stated in detail and very clearly that an annual $50 … Not an annual fee, but $50 will be charged for registration in the first year. If the use of e-cheques can save the banks so much money, will they help to simplify the application procedure, or even subsidize the registration fee?
President, second, by referring to digital certificates, I would like to point out that if we really want to make e-cheques a success, we have to learn from the past failure of digital certificates. In the absence of applications and user-friendly methods of use, e-cheques cannot be a success. What we will lose is time and opportunity, not money.
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Furthermore, I would also like to offer some views on the development of the Electronic Transactions Ordinance. The Ordinance was enacted in 2000 and amended in 2004, which was over a decade ago. This time, the amendment is focused on the provisions pertaining to the launching of e-cheques. This is not an issue and I give my full support. However, are there no other things in the Ordinance which require updating? Does the Government need to introduce some provisions to tie in with the development of e-commerce? For instance, I have over and again demanded the inclusion of time stamps in electronic certificates which at present is not a statutory requirement.
A time stamp in fact is an electronic proof issued by a reliable certification authority. It can prove the presence and integrity of an electronic document at a certain time, and can be certified. Actually, the e-cheques which are being promoted now will bear such a time stamp. However, a time stamp with legal effect can prevent tampering or denial afterwards, and can also ascertain the exact time the electronic document is generated. Regarding electronic certification, apart from having the functions of time certification and counterfeit prevention, it can also indirectly enhance the implementation of a paperless model. This can practically save administrative cost in all respects. There are many examples in this respect. For example, legislation is not yet applicable to the electronic versions of documents such as fixed penalty tickets, summons and bids. But in fact, resources required for the delivery of the actual documents can be saved by adopting this mode.
Up till now, the reply I have got from the Government is that the existing Ordinance does not rule out the possibility of including time stamps into digital certificates, and in fact, currently, many applications have included time stamps. Yet, the Government also said that it had consulted the market and found that there was no such need. I have also consulted the industry. Their response was that if there was such a statutory requirement, there would be more demand. So, this is a good thing. Therefore, this seems to be a matter of what comes first: the egg or the chicken.
The authorities enacted the Electronic Transactions Ordinance in 2000 and amended it in 2004. A decade has passed but no timely update has been made to the legislation for it to keep abreast of the pace of some international communities. Many neighbouring countries and regions, for example, Singapore, Taiwan and Macao, have required the inclusion of time stamps in 5044 LEGISLATIVE COUNCIL ─ 21 January 2015 electronic certificates. The authorities should make reference to the latest trend of electronic transactions in the international arena. Pertinent provisions should be introduced to enhance the recognition and legal status of electronic certificates.
In fact, many countries have required the inclusion of time stamps in electronic certificates. For instance, Singapore has done so; New Zealand did so in 2010; Australia in 2011; and Malaysia as early as 2006. In 2001, the United Nations Commission on International Trade Law released the Model Law on Electronic Signatures, which also recommended countries to legislate on the inclusion of time stamps for digital signatures.
Thus, my question remains: Why can we not conduct a more extensive consultation on the Electronic Transactions Ordinance? No doubt, in the Legislative Council, we often come across legislation which obviously requires review and consultation, but when we make enquiries with the Government, it will definitely say there are no problems, it sees no need for review and it has no plans to consult. I cannot understand what keeps it so busy behind. In 2000, Hong Kong became one of the regions which had introduced early legislation on electronic signature. However, more often than not, the Government is reluctant to introduce timely updates upon the enactment of legislation. Thus, every time, our "new cars" become out-dated ones, and we are overtaken by other countries and regions. Can the Government go for a change?
President, today, I will of course support the amendment to the pertinent legislation, but I hope that the Government can conduct an expeditious review of the Electronic Transactions Ordinance. I so submit. Thank you, President.
MR SIN CHUNG-KAI (in Cantonese): President, I would like to respond to the joke told by Mr Charles Peter MOK just now. Actually, a good friend of mine received some cheques as gifts for her daughter's wedding, then after half a year's time he found that the cheques were sitting in his pocket. As the cheques are now half a year old and not yet deposited to his bank account, he wonders if he should ask his good friends to replace their gift cheques with cash.
This is an area of concern in my view when I look at this amendment to the Electronic Transactions Ordinance. A paper cheque is a material object which one can be sure of its presence when one receives it. Whether or not the cheque is deposited before the expiry date is the payee's own responsibility which he has LEGISLATIVE COUNCIL ─ 21 January 2015 5045 to shoulder nonetheless. I have spent quite some time raising questions at the Subcommittee meeting, and my questions were all focused on this point: Can people refuse to receive e-cheques; if so, how can they do so? The Secretary and the representatives of the Hong Kong Monetary Authority (HKMA) have also pointed out that the bank concerned will get a record at the moment when the e-cheque is issued, as if the cheque had been sent to the payee. However, even though the cheque is sent, it does not mean the payee has received it or even deposited it. As such, we need to voice out our concerns and worries in this respect.
The amendment introduced by the Government to the Electronic Transactions Ordinance this time seeks to introduce the use of e-cheques and to allow e-cheque to carry the same statutory effect as paper cheques, so that Hong Kong can become the first in the world to use e-cheques, thereby making the Hong Kong financial sector an innovative pioneer in information technology application. If Members can recall, Hong Kong is the first in Asia to introduce the automatic teller machine, as the Hong Kong and Shanghai Banking Corporation set up Hong Kong's first automatic teller machine in the busy Central District in 1980. The Octopus Card is another good example. Actually, a certain bank had developed a product called Mondex before the Octopus Card was introduced. However, the Mondex was not successfully developed while the Octopus Card managed to make it to the market very quickly. The developer of Mondex had intended it to be a multi-currency product, capable of handling more than one type of digital currency. It has been said that Hong Kong's Octopus Card will become a multi-currency instrument later on, as it may also handle Renminbi transactions in addition to transactions in Hong Kong currency.
The Octopus Card is a success which is founded on several factors. While technology is certainly one of them, the most important one is its extensive application. Why did so many people choose to use the Octopus Card shortly after its introduction? As many people needed to take the Mass Transit Railway (MTR), the Octopus Card was extensively received and used by the public once it was launched. The Octopus is eventually developed into a payment instrument applicable in many areas. In addition to the MTR, people can use the Octopus Card to pay the fees for other mode of transportation or even make payments in areas other than transportation. Nevertheless, not many people know that the Octopus Card is somewhat like a licensed bank.
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The e-cheque introduced by the HKMA today should be of great help to the enterprises in their daily operation, including saving the time required for issuing cheques and other complicated procedures, enhancing the efficiency of payment and operation processes, saving on the costs involved in handling cheques like postage, and so on. To the banking sector, the enhancement in cost-efficiency is most obvious because large-scale cheque clearing procedures require ample manpower resources, and the huge cost involved is borne by the banks concerned. According to the information provided to the Subcommittee by the Executive Director of the HKMA, Mr Esmond LEE, it costs the banks $15 to handle a paper cheque, and the entire banking has to spend $1.7 billion per year in this respect. In other words, each e-cheque used will help the sector save $15. Actually, this is rather like a joke, as it takes $15 to handle a $2 cheque. How expensive this cheque is! I have worked in the IT office of a bank in the past, and I have also handled the bank's clearing system. I really have supported the bank's clearing system and worked with that clearing machine before, but that was some 20 years ago. I hope we will all use e-cheques in the future, so that those large machines can retire finally.
As Mr Charles Peter MOK or Mr Andrew LEUNG has pointed out just now, the total number of Internet banking accounts has increased to 9.1 million over the past 10 years, and the number of enterprise and corporate Internet banking accounts has also increased to 820 000. Digital banking services, including Internet banking, digital financial services and automatic teller machine services, are very popular among customers. Certainly, I have also received complaints from many grass-roots members of the community in this connection. They told me that as the cost for running a branch office is huge, many banks have been keeping their numbers of branches to the minimum, so much so that they have to go to some remote areas to use the banks' services. As such, I hope the HKMA will implement more measures to offer assistance and convenience to the public, and refrain from turning all banking services digital … after all, we do need to have some "face-to-face" interaction in using banking services every now and then.
I welcome with prudence the service introduced by the HKMA and the banking sector this time. Certainly, they are only amending the relevant ordinance, and the HKMA has to conduct a lot of tests to enhance the system after the Bill is passed. All systems have one thing in common and they all need to be founded on one crucial factor: the public's confidence in the system LEGISLATIVE COUNCIL ─ 21 January 2015 5047 concerned. If the people do not have any confidence in the system, not many of them will use it. Hence, it is most important for a new system to be painstakingly designed if its developers wish to ensure its success.
E-cheques are environmentally friendly. According to the HKMA's estimation, if half of the conventional cheques are replaced by e-cheques, about 18 million paper cheques can be saved, which means that we can save 1 800 trees and even reduce 132 carbon emission units.
I am also concerned about network security. There is no doubt that e-cheques will bring about much convenience, but they will also pose a great challenge to the security system of local banks. An e-cheque is issued through Internet banking services. When an e-cheque is created by the paying bank, it will either be sent directly to the payee via email or downloaded by the payer who will then email the downloaded e-cheque to the payee. The Internet world is borderless, and hence the Government must keep a very close watch on network security when implementing e-cheque. Certainly, a $20 cheque gives no incentive at all, but an e-cheque of $20 million or more will certainly pose a huge incentive to hackers. When the e-cheque is in the making and in the transmitting process, hackers may have the chance to break into the network through its security loopholes. In this connection, I hope the Government and the banking sector will put in great effort to check out the various unlawful activities, including impersonating the payee, forging the payer's digital signature, tampering the amount of the e-cheque, and so on.
Nothing is absolute. Even though the Government will certainly claim that e-cheques are safe, its security actually hinges on the cost concerned. As we all know, no network can claim that it is absolutely secure, the crux of the matter lies in the cost one intends to use to break into it. If I need to spend $1 million to break into a network to earn $10, I will not do it definitely; however, if the $1 million I spend to hack into your network can get me a return of $10 million, I will find it very profitable. Hence, both the banks and the HKMA have to deal with this issue with great care. It is my hope that the Government will have completed testing all the infrastructural facilities and technical tests before implement e-cheque, including encryption, digital signature and public key infrastructure technology, so as to ensure the security of e-cheques.
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Another point of concern I have mentioned repeatedly in the Subcommittee is refusal to accept e-cheques, and I will come to that later.
I will now speak on the time required to transfer the value of the cheque. At present, it takes one clearing day to clear a conventional paper cheque, which means that the cheque cannot be cashed immediately. Even though it is possible to cash an e-cheque on the same day in principle, payees still have to wait until the next day to cash their e-cheques because the objective of the Bill is to allow e-cheque to carry the same statutory effect as paper cheque. Without doubt, at the present stage, the first step we need to do is to allow e-cheques to carry the same statutory effect as paper cheques. However, if I can take the train, there is no point in forcing me to run. Even though running is good for health, it is not fast enough … Theoretically, e-cheques can be transferred, deposited and cleared immediately, but they are now required to be processed like paper cheques. After implementing e-cheques for some time, the authorities should really consider allowing e-cheques to surpass paper cheques, by that I mean e-cheques should not be the same as but better than paper cheques.
Indeed, one of the merits or special features of e-cheques is the fact that they can be paid right away. In addition to cutting cost, immediate payment can also help to eliminate the clearing risks arising from time lag, including defaults and liquidity risk, as well as credit exposure arising from eventually bounced cheques. As a digital payment method, the e-cheque should give full play to its merit as an immediately payable cheque and speed up the payment process. This is the merit of enabling e-cheques to surpass paper cheques, as the clearing risks I referred to just now can be minimized as a result.
Hence, I hope the authorities will conduct a comprehensive review after this new measure has been implemented for some time. Even though the authorities may have to wait until the measure has been in operation for a comparatively longer time to conduct the review, I still hope that the Government will include such a review in its agenda. At least the authorities have to consider speeding up the transfer time to allow enterprises greater flexibility in deploying their financial resources.
Another point which has also been raised in the Subcommittee is the so-called potential of application in cross-border payment. According to the Government's current arrangement, the use of e-cheques is confined to Hong Kong. However, in view of Hong Kong's successful experience, places like LEGISLATIVE COUNCIL ─ 21 January 2015 5049
Singapore may also follow suit. Should that the case, would there be any development room for the so-called cross-border e-cheques? Certainly, the issues involved will be more complicated than in the case of local e-cheques, as international co-operation must be secured.
According to the Government's statistics, an estimated total of 12 800 enterprises (4.3%) used e-commerce in 2013, representing a two-fold increase when compared with the 1.5% recorded in the previous survey conducted in 2009. As regards the ratio of total sales conducted through e-commerce in enterprises' business receipts, the figure has risen from 1.69% in 2008 to 3.69% in 2012, and the total sales in 2012 amounted to some $280 billion. From these figures we can see that the number of transactions conducted via the Internet has been on the rise. An additional payment method will certainly help to give cybertrade a boost. This morning, Mrs Regina IP raised an oral question about measures to boost e-commerce, only that the reply given by the Secretary was so ambiguous. Nevertheless, if one more payment method is made available, it will certainly help to give e-commerce a boost.
Moreover, as mobile technology and smart phones become increasingly popular, consumers can conduct Internet transaction via their smart phones anytime and anywhere.
Finally, after raising all these points, I will now come to my last and yet major point of concern: Are there any ways for payees to indicate clearly that they do not want to receive e-cheques? Other members of the Subcommittee have also raised many questions in this respect. Indeed, even though we have indicated that we do not wish to receive any e-cheques, we cannot rule out the possibility that we may receive such one day. I hope the Secretary will respond more specifically later on and tell us what measures the HKMA and the banking sector will implement in the future … I believe the Secretary is in a much better position than I to disclose those measures, right? This is because the measures to safeguard clients' interests will be involved. The payees of e-cheques can be individuals or business operations. For the business operations, e-cheques can be considered as one way to help them reduce cost, as they can at least save the time required to handle paper cheques. As regards individuals, those who always receive cheques may find it no big deal, but those who very rarely receive cheques may think otherwise, as not many people have … As pointed out by Mr Charles Peter MOK just now, the utilization rate of digital signature is rather low, and I believe this is a factor the Government needs to take into account.
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Over the past 10 years, technology has been developing very rapidly. Given that the Government is determined to try out this new attempt, I must give it encouragement and support. I also support the subsidiary legislation before us today, and my only advice is that the Government and the HKMA should exercise much greater care in implementing the e-cheque, which can be a success only after members of the public have built up enough confidence in it.
I so submit.
PRESIDENT (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
PRESIDENT (in Cantonese): Members have already spoken.
SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, as an international financial hub, innovative financial products are incessantly launched in Hong Kong with a view to substituting their old counterparts to tie in with its economic development and create numerous business opportunities.
At present, paper cheque is one of the mostly used payment instruments among others, as there are about 500 000 cheques cleared by the Hong Kong Interbank Clearing Limited on a daily basis. The Hong Kong Monetary Authority (HKMA) has been introducing continual improvement measures to smoothen the payment process. Today, Internet banking has gained increasing popularity, as it enjoys a three-fold increase in the number of accounts comparing with 10 years ago. With the concerted efforts made by the banking sector, HKMA is planning to launch the world's first e-cheque platform. By then, no matter the issuance or presentment of cheques, the process can be completed through Internet banking or mobile service.
The advantage of e-cheque is multifarious. First of all, members of the public may issue or present the e-cheque via the Internet. Besides, each e-cheque contains the digital signature of the payer and the paying bank, the LEGISLATIVE COUNCIL ─ 21 January 2015 5051 signing and issuance of e-cheque is faster and safer. E-cheque also retains the advantage of conventional paper cheque, such as the rights of the payer and the payee will still be protected under the Bills of Exchange Ordinance.
To enterprises, e-cheque will bring automation to the process of cheque issuance, signing and presentment, which will eliminate the current minute and complicated procedures and improve the operational efficiency. At the same time, it will save the manpower and time. It provides a safer and more cost-effective payment instrument to society, which may also lower the cost of economic activities. I believe this new payment instrument, that is, the e-cheque, will help local business, in particular SMEs to explore e-Commerce business and create business opportunities.
Prior to the launch of e-cheque, HKMA and participating banks will conduct a series of promotional and educational activities geared towards a wide audience in order to enhance the acceptance of e-cheque and the confidence of the business sectors and general public in e-cheque. HKMA and the Hong Kong Association of Banks will formulate guidelines and best practices, and participating banks will make resources and channels available to provide assistance to customers in handling any enquiries and possible operational issues of e-cheques. HKMA will conduct large-scale promotional and educational activities on the use of e-cheques. Banks will also assist their customers to apply for the digital certificate, and they will facilitate its uses as much as possible in a very user-friendly way. HKMA supports these efforts and will promote the use of e-cheques.
Moreover, just now certain Members, especially Mr SIN Chung-kai, are concerned whether the public will be forced to accept e-cheques as a means of payment. Generally speaking, a payer and a payee will reach an agreement on the payment instrument of a certain transaction before the payment is made. If a payee chooses not to accept paper cheques or e-cheques, he should refuse the acceptance of e-cheques to be issued by the payer or decline to give his email address to the prospective payer. HKMA and the Hong Kong Association of Banks will formulate guidelines and best practices which specify that payers can issue e-cheques to payees only if the payers have obtained the consent and valid email addresses from the payees.
Schedule 1 to the Electronic Transactions Ordinance stipulates that certain instruments (including promissory notes and cheques) are not allowed to be transacted electronically. Therefore, if we are to launch the e-cheque, the 5052 LEGISLATIVE COUNCIL ─ 21 January 2015
Government has to amend Schedule 1 to the Ordinance in order to allow e-cheques to carry the same statutory effect as paper cheques.
Just now Mr Charles Peter MOK said that it was necessary to review and amend the Ordinance to the effect that institutions are allowed to provide the time stamp service. The technically neutral approach adopted by the Ordinance does not prevent institutions to do so. In fact, recognized certification authorities have also provided time stamp service before, which is just the time stamp as Member mentioned just now. Recognized certification authorities will keep a close watch on the trade's need for time stamp and provide the service in a timely manner.
E-Commerce laws of most economic entities (such as China, Singapore and Hong Kong) are based on the Model Law on Electronic Commerce of the United Nations Commission on International Trade Law, as well as the United Nations Convention on the Use of Electronic Communications in International Contracts. The model law and the convention have not prescribed a statutory time stamp requirement. At present, most countries, such as Australia, Canada, China, the United Kingdom and the United States have not prescribed a statutory time stamp requirement in their e-commerce laws.
Just now Mr SIN Chung-kai also showed his concern about the future development of e-cheques. Until the public have been familiarized with the use of e-cheques in making payment locally, HKMA, clearing houses and banks in other places will explore the possibility of the cross-border use of e-cheques, in order to enhance the cost-effectiveness of cross-border payment.
President, I wish to thank the Chairman of the Subcommittee on Electronic Transactions Ordinance (Amendment of Schedule 1) Order 2014, Mr Andrew LEUNG and subcommittee members for endorsing the proposed amendments to Schedule 1, which has made the completion of the deliberation possible.
I so submit. President, thank you.
PRESIDENT (in Cantonese): End of debate. In accordance with Rule 49E(9) of the Rules of Procedure, I will not put any question on the motion.
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PRESIDENT (in Cantonese): Debate on motion with no legislative effect. The motion debate on "Combating insurance frauds".
Members who wish to speak in the motion debate will please press the "Request to speak" button.
I now call upon Mr CHAN Kin-por to speak and move the motion.
COMBATING INSURANCE FRAUDS
MR CHAN KIN-POR (in Cantonese): President, I move that the motion, as printed on the Agenda, be passed. Insurance frauds have become unmanageable, and among them, the worst cases are those about workmen's compensation insurance and motor vehicle insurance which involve personal injuries or death. What is more, the frauds have become syndicated. Very often, an extensive network of recovery agents, loss adjusters, lawyers and doctors is involved. In the face of persistent losses, insurance companies were forced to keep increasing the insurance premium, which has in turn forced members of the public, including employers and vehicle owners who are statutorily required to procure insurance, as well as owners and passengers of taxis and minibuses to foot the bill resulting from the frauds.
I would like to cite a number of authentic cases. Injured in a traffic accident, a motorcyclist was granted a prolonged long sick leave by a public hospital. But when he drove his motorcycle while on sick leave, he encountered another traffic accident and attended another public hospital. It so happened that these two public hospitals have granted him the same length of sick leave, and he has subsequently claimed from two different insurance companies. It is most ridiculous that after the trade relayed the case to the Hospital Authority (HA), the latter refused to conduct an investigation on the pretext of patient privacy.
As a matter of fact, insurance companies may refer dubious cases to private detectives for investigation and video-recording. An example is that, a worker who has reported work injuries was videoed to be wearing a neck brace and walking on crutches when he sought medical consultation, but then took off the neck brace and walked freely without the crutches after the consultation. However, when the video clips were submitted to the HA to request for a review, the latter refused to watch or conduct a review on the pretext that this involved 5054 LEGISLATIVE COUNCIL ─ 21 January 2015 the privacy of patients. Privacy is certainly important, but it is indeed too bureaucratic and absurd for the HA to turn a deaf ear to real-life problems or its own mistakes on such ground in this open society today.
Another case is concerned with a newly recruited bus captain who slipped when he was working in a bus depot a few days after he reported duty. Due to his back injury, he was granted a two-year sick leave respectively by a hospital and a private practitioner. However, according to the assessment result of work injuries assessed by the Labour Department, he had only lost 5% of his earning capacity. With the assistance of the lawyer engaged by the Legal Aid Department (LAD), however, the bus captain claimed $6.5 million, of which $3 million was for the compensation of future income loss; $1.6 million for the loss of free bus rides entitled to him and his family members; $630,000 for the loss of overtime compensation and Mandatory Provident Fund, and $500,000 for the pain and suffering and loss of amenities. After hearing his claims, I think ordinary people would consider him asking for an exorbitant price. Worse still, the reasons provided by him are absurd.
The trial was completed in August 2014. The Judge ruled that the bus captain was not seriously injured and the reasons for compensation were absurd, and he was a dishonest person who had avoided working on the pretence of being ill. In the end, the bus captain only received a compensation of $350,000. As he has already received a compensation of $590,000 … since he is not required to return that sum of money under the existing law, this case has cost the insurance company a considerable amount of lawyers' fees. Given that the prima facie evidence of fraud in many such cases are not obvious and fails to substantiate the fraud, even the Court can do nothing about them. This has also subject the insurance companies to huge lawyers' fees.
Some fraudulent cases related to work injuries do raise eyebrows. Recently, an insurance company came across a work injury case in which the young claimant in his early thirties claimed for work injuries for eight times. The insurance company believed that he had taken prolonged sick leave on eight occasions, and the total number of days on leave was probably more than the number of days at work. The claimant can be said to be a professional in work injuries as he is familiar with the claim procedure, and has obtained a huge sum of compensation insurance premium.
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In another case, a person claimed $320,000 from an insurance company but the latter bargained to pay $270,000. However, after the claimant was granted legal aid and secured assistance from a lawyer engaged by the LAD, he revised the claim amount to $3 million. Although the claimant received only a few hundred thousand dollars in the end, this has cost the insurance company concerned an extra few hundred thousand dollars of litigation fees.
I have actually repeatedly highlighted the operational deficiencies of the legal aid system, which has indirectly encouraged champerty activities of recovery agents. Under the existing system, an applicant for legal aid may choose a lawyer to represent him. Lawbreakers thus take advantage of this loophole to talk the victims who were injured in industrial or traffic accidents into applying for legal aid on the one hand, and then choosing their lawyers to represent them on the other, so that they can carry out champerty activities with the huge resources obtained from legal aid. Members of the trade stated that for cases handled by recovery agents, the clients often received only one third of the insurance payouts minus lawyers' fees from the insurance companies, whereas the recovery agents and lawyers received the remaining two thirds.
Insurance frauds have caused the insurance companies to suffer losses, and the hardest hit is workmen's compensation insurance. For the 10 years between 2004 and 2013, it has recorded a total loss of $2.8 billion, representing an annual loss of $280 million on average. The year-on-year deficit has forced the insurance companies to keep increasing the premium for workmen's compensation insurance. In 2009, the total premium was $4 billion, but it gradually rose to $6.7 billion in 2013, representing an increase of 67% in five years. Notwithstanding that, the loss incurred by insurance companies continued to climb and they can just keep increasing the premium. As a result, employers procuring insurance became the major loser, and the winner is the insurance fraudsters.
Over the past year or two, certain industries, especially the scaffolding, environmental protection, catering and cleaning industries, often encountered difficulties in procuring workmen's compensation insurance. As workers in these industries are more prone to work injuries, insurance companies would be particularly cautious about the insurance procured by these industries. Companies that have been awarded huge compensation will encounter even greater difficulties in procuring insurance.
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The motor third party insurance business in respect of taxis is still suffering heavy losses, and the accumulated loss is more than $120 million in the past decade. Taxi insurance premium has increased from some $9,000 in 2008 to presently over $20,000. Insurance premium for minibus has also increased from $20,000 in 2009 to presently $40,000. Not only the transport industry, but also passengers and the insurance sector have suffered.
In fact, the Legislative Council of the previous term formed the Joint Subcommittee on Issues Relating to Insurance Coverage for the Transport Sector (the Joint Subcommittee) to look into motor insurance frauds. A number of recommendations have been made, which include rectifying the abuse in the issuance of sick leave certificates and establishing a central reporting mechanism to receive complaints relating to insurance frauds. Although the report has been completed for two years, most recommendations have sunk into oblivion and the HA has simply neglected them. Luckily, the Police have responded proactively and decided that the Commercial Crime Bureau should be tasked to receive reports from the insurance sector. This has achieved certain success in the past two years, including the crackdown on a case of one-stop motor insurance fraud involving loss adjusters, vehicle repair workshops, recovery agents and vehicle owners, who were allegedly involved in more than 100 such cases and over 10 insurance companies were allegedly cheated.
The Hong Kong Federation of Insurers would like to take this opportunity to commend the efforts of the Police in particular, and hope that they will mount an all-out attack on other insurance frauds as well, especially those of workmen's compensation insurance. Workmen's compensation insurance frauds have profound effect on the insurance sector and small and medium enterprises, and the amount cheated is the largest on the whole. As an international financial centre, Hong Kong should not turn a blind eye to the astronomical number of fraud cases, otherwise fraud offences will continue to grow and turn the insurance sector into an "automatic teller machine" of lawbreakers.
I certainly understand that if the problem is not tackled at root, all the efforts of the Police will be futile. Given the extensive reach of insurance frauds, I propose that an inter-departmental task force be set up to pool the efforts of various departments, including the HA, Police, Social Welfare Department (SWD), Labour Department and Office of the Privacy Commissioner for Personal Data (PCPD), to comprehensively combat insurance frauds and plug the loopholes in the existing system so that fraudsters will have no chances.
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The HA plays a pivotal role in combating insurance frauds because people who want to cheat for insurance compensation must first cheat for medical certificates. The Joint Subcommittee has, at its last meeting, thoroughly discussed the issuance of medical certificates by HA doctors. Despite the difficulties explained by the HA, I think HA doctors have granted medical certificate of sick leave lasting for weeks, months and even years, too laxly, which has caused serious problems. The HA should make reference to overseas practices and establish a review mechanism for sick leave lasting for a few months. If doctors issue medical certificates too laxly, patients genuinely injured at work may not be able to receive proper treatment and become incapacitated in the end.
Furthermore, the Police should step up the combat against insurance frauds. More covert operations can be conducted to combat these illegal activities and focus on those syndicated frauds.
At present, the financial sector has already introduced the sharing of positive credit data for the examination of the borrowers' credit condition. However, due to privacy consideration, the insurance sector has yet to maintain a database on insurance frauds for prevention purpose. Even if a fraudster cheated a number of insurance companies in a row, we can do nothing about it. Thus, we hope that the PCPD can help the industry solve the technical problems and set up a central claims database for the insurance companies to get the relevant information. This may also serve to deter insurance frauds. While loss adjusters are often involved in traffic accidents, their work is not subject to statutory control and there is no qualification requirement either. This will definitely give rise to many problems and the Government should therefore consider bringing loss adjusters under control.
On the other hand, the SWD has implemented the Traffic Accident Victims Assistance Scheme to help victims of traffic accidents. While the intention is good, the approval procedure is too simple as it only requires an applicant to report to the Police and produce a medical certificate. Fraudsters thus tend to make up accidents to cheat for government assistance. Once they secure government assistance, they will move on to cheat for insurance compensation. Therefore, the SWD should review the existing approval procedure to prevent manipulation by fraudsters. Worse still, loopholes found in the existing Employees' Compensation System have resulted in a spiraling increase in lawyers' fee, and it now accounts for more than half of the total compensation. It is therefore necessary for the Labour and Welfare Bureau to look categorically into the matter.
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Lastly, if the Government can set up an inter-departmental task force and successfully combat against insurance frauds, it will not only stop fraud offences, but will also significantly cut down on the total compensation and insurance premium, thereby bringing benefit to both employers and members of the public.
I so submit.
Mr CHAN Kin-por moved the following motion: (Translation)
"That insurance frauds have become increasingly rampant and syndicated, and, in particular, frauds involving workmen's compensation insurance and motor vehicle insurance are ever-growing, resulting in continuous increase in the compensation amounts of relevant insurance and corresponding rise in insurance premiums, thereby increasing the operating costs of the various industries and trades, especially the transport sector as well as small and medium enterprises; although the relevant industries have been compelled to shift part of the costs to consumers, they are still facing operating difficulties; various sectors of the society have all along been at wit's end about what to do with the lawbreakers who are continuously engaged in insurance frauds, resulting in the rise of the absurd phenomenon of 'fraudsters cheating money, people footing the bill'; in this connection, this Council urges the Government to set up an inter-departmental task force to pool the efforts of various departments to comprehensively combat insurance frauds and plug the loopholes in the existing system."
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr CHAN Kin-por be passed.
PRESIDENT (in Cantonese): Mr LEE Cheuk-yan will move an amendment to this motion. This Council will now proceed to a joint debate on the motion and the amendment.
I now call upon Mr LEE Cheuk-yan to speak and move an amendment to the motion.
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MR LEE CHEUK-YAN (in Cantonese): President, I move that Mr CHAN Kin-por's motion be amended. My amendments primarily seek to include the concept of a "central employees' compensation fund" into the motion.
As the theme of Mr CHAN Kin-por's motion is insurance fraud, I will first give my response to it. Of course, I would not deny that the problems mentioned by Mr CHAN Kin-por have actually happened. But I am concerned that the insurance sector as a whole might have prejudice against the claimants of industrial or traffic accidents, regarding them as villains who intend to defraud insurance companies. In that case, insurance companies may have to engage private investigators to follow the claimant in each and every case.
We have received some complaints from employees who said that while they had actually sustained injury, they were still being followed. For them, this is also a kind of pressure. Of course, I would not dismiss the examples mentioned by Mr CHAN Kin-por just now. In fact, in many cases, the Court finally ruled against the claimant who must also pay the costs.
Just now, Mr CHAN also made certain allegations about champerty being encouraged by the availability of legal aid. However, the legal aid system has provided assistance to many people. If some people question the legal aid system simply because of some isolated cases, I think they are just being narrow-minded for they are only concerned about the interests of the industry. I hope Members will not take such a negative view towards legal aid.
Another negative view is that the doctors of the Hospital Authority (HA) are being too lax. As we are not doctors, we should neither challenge their professional judgment nor criticize them as being too lax. The patients are treated by the doctors and not you. Likewise, it would be difficult to substantiate the claim even if the challenge came from another doctor for the said doctor has not actually treated the patients concerned himself. If some people hold that HA doctors are too lax, the criticism is still premised on self-interest without considering objective circumstances. What they are referring to is seemingly a deception syndicate with members including doctors and lawyers. I think this view is quite unfair to the doctors. Of course, a criticism was also raised just now against the HA not paying attention to the matter. Nonetheless, the HA is tasked to treat patients and not to deal with the queries raised by insurance companies. I hope Members will clearly bear in mind the responsibility of HA.
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Coming back to the motion itself, we are of course against any act committed by any person to defraud insurance companies because that is illegal and improper. We condemn those acts. But we are concerned that innocent people might be caught inadvertently. If insurance companies wilfully engage private investigators to follow claimants suspected of defraud in the hope of deterring them, this is also a kind of harassment, and pressures would be created for the claimants. This is not what I want to see.
In fact, more proactive measures should be adopted by insurance companies. Previously, we had discussed with the insurance sector the proposal to establish a vocational rehabilitation programme to help workers get back to work as soon as possible. This is actually the proper way forward. I recall that the insurance sector also suggested that the HA should set up a department for vocational rehabilitation. At present, the insurance sector already adopts the arrangement under which claimants can voluntarily choose to be attended by doctors specified by the insurance sector. As I said just now, the insurance sector belittles the professionalism of HA doctors for its own interest. Likewise, claimants would query whether the demand for claimants be attended by doctors specified by the insurance sector is made to protect its own interest. They have no faith in the doctors specified by insurance companies. Hence, we consider that the best option is to set up a vocational rehabilitation programme under the HA because the HA is impartial.
Actually, a rehabilitation programme is provided by the HA for its employees. When holding discussions with the HA, we asked whether all patients with work injuries can join its rehabilitation programme, with the relevant costs to be paid by insurance companies. I recall that during the discussions, insurance companies also indicated the wish to establish their own rehabilitation programme because it would be a win-win situation if the programme can reduce the compensation payments while helping patients with work injuries to resume work early. We are willing to further explore the feasibility of this proposal with Mr CHAN Kin-por.
Separately, Mr CHAN Kin-por has mentioned that the problem of insurance fraud is worth our attention because a substantial amount of underwriting loss has incurred. According to the clear figures provided by Mr CHAN, while the amount of such loss between 2004 and 2013 is $2.8 billion, insurance premiums LEGISLATIVE COUNCIL ─ 21 January 2015 5061 have increased from $4 billion in 2009 to $6-odd billion in 2013, representing an increase of 67% over five years. That is exactly the focus of my amendments, namely, many people have complained about the difficulty in procuring insurance. Of course, some people would refer to the existing Employees' Compensation Insurance Residual Scheme (ECIRS). But what I mean by "difficulty in procuring insurance" is that a person cannot take out the relevant insurance at a reasonable premium. As the premium under ECIRS is still very high, it cannot help resolve the problem of escalating insurance premium. Both the transport and construction industries opine that their operating costs have been increasing.
As I said just now, insurance premium has increased by 67% on average over the said five-year period. That is just an average figure. For industries with a relatively large number of work injury cases, insurance premium over the said five-year period may have risen by 200% or 300%. This problem must be resolved. I propose that a "central employees' compensation fund" should be established so that the insurance sector will no longer have to bear the loss of $2.8 billion. Instead, the responsibility should be shouldered by the Government.
If the compensation fund is operated by the Government, insurance premium will definitely be put under regulation. As such, insurance premium will not keep rising. Moreover, we also hope that insurance premium can be pegged with occupational safety. The Government is duty-bound to improve safety through the "central employees' compensation fund" and hence, bring down insurance premium. The proposal can also cut down the profits of agents and administration fees. That is what I mean by the concept of a "central employees' compensation fund". I earnestly hope that the industry can support the establishment of a "central employees' compensation fund" to be operated by the Government because I do not want to see them suffer any loss again. As the proposal is supported by Mr Tommy CHEUNG, it means that the idea has the blessing of both the business and industrial sectors. Why does the Government still refuse to take it forward? I hope that the "central employees' compensation fund" can be established as soon as possible.
Thank you, President.
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Mr LEE Cheuk-yan moved the following amendment: (Translation)
"To add "; this Council also urges the Government to set up a 'central employees' compensation fund' to be operated by a statutory body, so as to save the administration fees incurred for handling insurance claims in respect of industrial accidents, and to reduce frauds relating to workmen's compensation insurance" immediately before the full stop."
PRESIDENT (in Cantonese): I now propose the question to you and that is: That the amendment, moved by Mr LEE Cheuk-yan to Mr CHAN Kin-por's motion, be passed.
UNDER SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, first of all I would like to thank Mr CHAN Kin-por for proposing this motion debate on "Combating insurance frauds" and Mr LEE Cheuk-yan for proposing the amendment. I would like to give a brief response concerning insurance frauds. As regards the "central employees' compensation fund" proposed by Mr LEE Cheuk-yan, I will make a collective response to it together with other proposals later on.
Fraud is a crime. Insurance frauds generally involve policyholders submitting false information and fabricating or exaggerating injuries or losses when making insurance claims. Some insurance frauds are committed by deliberately causing accidents and then making claims against them. There are cases involving cross-border activities or champerty and maintenance.
According to the Office of the Commissioner of Insurance, in recent years most insurance frauds involve motor vehicle insurance and workmen's compensation insurance but there are also other frauds involving medical insurance and travel insurance.
Motor vehicle insurance frauds mainly involve the exaggeration of injuries to obtain a medical certificate for prolonged sick leave, conspiracy to cause a traffic accident, or exaggeration of the damage to vehicles in a traffic accident. The workmen's compensation insurance frauds mainly involve employees making fraudulent claims about sustaining work related injuries or exaggerating their injuries to obtain prolonged sick leave.
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Owing to unnecessary underwriting loss suffered by insurance companies as a result of insurance frauds, insurance premiums have gone up, which affects the transport sector, small and medium enterprises, and also consumers. The Government will not tolerate any insurance frauds. After receiving the reports on suspected insurance frauds, the Police will take appropriate follow-up actions. In respect of the workmen's compensation insurance, the Government has set up an inter-departmental working group to review the current employee compensation system and the procurement of the workmen's compensation insurance.
To combat insurance frauds, we need the insurance sector to act as the goal-keeper. Insurance companies can, through the internal monitoring system and management of insurance intermediaries, identify insurance frauds early on and report them. As a matter of fact, the insurance sector has also taken vigorous actions against insurance frauds by working closely with the Police and other government departments and report on suspected frauds. Moreover, the sector also provides a market of last resort for employers who are unable to procure workmen's compensation insurance through the Employees' Compensation Insurance Residual Scheme.
President, we are more than willing to listen to Members' views on the original motion and amendments and will take them into consideration in order to further improve the operation of the insurance sector and regulatory measures. I will make a detailed response to the original motion and Members' speeches later on.
I so submit. Thank you, President.
MR POON SIU-PING (in Cantonese): President, this is a motion debate on "Combating insurance frauds". I will point out the insurance frauds triggered by the loopholes in the present workmen's compensation insurance (labour insurance) practice from the labour's perspective. Such fraudulent acts do not necessarily mean to defraud for a higher amount of insurance compensation. Instead, they mean to cover up or report less work injury cases, or even not to make any claim to the insurance company at all, so as to reduce the expenditure on labour insurance. Such acts are likewise dishonesty to bluff the present insurance system.
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It is stipulated in the current legislation that employers must take out labour insurance for their employees, with the intent to provide protection to the employees in case of injuries in industrial accidents. By taking out insurance, employers pool their risks. However obviously, the current practice of safeguarding compensations for employees through the labour insurance offered in the private sector in case of injuries arising from industrial accidents cannot solve the problem. In 2013, the Labour Department has issued over 900 summons for convictions for breaching the Employees' Compensation Ordinance, among which almost all involved failure to take out labour insurance. This means an increase of more than 20% as compared to that in 2012, and an increase of more than 30% as compared to that in 2011.
The illegal acts of employers not taking out insurance for their employees has increased for different reasons, while the huge increase in the costs for labour insurance is one of them. According to the Annual Report 2013 of the Office of the Commissioner of Insurance, the employees' compensation business prices have increased by 8% in 2011, and by 36.4% in 2012. I trust the growth rates are even fiercer in these two years; yet the huge increase in the costs for labour insurance does not mean that insurance companies can make awesome profits with it.
It is pointed out in the same annual report that the profit rate of insurance companies in employees' compensation business decreased by 8% in 2011, and by 16.3% in 2012. Furthermore, a weird phenomenon is found in the entire labour insurance system. The costs for labour insurance keeps rising, so much so that some employers take the risk by not insuring their employees, Likewise, insurance companies are not willing to underwrite labour insurance business because of the decline in profit potential caused by the ever-increasing risks on labour insurance. The Government is to be held substantially responsible for having caused the current scenario that pleases neither the employers who take out labour insurance nor the insurance companies.
Labour insurance is priced according to the risk level of the nature of work. Fatal industrial accidents in the construction industry increased substantially in recent years, and they keep the costs for labour insurance staying high. The construction industry becomes the most high-risk industry in Hong Kong, and various kinds of adverse outcomes are thus derived, including youngsters' reluctance to join the industry and the ever-rising costs for labour insurance. For time and again I have been demanding the Government in this Council to take LEGISLATIVE COUNCIL ─ 21 January 2015 5065 measures to enhance safety in the construction industry; yet the Government still takes no heed of my demand but even puts the cart before the horse to import foreign workers. Apart from prompting the employers to break the law deliberately by not taking out labour insurance, the ever-increasing costs for labour insurance even give rise to the problems of covering up work injuries, making under-the-table settlements and false self-employment, causing an all-lose situation among employees, employers and insurance companies.
The current Employees' Compensation Insurance Residual Scheme only serves as a market of last resort to assist employers who have difficulties in finding labour insurance cover, and that renders no solution to the all-lose deadlock in labour insurance. Moreover, the formalities of the Employees' Compensation Insurance Residual Scheme are very complicated. It requires, inter alias, employers to provide proof of declination for labour insurance cover from at least three insurance companies for their cases to be processed by the Scheme. I have received complaints claiming that insurance companies were making excuses to delay provision of proof so that employers could not take out insurance for their employees in due course.
President, the labour sector has been demanding for years for the establishment of a central employees' compensation insurance system, which is also requested by many employers' representatives. This is a rare consensus between the labour sector and employers' representatives. I demand the Government to consider afresh the establishment of a central employees' compensation insurance system.
President, I so submit.
MR TONY TSE (in Cantonese): President, according to the reply given by the Secretary for Labour and Welfare to a written question raised in this Council on 7 January this year, the number of cases involving various kinds of insurance-related frauds received by the Police during the period from 2012 to October 2014 has been increasing year on year. While there were 34 such cases in 2012, the number has increased to 49 in the first 10 months of 2014. Separately, it has been reported that in the first four months of 2014, there were 17 cases of insurance-related fraud, representing a substantial increase of 1.5 times over the same period in 2013. The deceptive practices involved are mainly fraudulent compensation claims made to insurance companies by the 5066 LEGISLATIVE COUNCIL ─ 21 January 2015 clients in collusion with the insurance agents. In some cases, the insurance agents have embezzled insurance premiums from the clients and then used the funds for investment. These situations should not be overlooked. As a matter of fact, I notice that insurance frauds have happened quite frequently, with some cases involving syndicated criminal activities and some involving doctors, lawyers, notaries public, and so on. Hence, a multi-pronged approach should be adopted to effectively combat and eradicate the problem of insurance fraud.
There are indeed some loopholes in the process of making insurance claims. In this connection, there is room for improvement and fine-tuning in various aspects involving different parties, including legal aid, the Hospital Authority, the Social Welfare Department (SWD), notaries public and recovery agents. At a meeting held on 25 March last year, the Panel on Administration of Justice and Legal Services of the Legislative Council discussed the issue on abolishing the offence of champerty. During its discussion, the problem of recovery agents was raised. In recent years, the Government has launched extensive publicity to alert members of the public about recovery agents who offer representation services in compensation claims on a "no win, no pay" basis, while the legal profession and the insurance sector or even society as a whole generally agree that recovery agents should be prohibited. But over the years, the problem with recovery agents has not shown any marked improvement, creating a large impact for both the employees and the insurance companies. On this problem, while the Government has clearly stated its position that recovery agents should be prohibited, it has all along failed to provide a clear account on the specific actions to be taken. This would naturally cast doubts in the mind of the public as to whether the Government is genuinely determined to resolve the problem.
In Hong Kong, there are a large number of insurance claims each year arising from industrial or traffic accidents. In recent years, the Police have busted several syndicated insurance frauds involving "car-crash gangs". In these cases, a person would first obtain a sick leave certificate by deception through claiming an injury from a fake traffic accident, and then make a bogus application to the SWD for the "driver's award", that is, grants from the Traffic Accident Victims Assistance (TAVA) Fund (with a maximum payment of around $100,000). Persons involved in such cases include taxi drivers, public light bus drivers, Chinese medicine practitioners and doctors. Two problems are highlighted by these cases, namely, the indiscriminate issuance of sick leave certificates by doctors and potential loopholes in the SWD's approval and monitoring mechanism in respect of the TAVA grants.
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As far as I understand, the TAVA scheme came into operation in May 1979 under the administration of the SWD to provide financial assistance to road traffic accident victims (or to their dependants in cases of death), regardless of the element of fault leading to the occurrence of the accident. Basically, the amount of grant would be decided by the SWD on the basis of the applicant's sick leave period as approved by the attending doctor. Nonetheless, some members of the insurance industry hold that the SWD's approval is far from stringent, and there is no effective monitoring. They hope that the SWD can review the approval and monitoring mechanism as soon as possible.
Separately, given the provisions of the Personal Data (Privacy) Ordinance, if a professional driver does not voluntarily declare his previous claims of traffic accident compensation, there is no way for the insurance company concerned to know about such claims. Likewise, if the said driver was previously involved in an insurance fraud, the insurance company can hardly know about it. Obviously, there is room for improvement in this regard, and the Government is duty-bound to deal with it squarely.
President, insurance premiums have been rising in recent years due to the problem of insurance fraud. As a result, the operating costs of many industries and trades have increased, thereby directly impacting their scope of operation as well as the livelihood of their employees. Hence, the Government must combat these fraudulent activities as early as possible.
With these remarks, President, I support the original motion moved by Mr CHAN Kin-por.
MR MA FUNG-KWOK (in Cantonese): President, as pointed out by Mr CHAN Kin-por in his original motion, the compensation amounts of employees' compensation (EC) insurance and motor vehicle third party risks insurance have been increasing at an unreasonable rate because of insurance frauds perpetuated by some lawbreakers in society, thereby causing the corresponding rise in insurance premiums. Apart from the operating costs of business operators being jacked up, part of the costs would eventually be shifted to the employees and consumers. This phenomenon represents a serious departure from the principle that a reasonable level of insurance premiums would be ensured by free-market operations, and public interest is undermined. The Government is duty-bound to follow up the matter in a more proactive manner.
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According to the statistics of the Labour Department, the overall number of occupational injuries in Hong Kong is actually on a downward trend. In 2004, the injury rate per 1 000 employees was 18.1%, and the rate dropped further to 13.2% in 2013. The actual number of occupational injuries also dropped from 44 000 cases in 2004 to 38 000 in 2013.
Of course, we hope that these occupational injury figures can go down as much as possible, and the numbers per se may not accurately reflect the nature of these cases. Nonetheless, as far as the trend is concerned, the risk of work injuries is actually on the decline. With the predominance of service industries in the current employment market, the chance of employees sustaining work injuries has been reduced substantially. Yet the number of EC claims has been rising sharply in recent years. From 2004 to 2013, the accumulated underwriting losses for EC insurance were as high as $2.9 billion, while the premiums from EC insurance have seen double-digit increases annually. The situation is more or less the same for underwriting motor vehicle insurance. For example, while there is no marked increase in the accident rate of taxis, the premium for third party risks insurance has soared from the initial rate of several thousand dollars to $20,000-odd per taxi, thereby further increasing the burden of the trade.
President, I believe that a major reason for the problem is that champerty syndicates are blatantly touting for business in the healthcare system as well as the Labour Department and abetting the injured employees to exaggerate the degree of their injuries sustained. In August last year, the Police busted a champerty syndicate which had been active for nearly six years. The syndicate would offer one-stop service for vehicle owners on a "no win, no charge" basis. For example, in one case, the cost of repair soared from $20,000 to $140,000, and syndicate would receive 15% to 25% of the compensation as service fees. This case can show how unruly these syndicates are.
Regrettably, the Government is not paying enough attention to these syndicated and organized fraudulent activities. Although recovery agents are blatantly touting for business by approaching injured employees in various healthcare organizations and Government departments responsible for handling work injuries, there are only 15 complaint cases involving harassment by recovery agents or staff of legal firms in public places over the past five years. Clearly, the Government is handling the problem in a conniving or most accommodating attitude.
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While the Government is not taking any active or proactive actions against these touting activities, the Police's prosecution and investigation work is likewise disappointing. When answering a question raised by Mr Frankie YICK in October last year, Secretary Prof K C CHAN stated that in the past three years, there were only four successful prosecution cases involving fraudulent traffic accident claims. It clearly shows that no deterrent effect has been achieved by such prosecution efforts.
President, as a matter of fact, EC insurance and motor vehicle third party risks insurance are mandatory and statutory requirements for the relevant operators. In other words, these are unavoidable responsibilities that employers and vehicle owners must shoulder. Hence, the relevant government departments must properly perform its role as a regulator, instead of dismissing the unreasonable increases in insurance premium as simply commercial activities or regarding the problem as the responsibility of other departments. Apart from stepping up prosecution and enforcement, the Government should also ensure active co-operation and co-ordination among all the relevant departments so as to tackle the problem at source and take follow-up actions to plug the loopholes in the system. Hence, I strongly support the original motion's proposal to set up an inter-departmental task force.
Regarding the specific actions to be taken, the Joint Subcommittee on Issues Relating to Insurance Coverage for the Transport Sector set up jointly by the Panel on Transport and Panel on Financial Services in the last term of the Legislative Council has held in-depth discussions with the relevant trades and industries in 2012, and various specific recommendations have been made. For example, studies should be conducted to introduce an independent assessment service in Hong Kong so that injury cases with a prolonged recovery period can be assessed objectively. The Hospital Authority and the insurance sector should jointly set up a medical review system and a central reporting mechanism should be established to receive complaints relating to exaggeration of injuries. "A fit note system" should be established to replace the conventional sickness certificate by making reference to the experience of the United Kingdom. Vehicle owners should be notified in case of traffic accidents involving rentee-drivers, and so on. Notwithstanding the personal data and privacy implications in some of these recommendations, more than two years have passed and no action has been taken by the Government yet. The Government should not allow the situation to stagnate at the stages of consideration and studies. I hope the Government can respond to these recommendations in a more proactive manner.
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President, problems about increasing or expensive insurance premiums have been mentioned in today's original motion. For employees in the sports or performing arts industries (such as athletes, martial arts experts and stuntmen) who want to or are willing to take out insurance coverage, they still face great difficulties even though they are willing to pay a higher premium because of the risks involved, and they are often rejected by insurance companies. Of course, this issue has departed from the theme of today's motion debate. But I still want to take the opportunity to express our concern, in the hope that the Government and Mr CHAN Kin-por can pay more attention to the difficulty faced by the industries in procuring insurance, so as to better safeguard the needy employees.
With these remarks, President, I support the original motion.
MS STARRY LEE (in Cantonese): President, insurance frauds have become increasingly syndicated in recent years. The data quoted by colleagues show that the amounts of compensation claimed and number of frauds are on the rise. In response to Mr CHAN Kin-por's request for the Government to combat insurance frauds on behalf of the insurance sector, it should look squarely at this problem, review the present law enforcement against such frauds, and improve the rules and regulations and the present practice to further clamp down on them.
President, I have been in contact with people from various sectors in the community and learned from them some issues relating to insurance at present. For instance, employers of high-risk industries such as recycling have great difficulty in taking out workmen's compensation insurance policies and the premiums of the policies are also getting increasingly high. I hope that the Government and the representative of the related sectors will pay attention to this. I have also received complaints from insurance companies about the high accident rates and the ever increasing amounts of claims. Besides, frauds involving motor vehicle insurance are rampant. Such frauds are often committed by garages, loss adjusters and recovery agents working together as a syndicate. The authorities must face up to this problem.
As regards the workmen's compensation insurance, due to the natures of their work, couriers, security guards, construction workers, cleansing workers and workers in the catering industry are more prone to injuries and may strain injuries more easily. With sick leave certificates issued by doctors, some workers may take paid sick leave which may last for weeks, months or even years. Of course, LEGISLATIVE COUNCIL ─ 21 January 2015 5071 doctors issue sick leave certificates according to their professional judgment. Sometimes, doctors would request workers to undergo scientific tests, including examination by means of magnetic resonance imaging, to determine their injury. A doctor may also refer workers to receive psychological tests or counselling if he suspects that their prolonged recovery is related to psychological issues. Some industries have relayed such problems to me. It is often reported that the lengths of sick leave for work related injuries taken by individual workers are getting increasingly long. This warrants our attention.
There have been reports earlier that during the Occupy movement, the director-general of a certain political party showed up at an occupied site while he was on sick leave for work injury and newspapers questioned whether he participated in Occupy Queensway under the pretense of injury. Of course, this was only a story reported. The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) reiterates that we must take proper care of injured workers and legislation must be enacted for their protection but the Government must also face up to the rising number of insurance frauds.
About frauds involving motor vehicle insurance, I have learned from the industry that damages are frequently exaggerated when people make insurance claims on traffic accidents and the deceptive tactics employed are also very complicated. Last August, the Police cracked down on a big scam syndicate consisting of at least four garages. The loss adjusters and the syndicate concerned had been in operation for over six years. It is no easy task for insurance companies to detect such frauds. Just like any other frauds, insurance frauds can hardly be eliminated by means of one or two tactics. The insurance sector points out that at present the professional qualifications of loss adjusters is not regulated by law and it suggests that the authorities should require all loss adjusters to be licensed personnel with appropriate professional qualifications to write and sign their reports so as to guarantee the professional judgment of the relevant reports. I think that the Government should vigorously consider putting this suggestion into practice.
In all fairness, the increase in insurance frauds and the development of frauds being committed by individuals into syndicate-operated ones are a great concern to us, although it is not yet out of control. The DAB earnestly hopes that the Government will continue to work with various parties to eliminate the chance for lawbreakers to fraud. If there is clear evidence that the legislation needs amendment, the Government should do so promptly.
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President, I wish to stress that we frequently hear about insurance frauds and sometimes policyholders get the impression that they are being cheated by insurance companies. Why do I say so? That is because they may not receive protection even though they have taken out insurance policies.
Some people have told me about their unpleasant experience of not getting compensation from insurance after an accident even though they have paid the premium. Most of these cases involve medical insurance. So far, the definitions and terms concerning the diseases covered by insurance prescribed in the policies are different, and different insurance companies also have different interpretations, which are not easy for ordinary consumers to follow. Insurance companies have plenty of resources and their teams of professionals definitely have more professional knowledge than consumers. When a subscriber takes out a policy without fully understanding what the policy entails, the compensation he gets from a claim may very often differ from what he expects. In the end, he may have to lodge complaints, and his relation with the insurer is thus undermined.
President, Hong Kong is an international financial centre and the insurance industry is an important pillar vital to our economy. The DAB expects that the Independent Insurance Authority to be established will look squarely at the relevant issues, endeavour to clamp down on insurance frauds, and standardize the relevant terms used and the scope of coverage across the board in the insurance sector to further protect the interest of the consumers.
With these remarks, President, I support Mr CHAN Kin-por's motion.
MR YIU SI-WING (in Cantonese): President, on account of the rampant frauds involving the workmen's compensation insurance and motor vehicles insurance (third party risks), the insurance industry is persistently faced with losses in the operation of relevant businesses. This has led to an increase in insurance premiums, which in turn has a significant adverse effect not only on the transport industry but also on the catering, recycling and cleansing industries. This indirectly adds to the burden of consumers. I think that insurance frauds have undergone some changes in recent years, mainly including the following points.
First, insurance frauds are now syndicated. Different parties in these syndicates have a clear division of work and their operation is highly professional. The suspects of such crimes are familiar with the procedures of LEGISLATIVE COUNCIL ─ 21 January 2015 5073 the certification of the incident and claims management, as well as the loopholes in the law. Around the middle of last year, the Police cracked down on a case in which a car company operated frauds involving motor vehicle insurance in a one-stop approach. It was found that loss adjusters were involved and over 10 insurance companies had fallen victim to its schemes.
Second, the modus operandi of the crimes is more subtle and wide spread. In recent years, with recovery agents and those engaged in champerty and maintenance becoming more pro-active, the problem is further complicated. The lawbreakers offer one-stop service to motorists involved in accidents and claim that they will not charge any fees unless their claims are granted. They usually claim very high compensations from insurance companies through various tactics and divide the compensation successfully recovered among themselves. Insurance companies thus suffer heavy losses and the compensation that the policyholder deserves is also eroded.
Third, the incentives are so strong that people may be tempted to make reckless moves. As the number of frauds is not large at present ― 34 cases in 2012, 46 in 2013 and 49 between January and October in 2014 ― it does not arouse much concern in society. However, with the compensation involved in each claim amounting to hundreds of thousands of dollars or even as high as tens of millions of dollars, coupled with the difficulty in cracking a case and gathering evidence, the legal risks are relatively low but the returns are high. Lured by the economic interest and large sums of money, recovery agents take the opportunity to scheme against insurance companies. They usually use various tactics to lure persons who are not well versed with the law to continue lowering their bottom line of morality to the point that they risk breaking the law and make fraudulent claims against insurance companies by fabricating or exaggerating the damages caused in an accident.
President, it is no easy task to eliminate such frauds, mainly because many people are not aware that they should abide by the law. They may think that insurance companies have the means and are willing to bear the responsibility of making compensation. Urged by recovery agents and being ignorant due to the lack of publicity by the Government, they would overlook the fact that they are committing a serious crime of fraud.
Of course, the loopholes of the legal aid system also indirectly encourage champerty. Under the existing system, legal aid applicants are allowed to choose the representative lawyers of their own. Therefore, the lawbreakers 5074 LEGISLATIVE COUNCIL ─ 21 January 2015 engaging in champerty can talk the victims sustaining injuries at work or in a traffic accident into applying for legal aid and choosing the recovery agents' own lawyers. Then they can engage in champerty with the huge resources obtained from legal aid.
In view of the features and causes of insurance frauds, I think that if the problem of insurance fraud cannot be resolved at source, the setting up of a "central employees' compensation fund" will only increase the Government's expenditure but will not help rid insurance companies of their long-term losses. At the same time, as the compensation fund is set up with public money, the Government will tend to be conservative in managing it. Hence the efficiency of handling the claim arrangements will certainly be much inferior to that of private insurance companies. Hence, Mr LEE Cheuk-yan's proposal is not practical. As to the prevention of insurance fraud, I have the following suggestions.
First, the Government must face up to the harm done by insurance fraud to society and consider clamping down on this crime as an ongoing task. In the face of increasingly rampant insurance frauds, the United States has taken a host of strict measures to prevent and deal with it since the 1990s in the last century. In general, its philosophy is as follows: enactment of legislation first, enforcement by the government with the support of the industry, participation of the community and dealing with it with concerted effort. Thus it has built up a multi-layer and all-round anti-insurance fraud system to strengthen its enforcement and investigation force. Drawing from the experience of the United States, the Government may consider setting up an inter-departmental task force to take effective measures promptly against any irregularities found, thereby enhancing the deterrent effect of its law enforcement, squeezing out the room for this kind of offences and preventing the spread of such illegal activities.
Second, the authorities need to step up publicity campaigns to educate the public about the harm of insurance fraud. To help the public have a better grasp of that, the authorities can choose some typical cases and show them in the media to arouse the public's awareness of the consequence of committing insurance fraud.
Third, the authorities can consider offering appropriate awards to the whistle blower. Apart from helping the policyholders understand their right and obligation and volunteer to fulfil the insurance contracts, it can also appropriately LEGISLATIVE COUNCIL ─ 21 January 2015 5075 encourage the public to report on insurance frauds. At the same time, through the Government and other stakeholders' monitoring, a certain degree of deterrent effect can be achieved in reducing and clamping down on the illegal act of insurance fraud.
President, even though the number of insurance frauds is small, the Government must not go off guard. The data of the past three years show that the number of such offences is on the rise. I hope that the Government will look squarely at the problem and formulate measures to strengthen Hong Kong's status as a financial centre.
With these remarks, I support the original motion. (The buzzer sounded)
MR FRANKIE YICK (in Cantonese): President, first of all, I would like to thank Mr CHAN Kin-por for proposing the motion on "Combating insurance frauds".
Under the existing labour law, all employers have to take out employees' compensation insurance policies for their employees and the transport sector must also take out the motor vehicles insurance (third party) for their vehicles on the roads. The original purpose of taking out insurance was to provide protection for workers injured at work or in an accident by offering them monetary compensation. But its nature seems to have changed and lawbreakers are now committing insurance frauds to make easy money.
The transport sector has long been troubled by insurance fraud but is unable to tackle it. Faced with soaring insurance premiums, refusal of insurance companies to underwrite insurance policies and insufficient insurance coverage, the sector is very much aggrieved. Although data show that over 10 insurance companies will underwrite the policies for commercial vehicles, only three to four of them are actually active in providing the service. Owing to the lack of competition and choices, even if insurance companies substantially raise the premiums (for example, the third party insurance of taxis has been raised from $9,000 in 2009 to the present $23,000, to make up for their losses caused by colossal claims and the increase in operation cost), the sector has to accept it.
In the light of the difficulties encountered by the transport sector in obtaining insurance coverage, the Panel on Transport and Panel on Financial Affairs of the last term of the Legislative Council set up the Joint Subcommittee 5076 LEGISLATIVE COUNCIL ─ 21 January 2015 on Issues Relating to Insurance Coverage for the Transport Sector (the Joint Subcommittee) to follow up such issues. Given that the culprit of the soaring premiums is the increase in the number of claims and amounts of compensation claimed as a result of claimants in traffic accidents exaggerating their injuries and lawbreakers committing insurance frauds and champerty, the Joint Subcommittee put forward a number of improvement measures. In the end, however, the only measure adopted was the setting up of a hotline by the Commercial Crime Bureau of the Police Force for reporting suspected frauds referred by the insurance and transport sectors while the other measures were eventually forgotten.
It has been reported that in the first quarter last year, there were about 17 insurance frauds involving a total amount of about HK$1.2 million, an increase of 142.8% as compared to the same period in 2013. It is evident that the insurance frauds are increasingly rampant in recent years. Worse still, insurance frauds are now operated by syndicates. In August last year, the Police cracked down on a syndicate engaged in champerty with loss adjusters and recovery agents conspiring to make fraudulent insurance claims on traffic accidents. The loss adjusters were dedicated to providing one-stop services in making claims for car owners involved in traffic accidents. They would exaggerate in their reports the property losses caused and the degree of injuries sustained by the injured in traffic accidents so as to get higher compensation, while the recovery agents were engaged in champerty. It is known that the case involved over 10 insurance companies which had committed close to 100 frauds altogether. If the Government does not resolutely clamp down on such insurance frauds, it will only encourage the evil trend of exaggerating the damage to get higher compensation and making fraudulent insurance claims. As a result, the insurance premiums will continue to rise and the public continue to foot the bill.
Loss adjusters are supposed to issue reports rightly reflecting the property losses but now some of them break the law and make claims for higher compensation in the name of loss adjusters. Without regulation, anyone can pose as a loss adjuster, which is a chance lawbreakers can take advantage of. Hence, the authorities should consider stepping up the regulation on loss adjusters. If loss adjusters are required to bear criminal liability for the reports they issue, I believed it can put an end to the illegal actions undertaken by lawbreakers acting in the name of a loss adjuster.
In respect of the champerty engaged in by recovery agents who allege they will not charge any fees unless the claim was successful, our concern is that at present most of the legally aided cases are assigned to the first 20 counsel and LEGISLATIVE COUNCIL ─ 21 January 2015 5077 solicitors on the Legal Aid Panel with the first person being assigned over 100 cases. I think it is an over-concentration of cases in the hands of just a few of them, which would increase the risk of champerty. The authorities should set a duty roster so that all counsel and solicitors on the Panel have an equal chance of being assigned cases under the principles of fairness and impartiality to avoid over-concentration of cases assigned to certain counsel and solicitors. In March last year, in answering my question on the improvement to the legal aid system, the Secretary for Home Affairs said that the Legal Aid Department had commenced a review of the lawyer assignment procedures in conjunction with the Corruption Prevention Group of the Independent Commission Against Corruption. I hope that the review will be completed soon and will be made public, and the authorities will adopt suitable improvement measures to eliminate the risks of champerty.
In fact, regardless of whether the frauds involve the third part risks insurance or the workmen's compensation insurance, they are all related to bogus work related injuries and bogus sick leave. Since employers or insurance companies have no power to require the claimants in suspicious cases to have another examination conducted by appointed medical practitioners, lawbreakers can take advantage of the loopholes of the public hospitals and conspire with others to obtain sick leave certificates and exaggerate the injuries to claim higher compensation. Hence, I agree with the Joint Subcommittee that the Hospital Authority should put in place an independent assessment service to diagnose the injuries of the injured fairly under the medical review system with a view to addressing the problems of exaggeration of injuries and abuse in the issuance of sick leave certificates, thereby reducing the rise in insurance premiums resulted from unnecessary payments of compensation.
With these remarks, President, I support the original motion.
MR TAM YIU-CHUNG (in Cantonese): President, it is proposed in today's motion that efforts in combating the increasingly rampant insurance frauds be strengthened to prevent the premiums of the workmen's compensation insurance or other insurances from ever increasing as a result of the rise in compensation amounts. The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) agrees to this. My colleague Ms Starry LEE has made an analysis of it in her speech earlier. As regards the workmen's compensation insurance, to 5078 LEGISLATIVE COUNCIL ─ 21 January 2015 enhance the protection of wage earners, I suggest the authorities consider the establishment of a "central employees' compensation fund" (central compensation fund).
In 1992, as a Member from the Federation of Trade Unions and the DAB, I repeatedly proposed in this Council the establishment of a central compensation fund. I even gave the details of the operation of this fund. It should be managed by a non-profit-making "central employees compensation council" which would take charge of all workmen's compensation insurance policies and make compensation for all employees who are injured or die at work, or suffer from occupational diseases. The council will be in charge of the existing Employees' Compensation Insurance Levies Management Board and the work of three organizations, namely the Occupational Safety and Health Council, the Employees Compensation Assistance Fund Board and the Occupational Deafness Compensation Board whose resources are distributed by the Board.
At present, our employee compensation system is regulated by the Government through legislation and its insurance policies are underwritten by private companies for risk diversification. The work of underwriting the workmen's compensation insurance, management of insurance premiums and payment of compensation is undertaken by various private insurance companies independently. As a statutory insurance, the employees' compensation insurance is very often considered by insurance companies as unwelcome as they can hardly make any profit out of it. Some insurance companies only offer the workmen's compensation insurance as a favour to attract clients for other big businesses.
The Government has always had reservation about the establishment of a central compensation fund and one of the reasons it insists is that a competitive private insurance market can keep the insurance premium under control and encourage innovation and continuous improvement. But is it really the case? We can look at some specific data. At present, only a very small portion of the total premiums paid by employers is spent on compensating workers injured at work. For example, the gross premium of employees' compensation insurance in 2012-2013 was $5.3 billion and after deducting government levies, there was still $5 billion left, but only $2.4 billion was paid to the injured employees and families of the diseased employees as compensation. Most of the premiums were actually spent on administration, rebate, reinsurance and commission, which took up over 60% of the gross premium.
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When reviewing the data at the time when we first proposed the central compensation fund, I find that after almost two decades, the percentages of the spending on administration, rebate, reinsurance and commission in the gross premium have not decreased. For example, in 1996, the gross premium of employees' compensation insurance was $2.31 billion but the amount of compensation paid was only $760 million. Over the past 20 years, have we seen the "insurance premium being kept under control" and any "innovation and ongoing improvement"?
The high operation cost of the private market for workmen's compensation insurance suppresses the compensation amounts paid to workers injured at work and it is also unfair to the employers who pay the premiums. Besides, the huge premiums have not brought about any improvement to occupational safety. To society, it is just a waste of resources.
Drawing from the experience of the United Kingdom, Canada and New Zealand, where the system of central compensation fund is in place, we can see that the system can eliminate the aforesaid problems, and in particular, it is effective in lowering the administration cost of the workmen's compensation insurance, which can be down to 10% of the premium. The expenditure thus saved can add to the compensation for the injured or deceased employees. This system will not increase employers' burden; instead, it will enhance the protection of wage earners. Besides, it can monitor employers' procurement of insurance more effectively, prevent employer from avoidance or evasion of procuring insurance and reduce the occurrence of employees being coerced into engaging in "false self-employment".
A bigger advantage of the central compensation fund is that it can link the workmen's compensation insurance to occupational safety. The central employees compensation council can, through monitoring the safety record of various trades, industries and organizations, determine the level of insurance premiums, thereby raising employers' awareness of occupational safety.
I hope that the Government will reconsider the proposal which we put forward in 1992 and set up a central compensation fund so as to help the wage earners feel more at ease while working.
I so submit.
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MR LEUNG YIU-CHUNG (in Cantonese): President, the debate today is about the increasingly rampant and syndicated insurance frauds. In this connection, Mr CHAN Kin-por "urges the Government to set up an inter-departmental task force to pool the efforts of various departments to comprehensively combat insurance frauds and plug the loopholes in the existing system".
President, it seems that there is no problem with his logic because the fact that frauds have become rampant reflects that there are problems with the system. Therefore, we can understand why he proposes setting up an inter-departmental task force to combat frauds. However, the problem lies in whether this can really curb frauds. I doubt whether this can effectively and successfully combat frauds? What are the reasons?
We all know that fraud is a criminal offence, and if corruption is involved, the cases will be handled by the Independent Commission Against Corruption. However, if corruption is not involved, the cases will be handled by the Police. The problem is whether the Police have the ability to deal with fraud cases. They do have the ability. A number of Members have referred to a large-scale syndicated fraud, and they said the Police successfully solved the case. In other words, the Police have the ability to solve such cases but the problem is whether the Police have handled these cases with all their efforts. If the enforcement actions of the Police are successful, they will have deterrent effects. Nevertheless, if the enforcement actions of the Police are not harsh enough, they will have limited effects only.
Why do I doubt whether the Police have spared no effort in dealing with fraud cases? As we all know, when reports are made by the victims, the Police often say that the fraud cases involved commercial activities which cannot be handled by them. I have dealt with some fraud cases involving tourism membership and tutorial courses, and so on. When the victims reported to the Police, the latter would only say that the cases involved commercial activities which could not be handled. This would encourage fraud.
What would happen if the efforts of various departments are pooled as proposed by Mr CHAN Kin-por? Are there existing loopholes that need to be plugged? The problem simply does not lie here as there are problems with the Police's judgment that the cases involving commercial activities cannot be handled. If the Police do their best to investigate these cases, the offenders will be brought to justice. The only problem is that the Police simply do not handle these cases.
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To curb frauds, first, the Police must review the existing procedures and means to handle such cases as they will simply determine that the cases involve commercial activities and therefore they cannot handle them. These issues are important. Otherwise, the effect of "curbing frauds" as mentioned by Mr CHAN Kin-por cannot be achieved even if other methods are adopted. This is the first point that I would like to emphasize.
Moreover, setting up a "central employees' compensation fund" (central compensation fund) is a very important issue. President, many workers have constantly complained to us that when they notified their employers that they had been injured at work and hoped that their employers would report to the authorities concerned, their employers only persuaded them not to report the cases because they might lose their jobs if they did so. President, if the employers reported work injuries, the workmen's compensation insurance premiums would be increased substantially in the next year. The amounts can be doubled, or increased by three to four folds, or up to a dreadful amount.
Some employers told me that they want to take out workmen's compensation insurance but they cannot do so because many insurance companies refused to provide the coverage. The Government would certainly say that this is impossible because there is a central mechanism. Yet, under this mechanism, the 26 agencies willing to provide such insurance coverage are collecting astronomical premiums, which have deterred employers. For this reason, employers often ask workers not to report work injuries.
President, workers injured at work are pitiful. Some work injuries may seem minor but the consequences often emerge slowly, not immediately. When workers come to realize the consequences of work injuries, they cannot claim insurance compensations because they have not reported these consequences to the insurance companies initially. Workers will suffer losses because of the after effects of work injuries.
At present, owing to the ineffective law enforcement by the Police and the difficulties in taking out insurance, workers are simply not protected. In my opinion, Mr LEE Cheuk-yan's proposal to set up a central compensation fund is the only means to help workers obtain compensations for work injuries.
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In addition to employers' asking workers not to report work injuries as I have just mentioned, another problem is that the current work injury reporting procedures are very complicated. Insurance companies tend to initiate legal proceedings against workers, and the whole process is extremely long, which will cause livelihood problems for the workers. Hence workers are often forced to agree to settlement, and they will be deprived of the compensations they should have got. We all know that a worker injured at work can no longer work and his incomes will be greatly reduced. What should he do then? He can apply for Comprehensive Social Security Assistance (CSSA) but he cannot live on the CSSA payments. For this reason, he has no choice but to "surrender". President, if a work injury case involves legal proceedings, it will often drag on for two years. Can we imagine how workers can get through these tough days?
If the Government can set up a central compensation fund, I hope that work injury cases can be handled as soon as possible under this mechanism, instead of being procrastinated as it happens now, so that the interests of workers can be safeguarded and they do not have to bear the grunt tragically.
President, I so submit.
PRESIDENT (in Cantonese): Does any other Member wish to speak?
MR WU CHI-WAI (in Cantonese): When Members from the business sector talked about insurance frauds just now, they focused on discussing the phenomenon that many victims deliberately defrauded insurance companies. However, when we were working in the communities, we frequently found that the due interests of the insured had not been safeguarded. On the contrary, in the face of gigantic insurance companies which seek to safeguard their interests, it is even more difficult for the victims to lodge claims for their harms or losses. Therefore, I think we must figure out what fraud is when we say that insurance fraud problems are very serious.
As far as we know, claims for compensations for work injuries, accidents or other incidents often need the professional support of a third party. For example, if a person wants to lodge a claim for work injury compensation, his claim must be substantiated with medical certificates. It is a very fundamental LEGISLATIVE COUNCIL ─ 21 January 2015 5083 problem if the doctor's judgment is not trusted. Whose judgment is trustworthy if the doctor's judgment is not trusted? In addition, the medical certificates will only be trusted if the doctor's name appeared on the list of doctors of the insurance company concerned. Yet, this is frequently questioned. Will the doctors designated by the insurance company have conflicts of interest as they have to safeguard the interests of the insurance company and not those of the victims? This contradiction often appears in the insurance claims process. As some Honourable colleagues have said, if there are conspiracy and collusion in the process which aim at defrauding insurance compensations deliberately, criminal offences have definitely occurred. Nonetheless, we have noticed that cases where the victims failed to obtain due insurance compensations are more common.
On the other hand, the victims' views about the values of their economic losses arising from the harms inflicted may be diametrically opposite to those of the insurance companies, which is quite natural. For example, under the existing laws on work injuries, the employees are entitled to request for re-assessment of their work injury assessment. Should this routine procedure be considered as insurance fraud? It really does not make sense. I think the fundamental reason is the increase in premiums year after year or the fact that insurance companies are facing increasing compensations. However, these problems tend to involve the overall statutory requirements. It has always been requested that the employees should be given better protection. With the progress of the times, there are new trends in the Court's judgment of employers' responsibilities to employees, and employees who suffered harms are compensated or given higher compensation amounts. This happens in the course of social progress and the progress of the times.
In my view, a fundamental problem with insurance is that, after the conclusion of an insurance agreement, the problem of moral hazard always emerged. We cannot unilaterally say that this moral hazard only exists when the victim, that is an insurance claimant, lodge his claims to the insurance company. In fact, the insurance company itself or its employees also have remote causes. For example, the insurance practitioners may, for the sake of doing business, instruct the insured to deceive the insurance company by certain means. They may dishonestly or incompletely disclose information or data on the policies, so that the insured will take out insurance without being fully informed. Owing to the restrictions under certain policy clauses, the insured can hardly claim compensations after the actual accidents.
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All those who have engaged in community services would have come across such cases: Though the insurance policies have cooling-off periods, it is objectively not easy for most of the insured to fully understand the exclusive policy clauses. This would also lead to the misunderstanding of insurance frauds as Mr CHAN Kin-por mentioned, and this might also cause conflicts between the insured and the insurance companies. Mr CHAN Kin-por mentioned the increase in insurance frauds year after year, but what is the basis of this increase? Is it necessary to deal with fraud itself or the overall behaviour of the whole insurance industry? I consider that the overall behaviour of the whole insurance industry is more important.
As in the recent discussions about health insurance, we hope we can also handle the so-called preceding cases under the general health insurance arrangements. Preceding cases refer to the pre-existing symptoms which are non-insurable, or those symptoms which will cause premiums to become considerably higher if they are found after insurance has been taken out. Because of these issues, the insurance coverage only includes unproblematic areas. When problems are found, due protection will be deprived or exploited by various means. This precisely reflects that insurance is a double-edged sword: there is a good side but there are also disadvantages to the insured. Hence, I think the Government must conduct a comprehensive review from this perspective and examine how the regulation of insurance products can be put on the right track.
Thank you, President.
MR ALAN LEONG (in Cantonese): President, the Civic Party would certainly not encourage people to defraud insurance companies but the problem is that the operation of insurance companies is a commercial activity, and as Mr WU Chi-wai said earlier, a claimant should not be required to pass through a number of barriers.
President, if a person wants to defraud an insurance company, he would fabricate certain facts or conceal the truth, and a series of operations are involved. He may have to conspire with others to provide false evidence, and he may have to provide false documents and make up false evidence. In fact, the laws of Hong Kong regulate all these procedures. If a person has committed the LEGISLATIVE COUNCIL ─ 21 January 2015 5085 criminal laws concerned, perjured himself, made up false documents, used false documents or made arrangements for false witnesses, all these have legal consequences. We have also noticed that our law-enforcement agencies such as the ICAC and the Police have the power of law enforcement; most important of all, the Court is the ultimate gatekeeper. If a claimant provides false facts or conceals the truth, his faults will eventually be exposed.
Concerning Mr CHAN Kin-por's original motion, the Civic Party's only reservation is that he urges the Government to set up an inter-departmental task force to pool the efforts of various departments to comprehensively combat insurance frauds and plug the loopholes in the existing system. We believe that things have not yet developed to such a stage and such strong reactions should not be made. Instead, we are worried that if the Government is to set up an inter-departmental task force to pool the efforts of various departments, will this create more barriers and obstacles for the insured when they have to claim compensations?
President, I notice that Mr CHAN's original motion is specifically targeting the ever-growing frauds involving workmen's compensation insurance and motor vehicle insurance. If an inter-departmental task force is set up, will it only focus on these two kinds of insurance? How about health insurance and life insurance? We find it difficult to distinguish between these cases. In connection with workmen's compensation insurance, which departments will the inter-departmental task force comprise? Will the task force include some healthcare personnel, and so on? Will there be deceitful medical reports? Insofar as workmen's compensation insurance is concerned, should the authorities examine if false facts have been fabricated through deceitful labour relations? Which departments should this inter-departmental task force include? Should the Labour Department and the Department of Health be included? Should the Hong Kong Police Force and the ICAC be included? If this is applied to motor vehicle insurance, we will similarly find that it is rather difficult to identify suitable departments to make up the inter-departmental task force. Is the present situation good enough? After all, there are appropriate laws, precedents and law-enforcement agencies to assist in dealing with matters such as fabrication, making up the truth and concealing the facts. Is it an over-reaction to propose setting up an inter-departmental task force? I so submit.
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MR ALBERT HO (in Cantonese): President, Mr CHAN Kin-por moved a motion today, asking Honourable colleagues to support combating insurance frauds, especially syndicated frauds. We certainly support it. We can understand why Mr CHAN Kin-por as the representative of the insurance sector moved this motion, and he is also obliged to do so.
However, we all know that such criminal offences also occur in other industries, and there are cases targeting banks and finance companies, and so on. As Mr LEUNG Yiu-chung has mentioned, consumers are also the objects of frauds. Syndicated frauds such as pyramid marketing schemes, and cases involving Ponzi schemes, London gold, gold and futures trading, tourism membership, and so on, are common. Being a law-enforcement agency, the Police should make their best efforts to enforce the law so as to tackle and curb corrupt or syndicated frauds.
The Police will … If there are very special cases, they will set up a task force to find about more about the patterns of such offences and how they work. Trained and experienced law-enforcement officers will investigate and solve the cases, gather evidence and initiate prosecutions. I do not think it is really necessary to set up an inter-departmental team which targets insurance frauds. I believe the Police should have sufficient manpower to deal with different offences through setting up task forces. The Police should have sufficient manpower.
I just heard Mr CHAN Kin-por mention two points which are open to question and I would like to discuss these points. First, he mentioned champerty. Champerty is definitely illegal in Hong Kong for it violates the law. Lawyers cannot collaborate with the litigants and share the proceeds of the lawsuits as a condition to the provision of legal services. This is not allowed.
However, the litigants but not the insurance companies are often the victims of champerty. We should not get it wrong because the lawyers who commit champerty takes advantage of the ignorance of the litigants to win their trust and reliance, and they specify some unfair conditions of service which do not warrant huge amounts of legal fees. Very often, the litigants cannot obtain the needed services. Lawyers who commit champerty will reach a settlement with the insurance companies because they can have a high return of, say 30% or 40%. As he can receive enough money, they would easily reach a settlement with the insurance companies. In fact the litigants are the victims.
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I cannot figure out why insurance companies are considered to be seriously victimized. In each claims case, the insurance company has its own lawyer who is very experienced and shrewd. He knows how much compensation should be given or whether full defence is required, and he will not ask for different compensation amounts because the litigant has an independent lawyer or a lawyer who commits champerty.
Lawyers who commit champerty might guarantee that the litigants will have legal representation. In that case, the litigants will pursue vigorously. This is an issue about the litigation right of the litigants. The litigants' lawyers can only take legal proceedings if there is a cause of action. The lawyers would pursue vigorously if there is a definite cause of action. Without a definite cause of action, the lawyers will not be able to force the insurance companies to make more compensations than what the litigants should be able to recover. Hence, we must not make a mistake. Champerty is an offence and improper, so, it must be stopped. However, the victims are not the insurance companies but the litigants who initiated legal proceedings.
Second, it seems that Mr CHAN Kin-por blames the Legal Aid Department (LAD). I think it is unfair as the LAD only grants legal aid on the basis of the cause of action of a case and whether there is a reasonable chance of winning a lawsuit. It also examines whether the litigant meets the assets requirements before granting legal aid, and it cannot grant legal aid casually.
After the LAD has granted legal aid, the litigants do have the rights to choose their legal representatives and our legal system has always remained the same. Under our legal system, the litigants' freedoms to choose their legal representatives is respected, which is very important. The mutual trust between the litigant and the lawyer facilitates co-operation. This system has been the same throughout the years. I do not think litigants should be disallowed to choose their lawyers due to the worry of some sectors that some lawyers may not be very honest or they may even be members of fraud syndicates. If so, the litigants will no longer have the rights and freedoms to choose their legal representatives, which is absolutely undesirable.
As regards these fraud cases, two Honourable colleagues, Mr Alan LEONG and Mr WU Chi-wai, said earlier that the litigants often resort to deceit and there are instances of pretended illnesses and injuries. In fact, insurance companies are well experienced and they often hire veteran detectives to take photographs 5088 LEGISLATIVE COUNCIL ─ 21 January 2015 related to the case. For example, a litigant might meet the lawyer and the doctor in a wheelchair but he might be running to catch a taxi in the street after leaving the meeting places. He might even be able to stand on one leg or play tai chi (all evidences were captured with the camera) … The insurance companies are very smart but the lawyers and doctors who acted recklessly have a price to pay. It is against the law to resort to deceit, fabricate false documents and medical certificates. Yet, these problems are not too serious.
Another problem is related to the operation of the insurance sector. I believe Mr CHAN Kin-por also knows that some brokers as insurance intermediaries are dishonest. For instance, they may not clearly explain the policy clauses; they may mislead clients for the sake of doing business, and sell some insurance-linked financial products, and so on. Mr CHAN Kin-por is also very much concerned about these issues. Nonetheless, he moved the motion debate today simply because he would like to speak for the insurance companies, which are his electorates. This is evidently a deficiency of this system of functional constituencies.
MR TANG KA-PIU (in Cantonese): President, there is a clear viewpoint in Mr CHAN Kin-por's motion, and that is, insurance frauds showed a rising trend in recent years. Regarding the actual figure, as the Labour and Welfare Bureau has pointed out in response to a Legislative Council question on 7 January, there were 34 cases in 2012, but it has risen to 49 in 2014. The figure has already included, inter alia, cases of insurance brokers conspiring with their clients to cheat insurance companies, and insurance brokers embezzling clients' insurance compensation for investment. However, there is no breakdown on the number of frauds by industries, not to mention any highlight on the ever-growing workmen's compensation insurance frauds. Thus, there is no substantial statistics to show the prevalence of workmen's compensation insurance fraud.
Certainly, as Mr HO has just queried, being a member of the labour sector, I may be biased to think that there is no problem with the workmen's compensation insurance. But the fact is, having dealt with so many labour cases, I am instead pretty concerned that many wage earners would be suspected of exaggerating their claims or even making fraudulent claims about work injuries at this juncture when the insurance sector has been driven into great panic. We notice that in recent years, many insurance companies engaging in workmen's compensation insurance business have tightened their compensation LEGISLATIVE COUNCIL ─ 21 January 2015 5089 requirements, or made use of the statutory power vested in them to minimize the chance of wage earners to claim compensation or to impose immense pressure on them. In this connection, there are at least two scenarios. Firstly, a wage earner who has invisible work injuries such as sprains or strain injuries (which are different from fractures whose recovery is visible) might worry that his condition would worsen if he returns to work when he still feels painful during the period of sick leave granted by the doctor. On the other hand, many insurance companies may grow impatient with their clients and suddenly draw the employers' attention to the allegedly dubious medical certificates provided by the clients to support the sick leave period of three to four months, saying that the medical certificates have failed to truly reflect the work injuries. The insurance companies then exercise their reservation right and cease the payment of compensation, which is equivalent to four fifths of the clients' wages. To put it simply, this is to deprive the wage earners of their income and protection all of a sudden. In that case, wage earners would be forced to terminate their sick leave and resume duty, but they may not be able to return to work. Complaints of this kind are on the rise. The insurance companies are accused of unreasonably conducting close examination of the medical certificates and alleging that the medical certificates cannot truly reflect the condition of the wage earners, which seems to suggest that a wage earner has fully recovered but is simply putting on a show. These cases have put the wage earners in a very difficult position.
Another emerging scenario is the engagement of intermediaries by insurance companies engaging in workmen's compensation insurance. Although these intermediaries have names resemble those of non-governmental organizations, such as Heep Hong Society. Such intermediaries are indeed not the Heep Hong Society that we are familiar with, which is engaged in early identification of children with special educational needs. They are actually private organizations that have employed social workers and physiotherapists. It is most noteworthy that they response very swiftly and liaise with and take statement from employees reporting injuries at work. Since some grass-roots employees are not sensitive to the choice of words, they may have said something like "pain is inevitable when we grow old". As such, their injuries may be misconstrued as old injuries rather than work injuries. Also, they may have said, "I am often careless. " But does it mean that they are really careless, or they are just trying to be humble? We do notice that given the increasing number of suspected fraud cases in recent years, insurance companies have imposed greater pressure on the wage earners through various means.
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While the current situation is worth our concern, what is even more worrying is the fact that insurance companies have imposed immense pressure through various means on wage earners who have reported work injuries. Notwithstanding that, we do agree that certain problems do exist and I think Mr CHAN Kin-por has also mentioned an interview survey conducted by a labour organization called the Hong Kong Workers' Health Centre in late December 2013. The findings show that more than 60% of the employees injured at work indicated that they had been approached by recovery agents at the medical boards of public hospitals and the Labour Department. And yet, I think the number should exceed 60% because as far as I know, recovery agents even distributed their name cards in emergency wards, vowing that "no win, no fee". I am also aware that they distribute name cards outside the physiotherapy and occupational therapy clinics of various hospitals as well. These problems do exist; I therefore agree with Mr CHAN's motion in this regard.
Given that champerty or maintenance has become more prevalent, I find it important to strike a balance between the protection of workers' rights and deterring such legal proceedings by minimizing the direct benefits. I personally think that the legal aid system is fair as consideration would be given to the merit of each case and the applicants' financial capacity. Is it a must for the applicants to choose lawyers of their choice after passing these two hurdles? I doubt it. As all lawyers have received professional training, anyone allocated on a random basis would demonstrate high professionalism, so I do not think there is a need for applicants to choose lawyers of their own choice. But what is the problem of allowing applicants to choose lawyers of their own choice? As I have just said, syndicates that engage in champerty and distributed name cards would deceive the wage earners. For accidents that litigation is unnecessary and can be settled through legal proceedings, the syndicates would exaggerate certain possibilities and vowed to the sandwich-class wage earners who have not applied for legal aid that "no win, no fee". If their potential clients are grass-roots wage earners, they may even do business with their heads held high. They have sought to solicit champerty business right from the beginning, but the fact that their potential clients may apply for legal aid has helped rendering their business legitimate. Therefore, allowing applicants to choose lawyers of their own choice would give rise to such direct interest. I therefore find it necessary to consider reviewing the arrangement of allowing legal aid applicants to choose lawyers of their own choice. I think a review is warranted.
We also support Mr LEE Cheuk-yan's amendment. Thank you.
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PRESIDENT (in Cantonese): Does any other Member wish to speak?
MR LEUNG KWOK-HUNG (in Cantonese): President, I have come over here to speak because some members of the public phoned me up and said it was a rather important issue when they watched this motion debate.
I remember that I have once handled a case of insurance … and I am not sure if it was a case of insurance fraud or not. A mentally ill woman took out an insurance policy through an insurance agent. Her husband found that out only because the family encountered some financial difficulties. They made numerous attempts to resolve the problem with the insurance company and the Office of the Commissioner of Insurance (OCI) but failed. The reason given was that once the woman had taken out the policy which was a contract, she had to continue with it. I remember that I accompanied the aggrieved in staging a protest and said that if the situation remained unchanged, I would persist in fighting for the interests of the woman with every effort. After an hour, the husband told me that the policy was cancelled. Was that a case of insurance fraud? I have no idea. I do not intend to reveal how people have cheated others as if I were a detective; all I want to say is that we should strengthen the functions of the OCI.
I am also aware that many existing insurance products are investment-linked, like investment products. If the OCI does not make any reasonable arrangement in this regard, consumers may not know clearly what they have purchased, what kind of product it is and how it is linked with investment, and so on. Even though the society does not call it a fraud, I believe it is a fraud. The reason is that when a person takes out an insurance policy, he mainly wants to chip in to enlarge the pool of money in the insurance system so that if anything unfortunate happens to him, he can get some money out of it. He does not want to invest. If he takes out an insurance policy which has an excessively high content of investment, he is taking risks rather than insuring, because the most basic purpose of insuring is lost. I think this is an issue which the OCI has to deal with.
President, why do I say so? The reason is that the case is similar to the Lehman Brothers incident, in which the consumers did not know what they had bought. I think we should draw on the lesson learned from the Lehman Brothers incident and strengthen the regulation concerned. In particular, due diligence has to be performed. In other words, a person selling an insurance policy to a 5092 LEGISLATIVE COUNCIL ─ 21 January 2015 customer has to comply with various requirements and complete certain procedures. In addition, he should certainly not ignore the financial capacity of the person intending to take out the policy and ask him to buy something which is in fact an investment product or a high-risk product.
I have received phone calls from members of the public who asked me to say these things. In fact, I do not know much about the insurance industry and have not taken out any insurance policy in my life. Yet, I think our debate today should follow one direction. I am not interested in catching the petty thieves because that is not our duty; it is the duty of the Police and the relevant authorities. The question is, what should the Legislative Council monitor? It should monitor the insurance industry to prevent it from expanding excessively. As more and more people are buying insurance products, there should be an adequate machinery and mechanism in the insurance industry to protect consumers' rights. We have to understand that the insurance industry faces very strong competition now because there is a large amount of Mainland capital inflow in Hong Kong. I do not mean that Mainland capital will definitely by inferior; I am only saying that competition will necessarily create a problem. Insurance companies have to fight to win customers over or increase their profits by every possible means, otherwise they cannot survive. In 2000, the Government said that since there was a reduction in the traditional business for banks, it would use the Securities and Futures Ordinance to open up the market and attract foreign capital inflow, or relax the regulation to encourage foreign capital inflow. If the Government adopts a similar policy for the insurance market, I think it will not be a wise move.
I have come over here to speak so that the public officials in attendance can hear the opinions of the public and my observations made from handling matters arising from the Lehman Brothers incident. If the Government's policy is directed towards the only objective of attracting as much business as possible to make Hong Kong the biggest insurance market in Southeast Asia or its peripheral areas, or encouraging insurance companies to set up their headquarters in Hong Kong, I think the OCI will have to compile a review report and submit it to the Legislative Council shortly.
PRESIDENT (in Cantonese): Does any other Member wish to speak?
(No Member indicated a wish to speak)
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PRESIDENT (in Cantonese): Mr CHAN Kin-por, you may now speak on Mr LEE Cheuk-yan's amendment.
MR CHAN KIN-POR (in Cantonese): Mr LEE Cheuk-yan's amendment urges the Government to set up a "central employees' compensation fund" to save on the administration fees incurred for handling insurance claims in respect of industrial accidents, and to reduce frauds relating to workmen's compensation insurance.
I respect Mr LEE Cheuk-yan's wish for the setting up of a "central employee's compensation fund", but I hope he understands that the rehabilitation programme he proposes, which is now undertaken by the insurance sector, will only help workers who wish to return to work and recover. Even if the rehabilitation programme under the "central employees' compensation fund" is launched, workers intending to deceive will not join it anyway. As a matter of fact, there are plenty of such cases. What I find even more difficult to understand is that so long as insurance frauds cannot be eliminated, private insurance companies will continue to suffer a loss of hundreds of millions of dollars year after year, whereas the Government's "central employees' compensation fund" will become even more bureaucratic with higher costs and greater losses. As such, why does Mr LEE Cheuk-yan suggest the Government to do so?
Just now, Mr LEE Cheuk-yan let slip his opinion, saying that if the fund is to be set up by the Government, increase in insurance premium should be subject to regulation. Insurance premium cannot be raised haphazardly, even if heavy loss has been incurred. But is this fair? Is this an appropriate way to deploy public coffers?
On the other hand, I wonder if Members are aware that there are nearly 10 000 intermediaries providing services relating to workmen's compensation insurance and motor vehicle insurance. Even if the "central employees' compensation fund" is set up in the future, services provided by the intermediaries are still necessary, and the relevant costs would have to be paid from the fund after all. Otherwise, a lot of staff will have to be recruited to do the work. Therefore, as someone must provide the services, Members should not think that this is a solution to the problem.
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Furthermore, laws vary from place to place, and it is rare for a place to provide for both statutory claims and common law claims like Hong Kong. While certain deduction can be made, this is only allowed in very few places. In Singapore, for example, one can only choose either. Unlike Hong Kong, where the laws are lax, some places have adopted simpler mechanisms. Thus, no simple conclusion can be drawn. Measures adopted in other countries may not necessarily be viable in Hong Kong, especially when the current system in Hong Kong is so loose. In view of the rampant frauds, I do not think the Government will take over the hot potato.
Nevertheless, I welcome the Hong Kong Government to look seriously into the matter and make comparison to see if there is really big differences between the centralized approach and the win-win approach. If it is really better to adopt a centralized approach than leaving the matter to the business sector, I will support it. However, this is unlikely to me because the Government will end up becoming even more bureaucratic, thereby driving up the costs even further. We are now suffering heavy losses and have worked very hard to combat frauds, but things still happen like that. It is very likely that the Government will be abused. As it is not the boss, there is no point for it to be so serious. I therefore predict that the public spending will continue to rise, which is absolutely no good to Hong Kong society, let alone helping combat frauds. Ignoring my hat of being a trade member, I sincerely consider it impossible to support the "central employees' compensation fund", which will doom to fail.
Given that the setting up of the "central employees' compensation fund" cannot combat insurance frauds, and just now Mr LEE Cheuk-yan has not explained how the fund can combat frauds, I think the fraudsters would continue to take advantage of the loopholes in the system and the legislation to conduct fraudulent acts after the fund is set up in the future. Except for making compensation payments, the fund can do nothing and fraud cases will continue to rise. In the end, taxpayers will have to foot the bill. Hence, I will absolutely not support Mr LEE Cheuk-yan's amendment. Thank you, President.
UNDER SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I thank Mr CHAN Kin-por and Members who have given their valuable opinions. As I pointed out in my previous speech, Members' views would provide important reference for us in examining how to further enhance the existing mode of operation and regulatory measures in the insurance industry.
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Insurance frauds which make insurance companies bear unnecessary underwriting losses are one of the causes of increased premium rates. A fraud is a crime. As I emphasized before, the Government will definitely not condone such crimes.
The Office of the Commissioner of Insurance (OCI), the Commercial Crime Bureau of the Police (CCB) and the Hong Kong Federation of Insurers (HKFI) have been working closely to combat motor vehicle insurance frauds. In December 2011, a dedicated team was established to follow up suspected fraudulent claims in relation to traffic accidents referred by the HKFI. The Police and the OCI have also been liaising closely with the insurance industry through the HKFI to keep track of the trend of insurance-related crimes so as to mount corresponding preventive measures. According to the information provided by the HKFI, over the past three years, a total of 30 cases of suspected fraudulent insurance claims in relation to traffic accidents have been referred to the CCB and four of them have resulted in successful prosecutions and convictions.
In relation to workmen's compensation insurance, the Government has set up an internal working group comprising representatives of the Development Bureau, the Department of Justice (DOJ), the Labour Department, the OCI and the Hospital Authority (HA) in December 2013. The working group has thoroughly reviewed the existing employees' compensation system and the current situation of taking out employees' compensation insurance. It has also conducted in-depth studies and proposed ways of improvement in insurance coverage, compensation, medical treatment and rehabilitation services, and so on, so that the relevant Policy Bureaux, departments or organizations can further consider the follow-up matters.
In conducting their business, insurance companies set their premium rates according to risk assessments. As the premium rates are determined by the free market mechanism, the OCI cannot intervene. However, in performing its functions, the OCI has adopted certain measures to prevent insurance frauds in general. For example, the OCI has required insurance companies to enhance their internal regulatory mechanisms and reminded them to make timely reports on suspicious transactions. The OCI has also asked insurance companies to draw up their commission systems for intermediaries carefully and restrained them from paying a large amount of commission to insurance intermediaries upfront so as to reduce the risks of insurance frauds. In addition, when 5096 LEGISLATIVE COUNCIL ─ 21 January 2015 conducting inspections on insurance companies, the OCI would pay particular attention to suspicious signals such as unreasonable premium rates and commission amounts, unusual circumstances of termination of insurance policies, frequent claims and a disproportionate number of high-risk insured persons. The OCI has advised insurance companies to do likewise in managing their intermediaries so as to identify insurance frauds in a timely manner.
Meanwhile, the OCI has been strengthening co-operation with insurance regulators outside Hong Kong by conducting meetings and seminars and exchanging relevant information. Recently, the OCI signed co-operation agreements with insurance regulators in the Mainland and Macao to enhance co-operation in combatting insurance frauds. These efforts will help prevent and combat cross-boundary insurance frauds.
Let me turn to the issue of combatting champerty. The huge amount of compensation payouts in the insurance business may be related to champerty. Under the laws of Hong Kong, champerty is a criminal offence which carries a maximum sentence of a fine and imprisonment of seven years. The authorities have been enhancing public education and stepping up law enforcement to combat such illegal activities.
According to the Legal Aid Ordinance, a legally aided person is entitled to choose a lawyer to represent him in a legal aid case involving a traffic accident. The Government knows that the insurance industry is concerned that such right may indirectly encourage champertous activities. To prevent improper touting or champertous activities, the Legal Aid Department (LAD) has introduced a declaration system for legal aid cases in September 2013 after consulting the Legal Aid Services Council and the two legal professional bodies. The system seeks to ensure that the aided person's nomination of the lawyer is entirely his own choice and that he has not entered into any agreement with anyone (including the lawyer nominated, his employees, his agents or recovery agents) to share any damages, property or legal costs which may be obtained in the legal proceedings. The LAD would also remind legally aided persons that if anyone contacts them and tells them that he could assist in applying for legal aid or advise them to nominate a particular lawyer, they should report the matter to the LAD.
Apart from adopting measures to combat insurance frauds, the authorities have made educational and promotional efforts from time to time through the media such as the press, television stations and radio stations, with a view to LEGISLATIVE COUNCIL ─ 21 January 2015 5097 raising public awareness about the serious consequence of insurance frauds and keeping them alert. To step up publicity efforts in scam prevention and increase the number of channels for disseminating crime fighting messages, the Police have introduced the scam prevention platform "Fight Scams Together" in July 2014. Through this Internet media, the authorities have conveyed scam prevention messages to the public. Information on this platform is updated in a timely manner with regard to the latest crime trend, including the latest mode of operation in making fraudulent insurance claims. The DOJ and the LAD have also reminded the public through other channels to guard against illegal behaviour of recovery agents and be aware of the risks concerned.
A Member opines that the Hospital Authority should combat attempts to make fraudulent insurance claims through obtaining prolonged sick leave certificates by exaggerating clinical conditions and degrees of injuries. In this regard, let me say that the first and foremost task of the Hospital Authority is to look after the health of Hong Kong people and our public medical services are mainly concerned with treating clinical conditions and providing rehabilitation. Doctors of the Hospital Authority have been conducting medical assessments and issuing sick leave certificates according to their professional judgment made on the basis of the clinical conditions of each patient, for example, the type and seriousness of the injury.
Doctors of the Hospital Authority will continue to uphold their professionalism and independence and they only issue a sick leave certificate to a patient if they are convinced that he is unfit for work, having regard to his medical history and actual clinical conditions.
According to the existing Professional Code and Conduct for the Guidance of Registered Medical Practitioners (the Code) issued by the Medical Council of Hong Kong, doctors are required to issue certificates (including insurance claim forms and sick leave certificates) on the basis that the truth of the contents can be accepted without question, and they should not include in certificates statements which they have not taken appropriate steps to verify. The Code also provides that a sick leave certificate can only be issued after proper medical consultation of the patient by the doctor, and the relevant dates must be truly stated in the certificate. Any doctor who in his professional capacity gives any certificate containing statements which are untrue or misleading renders himself liable to disciplinary proceedings.
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In relation to Members' views on legal aid, I would say that champerty and maintenance are criminal offences. According to the laws, the maximum sentence of these offences (including conspiring with and inciting another person to commit an offence) is imprisonment of seven years and a fine. Since legal aid is financed by public money, the authorities are very concerned about champerty and maintenance and will make every effort to combat them.
In addition, a Departmental Monitoring Committee is established under the LAD chaired by the Director to evaluate the performance of assigned lawyers in handling legal aid cases. The LAD has also joined efforts with the ICAC to form a Corruption Prevention Group which commenced a review of the lawyer assignment procedures in the middle of 2014 to guard against improper behaviour.
Furthermore, the LAD will issue advice or warning to assigned lawyers who have acted unreasonably or handled claim cases improperly. In serious cases, the LAD will place their names on the Record of Unsatisfactory Performance and Conduct or even remove their names from the Legal Aid Panel.
The LAD has put in place a mechanism for making "representations" regarding legal aid cases. If anyone believes an legal aid applicant or a legally aided person has provided false information regarding his case or his financial situation, he can provide the details to the LAD. If the representations are verified after investigation, the LAD will terminate the legal aid and refer the case to the Police for follow-up.
The LAD has also enhanced liaison with the two legal professional bodies to combat improper touting and given clear messages to the public that improper behaviour of assigned lawyers will be seriously dealt with. In November 2014, the LAD has assigned a lawyer at the directorate rank to join a designated group of the Law Society of Hong Kong to discuss ways to deal with touting activities of recovery agents.
In relation to the Traffic Accident Victims Assistance (TAVA) provided by the Social Welfare Department, the authorities have put in place a series of measures to prevent fraudulent claims and abuse of the TAVA. Unless prevented by special circumstances or immobility, the applicant will be required to attend an interview at the TAVA Section. He is responsible for producing evidence in support of his claim of temporary incapacity for work or any LEGISLATIVE COUNCIL ─ 21 January 2015 5099 permanent disability resulting from his injuries sustained in the traffic accident. With the victim's consent, medical examinations and reports may be arranged with the Hospital Authority or the Department of Health for the purpose of assessing his eligibility for assistance. Doubtful medical certificates or reports produced by the victim will be referred to the Hospital Authority or the Department of Health for re-assessment. The TAVA Section will also refer doubtful cases to the Police for in-depth investigations. In addition, standard forms are provided for reporting suspected fraud cases by members of the public.
We are aware that the insurance industry is considering setting up a claims database so that insurance companies can share records of improper claims or other negative records of insured persons. The proposal involves a number of technical issues, particularly that of privacy. The HKFI is examining the feasibility of the proposal and the Government has adopted an open attitude towards it.
Members have given their views on rehabilitation. In this regard, let me say that doctors of the Hospital Authority will, in addition to providing treatment and issuing sick leave certificates to patients, propose and design return-to-work plans for them. Where necessary, doctors can also refer patients to consult personnel in occupational medicine or occupational therapy for further assessments regarding their treatment, rehabilitation and working ability to help them return to work as soon as possible.
In respect of regulation on insurance loss adjusters, there is no uniform international practice. Each jurisdiction will make suitable arrangements according to its market situation. For example, there is no regulation on insurance loss adjusters in Australia and Singapore. In the United Kingdom, registration is required of certain types of insurance loss adjusters, but there is no full-fledged regulation on loss adjusters. A fraud committed by an insurance loss adjuster is a criminal offence. The authorities will continue to join hands with the industry to combat illegal activities in this regard.
A Member has pointed out that it is difficult for some industries to take out workmen's compensation insurance. In fact, the insurance industry has set up the Employees' Compensation Insurance Residual Scheme (ECIRS) to operate as the market of last resort for workmen's compensation insurance. As there is a particularly large number of ECIRS applications from the logistics/transport, cleaning and recycling industries, the Advisory Committee of ECIRS has 5100 LEGISLATIVE COUNCIL ─ 21 January 2015 classified them as High Risk Groups in 2012 and appointed an independent actuary to set the premium benchmark rates for these industries to facilitate the employers in taking out insurance policies and calculating the costs concerned.
Finally, I would respond to the proposal of setting up a "central employees' compensation fund" to be operated by a statutory body in Mr LEE Cheuk-yan's amendment.
Currently, Hong Kong's employees' compensation system is based mainly on the Employees' Compensation Ordinance (ECO) which adopts a system in which individual employers are responsible for their own employees. An employer must, in accordance with the requirements of the relevant legislative provisions, take out workmen's compensation insurance (that is, employees' compensation insurance) with an authorized insurance company to cover their liabilities both under the ECO and in common law. This private-sector mode has been operating very well and under the existing system of workmen's compensation insurance, employees who are injured or have died are entitled to reasonable rights and benefits and full protection as appropriate.
The insurance industry introduced the ECIRS in May 2007 as the market of last resort for workmen's compensation insurance to provide ultimate insurance protection to employers who have difficulties in taking out such insurance, particularly those who belong to the High Risk Groups. As at the end of November 2014, the Advisory Committee of ECIRS has received a total of 676 applications. In 620 of these cases, the policies have been underwritten by the Advisory Committee directly or by individual insurance company members.
Setting up a "central employees' compensation fund" is a very complicated issue. We have to consider carefully the possible problems and impact brought about by the proposal. For example, if a "central employees' compensation fund" is set up, we have to establish a large management structure at the same time. In terms of operation, the proposed system may not be any more flexible and efficient than the existing system. Besides, as the proposal will incur certain administrative, management and operational costs for the daily operation of the fund, it may not be able to save expenditure after all.
Under the existing employees' compensation system, 60-odd insurance companies are authorized to underwrite workmen's compensation insurance policies and among them, 50-odd have actually underwritten such policies. The keen competition can ensure that premium rates are maintained at a relatively LEGISLATIVE COUNCIL ─ 21 January 2015 5101 reasonable level. Such a system is not only beneficial to employers, it also allows the insurance industry to provide protection to employees more efficiently according to the law.
If the existing private market is to be replaced by a "central employees' compensation fund", underwriters of workmen's compensation insurance will suffer a serious blow and the employees concerned will face unemployment. Besides, without the risk spreading arrangement and mutual subsidization with other insurance businesses, the proposed scheme can easily plunge into financial difficulties, thus increasing the pressure of a hike in the premium. When that happens, the general public may expect the Government to provide financial support as a guarantor and if it does, the employers' responsibility of paying compensation will be shifted to the taxpayers.
Given that the establishment of a "central employees' compensation fund" may not necessarily result in a cost-effective scheme, and the present private-sector mode has not only been working effectively under the mandatory requirement for employers to take out workmen's compensation insurance, it can also better cater for the actual situation in Hong Kong to protect the rights of injured workers, the Administration considers it not desirable to make significant changes at present. However, the authorities will continue to keep in close contact with the people and organizations concerned to ensure enhancement of the current system.
I believe that the Policy Bureaux and departments will continue to join hands with the industry to combat insurance frauds and we will keep raising public awareness to prevent frauds. We will continue to listen to the views of the parties concerned and maintain close contact with them to enhance the effectiveness of our work.
President, I so submit.
PRESIDENT (in Cantonese): I now put the question to you and that is: That the amendment, moved by Mr LEE Cheuk-yan to Mr CHAN Kin-por's motion, be passed. Will those in favour please raise their hands?
(Members raised their hands)
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PRESIDENT (in Cantonese): Those against please raise their hands.
(Members raised their hands)
Mr LEE Cheuk-yan rose to claim a division.
PRESIDENT (in Cantonese): Mr LEE Cheuk-yan has claimed a division. The division bell will ring for five minutes.
(After the division bell had been rung for five minutes, a quorum is not present in the Chamber)
PRESIDENT (in Cantonese): A quorum is not present in the Chamber. Will the Clerk please ring the bell to summon Members back to the Chamber.
(While the summoning bell was ringing, a number of Members left their seats)
PRESIDENT (in Cantonese): Will Members please return to their seats for the headcount.
(The summoning bell stopped after ringing for 15 minutes)
ADJOURNMENT OF MEETING
PRESIDENT (in Cantonese): The summoning bell had been rung for 15 minutes, but a quorum is still not present in the Chamber. I now adjourn the Council.
Adjourned accordingly at 10.33 pm.
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Annex I
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Annex II
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