LEGISLATIVE COUNCIL ― 10 November 2016 415

OFFICIAL RECORD OF PROCEEDINGS

Thursday, 10 November 2016

The Council continued to meet at Nine o'clock

MEMBERS PRESENT:

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

THE HONOURABLE JAMES TO KUN-SUN

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

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

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

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

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

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

THE HONOURABLE CHAN HAK-KAN, B.B.S., J.P.

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

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

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

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

416 LEGISLATIVE COUNCIL ― 10 November 2016

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

THE HONOURABLE LEUNG KWOK-HUNG#

THE HONOURABLE CLAUDIA MO

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

THE HONOURABLE STEVEN HO CHUN-YIN, B.B.S.

THE HONOURABLE FRANKIE YICK CHI-MING, J.P.

THE HONOURABLE WU CHI-WAI, M.H.

THE HONOURABLE YIU SI-WING, B.B.S.

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.

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

THE HONOURABLE KENNETH LEUNG

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

THE HONOURABLE KWOK WAI-KEUNG

THE HONOURABLE DENNIS KWOK WING-HANG

# According to the Judgment of the Court of First Instance of the High Court on 14 July 2017, LEUNG Kwok-hung, Nathan LAW Kwun-chung, YIU Chung-yim and LAU Siu-lai have been disqualified from assuming the office of a member of the Legislative Council, and have vacated the same since 12 October 2016, and are not entitled to act as a member of the Legislative Council. LEGISLATIVE COUNCIL ― 10 November 2016 417

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

DR THE HONOURABLE FERNANDO CHEUNG CHIU-HUNG

DR THE HONOURABLE HELENA WONG PIK-WAN

THE HONOURABLE IP KIN-YUEN

DR THE HONOURABLE ELIZABETH QUAT, J.P.

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

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

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

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

THE HONOURABLE CHUNG KWOK-PAN

THE HONOURABLE ALVIN YEUNG

THE HONOURABLE ANDREW WAN SIU-KIN

THE HONOURABLE CHU HOI-DICK

THE HONOURABLE JIMMY NG WING-KA, J.P.

DR THE HONOURABLE JUNIUS HO KWAN-YIU, J.P.

THE HONOURABLE HO KAI-MING

THE HONOURABLE LAM CHEUK-TING

THE HONOURABLE HOLDEN CHOW HO-DING

THE HONOURABLE SHIU KA-FAI

THE HONOURABLE SHIU KA-CHUN

THE HONOURABLE WILSON OR CHONG-SHING, M.H.

418 LEGISLATIVE COUNCIL ― 10 November 2016

THE HONOURABLE YUNG HOI-YAN

DR THE HONOURABLE PIERRE CHAN

THE HONOURABLE CHAN CHUN-YING

THE HONOURABLE CHEUNG KWOK-KWAN, J.P.

THE HONOURABLE LUK CHUNG-HUNG

THE HONOURABLE LAU KWOK-FAN, M.H.

THE HONOURABLE KENNETH LAU IP-KEUNG, M.H., J.P.

DR THE HONOURABLE CHENG CHUNG-TAI

THE HONOURABLE KWONG CHUN-YU

THE HONOURABLE JEREMY TAM MAN-HO

THE HONOURABLE NATHAN LAW KWUN-CHUNG#

DR THE HONOURABLE YIU CHUNG-YIM#

DR THE HONOURABLE LAU SIU-LAI#

MEMBERS ABSENT:

THE HONOURABLE LEUNG YIU-CHUNG

DR THE HONOURABLE KWOK KA-KI

THE HONOURABLE TANYA CHAN

THE HONOURABLE HUI CHI-FUNG

# According to the Judgment of the Court of First Instance of the High Court on 14 July 2017, LEUNG Kwok-hung, Nathan LAW Kwun-chung, YIU Chung-yim and LAU Siu-lai have been disqualified from assuming the office of a member of the Legislative Council, and have vacated the same since 12 October 2016, and are not entitled to act as a member of the Legislative Council. LEGISLATIVE COUNCIL ― 10 November 2016 419

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE MRS CARRIE LAM CHENG YUET-NGOR, G.B.M., G.B.S., J.P. THE CHIEF SECRETARY FOR ADMINISTRATION

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

MR JAMES HENRY LAU JR., J.P. SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY

MR STEPHEN SUI WAI-KEUNG, J.P. UNDER SECRETARY FOR LABOUR AND WELFARE

CLERKS IN ATTENDANCE:

MS ANITA SIT, ASSISTANT SECRETARY GENERAL

MISS FLORA TAI YIN-PING, ASSISTANT SECRETARY GENERAL

MS DORA WAI, ASSISTANT SECRETARY GENERAL

MR MATTHEW LOO, ASSISTANT SECRETARY GENERAL

420 LEGISLATIVE COUNCIL ― 10 November 2016

MEMBERS' MOTIONS

PRESIDENT (in Cantonese): This Council now continues to deal with the motion moved under the Legislative Council (Powers and Privileges) Ordinance.

Stand over items (since the meeting of 19 October 2016)

MOTION UNDER THE LEGISLATIVE COUNCIL (POWERS AND PRIVILEGES) ORDINANCE

Continuation of debate on motion which was moved on 9 November 2016

DR YIU CHUNG-YIM (in Cantonese): President, to begin with, I noticed a great deal of misunderstanding, or even illogicality and erroneous causal reasoning, in some Members' remarks concerning the motion moved by Mr LAM Cheuk-ting yesterday. In particular, I noticed that when these Members expressed their disapproval of Mr LAM Cheuk-ting's motion, many of them used these words: accusation, intervention and tarnishing. But I must point out that Mr LAM merely proposed the invocation of the Legislative Council (Powers and Privileges) Ordinance to launch an inquiry.

"Investigation" necessarily implies that evidence has yet to be found. Hence, an investigation is not an accusation and will not even constitute any intervention or tarnishing. The objective of an investigation is to seek the truth and monitor the organization concerned. For that reason, I wish to read out Article 73 of the Basic Law on the powers and functions of the Legislative Council of the Hong Kong Special Administrative Region. Article 73(6) provides, "To debate any issue concerning public interests". And, Article 73(10) reads, "To summon, as required when exercising the above-mentioned powers and functions, persons concerned to testify or give evidence." For that reason, I hope Members can realize that the objective of Mr LAM's motion is to conduct an investigation and seek evidence. This is just an attempt to fulfil the functions, powers and duties vested with the Legislative Council under Article 73 of the Basic Law.

Yesterday, Dr Helena WONG and Mr Andrew WAN already gave a very detailed account of various unusual happenings in the Independent Commission Against Corruption ("ICAC") over some time in the past. I am not going to LEGISLATIVE COUNCIL ― 10 November 2016 421 dwell on these happenings now. The crux of the matter is that these unusual happenings have come to arouse grave public concern. Moreover, yesterday, I heard from the speeches of many Members that they were suspicious of the happenings and could not have a full picture of the facts. Hence, we should now fully understand that the matter has already come to involve public interests. Therefore, in order to fulfil the powers and functions vested with the Legislative Council under Article 73 of the Basic Law, we are duty-bound to investigate the matter.

I must emphasize that an investigation is not an accusation, not intervention and not tarnishing. An investigation can help us ascertain the facts and enable the public to know the truth of the matter. It will also have significant and far-reaching effect on the future improvement of the internal personnel deployment in ICAC and the restoration of public confidence in it. For that reason, I hope Members will look positively the proposal of setting up a select committee under the Legislative Council (Powers and Privileges) Ordinance. This will help us seek the truth, restore public confidence in ICAC, and dispel the public suspicion that ICAC has lost its credibility.

For that reason, I support Mr LAM Cheuk-ting's motion on invoking the Legislative Council (Powers and Privileges) Ordinance to investigate the personnel issues of ICAC. The purpose is to ensure the public interest and enable Hong Kong to have a better system in the future. This also something we Legislative Council Members should do in order to fulfil the functions, powers and duties vested with us under the Basic Law.

If the findings of an investigation reveal no violation of any procedures, they can actually do justice to ICAC and prove innocence. In this way, ICAC can move ahead once again. This is far better than simply watching the loss of public confidence in ICAC's work but having no better ways to deal with this incident of grave public concern. Therefore, let me stress once again that the sole purpose of setting up a select committee is to seek the truth. It definitely does not involve any accusation or pre-conclusion. It may even prove that ICAC is innocent, so that ICAC can move ahead and public confidence can be restored.

In fact, yesterday, a Member explained in detail that he would seek to amend sections 3 and 8 of the Prevention of Bribery Ordinance by way of a 422 LEGISLATIVE COUNCIL ― 10 November 2016 private Member's Bill. The Bill would involve the extension of the application of the Prevention of Bribery Ordinance to the Chief Executive.

For that reason, we have reasons to believe, and the public can reasonably suspect, that if sections 3 and 8 of the Prevention of Bribery Ordinance are not amended, in cases where the Chief Executive is involved, ICAC may well face intervention and fail to carry out any investigation due to the restrictions under sections 3 and 8. This reasonable doubt has already caused public concern and come to involve significant public interest. Under Article 73 of the Basic Law, this Council is duty-bound to fulfil its powers and functions, and conduct an investigation―I repeat once again―an investigation into whether or not any unnecessary intervention and any significant problems have emerged during the investigation of cases involving the Chief Executive as a result of the fact that sections 3 and 8 of the Prevention of Bribery Ordinance are not yet amended.

Lastly, I wish to read out section 3 of the Prevention of Bribery Ordinance: "Soliciting or accepting an advantage―Any prescribed officer who, without the general or special permission of the Chief Executive, solicits or accepts any advantage shall be guilty of an offence." The permission of the Chief Executive is clearly stipulated. In other words, if the person being investigated is the Chief Executive, then contradictions in logic within section 3 may arise. Therefore, we can reasonably believe that despite the establishment of a prima facie case, any investigation conducted under the Prevention of Bribery Ordinance may face intervention from the Chief Executive and fail to proceed due to section 3. Yesterday, a Member already pointed out that he had been asking for the amendment of section 3 over the previous four years. Therefore, the incident has come to arouse public concern. And, the public definitely have reasons to suspect that there are some inside stories concerning the personnel reshuffle of ICAC.

I have to repeat once again that in fact we do not need to discuss whether it involves any accusation, tarnishing or evidence. Just because the incident has caused grave public concern and the public have lost their confidence in ICAC's work, we Legislative Council Members should fulfil our responsibilities under Article 73 of the Basic Law and set up a select committee to investigate the incident under the Legislative Council (Powers and Privileges) Ordinance. This will be the most credible way to enable the public to understand the whole story and truth of the incident, in turn helping our society to ascertain all the facts and solve the problem of losing confidence in ICAC while having no better way out. LEGISLATIVE COUNCIL ― 10 November 2016 423

I hope Members will think twice and help Hong Kong and ICAC to solve the current problem.

Therefore, if Members who opposed Mr LAM Cheuk-ting's motion yesterday think that the motion amounts to an accusation, and that there is insufficient evidence, I wish to explain to them once again that the original intent of setting up a select committee is that since there is no evidence at present, we must rely on a select committee to find out the evidence and truth. Therefore, I hope Members will think it over and be logical. I hope they can understand that it is only by setting up an independent select committee that we can help Hong Kong and ICAC to prove that ICAC is innocent. Besides, we Legislative Council Members are duty-bound to fulfil our powers and functions. We Legislative Council Members are duty-bound to do so.

Thank you, President.

PROF JOSEPH LEE (in Cantonese): President, today Mr LAM Cheuk-ting moves a motion under the Legislative Council (Powers and Privileges) Ordinance to investigate the incident concerning Ms Rebecca LI, as well as the case of Mr LEUNG Chun-ying's receipt of money from UGL Limited. President, first of all, I wish to declare my interest. I am a member of the Operations Review Committee, so there are chances for me to access the information of the two incidents mentioned above. According to the terms of reference of the Operations Review Committee, there are chances for the Committee to access certain information. On the ground of the confidentiality agreement, I consider that it is not appropriate for me to discuss the relevant topic and participate in the voting of the motion. For that reason, President, I reiterate here that in view of a conflict of interest, I will not participate in this discussion and I will not cast my vote on this motion.

MR KWONG CHUN-YU (in Cantonese): Probity is one of the most important core values of Hong Kong. It is the duty of this generation to guard some of the core values which have been continuously eroded and destroyed. One example is what colleagues have been discussing in the Chamber this morning regarding whether the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") can be invoked to inquire into this Rebecca LI incident.

424 LEGISLATIVE COUNCIL ― 10 November 2016

Fellow Members, when the Chief Secretary for Administration said yesterday that she opposed an inquiry into this incident, the words she used were: "ICAC has never openly said that an investigation into this incident is underway. When I was preparing for this motion debate, I also made an effort to reconfirm that I had never been informed that ICAC was conducting an investigation." We have found many contradictions in the words above. Under what circumstances will ICAC openly say that it is investigating the matter, or that it will have to tell the Chief Secretary for Administration? Secondly, if the Chief Secretary has not been informed, has she learned of it then? Generally speaking, are "inform" and "learn" different in meaning? Right now we are in the Chamber. Under the leadership of LEUNG Chun-ying who is good at the art of double-talk, we really have to be excessively particular with the choice of words. This is precisely why we have to invoke the Ordinance to inquire into the ICAC incident.

We understand that we now see an "earthquake" and an ICAC filled with panic. Many ICAC staff are using actions and gestures to tell us that the existing value of ICAC is under impact. We are here asking for the invocation of the Ordinance to conduct an inquiry but are being stopped. We are told that there should be no inquiry as we have to trust ICAC. President, ICAC is crying for help!

Yesterday, Mr Holden CHOW referred to ICAC as a century-old shop. Although he is wrong in his calculation, we people in Hong Kong really hope that this value can pass on from generation to generation until it can really achieve the reputation and fame of a century-old shop. ICAC was established in 1974. Yet, today in 2016 when we are in the Legislative Council Chamber, we discover that there are problems with it and it is crying for help. At the time when it hopes that the Legislative Council can lend a helping hand, we unexpectedly say that no inquiry is warranted. An inquiry is not even allowed. My fellow Members in the pro-establishment camp, do you really think that there is nothing suspicious in this incident? Let us ask ourselves candidly: Is there really no problem? This is such an important moment, there is such a crucial staff change, and it happens that the UGL incident is being uncovered. All these point to a problem: Is there a correlation here? We have to inquire as we really wish to find out the truth. Nonetheless, you say that we do not have any evidence at hand and we are purely speculating, making up stories and deliberately hyping issues up. If you say that we are stirring up a hype, are you also saying that the people of Hong Kong are pitching in? The problem now is LEGISLATIVE COUNCIL ― 10 November 2016 425 that society has sounded the alarm and we are very worried. President, if we cannot even hold this last gate of probity, fellow Members, we are not being fair to the next generation of Hong Kong.

Therefore, I would like to call on fellow Members to stop and think because after all of us have spoken, we will proceed to vote. We do not only intend to argue here. Rather, we are here to find out what in fact is wrong with the value which we once strongly believed in. What is wrong with the century-old shop, or the old shop which is heading for the hundredth year? Fellow Members, we want to inquire into this incident in accordance with the power which the Legislative Council can confer, the consensus which we have obtained from the people and society, and the value of believing in justice which Hong Kong people have built over the years. If we cannot initiate an inquiry here, we cannot think of other means. No one would like to see anything wrong with ICAC. But since a problem has cropped up, we as Members of the Legislative Council are duty-bound to voice out from the justice perspective.

Thus, President, I support Mr LAM Cheuk-ting's motion to invoke the Ordinance to inquire into this incident. I also have a question for the Chief Secretary for Administration. Given the words I quoted earlier, I have to ask carefully if there is a difference between "inform" and "learn". Or should I say, if she has not been informed, has she inquired or asked colleagues or friends of subordinates to inquire? Would her words be "informed that ICAC is not having an investigation"? We would like to clarify what her words mean. I believe this may have a bearing on the stance of colleagues when they vote on the motion afterwards.

MR CHEUNG KWOK-KWAN (in Cantonese): President, over these two days, I have heard a very gripping screenplay, ICAC Storm. The plot starts with the failure of an officer in the Independent Commission Against Corruption ("ICAC") to get promoted after acting as Head of Operations. It then takes a turn, telling how the Chief Executive, who wants to interfere with an ICAC investigation involving himself, exerts clandestine pressure in order to have the officer's acting appointment cancelled. This stirs up clashes and conflicts among various people in ICAC. Meanwhile, various political parties and Members of the Legislative Council are also hurled into this anti-graft storm, causing heated arguments between the government and the opposition and producing one climax after another. Finally, the ICAC officer is so disillusioned that she resigns, 426 LEGISLATIVE COUNCIL ― 10 November 2016 bringing an end to the movie. The screenplay is marked by dramatic tension and nice characterization of villains. If it is really filmed, it will certainly rival Infernal Affairs or Cold War, winning acclaim and box office revenue.

President, a good plot should be filmed for screening. But if people bring it into this Chamber for discussion as a true story and even ask for an investigation using the imperial sword of the Council―the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance")―I would say this is a bit too much and a waste of the Council's public money and resources.

Yesterday, I listened attentively to the speeches of Mr LAM Cheuk-ting and some other pan-democratic Members. Honestly, their speeches were indeed very sentimental and emphatic, but I just could not hear any facts and evidence which can make me think that it is worthwhile to invoke the Ordinance for following up this incident.

I do not know what kinds of facts have led Mr LAM Cheuk-ting―he is not present now, but sorry, he is here―to think that Commissioner Simon PEH's offer of the acting appointment to Ms Rebecca LI must have been based on his belief that she was the person most suitable for promotion to the post. In his written reply to Members from the non-establishment camp dated 4 October 2016, Commissioner PEH explained clearly that at the time, he was of the view that no one was suitable for immediate promotion or an acting appointment with a view to substantive promotion within the Operations Department, so he followed the established practice of offering Ms LI an acting appointment for administrative convenience, so that he could thoroughly observe her ability and work performance. Is Mr LAM Cheuk-ting aware of this letter of reply? And if he has received the reply, has he turned a blind eye to it and chosen to believe all the hearsay rather than the official written reply from ICAC?

Commissioner PEH also stated solemnly in the letter that the arrangements for offering and cancelling Ms LI's acting appointment were all made in accordance with prevailing regulations and procedures in the Government. His decision to terminate Ms LI's acting appointment was based entirely on personnel management considerations, with nothing whatsoever to do any ongoing ICAC investigations and any pressure or intervention. Commissioner PEH also said that before Ms Rebecca LI started acting as Head of Operations in July 2015, he already told her very clearly, without any ambiguity, that the nature of the acting appointment was for administrative convenience. And, let us not forget that so LEGISLATIVE COUNCIL ― 10 November 2016 427 far, Ms LI herself has never made any complaint regarding the matter. The one who is seeking redress is neither Ms LI nor anyone from ICAC, but Mr LAM, who no longer has any connection with ICAC.

Mr LAM Cheuk-ting also claims that the cancellation of Ms LI's acting appointment might be due to her being the person in charge of the investigation into the Chief Executive's receipt of $50 million from an Australian company, UGL Limited. He therefore would like the Legislative Council to invoke the Ordinance for investigation. But while making such a serious accusation, Mr LAM has never provided any concrete evidence to support his allegation. Hence, it looks like his accusation is all based on hearsay. If Mr LAM really possesses any concrete evidence, would he please submit it to our colleagues for consideration immediately. I hear that Mr LAM was an Investigator in ICAC before working as the chief executive of the Democratic Party. Back then, Mr LAM probably would disapprove of such a sloppy attitude towards investigation.

It can thus be seen that the cancellation of Ms LI's acting appointment was just an internal staff deployment in ICAC, falling within the realm of ICAC's internal functioning. Is it reasonable for us, the Legislative Council, to interfere with and investigate the internal functioning and staff deployment of another organization? Our colleagues from the non-establishment camp often talk about the executive authorities' interference with the legislature. Then, why aren't they equally fearful of the Legislative Council's interference with the personnel deployment of ICAC?

What is more, the work of ICAC is highly confidential and significant. Like other Members from the pro-establishment camp, I also have queries, I do not know what special channels Mr LAM has and why he talks about the inside stories of ICAC before the media so very often. But I would advise Mr LAM to stop doing so, because whenever he speaks before the flashbulbs of media cameras, ICAC will have to pay the price of losing the credibility it has earned over the years. This is not a blessing to Hong Kong people. Moreover, if we invoke the Ordinance to investigate this incident in the absence of any evidence, a lot of ICAC officers will have to give evidence in the Legislative Council every day, and they may also have to do a huge amount of preparatory work in order to dovetail with the investigation by this Council. Will this affect ICAC's anti-corruption work?

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Integrity is a core value of Hong Kong. The high international recognition of our probity is attributable to the unity, efforts and perseverance of all ICAC staff since its establishment in 1974. Hong Kong people should give their full support to the work of ICAC, instead of querying and badmouthing it. Unfounded accusations like those put forward by Mr LAM not only fail to promote probity in Hong Kong but also ruin the credibility of ICAC among the people. Such a practice brings no benefit to Hong Kong nor ICAC, for that matter.

With these remarks, President, I oppose Mr LAM Cheuk-ting's motion.

MR KENNETH LEUNG (in Cantonese): President, on 17 October 1973, the then Governor Sir Murray MACLEHOSE delivered his Policy Address, in which he quoted from an inquiry report compiled by Sir Alastair BLAIR-KERR, a Senior Puisne Judge at the time. According to the inquiry report, it was absolutely necessary to set up an anti-corruption department separated from the Police Force as a means of enhancing anti-corruption efforts. Subsequently, the Independent Commission Against Corruption ("ICAC") was formally set up on 13 February 1974, and by now, it has a history of some 40 years.

"Hong Kong Our Advantage is ICAC" has remained a powerful slogan in society for a long time. It gives people a feeling that Hong Kong is a clean, transparent and fair society. This image is a result of various sides' efforts, and the anti-corruption work of ICAC also commands social recognition. Due to ICAC's efforts, Hong Kong's business environment and reputation in the international community have likewise continued to improve. Sadly, the recent years have seen the occurrence of certain undesirable instances. According to the Corruption Perceptions Index compiled by an international corruption watchdog called the Transparency International, Hong Kong's ranking on this Index has been on the decline over recent years. In 2015, Hong Kong ranked the 18th, a drop of six places over its ranking in 2011.

At this point of my speech, I wish to give a brief reply on the views of certain Members. Many Members (especially those from the pro-establishment camp) have said to me that ICAC is a very important law enforcement body, so we should facilitate rather than hinder its anti-corruption work. Precisely for this reason, we have the social responsibility and moral obligation to help ICAC LEGISLATIVE COUNCIL ― 10 November 2016 429 right the wrong. Actually, ICAC is subject to the monitoring of the Legislative Council. And, this "ICAC storm" is not created by us based on fabrication as asserted by Mr CHEUNG Kwok-kwan.

Let us look back at history. In April 2013, the Director of Audit issued a value-for-money audit report on ICAC's anti-corruption efforts. At the time, the Public Accounts Committee ("PAC") also examined other ICAC-related matters based on this report, especially the official entertainment, gifts, and duty visits involving former ICAC Commissioner Mr Timothy TONG. PAC held a number of public hearings as its subsequent follow-up and severely condemned former ICAC Commissioner Mr Timothy TONG in its conclusion.

Given this inquiry report, the Department of Justice once considered the initiation of prosecution against Mr Timothy TONG at the time. I certainly respect the decision of the Secretary for Justice in 2016 on not prosecuting Mr Timothy TONG. But given the Director of Audit's report and also the PAC report, it is honestly necessary for ICAC Commissioner Simon PEH to set up certain working groups to thoroughly review the internal control of ICAC (especially expenses control) and issue new guidelines, so as to improve and perfect its internal control.

In what we call the "ICAC storm" or "Rebecca LI incident" this time around, a number of senior ICAC officers (especially those in the Operations Department) departed one after another over just a few months, including Ms Rebecca LI, Principal Investigator Mr Dale KO, and Chief Forensic Accountant Ms Melissa TANG. Even Mr Ricky YAU, Acting Head of Operations at the time, likewise expressed the intention to leave ICAC. But later, he changed his mind. All this is based on facts rather than mere fabrication. Of course, certain individual media organizations have ascribed these personnel changes to the "Rebecca LI incident", and Ms LI was the highest-ranking operational officer in ICAC who was responsible for investigating the UGL incident. While we are unable to prove this, the many senior personnel changes in ICAC over just a short span of several months this year are already a problem. What has gone wrong in ICAC's manpower planning? Is it right to say that the ICAC Commissioner as the head of ICAC knows nothing about personnel management, thus leading to a high wastage of senior personnel? This is likewise one big query.

Most paradoxically, sometime around late July or early August this year, the ICAC Commissioner nonetheless invited Mr Ricky CHU, who had departed 430 LEGISLATIVE COUNCIL ― 10 November 2016

ICAC sometime before, to take up the position of Director of Investigation (Private Sector). At the time, Mr CHU was the Secretary-General of the Independent Police Complaints Council ("IPCC"). Members should note that at the time, Mr Ricky CHU was already 63 years of age and was approaching the retirement age. In that case, why should ICAC hasten to employ a retired former colleague who had departed ICAC several years before? This recruitment of ICAC aroused discontent among the management and members of IPCC. President, I now declare that I am an IPCC member. The four or five personnel changes I have talked about are all based on facts, and I do not see any need for verification. Besides, all this has already happened. Isn't it right to say that the personnel management and planning of ICAC alone already serves as a sufficient ground for an inquiry? I hope Members can give serious thoughts.

At the meeting yesterday, Mr CHAN Chun-ying talked about Members' visit to ICAC on 23 September. Of course, it was a courtesy visit, during which I also had an opportunity to meet with the ICAC Commissioner and discuss many issues relating to the practice and operation of ICAC and also matters of social concern, including the "Rebecca LI incident". I cannot go into the details of the meeting that day. But generally speaking, according to his remarks on public occasions and also at that internal meeting, the ICAC Commissioner cannot give a detailed reply to the questions about the "Rebecca LI incident" or Rebecca LI's resignation for reason of privacy.

Another thing is that as pointed out by many Members, Ms Rebecca LI has not given any reply since her resignation quite some time ago; nor has she expressed any dissenting views on the public statements issued by ICAC. Members should realize a fact. She was a senior officer in a law enforcement body, so she must observe the confidentiality agreement, regardless of how unhappy or reluctant she was at the time of leaving her position. In particular, she was a senior officer in a law enforcement body. The confidentiality agreement can remain in force many years after her department. I respect Ms Rebecca LI's silence. But this does not mean that there are no other reasons to explain this. Actually, any senior officer in a law enforcement body must observe the principle of absolute confidentiality after departure. This is a manifestation of professionalism.

In view of this incident and the many personnel changes, why should we refuse to set up a select committee to inquire into the actual problems in ICAC? LEGISLATIVE COUNCIL ― 10 November 2016 431

It is honestly unnecessary for Members to wear tainted spectacles and perceive our proposal of conducting an inquiry as a means of achieving political machination and taking political advantage. Members can see for themselves how the PAC inquiry two years ago has helped ICAC enhance its internal control. Over the past few years, many abnormalities have taken place in the SAR Government and ICAC. One particular example is that former Chief Secretary for Administration Rafael HUI was charged with bribery, and he was successfully prosecuted. Precisely because of many such incidents, precisely because of public concern about the problems with this anti-corruption organization which enjoys a high international reputation, we must seek to help this renowned organization return to the right track, even though ICAC is literally not a century-old organization. We do not have any political intention. We only want to help this organization find out its problems.

Throughout the 43 years of ICAC's history, how many times has the Legislative Council invoked the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to conduct an inquiry? Probably none. But this incident is honestly marked by extraordinary circumstances. So, we must adopt an extraordinary arrangement under extraordinary circumstances. While I cannot say that this personnel change is related to the UGL incident because all is just our mere conjecture, I think it is appropriate to invoke the Ordinance to conduct an inquiry. Members very often think that many matters in ICAC should be kept confidential. I think this is absolutely important. A select committee set up under the Ordinance to inquire into a government body will hold public hearings, and its members may have access to many government papers. But it may adopt a flexible approach, in the sense that it may hold closed meetings, and its members may decide that the papers they obtain are not to be disclosed to the public. We can deal with many sensitive issues under a flexible approach. All will just depend on whether Members have the enthusiasm or sincerity to bring an inquiry to satisfactory completion.

Apart from probity, the rule of law in our core values has also been dealt a severe blow. So, I think it is necessary to invoke the Ordinance to set up a select committee.

Thank you, President.

432 LEGISLATIVE COUNCIL ― 10 November 2016

MR YIU SI-WING (in Cantonese): President, I speak in opposition to Mr LAM Cheuk-ting's motion for invoking the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") in order to appoint a select committee to investigate the Independent Commission Against Corruption ("ICAC"), because that motion is not supported by concrete evidence. If the Legislative Council rashly uses its privilege to investigate ICAC, the credibility and image of ICAC will be impaired.

I notice that in Mr LAM's motion, there are subjective judgment and queries in three aspects, which include: first, whether the Chief Executive, Mr LEUNG Chun-ying, or other related organizations, participated in making the decision to cancel the acting appointment; second, whether the cancellation of the acting appointment relates to any intervention in the investigation into the case of Mr LEUNG Chun-ying; and third, whether there was any conflict of interest or illegal act on the part of Mr LEUNG Chun-ying if he participated in making the decision to cancel the acting appointment. These three sequential allegations are based on guesses. We should know that these allegations, which are based on guesses and not supported by any facts or evidence from the persons involved, should not be accepted lightly, especially when they are so serious and the targets are even the Chief Executive and ICAC. After the resignation incident, Ms Rebecca LI, the protagonist of this incident, has never openly voiced her grievances so far. In other words, when there is no plaintiff, how can there be any defendant? If we rashly invoke the Ordinance to commence investigation, we will be unfair to the ICAC Commissioner and the Chief Executive.

Besides, as highlighted in the letter from the ICAC Commissioner in early October in response to the questions raised by colleagues in this Council, in regard to the acting appointment of Ms Rebecca LI and the cancellation of her acting appointment afterwards, the Commissioner had reported to the Chief Executive as a usual practice, and after noting the views of the Commissioner, the Chief Executive did not give any comments. This is a clear denial of the allegations mentioned in the motion, meaning that the Chief Executive did not participate in making the decision to cancel the acting appointment. In the reply letter, the ICAC Commissioner clearly described the whole process of cancelling the acting appointment and took all the responsibility upon himself. Yesterday, Chief Secretary for Administration Carrie LAM even clearly said that the decision of cancelling the acting appointment of Ms Rebecca LI was purely based on the appraisal of on Ms LI's work ability, and she also criticized that Mr LAM's comments were entirely groundless, speculative and misleading. Two LEGISLATIVE COUNCIL ― 10 November 2016 433 high-ranking officials from the Government made their respective clarifications in black and white on a public occasion. Given their status and serious attitude, I think they are trustworthy.

President, ICAC enjoys very good reputation in Hong Kong and even in the whole world. Its anti-corruption achievements are attributed to its high transparency, as well as its monitoring mechanism and check-and-balance system. ICAC has to be accountable to the Chief Executive and is subject to monitoring by the Legislative Council. Apart from that, its various kinds of work are also subject to monitoring by four independent advisory committees. One of these committees is the Operations Review Committee, which has a membership of 13 prominent figures in society, one of them is my colleague from the democratic camp in this Council. This Committee receives from the Commissioner information about all complaints of corruption made, seeks to ascertain how ICAC deals with them, and receives reports on the investigations the ICAC has completed.

In 2015, ICAC received nearly 2 800 corruption complaints, including the UGL incident reported by the public and requested to be investigated thoroughly by Mr LAM. No matter what the investigation result is, it will be reported to the Committee concerned according to regulation. Then how can there be any clandestine operation or intervention in the investigation by the Chief Executive? If there is, the related Committee will also question about the situation.

President, ICAC has all along commanded public confidence, largely due to its emphasis on confidentiality in its publicity, an important principle in handling complaints of corruption and investigation. I believe that if the Legislative Council appoints a select committee to investigate ICAC, it will certainly require ICAC to provide explanations on the reasonable or unreasonable points of doubt, and this process will definitely tarnish its privacy code. The Head of Operations is in charge of four Investigation Branches and Internal Investigation, managing nearly 1 000 staff members. Inquiring into the reasons for Ms Rebecca LI's resignation will surely involve how she dealt with the daily investigation and management work during her acting period. As revealed in the ICAC Commissioner's letter, during the acting period of Ms LI, he held one to even three or four meetings with her every week in order to understand the work progress of the Operations Department and to discuss various management matters. After the select committee is established, it will naturally ask for or check the relevant papers before and after their meetings, and even the appraisal 434 LEGISLATIVE COUNCIL ― 10 November 2016 reports of Ms Rebecca LI. We can imagine that a lot of internal classified documents will be exposed. Can ICAC still live up to its reputation in future? Will the public still have confidence in reporting cases to ICAC?

President, probity is one of the core values of Hong Kong and ICAC has been demonstrating its high standard of professionalism and neutrality. It is really not my wish to see the invocation of the Ordinance to investigate ICAC due to some subjective speculations, thus causing unnecessary pressure to ICAC, and neither do I want ICAC to be used by the Legislative Council as a political tool against the Chief Executive. Therefore, the original motion is basically not worth supporting.

President, I so submit.

DR CHENG CHUNG-TAI (in Cantonese): President, to begin with, I strongly support the motion proposed by Mr LAM Cheuk-ting to invoke the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to inquire into the internal promotion and personnel matters of the Independent Commission Against Corruption ("ICAC"). By doing so, we also want to tell Hong Kong people that the need for the Legislative Council to invoke the Ordinance today to inquire into the promotion problems of ICAC can aptly reflect the systemic disintegration of ICAC.

In the very first place, I strongly disapprove of the reasons for objection put forth by pro-establishment Members, such as the saying that invoking the Ordinance to investigate the internal matters of ICAC is equal to interfering with its internal promotion mechanism. This is an argument that takes the result for the cause and distorts the facts. The need for us to seek the help of the Legislative Council and monitor the systemic defects of the ICAC can aptly reflect that the system of ICAC is itself defective.

All of a sudden in the past few months, different high-level ICAC investigation officers left their posts one after another, or "bounded in and out" in the words of netizens. In fact, Hong Kong people are puzzled by all this. What actually distinguishes the "confidentiality" that ICAC has been talking about from the kind of "clandestine operation" we see today? Well, the difference is very clear to those of us who understand the status of ICAC in Hong Kong.

LEGISLATIVE COUNCIL ― 10 November 2016 435

We know very well that before 1997, or when ICAC was first established in 1974, ICAC owed its legitimacy and status in the minds of Hong Kong people to two forces. First, although ICAC was supervised by the Governor appointed by the Queen of Britain, the Queen herself must follow the royal conventions in Britain, and culturally, she must also act within the parameters allowable by the British people, social order and all the long-standing cultural customs. Besides, the Governor of Hong Kong was, to a certain extent, monitored by the British people through the British Parliament.

In other words, even though Hong Kong was a British colony before 1997, ICAC was still able to command Hong Kong people's recognition, and this was attributable not only to its performance and efforts of promoting probity but also to the fact that it was under the people's supervision (that is, it had the people's mandate). However, both of these two forces have ceased to exist since 1997. First, the Governor appointed by the Queen of Britain has been replaced by the communist party, or the Hong Kong communist regime. The very existence of the Hong Kong communist regime runs completely counter to the concept of legitimacy in a modern-day democratic society. It is an autocratic regime. Second, our Chief Executive is not returned by universal suffrage. That being the case, we can actually see clearly over time how ICAC has been rotting day after day since 1997.

I believe that during her long years of service in the Government, Chief Secretary for Administration Mrs Carrie LAM should have witnessed how ICAC has been rotting and falling apart. The acceptance of small favours long since started to come under criticism in Donald TSANG's time, but why didn't ICAC launch any investigation into the then Chief Executive, Donald TSANG? Then, when LEUNG Chun-ying came to power later on, he turned ICAC and its special powers into his East Depot and launched investigation into Donald TSANG. We consider this a kind of political persecution.

This tells us that ICAC may become a political tool as a result of political changeover, or the coming of a new "emperor". If LEUNG Chun-ying is re-elected one day, the Chief Secretary for Administration herself, or President LEUNG up there, may well be the next target of persecution.

WONG Yuk-man liked to say these words very often: "For Hong Kong people the bell tolls". The need for us to ask the Legislative Council to defend ICAC by investigating its internal promotion problems is just one example, or the 436 LEGISLATIVE COUNCIL ― 10 November 2016 tip of the iceberg, showing the rotting of ICAC that we have witnessed over the past decade or so. Understandably, many pro-establishment Members may not agree with me. Why? The only reason is that they are not yet affected. However, we Hong Kong people know very clearly that the rotting of ICAC has not been limited to its internal affairs.

In addition, some pro-establishment Members say that the professionalism and confidentiality system of ICAC are instead ruined precisely by those non-establishment Members using the Ordinance as a tool. I want to point out that such an argument completely confounds the cause and the result and distorts the truth. Today, our situation has worsened to the point that we must invoke the Ordinance to inquire into the ICAC incident. This can aptly show that in the absence of a Chief Executive returned by universal suffrage and a Legislative Council fully returned by direct elections, ICAC has rotten beyond redemption.

You certainly cannot help breathing out a sigh if you really ponder on what I have just said. When we need to take this step to defend ICAC and the moment when we stand forward to do so, ICAC has already lost its impartiality. The very need to defend something means that that something no longer exists. Today, ICAC is only left with the three so-called "imperial swords". But I must also say that these three "swords" have all fallen into the hands of the Chief Executive. Nevertheless, on taking a closer look, you will find that the real problem lies not only in one single man. Our concern is instead how the entire Hong Kong communist regime will use our systems and institutions (including ICAC and our legislature) to wreak further havoc.

Today, regarding Mr LAM's motion on invoking the Ordinance, I do hope that both non-establishment and pro-establishment Members will bear in mind the future and prospects of Hong Kong people. Will Members please render their serious and solemn support to the motion. Frankly speaking, today you may dismiss the motion as one put forward by the opposition camp. Yet, the persecution facing us may not be confined to the opposition camp. Indigenous residents of the New Territories may be the next targets, and rural bigwigs may also be suppressed in the future. Even the setback suffered by the traditional pro-establishment camp in the recent Legislative Council Election was due to the damage done to the Registration and Electoral Office and Hong Kong's long tradition of probity and integrity.

LEGISLATIVE COUNCIL ― 10 November 2016 437

In regard to the above points, we have kept stressing the rotting of ICAC, but actually we should talk about the rotting of our professional ethics. And, the reasons why such rotting can come about so easily are precisely the inherent defects in the ICAC system itself. The ICAC Commissioner is appointed by the Chief Executive alone, but the Chief Executive is not subject to any public monitoring. The support for the Chief Executive comes from the authoritarian regime behind him. Therefore, my conclusion is that in the short run, we must support the invocation of the Ordinance for launching investigation. Yet, there is another point that concerns Hong Kong people as a whole. We must rewrite the Basic Law ourselves and draw authority and strength from public opinions so as to check the power of the Chief Executive who is not subject to monitoring by any systems. Currently, he can do whatever he likes.

Lastly, I would like to raise one point. Regarding the recent oath-taking controversy, some Members said yesterday that it was necessary to hold an adjournment debate to discuss the topic of Basic Law interpretation. Ms Starry LEE did not think that it was a serious and urgent issue. But if we look at it with a bit of common sense, we will realize how urgent it is. Pro-establishment Members are in the majority in this Council, so if they are clever and hardworking enough, they can actually move a motion on amending the content of the oath and affirmation to require absolute allegiance to LEUNG Chun-ying, and in that case, when taking an oath or affirmation …

PRESIDENT (in Cantonese): Dr CHENG Chung-tai, please pause for a while.

DR CHENG CHUNG-TAI (in Cantonese): President, my speech is entirely relevant to the motion.

PRESIDENT (in Cantonese): I remind you that you have deviated from the motion topic.

DR CHENG CHUNG-TAI (in Cantonese): My speech has not deviated from the motion topic. It is in every way relevant to the motion. All problems actually stem from a kind of authority that is not subject to any monitoring by public opinions. In that case, will the oath administrator, that is you, President, rule that since some Members do not really believe in the content of the oath on …

438 LEGISLATIVE COUNCIL ― 10 November 2016

PRESIDENT (in Cantonese): Dr CHENG Chung-tai, you have deviated from the motion topic. Please stop speaking.

DR CHENG CHUNG-TAI (in Cantonese): … absolute allegiance to LEUNG Chun-ying, they should be disqualified? So …

PRESIDENT (in Cantonese): Dr CHENG Chung-tai, please stop speaking and sit down.

DR CHENG CHUNG-TAI (in Cantonese): Let me return to my main point. President, please listen to me first. You must be patient with me in these 15 minutes of my speaking time.

Let me return to my point. ICAC has been rotting, so it is time for this Council to monitor it by invoking the Ordinance. Our action today can show everybody how helpless we are. But because of the defective composition of the legislature with pro-establishment Members constituting the majority and also due to the Basic Law interpretation triggered by the oath-taking controversy, our helpless situation is not as simple as people think, meaning that going against our conscience and simply taking the oath as it is presently worded is no solution. The pro-establishment camp may well alter the content of the oath, requiring absolute allegiance to this despot.

Therefore, I hope that pro-establishment Members can grasp the present situation and realize that the political persecution today may befall anyone one day. Of course, I am not talking about any particular political groups. I just want to give some examples, such as the rural forces, the Hong Kong Federation of Trade Unions, and so on. Once the Communist Party of China succeeds in completely replacing the membership of the Hong Kong legislature, you people in the traditional pro-establishment camp will longer be needed as its agents. When that time comes, the language used in the legislature will be Cantonese with all sorts of accents. I believe when this happens, our legislature will have fallen completely. But anyway, at least we can still make good use of the Ordinance today to defend our ICAC.

We hope Members will support the motion.

LEGISLATIVE COUNCIL ― 10 November 2016 439

MR CHARLES PETER MOK (in Cantonese): President, on 12 July 2016, three Members―Mr Dennis KWOK, Mr Alvin YEUNG and Mr Kenneth LEUNG―and I wrote a letter to the Commissioner of the Independent Commission Against Corruption ("ICAC"), Simon PEH, asking for a meeting with him. We hoped that he would explain why Ms Rebecca LI, who had been acting as Head of Operations, was not promoted and eventually resigned. We think that society is gravely concerned about the incident and we have adequate reasons to suspect that something has gone wrong. Many reports have pointed out that officers within ICAC are disappointed with this decision. Our letter was sent on 12 July and we received a brief reply from Mr PEH on 18 July. He said that he received our letter and was aware that we invited him to a meeting. If there was a formal arrangement, he said, he would be happy to answer Members' question in the Legislative Council. Yet, he said he knew that the last meeting of the last Legislative Council was held on 15 July but the appointment issue was not included in the Agenda. In other words, he blamed us for not including the matter in the Agenda.

The three Members and I were very furious upon receipt of the letter. He went on to say that with regard to the queries raised in our letter, he already explained everything on 11 July when he met with the media and had nothing to add. The reason for our sending him the letter on 12 July is of course the fact that what he said when meeting with the media on 11 July failed to answer our queries. Had we not received his reply letter, we would not have been so furious. On 30 July, 23 pro-democracy Members of the last Legislative Council sent another letter asking for a meeting with Mr PEH. However, the reply we received was that although our term was not yet over, since there would be no more meetings and election for the new Legislative Council had begun, he would not respond. Later, on 23 September, Members of the new Legislative Council visited ICAC. Twenty-three pro-democracy Members wrote to ICAC asking it to come to explain to us. On 4 October, Mr PEH gave us a reply of three and a half pages. Yet, he failed to completely answer our questions. I will not repeat the content of the letter.

Mr LAM Cheuk-ting said that Simon PEH contradicted himself in his response. Why? Simon PEH explained that it was due to "factors in general" that Rebecca LI was not promoted. In other words, there is a basket of reasons which he will not explain to us. PEH said that she was not fit for that position. She acted as Head of Operations for a long period. Why did they discover that she was not fit at late a time? There are two Directors under Head 440 LEGISLATIVE COUNCIL ― 10 November 2016 of Operations and Rebecca LI was originally one of them. She has not reached the retirement age and has acted as Head of Operations for a long period. Mr LAM Cheuk-ting said this proved that ICAC considered her a candidate for promotion. I have many friends who are civil servants. They tell me that a long-term acting appointment is in fact a promotion arrangement. In the debate held last night and this morning, some Members said that it was unfortunate that she could not get along with her superior. Fellow Members, ICAC is a government organization, not a private company. In the case of a private company, if an employee cannot get along with the boss, it is of course up to the boss to decide whether or not to promote him, but the Government has to follow the mechanism.

Furthermore, the ICAC Commissioner comes directly under the Chief Executive. LEUNG Chun-ying confirmed that he was informed by Simon PEH of the cancellation of Rebecca LI's acting arrangement. LEUNG Chun-ying said that he was only informed and he did not interfere. Since he was aware that he was being investigated, he should have let others handle the matter but he did not do so. This is tantamount to intervention. Public officers should be whiter than white. They should not let people have any doubts in them. However, he is after all LEUNG Chun-ying. What can we do?

Actually, we have adequate reasons to suspect that LEUNG Chun-ying did play a role in this incident. There was obviously a conflict of interest and we surely have to conduct a thorough inquiry. Many Members say that we do not have evidence. If there is evidence, we do not need an inquiry, right? I really cannot say anything if you cite the lack of evidence as a reason for disagreement. The sole reason for opposing an inquiry is to cover up certain facts. We cannot possibly believe entirely that LEUNG Chun-ying did not interfere simply because of his words of denial, right? Society is very concerned about whether LEUNG Chun-ying ever interfered with Simon PEH, and whether he ever abused his power to prevent ICAC from investigating the UGL incident. Thus, the Legislative Council is duty-bound to conduct a thorough inquiry.

Some Members opined that the establishment of a select committee to inquire into the matter will deal a blow to people's confidence in ICAC. In fact, public confidence in ICAC will be undermined if there is no inquiry. People will suspect that something must have gone wrong. Procrastination is by no means a solution to the confidence crisis.

LEGISLATIVE COUNCIL ― 10 November 2016 441

President, there were many cases of conflict of interest in the last Legislative Council which we considered that the power conferred to the Legislative Council by the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") should have been invoked to conduct inquiries. Nonetheless, many motions moved under the Ordinance were vetoed by pro-establishment Members. One question I want to ask them is: save when they want to pick on their political rivals in the pan-democratic camp, when will they be willing to invoke the Ordinance?

Some Members say that we are asking to invoke the Ordinance to conduct an inquiry because we want to attack the Chief Executive and the Government. Actually, our purpose is to monitor them. Some Members even say that the "imperial sword" should not be used arbitrarily. So, I am saying that the "imperial sword" has become a salted fish. Let us continue to put it away.

Another point I would like to raise is that since LEUNG Chun-ying was elected the Chief Executive, the Legislative Council has never invoked the Ordinance. This is in contrast with the past. In the 2008-2012 Legislative Council, the Ordinance was invoked on three occasions: In November 2008 for inquiring into the Lehman Brothers mini bonds incident; in December for inquiring into the LEUNG Chin-man incident; and in March 2012 for inquiring into whether there was a conflict of interest for the then Chief Executive candidate LEUNG Chun-ying when he was a member of the jury in the West Kowloon Reclamation Concept Plan Competition. Those motions must secure the support of the pro-establishment Members for them to be passed. On those occasions, they extended their support. When it comes to this Government, that is, after LEUNG Chun-ying became the Chief Executive, the last Legislative Council never invoked the Ordinance. LEUNG Chun-ying has successfully made himself an endangered species. None of his policies or conduct is subject to inquiry by the Legislative Council. How can you not admire him for controlling the pro-establishment Members and even the entire Legislative Council? The last Chief Executive is no comparison with LEUNG Chun-ying. Thus, he is now being investigated. Is Hong Kong regressing? No doubt about this. Even though the Legislative Council has the power, the pro-establishment Members do not allow us to use it.

Although the Government under LEUNG Chun-ying has wreaked havoc many times, the opportunities for us to find out the truth by way of inquiry are getting fewer. The transparency of the Government is decreasing. 442 LEGISLATIVE COUNCIL ― 10 November 2016

Pro-establishment Members, please do not continue to be hooked by your own lies. In the last Legislative Council, Alan LEONG sat at where Mr Alvin YEUNG is sitting now. His pet phrase was "the present system has degenerated". My Chinese is not good. What a pity he has left the Legislative Council. Otherwise, I would like to ask him what appropriate adjectives there are to describe the present situation which is even worse. The Legislative Council is not alone. The present system of the entire Government, and even that of ICAC, has degenerated.

"Hong Kong Our Advantage is ICAC". I have been hearing this catchphrase since I was a child. Now, we can find instances of calling a stag a horse and not telling right from wrong in the Government, the Legislative Council, society and even on the Chief Executive. The worst is that ICAC is no exception. People doubt the credibility of ICAC. How can we not have an inquiry? Although the Ordinance was not invoked, the Legislative Council did inquire into Timothy TONG, right? We all say that we should treasure ICAC. Yet, the fact is that since LEUNG Chun-ying was elected Chief Executive, all problems have been swept under the carpet. However, turning a blind eye should not be the attitude for addressing the problems.

Let me reiterate here that I fully support this motion moved by Mr LAM Cheuk-ting. I firmly believe that this is the best way to make the best use of the resources and time of the Legislative Council. If the pro-establishment Members say that this is a waste, please explain to the public. I wish you can give them a good explanation.

DR FERNANDO CHEUNG (in Cantonese): President, I speak in support of Mr LAM Cheuk-ting's motion which asks for invoking the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to appoint a select committee to inquire into the major personnel changes within the Independent Commission Against Corruption ("ICAC"), and their connections with the Chief Executive's receipt of about $50 million from UGL Limited ("UGL").

President, we hear many Members from the pro-establishment camp keep saying that we are purely making speculations, asking for investigation without any concrete evidence and requesting the Legislative Council to intervene in ICAC affairs without any reasons. President, I believe that no one will dispute the importance of ICAC. Back in the 1950s and 1960s, many law enforcement LEGISLATIVE COUNCIL ― 10 November 2016 443 officers accepted bribes in the community, and corruption was so rampant that it was practically present everywhere in society. Frontline police officers accepted bribes during hawker raids; hospital staff asked for red packets for offering just a glass of water; and officers in different law enforcement departments accepted bribes and red packets before rendering assistance. We do not need to look afar in order to know how the situation was like at that time, as we can see the problem readily when we look at the Mainland. Corruption corrodes the whole society, making social progress completely impossible. We have ICAC and it is lucky that Hong Kong has ICAC. As a result, we have been enjoying prosperity all these years and many people in society have been able to improve their livelihood. ICAC is one of the cornerstones of our society, and it is thus very important to safeguard this cornerstone. I think this is incontestable.

Why do we have to invoke the Ordinance to inquire into these personnel changes? ICAC is independent in operation. It was established under the law with an organizational structure of its own. It has been functioning effectively for over 40 years. I agree to all these, but this structure is marked by one loophole, as mentioned by many colleagues earlier. Mr Dennis KWOK, in particular, has described this loophole very clearly: ICAC is ultimately accountable to the Chief Executive and in case there is anything that upsets its accountability to the Chief Executive, that is in case ICAC has to investigate the Chief Executive, difficulties will arise. We now need to reform the laws, and Mr Dennis KWOK already made this very clear last night. Using his own resources, he has even drafted some amendments to the Prevention of Bribery Ordinance and the Independent Commission Against Corruption Ordinance, in an attempt to plug this loophole and extend the long arm of anti-corruption to the Chief Executive. In this way, ICAC will be able to avoid staying completely under the control of the Chief Executive and maintain a certain degree of independence. We are in strong support of these amendments.

Nevertheless, this summer, there were really some very strange personnel changes. Were these personnel changes connected with whether ICAC was about to investigate or was already investigating the Chief Executive's receipt of $50 million from UGL? This is very important. If ICAC collapses or fails to hold out, it will start to decay from top to bottom. Let us look at the facts. On 5 July, there was already news leaking from ICAC that the acting appointment as Head of Operations offered to Rebecca LI, often called the "No. 1 Lady" in ICAC, would be cancelled very soon. On 7 July, ICAC announced her resignation. On 11 July, Mr Dale KO, Principal Investigator of the Operations 444 LEGISLATIVE COUNCIL ― 10 November 2016

Department, requested to resolve his employment agreement. On 18 July, the position of Rebecca LI was taken over by Ricky YAU. On 29 July, ICAC announced the application from Ricky YAU, Acting Head of Operations, for resolving his employment agreement. Three hours later, ICAC issued another announcement that he had withdrawn this decision, meaning that he would continue to stay in ICAC. On the same day, Chief Forensic Accountant Melissa TANG of the Forensic Accounting Group also refused to renew her agreement. President, within half a month, four high-ranking officers in ICAC asked for resignation respectively. What actually happened? Were these personnel changes at that time, including Rebecca LI's resignation, connected with the UGL incident? We have no way to know.

In September this year, we were lucky to have an opportunity to go to ICAC, as there was a briefing arranged with the Legislative Council. I was there, together with ICAC Commissioner Simon PEH, Head of Operations Ricky YAU and other Directors of Investigation under the Operations Department. At that time, we directly asked them to explain this series of personnel changes, what had really happened, whether the Chief Executive had interfered with the affairs of ICAC or whether the personnel changes were connected with the UGL incident. Of course at that time, the Directors of Investigation and the Commissioner did not say that they were connected. However, Ricky YAU did try to explain the changes in his decision back then. This is what he said: He resigned. At first, he asked to resolve his employment agreement. He thought that ICAC's act of resolving Rebecca LI's agreement had already caused certain damage to ICAC's reputation in society and the public confidence in ICAC, so his taking over the position under these circumstances would not be good to the function of the entire of ICAC. He thus decided to resign. Nonetheless, he discussed this with his colleagues, and these colleagues persuaded him to stay. Finally, he stayed due to his colleagues' persuasion, and he was also convinced that if he stayed, there would be positive influence to the public confidence in ICAC. Ricky YAU also mentioned that when he submitted his resignation, the ICAC Commissioner actually urged him several times to stay, but he was determined to leave. However, he stayed at the end after persuasion from his colleagues.

President, this is a very weird situation. First of all, a few colleagues of course also said earlier that they found it a bit difficult to understand his initial decision to resign. At that time, Rebecca LI's acting appointment was cancelled and afterwards, she asked for resolving her contract, and all this had already LEGISLATIVE COUNCIL ― 10 November 2016 445 produced a negative impact on the public confidence in ICAC. We cannot understand why his succession could not make the impact a bit more positive. But the fact is that he was still determined to leave after being urged several times to stay by the ICAC Commissioner, whereas he finally stayed due to his colleagues' persuasion. How was the relationship between Mr YAU and the ICAC Commissioner? Could the ICAC Commissioner command the trust of his subordinate? Why was his persuasion unsuccessful whereas other colleagues' persuasion was effective? These are hard to understand.

Has Mr Simon PEH, the incumbent ICAC Commissioner, already lost touch the function of ICAC? How come in just half a month, the cancellation of Rebecca LI's acting appointment and her resignation could trigger a whole series of resignations? All this is hard to understand. President, generally speaking, we should not deal with such personnel affairs. However, ICAC is not a company. As I said earlier, it is the cornerstone of probity in Hong Kong, so any major personnel changes involving this cornerstone are definitely related to the public interest, especially when we know that there is a loophole in this system: ICAC is accountable to the Chief Executive without any checks and balances.

Members from the pro-establishment camp keep saying that we, the Legislative Council, should not do so, should not interfere with ICAC but should let it function independently. I agree that ICAC should operate as independently as possible, but all things (power in particular) have to be subject to checks and balances. Even in the web page of ICAC, eight monitoring forces are mentioned and the Legislative Council is precisely one of them. Every year, ICAC has to report to the Legislative Council on its work, and we can invite ICAC to report to us at any time. Of course, ICAC is directly accountable to the Chief Executive and has to report to the Executive Council on its work. Besides, there are nearly eight types of checks and balances, which include an independent judiciary, separate power of prosecution and the media. There are also four advisory committees, an independent complaints committee and an internal monitoring mechanism.

President, it is not that we do not trust these forces or its internal monitoring mechanism, but only that we are very concerned about the existence of this loophole. If this loophole cannot be plugged, we fear that this incident is really connected with the Chief Executive's receipt of $50 million from UGL. Any intervention in ICAC's investigation will only affect the whole cornerstone of probity. Therefore, President, we do not intend to exercise our power 446 LEGISLATIVE COUNCIL ― 10 November 2016 haphazardly, we are not acting without any basis of consideration, and it is not true that we believe only rumours. Instead, our proposal is based on our direct communication with ICAC and objective facts. We have not quoted the speculations from many media reports. We are not being speculative but are based on facts. We saw some important personnel changes, what ex-ICAC Commissioner Timothy TONG did and his misconduct in public office, and Simon PEH's "release" of all those ICAC officers involved in ex-ICAC Commissioner Timothy TONG's case of misconduct in public office. All these are facts.

Hence, we sense something unusual in this ICAC personnel storm and think that a select committee should be established to conduct an investigation into the matter and give an account to the public. This precisely will be putting the cornerstone of probity under the sun. If these loopholes had been plugged up earlier, this incident might not have happened and it would have been unnecessary for us, in this Chamber, to discuss setting up a select committee to inquire into the matter. Finally, I really hope that Hong Kong will not be reduced to place like the Mainland. We have to stand fast to this line of ICAC. Once Hong Kong turns into as corrupt as the Mainland, Hong Kong will be doomed. I thus hope that colleagues will support Mr LAM Cheuk-ting's motion. I so submit.

MR ALVIN YEUNG (in Cantonese): President, on behalf of the Civic Party, I rise to speak in support of the motion moved under the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") by Mr LAM Cheuk-ting.

President, what have recently happened in Hong Kong remind me of one scene in a concert two years ago. As the band played, what was originally the spectacular nightscape of the Victoria Harbour collapsed slowly, disintegrated slowly and turned into a mound of crimson debris in the end. This was a highly symbolic scene. Unfortunately, President, this scene seems to have come true in Hong Kong. Many cores values to which Hong Kong owes its success have disintegrated one by one, including the anti-corruption system which we want very much to safeguard.

President, Members of this Council have already recounted in detail the personnel reshuffle that occurred in the Independent Commission Against Corruption ("ICAC") in July 2016. Every time I hear about it, I am terrified. LEGISLATIVE COUNCIL ― 10 November 2016 447

Every time we hear about it, we feel like hearing the sounding of an alarm beside our very ears. Four senior staff members of ICAC announced their resignation one after another. President, one of them would have left with the rest of the three had he not decided to stay in order to retain his other colleagues. We are talking about four persons, and all of them were senior officers. President, I do not think that if the same thing happens in a private company, any boss in his right mind will treat it as an ordinary personnel issue. This cannot be an ordinary incident in the normal operation of a company. There must be something wrong. Any boss in his right mind will definitely delve into the matter in order to ascertain the causes, to find out whether it is caused by a job hopper who takes others with him, or whether it is caused any governance problems with the company.

President, I know pro-establishment Members all have a commiserating mind. They maintain that ICAC should function independently. Yes, I also agree that ICAC should function independently. But independent functioning should not imply our indifference. Independent functioning should not imply that we can ignore this component of the very important system defending our core values, or we can simply ignore a serious personnel problem which has actually happened. Pro-establishment Members all try to play down the incident, saying that it is only a minor incident not warranting the invocation of the Ordinance, the "imperial sword", to launch any thorough investigation. President, I must state clearly that this attitude of pro-establishment Members is precisely the culprit that ruins the anti-corruption system in Hong Kong. If it is not ignorance, then it must be an underestimation of the seriousness of the matter that has prompted them to cling so closely to this attitude. Or, there may be other reasons. We do not know if there is any and there is no way to know. But an objective fact is that the incident will be watered down, and the obvious objective effect is that our system will very likely continue to be a place that shelters evils and wrongdoing.

(THE PRESIDENT'S DEPUTY, MS STARRY LEE, took the Chair)

To date, opinions differ when it comes to the reasons behind Ms Rebecca LI's departure from ICAC. The reason most widely reported by the media and suspected by the Hong Kong public is that her departure is connected with Chief 448 LEGISLATIVE COUNCIL ― 10 November 2016

Executive LEUNG Chun-ying's receipt of money from UGL Limited. We do not know whether this conflict of interests directly constituted the reason for Ms Rebecca LI's departure, but this is exactly why we wish to find out the truth. The way that Ms Rebecca LI's acting appointment was cancelled is indeed quite contradictory to our usual understanding of the way things are run in ICAC.

Deputy President, ICAC Commissioner Simon PEH did respond to us on this matter and just now, Mr Charles Peter MOK has already mentioned Mr PEH's response. What was his response at the very beginning? He only said that the work performance of Ms Rebecca LI failed to meet the requirements, but he refused to give any details of the incident. After few months, and following his meeting with the Chief Executive, he eventually offered a further and more detailed reply last month to our enquiry. In the letter, Mr PEH says that the decision to cancel the acting appointment was made after a one-year observation and assessment, and the purpose of the acting appointment was for administrative convenience, which is different from an acting appointment with a view to promotion. Mr Simon PEH also sternly refutes that linking the UGL incident with the resignation of Ms Rebecca LI is a serious but unfounded allegation, adding that the incident has nothing to do with any cases being investigated by the Operations Department.

Deputy President, we feel even more puzzled after reading the reply. In order to find out the answer and the truth behind these puzzles, we need to move a motion under the Ordinance to provide us with sufficient power to do so. Only the Legislative Council can do so. First, if Ms Rebecca LI's acting appointment was intended for administrative convenience, then according to the usual practice of ICAC, was there any time limit for the acting appointment? When should such an acting appointment end? When would such "convenience" expire? What was the purpose of the assessment made on her performance during the acting appointment? Were there similar cancellations of an acting appointment in the past? If Ms LI's performance was satisfactory, instead of failing to meet the requirements as he has claimed, would she be asked to remain in the acting post or would she have a chance to be formally promoted to Head of Operations? If she was suitable for promotion, then what is the difference between acting for administrative convenience and acting with a view of promotion? Deputy President, the questions above can only be answered through the invocation of the Ordinance.

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Next is the reason why Ms Rebecca LI failed to pass the assessment. It has been reported that Ms LI was a very capable investigator in ICAC. She has been in the acting post of Head of Operations for years. Her work was well recognized by her colleagues who bid her farewell when she left ICAC. This objective fact proves that her achievement was recognized by her colleagues, and at least from the perspective of the public and the community, Ms LI had an outstanding performance in her investigation and administrative work, which enabled her to hold that post.

Deputy President, we are certainly well aware that it takes other criteria and attributes for one to scale new heights in a large organization. We also agree that ICAC Commissioner Simon PEH should be prudent in assessing whether she was suitable to take up the post of Head of Operations. We absolutely agree to these points. But our worry is whether any new standards have been applied and whether these standards are universally applied. Given the dramatic changes in the political climate in recent years, we simply wonder whether any political loyalty test has been applied in the promotion process.

Deputy President, we know nothing about all these. If ICAC continues with its "clandestine operation" and its refusal to answer questions from the public, the public will think that its operation is too haphazard. And in fact, Commissioner PEH has failed to answer the questions we have just raised.

Deputy President, more importantly, the public are now most concerned about the role of the Chief Executive. In his reply letter, Commissioner PEH specifically mentions that he reported the acting arrangement and cancellation of the acting arrangement concerning Ms LI to the Chief Executive as a usual practice; and that the Chief Executive was aware of his view but did not make any comments. But I am sorry to point out that, as everyone knows, our Chief Executive is a very smart person. He can be regarded as the top linguist in Hong Kong. Deputy President, with due respect, I have to carefully think over and analyse the explanation given to us by the Chief Executive. I have to carefully think about the meaning of Commissioner PEH's remark when he says that the Chief Executive did not make any comments when he reported the arrangement to him. One should know that the Chief Executive and Commissioner PEH might have met on some other occasions. Did he ever give any orders to him on those other occasions? I believe the public will be interested to find out the answers to these questions.

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What is more important and of great public concern is that the Chief Executive is now the target of an investigation by ICAC for the UGL incident. Even if he (I dare assume) really did not make any comments on the acting arrangement of Ms Rebecca LI, I am sure that the wider community will not find this a sufficient reason. Moreover, section 12 of the ICAC Ordinance specifically provides for the duties of the ICAC Commissioner, which include to "investigate any conduct of a prescribed officer which, in the opinion of the Commissioner is connected with or conducive to corrupt practices and to report thereon to the Chief Executive". Deputy President, everyone knows that the Chief Executive is the target of an investigation. What should be done in this case? Does Simon PEH have any standard to follow? We have a reasonable concern over all these questions.

As Mr Charles Peter MOK just said, we want the words and deeds of our public officers to be whiter than a piece of white paper. If Commissioner PEH were so concerned about the reputation of ICAC, what has he done since the incident happened? For instance, has he set up a "firewall" of any kind to ensure that no intervention of any kind can be made from the Chief Executive on the operation of ICAC especially when an investigation concerning the Chief Executive himself is being conducted. All these are matters of great concern to us.

Deputy President, if the Chief Executive and ICAC Commissioner Simon PEH have done nothing that can be criticized in their handling of Ms Rebecca LI's departure, I believe the best way, a way which can genuinely do them justice, is to pass a motion under the Ordinance to conduct a thorough investigation. I also believe that if the Chief Executive is not in any way related to this incident, we will not be able to find anything wrong in the investigation, no matter how hard we overturn trunks and boxes, or sweep everything out from under the carpet. If so, why don't we take this opportunity to do the Chief Executive justice?

After all, we are so worried and agitated because we want to rebuild public faith in the credibility of the ICAC Commissioner and the Chief Executive, who are now caught in an entangled relationship; this is at least the impression that the public have. Deputy President, just now, many Members have already recounted the anti-corruption history, including the "Oppose corruption and apprehend GODBER" movement in the 1970s, which directly expedited the birth of ICAC. When ICAC was founded, the then incumbent Governor MACLEHOSE said that anti-corruption combat must be carried out by an LEGISLATIVE COUNCIL ― 10 November 2016 451 organization completely independent of government departments. The most crucial word in his remark is "independent". It has been a long-standing belief of Hong Kong people that ICAC is an independent public organization. In order to maintain the independent nature of ICAC, we must ensure that ICAC does not have any relationship with the target being investigated. Any negative hearsay or attack on ICAC should be carefully investigated and substantiated. This is the right way to safeguard the credibility of ICAC.

Deputy President, I notice that many pro-establishment Members do not want the Legislative Council to intervene in the Rebecca LI incident, saying that her promotion arrangement was an internal affair of ICAC, or that we should respect the administrative procedure of ICAC and outsiders should not intervene in the matter, so on and so forth. But the pathetic and ridiculous fact is that moving a motion under the Ordinance is already our last resort. Let us not forget that as some Members have mentioned just now, no motion under the Ordinance was passed in the last Legislative Council. What is the use of the Ordinance? The Ordinance empowers the legislature to be the representative of the people to monitor the executive authorities for any loopholes in their practices. A totally impermeable department will often become a place of decay and corrosion. Actually, the same goes for the "imperial sword" of the Legislative Council. Over the past four years, we have never successfully moved a motion under the Ordinance, and there are both a fortunate and unfortunate sides to it. It is fortunate because Members did not need to be further overloaded with work; and it is unfortunate because many problems may arise as a result.

Here, I wish to say a few words to Chief Secretary for Administration Carrie LAM. I believe she is a competent and dedicated civil servant. I also believe that having seen the credibility of ICAC disappearing in the hearts of Hong Kong people, she will be saddened. I earnestly urge pro-establishment Members and the Government to understand our intention and support the motion moved under the Ordinance by Mr LAM Cheuk-ting to inquire into the personnel reshuffle of ICAC. I so submit.

MR CHAN CHI-CHUEN (in Cantonese): In the last Chief Executive's Question and Answer Session held in the previous term of the Council on 14 July this year, I held up a placard with the wording "Private Commission of LEUNG's Governance" and criticized LEUNG Chun-ying for turning the Independent 452 LEGISLATIVE COUNCIL ― 10 November 2016

Commission Against Corruption ("ICAC") into a private institution to facilitate his governance, and I was thus expelled from the Chamber. I have to thank my voters for supporting me again in the Legislative Council election held in September, so that I was re-elected and may vote to support the motion moved today to appoint a select committee to inquire into the personnel reshuffle within ICAC.

Let me first respond to the remarks made by Chief Secretary Carrie LAM in her opening speech delivered yesterday. She first said that ICAC has never indicated openly that an investigation is being conducted on LEUNG Chun-ying and the UGL incident, meaning that no one should be aware of the investigation conducted by ICAC at present on LEUNG Chun-ying and the UGL incident. Maybe I should put it more precisely like this: no one should aware if ICAC is investigating LEUNG Chun-ying and the UGL incident or not, but she did not say that no investigation is being carried out by ICAC on LEUNG Chun-ying and the UGL incident.

Besides, the Chief Secretary also suggested to Mr LAM Cheuk-ting that if he is really so interested in following up the matter, he may consider adopting other means to discuss the incident, such as moving a Members' motion for the purpose. However, we are not purely interested in following up the incident but rather, we consider that we are duty-bound to find out the truth. Moving a Members' motion and moving the current motion under the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to appoint a select committee are two completely different matters. While the former has utterly no binding effect, the latter is vested with actual statutory powers.

The Chief Secretary quoted the remarks made by ICAC Commissioner Simon PEH and pointed out that the termination of the acting appointment of Ms Rebecca LI is a personnel management decision made on the basis of a judgment on Ms LI's ability and potential. She put forward two concepts and said that there are two types of acting arrangements. The first one is "acting with a view to substantive promotion", and the other one is "acting for administrative convenience". It was alleged that the acting appointment of Ms LI as Head of Operations was actually made "for administrative convenience". What is the meaning of "acting for administrative convenience"? Frankly speaking, it implies that a well-experienced officer is not competent enough to take up a higher post, but since no other suitable candidate is identified, an acting appointment is made for the officer to take up the post for the time LEGISLATIVE COUNCIL ― 10 November 2016 453 being. This is what the Chief Secretary means, and I am just speaking the truth and stating the obvious for her.

The Chief Secretary concluded by quoting the remarks of Simon PEH again, pointing out that this is purely a personnel management decision made by Simon PEH to discharge his duties as Ms LI's supervisor and the approving authority of the acting appointment. Simon PEH also stated repeatedly that his decision has nothing to do with any investigation work undertaken by ICAC. The statement may appear right but it is actually wrong, and what exactly did he mean when he said that his decision has nothing to do with any investigation work undertaken by ICAC? When an assessment is conducted on the past performance of Rebecca LI, a review should be made on how she handled the investigation of various cases and drew conclusions from the investigation results for such cases, so as to determine if she can pass the test. Thus, how can the assessment not related to any investigation work undertaken by Ms LI? It may only be correct to say that it has nothing to do with that "one single man" or the investigation work of any one single case. This is the reason why we consider it necessary to appoint a select committee to summon witnesses (such as Simon PEH) to give evidence, and require ICAC to produce Rebecca LI's performance appraisal reports during the period of her acting appointment as Head of Operations, so that we may have a clearer picture of whether Simon PEH has made an objective and correct assessment of Rebecca LI's performance.

As I said earlier, the rationale behind an acting appointment "for administrative convenience" is for a well-experienced officer, though not competent enough, to take up a higher post for the time being when no other suitable candidate is identified. Then, when Rebecca LI was appointed by the Commissioner of ICAC as Acting Head of Operations on 17 July 2015, why did he not tell us clearly that it was a temporary arrangement made for administrative convenience so that she might take up the post for the time being? He highly commended Ms LI and even said that as a token of appreciation for her outstanding leadership and excellent performance, she was awarded the Hong Kong ICAC Medal for Distinguished Service in 2007. In other words, fine-sounding and flattering words had to be uttered when an acting appointment was made for her to take up the post, but once the acting appointment was cancelled, all he had to say was that she failed to perform up to the required standard. How can this be considered fair by the general public? Even insiders of ICAC consider it unfair, and this is why we say that there is internal unrest within ICAC.

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It has been three months since Rebecca LI resigned after she was not successfully promoted. The incident has tarnished the reputation of ICAC, and its staff morale has been adversely affected. These are undeniable facts that even Ricky YAU has to admit. This is also the reason why he chose to resign in the first place. According to him, although things may not what they appear to be, damage has already been done. This is what we and the Government has to face, and no one can speak against his/her conscience to argue that ICAC is doing perfectly fine and enjoys very high popularity. We simply cannot do so.

Simon PEH is so far the only person who has given an explanation for the matter, but even the former supervisor of Rebecca LI (that is, the former Deputy Commissioner of ICAC, Daniel LI) has queried the explanation given by Simon PEH. Although Rebecca LI was criticized by Simon PEH for failing to perform up to the required standard, she has so far neither refuted nor expressed her agreement with his allegation. Seemingly, Rebecca LI has now disappeared into thin air, no one can come into contact with her, and she has made no public speech. The only way to give Ms Rebecca LI a chance to tell the truth is to set up a select committee under the Ordinance and summon her to give evidence. It is argued that she has never come forward to refute, but she will definitely have her lips sealed if we do not invoke the Ordinance to give her the chance to speak.

There is one more point which I would like to specifically point out: The remarks made by Simon PEH in the reply letter dated 4 October from ICAC to democratic Members are a little bit misleading. He claimed that arrangements had already been made for Rebecca LI to take up her original post as Director of Investigation (Private Sector), but Rebecca LI was actually the Director of Investigation (Government Sector) and not the Director of Investigation (Private Sector) before she took up the acting appointment as Head of Operations. Why did he tell us in the reply letter that arrangements had been made for her to take up her original post? When she was the Acting Head of Operations, Ricky YAU was the Director of Investigation (Private Sector), and I have to make this point clear so that the public would not be misled.

You can of course argue that the reply letter issued to Members contains no misleading information, but as a matter of common sense, Rebecca LI would not be able to take up her original post because after her demotion, she would be the Director of Investigation (Private Sector) but not the Director of Investigation (Government Sector), and thus would not be responsible for undertaking investigation work concerning the government sector. It would also not be LEGISLATIVE COUNCIL ― 10 November 2016 455 possible for her to continue to follow up cases which she has handled in the past two years on the government sector. What is the reason for demoting Rebecca LI to the post of Director of Investigation (Private Sector)? Was it a move to make it impossible for her to handle cases concerning the government sector again?

Coincidentally, we have suspicion that an investigation is conducted in ICAC on LEUNG Chun-ying and the UGL incident, which came into light at the end of 2014. Therefore, in putting forward a request for the appointment of a select committee, we also seek to inquire into Simon PEH's handling of the matter when Rebecca LI was transferred to the post of Director of Investigation (Private Sector). Was it a deliberate move to keep her from investigating cases concerning LEUNG Chun-ying? You can of course deny, but members of the public or we do have reasonable doubts.

Besides, ICAC announced on 29 July that Ricky YAU had resigned from the post of Acting Head of Operations, but the resignation was withdrawn less than three hours later because he was persuaded to remain in office. If time permits, you may refer to the October issue of ICAC Post for a two-page interview report of Ricky YAU. He said during the interview that having considered the interest of ICAC, he made a verbal application to the Commissioner of ICAC for an early resolution of agreement on 11 July, and tendered a written application to him the following day. He was to proceed on final leave on 1 August, so as to allow time for the Commissioner of ICAC to make appropriate personnel arrangements. On 29 July, before the public announcement about his departure, he met with senior officers of the Operations Department to let them know his departure, and various views had been exchanged during the meeting. According to him, his colleagues strongly appealed to him that he should remain in office, and having considered such a genuine plea and the overall interest of ICAC, he decided to withdraw his application for a resolution of agreement. The withdrawal request was approved by the Commissioner of ICAC, who had all along requested him to stay.

It would not be difficult for us to identify some questions if we take a closer look at the two notices issued by ICAC on 29 July and the account given by Ricky YAU during the interview. Ricky YAU applied to Simon PEH for an early resolution of agreement on 11 July, and according to media reports, Simon PEH convened an internal senior staff meeting on the same day to give an explanation on his decision concerning the demotion of Rebecca LI. He 456 LEGISLATIVE COUNCIL ― 10 November 2016 explained at the meeting that as Ms LI failed to perform up to the required standard during the acting period, he decided to cancel her acting appointment.

It is understood―from media reports of course since unlike Mr LAM Cheuk-ting, I do not have any insider information―that at the meeting, some senior officers had queried the explanation made by Simon PEH and considered it unconvincing. Did Ricky YAU also find the explanation given by Simon PEH unreasonable and therefore asked for an early resolution of agreement on the same day? At which point in time was the public announcement about Ricky YAU's departure issued on 29 July? Was it issued before his colleagues appealed to him that he should stay, or after he had decided to withdraw his application for a resolution of agreement? How come Ricky YAU was convinced by his colleagues rather than Simon PEH to remain in office? Is it because Simon PEH was not really sincere and was just trying to be polite when he requested Ricky YAU to stay? Has the same thing also happened to Rebecca LI? Did the colleagues in ICAC appeal to Rebecca LI that she should remain in office? Was the public announcement about Rebecca LI's removal from office issued after her consent had been obtained? How come the colleagues in ICAC were successful in convincing Ricky YAU to stay, but failed to appeal to Rebecca LI that she should remain in office?

If we compare the letter from ICAC to democratic Members with the account given by Ricky YAU as reported in ICAC Post, we would realize that the departure of Rebecca LI was a bit different from that of Ricky YAU. The issue date of the press release on Rebecca LI's departure is exactly the same as the date on which a written application for a resolution of agreement was allegedly received by Simon PEH from Rebecca LI. How come these two things have happened on the same day? Yet, the press release on Ricky YAU's departure was issued 17 days after he had tendered a written application for a resolution of agreement. Is it because Simon PEH has never requested Rebecca LI to stay?

As a matter of fact, there is also something very interesting about the chronological order of events. The resignation of Ricky YAU was tendered on 14 July, which was a few days earlier than his taking up the acting appointment as Head of Operations on 18 July. In other words, he decided to quit his job as soon as he assumed office. Pro-establishment Members often accuse us of moving a motion lightly when there is no conclusive evidence to invoke the Ordinance to inquire into matters relating to ICAC Commissioner and the personnel reshuffle within ICAC, and claim that this is the reason why they do LEGISLATIVE COUNCIL ― 10 November 2016 457 not support our proposal. However, I would like to tell fellow colleagues that if we do have irrefutable evidence to prove our case, Simon PEH has already stepped down. It would not be necessary to carry out any investigation if there are supporting evidence or witnesses to clear all queries raised today and prove that Simon PEH has really mishandled the incident as we have suggested.

The point of discussion in the current debate that we should take into consideration today is: Whether the questions raised are reasonable doubts? You may of course take these as fabricated rumours and exaggerated and prejudiced allegations, but things really happened and no one can say that these are normal personnel changes and personnel appointments, and that arrangements made for an acting officer to take up his/her original post again are not uncommon and those who feel aggrieved are free to resign. If this is an isolated incident, how come it has triggered off a series of chain reactions, led to the resignation of a number of officers, and even a majority of staff members in ICAC have refused to attend that annual function of ICAC? In this connection, let us not discuss the question of right and wrong, but we know for sure that there are some extremely serious problems within ICAC. You certainly have the right to vote against the motion or abstain from voting, but you really cannot turn a blind eye to the situation and speak against your conscience, saying that nothing has happened.

With regard to the motion under discussion, if this is not the best way to deal with the matter or there is no need to invoke the Ordinance, suggestions should at least be made to tell us what better and more appropriate alternatives or better tools are available to assist ICAC. We are now trying to help ICAC and its staff, because an alarm has already been sounded. However, this may be a silent protest, since they are subject to restriction under the relevant legislation and cannot speak freely. Hence, we have to invoke the Ordinance and remove the plastic tape used to seal their lips, so that they can tell us the truth. Damage would surely be done, but we really have no alternative. The reputation of ICAC will only be disastrously affected if we do not take this course of action.

DR JUNIUS HO (in Cantonese): Deputy President, I rise to speak against the motion which proposes to invoke the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to conduct an investigation. The reason is simple. Mr LAM Cheuk-ting has mixed up the two issues.

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Some people said that the Independent Commission Against Corruption ("ICAC") has some unusual internal personnel reshuffle recently. This is a question on the one hand. But is this a question that can justify the Legislative Council's invocation of the Ordinance for investigation? We have to answer this first. I am highly satisfied with the explanation given by the Chief Secretary for Administration, Mrs Carrie LAM yesterday. The personnel reshuffle concerned is simply an internal issue, and the ICAC Commissioner certainly has the right to handle staff promotion or deployment within ICAC. This is entirely an internal issue under the purview of ICAC.

(THE PRESIDENT resumed the Chair)

From the explanation given yesterday, I heard nothing which suggested that Ms Rebecca LI was not promoted after a period of acting appointment because of an intervention as a result of her investigation into the corruption case of Mr LEUNG Chun-ying's alleged receipt of $50 million from UGL Limited. And she was not promoted because of this. Was this true? This is completely another question. I see no correlation between the two. Therefore, first, is it necessary, after all, for the Legislative Council to intervene in staff deployment or promotion of ICAC? Should we set this as an example, many problems will arise in future. So, what are the functions of the Legislative Council? Are we going to intervene in normal operations within the Government, like staff deployment or promotion? If this is the case, we are actually going beyond the boundaries. The Legislative Council has many business to deal with. Though monitoring the Government is one of our duties, we cannot take it casually. At this stage, I see no justification to invoke the Ordinance and appoint a select committee to investigate the issue concerning the promotion of Ms Rebecca LI.

The second question is whether the whole incident takes place on the basis of imagination. I do not know if Chief Executive C Y LEUNG has involved in corruption, but so far, the overall circumstances have indicated no misconduct or negligence on the part of ICAC in handling complaints. Putting the "Ms Rebecca LI incident" aside, if a situation arises in which ICAC handles a complaint in an unusual manner (say, practice of favouritism) without doing any follow-up despite the complainant's continuous demands for an investigation, we will really have to pay attention then. However, I see nothing similar in the present incident. This is the second point.

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Mr YIU Si-wing has also asked just now if there is a plaintiff in the present case. If someone tells me today that he has made every endeavour to go through all the procedures, yet he gains nothing despite all these hard efforts, not even after gathering a whole pile of evidence, in which the height of all the documents combined is taller than that of the International Commerce Centre. I can only say I do not realize that such a "document" exists. Under the circumstances, allow me to say that I do not see any necessity to invoke the Ordinance for appointing a select committee at this moment.

I am disappointed that Mr LAM Cheuk-ting has moved this motion. As a former investigator in ICAC with considerable experience, he should at least produce a credible document for Members' reference, instead of acting just like another pan-democratic Member who always quote any contents from a document as he pleases to facilitate his discussion. This is totally unacceptable, not to mention the fact that the general public would not understand these bits and pieces of information. A legislator should demonstrate a certain level of quality. Any Member proposing a motion should show us the whole folder of documents, quoting us chapter and verse.

Since yesterday, we have spent several hours, or even half a day, on this discussion, but most of the matters have been based on groundless accusations. I have to seriously state that Hong Kong is a place that upholds the rule of law. These are also my heartfelt remarks. Anyone contravening the law will be brought to justice, regardless whether he is the Chief Executive or a cleaning worker. No one is the exception to the law. Unlike South Korea where the President is exempted from criminal prosecution, Hong Kong is an advanced city where everyone is treated equal. I believe we should only consider invoking the Ordinance when there is concrete evidence, and when justice is not done after using all legitimate procedures. At present, I see nothing of this sort. Moreover, I am not in a position to teach others what to do.

However, anyone wishing to take this path and move a motion to propose invoking the Ordinance must first provide some solid evidence instead of relying on hearsay. I urge them not to waste precious time in this Council. Pan-democratic Members claim that they need to protect the reputation of ICAC, which is an institution with a century's history, yet ICAC actually does not have a hundred years of history. They have exaggerated indeed. The Legislative Council is truly an institution with a century of history instead. That said, 460 LEGISLATIVE COUNCIL ― 10 November 2016 pan-democratic Members can still manage to laugh shamelessly. For me, I cannot laugh at all. Before the very eyes of the public, the Legislative Council degenerates into something filthy and bad. So, who actually has destroyed the reputation of the Legislative Council earned over its hundred years of history?

(Mr LAM Cheuk-ting left his seat, sitting beside Mr IP Kin-yuen, and started chatting with him)

PRESIDENT (in Cantonese): Will Member please do not leave your seat and chat with another Member.

DR JUNIUS HO (in Cantonese): I hope Members can do some introspection. In the name of protecting ICAC, they are in fact trampling on ICAC's independence, while their frivolous and casual accusations have wasted our time and public money. The Chief Secretary attended the Council meeting yesterday, and has listened carefully to speeches delivered by Members today. However, the Members concerned have simply left the Chamber after giving speeches. What are the duties that legislators are supposed to have? We should listen attentively and endeavour to earnestly participate in the business of the Council. Do you think a quorum is present if I request a headcount now?

Mr James TO mentioned yesterday that the issue was so serious that a quorum must be present. But he disappeared instantly after saying this. Irresponsible he was. It breaks my heart to see this. Maybe I am a "freshman", yet I will take every chance and learn to fulfil my duties as a proper legislator. Some Members like to quote the "red book", that is, the Rules of Procedure, and raise points of order. So, I happen to listen to the points of order raised by them. However, those Members raising points of order are always the ones to despise and dishonour the spirit of the procedures. They swear in the Legislative Council. They behave violently in the Legislative Council. And, they ignore the President's orders in the Legislative Council. When the President orders one of them to leave the Chamber, a swarm of these legislators will gather around the very Member who violates the rules, the regulations and the laws. Today, they claim that they have to manifest the spirit of the rule of law and protect the reputation of ICAC, an institution claimed by them as having a century of history. First, they have exaggerated their claims; second, they have made unfounded LEGISLATIVE COUNCIL ― 10 November 2016 461 remarks; third, they have disregarded the rules; fourth, they have been unable to get things done. I hereby tell them that, if this situation goes on, it is not ICAC that will fall, but those people who say one thing and do another, who are still laughing unabashedly, and who disrespect the solemnity of the Council.

I so submit. I adamantly object this motion. Thank you.

MR IP KIN-YUEN (in Cantonese): President, when Dr Junius HO talked about "a century-old shop" just now, he kept mentioning pan-democratic Members. But as far as I know, the term was put forward by Mr Holden CHOW in his speech. I hope that Dr HO can get his facts straight.

President, getting the facts straight is very important. I saw on television last night that after the meeting, an i-Cable News reporter …

(Dr CHENG Chung-tai raised his hand in indication)

PRESIDENT (in Cantonese): Dr CHENG Chung-tai, what is your point?

DR CHENG CHUNG-TAI (in Cantonese): President, I request a headcount.

PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(While the summoning bell was ringing, some Members talked loudly in their seats)

PRESIDENT (in Cantonese): Will Members please do not talk loudly in your seats.

(After the summoning bell had been rung, a number of Members returned to the Chamber, but some Members did not return to their seats)

462 LEGISLATIVE COUNCIL ― 10 November 2016

PRESIDENT (in Cantonese): Will Members please return to their seats.

Mr IP Kin-yuen, please continue with your speech.

MR IP KIN-YUEN (in Cantonese): President, I was up to the point that getting the facts straight is very important. Last night, I saw from i-Cable News that after the meeting, an i-Cable News reporter questioned Chief Secretary for Administration Carrie LAM why she knew that ICAC was no longer investigating the case involving C Y. The Chief Secretary for Administration replied, "I didn't say so. You people mustn't say anything like this." The reporter then asked her if she had made an enquiry with them, and then she said, "I did not say so. Please read the transcript." Hearing this, I was confused. Didn't she say that ICAC was not conducting any investigation into the case? Then, I took her advice and read the transcript of her speech in the meeting yesterday. This was what she said: "When I was preparing for this motion debate, I also made an effort to reconfirm that I had never been informed that ICAC was conducting an investigation." This is a very complicated sentence. It says that she did reconfirm that she had never been informed … If the fact is merely that she had never been informed, then we must ask: Did the Independent Commission Against Corruption ("ICAC") actually conduct any investigation? In her reply to the i-Cable News reporter, she said, "Actually, I have not said whether ICAC is investigating the case involving C Y." I think this point is very important. It is very important to the question of whether we should invoke the Legislative Council (Powers and Privilege) Ordinance ("the Ordinance") to look into the case. The words of the Chief Secretary for Administration which I have quoted are very complicated, but I do not think she should have made them so complicated. We only want the Chief Secretary for Administration to answer this question clearly in her conclusion later on: Is ICAC investigating the case involving the Chief Executive and UGL Limited? If the Chief Secretary for Administration knows the answer, please just say yes or no. If she does not know the answer, please tell us so. Please do not say anything like "never been informed", which is such a complicated and passive way of speaking. Actually, what we want to know is whether the Chief Secretary for Administration knows the answer and what she really knows.

The Chief Secretary for Administration, when referring to Mr LAM Cheuk-ting's repeated mentioning of the case involving the Chief Executive and UGL Limited, also said she was afraid that his comments were totally speculative LEGISLATIVE COUNCIL ― 10 November 2016 463 or even misleading. In her speech, the Chief Secretary used the word "afraid". What does "afraid" mean? It means doubt and uncertainty. I would very much like the Chief Secretary for Administration to make a clarification. If she has any facts to support her saying that Mr LAM Cheuk-ting's remarks are all speculative and misleading, then please tell us directly that his words are all speculative and misleading. Her use of the word "afraid" cannot be of any great help to us. I really hope that the Chief Secretary for Administration can tell us everything in clear and definite terms. We certainly know the Chief Executive is her supervisor, and she will find it very embarrassing to mention his problems here. However, we also once heard her say, "A government official with no expectation is always courageous." I hope she can courageously choose the option she considers helpful to Hong Kong when it comes to the protection of her supervisor and holding herself accountable to the public.

President, all the recent happenings in Hong Kong are unprecedented and saddening. The core values and time-tested systems of Hong Kong are all disintegrating incessantly. How many of our core values are left intact? The debate today on the invocation of the Ordinance is related to one important core value, probity. I support Mr LAM Cheuk-ting's motion and agree that this Council should invoke the Ordinance to appoint a select committee for conducting an investigation into the ICAC personnel reshuffle arising from Commissioner Simon PEH's cancellation of Ms Rebecca LI's acting appointment as Head of Operations. The areas to be investigated should include whether the cancellation of the acting appointment was related to any intervention in the investigation into LEUNG Chun-ying's receipt of $50 million from UGL Limited, whether there is any conflict of interest on the part of LEUNG Chun-ying, and so on.

As we all know, probity is one of Hong Kong's core values. I believe all the 70 Members here will agree. Founded in 1974, ICAC has a very long history, though it cannot be called a century-old shop. All along, it has been combating corruption under the three-pronged approach of law enforcement, prevention and community education, thus transforming Hong Kong into one of the most corruption-free places in the world. Safeguarding the hard-earned core value of probity is of critical importance. Thus, people have been saying, and ICAC has also been advocating in its publicity, that Hong Kong's advantage is ICAC.

464 LEGISLATIVE COUNCIL ― 10 November 2016

I support this motion for the simple reason that the staff change we see this time is highly unusual. The incident is also a great concern of the public as it relates to whether the Chief Executive has intervened in the operation of ICAC. Owing to these reasonable suspicions, the Legislative Council is obligated to conduct an investigation. We must never yield on this core value and bottom line of probity. I hope all the Members present today can understand why we must get to the bottom of this incident.

President, on 5 July this year, it was reported by the press that there was a personnel reshuffle in ICAC, and the Number 2 person in charge of investigation, Rebecca LI, had been suddenly removed from the position of Acting Head of Operations after an acting period of almost one year. It was reported that ICAC staff were shocked by this personnel change, because Rebecca LI was the first department head since the reunification who failed to get an substantive promotion after an acting appointment.

In the evening of 7 July, ICAC issued a simple press release, announcing that Rebecca LI would proceed on pre-resignation leave on 18 July. ICAC also announced that Ricky YAU, Director of Investigation, would replace Rebecca LI as Acting Head of Operations with effect from 18 July. The press release did not give any reasons for the sudden resignation of Rebecca LI. This high-level personnel reshuffle, which caused reverberation both inside and outside ICAC, is extremely unusual.

ICAC Commissioner Simon PEH finally met the press on 11 July. He said publicly that LI's acting appointment was cancelled as her performance could not meet the required standard. But he declined to disclose any further details, citing privacy as a reason.

The mover of this motion, Mr LAM Cheuk-ting, used to be an Investigator in ICAC. Quoting a source, he said that before seeing the media, Simon PEH held a meeting several staff members at the rank of Principal Investigator and above. He told the meeting that the acting appointment of Rebecca LI was cancelled due to "poor performance". However, the meeting considered the reason "unsound" and "unsatisfactory", or unconvincing in other words. PEH also admitted that he had not pointed out to Rebecca LI any problems with her performance over the previous few months, nor had he put forth any suggestion to her. He was then challenged immediately for having violated normal staff appraisal procedures.

LEGISLATIVE COUNCIL ― 10 November 2016 465

This incident triggered an earthquake in ICAC. Later, Rebecca LI offered to resolve her agreement and resigned of her own accord. Principal Investigator Dale KO, said to be Rebecca LI's favourite subordinate, also resigned. This unprecedented earthquake drastically lowered staff morale and it was even rumoured that nearly 80% of the ICAC staff boycotted the annual dinner. The incident also aroused international concern. On 26 July, The New York Times Chinese carried an article entitled "Hong Kong Graft Buster's Exit Stirs Fears Over Agency's Independence", querying the independence and neutrality of ICAC.

The crux of the incident is that we do not understand why the "Number 2 person" of ICAC was removed from her acting post all of a sudden. Rebecca LI used to be regarded as the ablest woman investigator in ICAC, commended for her outstanding performance over the last 30 years or so. When she was offered an acting appointment as Head of Operations last year, the Government commended her very highly in the press release (and I quote), "Ms LI commenced her career in the ICAC in 1984 as an Assistant Investigator. She was promoted through the ranks to Principal Investigator in 2002, Assistant Director of Operations in 2004 and Director of Investigation in 2010. Ms LI received the Hong Kong ICAC Medal for Distinguished Service in 2007 for her outstanding leadership and exemplary service." (End of quote)

This quotation brings out a whole series of queries. In the past one year, Rebecca LI did not commit any major mistakes. And, Simon PEH has so far failed to tell the public clearly what shortcomings Rebecca LI had. PEH's failure to dispel public queries has thus created further questions among the people.

The most baffling thing lies in the fact that Rebecca LI was the highest official responsible for overseeing the investigation into the alleged corruption case involving Chief Executive LEUNG Chun-ying's receipt of $50 million from Australian enterprise UGL Limited, and LEUNG Chun-ying was under investigation in the UGL case. LI's departure occurred at a time during the investigation, so we can question whether the personnel deployment in ICAC involved any political intervention. Did LEUNG Chun-ying participate in making the decision of cancelling the acting appointment? If yes, the problem will be very serious, as serious conflict of roles and interests were involved.

466 LEGISLATIVE COUNCIL ― 10 November 2016

According to sources, ICAC already requested LEUNG Chun-ying to provide information on the UGL case more than a year ago. But the Office of the Chief Executive of the Hong Kong Special Administrative Region and other related departments have not given any responses after one whole year. As ICAC has so far stopped short of exercising its power of requiring the turning in of documents, people are worried that it may have slacked its efforts. Could it be possible that someone was told to resign because she was "not good" and another person was forced to accept promotion because he was "very good"?

The public are gravely concerned about whether the termination of the acting appointment was connected with LEUNG Chun-ying's involvement in the UGL incident. But Simon PEH remains equally ambiguous about it. In the press conference held on 11 July, PEH said that he had notified LEUNG Chun-ying after cancelling Rebecca LI's acting appointment, but LEUNG did not take part in making the decision and did not give any advice. Simon PEH indicated that the decision was made all by himself as the immediate supervisor of Rebecca LI. When responding to the incident, LEUNG Chun-ying also said that he played no part in making the decision to cancel LI's acting appointment, and that he was only informed after the decision had been made.

But there is one interesting point here. The Independent Commission Against Corruption Ordinance lays down that the Commissioner takes instruction from the Chief Executive. Section 5(1) stipulates that "[t]he Commissioner, subject to the orders and control of the Chief Executive, shall be responsible for the direction and administration of the Commission." Section 8(1) also provides that "[t]he Commissioner may appoint such officers as the Chief Executive thinks necessary to assist the Commissioner in the performance of his functions under this Ordinance." Under Section 8(3), "[t]he terms and conditions of employment of officers shall be subject to the approval of the Chief Executive". Do you agree that we need to find out if the Chief Executive, the Office of the Chief Executive or any agent acting on behalf of the Chief Executive has played any role in the incident? Members who oppose the setting up of a select committee, do you think you should refrain from conducting an investigation and avoid finding out the truth for the people, when we are facing a matter of such importance?

President, this ICAC storm has dealt a heavy blow to Hong Kong. No matter how hard ICAC and LEUNG Chun-ying try to explain, people will not be convinced. It is only when the truth is revealed through an investigation that we LEGISLATIVE COUNCIL ― 10 November 2016 467 can see staff morale in ICAC restored, and its name as a trustworthy guardian of probity in Hong Kong revived. Whether ICAC is really a century-old shop, we earnestly hope that it can remain steadfast in its duty and continue to safeguard the core value of probity in Hong Kong. If ICAC is finished, there probably will not be any good day for Hong Kong. Therefore, the Legislative Council must invoke the Ordinance for investigation and fulfil its function in monitoring the Government.

I so submit.

MR CHAN HAN-PAN (in Cantonese): President, the motion under debate today is about the invocation of the powers under the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to set up a select committee to inquire into the personnel reshuffle within the Independent Commission Against Corruption ("ICAC"). Judging from the justifications given for moving the motion, this cannot even be described as a weak case. If we view the whole thing as writing a drama script, 30% of its contents are adapted from various phenomena while the remaining 70% are the scriptwriter's imagination. First of all, some personnel reshuffles have to be made within ICAC as a staff member has resigned to express her dissatisfaction, but the incident is played up to suggest that ICAC has been subject to intervention, dragging the Chief Executive and the UGL incident into the mire. It sounds perfectly logical and reasonable, but there is no tangible proof and justification to back up the arguments, and such unsubstantiated allegations are hardly convincing.

Although my fellow party member Mr CHEUNG Kwok-kwan commented just now that it is a good drama script, I consider the script loosely written. It can only be described as a rotten drama with far-fetched story lines and turning points, which are not convincing to the viewing public at all. Moreover, similar dramas have been put on the stage of this Council many times in the past few years, and there is nothing new to the general public since they all know the story lines very well. If the drama is really adapted into a movie, it will definitely have a very poor box office receipt.

If the story is allowed to develop further, a new chapter will start with the appointment of a select committee by this Council under the Ordinance to inquire into the personnel reshuffle within ICAC. However, this is contrary to the basic value cherished by Hong Kong people because in their opinion, personnel 468 LEGISLATIVE COUNCIL ― 10 November 2016 reshuffles within ICAC are actually very ordinary. Besides, does an acting appointment necessarily lead to substantive promotion? This is common knowledge. If all acting appointments should be arranged with a view to substantive promotion, no one should accept an acting appointment in the future or the Government should simply abolish the acting arrangement, since suitable candidates should be allowed to take up positions at a higher rank directly, am I right? Most importantly, the internal affairs of ICAC should definitely be free from any outside intervention, and this is in fact the core value widely upheld by Hong Kong people. The most important thing is that if Members who have not even taken the Oath of this Council are allowed to inquire into the matter, things would become so ridiculous that a huge uproar would be aroused among Hong Kong people. Public indignation would surely be provoked if an inquiry is really conducted into the matter, and the agitated masses would even cause damage to cinemas showing such a rotten movie.

Furthermore, Chief Executive LEUNG Chun-ying also has a role to play in the script, and we have already got used to this over the past many years. Whatever happened in recent years, it was alleged at the end without any exception that it had got something to do with LEUNG Chun-ying. This would be the conclusion of the whole story, and viewers have already got used to the boring and uncreative plots. As I have said, there is no need for the scriptwriter to use his brain, and all he has to do is to put the blame on LEUNG Chun-ying. This is the reason why I consider Mr CHEUNG Kwok-kwan's taste in movie is open to doubt.

Moreover, the UGL incident has also appeared in a number of these scripts. The incident is taken as a "golden handshake", which is a very common practice in the business sector. As the Chief Secretary has said, she has never received any news about the conduct of an investigation into the incident. The scriptwriter, who is a former employee of ICAC, should understand very well that he has to produce some evidence in order to solicit support from the public, but he has done nothing other than making empty accusations. How can members of the public be convinced by empty accusations?

Yet, this is what the scriptwriter has done repeatedly in the past to attract attention. For example, during the Legislative Council Election this year, he convened a press meeting in a high-profile manner, claiming that he had received some inside information of ICAC which suggested that ICAC had stopped following up a case involving a political opponent of him. He made a very LEGISLATIVE COUNCIL ― 10 November 2016 469 serious allegation against ICAC of letting off the person involved in the case, but when asked by reporters if he could produce any evidence to prove it, no actual evidence could be presented.

What he has done is actually a blow to ICAC, and he has seriously undermined ICAC's credibility. His reckless remarks have ruined ICAC's hard-earned reputation over the years of handling all its investigation cases in strict confidence. As a former employee of ICAC, does he know that he should refrain from making such remarks so recklessly? Why did he make such empty accusations without substantive evidence? Should internal affairs be disclosed to the public so lightly? He has to make it clear that politics and facts are two separate issues. Would it be correct for me to follow his practice and claim that I have received some inside information which indicates that the inside information he has is not very reliable? Hence, things did not turn out as he expected, and the case failed to attract extensive coverage by the media. I firmly believe that if the whole story is adapted into a movie, it will have a very poor box office receipt.

I hereby call upon Mr LAM the scriptwriter to stop taking advantage of his capacity as a former employer of ICAC, and exposing this or that by citing the so-called "inside information" he received. This is actually a source of reputational damage to ICAC. As a meeting of this Council can be smoothly held today, we should try to do some practical and meaningful things, instead of debating on an issue which has already been repeatedly discussed in the last term of this Council and for which a final conclusion has already been reached.

With these remarks, President, I oppose the motion.

MR SHIU KA-CHUN (in Cantonese): English playwright Oscar WILDE has said something about the play Mr CHAN Han-pan just said, and I wish to use it to respond to Mr CHAN, and that is, "The world is a stage, but the play is badly cast." If the quote is turned into a line in a play, it would be something like, "The world is a stage, but not everyone performs well on this stage, not every Member does well either and not every Member says things of substance."

President, may I ask from when a person who voices out a problem becomes a problem himself and that the problem he voiced out can be cast aside? Mr LAM Cheuk-ting moved a motion under the Legislative Council (Powers and Privileges) Ordinance to look into the incident concerning Ms Rebecca LI. I 470 LEGISLATIVE COUNCIL ― 10 November 2016 notice many Members holding a different view speculate on his motive, saying that he is ill-intentioned, trying to stir up troubles to disturb the operation of the Independent Commission Against Corruption ("ICAC"). It is indeed a very good tactic for them to pin Mr LAM Cheuk-ting's motion down to a conspiracy theory because people who say other people have a conspiracy never have to reveal their own intention except always suspecting others' intentions. Are people who accuse others as the conspirator free of any conspiracies or motives that they have to hide?

I see Mr LAM Cheuk-ting as a whistle-blower. A whistle-blower is one who reports dishonest activities. In this stinky society, a whistle-blower, who exposes a problem to the limelight, hoping that people can be awaken to the problem and face it squarely rather than ignoring it, will certainly be regarded as a problem-maker and will certainly trigger many backlashes. As a comrade of democratic Members, I certainly support Mr LAM Cheuk-ting and treat him with respect because what he did is no easy task.

I believe ICAC itself is also a whistle-blower in our social system. It discovers illegal, dishonest or improper activities in Hong Kong and then conducts investigation on them and reports about them. "Hong Kong Our Advantage is ICAC", "Hong Kong Our advantage is ICAC" and "Hong Kong Our advantage is ICAC". Important things should be said three times.

I wish to declare interests. In 2014, I, together with some scholars, was appointed by ICAC to conduct a research on young people in Hong Kong, Macao and Guangzhou regarding their attitude towards neighbourhood decision. Today, I am not going to spend time on the result of that research. But my experience gained from that research is that the ICAC officers are very conscientious about their work. They carefully looked into any changes in attitude that Hong Kong young people might have in this rapidly changing society towards integrity and corruption, and how to respond to and prevent such negative changes, if any. I saw how hard the ICAC officers have worked to safeguard this important gate of Hong Kong.

Every Hong Kong citizen knows in their heart that not many gate-keepers are left in Hong Kong now. We have the Audit Commission and ICAC. This is exactly the reason why we attach so much importance to this incident. I don't know if we will feel the same concerned and work the same hard if the same incident takes places in other public organizations or government departments. But one thing for sure is that all Hong Kong people are shaken to learn that this LEGISLATIVE COUNCIL ― 10 November 2016 471 incident took place in ICAC because the slogan "Hong Kong Our advantage is ICAC" is deep-rooted in us.

I believe every one of us cherishes ICAC and the best way to cherish it, which is the same way Mr LAM Cheuk-ting adopted, is to find out the truth. There can be no premise or precondition. All that we want to do is to go inside or invite them over to ask them what it is all about. Most importantly, we seek not to satisfy our curiosity, or fulfil our duty as Member, but to let Hong Kong people know the details of the incident and to do ICAC justice.

Of course, ICAC stands in history not as a 100-year old shop. But in my heart, it feels like a 100-year-old shop to me. It is a cornerstone of Hong Kong. When we feel disappointed or frustrated about the many unfair things in life, we feel fortunate that we still have ICAC. But I am concerned that whether we still think the slogan is true if this motion is vetoed.

When I graduated from university, I became a social worker. Some classmates more senior than me did not work as social workers and applied to ICAC to work as investigation officer. In a reunion gathering, I met one of my senior classmates. She proudly told me she joined ICAC. Many of us felt strange because when one chooses to study social work, one is supposed to work in this profession. Only she did not and joined ICAC instead. She thinks that her work needs the same spirit of a social worker, which is to defend justice, and it requires one to be conscientious. This conscience is certainly not only about her being conscientious, but being the conscience of society. At this juncture, I can recall how spirited she looked when she shared her vision with me. I am worried whether she can still be the same spirited today. I very much hope that by moving this motion under the Legislative Council (Powers and Privileges) Ordinance, we can let Hong Kong people, including my senior classmate, face ICAC with their head held up high and let her tell others proudly that she works for ICAC.

I hope that Members will not be oversensitive about the word "independence". ICAC, for instance, operates independently and such independence has been of great importance to us. Today, Mr LAM Cheuk-ting received information saying that the investigation on the LEUNG Chun-ying case may be subject to some kind of pressure and may even lead to serious consequences. LEUNG Chun-ying is certainly a problem, but ruining this independence is a more serious problem. If ICAC cannot operate independently, if it cannot say what is right as right and what is wrong as wrong 472 LEGISLATIVE COUNCIL ― 10 November 2016 and if it also starts to be subject to political interference, such that it has to consider other factors in case investigation, this is not only the collapse of ICAC, but the collapse of Hong Kong.

So, today, Members can veto this motion out of political reasons, but I hope that Members will not veto the importance of ICAC to Hong Kong and the importance of its independent operation. I so submit. Thank you, President.

MR WU CHI-WAI (in Cantonese): The presidential election of the United Sates has been the focus of our attention over the past few days. Especially after Donald TRUMP was elected, the topic of gossip at our leisure is: "Why Donald TRUMP is elected"?

According to one analysis, it is a phenomenon that comes down in one line with the outcome of the United Kingdom European Union membership referendum. That is, a strong anti-establishment sentiment has emerged in the United Kingdom and the United States, or even in various European countries. There is a prevalence of anti-establishment sentiment from the bottom of the entire community. It is because there is a general resentment on many issues, so it is reflected in the people's voting behaviour. In the United States, people cast their votes to let Donald TRUMP win. In the United Kingdom, people cast their votes to allow "Brexit". This is only an analysis, a view. However, as to the behaviour of casting votes to a novice politician due to the general mistrust in the society at large towards the establishment, we politicians should pay heed to the future development in society and face up to the causes of global trends. These causes are generally very complicated. However, if we are unable to examine our shortcomings, or if we fail to understand these causes or fail to understand how these anti-establishment trends have come into being, then we are not making plans for our society's future by identifying such a key process.

(THE PRESIDENT'S DEPUTY, MS STARRY LEE, took the Chair)

Have we, legislators, asked ourselves in this process if we have played a part in facilitating these anti-establishment trends? Have we do our jobs to prevent the collapse of traditional values and ethics, so as to ensure the public to trust the establishment unconditionally?

LEGISLATIVE COUNCIL ― 10 November 2016 473

Just now many colleagues have expressed that for many years in the past―that is, over the past few years―we have frequently proposed to investigate many issues by virtue of the Legislative Council (Powers and Privileges) Ordinance. Each time we proposed to look into these issues, the arguments of the people who opposed to us were the same. That is, no investigation should be conducted as there is no solid evidence; no investigation should be conducted as these are only conjectures; no investigation should be conducted as these are only estimations. In fact, we are falling into a situation, which is tantamount to what has been said in the controversial movie Ten Years: Over the past 10 years, what we have learnt most, is conspiracy; and what we have lost most, is trust. Nevertheless, we cannot build trust by means of constructing some obstacles with written words, or making use of some weasel words to pad out some written words and expect others to trust us. We need a process to display the facts and expound the justifications.

In fact, if the incident concerning Ms Rebecca LI is merely a matter of whether she could get promoted after taking the acting appointment, of course we have no interest to study it. However, if Ms Rebecca LI had to return to her former post after the acting appointment is cancelled, and then a number of high-ranking staff of ICAC resigned: Mr Dale KO, Principal Investigator of the Operations Department ("OD"); followed by Ms Melissa TANG, Chief Forensic Accountant, and then the Acting Head of Operations Ricky YAU, who has just taken office less than a half month, requested to terminate his contract with the commission―of course, after OD has made a supreme effort to urge him to stay, he eventually withdrew the decision of resigning, then, aren't these incidents critical and important? As far as I understand, as to what is known as a succession plan, top government management will make all the preparations beforehand. It is fundamentally impossible to ask somebody to take over an important post at such a short notice, especially when it is ICAC, a very important institute which involves probity, a cornerstone in our society. For that reason, even if we treat the matter with common sense, isn't it normal for us to see that something is rather odd? Why Ms Rebecca LI was sent back to her original post after taking the acting appointment for one year, and other colleagues of her tendered their resignations after that? Why the massive resignation of high-ranking staff at ICAC is not a kind of shock? In the face of this shock, can ICAC put it in a simple way and say it is only an internal issue and the public need not be that anxious?

In fact, what we concern about is that whether a certain issue concerning internal personnel management that we know nothing about, has emerged in the 474 LEGISLATIVE COUNCIL ― 10 November 2016 course of devising a succession plan within ICAC? Why the society has lost confidence gradually in the establishment over the past 10 years or so? One of the reasons is that the establishment tends to "cover up all stinking shit", resulting in the fact that the whole truth of each and every incident cannot be revealed. And every time when we ask for an investigation or examination, objectors will exercise their powers to veto―because they will definitely win as to casting the ballots―the call for setting up and independent investigation committee, or the call for invoking the Legislative Council (Powers and Privileges) Ordinance in order to find out the truth of a certain issue.

The failure to seek the truth or to demonstrate the relevant arrangement in a credible way will become the basis for the build-up of mistrust against the establishment. I believe that it can explain one of the reasons why a strong anti-establishment sentiment is prevalent in the United Kingdom and United States. For example, a lot of Americans criticized the reason why Hillary CLINTON was unable to win public trust was that during the past several decades when she was holding public office, she failed to express clearly the attitude she should have expressed and she failed to clarify all those problems. As a result, the public did not trust her.

As a matter of fact, this is a question that we political figures should ask ourselves. If the society at large does not trust the establishment, then difficulties in its governance will arise. Two elementary factors can be found in a society, governance and politics, and the connecting point between the two is whether there is a check and balance on the use of power. Moreover, in the course of exercising the check and balance, whether or not the establishment can win public trust and support by coming clear on the entire issue. For that reason, it is an important process. But if no importance is attached to that, then no matter how painstaking is the discussion, the voting result will be the same. No matter it is 40:30 or 39:30, we are bound to lose.

Nevertheless, have we ever thought of the aftermath? What if you win the ballots and manage to "cover up all stinking shit"? Will the mistrust be quietened down after the "covering up all the stinking shit"? After all, does the solution of coming clean in front of the crowd, rectifying problems and mistakes and improper approaches represent a better governance model? Or is "covering up all the stinking shit" a better governance model instead?

I support Mr LAM Cheuk-ting's motion to investigate into the case of Ms Rebecca LI by invoking the Legislative Council (Powers and Privileges) LEGISLATIVE COUNCIL ― 10 November 2016 475

Ordinance. Of course, this will also involve a problem of the system accordingly. That is, ICAC is accountable to one person only, it is an institution which is directly accountable to the Chief Executive. For that reason, in case the incident is related to the Chief Executive, then it will be difficult to avoid all sorts of speculations and suspicions in the community. Nevertheless, even everybody forgets the prima facie evidence or the issues that we could easily identify out of common sense that we are referring to due to all sorts of conjectures; even it has not reached the brink of intervention, after all, it involves the internal personnel management of ICAC, and it also reflects a problem which has arisen in the long-standing process of devising a succession plan.

I wish to ask one thing. Do we concern about a succession gap in the Government? Does anybody know as far as the problem of succession gap is concerned, what measure has the Government put in place to ensure that would not happen and thereby not affecting the governance structure? I consider that there are reasonable grounds for the public to request the Administration to disclose the information publicly, so that everyone can see them. However, it is unfortunate that I have seen the establishment keeps on saying in the debate that we are just over-suspicious, the argument is unfounded and conspiratorial.

Nevertheless, what's next after saying all these words? If we are not going to debunk what Mr LAM Cheuk-ting have been saying are being over-suspicious and merely some conspiracy theories, may I ask what should be done to prevent these imaginations and conspiracy theories from festering? What we should ponder is how to prove in an open, transparent and solemn way that all the conspiracies and conjectures as everybody surmises are really something out of Mr LAM's own imaginations and conspiracy theories. Only if we do it in that way can we solve the problem. If we insist to hide the "dirty linen", I really do not know how we can address public concerns about the incident.

Therefore, coming to the final part of my speech today, I wish to urge Members that since we all want to deal with the matter, or I just want to borrow the wording of the establishment: In order to challenge whether or not the content of the speech of Mr LAM Cheuk-ting is just over-suspicious and based on conspiracy theories, you should cast your votes to support that the Legislative Council (Powers and Privileges) Ordinance should be invoked for the setting up of a select committee to investigate the incident. Only in so doing can we prove what Mr LAM have said are nothing but imaginations, conspiracy theories and 476 LEGISLATIVE COUNCIL ― 10 November 2016 conjectures, instead of "covering up all the stinking shit" and making the public believe that the issues would continue to fester and affect the governance as well as public confidence in ICAC. This is something I do not wish to see at all.

Therefore, I am calling on Members for the last time and hope Members can consider the matter from various perspectives and see if they can support Mr LAM Cheuk-ting's proposal by setting up a select committee and launching a comprehensive investigation under the Legislative Council (Powers and Privileges) Ordinance, so that we can see justice to be done to ICAC and to restore public confidence to the establishment.

Thank you, Deputy President.

MR PAUL TSE (in Cantonese): Deputy President, what Mr WU Chi-wai said just now is exactly true. His words are true of all modern-day societies, not only Hong Kong, but also the one country which is most advanced and at forefront of democratization, the United States. In the United States, people will quickly escalate an issue to the level of cardinal principles and make nationwide accusations based on mere speculations and suspicions. Earlier in a magazine, an academic described this as post-truth politics, that is attempts to escalate issues to the level of cardinal principles irrespective of the truth. This practice is thus not restricted to Hong Kong or this Council. Many Members say that since we keep―I do not want to use the expression used by Mr WU Chi-wai just now―suppressing the truth or scandals, more and more people in society have come to dislike the establishment. Of course, there are many reasons why people do not like the establishment, but we will not have sufficient time and opportunities to discuss this topic today.

In regard to this motion, Deputy President, since quite a number of new Members take part in the debate and this is also the first time that this new Legislative Council discusses the invocation of the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to conduct investigation, I must once again endeavour to explain some widely accepted principles adopted by this Council all along. Of course, this Council is not a court and we are not supposed to give any interpretation of the law. We do not have an absolute principle which is totally binding. However, I hope that Members can study these principles, so that we can avoid the trap of misleading the people listening to our debate into thinking that we, as Legislative Council Members, have the responsibility to monitor and investigate the Government. As a matter of fact, LEGISLATIVE COUNCIL ― 10 November 2016 477 the most important duty of the Legislative Council is to make legislation. Monitoring the Government is of course one of our duties, and so is the scrutiny of financial budgets. But constitutionally, procedurally and ability-, expertise- and composition-wise, the Legislative Council is not the most appropriate investigation body, nor is it designed as a frontline investigation organization. In different sectors, there are respective investigation bodies, and the investigation power of the Legislative Council is just the last resort. In other words, the Legislative Council may discharge its investigation role and duty in the absence of any alternatives only when there happens in society a significant incident in which clear prima facie evidence can be established to indicate that a government body, a public sector organization or a government official or employee is at fault, and when the relevant government organization or department fails to give an appropriate response. This is the choice or principle that I or many people have been emphasizing. It is different from the arguments of some Members, especially Dr YIU Chung-yim, who say that we can still launch an investigation even without any evidence, or it will be pointless to confer such a power on us. Many Members keep saying that we should do justice to the Government and the organization, but this is an absurd argument showing a complete failure to understand the duties and principles of the Legislative Council. We are not supposed to conduct any frontline investigation, nor is it appropriate for us to do so. Besides, we do not have sufficient ability and resources to do so either.

Besides, Deputy President, I want to stress that when it comes to the evidence in support of an investigation, we are certainly not talking about concrete evidence, and some Members also say that such a criterion is much too demanding. But then, I simply do not think we should buy Mr CHAN Chi-chuen's argument that whenever there is any reasonable suspicion, we must launch an investigation. This criterion should instead be adopted by the Police or other inquiry bodies in general. I mean that once they can tentatively establish any reasonable suspicion, they will commence investigation. In the case of the Legislative Council, it can make use of this mechanism as the last resort only when there is sufficient prima facie evidence and the Government fails to give a proper response.

Deputy President, the second point I want to raise is about the amount of prima facie evidence we have in the present case. Is it sufficient? A number of Members have mentioned an argument which I have also applied many times before. The clearest example, the case in which almost all Members acknowledged the necessity to invoke the Ordinance, was the KAM Nai-wai case 478 LEGISLATIVE COUNCIL ― 10 November 2016 in the time of the last Legislative Council. He was suspected of sexually harassing his subordinate. Nevertheless, no one was willing to come out as the plaintiff in the investigation. When there was defendant but not any plaintiff, a proper investigation was not possible.

Apart from the above, Deputy President, let us look at the response to this incident. What has the Government done? As also asked by a number of Members just now, why this Government so different from the last Government? As Mr Charles Peter MOK mentioned, the last Legislative Council at least conducted investigations into the Lehman Brothers incident and the LEUNG Chin-man case. In contrast, this Legislative Council has not conducted any investigation at all. Well, this is just like asking why there is no war after such a long time. Why is there no world war? After the First and the Second World Wars, why is there not any Third World War? The Pope once said that the Third World War had already begun, though. In my view, having no investigations does not mean that we have been overly restraining ourselves or suppressing or disallowing any requests for investigation―I do not want to repeat the expression used by Mr WU Chi-wai.

Deputy President, will the real reason be that this Government is relatively more willing to cooperate and implement some remedial measures? I said publicly earlier on, also during the election campaign, that if the Government did not give a concrete response and deal with this query in a more sincere manner, I might also tend to support commencing an investigation. In fact, what has the Government done? On different occasions, Commissioner Simon PEH has made some comments and explanations. This includes the meeting unprecedentedly arranged by him on 23 September between new Members and all senior officers of the Independent Commission Against Corruption ("ICAC") at the ICAC office. In addition to that, Commissioner Simon PEH in his letter dated 4 October has also made detailed explanations on some queries and the Government's stance. Moreover, we have also heard some explanations from the Chief Secretary for Administration inside and outside this Council. Concerning this incident, do we really think in line with the allegation, namely, if it had been unrelated to UGL, these matters would not have happened? Do we have sufficient preliminary evidence? Does a prima facie case warrant our further investigation?

Deputy President, I notice that a former ICAC Commissioner, Bertrand de SPEVILLE, is a highly credible and respectable person, as no Members from the opposition camp have ever criticized him or said that he was wrong. He once LEGISLATIVE COUNCIL ― 10 November 2016 479 said that if we give casual remarks repeatedly, the ICAC system may suffer serious damage. Although he acknowledges that if a related investigation is conducted by the Legislative Council, the people concerned should cooperate as much as possible, he does not agree that we should make too many explanations and comments away from the Ordinance.

Commissioner Simon PEH might not have listened fully to his predecessor, as he tried to explain on various occasions outside the context of the Ordinance. Be that as it may, no matter how he explained, some people just did not believe him. I now quote a very simple example. People always ask me whether Simon PEH and Pamela PECK are related, or whether they are brother and sister. Even though I have explained more than a hundred times, people still say that they are related because they share the same Chinese surname "白", while their Chinese middle names "韞"和"韻" sound the same, and my explanation is thus rendered useless. This precisely is an absurdity in society. In regard to some firmly fixed viewpoints, our explanations will all be useless. Of course, I am just being cracking a joke here.

Deputy President, just now I have talked about the question why the Ordinance has not been invoked for investigation in these four years, or why the relevant motions were invariably negatived due to objection from a majority of Members. In my impression, when dealing with various crises, the attitude of this Government is indeed more positive than the last Government. Disregarding whether we were totally satisfied, the Government at least gave some response in each case―the incident of the Hong Kong Television Network Limited ("HKTV"), this incident and the vessel collision near Lamma Island. Through various channels and ways, it has tried to minimize our queries or tried to clear part of the doubts of those who would criticize it. Indirectly due to this perhaps, we do not have to resort to exercising our power of invoking the Ordinance. I am of course not an expert and this is only my personal opinion, but it is good for reference.

Deputy President, concerning Commissioner Simon PEH's letter, I naturally also have some queries. Mr CHAN Chi-chuen raised a lot of questions, and Mr Alvin YEUNG also raised many valid questions such as the administrative measures and arrangements for dealing with certain issues, why they were without any time limit or conditions, as well as whether they were handled according to the usual practice. As all these can be relayed to the Government through other channels and can get proper answers, we thus do not need to deal with the matter under the Ordinance.

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Mr Alvin YEUNG asked a very good question of whether it has nothing to do with his performance but is only a matter of his political credibility. It is indeed difficult for us to get a full explanation, as I cannot explain why Mr Alvin YEUNG's mentor Ronny TONG would say he did not support Mr Alvin YEUNG when casting his vote, after they have worked together for so many years and Ronny TONG has trusted Mr Alvin YEUNG so much as to recommend him to be his successor. Is it also the same in Commissioner Simon PEH's case when after working with Rebecca LI for one year, he found out something about Rebecca LI that made him really unable to recommend her? Or did he feel the same as Ronny TONG who regretted after making a recommendation? We have no idea about all these, as when a person has come to a certain position and is considered to be promoted further, actually many factors need to be taken into account. I hope that Mr Alvin YEUNG will not take my comments too seriously. But concerning this point, I really find it hard to explain clearly, and sometimes we regret of what we have done. It is better to ask Ronny TONG why he regretted so much.

Deputy President, let us look at the existing mechanism again. In fact, it is not the case that we cannot pursue this matter or find out what happened through other channels. The simplest reason is to look at the few committees which oversee corruption investigations. In fact, if anyone wants to be above the law, I am afraid that he cannot escape from the monitoring of the Operations Review Committee ("ORC"), which is a relatively independent body. Our colleague, Prof Joseph LEE, is one of its members, and in his speech, he said that he did not want to make any comments on the incident as this might influence the investigation. This means that ORC may be conducting or may have conducted an investigation of this incident. This precisely is one of the lines of defence which does not allow casual manipulation by the Chief Executive.

Of course, as regards our usual mechanism, Dr CHENG Chung-tai criticized that it is rotting, and other Members also made the same criticism. This morning, Mr Alvin YEUNG said that this involves conflict of interest. This is why when the mechanism is investigating the Chief Executive, a so-called firewall is unable to be established to prevent the Chief Executive from getting involved in any conflict of interest question. Nevertheless, our existing mechanism truly does not allow the Chief Executive to casually delegate his powers, including the power of having ICAC accountable to him, to other people. If it is allowed, I believe that this can be under our consideration. However, it is indeed not allowed. Under the circumstances, should we put forward some proper reforms?

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I agree with these reforms. In my opinion, we have to consider the existing responsibilities of the Chief Executive. True enough, a number of Chief Executives and high-ranking officials were also involved in corruption, and thus we really have to review under the existing mechanism, whether it is appropriate for ICAC to be accountable only to the Chief Executive or for the Chief Executive alone to deal with the appointments. Is there any room for improvement? I agree to put forward these reforms and think that it is necessary to do some studies.

This, however, does not mean that we have to open the cover of this incident, as we did last time in the HKTV incident as we wanted to open the cover of the Executive Council in order to find out what had happened, what was being discussed, who had made any comments, what decisions had been made, who were right and who were wrong. This is a very serious thing to do. In regard to the establishment, to the important institutions that we have given the power, including the Executive Council, ICAC or any independent organizations, we have to be very careful when using this yardstick or adopting this way to deal with their internal problems.

Deputy President, I have looked over the information about ORC and Commissioner Simon PEH's letter has also mentioned some details. Under the terms of reference of ORC, particularly in accordance with the first, second, fifth and eighth items, investigation can be conducted in various aspects. In case there is any question, they can provide an appropriate mechanism for the question concerned to be highlighted so that no one can be above the law.

In conclusion, Deputy President, our discussion is about setting up a select committee to inquire into the UGL incident, and no matter how broad its ambit is, this will still be our future direction. But as we mentioned earlier, ORC will also oversee any questions concerned. Under the circumstances, if balance is taken as a factor in considering whether the Ordinance should be invoked, apart from considering whether there is any prima facie evidence, response from the Government or other better investigative measure, we need to be extra careful about this balance in the sense that we have to know when our structure will be intervened, when its operation will be damaged and when the power of invoking the Ordinance should be appropriately exercised. In my opinion, it is unnecessary to exercise the power in this incident.

Thank you, Deputy President.

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MR JEREMY TAM (in Cantonese): Deputy President, I rise to speak in support of the motion moved by Mr LAM Cheuk-ting under the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance"). In the debate held yesterday and today, the pro-establishment Members kept saying that most of what Mr LAM Cheuk-ting said was not based on facts. In that case, let us rely on the information we have obtained to decide on whether or not the Ordinance should be invoked. I believe all fellow Members have this letter which I have at hand. This is the reply from the ICAC Commissioner Simon PEH to Members of the Legislative Council after our visit to the Independent Commission Against Corruption ("ICAC") on 23 September.

Let us first look at the acting appointment issue. He said that the acting period for Ms LI began when the former Head of Operations Mr Ryan WONG left upon completion of contract on July 2015. In the letter, he stated clearly that there are two kinds of acting appointment: One is acting with a view, meaning that the officer concerned is capable of being promoted and the acting appointment is for honing his skills so that once the opportunity arises, he will be promoted; the other is acting for administrative convenience. The letter explained clearly that acting for administrative convenience does not imply a promotion upon completion of the acting appointment. The officer concerned will return to his original position once the acting period is over. Mr PEH also stated clearly that Ms LI's acting appointment carried no implication of promotion and it was purely for administrative convenience.

Mr PEH said that after Rebecca LI had acted for a year, he concluded in her appraisal report that she failed to pass the test. This is illogical. Since he made it clear that the acting appointment was for administrative convenience, why was there an appraisal when she completed it? Moreover, the appraisal did not simply say that she has finished the appointment but that she has failed the test. In other words, Rebecca LI's acting appointment was not completely without the implication for promotion as he put it. This is the first point.

Second, Mr PEH also mentioned in the reply that if the ICAC Commissioner is to promote someone to a position of point 3 or above on the Directorate Pay Scale, or before he makes an acting-with-a-view appointment, he has to first secure the Chief Executive's approval. In principle, the Chief Executive did not have to be informed of Ms Rebecca LI's acting appointment but LEGISLATIVE COUNCIL ― 10 November 2016 483

Mr PEH said that he informed the Chief Executive of Ms LI's acting appointment and its cancellation. This makes his move problematic.

He said that the cancellation of the acting appointment might trigger extensive discussion in society. As a result, he considered it necessary to inform the Chief Executive. I can understand this. However, what about when the acting arrangement was made? At that time, society neither queried nor held extensive discussion. Under such circumstances, why did he not follow the practice of not having to inform LEUNG Chun-ying?

Now, I would like to talk about timing. The UGL incident came to light in October 2014, while Ms Rebecca LI began acting as Head of Operations a few months later. I have listened carefully several times to the speech delivered by the Chief Secretary yesterday. She said, "When I was preparing for this motion debate, I also made an effort to reconfirm that I had never been informed that ICAC was conducting an investigation." What did she mean? In other words, ICAC has not informed her that the investigation is on. This misleads people into thinking that ICAC has not investigated LEUNG Chun-ying and the UGL incident at all. Yet, the Chief Secretary later clarified that she did not say that. Is this an art of double-talk? Would it be like "I have not said that I do not have unauthorized structures"?

Mr PEH also remarked in the reply that all corruption investigations have to be conducted in accordance with the established procedure, and a report has to be made to the Operations Review Committee ("ORC"). Some Members said earlier that of the pro-democracy Members, only Prof Joseph LEE is a member of ORC of which Maria TAM is the Chairman. I raise this point not for the purpose of querying whether Maria TAM can handle the ICAC cases justly and impartially. This is not the scope of discussion of the motion.

Government representatives on ORC include the Secretary for Justice or his representative, the Commissioner of Police or his representative and the ICAC Commissioner. The Chief Secretary for Administration is not a member of ORC. Therefore, she neither should have known what investigations ICAC is conducting, nor be "informed that ICAC was conducting an investigation." Thus, I suspect that her speech is an art of double-talk.

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Moreover, when a number of Members visited ICAC on 23 September, Mr Ricky YAU told us the reason for his leaving and returning to ICAC. We have always practiced … When I first met the Chief Secretary for Administration, I told her that I fully support the practice of Members and government officials making their respective statements without quoting each other. I find this a very good tradition. That said, in yesterday's debate, many Members quoted the words of Mr Ricky YAU during the meeting with us. Unfortunately, they (as well as Members who did not visit ICAC that day) did not quote Mr Ricky YAU in full. They only quoted those words which can be used to support their opposition to this motion. I paid the visit that day but I will not quote the comments of Mr Ricky YAU. Given the many reasons, it is difficult for us to regard the entire incident as normal based on the information provided by the Government at this stage.

Some Members asked earlier if an inquiry is absolutely necessary, and if we really have to use this power which we have. Of course not. However, can our doubts really be cleared now? Take the television license saga which took place earlier as an example. We also said that an inquiry was necessary but some Members changed their stance after meeting with officials of the Liaison Office of the Central People's Government in the Hong Kong Special Administrative Region ("LOCPG"). I believe LOCPG has all along been very supportive of some Members who are now in the Chamber. They must have made the right choice. They have always opposed the invocation of the Ordinance to inquire into matters which the people regard as very important.

I must emphasize that probity is Hong Kong's core value, and ICAC is also Hong Kong's most important cornerstone. In the wake of such a major incident, have the Government and ICAC made any important statement in the last one or two months, apart from giving us this reply letter? The answer is "no". We of course do not have to use the power we have to the utmost. The Legislative Council is not the Standing Committee of the National People's Congress. Nonetheless, should we act against our conscience and turn a blind eye to the incident?

Some ICAC officers said that the victims have not come forward because as former ICAC officers, they know they have to abide by the law and observe the confidentiality agreement. The Ordinance precisely allows them to legitimately tell Hong Kong people what actually has happened. We have to LEGISLATIVE COUNCIL ― 10 November 2016 485 explain to the people and ensure that ICAC can continue to operate independently. It will then become our real century-old shop.

Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): Mr Nathan LAW.

(Mr LEUNG Kwok-hung stood up)

DEPUTY PRESIDENT (in Cantonese): Please wait. Mr LEUNG Kwok-hung, why are you standing up?

MR LEUNG KWOK-HUNG (in Cantonese): I am interpreting the law. The meeting should have a quorum.

DEPUTY PRESIDENT (in Cantonese): Are you asking for a headcount?

MR LEUNG KWOK-HUNG (in Cantonese): Yes. I am explaining that the law should be observed.

DEPUTY PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(While the summoning bell was ringing, some Members returned to the Chamber but had not returned to their seats)

DEPUTY PRESIDENT (in Cantonese): Will Members please return to their seats soon to facilitate a headcount.

(Some Members had not returned to their seats)

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DEPUTY PRESIDENT (in Cantonese): Will Members please return to their seats to facilitate a headcount.

(After the summoning bell had been rung, a number of Members returned to the Chamber)

DEPUTY PRESIDENT (in Cantonese): Mr Nathan LAW, please speak.

MR NATHAN LAW (in Cantonese): My fellow Members, probity and the capacity to conduct independent investigations are the most well received qualities of the Independent Commission Against Corruption ("ICAC") since its establishment. They are also the foundation of ICAC's success. Looking back, ICAC was established exactly with an aim to fight corruption and contain the unrestrained power of the Police at the time. However, the recent incident of personnel reshuffle related to senior officers of ICAC in July has shaken the core values of ICAC, and has significantly undermined Hong Kong people's confidence in ICAC as the pillar safeguarding the city's effective operation.

In fact, since LEUNG Chun-ying has come into office, he has been "exploiting his powers to the fullest extent" to serve his political interests. This is his way of doing business. Four years ago, the Legislative Council voted to invoke the Legislative Council (Powers and Privileges) Ordinance and investigate whether LEUNG Chun-ying, a candidate for the Chief Executive Election then, had any conflict of interests in the West Kowloon Reclamation Concept Plan Competition. This demonstrates that his political integrity has always been called into question. Mr IP Kin-yuen's speech just now has aroused my emotion. Over the years, I have been actively participating in the civic society, while it seems that the power behind the scenes has also never ceased making political interventions. These kinds of power abuses and exploitation, violations of procedures and damages to professional integrity do not only exist in the education sector, but also the law enforcement agencies, and have even influenced the legal sector. The debate today is conducted exactly because we notice that our system is in jeopardy. After we realize the problems, shall we not do anything and allow the system to rot, until Hong Kong people have totally lost their confidence in it?

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My fellow Members, that ICAC is directly responsible to the Chief Executive is a big cause of concern to the public. They worry if LEUNG Chun-ying will play the same old trick of cancelling the acting appointment of Ms Rebecca LI as the Head of Operations of ICAC, and go further to try stopping ICAC's investigation into his receipt of $50 million from UGL Limited. Regarding issues concerning public interest, the Legislative Council has the duty to uncover the truth to Hong Kong people when other institutions are unable to conduct effective inquiry. Therefore, I support the motion moved by Mr LAM Cheuk-ting in hope of addressing the people's concern.

Although Mr Simon PEH, the Commissioner of ICAC, has explained many times after the incident that the personnel reshuffle was done internally in accordance with performance assessment only, the incident is still highly doubtful. Mr Simon PEH said that Ms Rebecca LI's acting appointment was cancelled because she failed to come up to expectation. However, the Government and ICAC had commended Ms Rebecca LI's performance on many occasions in the past. Many media reports and interviews also indicate that frontline ICAC staff do not buy Mr Simon PEH's explanation. It is not in conformity with conventional reshuffling arrangement to cancel the acting appointment of Ms Rebecca LI and assign another official with less experience to fill her post. Mr Daniel LI, former Deputy Commissioner and Head of Operations of ICAC, also said that the incident is intricate. After the incident, it was rumoured that Mr Ricky YAU, who was appointed to fill the post, resigned in the same month because of his dissatisfaction of Mr Simon PEH's handling of the issue, and the resignation was accepted. That said, merely three hours after the resignation, fellow staff of ICAC successfully persuaded him to stay. The recent events of personnel reshuffle in ICAC are probably the most serious and unusual ones since its establishment.

As regards LEUNG Chun-ying, he repeated his hypocritical rhetoric in the last Chief Executive Question and Answer Session in the previous term of the Legislative Council and dodged the questions raised by Members. He has been refusing to provide more information, giving excuse that the incident of his alleged receipt of payment was being investigated by ICAC; he also uses the Independent Commission Against Corruption Ordinance as shield, claiming that acting appointments for administrative convenience fall outside the purview of the Chief Executive, so as to dispel the suspicion against him.

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Apart from the above arguments, I would like to reiterate an argument mentioned by another Member: the current incident which has ignited heated public discussion is not only about the cancellation of the acting appointment of Ms Rebecca LI. Some pundits have pointed out that this extremely unusual reshuffle involves a question behind the scenes, which will affect whether ICAC can effectively investigate Chief Executive LEUNG Chun-ying under the system. The Independent Commission Against Corruption Ordinance stipulates that ICAC "shall consist of the Commissioner, the Deputy Commissioner and such officers as may be appointed by ICAC". However, the position of Deputy Commissioner has fallen vacant since Mr Ryan WONG left office in July 2015. By now, the vacancy has spanned more than one year. Such an important statutory position has been allowed to remain vacant for over a year, and during this period, the Head of Operations has been arranged to fill the post under acting appointment which is extendable once every three months.

On the other hand, concerning the post of Head of Operations, what is the difference between the power of an incumbent of the post on acting appointment, and an incumbent on substantiated appointment? Pundits find that an incumbent of the post on acting appointment is not conferred with enforcement power related to "Referral of matter involving offence suspected to have been committed by Chief Executive" stipulated under section 31AA of the Prevention of Bribery Ordinance. Simply speaking, in case the Commissioner suspects that the Chief Executive is involved in corruption―please be reminded that this is about suspicion, as the Chief Executive is liable to prosecution if there is concrete evidence―if the Chief Executive is suspected to be involved in corruption, the Commissioner may refer the matter to the Secretary for Justice for consideration. If the Secretary for Justice agrees that it is probable that the Chief Executive is involved in corruption, he may refer the case to the Legislative Council for initiating the impeachment procedure.

ICAC received complaint about the UGL case in October 2014. Nine months later, Deputy Commissioner Mr Ryan WONG retired, and Ms Rebecca LI took up acting appointment as the Head of Operations for a long period. Due to the complicated details of the case and the lengthy time required for collecting evidence, as well as the possibility for seeking legal advice, Ryan WONG was never able to complete the investigation within his term, so it was necessary for Ms Rebecca LI to take over.

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If Ms Rebecca LI was appointed following conventional practice as the Deputy Commissioner and Head of Operations after her predecessor retired, she would have the authority to independently exercise all the investigative power, and more importantly, she would be able to independently implement section 31AA of the Prevention of Bribery Ordinance and refer relevant cases to the Secretary for Justice. Therefore, objectively speaking, the Chief Executive's insistence of not appointing anyone to fill the post of the Deputy Commissioner may in effect lead to Ms Rebecca LI's resignation, and his practice would certainly influence the investigation of the alleged corruption case related to him.

My fellow Members, summarizing all the above points, I have to say that the people have raised a clear and serious doubt because of the complicated and exception nature of the case. Many Members in this Chamber have questioned the case because of its unusual nature: Was the reshuffling of senior officers of ICAC caused by LEUNG Chun-ying's attempt to avoid investigation? Was the ICAC incident a result of LEUNG Chun-ying's scheme to circumvent investigation? Some pro-establishment Members said that the incident was simply ICAC's internal personnel arrangement, and the Legislative Council should not intervene. Another kind of argument states that investigating ICAC will only undermine its credibility. If the incident is about a private institution only, the Legislative Council will truly have no role in it. However, throughout the entire political structure in Hong Kong today, the Legislative Council is the only elected institution with the people's mandate. We are duty-bound to ensure that society runs smoothly under a healthy regime, to protect the values and bottom line of Hongkongers, and to safeguard the system and the beliefs that form the foundation of Hong Kong's success. A corruption-free environment is exactly something we will defend at all costs, and is the value generally cared and regarded by the people as essential to the effective operation of society.

Therefore, any unusual incident in ICAC, the controversy involving LEUNG Chun-ying in particular, is related to whether the incorruptibility in society can be protected, thus concerning the interests of every citizen. As an internal reshuffle within ICAC relates to the well-being of society, when all other institutions are unable to conduct an effective investigation, the Legislative Council has the responsibility to pay attention to the issue and expose the truth by exercising its powers, in order to maintain the people's confidence in the system. A thorough investigation is the only way to address the root problem, so that 490 LEGISLATIVE COUNCIL ― 10 November 2016

ICAC can retain its credibility and protect its reputation at this moment of decreasing confidence and ranking.

My fellow Members, since ICAC's establishment in 1974, it has been the pride of Hong Kong. Our generation of people has grown up familiar with the slogan "Hong Kong Our Advantage is ICAC". We take honesty and integrity as a matter of course. Never have I experienced the worst era of rampant corruption in Hong Kong, and I do not wish to witness it degenerating into such a painful period of history. Today, we find how fragile our system of ICAC is. The Chief Executive is merely elected among a small-circle of interests without popular mandate, and there is no adequate mechanism and system to balance his power. Over the last few years, many intrinsic values shared among Hongkongers have been subject to indiscriminate abuse. If it is proven that ICAC has failed to impartially exercise its functions, and, against a backdrop of widespread doubts in society, if ICAC cannot demonstrate the integrity of its operation and convince Hong Kong people that its system can still protect Hong Kong from corruption, then Hong Kong is no longer the Hong Kong we used to recognize. As Members of the Legislative Council, we have the duty to ensure that ICAC operates effectively, and that it conducts its investigations without subject to pressure exerted by the Chief Executive. We are obliged to defend the pride of Hong Kong people.

For Hong Kong, I earnestly request Members to support this motion. It is necessary for the Legislative Council to reveal the whole picture to relieve public concern. I so submit.

MR CHUNG KWOK-PAN (in Cantonese): Deputy President, I believe it is not likely that the motion Mr LAM Cheuk-ting moved under the Legislative Council (Powers and Privileges) Ordinance will be passed. So, whether the Liberal Party supports the motion or not will not make a big difference. The motion is mainly divided into two parts. First, it seeks to inquire into the personnel reshuffle within the Independent Commission Against Corruption ("ICAC"); and second, it is about whether the personnel reshuffle has affected ICAC's investigation on the case of Mr LEUNG Chun-ying's receipt of $50 million from UGL Limited.

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First, I would like to talk about the first part. Has the Legislative Council ever conducted any inquiry into any personnel reshuffle of ICAC in the past? Actually, the Legislative Council did move a motion under the Legislative Council (Powers and Privileges) Ordinance to initiate an inquiry into ICAC. It took place in 1993 and the motion was moved by Mrs Selina CHOW, the then Council Member and also our former party leader, to inquire into the sudden dismissal of Mr Alex TSUI, the then Deputy Director of Operations of ICAC. Mr Alex TSUI said that he was dismissed with a groundless reason. I believe Members may still remember this controversial incident some 20 years ago.

What was the outcome of that inquiry then? The report of the inquiry confirmed that ICAC's decision on the dismissal of Mr TSUI was justified. Mr TSUI said that he was sacked with a groundless reason. The incident then may be somewhat different from the incident concerning Ms Rebecca LI now, because Ms LI claimed that she resigned of her own accord. Of course, only she knows whether she really resigned out of her own accord. But if we compare the two cases, in which one was dismissed and it was ultimately confirmed that the dismissal was justified, while the other resigned of her own accord. Is it that easy to confirm whether there is any irregularities in this incident? I believe it will not be that easy.

Besides, there are many monitory mechanisms in ICAC. Let me name three of them. One is the Advisory Committee on Corruption which keeps under review the operational and staffing issues of ICAC; second is the Independent ICAC Complaints Committee; and third is an internal investigation and monitoring unit in ICAC responsible for investigating breaches of staff discipline. The existence of these committees and unit, which operate independently, shows that not even senior ICAC officers like ICAC Commissioner Simon PEH can do whatever they please. More importantly, any ICAC officer who has breached staff discipline will have to successfully bribe members of these committees and unit to sing the same tune as his before he can escape the long arm of the law. Is it that easy to do so? I don't think so. If it is that easy, it means that he manages to bribe all these members to support his view and turn all internal problems in ICAC into no problem. At this point of time, I still do not think that Hong Kong has degraded to such a level.

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The second part of the motion is about the investigation on the $50 million from UGL Limited. Last week, Mr Kenneth LEUNG and Mr Andrew WAN presented a petition to this Council, seeking to establish a select committee to inquire into the UGL incident. Certainly, the statutory power of that select committee is not as large as this select committee proposed to be established under the Legislative Council (Powers and Privileges) Ordinance now. But the point is that if this motion is vetoed and a select committee cannot be established, that select committee can still try to find if there is any hints or traces of irregularities in this incident. If it does find such hints and traces of irregularities, we can reconsider this option then. That is why several pro-establishment Members today said that the request to appoint a select committee was unjustified. If the select committee already established manages to find such irregularities, we will be more than justified to establish a select committee again. I think, by that time, Members will have a different view on this motion.

Many people criticize the incompetence of ICAC, but I still feel very confident about ICAC. Why? If one commits crimes, do you think that he can escape the long arm of the law? One good example is former Chief Executive Donald TSANG who is under prosecution by the Department of Justice with the evidence provided by ICAC. If the $50 million from UGL Limited really involves any irregular practices, I don't think the person under investigation can escape the law. Only seven months are left in the incumbent Government. Even if the Chief Executive can serve for another term of office, the post of Chief Executive can only protect him for another five years and it cannot protect him forever. Hence, I do not believe that ICAC will not take action against anyone who has commit crimes. No one can escape the law.

Hence, please don't worry. I have confident in ICAC. We just need to wait and see how the future unfolds. We don't think that we need to argue anymore on whether or not we should move a motion under the Legislative Council (Powers and Privileges) Ordinance to appoint a select committee now. Thank you, Deputy President.

MR JEFFREY LAM (in Cantonese): Deputy President, I would first like to declare that I am the Chairman of the Independent Commission Against Corruption Complaints Committee.

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Deputy President, the expression "be like dad, keep mum" can best sum up the silent mode of service of the Independent Commission Against Corruption ("ICAC"). ICAC has all along handled its investigation work in strict confidence. Under section 30 of the Prevention of Bribery Ordinance, any person who discloses the details of an investigation undertaken by ICAC shall be guilty of an offence, and as far as the UGL incident is concerned, ICAC has never openly disclosed that an investigation in respect of the incident is taking place.

However, Deputy President, very regrettably, some politicians and Members among us are anxious to see the world in disorder and keep arguing that an investigation is being conducted by ICAC on the Chief Executive and the UGL incident. Some so-called inside information from ICAC has even been cited to suggest with certainty that the personnel reshuffle within ICAC is actually related to the investigation underway. In my opinion, not only is this a misleading assertion, those who say so have even tried to use the well-earned reputation of ICAC, which Hong Kong has been so proud of, as a political tool and a medium for self-promotion for themselves. They have never hesitated to challenge the confidentiality system of ICAC and damage the image and undermine the credibility of ICAC at all costs, so as to build up political capital for themselves.

As for the personnel reshuffle within ICAC, I understand that some members of the public are gravely concerned about the matter, but the Commissioner of ICAC has repeatedly responded and explained that the decision to terminate the acting appointment of Ms Rebecca LI was made purely on the basis of his judgment of the work ability of Rebecca LI, and it had nothing to do with any investigation work undertaken by ICAC. Therefore, it would be a totally groundless accusation for anyone to suggest that Rebecca LI was forced to resign since an investigation was being conducted on the Chief Executive. If the opposition Members keep on spreading rumours, creating trouble and making an issue of the matter, not only will the credibility of ICAC be undermined, public confidence in ICAC will also be brought down.

Deputy President, the rule of law is the core value of Hong Kong, and I firmly believe that with the power given to ICAC under the law, it should be able to conduct its investigation independently. If we base our decision solely on some unfounded speculations and rumours and rashly invoke the power given to this Council to interfere with the work arrangements and personnel matters of 494 LEGISLATIVE COUNCIL ― 10 November 2016

ICAC, this will only hamper the independence and damage the credibility of ICAC.

Deputy President, I object to the motion.

DR LAU SIU-LAI (in Cantonese): I speak in support of the motion moved by Mr LAM Cheuk-ting because Hong Kong people, be they members of the general public or Members of this Council, have all along been upholding democracy, freedom, honesty and integrity as the core values of Hong Kong. However, as at today, Members of this Council and even the Chief Executive are not elected through genuinely democratic procedures, and the democratic nature of the present election system is highly questionable. It can be seen that the freedom enjoyed in Hong Kong at present is not the freedom from fear, since the political persecution and verbal intimidation from those who suppress us are getting more and more serious. What Hong Kong people have always been really proud and confident of is the system integrity we maintain. I am sure "Hong Kong Our Advantage is ICAC" is a slogan that makes everyone in Hong Kong feels so proud of since childhood. However, the Rebecca LI incident has shaken our confidence in and triggered off public anxiety over the system of the Independent Commission Against Corruption ("ICAC"), and it really deserves our careful consideration.

Very surprisingly, as an officer who has all along been highly acclaimed for her good ability and outstanding performance, Ms Rebecca LI was suddenly criticized for failing to perform up to the required standard and was therefore considered not suitable for substantive promotion to the position of Head of Operations. Why is that so? The shock the incident caused to ICAC had also led to the resignation of a few senior officers, which was also unprecedented and extremely shocking. In order to safeguard the core values of Hong Kong, a thorough investigation of the incident should indeed be conducted.

Many people argued that this is actually a very simple incident and it just involves personnel appointment matters, which are in essence the internal affairs of ICAC, but we find many doubtful points concerning the case. How come an officer who has always been highly acclaimed by her supervisors and subordinates for her unsurpassed ability was suddenly assessed as failing to perform up to the required standard? On her last day of service in ICAC, many LEGISLATIVE COUNCIL ― 10 November 2016 495 of her subordinates and a large number of frontline officers bade her farewell by shouting aloud "Madam, you have our support!" and giving her a warm applause for three minutes. Did she really fail to perform up to the required standard? We do have reservations about this.

It can even be noticed that Rebecca LI has been highly commended for her outstanding performance during the whole promotion process. Ms LI joined ICAC as an Assistant Investigator in 1984 and has since then been performing with flying colours, rendering her an officer selected for focused training. She was promoted to the position of Principal Investigator in 2002, further to the position of Director of Investigation in 2010, and took up the acting appointment as Head of Operations from July last year. As she has always been highly acclaimed for her exemplary performance, how truthful it is to say that she was incapable of performing up to the required standard? How come she was suddenly rated as an incompetent officer in just one year? In this connection, we consider it necessary to give a very clear account of the aspects of performance in which she was alleged to have failed to meet the required standard. However, the explanation made by Simon PEH has been wholly unconvincing, otherwise there would not be such a huge outcry within ICAC that over 70% of its staff members refused to attend the annual dinner. We certainly could not jump to the conclusion that there is something fishy about the whole thing and some very dirty tricks must have been involved, but this is exactly the reason why an investigation has to be conducted.

Why should an investigation of the incident be conducted? This is not only a gesture to show our concern for an officer who has been highly commended for her outstanding performance, but also a move with an even more important meaning behind, because we feel deeply concerned whether the appointment system of ICAC will constitute a hurdle in the investigation of the alleged corruption of the Chief Executive. According to our understanding, since there are loopholes in our Prevention of Bribery Ordinance ("POBO"), a thorough investigation cannot often be conducted of the alleged corruption of the Chief Executive, because the Chief Executive is exempted from the most stringent regulation imposed by the toughest law.

When a discussion is conducted on whether there is a need to amend the POBO, the Rebecca LI incident has shed a little more light on the issues involved. Will the internal personnel appointment system of ICAC set up another hurdle to 496 LEGISLATIVE COUNCIL ― 10 November 2016 prevent us from conducting a thorough investigation of the alleged corruption of the Chief Executive? Since the Commissioner of ICAC has to inform and consult the Chief Executive on the appointment or termination of appointment of officers at Director level in ICAC before the actual personnel appointment can be made, whether this will create inconvenience to a subordinate who is investigating his/her superior? If a subordinate insists on investigating his/her superior, whether he/she will be put in an unfavourable condition with the arrangement mentioned above, so that he/she cannot get a promotion and will even be forced to resign? We should carry out a thorough investigation of the case, or else the system integrity of Hong Kong cannot be safeguarded.

Hence, what Hong Kong people and Members are concerned about is absolutely not the personal ethical problem of "689", but the system integrity of Hong Kong, and whether we can safeguard the core values of honesty and integrity, which the whole society has always been relying on and proud of.

Many people, including pro-establishment Members, have been criticizing us severely for demanding a thorough investigation of the incident. In their opinion, it is not worth the trouble to carry out a thorough investigation because these are just groundless accusations made on hearsay statements and unsubstantiated rumours. I would like to ask fellow Members what is the point of conducting a thorough investigation if irrefutable evidence is present? It is exactly because there are reasonable doubts but no evidence of proof that a thorough investigation is needed. However, many pro-establishment Members have seized the opportunity to smear the reputation of Mr LAM Cheuk-ting by accusing him of making whimsical statements and citing ICAC's internal information which can hardly be verified, and alleging with exaggeration that Mr LAM Cheuk-ting is taking advantage of the situation with malicious intent.

All these are in fact unfair criticisms because under the POBO, it will be an offence for any staff member of ICAC to disclose the details of any investigation. How then can the source of the news be disclosed? By doing so, the informants will only be made to face the risk of criminal liability. Although exemption provisions have already been provided for in the POBO, the exemptions only cover disclosures which seek to "reveal any unlawful activity, abuse of power, serious neglect of duty, or other serious misconduct by the Commissioner, the Deputy Commissioner or any officer" of ICAC. How about disclosures which seek to reveal information concerning the Chief Executive? Under such LEGISLATIVE COUNCIL ― 10 November 2016 497 legislative provisions, it is simply impossible for us to directly disclose the source of the news.

It would be totally unreasonable for informants to take this risk, and it is grossly unfair to smear the reputation of Mr LAM Cheuk-ting in this way. As I said earlier, it is exactly because there are so many doubtful points that an investigation is needed. Pro-establishment Members have not only turned a blind eye to these doubtful points, but have also made some threatening and defamatory remarks against Mr LAM Cheuk-ting. They are actually speaking against their conscience.

Since there are really so many reasonable doubts and queries concerning the Rebecca LI incident, we do think that it must have something to do with the UGL incident. As explained by Albert HO, who has cited information from some reliable sources as illustration, the lack of progress of the investigation into the UGL incident can be attributed to the unavailability of a reply one whole year after questions have been put to the Chief Executive to enquire about the details of the case. Why did ICAC not exercise its power and apply for a court order? How come no progress has been made in following up the incident? Has the internal structure of ICAC caused any hindrance to its investigation work? These are what we need to know.

Mr LAM Cheuk-ting also pointed out that he has received information from three different sources, all querying that the cancellation of the acting appointment of Rebecca LI may relate to the UGL incident. The whole thing is fraught with doubts, and it can be said that ICAC has already been plunged into a dark age. Such being the case, why not carry out an investigation properly so as to ensure that the system and core values which we have been so proud of over the years can be maintained?

There are also a lot of doubtful points in the personnel appointment made by ICAC in the current case and the explanation given all along by Simon PEH for the promotion arrangements for Rebecca LI. He pointed out that LEUNG Chun-ying had never been consulted on the personnel reshuffle involved and knew nothing about it. Nevertheless, there are a lot of contradictions between what he has said and the remarks made by LEUNG Chun-ying. As commented by Daniel LI, Rebecca LI's former supervisor as well as the former Deputy Commissioner and Head of Operations of ICAC, this is actually impossible 498 LEGISLATIVE COUNCIL ― 10 November 2016 because the Chief Executive has to be consulted on the appointment or termination of appointment of all officers at Director level or above in ICAC. It would not be possible for the Commissioner of ICAC to handle the matter all by himself, and if so, he has failed to act according to the law. This is a reasonable doubt of great significance, and we therefore consider that if these few cases are put together, a lot of queries can be raised with regard to the system of ICAC from its personnel appointment to its investigation into cases concerning the Chief Executive. There is indeed something dubious about the whole case.

I sincerely hope that President and fellow Members would strive to defend our core values together, no matter which sector they belong and what political line they adopt. Hong Kong people are most proud of the system of ICAC, and let us come together to support Mr LAM Cheuk-ting's motion.

MR CHU HOI-DICK (in Cantonese): Deputy President, Honourable Members, please try to understand that every time when I address this Council, I would feel uneasy. Because I think that before we discuss any other public affairs, we should first of all try to clarify the various matters which happened in the Legislative Council meeting on 12 October. We should first debate why Mr Andrew LEUNG has been refusing the retaking of oath by two Members from the Youngspiration, two elected Members with a mandate of nearly 60 000 public members. Today, we should have a debate on the impact of the document concerning interpretation of the Basic Law, which is the most stringent, ridiculous, ultra vires and law-defying document, on the entire political system of Hong Kong, because this interpretation document is constantly affecting this Council's credibility. I believe that Chief Secretary for Administration Carrie LAM is very clear about this, because the Chief Secretary for Administration has voiced her reservations about the qualification of each one of the Members sitting here or who has spoken in this Council.

This interpretation document is related to every Members sitting here, including all Members from the pro-establishment camp. If we allow it to be implemented silently, with a trumped-up charge, it can take away the constitutional power of any one elected Member. This is very dangerous, because an elected Member can be deprived of his seat only if he refuses to listen to the Beijing authorities. This will lead to a total loss of public confidence in the election system which was gradually established over years. Therefore, even LEGISLATIVE COUNCIL ― 10 November 2016 499 if Mr Andrew LEUNG repeatedly says that there is no point of order, and that we should discuss on other occasions, I still think that if we immediately switch to discuss other matters instead of the issues concerning interpretation of the Basic Law, the reasons for not allowing those two Members to retake the oath, and the procedure taken by Mr Andrew LEUNG for the election of the President of the Legislative Council, this is not appropriate.

DEPUTY PRESIDENT (in Cantonese): Mr CHU Hoi-dick, I have to point out that …

MR CHU HOI-DICK (in Cantonese): In regard to the Independent Commission Against Corruption ("ICAC") …

DEPUTY PRESIDENT (in Cantonese): Mr CHU Hoi-dick, please stop speaking first.

MR CHU HOI-DICK (in Cantonese): Deputy President, I now return to the motion moved by Mr LAM Cheuk-ting.

MR CHU HOI-DICK (in Cantonese): Deputy President, now I am referring to Mr LAM Cheuk-ting's motion. As regards the earthquake of ICAC and the UGL case which have been lacking of progress in our questioning, I believe that my colleagues from the democratic camp have already stated very clearly in respect of different details and justifications that an investigation is necessary, and thus I will not dwell on these details here.

I would like to briefly highlight a point. Why does the Legislative Council need to conduct an investigation? It is because the political system of Hong Kong is an executive-led system. With the introduction of the political accountability system by Mr TUNG Chee-hwa, the first Chief Executive, the system has even become a Chief Executive-led system, and we have to stay vigilant at all times about the power structure of this system. LEUNG Chun-ying has the power to appoint Members of the Executive Council, 500 LEGISLATIVE COUNCIL ― 10 November 2016

Secretaries of Departments, Directors of Bureaux, a large number of members in public institutions (including the Town Planning Board and the Advisory Council on the Environment which I have been very concerned over the years), members of the university governing councils, Chairman of the Airport Authority Hong Kong, etc. We can see clearly that LEUNG Chun-ying is a Chief Executive who tends to abuse power. In terms of the system, when ICAC, headed by Commissioner Simon PEH who is a trusted aide of LEUNG Chun-ying and appointed by him, is responsible for investigating whether LEUNG Chun-ying has criminal liability in the case, this is extremely unhealthy and irrational. Before we have any means to select the Chief Executive by universal suffrage and reform this political system featuring extreme centralization of authority so as to render ICAC and ICAC Commissioner more independent, Hong Kong has no other alternatives but to investigate and clarify the incident through invoking the Legislative Council (Powers and Privileges) Ordinance by the Legislative Council, thus also giving an account to the public who have the right to access information.

Therefore, I support Mr LAM Cheuk-ting's motion. I so submit.

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

MR MARTIN LIAO (in Cantonese): Deputy President, I am really very surprised after listening to Mr LAM's speech on this motion today. How can Mr LAM think that what is said in his motion can be regarded as grounds for asking this Council to consider the invocation of the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to set up a select committee for the purpose of inquiry? The "doubts" he has raised are at best pure speculations only. They are not supported by any adequate and concrete information. We can even say that there is no prima facie evidence at all.

Actually, the doubts raised by Mr LAM are basically very simple. He has openly mentioned time and again in his articles that he thinks that former Acting Head of Operations Ms Rebecca LI "was removed all of a sudden"―these are his exact words. And, since the Chief Executive was informed of the cancellation of her acting appointment beforehand and he did not indicate any disagreement, it can be construed as a matter of objective effect that the Chief Executive actually LEGISLATIVE COUNCIL ― 10 November 2016 501 gave tacit consent to her demotion. Mr LAM hence suspects that the cancellation of the acting appointment was no ordinary personnel change but might, as said in the motion, relate to some sort of intervention in the investigation undertaken by the Independent Commission Against Corruption ("ICAC"), and the Chief Executive might have "participated in making the decision to cancel the acting appointment" and there might be "conflict of interest or illegal act on the part of Mr LEUNG Chun-ying".

The critical point here is whether Mr LAM's suspicion and logic are tenable. Many such speculations and speeches of Members all seek to escalate the incident without presenting any facts. Let us first look at some facts that are already known. First of all, in his reply letter to non-establishment Members on 4 October, ICAC Commissioner Simon PEH already explained quite clearly that when former Head of Operations Mr Ryan WONG left the post upon completion of agreement last year, he deemed that there was no candidate suitable for immediate promotion and also no one fit for "acting with a view to promotion". Therefore, the ICAC Commissioner invited Ms LI to act as Head of Operations under the arrangement of "acting for administrative convenience". The adoption of this arrangement means that the officer concerned is less satisfactory in terms of competence and performance but can still …

(Mr LEUNG Kwok-hung stood up)

DEPUTY PRESIDENT (in Cantonese): Mr LIAO, please pause for a while. Mr LEUNG Kwok-hung, what is you point?

MR LEUNG KWOK-HUNG (in Cantonese): As provided for under the Basic Law, a Legislative Council meeting shall be attended by one half of all the Members. I think the number of Members present here now is far from …

DEPUTY PRESIDENT (in Cantonese): Are you requesting a headcount?

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MR LEUNG KWOK-HUNG (in Cantonese): You have ruled that a reason must first be given before a request for headcount can be made.

DEPUTY PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(While the summoning bell was ringing, THE PRESIDENT resumed the Chair)

(After the summoning bell had been rung, a number of Members returned to the Chamber)

PRESIDENT (in Cantonese): Mr Martin LIAO, please continue with your speech.

MR MARTIN LIAO (in Cantonese): President, as I have said just now, when Mr Ryan WONG left, the ICAC Commissioner found no candidate suitable for immediate promotion or "acting with a view to promotion". Therefore, he invited Ms LI to act as Head of Operations under the arrangement of "acting for administrative convenience". The adoption of this arrangement means that in terms of competence and performance, an officer is not yet able to meet the standards required for immediate promotion to a post, but can still be offered an acting appointment for "administrative convenience", so as to meet departmental operation needs and give the officer more time and opportunities for exposure and tests in the post. There is no implication of promotion upon completion of the acting appointment. In the case of Ms LI, the ICAC Commissioner already informed her of this point before she started acting.

Moreover, according to the ICAC Commissioner, before Ms LI started to act as Head of Operations, he already told her clearly that apart from professional competence in corruption investigation, the post also required other important skills demanded of directorate-equivalent officials in the Government. He also expressly talked about his expectations regarding her work performance and competence. And, during her acting period, he also met with her once a week or LEGISLATIVE COUNCIL ― 10 November 2016 503 sometimes even three to four times a week, in a bid to understand the work progress of the Operations Department and discuss with her various management issues. After almost a year of observation, the ICAC Commissioner came to the conclusion that Ms LI could not pass the test. He then wrote an appraisal report on her performance and arranged for her return to the original post of Director of Investigation.

It can be seen that the cancellation of Ms LI's acting appointment was made in accordance with established rules and procedure on the basis of personnel management reasons. It was not done "all of a sudden" and did not constitute any major doubts involving significant public interest, so there is no reason why we must, as pointed out in the motion, invoke the Ordinance to inquire into the process and reasons. The ICAC Commissioner has also indicated that his decision to cancel Ms LI's acting appointment was based purely on personnel management considerations, having nothing whatsoever to do with any cases under investigations by ICAC or any pressure brought to bear on him. If Mr LAM cannot provide any cogent arguments or evidence, the public will definitely ask: What is the basis of his queries?

As to Mr LAM's allegation that the cancellation of the acting appointment had the tacit consent of the Chief Executive, the ICAC Commissioner has clarified that under the rules of ICAC, the prior approval of the Chief Executive is required only when a promotion or an arrangement of "acting with a view to promotion" involves a post at Point 3 or above of the Directorate Pay Scale. There is no such a requirement for acting appointments "for administrative convenience" as in Ms LI's case. In other words, whether the Chief Executive has any comments or whether he agrees or not is basically irrelevant. It is true that the ICAC Commissioner still informed the Chief Executive of the offer and cancellation of Ms LI's acting appointment, but this is just a practice by convention adopted to keep the Chief Executive posted of the personnel changes in ICAC. But then, on the basis that the Chief Executive expressed no disagreement to the cancellation of Ms LI's acting appointment and assuming that this amounted to his tacit consent, he jumps to the conclusion that the Chief Executive is suspected of intervening in the investigation into the UGL case.

Based on Mr LAM's personal conjecture, we may say that the worst scenario in his mind may be the Chief Executive's suspected attempt to resort to personnel deployment as a means of intervening in ICAC's investigation into the 504 LEGISLATIVE COUNCIL ― 10 November 2016

UGL case. However, Members may as well consider one point. Even if Ms LI accepted yet another posting change and reverted to her original post of Director of Investigation (Private Sector), she could still continue to follow up the investigation. So how can people say that the investigation would be affected? As Mr LAM puts it, Ms LI achieved distinguished merits in performing anti-corruption tasks, and I believe that he is not just referring to the one year in which Ms LI acted as Head of Operations. Then, why should her reversion to the original post produce any effect anyway? Moreover, ICAC is subject to a monitoring mechanism. All corruption investigations must be reported to the Operations Review Committee in accordance with established procedures. If there is any improper handling of investigation on the part of ICAC, it will certainly be held accountable. Such irresponsible conjecture of Mr LAM is only meant to trump up a charge. But then, the community may thus form a negative perception of ICAC, and ICAC staff may even become victims of wrongful accusations. The ICAC Commissioner has already expressed his great regret at this.

In addition, it has been reported that following the resignation of Ms LI, two upper-middle level officers of ICAC also left their posts, and the annual dinner of ICAC was postponed. According to Mr LAM, all these can show the strong dissatisfaction and grave queries in ICAC arising from the departure of Ms LI. Although Mr LAM claims that he has access to internal ICAC sources, this does not mean that he can speak for the people in ICAC. Has it ever occurred to Mr LAM that the people in ICAC may think totally differently? They may actually fear that the public may wrongly relate the Rebecca LI incident to the ICAC investigations, thus causing an erosion of social confidence in ICAC. Mr Ricky YAU, who succeeded Ms LI as Acting Head of Operations after she had left the post, applied to resolve his agreement with ICAC but withdrew his application on the same day. His act stirred up a wave of media speculations. But in a recent interview, he already disclosed his thoughts and feelings back then. He frankly pointed out that Ms LI's resignation had led to many commentaries and speculations on the connection of this incident with ICAC's investigation, and as a result, the ability of her successor (that is him) to oversee the investigation work of the Operations Department impartially and justly had come under doubt. As recorded in the interview report, he said very clearly that the negative perception was based purely on speculations and not backed up by any facts. But since he was worried that his taking over the post would only give rise to more public concerns, he offered to resolve his LEGISLATIVE COUNCIL ― 10 November 2016 505 agreement. But then, his colleagues in the Operations Department feared that his departure would further shake public confidence in ICAC, so they asked him to stay. Eventually, he chose to stay for the benefit of ICAC.

Owing to the extensive media coverage of Ms LI's departure, many ex-officials of ICAC have reportedly expressed their views on this incident. Earlier on, Mr LAM, as a former Investigator in ICAC, demanded the stepping down of the ICAC Commissioner. However, a former ICAC Commissioner, Mr Bertrand de SPEVILLE, when responding to press enquiries, expressed his clear disagreement to the resignation of Simon PEH. In his view, Simon PEH had done the right thing by refusing to disclose details concerning Rebecca LI's appointment on the grounds of confidentiality, and that the cancellation of an acting appointment was actually very common. Why did Mr LAM think that members of the public should accept his views instead of Mr SPEVILLE's? How is he going to convince the public that his so-called insider information is not a kind of ungrounded speculations of his?

The public may understandably have different views on the incident but personnel management cases often involve various personal privacy issues which should not be made public. Putting such cases under public scrutiny may be against the wills of the parties concerned and is also unfair to them. Moreover, the present prevalence of indiscreet comments on ICAC's personnel management will harm ICAC's prestige to a certain extent. Now, Mr LAM even goes so far as to move a motion in this Council without sufficient evidence, making serious allegations with the aim of invoking the Ordinance for launching an inquiry. This is no different from opening the floodgate, allowing the penetration of partisan politics into ICAC. This is just like unlocking the Pandora's Box. The independence of ICAC will come under severe challenge and the consequences will be beyond imagination.

President, the invocation of the Ordinance for setting up a select committee is a serious matter. This Council should decide to invoke the Ordinance only when there is concrete prima facie evidence or information, and when significant public interest is involved. The Ordinance must not be invoked on the basis of mere speculations.

The allegation in the motion today is very serious, but the stance of pan-democratic Members is that despite the absence of any concrete evidence, the 506 LEGISLATIVE COUNCIL ― 10 November 2016

Ordinance must be invoked to inquire into the incident, because there must be something "fishy"―this word may be a bit vulgar. However, the wider community can only hear speculations but not any major issues of suspicion from Mr LAM's arguments.

President, the Ordinance and the select committees of this Council are never meant to be a tool of suppressing political rivals. They are also not meant to be used as convenient tool by individual Members to satisfy their desire to very their wild guesses.

President, probity is among the most precious core values of Hong Kong. Having spared no efforts in acting impartially to uphold probity in Hong Kong over the years, ICAC enjoys high reputation in the international community. Therefore, both this Council and the general public must cherish and defend it, safeguarding it against any political interference.

According to one Member, ICAC wants to seek help from this Council, hoping that an inquiry into the incident can be conducted. Yet, I have never heard of that, nor have I ever heard of ICAC's seeking of help from the pro-establishment camp. If it really needs help, it can contact pro-establishment Members straight ahead and need not convey to us their message via the speeches delivered by pan-democratic Members. As long as they are willing to speak up, I believe that the pro-establishment camp will be more than willing to listen.

President, this Council is now in a virtual state of paralysis nowadays due to the political motives of some people. If we allow them to conduct an aimless inquiry based on speculations not backed by any basic evidence, if we allow them to politicize and erode this very important pillar of Hong Kong called ICAC at will, society as whole will have to pay a high price. It is such a great pity that while Mr LAM speaks of the need for upholding the fairness and impartiality of ICAC, his act will instead deal a blow to the confidence of the public and even the international community in ICAC. This will damage the long-standing reputation of ICAC. What a regret!

I so submit and oppose the motion.

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IR DR LO WAI-KWOK (in Cantonese): President, originally I do not intend to speak on Mr LAM Cheuk-ting's motion. It is because I think that this motion is based on a false proposition, and we have spent a lot of time on it since yesterday afternoon.

As soon as this session of the Legislative Council kicked off, we have been delayed repeatedly and the order of the legislature is undermined. As to the fact that we have spent too much time discussing this false proposition, actually we are wasting the precious time of the Legislative Council as well as public money. However, after listening to some weird and unreasonable arguments in support of Mr LAM Cheuk-ting's motion, I feel that I have to voice certain sentiments which I can no longer repress. Therefore, even though I have not prepared a speech, I still have to unburden the bitterness of my heart.

The slogan "Hong Kong Our Advantage is ICAC" is indeed true. The significance of the founding of ICAC is not limited to fighting how many tigers and swatting how many flies, but to build a sense of probity and a respect for law and order. For that reason, I consider that these people are contradicting themselves on the issue and I find it laughable when we see them damaging social order and ignoring law and orders in society on various pretexts on the one hand, but keeping on saying in this Council of how they respect the special function of ICAC on the other.

"Be like dad, keep mum" is true. ICAC will keep the confidentiality of its work due to the uniqueness of its work. A friend of mine has been working for ICAC for many years, he has also worked in the Operations Department ("OD"). The work in OD is not as multifarious and interesting as depicted in television dramas. Nevertheless, it is rather dangerous, and he always needs to keep confidentiality. This friend of mine as well as his wife had worked for ICAC. Both of them are now retired. They have never mentioned their work in ICAC in our circle of friends. For that reason, it has affected their social activities over the past decades. In fact, in view of the way they have served the public and they have maintained the integrity throughout their career with ICAC, they really deserve our respect.

We should not invoke the Legislative Council (Powers and Privileges) Ordinance in this Council on various pretexts to intervene with the normal personnel promotion and transfer as well as normal work arrangement of ICAC. There are unreasonable and illogical arguments as far as this motion is concerned, 508 LEGISLATIVE COUNCIL ― 10 November 2016 because personnel promotion and transfer involves very complicate issues and a lot of things should be taken into consideration.

President, I have been working in a private firm for more than 30 years. The management has to deal with various personnel matters, there are countless issues and most of the time they are difficult to deal with. As far as promotion is concerned, we have to consider the abilities of a certain individual, and we also have to take into account of the interaction with the entire institution, thus it is very complicate. Very often, my voluntary service in the public sector also involves personnel matters such as promotion and transfer. As to providing advice to deal with personnel matters, I have a deep feeling that it is much more difficult to deal with these matters in the public sector. Should a person be promoted to take a substantive post after taking an acting appointment? Numerous factors are involved. Perhaps there was a plan at the beginning, but it ended up differently. Perhaps it was a tentative arrangement, and one could not say for sure that if the relevant person who undertook the acting appointment could take up the post eventually. For that reason, does it make anybody wonder why there must be some irregularities? Why should we make such baseless claim as if they have solid proof that someone has intervened and even lay the blame on Mr LEUNG Chun-ying?

Another logical fallacy is to link personnel promotion and transfer matters with the UGL incident. "Be like dad, keep mum", President, if ICAC is really investigating the matter, will we affect the ICAC's investigation if the Legislative Council (Powers and Privileges) Ordinance is invoked for investigating the personnel matters, and then it is linked with the UGL incident? If ICAC has not conducted any investigation, it would be meaningless to make such kind of association, as it is even more ridiculous to do so.

President, someone in this Council insists that we should conduct an investigation even there are doubts but no proofs. President, too many things in this society are dubious but proofless. We can even unduly overplay them as major social interests and that we should investigate although they are dubious but proofless? President, if so, I believe that we cannot deal with the investigations of dubious but proofless matters. Some people also said that was no presupposition as far as the investigation was concerned. Please do not try to spoof, as it was already written in the text of the motion. The presupposition is to lay the blame on the Chief Executive, to link him directly with the UGL incident, and to lay the blame on him for intervening the personnel matters of ICAC. Why should there be no presupposition?

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President, I need not use up my 15 minutes, but I consider that if this Council keeps on burning the time, and Members keep on burning their youth―although I am not young any more―this will do no good to the public, and this will do no good to the forward development of Hong Kong. When we are discussing this motion, I wish to remind Members once again that we should not only uphold the value of probity when we carry out official duties, we should also give our respect for law and order.

With these remarks, President, my colleagues of the Business and Professionals Alliance for Hong Kong and I will not vote for the motion. Thank you.

MR STEVEN HO (in Cantonese): I must first tell Ir Dr LO Wai-kwok one thing. I believe in the four years ahead, he may find that he will rarely want to speak because the Legislative Council will need to deal with many pseudo-propositions.

Earlier on, Mr KWONG Chun-yu asked Chief Secretary for Administration Carrie LAM to explain the meaning of "to be informed" and "to know", and also the difference between the two. I believe Members should know the answer very well, and Mr KWONG has even given us an explanation through his action. Recently, I read a newspaper and found that certain opposition Members had made a huge fuss of the Wang Chau incident. My friends have shown me many newspapers, saying that several years ago, Mr KWONG already knew that 17 000 public housing units would be constructed at Wang Chau. But over the past few months, he has nonetheless told us the otherwise. They wonder why he was able to tell the press in the past that the number would be 17 000, and why he now says he only knows that the number will be 4 000. It is stated in District Council papers that there will be 4 000 units. So, has he raised any questions with the Government? According to him, the Government has not told him. We can see from this that "to be informed" and "to know" are very different to him. Later on, the Chief Secretary for Administration may take her time to answer his query. I must tell Mr KWONG Chun-yu that his "forgetfulness" and "feigned forgetfulness" may be a blessing to him. But they are no blessing to Hong Kong people.

Mr Jeremy TAM talks about the two types of acting appointment mentioned in a letter issued by Simon PEH, Commissioner of the Independent Commission Against Corruption ("ICAC"). The first type is that the officer concerned is awaiting promotion as he is already equipped with the necessary 510 LEGISLATIVE COUNCIL ― 10 November 2016 competencies, and the other is acting for administrative convenience. But as pointed out by Simon PEH in the letter, she was unable to pass the assessment after acting for one year, so she was not offered any promotion. Mr TAM is of the view that this arrangement was contradictory. Having considered his view over and over again, I do not think his argument stands. Civil servants must undergo assessment every year, and those who are incompetent will not get any promotion. Even if she was offered an acting appointment to the position of Head of Operations, she would be denied any promotion and must remain in her original position if she was considered to be unfit for the post. Of course, I am not clear about the grounds for ICAC's decision, and perhaps their grounds are abstract and general. Eventually, all may just be a pointless argument. Even if a select committee is set up, it will still fail to find out the underlying reasons. So, why don't we do something more pragmatic?

Mr LAM Cheuk-ting asks whether the "Rebecca LI incident" is related to the UGL incident. Let me ask Members a question. Many people wonder where Mr LAM Cheuk-ting gets his information. Many Members say that "Be like dad, keep mum". Confidentiality is a core requirement Hong Kong people expect of ICAC. Or else, what if an informant faces retaliation? This is widely recognized by people. ICAC is necessarily in the wrong if any ICAC officer informs Mr LAM Cheuk-ting of this piece of confidential information. In that case, this Council must conduct an inquiry. However, if ICAC holds fast to this principle and has not informed Mr LAM of anything, then he is obviously talking nonsense, just as Mr LAU Kwok-fan has asserted. If an inquiry is to be conducted, it must examine the crux of the matter and those visible and substantiated issues. I cannot accept the invocation of the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") for the purpose of inquiring into the matters raised by Mr LAM Cheuk-ting based on his fabrication―I will not say "his nonsense", lest he may criticize me for being offensive. This is one reason for my opposition.

Even if an inquiry is really conducted, we must still ask ourselves if we are capable of conducting any inquiry. Whenever a motion concerning the Ordinance is discussed, opposition Members will all turn themselves into Sherlock HOLMES and request to conduct an inquiry. Are they capable of doing so? In the previous term of the Legislative Council, certain Members were accused of accepting money from Jimmy LAI, and this was supported by payment slips and receipts. Therefore, the relevant committee convened meetings. I requested to summons Jimmy LAI and Mark SIMON. But they nonetheless raised objection. In that case, how could we conduct the inquiry? LEGISLATIVE COUNCIL ― 10 November 2016 511

IP Kwok-him, a Legislative Council Member at the time, could only cast an opposition vote in his capacity as chairman of the committee, and the final voting result was 4:3. The complaint was ruled out. Now, he dares to take out the report and says that he was not involved in it. How can the Legislative Council possibly command people's trust? Even I have no faith in any select committees set up by the Legislative Council. How come they can still request to conduct an inquiry? They should ask themselves!

Finally, I must talk about how their affiliated political parties rigged the recent Legislative Council election. They ran for the super District Council seats under seven or eight lists and then collectively withdrew from the election. They exhausted all the electoral resources, but they nonetheless announced their withdrawal one day before the election and called upon voters to vote for another candidate. Eventually, the Democratic Party won two seats. Now, we can see how an anti-rigging advocate rigged the election of Legislative Council seats. Why don't they ask for an inquiry into this serious corruption case?

Certain Members say that as he denies any involvement in this matter, he should agree to conduct an inquiry as a means of proving his innocence. Following this logic, I think those Members who was accused of receiving money from Jimmy LAI (such as "Long Hair") should turn themselves in and ask for an inquiry into themselves, so as to prove their innocence. They should be cooperative. So, they should not hold double standards and think that they can obtain more votes by chanting the slogan "Down with CY", just as Mr CHAN Han-pan has said.

I do not want to see so many pseudo-propositions in the Government, the Hong Kong community and even the Legislative Council. It will be a sheer waste of time for the legislature to deal with all such pseudo-propositions. It is already November now, and it is not until today that we can formally hold the first meeting. I have just received a WhatsApp message from a friend, and he asks me these questions: If a select committee is set up, will those Members be qualified for its membership? Which Members will join the select committee and conduct the inquiry? And, will the select committee become void if certain members are disqualified from office as Legislative Council Members after it is formed? They are Members of the Legislative Council, but they are even unable to handle their own matters properly. Let us spend more time on discussing livelihood issues and doing good deeds for people before seeking to adjust or understand the ICAC structure! We must indeed find out the snitchers and who puts words into ICAC's mouth by taking advantage of the present moment when 512 LEGISLATIVE COUNCIL ― 10 November 2016

ICAC must remain silent and refrain from offering any explanation. Let us discuss all those matters on the committee platform! I think this is very reasonable.

Finally, I want to give a piece of advice to opposition Members. While it is not necessary for us to speak on the basis of facts in the Legislative Council, I wish to say that they should not go so far as to hinder people's well-being and Hong Kong's development. We have to deal with two motions afterwards. One motion is about the Mandatory Provident Fund Scheme, and the other is about the Chinese History subject. Recently, some people blatantly propagated the independence of Hong Kong, and this is precisely due to their shallow historical foundation and lack of understanding about Hong Kong's history. Much to our anger, they use "Shina" to describe our country. How can they claim themselves to be Hong Kong people? I wonder where their parents came from. All these matters are an important cornerstone of Hong Kong's development in the time ahead. But instead of discussing these matters, we are nonetheless discussing this motion. The worst thing is that at the last meeting, certain Members already rose to their feet in support of a petition on inquiring into the UGL incident. That select committee is actually similar in nature, and they should refer any related matters to it instead of wasting the time of our Council meetings.

With these remarks, President, I oppose the motion.

MR WONG TING-KWONG (in Cantonese): President, since the 1970s, there have been two slogans for the Independent Commission Against Corruption ("ICAC") which have deeply impressed all of us―"Hong Kong Our Advantage is ICAC" and "Be like dad, keep mum".

However, the situation now is very absurd. Someone who has once worked with ICAC is constantly claiming that he has inside information. He discloses ICAC's internal information and names the cases that are being investigated by ICAC, thus giving an impression that he is very authoritative. Regarding this motion which we are debating today, on the surface, it is asking for the invocation of the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") to establish a select committee to inquire into the Rebecca LI incident. In fact, it is asking for an inquiry into LEUNG Chun-ying's acceptance of $50 million from UGL. The UGL incident has dragged on for four years. LEGISLATIVE COUNCIL ― 10 November 2016 513

LEUNG Chun-ying has over and again explained the details surrounding the payment and the Government's declaration system.

Now, many people with ulterior motive are discussing the payment. They allege that bribery is involved and both parties have made a secret agreement. Regarding the £4 million, it represented the amount LEUNG Chun-ying received for selling his stake at DTZ Holding Inc.. It was stated clearly in the sale contract that the vendor could not poach employees or set up a new business to compete for business. This is a conventional practice in the business world. Furthermore, there is no lifetime enemies. If required, assistance would be offered in future. However, LEUNG Chun-ying included a line in the contract, providing that he would do so only if public interests were not compromised. Actually, after the signing of that contract, LEUNG Chun-ying has not done anything for the buyer. After all, on the surface, they are asking for an inquiry into the Rebecca LI incident but in fact, they are targeting LEUNG Chun-ying and attacking the SAR Government. We must expose this conspiracy.

I have been sitting in the Chamber listening to the speeches of many Members. I find a lot of them baffling. Mr IP Kin-yuen said that Simon PEH met a number of senior ICAC officers before and after the resignation of Rebecca LI. Do we not say "Be like dad, keep mum"? How did Mr IP Kin-yuen learn that Simon PEH met with senior officers? Who divulged to him? He also said that Simon PEH expressed clearly that Rebecca LI's resignation has nothing to do with the UGL investigation. How would ICAC disclose whether there is an investigation ongoing and what case it is probing into? I have this question for Mr LAM. When he was working with ICAC, would he disclose what cases ICAC was investigating? So, is this a case of spreading falsehoods or spilling the beans?

Members have employed some tactics in the course of this motion debate. Given the protection under the Ordinance, Members are immune from prosecution for their comments made in the Chamber. Of course, the Rules of Procedure stipulates that Members shall not use offensive and insulting language against other Members but some Members simply ignore the rule. Is it because this is their first term as a Member of the Legislative Council? Members will have intense debates in the Chamber. Mr WONG Yuk-man and Mr Albert CHAN are past examples. Yet, even they would not frequently allege that other Members used offensive language. They would not waste time to request the President to check the video recordings and make a ruling. These Members keep resorting to this tactic. They are actually wasting public funds. At the 514 LEGISLATIVE COUNCIL ― 10 November 2016 start of the meeting yesterday, Mr James TO asked for a headcount. Then, Members, including Mr LEUNG Kwok-hung, left the Chamber after requesting a headcount. Outside the Chamber, they told the reporters that the meeting should not be held up. However, there are now only two Members in the Chamber, one of whom is the mover of the motion.

President, some Members intend to make use of the Legislative Council's function by way of this motion to achieve some political purposes. I can hardly agree with them. DAB and I oppose this motion. Thank you, President.

MR ABRAHAM SHEK: President, I speak to express my objection to this motion.

I cannot see the reason nor the need for this Council to exercise the powers conferred by the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") for the purpose of inquiring into the matter on the personnel reshuffle and promotion within the Independent Commission Against Corruption ("ICAC"). Public comments and ICAC's response may differ, but the cancellation of the acting appointment of Ms Rebecca LI lies clearly in the domain of human resources management of ICAC, which I believe is best to be handled by the institution itself. Moreover, as the executive body charged with fighting corruption, ICAC should operate with a high degree of independence and be free from external intervention and interference.

I do not wish to see our ICAC, which is committed to fighting corruption through effective law enforcement and helps to keep Hong Kong fair, just, stable and prosperous, being hampered or even destroyed by conspiracies and ungrounded accusations. These accusers, with their hidden agendas, have the simple intention of destroying not only ICAC's reputation, but also Hong Kong's integrity. Recently, many of our fine traditions, established mechanisms and regulations have been abused or distorted, as evidenced by the recent affairs in the Legislative Council. As the cornerstone of our success, ICAC should be respected and protected. And most importantly, its independence should be cherished and safeguarded, especially in times when our society is full of confrontation and disparity. We should remain vigilant of the unscrupulous attempts of those who aim to disrupt and even destroy our society.

Recently, ICAC Commissioner, Mr Simon PEH, wrote to 23 non-establishment Members of this Council on 16 October, reiterating that the LEGISLATIVE COUNCIL ― 10 November 2016 515 decision to cancel Ms LI's acting appointment was based on comprehensive observation and performance assessment, who are we to doubt those assessments? According to the Commissioner, the matter under discussion was purely a human resources management decision and was not related to any ICAC's investigation that might involve external pressure. As the Commissioner has already explained repeatedly the basis for that decision, I cannot understand the persistent call for a further investigation.

Indeed, a select committee set up in this Council can summon and investigate individuals under the powers conferred by the Ordinance. It can also require the individuals concerned to testify and produce records and documents for investigation. Given its powers and privileges, the Ordinance is the "imperial sword" of this Council. This does not mean that we should use this "sword" lightly or casually as now being suggested. Only matters that involve significant public interest should be investigated, using the powers and privileges conferred by the Ordinance.

In the 19 years since the handover, this Council has set up a total of six select committees under the Ordinance to investigate social issues, such as the circumstances leading to the problems surrounding the commencement of operations of the new Hong Kong International Airport at Chek Lap Kok; the Yuen Chau Kok short piling case; the handling of the SARS outbreak by the Government and the Hospital Authority; the Lehman Brothers-related Minibonds and in 2012, C Y LEUNG's involvement in the West Kowloon Cultural District design competition. All these cases have a significant impact on our society and the related investigations were supported by the majority in this Council, as Members agreed that we needed to investigate to ensure future improvements.

For example, after the short piling case, the Government made comprehensive improvements in monitoring the construction quality of public housing, the procurement of construction material and the culture of the construction industry. I firmly believe that we should learn from these cases and promote improvement by studying the investigation results, instead of using these investigations as a means to discredit and jeopardize the authority of the SAR Government or any of its officers. I believe that investigations conducted under the powers conferred by the Ordinance should be aimed at finding the facts and seeking improvements for the future. Otherwise, investigations conducted to further hidden political agendas would only harm Hong Kong's well-established image as a clean and corruption free society.

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President, during the last few sessions, Members have repeatedly moved similar motions, trying to set up various select committees under the Ordinance. Instead of using the Ordinance for the purpose of conducting a thorough investigation, they seek to use it as a means of staging their political conflicts and confrontations, and this is something that we have to fight against. In fact, some of these cases are not even related to our institutions but merely represent differences in views based on unsubstantiated allegations. If these conflicts continue, our society will probably be wasted in unconstructive quarrels.

President, the current legislative session has just begun but this is definitely not a good start. After all these disturbances that we have seen over the last few weeks, I believe our citizens would want us to bring this Council back to the right track, to the normal working of this Council so that we may exercise the powers and functions given to us under Article 73 of the Basic Law. Furthermore, we would then be able to focus on policies that promote economic development and improve the livelihood of local citizens. It is apparent that we are tired of all these endless constitutional conflicts. As you may know, international society and overseas investors are expressing their concerns over Hong Kong's policy stability. In light of severe global competition, internal conflict would only jeopardize our economy and our future. I sincerely hope that our colleagues, irrespective of where they come from, could face up to such adverse development and focus on the overall interest of Hong Kong.

Thank you.

MR LUK CHUNG-HUNG (in Cantonese): President, I have waited for two days. I tried hard to listen to the views delivered by my colleagues, whether they are supportive of the motion. I was listening on the one hand, and I was anxious on the other. Why should I be so anxious? The Hong Kong Federation of Trade Unions ("FTU") will have a motion debate about abolishing the Mandatory Provident Fund offsetting mechanism, which is an important livelihood issue. However, we have spent almost two half days, that is, more than one day, to discuss and debate on the motion moved by Mr LAM Cheuk-ting. I cannot say that the debate is meaningless, because it is very important to defend ICAC―the cornerstone of our success. Nevertheless, the justifications delivered by Members supporting this motion are far too weak. First, after listening for a long time, not even a slightest news about it is leaked. Has ICAC really opened a file concerning UGL and LEUNG Chun-ying? Has the case been established? There is no news at all.

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Second, was Ms Rebecca LI really in charge of the investigation of the UGL case? That again, no information. That makes the incident seem to be a false proposition as some Members suggested. Okay, if we really invoke the Legislative Council (Powers and Privileges) Ordinance to investigate the matter, what outcome should we get? Is the Legislative Council an appropriate platform? At least, there would be three possibilities: The first possibility is …

(Mr LEUNG Kwok-hung stood up)

PRESIDENT (in Cantonese): Mr LEUNG Kwok-hung, what is your point?

MR LEUNG KWOK-HUNG (in Cantonese): President, a point of order. Under the Basic Law, the quorum for the meeting of the Legislative Council shall be not less than one half of all its Members. I consider that far less than one half of all the Members are present. I request the counting of the quorum.

PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(After the summoning bell had been rung, a number of Members returned to the Chamber)

PRESIDENT (in Cantonese): Mr LUK Chung-hung, please continue with your speech.

MR LUK CHUNG-HUNG (in Cantonese): President, just now I was talking about baseless claims, and there were no gossips at all. It seems that Members who support the motion could not give the most fundamental proof or to illustrate the reasonable doubt. For that reason, how can we have sufficient proofs to string together these unrelated cases in order to support the call for setting up a select committee to investigate? Even if we proceed with the investigation, what outcomes can we get?

Of course, we attach great importance to the important function of the Legislative Council in monitoring the Government and the Chief Executive. But if a select committee is set up, I can surmise the following situations. First, it 518 LEGISLATIVE COUNCIL ― 10 November 2016 may prove that ICAC has not opened a file for UGL, thus it can best illustrate that it is a false proposition. Second, we may find that ICAC has opened a file for UGL, and this will affect the progress of its investigation in the UGL case, because that will undermine the confidentiality of the investigation mechanism, and it will even affect the findings of the investigation. Have we even thought of that?

Third, the most likely scenario is that nothing could be found. Because all of us know that the Legislative Council has already reduced to a platform for the manifestation of political stance. No matter what proof public officers have provided, nothing can be clarified eventually as my colleagues will consider that you are questionable on the basis of some political stand or deep-rooted prejudices. For that reason, I do not think the setting up a select committee is that meaningful at all. First, it is a matter of false proposition; second, it has no effect; third, as I said just now, why can I not suppress my thoughts and why should I speak up? Because I have been waiting for four weeks since the commencement of the oath incident/saga to the motion which we have discussed for two days. The next motion is moved by Mr WONG Kwok-kin on "Abolishing the Mandatory Provident Fund offsetting mechanism". We hope that we can commence the discussion of that as soon as possible.

I oppose to Mr LAM Cheuk-ting's motion. Thank you, President.

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

MS ALICE MAK (in Cantonese): President, my speech will be brief. I declare that I am a member of the ICAC Complaints Committee. But I do not think I have any direct pecuniary interest. So, I will take part in the voting later on and oppose this motion.

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

MR JIMMY NG (in Cantonese): I would also like to declare that I am a member of the Hong Kong Business Ethics Development Advisory Committee of the Independent Commission Against Corruption ("ICAC") as well, but there is no pecuniary interest involved, so I will vote on the motion.

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MR LEUNG KWOK-HUNG (in Cantonese): President, "Mr HO Kwok-hing" is not present at this moment. I heard Mr Steven HO pointed out in his speech just now that he was a busy man, and that investigating the matter related to ICAC by exercising the powers conferred under the Legislative Council (Powers and Privileges) Ordinance ("the Ordinance") as proposed today would waste his time. The situation is easy indeed. Any educated person will know that debating on motions not intending to have legislative effect in this Council is just next to nothing. If former Member Mr WONG Kwok-hing's inheritor, "Mr HO Kwok-hing", or Mr Steven HO, considers that this is time-wasting, he is in fact lying blatantly.

Everyone knows that moving a motion not intended to have legislative effect in this Council will not achieve anything, but the motion under discussion is not the case, as it is related to voting on whether the Council is to invoke the Ordinance for an inquiry into the matter concerning ICAC. Of course, the issue is related to Chief Executive LEUNG Chun-ying, nicknamed "689". Therefore, it is a matter of utmost importance for the legislature to monitor ICAC, or ICAC's conscientious fulfilment of its duty to investigate the alleged receipt of benefits by the Chief Executive. If the upcoming voting is not about a matter of utmost importance, I believe the Council meeting today would have been adjourned already, as pro-establishment Members are not really too disciplined in carrying out orders, as far as I know.

Let us return to the subject. First, I have to respond to a point made by Mr Abraham SHEK. He said that if we were to invoke the Ordinance and investigate allegations of the Chief Executive's involvement in corruption and ICAC's failure to dutifully investigate him, then there would be a doubt, in which we implied that he did indicate, explicitly or implicitly, that he should be exempted from being investigated by ICAC. For example, certain royalists had to leave the Council after losing the election. However, regarding the expressions made in 2008 by Mr KAM Nai-wai, a former Member from the Democratic Party, who was alleged to have made improper advances to an assistant, why did they insist on conducting an investigation without taking into account the fact that the allegation was merely found on hearsay? We considered an investigation not necessary at that time, as the witness was unwilling to testify, and the investigation would achieve nothing. But they insisted on an investigation. I want to ask how much time was wasted on that? Mr Jeffrey LAM is an experienced Member too, and Dr Priscilla LEUNG cannot convey her meaning property when she speaks. They should clearly illustrate 520 LEGISLATIVE COUNCIL ― 10 November 2016 these past events. When it came to an individual legislator, they insisted on convening a hearing to inquire into the issue in spite of an absence of concrete evidence, and that the person concerned stated plainly her wish to leave the issue behind … Dr Priscilla LEUNG stands up suddenly … is she going to condemn me? No, she is leaving the Chamber in protest, as she always does when come under criticism during a meeting.

Having abused their official power, they should have felt ashamed. Ms Starry LEE was a junior Member of the Council at that moment. Why did they want an investigation then? It is because Mr KAM Nai-wai was a member of the Democratic Party, which was a sin punishable by death. And, they also want to bring Mr LAM Cheuk-ting on a public trial today for leaking classified information. Buddy, be careful, someone is going to sue you. So, what kind of phenomenon is this?

My perspective of the issue is that I joined two investigations conducted under the Ordinance. The first one was about the Lehman Brothers incident which had far-reaching consequences, and the second was related to the Hunghom Peninsula case which also had lasting impact. However, in comparison with the alleged corruption concerning the Chief Executive with supreme power and a transcendent status, in which it is claimed that he has asked about the progress of investigation, what kind of incident has a bigger impact than this one? Chief Secretary, of course you were not a member of the relevant committees, but you can find out if the Chief Executive is under investigation simply by asking ICAC in writing. According to what you have just said, ICAC has publicly stated that the Chief Executive is not under investigation. However, you may officially mention in your letter by pointing out that Members considered your remarks incomplete, and that you expect ICAC to help and let you know if an investigation targeting the Chief Executive has been conducted before, though ICAC has openly claimed otherwise. Has ICAC initiated any investigations? You can easily ask this question, and the Chief Executive will not object you doing so. Honestly speaking, under the withdrawal mechanism, the Chief Secretary should well have replaced the Chief Executive once accusations against him emerged. He would not be able to say anything about this. The point is that Simon PEH once said that he did ask for the Chief Executive's instruction on the incident concerning Ms Rebecca LI, and that the Chief Executive declined giving any instruction. What does this mean? This means that the incident has truly happened.

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One more thing, Chief Secretary, has the Chief Executive met Simon PEH privately? Has he mentioned about the issue on any non-public occasions? I do not know. This is simple indeed, and no document or record is required to prove this, as we have already raised every question necessary.

Third, concerning the incident related to Ms Rebecca LI mentioned just now, ICAC should have some sort of internal documents and records to prove that they arranged the acting appointment only for administrative convenience. They only need to bring such evidence to us, nothing else. The doubts will be dispelled if it can show that they did it really for administrative convenience, yet this is not the case now. With such an unusual arrangement, it is just natural that the people have their queries. If the authorities can duly explain the whole thing, they would not have to be entangled with us, in case they consider themselves being entangled.

President, ICAC will not disclose if an individual is under investigation. However, due to the Chief Executive's superior status and overwhelming authority, they should make such disclosure if he is the one in question. This is a major incident if he truly happened to have a "golden handshake" as alleged presently. I mean "evil handshake". In fact, LEUNG Chun-ying has never given a clear answer, and the "golden handshake" as mentioned by him … Mr WONG Ting-kwong, is it what "golden handshake" means? "Golden handshake" means an employee's receipt of a sum of money when he leaves an institution, and in return, the employee will refrain from joining another institution, where there is conflict of interests, for his personal gain. It does not mean that he received the payment because he would be able to exercise his power as the Chief Executive and exert influence on policy formulation after the transaction. As a matter of fact, he might not be able to become the next Chief Executive at that time.

Moreover, with respect to the agreement concerning UGL Limited, he was not the boss of DTZ Holding Inc., and he made recommendations which harmed the company's income. To resolve the people's doubt, he has to explain why he made such an arrangement, which would only be made by someone stupid or villainous, right? The reason is simple, yet all of them decide not to respond. The argument from us is simple. The episode is over as long as the person or the authorities concerned can answer all the queries. However, they have not done so. Does the Chief Secretary know if LEUNG Chun-ying has been investigated? It is rumoured that the acting arrangement of Ms Rebecca LI 522 LEGISLATIVE COUNCIL ― 10 November 2016 became something done for administrative convenience as she pursued the investigation into the UGL incident, even risked stepping on a landmine. Is this true?

It was even more ridiculous that, after resuming the previous post, she was effectively downgraded to a position in which she did not have the authority to investigate LEUNG Chun-ying's case. She was responsible for investigating commercial cases instead, but not cases about the Government. This is an appropriate degradation of rank, right? The lies are presented behind the rhetoric, in which resuming the past position practically means investigating other cases. Why is that so? As ICAC considers her performance up to standard, but lacking leadership skills, then why did they make such an absurd arrangement to redeploy her to an unrelated department where she was assigned to inquire into commercial cases? Will this not just make her situation even more difficult? What is Simon PEH doing after all? Is this not unusual? Over the years, ICAC organizes its annual dinners in a festive atmosphere, yet this year there is no celebration owing to the dismay among its staff, right? If Timothy TONG were to join the annual dinner, he would surely get drunk.

The Chief Executive is impartial, they said. If so, he should explain unequivocally if he has been investigated, if he has refused to disclose the records, if he has rejected to reply whether he has exercised his privileges, or if he has told his lawyers that the accusations concerning sections 3 and 8 of the Prevention of Bribery Ordinance do not apply to him. Has he replied like this? Hypocritical rhetoric is useless in this respect. When we consider that an investigation is necessary, many pro-establishment Members said that … as a matter of fact, investigations conducted under the Ordinance do not necessarily span five years. They may be completed in two months. It is because, if he can answer all the queries and clear up all the doubts, the report in the end may state that there is a lack of evidence against the Chief Executive, and Mr LAM Cheuk-ting will then have to apologize, as it turns out that the Chief Executive is whiter than white. Things can also turn out this way, right?

Once I scolded an unscrupulous official called AU Choi-kai. We invited him to a Panel meeting. So, Members please pay heed to the fact that we raised our queries through a Panel that time, alright? We asked if he had examined whether LEUNG Chun-ying had properly dealt with the unauthorized building works. AU Choi-kai replied that they normally would not respond to individual cases. Therefore, I accused him as being unscrupulous. I pointed out that he LEGISLATIVE COUNCIL ― 10 November 2016 523 was invited to the meeting because he was required to update on the issue concerning the Chief Executive, yet he claimed that no reply would usually be given regarding individual cases. I then pointed out that I would not investigate LEUNG Chun-ying as a citizen, but I would investigate Chief Executive LEUNG Chun-ying, especially after he lied in public that he did not erect any unauthorized building works, and he even gained the position of the Chief Executive because of this. That said, his scheme was exposed finally. This is what we get if we are to investigate under a Panel! There was an official called AU Choi-kai, and I did not bother to know if he was a Secretary or not. He said, "Mr LEUNG, I will not answer your question." Paul CHAN even furthered such evil deeds, claiming that he would not offer any response. So what? If the Ordinance was invoked then, was he able to decline answering our questions? I would even be able to demand him presenting the documents, right? Did we not try to investigate the issue by our own means? All we got was his refusal to offer any information, in which he even asked the Chairman to expel me from the meeting room by reason of my overly detailed queries.

Chief Secretary for Administration Carrie LAM, have you heard of such logic? I repeat: the one we target is not LEUNG Chun-ying the citizen, but LEUNG Chun-ying the Chief Executive, who is the most important figure in the territory; otherwise, XI Jinping would not have to send a small group of staff to station in the Liaison Office, as only such a group can investigate ZHANG Xiaoming. Do Members consider that XI Jingping has done something unnecessary? Do you consider him acting recklessly? No. There are open procedures to relieve public concern. Since LEUNG Chun-ying has recruited Simon PEH under him, all of his political rivals have been luckless, in which Donald TSANG was prosecuted, and a further charge was brought against him; LEW Mon-hung was alleged to have committed election fraud, and was jailed as a result; I am the third target, to be put on trial for misconduct in public office. Is this fair at all? If I have to be brought to court, he will have to face a trial too.

Second, the Democratic Alliance for the Betterment and Progress of Hong Kong still considers it alright that CHAN Kam-lam failed to produce relevant records and receipts for the HK$3 million or so involved in the Hong Kong Dragon and Lion Festival. Why is this the case? It is because the Operations Review Committee, a committee in command of whether to initiate prosecution, is chaired by Ms Maria TAM. However, her own integrity is questionable. In 1992, she resigned after failing to declare her status as members of four councils spontaneously, and was even involved in alleged intervention of the operation of 524 LEGISLATIVE COUNCIL ― 10 November 2016

Television Broadcast Limited. Today, he appointed her to administer issues of prosecution. She who lacks integrity is assigned to check my integrity. This is how gate keeping roles are assigned nowadays.

President, the issue we want to investigate is simple. We merely wish to inquire if LEUNG Chun-ying is subject to investigation. Has he refused to cooperate after he has been put under investigation? After refusing to cooperate, has he told anyone that no more such investigation should go on? In fact, according to the unreasonable ordinances we inherited from the British Empire, the Commissioner, subject to the orders and control of the Chief Executive, shall be responsible for the direction and administration of ICAC. This means that he is entitled to have a hand in this. We are simply asking about this. An investigation conducted under the Ordinance may indeed end after merely three meetings. It is done as long as they can provide all necessary records to prove that everything is fine.

My fellow pro-establishment Members, it is lethal to take part in the plot too eagerly. When Sing Pao reveals their entire network every day with such vivid and splendid remarks, LEUNG Chun-ying acts as if he does not notice this, and opts to sue Apple Daily instead. What is going on indeed? Yet you people are acting like accomplices.

President, now I feel that a quorum is not present. Please summon them back.

PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(After the summoning bell had been rung, a number of Members returned to the Chamber)

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): If not, Chief Secretary for Administration, please speak.

LEGISLATIVE COUNCIL ― 10 November 2016 525

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): President, although the first meeting of the Sixth Legislative Council has been successfully convened these two days, there are still some hiccups and I have been listening attentively to the speeches made by Members. I notice that some remarks made in my opening speech yesterday have aroused the interests of a number of Members and the media, so I am happy to make further elaboration here.

But before making further elaboration, I must first respond to Mr IP Kin-yuen's remarks; he seems to comment on my attitude of deliberation in this Council. If I remember correctly, according to Mr IP, the Chief Secretary should not choose between defending the Chief Executive and telling the facts when she spoke in this Council. I have strong views on such a remark. In fact, for years, when speaking in the Legislative Council, I have adopted the attitude of "presenting the facts and speaking with reason". I say what should be said and I will not choose to remain silent for fear of offending Members or attracting Members' criticisms. My style of deliberation over the years is known to all.

In order to enable Members to have a better understanding of what I said in my opening remarks yesterday as I have just mentioned, I would like to provide some background information first. Article 57 of the Basic Law provides that the Independent Commission Against Corruption ("ICAC") shall function independently and be accountable to the Chief Executive. Under section 5(1) of the Independent Commission Against Corruption Ordinance, the Commissioner of ICAC ("Commissioner"), subject to the orders and control of the Chief Executive, shall be responsible for the direction and administration of ICAC. Section 5(2) of the same Ordinance provides that the Commissioner shall not be subject to the direction or control of any person other than the Chief Executive.

As the Chief Secretary, I have abided by the above provisions. For more than four years within my term of office, I have never participated in the regular meetings between the Commissioner and the Chief Executive, nor have I met with the Commissioner for official business or in private; I certainly have not been involved or intervened in all operations of ICAC, including its investigations.

I was astonished to hear what Mr LEUNG Kwok-hung said just now. If I have not mistaken him, he said that this matter could be handled easily, the Chief Secretary could simply write a letter to the Commissioner, asking him whether the incident involving the Chief Executive and UGL was under investigation. 526 LEGISLATIVE COUNCIL ― 10 November 2016

Having been served as a Member of the Legislative Council for many years, Mr LEUNG Kwok-hung is deliberately breaking the law or instigating me to break the law. Under section 30(1) of the Prevention of Bribery Ordinance, no person may disclose without lawful authority or reasonable excuse the identity of the person who is suspected to have committed a bribery offence under the Ordinance or any details of such investigation …

(Mr LEUNG Kwok-hung stood up, indicating his intention to raise a point of order)

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

MR LEUNG KWOK-HUNG (in Cantonese): President, the Chief Secretary has mentioned my name and I have to respond. She only needs to make a reasonable excuse; she definitely has a reasonable excuse because the Chief Executive …

PRESIDENT (in Cantonese): Mr LEUNG Kwok-hung, please sit down. This is not the time for you to speak.

MR LEUNG KWOK-HUNG (in Cantonese): She cannot make a slanderous accusation. The Chief Secretary should provide a reasonable excuse.

PRESIDENT (in Cantonese): Mr LEUNG, could you then make a slanderous accusation? Please sit down.

Chief Secretary, please continue with your speech.

MR LEUNG KWOK-HUNG (in Cantonese): No, I am the one being accused.

LEGISLATIVE COUNCIL ― 10 November 2016 527

CHIEF SECRETARY FOR ADMINISTRATION (in Cantonese): Under Section 30(2) of the Prevention of Bribery Ordinance, under certain circumstances, disclosure of the identity of the subject person or the details of investigation is not unlawful; for example, the subject person has been arrested or a warrant has been issued for the arrest of the subject person; the residence of the subject person has been searched; or the subject person has been required to surrender any travel document, etc. ICAC has strictly complied with the disclosure restrictions under section 30 of the Prevention of Bribery Ordinance and has honoured its pledge of confidentiality to members of the public. In order to protect the reputation of the subject person and maintain confidentiality of investigation, even if the subject person has been arrested, ICAC will not make any public comments on individual cases. Before charges have been brought against the subject person, unless material public interests are involved, ICAC will not disclose or confirm the identity of the subject person.

Having clarified the above provisions and circumstances, some may ask: in this motion debate related to ICAC, since the Chief Secretary seems to know nothing, what is her role when she responded on behalf of the SAR Government? If Members have paid attention, my remarks made yesterday on the Commissioner's decision to cancel Ms Rebecca LI's acting appointment were based on the information provided by the Commissioner. My role is almost like a spokesperson. The reason is that the Chief Executive has only designated, in accordance with Article 62(6) of the Basic Law, the Secretaries of Departments, Directors of Bureaux, Under Secretaries, the Permanent Secretary for the Civil Service and the Law Officers in the Department of Justice to sit in on the meetings of the Legislative Council and to speak on behalf of the Government. The Commissioner is not a designated official. Hence, though there is no supervising/subordinating relationship between the Commissioner and I, and I have not been involved or intervened in the work of ICAC, I still act in accordance with the established practice and respond to issues relating to ICAC, including this motion debate, on behalf of the Government in the Legislative Council in my capacity as the Chief Secretary. A similar practice is that I will speak on behalf of the Government in the Legislative Council on matters relating to the Judiciary.

In my speech yesterday, before citing information provided by the Commissioner, I made two personal remarks in response. First, when a number of non-establishment Members claimed with certainty that the Chief Executive has been investigated by ICAC on the UGL incident, and have even vividly 528 LEGISLATIVE COUNCIL ― 10 November 2016 described the investigation process, if I, as an official responding on behalf of the SAR Government, made no response, I am afraid other people would assume that I tacitly acknowledge the incident or I am aware of the matter. However, the actual situation is that ICAC has acted in accordance with the law and has never disclosed matters relating to investigations. Even though I am the Chief Secretary, given the requirement, I have never been involved or intervened in the work of ICAC.

However, for the sake of prudence, in preparing this debate, I have also reaffirmed that the Chief Secretary has not been informed that an investigation was in progress. Why did I do so? As Members are aware, some colleagues have provided support to my work in the Legislative Council. I am worried and afraid that, in the course of preparing my speech, they might have done something that I was not clear about or not aware of, so that I might mislead Members when I spoke in the Council. Therefore, I said, "I have not been informed". I confirm after verification that no one has informed the Chief Secretary or notified me through the Chief Secretary's Office of the investigation on the UGL incident. Therefore, to respond briefly to interested Members, I "do not know and have not been informed". As understood by Dr Priscilla LEUNG, the meaning of my remark is actually quite simple. In fact, what I mean to say is that I do not know if there is an investigation or not, and that is all. I am not sure if I have made that clear enough. As Mr Andrew WAN has criticized, this saying is tantamount to declaring that "the Pope is Catholic" or, as some Members have said, "what has been said is devoid of substance", but I cannot help doing so. In this Council, some Members have made certain unrestrained remarks, and hence I must state clearly; otherwise, a wrong impression that "I know about the investigation" will be conveyed. If I did not make a clarification yesterday, I believe that it would be reported in the press this morning that the Chief Secretary admitted in this debate that the Chief Executive was being investigated by ICAC on the UGL incident. But as a matter of fact, I do not know if there is an investigation or not.

President, I know that Mr LAM Cheuk-ting who moved the motion will still have a chance to reply after I have spoken; unfortunately, I will not have another chance to respond, so I would like to make some remarks beforehand. I noted that it is reported in the press today that (I quote), "in response to media enquiry, LAM Cheuk-ting said that he did not agree to Carrie LAM's argument but he would only give an official response under the protection of the Legislative Council (Powers and Privileges) Ordinance. He asked the media to pay LEGISLATIVE COUNCIL ― 10 November 2016 529 attention to his speech delivered at the Council meeting today." I urge all Members present to listen carefully to the speech delivered by Mr LAM in a moment.

I have spent some time explaining whether I am aware of any investigation conducted, my purpose is not to use this as a reason for opposing Mr LAM Cheuk-ting's motion, for whether or not an investigation is being conducted has nothing to do with the whole incident.

The SAR Government's objection against Mr LAM Cheuk-ting's proposal to appoint a select committee under the Legislative Council (Powers and Privileges) Ordinance to inquire into Commissioner's cancellation of the acting appointment of Ms Rebecca LI as Head of Operations has nothing to do with an investigation being conducted or not. The Commissioner had explained in detail that this was a personnel management issue and a personal decision of the Commissioner which had nothing to do with ICAC's investigations.

The incident concerning Chief Executive Mr LEUNG Chun-ying and UGL, as mentioned in Mr LAM Cheuk-ting's motion, are even more unrelated. Concerning the second personal response I made yesterday, I pointed out that as the Chief Secretary, I had, in the last Legislative Council, discussed with Members on three occasions about the termination agreement between the Chief Executive and UGL, an Australian enterprise. Certainly, all such discussions were raised by non-establishment Members. As I said at that time, if some Members were still dissatisfied, they could directly propose further discussion. In fact, I noticed that at the meeting of the Legislative Council on 2 November, more than 20 non-establishment Members supported a petition requesting that matters relating to the investigation of the Chief Executive and UGL be referred to a select committee.

I only express my personal views when I speak. In my view, there is no point to discuss this matter again, so as to hype up a personnel management decision of the Commissioner, thereby dealing a blow to ICAC's credibility, slandering the Commissioner's personal integrity, and damaging the good reputation of Hong Kong as the city with the highest level of probity in the world.

Perhaps some people will say, "Chief Secretary, do you have to blow up this incident? How will a debate held in the Legislative Council today affect the clean reputation of Hong Kong?" In recent years, the ranking of Hong Kong's 530 LEGISLATIVE COUNCIL ― 10 November 2016 corruption index has fallen in a number of rating agencies, as mentioned by a few non-establishment Members. This is mainly because we have lower ratings in terms of perception. Hong Kong ranked 18th in the Corruption Perceptions Index published by Transparency International in 2015. But if the actual experience of corruption rather than perception is measured, according to ICAC's annual opinion polls, in the five years between 2011 and 2015, only 1.2% to 1.8% of the respondents indicated that they had experienced corruption in the preceding 12 months covered by the annual opinion poll. Evidently, perception-based rankings cannot illustrate Hong Kong's actual probity situation. If the Legislative Council frequently requests to set up select committees based on untrue allegations against ICAC, this will certainly affect the corruption perception index of Hong Kong and will undermine the overall interests of the Hong Kong economy in the long run.

Some members of the community have expressed concern about intervention in ICAC's investigation work. As reiterated repeatedly by Commissioner Simon PEH and pointed out by a number of pro-establishment Members, all investigations conducted by ICAC must be reported to the Operations Review Committee, which comprises of Legislative Council Members and people from different sectors, professions and backgrounds. Under the close monitoring of the Operations Review Committee, intervention in the investigations of ICAC will not be possible.

Under section 8 of the Independent Commission Against Corruption Ordinance, the Commissioner and officers shall be subject to government regulations and such administrative rules as apply generally to public officers. The cancellation of the acting appointment of Ms LI fully complies with the regulations and guidelines of the Government and ICAC. Simon PEH had discharged the duties of ICAC Commissioner and made the decision independently. However, according to some Members, some ICAC officers opined that Ms LI's acting appointment should not be cancelled owing to her outstanding performance; some officers even resigned because they were dissatisfied with the decision, thus, the Member considered that the Commissioner's decision was unreasonable. Simon PEH had made it clear that as the Head of Operations was a very important post; he must select the most suitable person to take up the post, so as to ensure that under his/her leadership, the Operations Department could operate effectively and cope with the impact of social changes. As Ms LI's boss, Simon PEH had the responsibility to make an independent and comprehensive assessment of Ms LI's performance and potential LEGISLATIVE COUNCIL ― 10 November 2016 531 for taking up higher positions. For the long-term development and interests of ICAC, Simon PEH is willing to make an unpopular decision and put up with the resulting pressure.

In the course of the debate, Mr Dennis KWOK spent most of his speaking time on sections 3 and 8 of the Prevention of Bribery Ordinance, indicating that the application of the two sections should be extended to the Chief Executive. I have repeatedly explained on behalf of the Government in the Legislative Council that as the extension of sections 3 and 8 of the Prevention of Bribery Ordinance to the Chief Executive involves the provisions of the Basic Law on the political system of the Hong Kong Special Administrative Region, as well as the provisions of the Basic Law on the constitutional status of the Chief Executive in the Hong Kong Special Administrative Region, the issue must be examined carefully and a holistic consideration be made on the relevant constitutional, legal and operational issues. What happened in recent months made me realize that we must implement the Basic Law in a comprehensive and accurate manner.

In his speech, Mr Charles Peter MOK said that during the tenure of the current-term Government, the Legislative Council (Powers and Privileges) Ordinance was rarely invoked by the Legislative Council to conduct investigations, and basically the Ordinance has not been invoked. A question thus arises: Is the Chief Executive so influential that all pro-establishment Members oppose invoking the Legislative Council (Powers and Privileges) Ordinance? I think the actual fact is, as Mr Paul TSE has objectively pointed out, this phenomenon indicates that the current-term Government is more willing to actively deal with issues of public concern. In fact, while Mr MOK considered that the Legislative Council (Powers and Privileges) Ordinance was rarely invoked by the Legislative Council, there is one ordinance that the current-term Government has more frequently invoked, and that is, the Commissions of Inquiry Ordinance. Under the Commissions of Inquiry Ordinance, the Chief Executive in Council may appoint an independent commission chaired by a judge. For nearly two decades since the reunification, the Ordinance has only been invoked four times, two of which were invoked by the current-term Government to investigate into the collision of vessels near Lamma Island and the excess lead found in drinking water in public rental housing estates. I therefore call upon all Members to comment on issues more comprehensively and objectively.

532 LEGISLATIVE COUNCIL ― 10 November 2016

President, in today's debate, many Members opposed Mr LAM's motion. They have made a rational analysis of the matter and put forward objective views. Simon PEH's discharge of his powers and responsibilities as the Commissioner to cancel Ms Rebecca LI's acting appointment is purely a personnel management decision, made strictly in accordance with the existing regulations and guidelines of the Government and ICAC. Nobody has interfered with his decision. Simon PEH has repeatedly said that it is entirely groundless to associate this incident with the termination agreement signed between the Chief Executive and UGL. If this incident is exploited to allow the Legislative Council's involvement and intervention in the internal personnel matters of ICAC, the independent operation of ICAC would be seriously undermined. Mr LAM's motion is groundless and unnecessary and it will seriously undermine ICAC's independence and the perception of Hong Kong by rating agencies. I would like to take this opportunity to reiterate that the SAR Government will make all-out efforts to uphold the probity of Hong Kong, which is our core value, and ICAC will fairly and impartially follow up all reports of corruption as it did in the past.

With these remarks, President, I implore Members to oppose Mr LAM Cheuk-ting's motion. Thank you, President.

PRESIDENT (in Cantonese): I now call upon Mr LAM Cheuk-ting to reply. This debate will come to a close after Mr LAM Cheuk-ting has replied.

MR LAM CHEUK-TING (in Cantonese): President, yesterday, Chief Secretary for Administration Carrie LAM cited my remarks in the Chamber that "The Independent Commission Against Corruption ("ICAC") is investigating the Chief Executive and the UGL incident", and she criticized that my remark was speculative and even misleading. Today, the Chief Secretary said that she simply did not know if ICAC had investigated the corruption case involving LEUNG Chun-ying. How then could she criticize that my remark was speculative and misleading? Who has been misleading the public: LAM Cheuk-ting or Carrie LAM?

I would like to tell members of the public, LEUNG Chun-ying is indeed being investigated by ICAC because I am the one who lodged a complaint against him. According to the Independent Commission Against Corruption Ordinance, the complainant will eventually be informed of the result of investigation, but so LEGISLATIVE COUNCIL ― 10 November 2016 533 far, I have not been informed by ICAC that the investigation has been completed. On the contrary, an ICAC senior officer had taken my statements in person; did that mean that an investigation is in progress? Pro-establishment Members have criticized that the premise of this motion is not established. In fact, they have not correctly interpreted what the Chief Secretary said yesterday. She said that she has not been informed that ICAC is conducting an investigation. May I ask pro-establishment colleagues not to make comments hastily; they must be very careful when they interpret the Chief Secretary's remarks; otherwise, they would very easily fall into language style typical of LEUNG Chun-ying's style.

In these two days, pro-establishment Members has made three main points: First, Simon PEH is honest and reliable and he has fully explained that the appointment and removal of officials is a normal practice; second, the reasons given for setting up a select committee are not substantiated and we should not rashly conduct an investigation; third, an investigation will interfere with ICAC.

First, is Simon PEH reliable? In fact, it seems that members of the public and democratic Members live in a planet totally different from that of the pro-establishment camp and the Government. The latter have simply failed to notice the sudden resignation of senior ICAC officials including Rebecca LI, Dale KO and TANG Shuk-nei, and the boycott of ICAC's annual dinner by a large number of ICAC staff, leading to its cancellation. The actions of ICAC officers clearly indicated that the current appointment and removal of officials is definitely not a so-called normal arrangement, and they had cast their votes with their feet.

Second, Simon PEH let off Julie MU, the principal accomplice in the Timothy TONG case. Julie MU was criticized at the hearing of the Public Accounts Committee of the Legislative Council. The Community Relations Department under her leadership was severely derelict of its duties, leading to problems such as splitting of entertainment bills. However, Simon PEH simply ignored these problems and did not even give Julie MU a warning letter and she later retired from ICAC.

If Honourable colleagues think that the Commissioner is in good faith and his reply to the Legislative Council is reliable, they are too naive. Do they remember who the last ICAC Commissioner was? The last ICAC Commissioner was Timothy TONG, how about his conduct? It is obvious to all and I need not elaborate.

534 LEGISLATIVE COUNCIL ― 10 November 2016

Another point is that there is no evidence to support this motion as the accusations are groundless. Honourable colleagues, the Chief Secretary has not responded to one of my key questions, that is, why is it possible for LEUNG Chun-ying to moonlight as the Chief Executive? While he is acting as the Chief Executive, how come he can receive a consultant fee amounting to several hundred thousand dollars from an Australian enterprise to promote its business? LEUNG Chun-ying claimed that, "I have stipulated in the agreement that such services will only be provided on the premise that there is no conflict of interest; UGL has never asked me to provide services and I have never provided services; thus there is no conflict of interest and there is no need to report to the Executive Council." If such a case can be justified, can all Legislative Council Members present sign consultant service agreements with major property developers before they assumed office on 1 October, specifying that services would only be provided if there was no conflict of interest, and they could receive an annual consultants fees amounting to several hundred thousand dollars without providing any services? Chief Secretary, is this not a breakdown of all protocols?

Chief Secretary Carrie LAM has also said that LEUNG Chun-ying had actually delegated to her the power to appoint the Deputy Commissioner, but my main point is that LEUNG Chun-ying, being under investigation, should not take part in the appointment of staff. As mentioned by LEUNG Chun-ying and Simon PEH, Simon PEH had notified LEUNG Chun-ying of his decision in advance but LEUNG Chun-ying had no comments. Though LEUNG Chun-ying made no comment, does that mean that he had not been involved in making the decision? Absolutely not. The reason is very simple. If the second highest ranking person in any large organization told the highest ranking person that he would demote the third highest ranking person; the highest ranking person made no comments and finally the third highest ranking person was demoted, would you think that the highest ranking person had not been involved in making the decision? Obviously, LEUNG Chun-ying had participated in making the decision and he tacitly agreed to the decision for Simon PEH to demote Rebecca LI. In fact, he should have said, "I am sorry, ICAC is investigating me, please do not discuss this matter with me. Please discuss with the Chief Secretary because I have delegated the power to her." Similarly, he had previously delegated to the Chief Secretary the power to appoint the Head of Operations who is concurrently the Deputy Commissioner.

Is an investigation to be conducted by the Legislative Council interfering with ICAC? The Legislative Council has the responsibility to monitor the Government and ICAC is within the scope of monitoring. Some Members have LEGISLATIVE COUNCIL ― 10 November 2016 535 said that we have to exercise checks and balances over the operation of ICAC. But if ICAC is operating regularly, why do we have to investigate? As I have just said, there are serious problems with the operation of ICAC. However, it seems that pro-establishment Members are living in Mars and they have completely failed to notice the problem, and they are totally out of touch with the general public.

In fact, what is meant by "normal"? A large number of pro-establishment Members in the Legislative Council often refer to abnormal situations as normal, and that is the most abnormal situation.

According to Mr YIU Si-wing, Rebecca LI has not lodged a complaint, how can there be a defendant when there is no plaintiff? I would like to tell Mr YIU, there is a kind of victim who cannot make their voices heard. Should we not speak up for such victims? It is very difficult for the ICAC officers to speak up as they are subject to official confidentiality requirements but we can definitely speak up for them in this Chamber. We have to speak up not only for the ICAC officials but also for Hong Kong people because this is a very important core value of Hong Kong and it is also the pillar of ICAC's probity.

Mr CHEUNG Kwok-kwan criticized me, saying that since I had once worked in ICAC, I should not casually ask the Legislative Council to conduct an investigation. Let me tell Mr CHEUNG as he may not be aware, the threshold for ICAC to launch an investigation is much lower than that of the existing threshold of the Legislative Council; so long as the allegations involve corruption or the cases are pursuable, reports can be made without the need to provide substantial evidence, and ICAC will launch investigations. ICAC's slogan "Be Smart, Report Corruption" encourages people to report corruption. Unfortunately, though we have raised so many reasonable queries and provided factual information, the pro-establishment camp has turned a deaf ear and a blind eye.

Mr LAU Kwok-fan said that Mr Ricky YAU had explained the sequence of events related to his resignation and I expressed consent in the press, saying that it was consistent with my understanding. Mr LAU interpreted my understanding as claiming that there was nothing wrong with the whole incident. I think Mr LAU's comprehension power is weak. While I agree with the facts concerning Mr YAU's resignations, this does not mean that I also accept given the 536 LEGISLATIVE COUNCIL ― 10 November 2016 explanation given by ICAC for cancelling the acting appointment of Rebecca LI and the subsequent radical staffing shake-up. I hope Mr LAU Kwok-fan could understand this simple truth.

In addition, other Members have lodged personal attacks against me, saying that I have undermined ICAC's credibility by making malicious defamation. The Chief Secretary has also blown up the issue, saying that we hyped up the issue to undermine ICAC's credibility, slander the Commissioner's integrity and Hong Kong's reputation as a "clean" city. I would like to ask Honourable colleagues and Hong Kong people, why has Hong Kong's clean reputation been declining these few years? The problem originated from the Timothy TONG incident and also from the corruption of a number of senior government officials including Donald TSANG, LEUNG Chun-ying, Rafael HUI and Timothy TONG. Carrie LAM said that the Member's motion would harm Hong Kong's clean reputation. As the Chief Secretary, she has surprisingly made such unconscionable remarks. Did she attain her reputation as "a good fighter" by making such unconscionable remarks, defaming us who represent public opinion and blaming us, pro-democractic Members for Hong Kong's declining clean reputation? I hope she would be honest with herself: Will Hong Kong's clean reputation be declining if the Government's performance has not been so poor?

(Some Members clapped)

Of the three Chief Executives including TUNG Chee-hwa, Donald TSANG and LEUNG Chun-ying, two were involved in corruption and two were being investigated. This is a tragedy for Hong Kong. Therefore, ICAC should no longer be subject to the Chief Executive's monitoring and control. The present situation is very embarrassing: ICAC is investigating the Chief Executive while the Chief Executive is monitoring ICAC. I believe that the operation of ICAC should in future be monitored by an independent committee made up of Judges. In response to Mr Dennis KWOK, Carrie LAM said that whether the Prevention of Bribery Ordinance should be amended involved monitoring the Chief Executive and also constitutional issues. We have heard this remark for more than four years. How complicated are the issues? Is she reluctant to do so or is she unwilling to do so? Has LEUNG Chun-ying's improper conduct given rise to many problems and thus he dares not subject himself to monitoring under the Prevention of Bribery Ordinance? Please make this clear to Hong Kong people.

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I understand that some Honourable colleagues may question my disclosure of ICAC's investigations. The Chief Secretary has just read out section 30 of the Prevention of Bribery Ordinance clearly, but she has not mentioned that a reasonable excuse as regards ICAC's investigation is provided in section 30(3)(a), "the disclosure reveals any unlawful activity, abuse of power, serious neglect of duty, or other serious misconduct by the Commissioner, the Deputy Commissioner or any officer of the Commission". If our query is correct, that is, since Rebecca LI was the most senior ICAC officer responsible for investigating LEUNG Chun-ying, Simon PEH and LEUNG Chun-ying thus removed the thorn in the flesh through the appointment and removal of officials, they had seriously abused their power. This constitutes a serious misconduct and even an illegal act.

I would like to ask the Chief Secretary to answer one question: Why could a person under investigation tacitly agree to the demotion of the most senior ICAC officer investigating him, finally forcing her to leave office?

I so submit. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the motion moved by Mr LAM Cheuk-ting be passed. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

Mr Alvin YEUNG rose to claim a division.

PRESIDENT (in Cantonese): Mr Alvin YEUNG claimed a division. The division bell will ring for five minutes.

(While the division bell was ringing, a number of Members had not returned to their seats)

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PRESIDENT (in Cantonese): I remind Members that the meeting is in progress, please return to your seats as soon as possible.

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

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

Functional Constituencies:

Mr James TO, Mr Charles Peter MOK, Mr Kenneth LEUNG, Mr Dennis KWOK, Mr IP Kin-yuen, Mr SHIU Ka-chun, Mr KWONG Chun-yu and Dr YIU Chung-yim voted for the motion.

Mr Tommy CHEUNG, Mr Jeffrey LAM, Mr WONG Ting-kwong, Ms Starry LEE, Mr CHAN Kin-por, Mr Steven HO, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr Christopher CHEUNG, Mr Martin LIAO, Mr POON Siu-ping, Ir Dr LO Wai-kwok, Mr Jimmy NG, Mr HO Kai-ming, Mr Holden CHOW, Mr SHIU Ka-fai, Mr LUK Chung-hung and Mr LAU Kwok-fan voted against the motion.

THE PRESIDENT Mr Andrew LEUNG and Prof Joseph LEE did not cast any vote.

Geographical Constituencies:

Mr LEUNG Kwok-hung, Ms Claudia MO, Mr WU Chi-wai, Mr CHAN Chi-chuen, Dr Fernando CHEUNG, Dr Helena WONG, Mr Alvin YEUNG, Mr Andrew WAN, Mr CHU Hoi-dick, Mr LAM Cheuk-ting, Dr CHENG Chung-tai, Mr Jeremy TAM and Mr Nathan LAW voted for the motion.

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Mr CHAN Hak-kan, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mr Paul TSE, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Dr Elizabeth QUAT, Dr CHIANG Lai-wan, Mr Wilson OR and Mr CHEUNG Kwok-kwan voted against the motion.

Dr LAU Siu-lai did not cast any vote.

THE PRESIDENT announced that among the Members returned by functional constituencies, 29 were present, 8 were in favour of the motion and 19 against it; while among the Members returned by geographical constituencies through direct elections, 26 were present, 13 were in favour of the motion and 12 against it. Since the question was not agreed by a majority of each of the two groups of Members present, he therefore declared that the motion was negatived.

PRESIDENT (in Cantonese): Debate on motion with no legislative effect.

The motion debate on "Abolishing the Mandatory Provident Fund Offsetting Mechanism".

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

I now call upon Mr WONG Kwok-kin to speak and move the motion.

ABOLISHING THE MANDATORY PROVIDENT FUND OFFSETTING MECHANISM

MR WONG KWOK-KIN (in Cantonese): President, I move that the motion, as printed on the Agenda, be passed.

President, since the implementation of the Mandatory Provident Fund ("MPF") scheme in late 2000, its effectiveness in providing retirement protection has been subject to public criticisms. After looking into the matter, we discovered that apart from the varied performance of different MPF funds and the high level of fees, the prime culprit that undermines the retirement protection function of the MPF scheme is its offsetting mechanism.

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In fact, in as early as 2012, the Chief Executive undertook in his Election Manifesto 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". However, four years have elapsed but no progress has been made by the SAR Government in respect of the offsetting arrangement. Is this because the SAR Government is insincere or is reluctant to take any action? I believe society will make a fair judgment.

The major reason for abolishing the MPF offsetting mechanism lies in the different objectives behind the implementation of the MPF scheme and the provision of severance and long service payments. First of all, regarding severance and long service payments, while the former is the amount of money payable by an employer when an employee having two years' service or more is dismissed, made redundant or suspended from work, the latter is the sum of money payable by an employer when an employee having five years' service or more resigned on ground of ill health or old age. Simply put, severance and long service payments seek to alleviate the short-term financial hardship upon loss of employment.

Contrarily, the MPF System mainly serves to provide retirement protection. This employment-based, mandatory contribution scheme ensures that each employee sets aside some income during his/her working life as savings for their retirement. Some people who may not save much or any for their retirement can now use the sum of money saved under the MPF scheme for their retirement.

From this, we can see that the severance and long service payments and MPF actually serve difference purposes. Therefore, we should not use employer's contributions to offset severance and long service payments as they should not be confused.

Another major reason for requesting the abolition of the offsetting mechanism is that this arrangement has seriously eroded the hard-earned money of wage earners and directly affected their retirement protection, especially the low- and middle-income grass-roots workers. In 2015, among the 47 300 employees affected by the offsetting arrangement, an average of about 93% of employers' contributions were offset.

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In fact, employees of certain industries such as catering, cleaning and security, are often made redundant upon the expiry of their two- or three-year contracts. Under the offsetting arrangement, their MPF accrued benefits were substantially reduced and the amount remained is hardly adequate to provide retirement protection. Owing to the Government's delays in abolishing the offsetting arrangement, the hard-earned money contributed by wage earners has been eroded. Therefore, the Government is actually an accomplice weakening the retirement protection function.

Furthermore, we also request the Government to conduct a comprehensive review of the MPF scheme to ensure that it can effectively provide retirement protection for wage earners. The high level of fees and varied performance of the MPF scheme have attracted much criticism by society.

Although the Government carried out a reform in 2016 by introducing the core fund and striving to bring down the fees, the latest average Fund Expense Ratio ("FER") of MPF funds still stood at 1.56%, much higher than those in four other countries with similar retirement schemes, including Chile (0.56%), the United Kingdom (1.19%), Australia (1.21%) and Singapore, which has a relatively higher FER of 1.4%.

As stated by the Mandatory Provident Fund Schemes Authority ("MPFA"), "the MPFA has to continue its efforts in reducing fees as there is still a gap between the existing fee levels and the general expectation of scheme members. Reducing fees must remain one of the priorities in the future." The performance of different funds also varied. This is mainly because about 66% of total MPF assets were held in equities, making it vulnerable to external economic shocks.

Some representatives of the business sector consider the abolition of the offsetting mechanism abhorrent for reasons that employers have to make double payments, that is, they have to pay severance and long service payments on the one hand, and make MPF contributions on the other; abolishing the offsetting mechanism will impose heavier burden on employers, thereby seriously affecting the business environment of micro-enterprises or small and medium enterprises; and the offsetting arrangement is indeed the consensus reached after consultations in enacting the MPF legislation.

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Here, let me explain such reasons one by one. Firstly, based on the offsetting amount (about $3 billion) in 2013, it only accounted for 0.37% of the territory's total wage bill and was therefore insignificant to the actual cash flow of enterprises. Mr LAW Chi-kwong, an academic, has also pointed out that abolishing the offsetting mechanism actually has very little financial impact on enterprises. It can therefore be concluded that the argument that the abolition will impose a heavier burden on enterprises is an unsubstantiated claim of the business sector and a proof of the Government's favouritism. Secondly, as time went by, a total of $29.2 billion of the hard-earned money of local wage earners had been offset under the offsetting arrangement, seriously affecting the MPF scheme to perform its due function of providing retirement protection. Hence, in order to secure retirement protection for wage earners, it is necessary to expeditiously abolish the MPF offsetting mechanism.

It has been reported recently that the Government is inclined to abolish long service payments and replace severance payments with unemployment insurance fund. The Hong Kong Federation of Trade Unions considers this unacceptable. As I said earlier on, both long service and severance payments seek to alleviate the short-term financial hardships of employees due to the loss of their job. Hence, abolishing long service and severance payments is tantamount to putting the cart before the horse, and distracting people's attention from the abolition of the offsetting mechanism. The proposed abolition of long service payment indicates that the Government intends to shirk its responsibility in protecting labour interests, giving the business sector the wrong message that the fight for labour interests can "take one step forward but two steps back". This would have an adverse effect on negotiations between employers and employees in the future. With regard to the proposal to replace severance payments with unemployment insurance fund, it implies that the Government intends to use public funds to foot the bill for the business sector. Its bias towards the business sector is too obvious to all.

President, the obstacle to abolish the MPF offsetting mechanism is mainly psychological. I think the Government should set an example as a good employer and as a first step, take the lead to abolish the offsetting arrangement for employees of government outsourcing contractors, non-civil service contract staff and grass-roots employees. In other words, the Government should take the initiative to abolish the MPF offsetting mechanism with regard to those staff, and should not be perfunctory in handling the offsetting arrangement. Given the SAR Government's belief that "no livelihood issue is too trivial" and the LEGISLATIVE COUNCIL ― 10 November 2016 543 offsetting arrangement is of prime concern to all local wage earners, the Government should therefore expeditiously handle the matter effectively and respond to people's aspirations. I hope that Secretary Matthew CHEUNG, who is present at the meeting today, would genuinely listen to the voices of the labour sector. I also hope that the Secretary would give us a good start and take the lead to abolish the MPF offsetting mechanism, and set a good model for the business sector.

President, I so submit and will respond again later.

Mr WONG Kwok-kin moved the following motion: (Translation)

"That, since the implementation of the Mandatory Provident Fund ('MPF') scheme in 2000, its effectiveness has been questioned by society, and the MPF offsetting mechanism (i.e. the use of the accrued benefits derived from employers' MPF contributions to offset severance payments and long service payments) has all along been criticized by society; as at the first quarter of 2016, over $29.2 billion under the MPF scheme was offset, which seriously eroded the hard-earned money of wage earners and directly affected their retirement protection; in this connection, this Council urges the Government to expeditiously abolish the MPF offsetting mechanism and comprehensively review the MPF scheme, so as to ensure that employees' rights and interests will not be undermined and their retirement life be better protected."

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by Mr WONG Kwok-kin be passed.

PRESIDENT (in Cantonese): Six Members will move amendments to this motion. This Council will now proceed to a joint debate on the motion and the six amendments.

I will call upon Members who move the amendments to speak in the following order: Mr Jimmy NG, Dr CHIANG Lai-wan, Mr Andrew WAN, Dr Fernando CHEUNG, Dr LAU Siu-lai and Mr Michael TIEN; but they may not move the amendments at this stage.

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MR JIMMY NG (in Cantonese): President, I thank my colleague in this Council for moving a motion on "Abolishing the Mandatory Provident Fund offsetting mechanism", which allows me to express views from the perspective of my sector. The industrial and commercial sectors always oppose a gradual or complete abolition of the Mandatory Provident Fund ("MPF") offsetting mechanism before a comprehensive review of various social and retirement protection schemes is conducted.

We always say, "Forget not the original intent and the goals will be achieved." Before discussing the MPF offsetting arrangement, it is necessary to reflect on how this arrangement came about. The MPF scheme involves two concepts: first, severance payment and long service payment. When the Employment Ordinance was enacted in 1968, there were many disputes in society over the implementation details, including employees' severance payment and retirement arrangements. After many rounds of discussions, the Government finally enacted legislation to introduce severance payment and long service payment in 1974 and 1986 respectively. It also repeatedly stated that it was inappropriate to require employers to make double payments. This principle has been applied since then and the mechanism has worked well.

The second concept is of course MPF. As we all know, MPF is contributed by both employers and employees for employees' retirement protection. As the origin intents to introduce severance and long service payments, as well as MPF were to safeguard employees' retirement protection, if the two run in parallel, employers have to shoulder double burdens while employees can enjoy double benefits. Therefore, when the Mandatory Provident Fund Schemes Ordinance was enacted in 1995, the Government promised to maintain the offsetting mechanism, so that employers would not have to make double contributions.

As the function of severance and long service payments, as well as MPF is to provide retirement protection, the two overlap each other. Employees should not get both benefits. The offsetting mechanism can effectively balance the interests of both employers and employees. It is also the consensus reached by both sides after careful considerations and in-depth studies.

According to the statistics provided by the Labour Department, the upper limits of severance and long service payments have been raised to $390,000. In the face of the ever increasing severance and long service payments, the industrial LEGISLATIVE COUNCIL ― 10 November 2016 545 and commercial sectors can hardly afford to abolish the MPF offsetting mechanism. Over 90% of enterprises in Hong Kong are small and medium enterprises ("SMEs"). Let us imagine, if the owner of an SME wishes to close his business or retire owing to operation difficulties, he will have no choice but to pay huge amounts of severance and long service payments, which deals a further blow to him. Not all companies in Hong Kong are limited companies but many are unlimited companies. If the owner of an unlimited company wishes to retire or close the business or as a result of mal-management, he may go bankrupt if he has to pay huge amounts of severance and long service payments which he can ill afford.

Some claims that the purpose of MPF is to help the employed population to prepare for their retirement while the purpose of severance and long service payments is to help an employee meet his short-term financial needs when he loses his job under specific circumstances. I cannot agree to such a view. First, I do not see any difference between MPF and severance and long service payments since employers have to pay real cash to make contributions. Do we have to force employers to shoulder a double burden simply because of the so-called different purposes? Second, even if the purposes of the two benefits are really different, do employers have to bear the entire burden to provide retirement protection and unemployment protection to employees? Of course not.

I wish to further point out, regarding retirement protection schemes, the Government should play a more important role in respect of social security. It must be admitted that our retirement protection schemes cover a rather broad area. There are four pillars, namely, first, social security schemes, including the Comprehensive Social Security Assistance ("CSSA"), Old Age Living Allowance, Old Age Allowance and Disability Allowance; second, MPF; third, voluntary savings schemes; and fourth, social services and family support. Actually, in respect of unemployment protection, the Government can do more. Unemployed workers can apply for CSSA, but owing to the complicated application procedures, CSSA may not be able to meet their urgent needs. As regards the Support for Self-reliance Scheme, Employees Retraining Scheme, and so on, they obviously cannot meet the financial needs of unemployed workers.

The business sector thinks that the Government can set up a specific fund for severance payment, so as to replace the arrangement of using MPF to offset severance payment. It can also set up a new short-term supplementary 546 LEGISLATIVE COUNCIL ― 10 November 2016 unemployment insurance fund, independent of MPF to provide unemployed workers with a one-off payment to meet their living expenses for two to three months. I think these are productive suggestions worthy of rational exploration by various sectors in society together.

Hence, Hong Kong should continue to adopt a multi-pillar model in providing diversified sources to deliver retirement savings and income, to be complemented by a range of public services, so as to establish an adequate, sustainable, affordable and robust system for unemployment and retirement protection.

The public consultation on retirement protection conducted by the Government ended in June this year. The Government has indicated earlier that the consultation results will be released early next year at the earliest. We expect the Government to conduct an in-depth quantitative study on the impact of the abolition of the MPF offsetting mechanism on employers, employees, employment market, as well as the overall economy and people's livelihood, so as to guide the community to engage in rational and objective analyses and discussions. By that time, if the Government puts forward more ambitious proposals regarding unemployment and retirement protection and undertakes more responsibilities, I believe that will help resolve the present disputes in society. In other words, when the Government implements a retirement protection policy in future, it should at the same time consider enhancing workers' unemployment protection and address the problems relating to the MPF offsetting mechanism. I believe it is now the opportune time to do so.

Of course, the business sector is not so rigid. We are willing to explore any initiatives that can help enhance workers' unemployment and retirement protection. In any case, if the Government insists on abolishing the MPF offsetting mechanism, will the new legislation have any retrospective effect on the MPF benefits accrued before the commencement of the legislation? Besides, since it is considered that retirement and unemployment protections are the collective responsibility of every sector in society, apart from the business sector, what role will the Government and the labour sector play? What responsibilities can they bear? I hope that everyone will give careful consideration to these issues. I hope that people will carefully consider these practical problems, rather than abolish the MPF offsetting mechanism hastily.

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Finally, I wish to stress that apart from conducting a comprehensive review on the MPF scheme, the Government should also review various social security systems to ensure that social resources will be used fairly. Hence, I oppose Mr WONG Kwok-kin's original motion.

I so submit. Thank you.

DR CHIANG LAI-WAN (in Cantonese): President, at present, many wage earners are seeing the accrued benefits in their Mandatory Provident Fund ("MPF") accounts almost eroded completely as a result of the offsetting mechanism. As we note from the Statistical Report on Claims for Offsetting Severance Payment and Long Service Payment against MPF Accrued Benefits recently published by the Mandatory Provident Fund Schemes Authority, the problem has actually become quite serious. According to the report, more than 40 000 employees were affected by the offsetting arrangement, and on average, over 90% of the accrued benefits derived from their employers' contributions have been used for offsetting purpose. For some low-income earners, for example, those with a monthly salary of about $7,000-odd or less, not even $1 is left in their MPF accounts. It is thus evident that the offsetting mechanism has a greater impact on low-income earners; the lower the income, the greater the impact.

As the name suggests, MPF was established for the purpose of protecting the retirement life of labourers or the working class. But with the existing offsetting mechanism, the accrued benefits of many employees are being "eaten away". How then can their retirement life be protected?

Actually, the arrangement of making severance payment came into operation since 1974 to provide compensation to employees dismissed owing to redundancy upon the closure of their enterprises or companies, so as to alleviate their financial hardship upon sudden loss of employment. The arrangement was originally introduced for a good cause with valid and reasonable grounds. Later, in 1986, the arrangement of long service payments was introduced by the Government. The purpose is to provide compensation to employees who have served the same employer for a long period of time (or even decades), but were suddenly dismissed for some reasons. With such an unexpected loss of employment, the employees would have financial difficulties and even lose all their retirement protection. This is also a good arrangement. Eventually, the 548 LEGISLATIVE COUNCIL ― 10 November 2016

Occupational Retirement Schemes Ordinance was enacted in 1992, and the Mandatory Provident Fund Schemes Ordinance finally came into operation in 2000.

Presented as such, wage earners in Hong Kong seem to enjoy favourable treatment as various arrangements are in place to give them protection, including severance payment, long service payment, occupational retirement schemes and MPF. But the truth is that all these payments come from the same pool of funds, and the only difference is whether the money is drawn sooner or later. For instance, if an employee is made redundant due to the closure of business by his employer, he will receive a sum of money called "severance payment" at an early stage. If an employee works for the same company for a long time, say, 20 or 30 years, but is suddenly dismissed, he will be entitled to receive a sum of money called "long service payment", which is also drawn from the same pool of funds. If an employee is lucky enough to stay working in the same company until retirement and has received neither severance nor long service payments before, he will eventually get the so-called MPF benefits. But the truth is that for many employees, their funds have been mostly or even completely offset. So what kind of retirement protection can they enjoy?

The situation completely deviates from the purpose of setting up various types of protections at that time. That is why we consider it necessary to conduct a comprehensive review, including long service payment, severance payment and MPF, in order to strike a balance while ensuring that employees will eventually receive a reasonable amount to enhance their retirement protection. It will be unreasonable if the ultimate amount received by an employee is less than expected. I believe not only representatives of employees, but also the business sector will find the situation undesirable. That is why we hope all these different arrangements can be reviewed comprehensively.

In February this year, the Democratic Alliance for the Betterment and Progress of Hong Kong ("DAB") hosted a round-table meeting on the offsetting mechanism under MPF. Academics, as well as representatives from the business sector and labour unions were invited to frankly exchange views on the matter. Through such exchanges, all parties concerned managed to get a better understanding of each other's views, and they all hoped that a consensus could be forged to provide better retirement protection to workers.

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The meeting eventually drew a conclusion on several key points as follows. Firstly, it would be most important to have an open platform in society for ongoing dialogue. Besides, the Government must take an active part or even take the lead in this matter, in order to expedite progress. Secondly, as severance payments, long service payments and MPF benefits are involved in the MPF offsetting mechanism, the matter should be dealt with by phases in an orderly and gradual manner. Thirdly, in respect of severance payment, can consideration be given to replace it with unemployment insurance fund? We hold that so long as concerted efforts are made to hold frequent discussions on the matter for the purpose of mutual lobbying, everything would be possible if all parties concerned genuinely want to find a solution to benefit the public at large.

Therefore, the Government should actively consider making the necessary financial commitment for such an arrangement. As Chief Secretary for the Administration Carrie LAM once said, the Government was firmly committed to abolishing the offsetting mechanism, and it was hoped that such a goal could be achieved. We believe that as long as the Government has the will, there is a chance of success. So long as the Government is willing to do its part and make a certain financial commitment, the matter will definitely be resolved.

President, apart from abolishing the offsetting mechanism, it is equally important to reform the MPF System comprehensively. That is why DAB has all along suggested that the variety of MPF investments should be increased, for example, to include products like infrastructure bonds, Exchange Fund-linked products or inflation-protected bonds, so as to better protect wage earners by providing a more stable return. Although we will not expect a huge income from MPF investments, the capital should at least be preserved, right?

DAB also considers that the authorities should consider the appropriate time to implement MPF full portability. Besides, we note that while there are over 2.5 million wage earners in Hong Kong, the number of MPF accounts is well over 7 million. Hence we consider it necessary to examine ways to reduce the administrative costs.

President, in his proposed amendment, Mr Jimmy NG states that the industrial and commercial sectors resolutely oppose abolishing the offsetting mechanism, and DAB also raises objection. In his amendment, Dr Fernando CHEUNG strongly condemns the Chief Executive. In our view, he has clearly deviated from the subject, and he makes such a remark obviously for reaping 550 LEGISLATIVE COUNCIL ― 10 November 2016 political advantages. That is why we will also oppose his amendment. In addition, although we note that there are merits in some other proposals, we hope that more room should be available so that the ongoing review would not be hindered by any restrictions. Hence, DAB has reservations about these proposals.

President, I so submit.

MR ANDREW WAN (in Cantonese): President, I believe many people remember that when contending for the office of the Chief Executive in 2012, the incumbent Chief Executive LEUNG Chun-ying said that "no livelihood issue is too trivial" on various occasions, and following his successful election as the Chief Executive, he said that "with a stool, a notebook and a pen, I am ready to listen to what you say". However, what has LEUNG Chun-ying actually done for Hong Kong people in the area of livelihood issues over the past four years or so? Has he ever again visited the districts carrying a pen and a notebook? As far as I know, he has done so, probably because his term of office is coming to an end, and he has again visited the districts recently.

Leaving aside other policies, let us just talk about labour policy as the Secretary is present. Nothing commendable has been achieved over the past four years, or I should say there are still a lot of outstanding tasks. Let me cite the bi-annual review of the minimum wage as an example. President, it is a well-known fact that the inflation problem is very serious in Hong Kong. As the minimum wage is increased by only several dollars following the bi-annual review, how can workers' incomes keep pace with inflation? In fact, each and every wage increase has been fully eroded by inflation, and in some cases, the increase even lagged behind inflation.

Since its implementation in 2011, the transport subsidy of $600 has never been increased, but fares of public transport in Hong Kong such as the MTR have been increasing continuously. Since 2011, MTR fares have increased by over 20%, but have the authorities conducted any review? Though we have often raised our views, the progress in this regard is very slow. In addition, LEUNG Chun-ying talked about enacting legislation on standard working hours in his election manifesto, but finally, the proposal on contractual working hours is raised instead. After conducting one consultation after another with no LEGISLATIVE COUNCIL ― 10 November 2016 551 deadlines set, we were ultimately offered the option of contractual working hours, the concept of which total deviates from standard working hours. All that is offered is simply meaningless.

The topic under discussion today, namely the abolition of the Mandatory Provident Fund ("MPF") offsetting mechanism, has actually been discussed many times since the implementation of the MPF schemes. LEUNG Chun-ying proposed the abolition of the MPF offsetting mechanism as early as 2012. I believe that at that time, many people from the labour sector, the grass roots or wage earners had certain expectations on his proposal. That said, apart from setting up a committee in the Council in the previous legislative session for follow-up actions, and government officials attending four meetings of the committee, what practical work have the executive departments or the Bureau done? I very much hope that the Secretary can give us a reply today.

President, the Democratic Party today accepts the general direction of Mr WONG Kwok-kin's motion on "Abolishing the Mandatory Provident Fund offsetting mechanism". I believe Members representing the labour sector and grass-roots members of the public hope to ask LEUNG Chun-ying, on behalf of wage earners, to make good on his promise. As regards whether The Hong Kong Federation of Trade Unions is infuriated by its acceptance of a dishonoured check from "689" is strictly a matter known to their members. President, the Democratic Party supports the abolition of the MPF offsetting mechanism, and we therefore support Mr WONG Kwok-kin's original motion.

As for the amendments of Dr CHIANG Lai-wan, Dr Fernando CHEUNG and Dr LAU Siu-lai, the Democratic Party will support them given the long-term objective of abolishing the MPF offsetting mechanism.

As Mr Michael TIEN's amendment proposes to abolish the arrangement of offsetting severance payments with MPF contributions, but retain the arrangement of offsetting long service payments with MPF contributions, and the Liberal Party's amendment even opposes the abolition of the MPF offsetting mechanism outright, the Democratic Party does not endorse such proposals. For this reason, we do not support the relevant amendments.

I believe Members are all aware that the original intent of establishing MPF is to develop a sound retirement savings and protection system through contributions jointly made by employers and employees, so as to enable 552 LEGISLATIVE COUNCIL ― 10 November 2016 employees to have financial support in their twilight years after retirement. This is the original intent of MPF, and hopefully, it will serve as a retirement protection mechanism. On 13 June 2001, Mr Stephen IP, the then Secretary for Financial Services, said on a motion on reviewing the MPF System: "to ensure that participants of MPF schemes can receive hard cash (真'金'白銀), reap a good harvest after sweat and toil (苦盡'甘'來), and enjoy the fruits of their MPF contributions (積'金'成果). That is … '強積金' …".

However, what are the realities? The realties are: wage earners' MPF benefits are being eroded, the administrative fees remain high despite our criticisms for years, investment returns are unsatisfactory and the offsetting arrangement is still in place. For this reason, in many cases wage earners have no money after retirement, or the benefits they receive cannot support them financially in their twilight years. This runs contrary to the original intent of establishing MPF.

President, the offsetting mechanism and MPF are basically contradictory. The reason is very simple. Severance payments are expenses incurred by companies in making their staff redundant, and any businessmen should know that they are obliged to make such payments. The other type of contribution, however, is employees' pension. As I have said just now, the original purpose of MPF is to serve as employees' pension after retirement. Hence, regardless of how it is called, the money aims at enabling employees having worked laboriously for decades to obtain a pension after retirement. It does not matter whether we call the money by the name of pension or whatsoever, the point is that employees can receive such money to support them financially in their twilight years. Regrettably, however, under the offsetting mechanism, workers are unable to enjoy their entitled rights and benefits. Due to loopholes of the mechanism, the retirement protection system is basically rendered ineffective. The same situation also applies to long service payments. Having quietly dedicated their efforts to their companies, employees ultimately find that the compensation they finally received constitutes only their own contributions. How ludicrous!

According to information, the amount of MPF contributions offset from 2010 to 2017 reached over $29 billion, which is the hard-earned money of wage earners. The offsetting process has totally eroded the retirement protection system and weakens its functions. How can our wage earners and grass-roots workers have financial support in their twilight years after retirement? From LEGISLATIVE COUNCIL ― 10 November 2016 553

2010 to 2014, the amounts offset accounted for 26% to 36% of the amounts withdrawn, and in 2010 and 2011, the amounts offset were even higher than the amounts withdrawn on grounds of retirement and early retirement. Members must immediately realize that there are serious problems with the system. If the offset amount of over $29 billion was ploughed back into the pockets of wage earners to protect their retirement life, the level of protection accorded to them would be greatly enhanced.

In addition, we learnt from cases in the districts that many workers are very much discontented with the offsetting mechanism, and most of them are casual workers or grass-roots workers. I think the catering industry is the hardest hit. The Secretary must have realized that many operators in the catering industry will, coincidentally or intentionally, close their businesses and reorganize their companies after operating for several years. As we all know, under the company registration system of Hong Kong, a boss may not be an immediate employer, so different companies will keep recruiting the same group of workers to exploit the legal loopholes continuously. In this way, employers can make use of the so-called "Grandpa's money" to subsidize their contribution. Is this fair? Is this a proper arrangement to workers? The biggest problem is that workers are normally employed on contract basis ranging from two to three years, and upon the expiry of their contracts, they will work for another contractor and enter into new contracts. Just think, the money will be offset continuously, consequently, many workers may end up getting less than $100,000 after having toiled for decades. How sad! How are they supposed to live a proper life in the future?

What will become of these people in the future? In fact, society will ultimately have to foot the bill. If these Hong Kong people receive no protection in their life, they will ultimately have to be taken care of by the local social security system. For this reason, I believe such expenditure is inevitable. I think it is unreasonable that the Government should allow some unscrupulous business operators to evade their responsibilities by such means, and then use public money to fulfil their duties toward their employees.

Earlier, I learnt about a comment made by a veteran labour activist. He doubted whether LEUNG Chun-ying deliberately delayed addressing the issue for using it as a bargaining chip for his re-election, or whether he would address the issue only after being re-elected. I wonder if his remarks are true, but that 554 LEGISLATIVE COUNCIL ― 10 November 2016 sounds saddening. In dealing with a pressing livelihood issue, the person who claims to serve the people by carrying "a stool, a notebook and a pen" ends up making some deceptive, vague and shallow remarks.

For this reason, President, I support the direction of Mr WONG Kwok-kin's original motion, and I have also proposed an amendment. I so submit. Thank you, President.

DR FERNANDO CHEUNG (in Cantonese): President, just now Mr Jimmy NG said that he could not tell the difference between the objectives of severance payments, long service payments and Mandatory Provident Fund ("MPF"). For him, the money offset is merely the contributions made by employers, and if the MPF offsetting mechanism is abolished, employers have to hand out more money, and they will certainly voice their opposition.

President, the web page of the Mandatory Provident Fund Schemes Authority ("MPFA") introduces the retirement protection of Hong Kong in the section "Background" of the MPF System. Against the backdrop of population ageing, there is a greater need for us to develop a sound retirement protection system. The web page of MPFA clearly indicates that under either the three-pillar framework or five-pillar framework as championed by the World Bank, MPF is invariably the second pillar, namely a mandatory, privately managed, fully funded contribution scheme. Obviously the MPF benefits are for retirement protection purposes and can only be withdrawn by employees when they reach the retirement age, which is currently set at 65 by us.

Under the MPF System, wage earners are simply not allowed to withdraw such money before they reach the retirement age. However, in the event of business closure and the dismissal of employees, employers are surprisingly allowed to dispose of such money. Why should there be such an absurdity? Employees likewise need to make contributions for the purpose of―Mr Jimmy NG mentioned "forget not the original intent"―the "original intent" in this case is retirement protection. While employees are not allowed to withdraw the money before retirement, the boss is allowed to do so at any time. This obviously runs contrary to the objective of MPF.

Certainly, the business sector has been saying that the offsetting arrangement has long been in place, and even before the introduction of MPF, the Employment Ordinance already allowed employers from the business sector to LEGISLATIVE COUNCIL ― 10 November 2016 555 offset severance payments with employer contributions under retirement protection systems set up by them. Yes, this is history. But why were they allowed to do so back then? When a mandatory retirement protection system as required by the Government was not in place in the broader community, the permission of such an offsetting arrangement served to encourage the business sector to provide employees with retirement protection on a voluntary basis. However, as legislation has been enacted to set up a system, namely the MPF System, under which all employers and employees are mandatorily required to comply, it is no longer necessary to further implement any incentive measures. The offsetting mechanism must be abolished as it is a contradictory arrangement. This is a very clear concept that the Government should clearly understand.

Dr CHIANG Lai-wan accused us of piggybacking, but may I ask what we are piggybacking on? LEUNG Chun-ying had written clearly in point 16 of the section "My Pledge on Population and Human Resources" in his election manifesto (I quote): "We 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." He has made such a promise, and we are not piggybacking on his promise. As he stated that the proportion would be reduced progressively, it implies the progressive and ultimate abolition of the offsetting mechanism. There is no problem concerning a progressive abolition of the mechanism, but regardless of whether the mechanism should be abolished progressively or in any other manner, he should offer a timetable and a roadmap. Now that a good half of LEUNG Chun-ying's five-year tenure has already passed, will he renege on his promise in the remaining six months or so? Should he be condemned for reneging on his promise?

Regarding such a protection system to workers, the offsetting arrangement was wrong from the outset. Back then when I was not a Member, I already opposed MPF, and the offsetting arrangement was one of the reasons. How much money has been offset over the years? Of the MPF contributions made by employers for some 40 000 employees, over 90% or $30 billion has been offset. How far-reaching is the impact? How many workers have lost retirement protection due to unemployment, change of contracts or change of employers? Many vivid cases have been reported in the press. Over the past 10 years or so, many cleansing workers have constantly changed the companies they work for. Frankly speaking, the Government is the leading culprit for all this. The employees of outsourced cleansing service or security contractors of the Food and 556 LEGISLATIVE COUNCIL ― 10 November 2016

Environmental Hygiene Department, the Leisure and Cultural Services Department and the Housing Department change every two to three years, and the employer contributions made for them are offset upon each change. Having worked as casual workers for over 10 years, they will have only $20,000 to $30,000 left in their MPF accounts when they reach 65, for most of the employer contributions have been offset. People aged over 60 can hardly be employed, and with only several ten thousand dollars in hand, how can they enjoy their retirement life? They simply cannot afford to have a dignified retirement life. The problem is that simple

If we look at facts and make reasonable arguments, we should be able to see the clear picture long ago. Since 2003, over $1 billion has been offset each year, and over $2 billion was offset in 2011, and over $3 billion was offset in 2014. The amount offset has been increasing year by year. Even a most conservative professor of economics such as Richard WONG has indicated that given the mandatory nature of MPF, no offsetting arrangement should be allowed on the part of employers. He even opines that MPF reforms should not be restrained by vested interest groups such as banks, insurance companies and employers. I rarely agree to the remarks of Richard WONG, but I think this is one of his most exhilarating and incisive points. In addition, Andy KWAN, a relatively conservative economist, has also indicated that the offsetting mechanism is indeed treating employees like fools. Since the two types of contributions are totally different in nature, they should not be mixed and withdrawn. This point is clear enough, even the most conservative economists have adopted this saying.

When LEUNG Chun-ying assumed office, he stated that he would deal with the offsetting arrangement. Now that the matter has dragged on for such a long time, what is his intent? Why can't he take some practical actions? Certainly, there is a saying that the authorities will establish a new fund, or even consider adopting unemployment insurance fund as an alternative. President, if the authorities consider adopting the form of social security to safeguard people who fall into poverty or have economic needs due to unemployment or other reasons such as old age, disability and illness, we will give our consent. It is desirable if we offer risk protection for the broader community by way of social security. However, such an initiative should in no way replace the expeditious abolition of the MPF offsetting mechanism we are discussing today. Most ideally, I think the whole MPF System should be abolished, for this is a system that fools people with excessively high administrative fees and low returns. LEGISLATIVE COUNCIL ― 10 November 2016 557

Today, we should at least right the wrong by abolishing the offsetting mechanism, so as to avoid the situation in which a large number of short-term contract workers, having working for 10 to 20 years and contributing for a long time, still fail to get protection and enjoy a basically dignified life after retirement.

I so submit.

DR LAU SIU-LAI (in Cantonese): Honourable Members, as we discuss the motion on "Abolishing the Mandatory Provident Fund offsetting mechanism" today, I believe many of us will be caught in a dilemma. As elected representatives in this Council, we are duty-bound to review policies which have been implemented for some time and discuss how amendments and changes can be made, so that the policies can better meet the needs of the time and the people. That is also the need of society. There should be no cause for any dilemma. However, the dilemma has arisen for a particular reason. As the Mandatory Provident Fund ("MPF") is intended to provide retirement protection for the public, abolishing the MPF offsetting mechanism should be our unshirkable duty. Nevertheless, the Government is good at covering up its faults and has actually prepared to take the wrong path. Instead of returning to the right way, it has been seeking ways to walk more comfortably on the wrong path.

Why do I say so? Perhaps I should explain the history of MPF so that Members will understand why the demand for abolishing the MPF offsetting mechanism today has been met with opposition. We should understand that MPF was established as a shield against pressures exerted by the public and academia to implement a universal retirement protection system. In the 1960s, Hong Kong commenced to study the feasibility of implementing a universal retirement protection system. The Government commissioned Mrs WILLIAMS, a professor of the University of London, to conduct studies on reforming the welfare policies of Hong Kong. The conclusion at that time was that it would be impossible to rely on family support as retirement protection and that a comprehensive social security system should be established. At that time, a working group of the Government agreed that "the cost of not implementing a social security system is exorbitant, because the problems will become increasingly serious as time goes by". Today, 40 years later, we still fail to enjoy any retirement protection. As regards the "cost" described 40 years ago, we have to watch helplessly 300 000 elderly people living in poverty now. The number of elders collecting cardboard boxes on the street has been on the rise. 558 LEGISLATIVE COUNCIL ― 10 November 2016

They have to collect 150 soft drink cans to get $5 for buying a pineapple bun. We have talked about this situation so many times that we are really sick of it, but still no improvement has been made.

Back then, the Government undertook to explore the feasibility of implementing a universal retirement protection system, but eventually, it was not willing to make any commitment and only introduced policies "to take care of the most needy", including granting public assistance (currently the Comprehensive Social Security Assistance), disability allowance and old age allowance. However, people in the community began to join forces and put forward various retirement protection proposals one after another. Finally, in 1980s, they put forward the Central Provident Fund proposed by the Hong Kong Christian Industrial Committee (subsequently renamed as the Hong Kong Confederation of Trade Unions). Owing to public pressure, the Government eventually conducted a consultation on the Old Age Pension Scheme ("OPS") in 1993. Under OPS, any person who reached the age of 65 was eligible to receive a monthly pension amounting to some 30% of the median wage. It was proposed that the pension benefits would be funded by contributions from employers and employees at the rate of 1.5%, together with a start-up fund of $10 billion injected by the Government. In retrospect, there are great similarities between OPS and the universal retirement protection system currently under discussion. If the Government had succeeded in introducing OPS then, people would not be confused by the cost overrun proposition. Instead, we would be exploring ways to improve the policy so that we could really have retirement protection and the elderly people could benefit from it.

Unfortunately, under the pressure from the business sector and the Communist Party of China which claimed to practice socialism, the Government eventually withdrew OPS as it was criticized that the implementation of which would end up in total wreckage. Consequently, the Government introduced a more conservative proposal in 1995, entrusting the task of saving retirement funds to private organizations. This is the MPF scheme at present. At that time, the Government used the MPF offsetting mechanism to exchange for the business sector's endorsement, sowing the seed for today's predicament. Back then, the business sector unanimously opposed OPS and supported MPF and the offsetting mechanism. The reason was simple enough. The business sector did not want to shoulder the responsibility of paying retirement protection benefits to employees, and hence deliberately mixed up the concepts of retirement protection and labour protection.

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The amendment proposed today by Mr Jimmy NG, Vice President of the Chinese Manufacturers' Association of Hong Kong, basically runs contrary to the spirit of the original motion. He deleted the words that the MPF offsetting mechanism "seriously eroded the hard-earned money of wage earners and directly affected their retirement protection", and commended the mechanism for "functioning effectively" and "resolutely oppose abolishing the offsetting mechanism". The reason for the opposition is that the business sector can actually get vested interests from the offsetting mechanism. Last year alone, unscrupulous employers exploited the offsetting mechanism to offset $3.35 billion. In other words, each employer has offset $233,000 on average. The consortiums claim that without the offsetting mechanism, the amount they have to pay will affect their profits as well as the so-called "Hong Kong's business environment". Yet, the pay rise for their senior staff well exceeds $233,000 each year. These consortiums do not the pinch in handing out pay rise to their senior staff, yet they are happy for not having to pay severance payment out of their pockets. Once they have to pay severance payment, they will say that the business environment is affected.

Before continuing with this debate, I have to clarify some concepts for Members. First, the long title of the Mandatory Provident Fund Schemes Ordinance states that it is (and I quote) "[A]n Ordinance to provide for the establishment of non-governmental mandatory provident fund schemes for the purpose of funding benefits on retirement". Thus, MPF is a retirement fund and a form of retirement protection.

Nevertheless, the worst part of the entire MPF System is the offsetting mechanism. The demerit of the mechanism is that many wage earners will have their hard-earned accrued labour benefits all eaten away, and worse still, it allows employers to confuse their two due responsibilities of providing retirement protection and labour protection for their employees as one. Employers simply do not want to shoulder their responsibilities at all, and arbitrarily deduct the benefits of their employees. Actually, the amounts of money are insignificant to employers, for their profits are still high even if they have to pay 10 times the amount to employees. On the contrary, labour protection benefits are vital to employees, affecting their children's education, as well as the stability of their lives.

What is severance payment? It is a compensation given to an employee when he is dismissed by reason of redundancy, when his employment contract is not renewed or when the company closes down. The payment will protect the employee from losing his means of living once he loses his job. It will protect 560 LEGISLATIVE COUNCIL ― 10 November 2016 him from failing to live from hand to mouth, enable him to live on and relieve his financial burden during unemployment. As regards long service payment, it is intended to supplement severance payment and is paid as compensation to an employee who has served his employer for more than five years. Obviously, these two arrangements are not intended as savings for retirement; they are forms of labour protection instead.

Unfortunately, the Government has been creating public opinion since the middle of last year. Then, at the end of last month, Carrie LAM and Matthew CHEUNG hinted that severance payment and long service payment might be abolished after testing the water with the Hong Kong Federation of Trade Unions. Such an approach actually dodges the issue and seeks to protect the interests of the stingy consortiums at the expense of labour rights. The Government indicated severance payment and long service payment would be abolished and replaced by an unemployment insurance fund.

I hope Members will understand that the setting up of an unemployment insurance fund implies that the Government will bear its responsibilities through tax. While employees can get some kind of protection, consortiums and big corporations can totally shirk their social responsibilities. From the amendments proposed by Mr Jimmy NG and Mr Michael TIEN, we can picture the disgusting countenances of businessmen.

I want to make it clear that labour rights cannot be curtailed in this way. More importantly, we should clearly understand the concept of retirement protection. We should really establish a universal retirement protection system so that the livelihood of the elderly can be protected. The grass roots of Hong Kong have contributed a lot to our economic achievements, but they have been deprived of protection and the wealth gap is becoming wider and wider. I hope the industrialists and the businessmen will squarely face their social responsibilities and seek ways to improve the livelihood and welfare of all Hong Kong people.

MR MICHAEL TIEN (in Cantonese): President, before I begin my speech, I have to declare that I am the proprietor of a fashion group, as well as a member of the Commission on Poverty. It is precisely because I am wearing these two different hats that I consider myself all the more capable of viewing this highly controversial issue from different angles.

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I thank Mr WONG Kwok-kin for moving this motion. In proposing my amendment, I hope to provide my answer for Members' reference, so as to enable Members to have a rational discussion on the Mandatory Provident Fund ("MPF") offsetting mechanism in search of a solution. Chief Secretary Carrie LAM has described this issue concerning MPF as one of the "three mountains" currently facing Hong Kong. I very much agree with her on that. Leaving aside political wrangling, MPF is indeed a top priority when it comes to livelihood issues.

I greatly appreciate that the Government has attached importance to this issue by assigning two officials, namely the Secretary for Labour and Welfare and the Secretary for Financial Services and the Treasury, to participate in our discussion in the Chamber today. I hope that the two officials can imbibe the wisdom of Members and translate it into policies beneficial to Hong Kong.

Let me come back to the subject. While MPF is well meaning in terms of both its concept and original intent, it has been most criticized for its offsetting mechanism. President, years ago there was a prolonged discussion on how to implement MPF with many rounds of negotiations between employers and the Government. This is history. Before the MPF legislation came into force, the Employment Ordinance already allowed employers to use contributions made to retirement schemes under the Occupational Retirement Schemes Ordinance, or gratuities based on length of service payable to employees, to offset severance payments and long service payments. In 1995, the Legislative Council passed the MPF legislation and extended the applicability of this long-standing offsetting procedure to MPF schemes. Nevertheless, during the drafting of the MPF legislation, the labour sector expressed very strong views and vigorously opposed the continuation of this offsetting mechanism.

As pointed out by the Labour Department, the MPF System was the result of years of study and extensive consultation, and was officially launched by the Government in 2000, at which time the Administration specially introduced the offsetting mechanism to allow long service payments and severance payments to be offset against employers' MPF contributions. This was done in exchange for the support of employers for the system. Clearly, without this compromise back then, the MPF System would not have received the support of both employers and employees, and this happens to coincide with the principle of the amendment proposed by me today.

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My amendment consists of two main points: first, it is hoped that the Government will expeditiously abolish the arrangement of offsetting severance payments against MPF contributions, and that severance payments will be met by unemployment insurance with premiums borne by the Government; second, the arrangement of offsetting long service payments against MPF contributions should be retained. Someone has said to me that as my amendment seeks to benefit employers on the one hand and employees on the other, it will not find favour with either side, and no one will support me. I am now discussing the issue on its own merits and trying to reason it out, rather than taking sides. The offsetting of long service payments against employers' MPF contributions was mooted back then because many scholars at the time shared the view that retirement protection was intrinsic to the nature of long service payments, and so there was an overlap between the two concepts.

That said, when I revisit this issue today, I realize that it is actually very hard for the arrangement of offsetting severance payments to be justified on such grounds. Severance payments are basically made to wage earners dismissed by a company because of a change of strategy or poor operation. It is impossible for such employees to secure new employment the next day, so what can they rely on when they are between jobs? In any event, there needs to be protection for these people who live from hand to mouth, right? In a dispute involving labour relations, what kind of proposal can find favour with both employers and employees? Or is there a kind of proposal which benefits only one side but will not be opposed by the other side? We should think rationally. Will a proposal that does not find favour with either side turn out to be the solution? When it comes to resolving any social issue, will a proposal supported by everyone turn out to be a proposal that deceives themselves? Is it necessary for both sides to each take a step further in order to resolve the issue?

Last year, there were rumours in the business and labour sectors that during the discussions on new proposals to abolish the MPF offsetting mechanism, a proposal for abolishing only the offsetting of severance payments while retaining the offsetting of long service payments was put on the table; at that time, Stanley LAU, Honorary President of the Federation of Hong Kong Industries, and our respectable Mr WONG Kwok-kin both indicated that they kept an open mind―of course, keeping an open mind does not mean giving support. Meanwhile, Nelson CHOW, a scholar from the University of Hong Kong, takes a similar view that from the perspective of justice, the arrangement of offsetting severance payments should be abolished. In fact, employers, employees and scholars all LEGISLATIVE COUNCIL ― 10 November 2016 563 know deep down that compromise is the best way to break the deadlock. Anyone who has tied a knot knows that the harder the rope is pulled to both sides, the tighter the knot becomes. Our responsibility as politicians is to figure out a way to untie the knot for all those who are involved. While I had expected that both sides would have opinions on my proposal, I still plucked up courage to say something that might not sound agreeable to them.

How should this knot be untied? On the face of it, employers may object to my proposal for abolishing the arrangement of offsetting severance payments, but then the precondition suggested by me is that an employer must take out unemployment insurance for each of his employees, and the premiums are to be borne by the Government, so that if the employer dismisses his employees, the employees can make full claims against the insurer. If the company runs into difficulties, the employer may have to close it down or may be forced to lay off his employees due to a change of operation strategy, and such employees who are rendered jobless immediately will be faced with great livelihood hardships.

I have very deep feelings about the situations of employees. Early this year, the staff of my company relayed to me that … Early this year, we made some strategic changes and removed certain job positions. This could not be helped, as the Government had done nothing and the number of visitors to Hong Kong under the Individual Visit Scheme had dropped. Monthly total retail sales had fallen for 10-odd or 20 months, and we simply did not know how we should continue operating. The staff of my company relayed to me that the employees who were laid off due to the changes in our operation strategy were immediately faced with great livelihood hardships. After pondering for a long time, I decided to abolish my company's arrangement of offsetting severance payments with immediate effect. This approach will be maintained henceforth.

I boldly propose that the Government should set up an insurance fund to create an opportunity for breaking the deadlock. My proposal not only retains the system of severance payments for employees, but also alleviates the pressure on the business sector, particularly employers of small and medium enterprises. As an employer, I certainly understand that some employers indeed have no alternative but to dismiss their employees in times of adversity, and it is really not easy for employers to bear the cost of both MPF and severance payments. As the Government has an enormous surplus, it can consider acting as a go-between to help untie this knot, or else this knot will only become tighter and tighter with increasing tension.

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While Prof Nelson CHOW has proposed to abolish the system of long service payments, my amendment proposes to retain the arrangement of offsetting long service payments against MPF contributions. The difference between these two proposals is that under my proposal, if the amount of long service payment is rather large, the employee can benefit from the money left after the offsetting. I believe that most employers are willing to allow their employees to have more retirement protection. I hope that they will support my proposal.

Lastly, speaking of a move that does not find favour with either side, it is all about steering a middle course as advocated by the Chinese nation for several thousand years in its history. I have been a businessman for a long time, and I have only one golden rule for doing business: always aim for a win-win outcome, as there is definitely no way that a deal can be struck if one side wins all and the other side loses all. Members, regardless of whether you represent employers, employees, the business sector or the grass roots, I implore you to resolve this issue with great wisdom. I hope that all of you will spend a little time thinking about it, or we will just keep arguing. If everyone says "over my dead body" in these negotiations, how many more months and years do we have to wait before a consensus can be reached? Should this issue be brought up again for discussion at the next Chief Executive election? Will the Government go back on its word again five years later? Will there be further procrastination?

President, I so submit.

SECRETARY FOR LABOUR AND WELFARE (in Cantonese): I thank Mr WONG Kwok-kin for proposing this motion and also six Members, namely Mr Jimmy NG, Dr CHIANG Lai-wan, Mr Andrew WAN, Dr Fernando CHEUNG, Dr LAU Siu-lai and Mr Michael TIEN, for the amendments proposed. This presents a precious opportunity for us to gather views from Members of the new Legislative Council, especially those new Members, on a subject that is complicated and highly controversial.

First of all, let me give a succinct account of the protection in the form of severance and long service payments under the Employment Ordinance ("EO"), as well as the background of the offsetting arrangement under the Mandatory Provident Fund ("MPF") System.

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The protection of severance payment was introduced into EO in 1974 to make compensation to employees dismissed owing to redundancy so as to help alleviate their short-term financial hardship upon loss of employment. After that, given the huge gap in the amount of compensation receivable under the law by older employees dismissed for reasons other than redundancy after serving the same employer for a long period of time compared with employees dismissed owing to redundancy, and coupled with the fact that it was very often quite difficult for older employees to find a new job after dismissal, long service payment was introduced into EO in 1986 to compensate such employees. A number of amendments were subsequently made to the provisions on long service payment to provide compensation to employees under different circumstances. The offsetting arrangement was already in place when severance and long service payments were introduced allowing employers to offset their expense on severance and long service payments against the gratuity based on the length of service payable to an employee or the contributions made to a provident fund.

The Mandatory Provident Fund Schemes Ordinance ("the Ordinance") was implemented in 2000. The legislative intent behind the MPF System is to set up MPF schemes for the retirement benefits of people in employment. Along with the introduction of MPF schemes, the Ordinance allows employers to use the accrued benefits in an employee's MPF account derived from their contributions to offset the severance or long service payments payable to that employee (the offsetting arrangement), so that employers would not need to make payments twice.

At present, the MPF System, with a coverage of over 2.5 million employees, is one of the four pillars under the retirement protection system of Hong Kong as a whole, while the other three pillars are, namely various publicly-funded social security schemes, voluntary retirement savings-related insurance, as well as public services, family support and personal assets. In fact, given the growing elderly population of Hong Kong, the Government has persistently increased the resources dedicated to the elderly. In 2016-2017, the Government's recurrent expenditure on elderly services, social security and health care totals $67.3 billion, accounting for about 20% of its recurrent expenditure, so it shows how firmly committed the Government is to the elderly. All along, there have been views in the community that the function played by the MPS System as the second pillar of retirement protection of Hong Kong should be 566 LEGISLATIVE COUNCIL ― 10 November 2016 strengthened, and that the effect of retirement protection achieved under the MPS System will be undermined by the continual existence of the offsetting arrangement in its present form long term.

In fact, different sectors of the community have divergent views about the offsetting arrangement, which are poles apart so to speak. The labour sector is concerned about the offsetting arrangement reducing the accrued benefits derived from employers' MPF contributions, thus making strong calls for its expeditious abolition with a view to enhancing the retirement protection for employees. On the other hand, trade associations, employers' groups and enterprises in general are strongly opposed to abolishing the offsetting arrangement, holding that this will greatly add to employers' burdens and affect the business environment.

If we look at the figures on the offsetting of severance and long service payments against MPF benefits, I believe Members will agree that the issue must be addressed. In 2015 alone, $3 billion of MPF benefits derived from employers' mandatory contributions was withdrawn owing to offsetting, involving 45 300 employees. The amounts of severance and long service payments so offset amounted to $58,600 and $105,600 respectively for each employee. Since the introduction of MPF schemes, nearly $30 billion has been withdrawn owing to offsetting. The amount withdrawn owing to offsetting accounted for merely 5% out of the total worth of nearly $600 billion of MPF benefits, but to the employees affected by offsetting, the amount withdrawn owing to offsetting may take up half of the accrued benefits of their MPF accounts, and the impact of offsetting on low-income employees is even greater. As regards the retirement benefits for employees at large, the situation is definitely not satisfactory and we must tackle it.

Given the persistent and rapid ageing of Hong Kong's population, retirement protection is a pressing issue. Towards the end of last year, the Commission on Poverty ("CoP") launched a six-month public consultation on retirement protection to canvass views from the public on how the functions of each of the pillars under the existing retirement protection system can be strengthened, including the MPS System and the offsetting arrangement. I would like to emphasize that the said public consultation on the offsetting arrangement was initiated and proposed by the current-term Government, evident of the Government's determination to tackle this old, big and difficult issue.

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I believe Members will understand that the MPF offsetting arrangement is a very complicated and highly controversial issue. In conducting the public consultation, CoP remarked that the complexity of the issue should not be underestimated, and that it understood employers' concern about rising operating costs. CoP also stressed that dealing with the question of offsetting does not simply boil down to a choice between "retention" or "abolition". Should the offsetting arrangement be abolished, we must enable ample discussion in the community on when and how to do it and identify a way acceptable to both employers and employees so as to strike a suitable and reasonable balance between the interests of employees and employers' affordability. I hope that both employers and employees can adopt a rational and pragmatic approach with a sense of mutual understanding and accommodation in this course of the Government endeavouring to forge a consensus. The said public consultation ended in June this year, and the Government is now doing some careful analysis and studies on the views collected.

President, with regard to the part on offsetting severance and long service payments against MPF benefits in the motion proposed by Mr WONG Kwok-kin today, I shall stop here. The Secretary for Financial Services and the Treasury and I will make further responses after listening to the opinions of Members. Thank you, President.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, over the last 16 years since the implementation of the Mandatory Provident Fund ("MPF") System in 2000, the Government has introduced various enhancement measures from time to time to improve the effectiveness of MPF in the overall retirement protection system and strengthen the retirement protection for the working population.

The MPF System is one of the links of the retirement protection system in Hong Kong and it plays the role of Pillar Two under the retirement protection framework advocated by the World Bank. Compared with the situation where only one third of the working population enjoyed retirement protection before the MPF System was implemented, 85% of the working population (that is, over 3.2 million employees and self-employed persons) are now enjoying various degrees of retirement protection under the MPF System and other retirement protection schemes. As at August 2016, MPF contributions together with investment returns reached $646.6 billion. After deducting the fees and charges, the investment returns amounted to $133.6 billion since the implementation of the 568 LEGISLATIVE COUNCIL ― 10 November 2016

System, which means the annualized internal rate of return (net of fees and charges) was 3.2% and such a rate is higher than the annualized growth rate of the Consumer Price Index for the same period.

Since the Secretary for Labour and Welfare has briefly introduced the public consultation on retirement protection and the next stage of work on the offsetting arrangements, I will focus my speech on briefing Members on the work of the Government and the Mandatory Provident Fund Schemes Authority ("MPFA") with regard to perfecting the MPF System.

In the past 16 years, the Government and the MPFA have introduced various measures to consolidate the role of the MPF System as one of the pillars for retirement protection for the working population, including the "Employee Choice Arrangement" ("ECA"), increasing the flexibility in the withdrawal of MPF benefits, tightening the regulations concerning sales and marketing, strengthening the protection for the contributions of scheme members and a series of measures aimed at reducing the level of fees. The latter included tightening the disclosure requirement for the fees of funds, requiring the industry to launch low-fee funds, encouraging and facilitating the consolidation of MPF schemes, constituent funds and personal accounts, providing the Low Fee Fund List and a platform for comparing the fees and performance of funds as well as the service of trustees on the website of the MPFA, and so on.

Since the implementation of ECA, over half of the management fees of constituent funds have been reduced; nearly 40% of the constituent funds are low-fee funds (that is, funds with management fees not exceeding 1% or fund expense ratio not exceeding 1.3%); the fund expense ratio has also been reduced from 2.1% in 2007 to 1.56% at present, representing a decrease of over 25%.

The latest important reform initiative is the implementation of the fee-controlled Default Investment Strategy ("DIS"). Subsequent to the passage of the Mandatory Provident Fund Schemes (Amendment) Ordinance 2016 ("the Amendment Ordinance") in the Legislative Council in May this year, MPFA and the industry are actively preparing for the early implementation of DIS. The Government gazetted the Commencement Notice of the Amendment Ordinance on 14 October which specified that from 1 April 2017 onwards, each MPF approved trustee must provide a highly standardized and fee-controlled DIS in each MPF scheme as an option for all scheme members. The MPF accrued benefits of scheme members who have not made any investment choices will be invested according to DIS. The fee control consists of a management fee cap of 0.75% and an out-of-pocket expenses cap of 0.2%.

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DIS directly addresses the problems of "high fees and difficulty in making investment choices" and it is a significant step towards enhancing the MPF System. Since the passage of the Amendment Ordinance, we have also noticed the positive impact effected by the Amendment Ordinance on the MPF System overall. There has been a reduction in the management fees of another 45 constituent funds and consolidation of eight MPF schemes since the end of May this year. Subsequent to the implementation of DIS on 1 April next year, we expect the fee-controlled DIS to achieve a benchmarking effect and bring about further MPF fee reduction across the board.

President, I will give a consolidated and specific response after listening to the speeches of Members on the motion and amendments. My colleagues in the Government and MPFA will take into account the valuable views and suggestions given by Members when formulating plans to perfect the MPF System.

I so submit. Thank you, President.

MR TOMMY CHEUNG (in Cantonese): President, on behalf of the catering industry, I strongly oppose the motion moved by Mr WONG Kwok-kin, who calls for abolishing the use of the accrued benefits derived from the Mandatory Provident Fund ("MPF") to offset severance payments and long service payments.

During the Legislative Council election, the members of the trade with whom I had met were most concerned about the MPF's offsetting arrangement and standard working hours. They hoped that I would properly perform a gatekeeping role at the Legislative Council and never allow the proposals of the employees to go through, or the Secretaries to muddle their way through on passing these motions.

As we all know, payroll has all along made up a relatively large portion of the expenses in the catering industry of Hong Kong, accounting for about half of the expenses on average, or over 30% of the turnover (namely total revenue). In line with government statistics, these figures are not something I cite off the cuff, but what we have been seeing with our own eyes for years. For this reason, the abolition of the offsetting mechanism will deal a very heavy blow to the labour-intensive catering industry.

In recent years, given the double impact of minimum wages and high rentals, the catering industry has been operating under very difficult conditions. If the offsetting arrangement is abolished, those responsible enterprises will have 570 LEGISLATIVE COUNCIL ― 10 November 2016 to make provision for long service payments and severance payments of employees. Some members of the trade have relayed to me that many small and medium enterprises are struggling to survive. Given the lack of cash flows, it is simply impossible for them to set aside an extra amount of money as provision. If the Government is hell-bent on abolishing the MPF offsetting arrangement, it is totally indifferent as to whether members of the trade are alive or dead.

From a macro perspective, based on the number of employees in Hong Kong, the total provisions will far exceed the $3 billion MPF benefits drawn by the Mandatory Provident Fund Schemes Authority every year for the purpose of offsetting, which means that huge funds will be withdrawn from the market, dealing a further blow to the declining local economy.

Earlier, when members of the Liberal Party and I met with the Chief Executive on his policy address, we pointed out that the competitiveness of Hong Kong enterprises, especially those in the catering industry, was declining. We call on the Government not to take further measures to exacerbate the plight of the industry by increasing the operating costs of enterprises. Otherwise more restaurants will fold and eventually the employees, who are inextricable from the businesses, will also suffer.

I have pointed out time and again that the Government, when promoting the MPF scheme back then, had conducted adequate consultation on the offsetting arrangement. All stakeholders had reached a consensus after negotiation and compromise. It was precisely due to this offsetting arrangement that the opposition to MPF from business chambers and employers' groups had been significantly reduced.

The offsetting arrangement has been in place long before the launch of the MPF scheme. Under the Employment Ordinance, employers are already permitted to offset severance payments and long service payments with their contributions to pension scheme. Subsequently, this arrangement has naturally been incorporated into the MPF scheme. At the time when the Government was lobbying the trade, it said that the MPF scheme would also put in place an offsetting arrangement. It was only for this reason that many enterprises which originally contributed to provident funds would agree to switch to MPF.

Hence, I beg to differ with the employees who say all the time that the MPF offsetting mechanism has seriously eroded the hard-earned money of wage earners. On the contrary, if the Government is bent on abolishing the MPF LEGISLATIVE COUNCIL ― 10 November 2016 571 mechanism and requires employers to provide additional retirement protection for employees, the Government has in effect suddenly moved the goalposts. Employers, who are required to provide double benefits, will only be left with the impression that the trade has been betrayed. The credibility of the Government will be completely lost.

I have no objection to the Government's plan to increase the retirement protection of wage earners, but this has to be handled in a pragmatic way. That said, if the authorities turn a blind eye to the difficulties of the trade, especially those of micro, small and medium enterprises, in their attempt to win applause for the Government to the detriment of the trade and at the expense of our pockets, I will really find it unacceptable.

I should like to mention in passing that the Liberal Party and I surely support Mr Jimmy NG's amendment, which notes that "the industrial and commercial sectors resolutely oppose abolishing the offsetting mechanism". However, I have to add a footnote here. In his amendment, Mr NG claimed that the MPF offsetting mechanism has been "functioning effectively", leaving people with the wrong impression that the MPF scheme is free of problems. In the past decade or so, I have time and again raised many views on the MPF mechanism in this Chamber―high fees; low returns; enriching only fund managers and bankers; and leading to widespread discontent among wage earners. It has been reported that the annual fees amount to several billion dollars a year, meaning that the fees of the past 10-odd years add up to $20 billion to $30 billion. However, if memory serves, the management fees were as high as $50 billion to $60 billion. But now the spearhead is aimed at employers. I therefore support a comprehensive review of the MPF scheme in order to provide the right remedy for the problems.

Some colleagues pointed out in their speeches just now that wage earners should retire with dignity, and the MPF's offsetting arrangement should thus be abolished. For many years, our parents and many Hong Kong people of our age live on their own savings after retirement or depend on their children, but not on MPF. No MPF has ever guaranteed that wage earners can live with dignity upon retirement. As a result, I do not consider this will justify the abolition of the offsetting arrangement. Frankly speaking, even with the abolition of the offsetting arrangement, wage earners will still be unable to have a dignified retirement by relying on MPF alone. It is safer for us to have more savings.

Thank you, President.

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MR POON SIU-PING (in Cantonese): President, first of all, I declare that I am a non-executive director of the Mandatory Provident Fund Schemes Authority ("MPFA"). That is a voluntary service not involving any advantage. Today, I speak on behalf of the labour sector to ask the Chief Executive and the current-term Government to make good of their promises. I support the motion of Mr WONG Kwok-kin. Obviously, the offsetting mechanism of Mandatory Provident Fund ("MPF") is a loophole in the system which not only weakens the function of MPF as a pillar of retirement protection, but also erodes the entitled benefits of employees such as severance payments. The Chief Executive ought to honour his election pledge and abolish the MPF offsetting mechanism.

It is a well-known fact that under the MPF offsetting mechanism, many wage earners cannot get the full amount of their severance and long service payments. According to the report of MPFA, the total offsetting amount, the average offsetting amount and the number of offset cases have been on the increase year on year. In 2015 alone, there were already 45 300 offset cases, representing an increase of 4% as compared with 2014; the offsetting amount reached $3.37 billion, representing an increase of $348 million; the average offsetting amount has even increased to exceed $70,000. President, I must point out that these amounts are not just figures, they are the compensation that wage earners are entitled to for their hard work. However, under the offsetting mechanism, over 90% of employers' contributions to MPF of the affected employees have been offset, seriously weakening the function of MPF as a retirement protection for employees. Chief Executive LEUNG Chun-ying pointed out clearly in his election manifesto that he 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". Regrettably, while the term of office of the Chief Executive will soon expire, no proposal has been introduced after a delay of four years. So far, the community has only been consulted on the policy direction. I am disappointed about this.

The Federation of Hong Kong and Kowloon Labour Unions ("FLU") has all along been demanding the expeditious abolition of the offsetting mechanism. We do not agree to abolish long service payment and replace severance payment with unemployment insurance fund. In its paper submitted to the Council this February, the Government has already pointed out clearly the policy intents of severance payment and long service payment: while the former means to alleviate employees' short-term financial hardship upon loss of employment, the latter is to LEGISLATIVE COUNCIL ― 10 November 2016 573 make up the insufficiency of severance payments by providing compensation to long-serving employees upon dismissal. Obviously, neither of them has the nature of a provident fund. Now, the Government treats the two kinds of payments as one and complicates the policy, which is not conducive to solving the problem. We reiterate that besides employees and employers, the Government is also responsible to tackle this problem which has been delayed for years, and it should put in resources to solve this problem.

As regards unemployment insurance, the labour sector has all along been demanding the Government to establish an unemployment assistance mechanism. As in the case of FLU, we have been suggesting the Government since 2010 to establish an unemployment loan fund to provide immediate assistance in the form of a short-term low-interest lump sum or interest-free lump sum to those who lost their jobs, so as to alleviate their financial hardship and at the same time, spare the Government from huge financial burden. Nevertheless, this does not mean long service and severance payments should be abolished. In our view, both issues ought to be dealt with separately.

On refining the MPF System, the "Default Investment Strategy", commonly known as "core fund", will be implemented in April next year. While lowering the management fees of MPF, it will also offer a balanced investment option to those wage earners who are not good at investment. I welcome such changes, but they still cannot meet the needs of the community. The most obvious case is that MPF fails to protect non-working people such as housewives. I once again ask the Government to plug this loophole by extending the scope of protection to set up MPF accounts for non-working people and make the minimum contributions for them, thus further refining the MPF System.

President, I hereby reiterate that the MPF offsetting mechanism, a loophole that has existed for a long time, should be abolished. While the Chief Executive should honour his election pledge, the Government has to play a role and bear responsibility in protecting the rights and benefits of employees. It should duly put in resources to solve the MPF offsetting problem, and should not employ the delaying tactic to blur the focus.

President, I so submit.

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DR CHENG CHUNG-TAI (in Cantonese): President, first of all, I have to state my position. I believe the abolition of the Mandatory Provident Fund ("MPF") System is a must and the Hong Kong Government should undertake long-term planning for the future of Hong Kong people and the retirement protection system for them. This alone is the ultimate solution.

Since the implementation of the MPF System more than a decade ago, many problems related to it, in particular, such problems as high management charges and low transparency, have been targets of criticisms. The Government has also amended the Mandatory Provident Fund Schemes Ordinance a number of times in response to public grievances and discontents. However, the amendments on each occasion had the opposite effect of exposing the shortcomings of MPF even further, thus making us consider it necessary to make amendments or even abolish the MPF scheme. For example, the Government implemented the Employee Choice Arrangement in 2012 but it is obvious that the relevant amendments could not achieve any result. A report published earlier this year points out that in 2015-2016, the MPF schemes recorded an overall loss of -8.2%. In other words, each wage earner suffered a loss of $20,000 on average. If the amendments on each occasion were effective, why do the figures tell us that the hard-earned money of Hong Kong people has failed to afford them any long-term retirement protection? The hard-earned money of 7 million Hong Kong people was mandatorily invested in the capitalist markets throughout the world, with fund companies and insurance companies being given a free rein to gamble in this casino. The most unfortunate point is that when wage earners have suffered losses, they do not even know it.

This motion moved by Mr WONG Kwok-hing today is precisely intended to address the problem of the offsetting mechanism under MPF. However, this subject matter is actually a false proposition. The MPF System should not be used as a means to offset the severance payments and long service payments under the Employment Ordinance. When employers encounter difficulties in business operation or cannot continue to operate in the face of such factors as exploitation by consortia or real estate developers or increases in costs or rents, they should assume responsibility for their business failure. They should voice their discontent to the SAR Government, rather than further rob wage earners in dire straits. For this reason, severance payments and long service payments absolutely should not become a source of finance, of which employers can rob employees in distress, by way of the offsetting mechanism.

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In view of the foregoing arguments, including the fact that the MPF System cannot serve the purpose of providing retirement protection, and the discussions related to the offsetting mechanism, I believe all such discussions are impractical because we should abolish the MPF System altogether. Not only has this System failed to protect wage earners, it even forces Hong Kong people to take part in gambling, so it is counter-productive. Not only does it cause wage earners lose their hard-earned money; such people as housewives are also excluded from the protection of the MPF System. It even permits fund companies and insurance companies to gamble in the "casino" with the incomes of the breadwinners of families. Various figures tell us that the MPF System is totally incapable of providing any retirement protection; quite the contrary, it prevents wage earners from improving their lot.

This is a motion with no legislative effect. My position is that of demanding the abolition of the MPF System. For this reason, I will not take part in the voting on this motion. I hope Members can gain a clear understanding of the relevant problems. Thank you, President.

PRESIDENT (in Cantonese): Dr CHENG Chung-tai, let me remind you that the motion on which you spoke was moved by Mr WONG Kwok-kin rather than Mr WONG Kwok-hing, a former Member of the Legislative Council.

MR JEREMY TAM (in Cantonese): Honourable colleagues, I speak in support of abolishing the offsetting mechanism under the Mandatory Provident Fund ("MPF") System.

The original intent of MPF is to enable employees to have some savings at their disposal when they go into retirement. This is one of the five pillars of retirement protection advocated by the World Bank. Unfortunately, ever since the implementation of MPF 15 years ago, a puzzling policy that allows employers to offset employers' contributions to MPF against the severance payments and long service payments that they are originally required to make has all along been in place.

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As a result, some $26 billion in contributions were offset for no sound reason in the course of the 15 years since the implementation of MPF. Of all MPF accounts, the employers' contributions in 67% of them were completely offset.

If we wish to discuss whether or not the offsetting mechanism should be abolished, we should take a look at the original purpose of the severance payments and long service payments first. As early as 1995, when the Mandatory Provident Fund Schemes Bill was being scrutinized by the Legislative Council, then Member of the Legislative Council Mr LEE Cheuk-yan already elaborated on this in detail.

The introduction of the severance payment is intended to protect wage earners who are laid off, so that they can have a sum of money to tide over difficult times, whereas the original intent of the long service payment is to provide protection to dismissed workers who have performed great lengths of service, so that they will not be empty-handed after working for the same employer for several decades. In sum, severance payments and long service payments are intended to ease the hardship of employees as a result of dismissal, whereas MPF is designed to protect the living of employees gone into retirement.

It can thus be seen that when compared with severance payments and long service payments, MPF has a very different objective in terms of providing protection. If they are offset against each other, to put it more colloquially, they are on two entirely different planes of existence. Not only does this undermine the retirement protection for employees, the protection they get upon dismissal is also reduced.

In fact, the formulation of this offsetting mechanism back then was nothing other than a policy blunder and it can even be described as a political deal that betrayed wage earners. Back then, there was only one ground for the Government's proposal for offsetting, that is, the offsetting mechanism was an "established practice". I really do not understand it. Does "established " mean being correct? That was a lie to deceive the public. Back then, it was under private provident funds that offsetting was allowed but employees could withdraw their benefits when they quit, whereas under MPF, it is stipulated that employees can withdraw their benefits only when they retire. LEGISLATIVE COUNCIL ― 10 November 2016 577

The authorities, in high-handedly transplanting the offsetting system to the MPF System, again tried to place two things on entirely different planes of existence together. In fact, the Government had only one underlying motive in doing so, that is, to make a political deal with the business sector.

Back then, the Government formulated the offsetting mechanism and in doing so, handed over wage earners' interest to employers in exchange for the latter's consent to implement MPF, so that was essentially a compromise proposal that the labour side was forced to accept, thus injuring wage earners' interest. The Government bullies the meek and fears the strong, so it only bullies wage earners but is afraid of standing up to businessmen.

Today, a number of Members seek to make LEUNG Chun-ying, whom they once supported, right the wrong by honouring the promises made by him when he ran in the election. In fact, this is a debt of blood owed wage earners by the Government as a result of its betrayal of wage earners. It is now time the Government settled the bill. Even if we can right the wrong successfully, this does not amount a benevolent measure introduced by LEUNG Chun-ying, so there is no need to thank him in particular because this policy is wrong per se. In 1995, the Government undertook to conduct a long-term review of the offsetting mechanism but 20 years have passed and the review is still in progress.

I also hope that Members representing the business sector can think about this issue carefully. They should not say all the time that abolition of the offsetting mechanism means employers have to pay two sums of money and feel aggrieved as a result. In response to this, may I ask why employees should not receive two sums of money? The two types of protection are different. Does it mean that if one has had lunch, one does not need a dinner? Surely one has got to have at least two meals a day? This is perfectly normal.

If the business sector thinks that employers' contributions to MPF are purely intended for the payment of long service payments and severance payments, why do we not simply mandate employers to set up accounts on their own for saving purposes, rather than depositing them into wage earners' MPF accounts as a pretence of caring for wage earners? Does the business sector like to put up a show of kind-heartedness in this way? I believe this is not the case.

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Some Members even said that the offsetting mechanism is functioning well. During the discussions on a number of occasions in the past, various political parties and groupings pointed out that the offsetting mechanism definitely was problematic. In particular, I noticed that some Member proposed the incorporation of some retirement plans into insurance policies and requested the Government to foot the premiums. In fact, we can have more in-depth discussions in this direction but unfortunately, the Member putting forward the relevant proposal did not elaborate in greater detail or calculate the actual sum that the Government has to bear. This would probably be a rather substantial expenditure.

Members, we have to ask ourselves if we want wage earners to toil throughout their lives and upon retirement, are left with only the 5% of contributions made by them to their MPF accounts?

I support the original motion and the amendments proposed by Mr Andrew WAN, Dr Fernando CHEUNG, Dr LAU Siu-lai.

I so submit.

MR NATHAN LAW (in Cantonese): Members, many debates have been held in this Council about motions on the offsetting mechanism under the Mandatory Provident Fund ("MPF") System in recent years. The two motions proposed, one by Mr WONG Kwok-kin in 2010 and another by Mr TAM Yiu-ching in 2011, called on the Government to review the offsetting mechanism under the MPF System and were passed in this Council. However, the two follow-up reports at the time made no mention of abolishing the offsetting mechanism and declined to launch the relevant work, citing a lack of consensus. It was not until LEUNG Chun-ying's bid to seek re-election in the last several months that he made some high-profile remarks about his hope to identify a solution to offsetting under the MPF System within his term of office. He touched base with different parties for the sake of canvassing votes for himself. Members of the public might think that it was better late than never, but the Government's proposal was for the abolition of long service and severance payments and their replacement by unemployment insurance, which is really disappointing.

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A report released by the Commission on Poverty this year shows a rising trend in the poverty population, but the Government's solution is to abolish long service payments, which makes life even harsher for the grass roots who are already living in an immense plight, especially for the elderly. Therefore, many people call this Council a "Rubbish Council"1 which fails to introduce concrete policies for the benefit of the people, and such an argument holds water. We should all feel ashamed. The Government is also responsible for that, because regardless of how many times this issue has been debated in this Council, how much elected Members wish to protect public interest or how many motions have been passed, the Government, which lacks a popular mandate, can still turn a blind eye to it.

The core question of the offsetting mechanism as a whole lies in various unrelated labour interests being placed in a single pot. The three types of labour interests have different objectives: unemployment protection is available for a worker to maintain a certain standard of living after losing his job; retirement protection protects the retirement life of the elderly; and employment protection prevents employers from dismissing employees at will. However, under the offsetting mechanism, the MPF System, allegedly run on the premise of two parties making contributions together, is actually just a means for employers to make contributions for settling severance payments. As money is already paid, employers can dismiss employees at no additional cost, thus in a way undermining the employment protection for workers. In addition, as the benefits accrued in employees' MPF accounts have been offset, their retirement protection under this mechanism is also greatly affected.

It was pointed out in a relevant report of this Council that the median age of employees affected by offsetting was 50, and most of them were grass-roots workers earning less than $7,100 a month, so their MPF accounts only comprised employers' contributions. After their severance or long service payment is offset, not much would be left to support their retirement life in their twilight years. In 2015, there were 1 100 cases where an employee's MPF account balance was reduced to zero after offsetting. Under such a deformed system,

1 In Cantonese, the pronunciation of "立法" (legislative) is similar to that of "垃 圾" (rubbish). 580 LEGISLATIVE COUNCIL ― 10 November 2016 our call for abolishing the offsetting mechanism is a rather mild and humble demand that will help re-establish the three aforementioned labour interests for the protection of grass-roots employees.

Hong Kong's Gross Domestic Product has kept growing since 1997, but its Gini Co-efficient has risen from 0.47 to 0.53. It tops among advanced regions when it comes to the wealth gap, and the starting salaries for its university graduates have dropped 17%. The Hong Kong community is characterized by an extremely uneven distribution of wealth and income. It is utterly ridiculous for people to settle their severance payments with their own retirement benefits. In addition, employees are made redundant or dismissed very often not because of their own problems but because of the socio-economic conditions. If such cost is passed onto workers, it will show how heartless the Hong Kong community is. A study by the Legislative Council Secretariat also pointed out that such a heartless offsetting arrangement is existent in no other country. Hong Kong is really a global leader in terms of exploitation of workers.

As many Members said earlier, every time the offsetting mechanism is made a question of debate, the business sector will very often resort to the argument that the Government used the offsetting mechanism as a chip to win the support of the business sector when the Mandatory Provident Fund Schemes Bill was passed in 1995. First of all, it was just a pact with the devil between the business sector and the Government rather than a consensus of the community. More importantly, it is now 2016 and the economy of Hong Kong has been growing over the past 20 years, but grass-roots workers remain unable to share the fruits of economic development. In the face of the problems of population ageing and poverty, should we still stick to the old rules by not reviewing this decision and not doing anything at a cost with regard to this devilish pact? Should we continue to connive at people singing praises of the economic fruit achieved in Hong Kong but turn a blind eye to the problems faced by workers? As a member of the younger generation, I find this absolutely unacceptable.

I strongly oppose the amendment proposed by Mr Jimmy NG, who represents the Industrial (Second) Functional Constituency. It is claimed in the amendment that the offsetting mechanism is "functioning effectively". The business sector has surely gained a lot from the offsetting mechanism, which has LEGISLATIVE COUNCIL ― 10 November 2016 581 allowed them to pay $29.2 billion less, but one should not forget that this $29.2 billion comes from the benefits in relation to workers' long term of service and them being made redundant. A penny's loss to a worker will become a penny's gain to the business sector. Workers receive no extra pay for overtime work and lack retirement protection, and the hard-earned money of wage earners is eaten up by the offsetting mechanism. That a Member returned by zero vote proposes such an amendment demonstrates how bad the political system of Hong Kong is. I also object to the amendment proposed by Dr CHIANG Lai-wan. In addition, I agree to each of the amendments proposed by Mr Andrew WAN, Dr Fernando CHEUNG and Dr LAU Siu-lai. As regards the pledge made by LEUNG Chun-ying in his election manifesto, no relevant studies have ever been conducted over the past five years, and even the Hong Kong Federation of Trade Unions is asking him to honour his pledge. It is not until the election is imminent that a crappy package of abolishing long service and severance payments is proposed. That is unacceptable indeed.

I hope that the business sector and the Government should not always see protection for workers as a kind of loss. The Government always mentions the need to identify a solution to population ageing, but it is actually not an isolated problem. All along, grass-roots workers in the community need better protection, rights and interests. We collectively make this call for universal retirement protection and implementation of the "2064 proposal" such that the elderly in Hong Kong will be able to spend their twilight years with peace of mind and that the benefits accrued in the MPF accounts of many in the middle and lower classes (The buzzer sounded) …

PRESIDENT (in Cantonese): Mr LAW, please stop speaking and sit down.

MR NATHAN LAW (in Cantonese): … will suffice to support their living continuously.

I so submit.

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MR ALVIN YEUNG (in Cantonese): President, on behalf of the Civic Party, I speak in support of the motion on "Abolishing the Mandatory Provident Fund offsetting mechanism" moved by Mr WONG Kwok-kin.

Our Party has always been opposed to the arrangement that allows the offsetting of severance payments and long service payments with Mandatory Provident Fund ("MPF") accrued benefits. In our view, the original intent of setting up MPF was to protect the retirement life of wage earners. But the existing MPF offsetting mechanism has put the cart before the horse, which serves to protect the interests of employers.

President, the offsetting mechanism has severely altered the original intent of MPF. MPF has become a fund for employers to make severance payments. At present, except under special circumstances stated in the law, MPF does not allow wage earners to make early withdrawal. But ironically, the offsetting mechanism has conferred privileges on employers. When they wish to lay off their staff members, they can draw on MPF to make severance payments. In that case, MPF has in turn become a fund for employers to make severance payments.

Earlier on, an Honourable colleague mentioned that MPF had a history of 15 years, and up to $28 billion of contributions were used for offsetting purposes. In fact, the submission of the Mandatory Provident Fund Schemes Authority to the Commission on Poverty also mentioned that among the cases in which MPF benefits were offset in 2015, the amount of offsetting claims accounted for 51% of the account balance or 93% of the employer's portion of account balance on average. President, what does it imply? That means almost all the employer contributions have been washed away. In that case, what is the actual responsibility borne by employers? And how much protection is left for wage earners?

President, Hong Kong cannot be considered a welfare society. The protection for grass-roots workers by the Hong Kong Government has been little, and in fact, the local economic structure also puts grass-roots employees in a most unfavourable position. The MPF offsetting mechanism has further deprived wage earners of their due protection and compensation. Appalling cases are commonplace in society: When grass-roots workers work for unscrupulous employers, they will be retrenched time and again, and their MPF benefits will LEGISLATIVE COUNCIL ― 10 November 2016 583 continually be offset. Moreover, staff members on contract terms are subject to a more far-reaching and serious impact inflicted by the offsetting mechanism. When they reach retirement age, they will have hardly any MPF balance left.

If we take a step back, we will clearly see the need to abolish functional constituencies ("FCs") in the existing political system because of the presence of the MPF offsetting mechanism. Reviewing history, in those days, the Government particularly permitted the offsetting of severance payments and long service payments with MPF benefits only because it had to secure support from those FCs, the members of which were employers, for the MPF System. Certainly, apart from those FCs representing the business sector, the Hong Kong Federation of Trade Unions ("FTU"), which participated in the negotiation as the labour representative back then, should actually bear a certain share of the responsibility. In the negotiation between employers and employees back then, CHENG Yiu-tong of FTU eventually accepted the MPF offsetting arrangement, which still wreaks havoc today. Employers have so far made no compromise at all, reluctant to abolish the offsetting arrangement.

President, as members of a political party with conscience, we are obliged to oppose the amendment proposed by Mr Jimmy NG. According to Mr NG's amendment, the MPF offsetting mechanism has all along been "functioning effectively". I believe he has made such a remark probably because he just sees employers as Hongkongers. In fact, such a remark made by Mr NG is really way too Westminster Bubble―divorced from the people. I believe the general public in Hong Kong, especially wage earners or people whose MPF benefits have been offset, can hardly feel that it has been "functioning effectively" as claimed by Mr NG.

In fact, will the abolition of the MPF offsetting mechanism add substantial pressure to business operation? In a commentary on the MPF offsetting mechanism, Prof WONG Yue-chim of the University of Hong Kong also particularly stressed that it actually allowed employers to pass on the cost of severance payments and long service payments to employees. The burden of severance payments and long service payments is supposed to be borne by employers, which should not constitute any so-called business pressure. They should not use it as such a high-sounding excuse for not abolishing the offsetting arrangement.

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President, our Party also opposes the amendment proposed by Dr CHIANG Lai-wan. In our opinion, the burden of making severance payments and long service payments to employees should be borne by employers. It is totally inappropriate to be borne by taxpayers through the Government.

We also find it hard to support Mr Michael TIEN's amendment. We consider that the provision of long service payments is a responsibility of employers to employees, as well as a kind of labour protection stipulated in the Employment Ordinance. We really see no reason why the offsetting of severance payments can be abolished on the one hand while the offsetting of long service payments is retained on the other. This absolutely does not hold water.

As mentioned by a number of Honourable colleagues earlier on, the incumbent Chief Executive LEUNG Chun-ying stated during the election campaign in 2012 that he would "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". Regrettably, while four years have passed and his remaining term of office is actually less than one year, the Government has not shown us the slightest intention to honour this pledge. Certainly, we are extremely dissatisfied with this and wish to condemn the Chief Executive here for having taken no action so far.

President, before concluding my speech, I wish to remind Members representing the business sector that I do not believe the business sector will act in such a selfish way, nor do I believe the business sector will think that they can evade the responsibility by using the offsetting mechanism as a shield. In fact, I think the existing offsetting mechanism is also tremendously unfair to the general businessmen in Hong Kong. Certainly, under the system, they must exhaust their rights. But is it possible that they also wish to shoulder corporate responsibilities? I hope the Government can hear our voices, and allow members in the business sector to do their part as conscientious enterprises, so that they can be a role model to show that Hong Kong is still a place where there is conscience.

I so submit. Thank you, President.

LEGISLATIVE COUNCIL ― 10 November 2016 585

MR FRANKIE YICK (in Cantonese): President, the original intent of the introduction of the Mandatory Provident Fund ("MPF") System is to provide financial protection for the retirement life of employees, but the effectiveness of the System, which has been implemented for almost 16 years, has all along been questioned. There are many views and comments against the MPF System in society. The most scathing criticisms include the exorbitant administrative fees eroding the pensions which the contributors may withdraw in the end, and unsatisfactory returns and even losses recorded. In 2015-2016, MPF schemes recorded a loss of 8.2% with more than HK$50 billion evaporated. It is estimated that each employee has thus lost nearly HK$20,000. Hence, it is indeed doubtful whether the MPF System can sufficiently serve as retirement protection for employees. Given the inadequacies of the System, there are incessant calls for reform in society.

After a number of amendment exercises, the MPF System has currently implemented "semi-portability" under which employees may choose their own MPF trustees. They may also make early withdrawal of the MPF accrued benefits under specific circumstances, or choose to withdraw them at one go or in phases. Moreover, in the last legislative session, the Legislative Council approved the introduction of the "Default Investment Strategy" and downward adjustment of fund management fees. Nevertheless, there is still a more demanding proposal in society for abolishing the mechanism of offsetting long service and severance payments against the MPF accrued benefits being the employers' contributions.

The offsetting arrangement is not a new arrangement. As early as 1974 and 1986, severance and long service payments were respectively introduced under the Employment Ordinance. At that time the Government allowed employers to use provident fund benefits to offset severance and long service payments. For this reason, when the Government launched the MPF System, it similarly allowed an offsetting mechanism for MPF. Some people have commented that the present MPF offsetting mechanism has in effect washed away the benefits being wage earners' contributions. They have even commented that as at the first quarter of this year, $29.2 billion has been washed away. I consider such comments misleading because under the offsetting mechanism, all the contributions and accrued benefits in MPF accounts are simply transferred to the wage earners' savings accounts earlier. That means an early withdrawal, rather than being washed off. However, the availability of an 586 LEGISLATIVE COUNCIL ― 10 November 2016 offsetting mechanism does not mean that employers absolutely need not follow up anything. If an employer's contributions and their accrued benefits are not sufficient to pay the required amount, the employer will still have to meet the shortfall.

Now Hong Kong is experiencing an economic downturn. Take the freight forwarding and logistics industry which I represent as an example. The cargo throughput in Hong Kong has dropped for 26 months in a row, but business costs have continuously surged, making business operation in the freight forwarding industry increasingly difficult. The Financial Secretary has repeatedly indicated that given the encumbrances of global economic uncertainties, it is estimated that the Hong Kong economy can only maintain slow growth. It is believed that the overall economic situation in Hong Kong will hardly show any signs of improvement in the short run. With the slack economy and continual reduction in cargo throughput, most of the operators in my sector, which are small and medium enterprises ("SMEs") and micro-enterprises, have tightened their belts. While employers are struggling hard in their business operation, if the Government now implements the abolition of the MPF offsetting mechanism, they will have to bear the dual burden of continuing to make MPF contributions and making provisions for employees' long service or severance payments. It will only add to the miseries of the industry and even give rise to a spate of business closures.

If the Government is bent on abolishing the MPF offsetting mechanism, it cannot be ruled out that the following situations will emerge: first, many SMEs will take early actions to dismiss some non-essential employees with long years of service in order to save the costs of compensation. Second, to avoid making enormous severance or long service payments, employers may hire additional contract staff to replace full-time staff, thus hindering the development of the labour market. Third, employers in SMEs may fail to make severance or long service payments owing to the liquidity crunch, thus leading to an increase in the number of default cases.

The MPF offsetting mechanism was a consensus reached after extensive consultation during the review of the MPF arrangements back then. The mechanism aims at reserving a sum of money for employers so that they will not be unable to make enormous severance or long service payments to their employees owing to any future business problems. SMEs, accounting for 98% LEGISLATIVE COUNCIL ― 10 November 2016 587 of the Hong Kong market, do not have a lot of liquid capital. Back then, many enterprises supported the implementation of the MPF System only because the offsetting mechanism could be maintained. It is absolutely unfair to the approximately 300 000 employers in the SMEs and micro-enterprises in the whole territory if the then agreement is overturned now. It will also add to the miseries of the SMEs which are already in dire straits and bring far-reaching impact on their operations. SMEs are the mainstay of Hong Kong. Any policy which affects the business environment of SMEs will also cause adverse impacts to the Hong Kong economy.

(THE PRESIDENT'S DEPUTY, MS STARRY LEE, took the Chair)

The MPF System alone is certainly insufficient for providing retirement protection, and the World Bank has also suggested applying a multi-pillar retirement protection model to make up for each other's deficiencies. In fact, the Government should not completely shirk the responsibility of retirement protection onto the business sector, only fleecing the employers. Rather, it should assume a considerable part of the responsibility for the retirement protection issue. Given that the Government's Exchange Fund and reserve have now reached $3,000 billion, will the Government consider ear-marking part of the reserve as a seed fund designated for retirement protection? It is only through a multi-pronged approach can members of the public receive the best retirement protection.

Deputy President, I so submit.

MR YIU SI-WING (in Cantonese): Deputy President, I rise to speak against the motion on "Abolishing the Mandatory Provident Fund offsetting mechanism" proposed by Mr WONG Kwok-kin.

Let us recap some history. Amendments were made to the Employment Ordinance respectively in 1974 and 1986 to provide for the provision of severance and long service payments to eligible employees. The legislative intent was to protect employees' legitimate interests. Under the then economic environment and social atmosphere, both employers and employees were willing 588 LEGISLATIVE COUNCIL ― 10 November 2016 to accept the amendments. Following social advancement, various parties began to show concern for the lack of retirement protection for employees. After a long period of discussion, the Government, employers and employees eventually reached a consensus on the implementation of the Mandatory Provident Fund ("MPF") System, under which employers and employees would each make an 5% contribution on basis of the latter's income. To avoid adding to the employers' burden and to seek their support, during the negotiation process the Government promised that the MPF accrued benefits could be used to offset severance and long service payments. Eventually, the Mandatory Provident Fund Schemes Ordinance was passed in 1995 and came into operation at the end of 2000. The successful implementation was the result of mutual understanding among the Government, employers and employees and the tripartite preparedness to address the reality.

The MPF System has been implemented for over a decade. There are in general strong views in society about the failure of MPF to achieve the original purpose of protecting employees' retirement life. Firstly, the return rate of MPF schemes is low. According to the information of the Mandatory Provident Schemes Authority, since the establishment of the MPF System, the average annual return rate is only 2.6%, and individual years of economic downturn have even seen a high rate of loss. For example, last year the loss reached 8.2%, equivalent to $5.1 billion. Secondly, MPF has failed to achieve the effect of retirement protection. Many low-income employees find, only upon retirement, that the protection is seriously insufficient since they are exempt from making contributions or the amounts of their contributions are small. However, employers are not to blame for these. The lack of retirement and MPF protection for employees is caused by the Government's then miscalculation and its ineffective regulation. Over the years, employers have fulfilled their duty of making contributions in accordance with the statutory requirements. It is an unreasonable arrangement to require employers to shoulder the responsibility for the Government's past mistakes and enhance the protection for employees through an abolition of the offsetting mechanism today.

Deputy President, at present there are 320 000 small and medium enterprises ("SMEs") in Hong Kong, employing 46% of the total employed population in commercial organizations, comprising about 1.3 million people. An abolition of the offsetting mechanism will cause an immense impact on the SMEs, directly imposing a heavy burden which will also adversely affect the LEGISLATIVE COUNCIL ― 10 November 2016 589 employees. As we all know, the present economic environment in Hong Kong is just so-so. Most of the SMEs have difficulties in carrying on their business and hardly hold much reserve. People who have operated a business will know that many business operators will spend money ahead of their income. It is very common for enterprises to make purchases on credit because of insufficient liquid capital.

If the offsetting mechanism is abolished, responsible employers will be compelled to hold a reserve by reducing their investment or securing loans so as to raise sufficient money to cater for the making of severance and long service payments. Suppose a medium enterprise has hired 20 employees whose length of service is 10 years on average. Using the median wage of $15,500 as the basis for calculation, the enterprise will have to reserve some $2 million. The greater the number of employees with long years of service, the greater the amount of money the enterprise will need to reserve.

If the employers find themselves incapable of resolving the reserve problem, the following situations, I believe, may arise: employers who are unable to raise such money may have no choice but to reduce the business scale or even fold the operation. Be it a reduction in the scale of the company or business closure, those who are affected the most will definitely be the staff. If the SMEs consequently close down one after another like dominoes, it will seriously affect the economic vitality, industrial ecology and social stability in Hong Kong. While members of the public will have fewer choices of consumption, monopolization by major enterprises will even come into existence.

Another possibility is that before the implementation of the law, a company will first lay off employees with long years of service and then hire them afresh. Every time an employee's length of service approaches five years, it will sign a new contract with him or recruit a new employee. In this way, it seems the enterprise is able to resolve the problem brought by the abolition of the MPF offsetting arrangement, but in reality, it will have counter-effects. Employees who remain in their jobs will lack a sense of belonging because their welfare has been compromised, and it will be difficult for them to maintain good performance. Labour disputes will also be aroused easily, injuring the employer-employee relationship. If a company frequently replaces its employees with new ones, repeated recruitment and training exercises will also mandate the injection of a large amount of resources, which will certainly affect 590 LEGISLATIVE COUNCIL ― 10 November 2016 the company's business performance. Hence, an abolition of the offsetting mechanism will only further undermine Hong Kong's competitiveness in the long term.

Deputy President, as Mr Jimmy NG has pointed out in his amendment, "on the premise of ensuring that Hong Kong's business environment and employment market will not be challenged and social resources will be fairly utilized", we should "comprehensively review the MPF scheme". Only then will the core problem be resolved. Mr WONG Kwok-kin's proposal merely requests abolition of the MPF offsetting mechanism from the angle of the labour sector without considering the overall interests of Hong Kong society and the price payable. Neither does it make any objective analysis of the deep-rooted conflicts which employers and employees may consequently face. I hope the Government will conduct an in-depth exploration and listen to more views of different stakeholders. Do not abolish the MPF offsetting mechanism under pressure. Instead, it should carry out further studies on the existing retirement protection issues.

Deputy President, I so submit.

MR LUK CHUNG-HUNG (in Cantonese): Deputy President, may I ask the Secretary if he knows the nickname given to the Mandatory Provident Fund ("MPF") by the community as a mockery of it? I just want to know whether the Secretary can feel the public pulse or he is detached from reality. The MPF (強 積金) is nicknamed "Oppressive Fund" (強迫金)2. Why is it called as such? Because everyone is making his contributions most unwillingly. The original intent of introducing the MPF is to provide retirement protection with a positive vision to Hongkongers. Years ago I obtained the qualification to become a licensed MPF Intermediary and back in the late 1990s when I sit for the licensing examination, the vision then was that a person who started to make contributions in his twenties would have accumulated several million dollars or even become a billionaire upon retirement, meaning that his retirement would definitely be assured of protection. However, the reality was that the MPF yields a low return and incurs high fees. This, coupled with the offsetting arrangement, has poked

2 "MPF" (強積金) in Cantonese rhymes with "Oppressive Fund" (強迫金). LEGISLATIVE COUNCIL ― 10 November 2016 591 holes in the pocket of retirement protection. How can we live well in retirement? Certainly, after the improvement of the MPF, we still have to continuously fight for retirement protection.

Turning back to the point at issue, MPF is fraught with loopholes. It has become not only a money-spinner for bankers and the fund industry, but also an automated teller machine for employers. The offsetting of severance payments and long service payments with MPF contributions alone has washed away $29.2 billion. Here, let me provide some supplementary information on the history of the devlepment of the relevant labour legislation and in the meantime, I wish to remind Mr Alvin YEUNG of it, for he may not know it too well. In fact, the Federation of Trade Unions ("FTU") has all along been championing for the abolition of the MPF offsetting mechanism. In 1997 when the Provident Fund Schemes Legislation (Amendment) Bill 1997 was scrutinized by the Legislative Council, CHAN Yuen-han of FTU already proposed an amendment seeking to abolish the arrangement for offsetting long service payments and severance payaments with MPF contributions. There is such record in the archives of the Legislative Council, so it brooks no besmirching and attempts of taking advantage of it.

Moreover, the remarks made by Mr Jimmy NG of the industrial sector are flawed in that he has confused the functions of MPF, severance payments and long service payments. He said that they all belong to retirement protection, which is completely wrong. They are actually very different. Severance payments are meant to meet urgent needs. For instance, when a company is wound up or downsized, this one-off payment can be instantly made to the workers to meet their urgent needs in the short term. Long service payments are receivable by workers with five years of service or more who are dismissed by the employers not due to the workers' serious misconduct or upon their retirement. This requirement provides certain protection to workers who are subject to unfair dismissal and offers greater protection to workers who have worked for the same employer for a long period of time, while prompting employers to think clearly about dismissing their employees. Therefore, their original intents are substantially different. The MPF is meant for retirement purposes, whereas the severance payments and long service payments are intended for meeting urgent needs. Therefore, the FTU has, over the years, opposed the MPF offsetting arrangement.

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Recently there has been unverified news about the Government and the commercial sector wishing to abolish long service payments and replace it with unemployment insurance as an option for handling and addressing the problem of the MPF offsetting arrangement. We in FTU strongly oppose it. The logic is simple. MPF can be compared to a house. When the house has a leakage problem but instead of carrying out repairs to it, the house is pulled down in a bid to solve the problem. This is entirely ridiculous. MPF, severance payments and long service payments are substantially different. If, in order to address the problem, the long service payments were sacrificed, that would be grossly outrageous.

Although the Chief Executive is not in the Chamber, I hope the Secretary who is with us today can convey our views to him. I wonder if the Chief Executive is watching the television, but I will send this video clip to him anyway. I hope he would recall the fact that he received the most applause when he visited the grass-roots communities and trade unions during his election campaign some four years ago. Why? Because both the trade unions and the grass-roots communities appreciated his support for setting a minimum wage and they had expectations for him in the improvement of labour welfare. But more than four years have passed and he has yet put forward a concrete proposal for abolishing the MPF offsetting mechanism. He has failed to honour his election pledge and worse still, rumour has it that there is this intention of abolishing the long service payments. While there is no way to establish the validity of the rumour, let me tell the Government that it must not attempt to do it, or else political consequences would definitely follow.

I also wish to tender a piece of advice to the Chief Executive and the Secretary―although Mr Jimmy NG already said this earlier on, I had written it down in advance―that is, the very beginning mind itself is the most accomplished mind of true enlightenment. One should carry through to the end what he vows to do at the beginning. With regard to the promises made, one should persevere no matter how difficult it is as long as the promises are correct, in order to achieve a fruitful outcome in the end. Why did I stress "correct"? Because apart from us in the labour sector, the Government, the Chief Executive and Chief Secretary Carrie LAM have also said that the existing offsetting mechanism is unreasonable and undesirable. Such being the case, improvement should be made, and disregarding how difficult it is or what reasons are given by Members of the commercial and industrial sectors to oppose it, the Government should work against all odds, or else it would give people an impression that the LEGISLATIVE COUNCIL ― 10 November 2016 593

Government is biased in favour of the business sector, in which case how will the community feel the presence of fairness and justice? How can the Government win popular support?

Indeed, the position of the business sector is important. In the past year, profits tax amounted to a record high of $140 billion. The economic fundamentals of Hong Kong are not bad by any standard. The business sector absolutely has the means and responsibility to promote fairness and justice in society. In fact, a so-called business-friendly environment refers not only to low costs and good labour relations, but also a fair and harmonious society which is equally important. Allowing wage earners to share the fruits of the economy and restoring the original function of MPF are conducive to creating a fair and harmonious society and this will ultimately benefit the business environment. Therefore, we in FTU absolutely do not just set eyes on the interest of the labour sector. Rather, we make consideration from the interest of Hong Kong as a whole.

Lastly, I hope that the Government will expeditiously adopt measures (The buzzer sounded) …

DEPUTY PRESIDENT (in Cantonese): Your speaking time is up. Please stop speaking.

MR LUK CHUNG-HUNG (in Cantonese): … to abolish the MPF offsetting mechanism.

With these remarks, I support Mr WONG Kwok-kin's motion. Thank you, Deputy President.

MR HO KAI-MING (in Cantonese): Deputy President, today is the first time I am making a speech in the Chamber of the Legislative Council. Unfortunately, I have to play the debt collector to recover a "debt the SAR Government owed workers" in respect of the present motion, that is, to urge the Government to abolish the offsetting mechanism of the Mandatory Provident Fund ("MPF") System.

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As Mr WONG Kwok-kin and Mr LUK Chung-hung said, the Chief Executive has stated unequivocally in his 2012 election manifesto, under point 16 in page 11, that "We 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." Now that only six months are left of his five-year tenure, this promise has yet to be fulfilled. It is a great disappointment to wage earners indeed.

The MPF System was launched in December 2000 with the objective of helping the ageing working population to keep savings for their retirement. This is the second pillar of the five pillars of old age protection envisioned by the World Bank.

It is lamentable that grass-roots wage earners, despite decades of toil, have to watch this pillar being eroded continuously by the offsetting mechanism and it being handicapped in fulfilling the intended functions. Let me quote a simple example. Between 2001 and end of the first quarter of 2016, $29.23 billion was withdrawn from MPF schemes for offsetting severance payment and long service payment, yet during the same period, only $27.6 billion was withdrawn from MPF schemes by employees upon retirement. In other words, over the 16 years since the implementation of MPF, the amount of employers' contributions used for offsetting exceeds the amount withdrawn by wage earners for retirement. It is the initial objective of MPF to prepare for the retirement of wage earners with contributions from both employees and employers, but now it has been reduced to mere empty talk.

As a Cantonese slang goes, "poverty and bad luck come hand in hand", and this is an apt description of the situation of the MPF offsetting mechanism. The grass-roots workers and those in unstable employment, such as security guards and cleaners under outsourcing contracts, are most susceptible to the effect of the offsetting arrangement and the amount they can save for their retirement is relatively small. Since grass-roots workers are usually employed on contract terms, which lack security, and they have to start new contracts and change jobs frequently, as in the case of outsourcing work under the Housing Department or the Government, they always live in fear and anxiety. As they keep changing employers and contracts, their benefits in the MPF accounts are offset frequently. The same applies to clerical workers. Take the assistants of Members of the Legislative Council as an example. They are dismissed every four years. If we LEGISLATIVE COUNCIL ― 10 November 2016 595 are lucky to be Members till 60, the MPF benefits of these assistants, after being offset for numerous times, will be left with a meagre amount by the time of their retirement.

According to the recommendation of the World Bank, retirement should be supported by five pillars. However, in Hong Kong, we do not have retirement protection, and worse still, MPF which is the second pillar exists in name only. As a result, the elderly cannot lead a secure life in their golden years after retirement. The problem of elderly poverty is becoming more serious. With the continual ageing of the population of Hong Kong, this problem will become more palpable.

According to the latest figures announced by the Commission on Poverty at the Summit last week, the size of the elderly population living in poverty in Hong Kong is 390 000, at a poverty rate of 40%. At present, the ratio between employed population and dependent elderly is 5:1, yet by 2064, the peak year of population ageing, the elderly dependency ratio will have risen to 2:1. By then, it will be unrealistic to rely on MPF as the sole support for the elderly. Will the next generation be able to cope with this? The Government has long since been aware of this risk, yet it chooses to procrastinate. It has done a disservice to all three generations, the elderly, the middle-aged and the young, in Hong Kong.

Last month, a number of colleagues from the Hong Kong Federation of Trade Unions met with the Chief Executive to discuss the issue relating to the offsetting mechanism. The Chief Executive said at the time that he would exert his utmost to address the issue, whereas Chief Secretary for Administration Carrie LAM reiterated openly the firm position held by the Government. However, the loopholes found in the MPF System were created over decades, which the Government has failed to address all along. Now that the Government hastily proposes substituting the severance payment and long service payment with unemployment insurance, this has really made us, the working class, feel helpless. As we see it, the Government's proposal is actually trimming the toes to fit the shoes.

Secretary Matthew CHEUNG and Secretary Prof K C CHAN, who are responsible for the relevant work, have been accountability officials since 2007. In the past decade, the MPF should be a specific task within their purview. Why have they not addressed the problem arising from this loophole so far? Yet they have been playing the onlookers, watching the conflicts between the 596 LEGISLATIVE COUNCIL ― 10 November 2016 representatives of employers and employees to go on in the Labour Advisory Board. They then come up with the final statement that "there is no consensus in society" and close the case.

In the past decade, four motions on the MPF were proposed by Members at the Legislative Council, and 43 questions on MPF asked, among which 10 questions were on the subject of the offsetting arrangement. As the government officials-in-charge, they should understand that the reform of the MPF System can brook no delay, yet they remain indecisive and have not taken any action to date.

Today, I have prepared a form for applying for offsetting particularly for Secretary Matthew CHEUNG and Secretary Prof K C CHAN. I have filled in their names and I hope they will act determinedly to address the problem involving the MPF offsetting arrangement. I have also stated the amount of $22.8 billion in the form, which is the amount of MPF benefits to be offset in MPF accounts since the assumption of office by the two Secretaries. I hope this form will prompt the two Secretaries to restore reasonable retirement protection for wage earners. If the problem is allowed to be dragged on further, it will not only offset the benefits in MPF accounts but also offset the public trust in the SAR Government.

Just now, some Honourable colleagues claimed that the Government had contacted us to touch base on issues concerning unemployment insurance. I must clarify that there is no such thing and it is mere fabrication. Since we are all working for the good of grass roots, we should stop all such besmirching acts and confrontations. I hope we can work together wholeheartedly to speak for the grass roots.

With these remarks, I support the original motion. Thank you, Deputy President.

MR IP KIN-YUEN (in Cantonese): Deputy President, since its implementation in December 2000, the Mandatory Provident Fund ("MPF") scheme has been persistently criticized by the public for its low rates of return and exorbitant administrative fees, and the resultant failure to effectively protect the fruits of their labour and achieve the goal of "giving retirees a sense of support and the elderly a sense of enjoyment". In order to prevent the retirement interests of LEGISLATIVE COUNCIL ― 10 November 2016 597 employees from being further eroded, members of the public demand the Government to comprehensively review the MPF System, or even abolish it for good. Although such views sound familiar, the MPF System still survives, with fund companies operating long-lasting businesses with the introduction of all sorts of new products.

MPF is also most severely criticized for its offsetting mechanism. Under the Employment Ordinance ("EO"), if an employee becomes entitled to severance payment or long service payment based on his length of service, his employer may withdraw the employer's MPF contribution and the accrued benefits from the same to offset the severance payment or long service payment payable to the employee.

The original intent of adding provisions related to severance payment and long service payment to EO in 1974 and 1986 respectively was to afford employees protection. If an employee, after serving the same employer for a period of time, is dismissed due to retrenchment or other causes, he will receive a certain amount of compensation to alleviate the financial pressure faced by him as a result of unemployment. Under the MPF offsetting mechanism, however, the employer's MPF contribution will be used for offsetting purpose at the termination of his employment. Such an arrangement has seriously deviated from the original purpose served by severance payment, long service payment, and even the MPF System.

Let me cite some examples for illustration. Members' assistants who are working at the Legislative Council are also required to make MPF contributions. One of these assistants already joined the service before the implementation of the MPF System in December 2000 and had since been making contributions according to the MPF contribution requirements. When the tenure of office of the Member served by him terminated after more than a decade in September 2012, the amount of contribution made by the Member as an employer over 12 years was close to $150,000. However, when the assistant was laid off, the accumulated contribution made by the employer was used for offsetting severance payments. Even though the Member did not approve of the offsetting mechanism and considered that additional compensation in the form of severance payments should be provided by the Legislative Council, he was still unable to do anything. In the end, he could only watch his assistant suffer a loss of $150,000 in employer's contribution for no reason. It was a living example that occurred in the Legislative Council. In fact, when I left the Hong Kong Institute of 598 LEGISLATIVE COUNCIL ― 10 November 2016

Education, now the Education University of Hong Kong, my contribution was offset, too. These situations were quite bad, but why do we allow them to continue all the same?

Another unsatisfactory point is that the maximum level of income and the maximum and minimum contributions made under the MPF scheme have been adjusted numerous times. Consequently, the total amount of MPF contributions is higher than the due severance payment or long service payment receivable by an employee when he leaves his job. As a result, his loss will outweigh his gain. Specifically, the maximum level of income under the MPF scheme now stands at $30,000 a month, which means that the total maximum contribution is $18,000 per annum. Currently, EO stipulates that the monthly wage governing the severance and long service payments is capped at $22,500, which means that the maximum amount of compensation receivable is, upon conversion, $15,000 per annum. Obviously, the total amount of MPF contributions of $18,000 is higher than the amount of compensation of $15,000 receivable by an employee upon quitting his job. As a result, an employee earning a monthly wage of more than $22,500 is very likely to be unable to receive substantive compensation at the termination of his employment.

Insofar as this issue is concerned, in a paper submitted on 17 July last year to the Legislative Council Panel on Manpower regarding the monthly wage caps for calculating severance and long service payments, the Labour and Welfare Bureau indicated that since the median monthly employment earning stood at $13,000, the Government would not propose to change the current statutory payment ceilings applicable to severance and long service payments. Nevertheless, the scope of employees covered, as mentioned by the Labour and Welfare Bureau, is limited, and employees with a certain length of service or qualification, including most of the employees in the education sector represented by me, are excluded. Although teachers in aided schools are very likely to enjoy provident fund benefits, many teachers in Direct Subsidy Scheme schools or contract teachers in public sector schools are required to make MPF contributions. Hence, they will be affected, too.

According to the Quarterly Report on General Household Survey published by the Census and Statistics Department, as of the end of 2015, the monthly income of nearly 20% of the total employment population, or more than 700 000 employees, was more than $30,000. These employees are very likely to be unable to receive substantive compensation upon quitting their jobs. As we all LEGISLATIVE COUNCIL ― 10 November 2016 599 know, the majority of teachers in the education sector have also joined the MPF scheme. They can only be gripped helplessly by the retirement arrangements made under the MPF System. What is more, they might have to face the offsetting mechanism, thereby becoming double victims, and the relevant compensation will eventually not serve its purpose at all.

An overseas expert in pensions has pointed out that Hong Kong is the only place where MPF is used to serve two different purposes, as unemployment assistance in the form of severance payments, and retirement protection. The MPF offsetting mechanism has undermined not only the function of retirement protection as a pillar, but also employees' interests. Under such circumstances, we must call upon the Government (The buzzer sounded) … to abolish the offsetting mechanism expeditiously …

DEPUTY PRESIDENT (in Cantonese): Speaking time is up.

MR IP KIN-YUEN (in Cantonese): … I so submit.

MR JEFFREY LAM (in Cantonese): Deputy President, I would like to state at the outset that the business sector resolutely opposes abolishing the offsetting mechanism and other policies that affect Hong Kong's favourable business environment. Since the implementation of the Mandatory Provident Fund ("MPF") scheme in 2000, its effectiveness has indeed been unsatisfactory. However, it is not because the offsetting mechanism has all along been criticized by society, as stated in the original motion. On the contrary, the overall performance of MPF schemes has failed to meet the expectations of wage earners, or even met the aspirations of employers in general. Is the crux of the problem lies in its exorbitant management fees and low rates of return? Can blurring the focus by unilaterally proposing abolishing the MPF offsetting mechanism resolve the problem with the MPF scheme immediately?

First of all, the offsetting mechanism as an important component of the MPF System represents the tripartite consensus reached by employers, employees and the Government after prolonged discussions. Under the Mandatory Provident Fund Schemes Ordinance, an employer who is liable to pay an 600 LEGISLATIVE COUNCIL ― 10 November 2016 employee severance payment or long service payment under the Employment Ordinance ("EO") can offset the severance or long service payment with the accrued benefits derived from the employer's contributions made to an MPF scheme for the employee. Actually, this practice was already allowed under EO prior to the implementation of the MPF System. In other words, this arrangement is an extension of the long-standing practice prescribed in EO, and an abolition of the offsetting mechanism will deviate from the legislative intent.

Before the reunification, Deputy President, during the scrutiny of the Mandatory Provident Fund Schemes Bill in 1995, the then Secretary for Education and Manpower clearly stated that "the employers' contributions to a retirement scheme may be set off against any amount paid out for severance payments or long service payments. It is not appropriate to expect employers to pay twice". Not only have these remarks been quoted many times, but it was also because of this pledge that employers agreed to the implementation of the MPF scheme. After duping the industrial and commercial sectors into agreement, the authorities cannot make a request for change on the ground that the labour sector considers the MPF scheme not well implemented. As a result, the Chief Executive and the Special Administrative Region Government are compelled to target on the industrial and commercial sectors due to unilateral pressure.

As with the biennial wage level review conducted after the commencement of the Minimum Wage Ordinance, the labour sector has often been found proposing a huge wage increase. Even though the industrial and commercial sectors would invariably drive a bargain with justifications, they were criticized for being "unscrupulous employers" or "maximizing their profits". However, was it the actual case? Why was the price for a meal served in a Hong Kong-style café raised from $30 to $40 within a very short period of time? Why do home owners feel that management fees will only go up? Everyone should know the reasons. The point is that proprietors have to consider whether wage increases should be offered to administrative personnel, floor staff, supervisors, cashiers, kitchen staff, and so on, in addition to raising the minimum wage for dishwashing workers or security guards. This is called a ripple effect. Do not ever think that raising the minimum wage by a small rate is not a problem, for it is affordable to the business sector. Members should be able to see the difficulty experienced in the current business environment. Not only must proprietors consider how to avoid folding up their businesses, but they cannot even resort to LEGISLATIVE COUNCIL ― 10 November 2016 601 winding up should the offsetting mechanism be abolished. We used to say "it is not easy to start a new business but even more difficult to stay afloat". Nowadays, "it is even more difficult to fold up".

If the industrial and commercial sectors propose abolishing the mechanism for reviewing the minimum wage, for instance, I believe the labour sector might disagree. Now the Government is saying that active consideration will be given to the labour sector's unilateral proposal for abolishing the MPF offsetting mechanism, is it doing so for the sake of canvassing votes? While the labour sector has its share of votes, the industrial and commercial sectors have also got their shares of votes. This point must be taken into consideration, too. The Government must balance the interests of various sectors in society, rather than considering the matter unilaterally all the time.

Furthermore, in responding to the questions raised by Members last year, the Government also conceded that it had not assessed the impacts of an abolition of the offsetting mechanism on employers, the business environment and the economy. Here are some data from the Business and Professionals Alliance for Hong Kong for reference by the Government. In a questionnaire survey conducted by us from March to May this year in which 300 trade associations were involved, nearly 80% of the respondents considered that an abolition of the MPF offsetting mechanism would increase the operating costs of enterprises; 70% believed that Hong Kong's competitive edge would be undermined; and more than 85% opposed the abolition of the offsetting mechanism. Should the offsetting mechanism be abolished, some 70% of the respondents anticipated that enterprises would hire more contract staff instead; 60% anticipated that enterprises would shift the additional costs onto consumers; and more than half anticipated that before the offsetting mechanism was abolished, enterprises would dismiss staff members whose length of service was more than or close to five years, with a view to achieving savings in long service payment.

Deputy President, it is thus evident that abolishing the offsetting mechanism will inevitably result in fragmentation of jobs. It can be said that such an initiative will bring nothing but harm to the conditions of work of employees currently in employment and the maintenance of harmonious employment relations. Furthermore, in the aforesaid questionnaire survey, 40% of the respondents anticipated that enterprises would reduce the number of employees, and close down their businesses and make all of their staff redundant 602 LEGISLATIVE COUNCIL ― 10 November 2016 before the abolition of the offsetting mechanism. The impacts thus caused on the economy and unemployment will make the Government face even bigger difficulties in governance.

I believe both the commercial and labour sectors consider it necessary to comprehensively review the MPF scheme to further reduce fund fees and enhance fund performance, with a view to increasing the investment return on MPF. It is not in line with the general public interest (The buzzer sounded) to abolish the offsetting mechanism unilaterally without conducting a comprehensive review.

DEPUTY PRESIDENT (in Cantonese): Speaking time is up.

MS CLAUDIA MO (in Cantonese): Deputy President, a consensus can actually never be reached on the subject of abolishing the Mandatory Provident Fund ("MPF") offsetting mechanism. Even the pro-establishment camp, which has always been supportive of the Government, holds two entirely opposite positions. I have just heard Mr Jeffrey LAM, who represents the business sector, say he resolutely opposed the idea while those Members representing the labour sector said they would play "debt collector" today and considered that the whole MPF System does not serve any practical purpose. The Government is now taking full advantage of this situation because the authorities are armed with the best weapon, that is, the lack of a consensus in society which entails the need for further discussion. The discussion on this subject has therefore continued. Over the past four years, the Government has been most adept at creating polarization on this subject as if employers and employees are arch-enemies while the representatives of the commercial and labour sectors hold entirely opposite views. I hope the people of Hong Kong can see clearly that all Members of the democratic camp in the Legislative Council basically support the motion, including the original motion as well as the amendments proposed by Dr Fernando CHEUNG, Dr LAU Siu-lai and Mr Andrew WAN.

In this society where we live together, helping the weak and vulnerable is the most fundamental principle. The business sector certainly believes that it is necessary to take into account the overall economic situation because many people will be laid off if the large and small capitalists are dragged into collapse. They are the minority but they wield enormous power; employees are the majority but they only have limited power. This situation is similar to what has LEGISLATIVE COUNCIL ― 10 November 2016 603 been happening in Hong Kong in the fight for democracy. All along we have to inform the boss, that is, Beijing, before engaging in any democratic movement. He first gave us the white paper. Then, he made the 31 August Decision. Lastly, he let you select one person from the candidates screened by him, and this is the so-called "one person, one vote".

The Government actually put up a show and intended to test the waters. The authorities suggested abolishing long service payment and replacing it with unemployment insurance. The more they say, the more confused things become. How can the basic rights and interests of workers be offset? The business sector further said that it is necessary to reach a tripartite agreement and such a consensus shall remain unchanged in the future because the original consensus cannot be altered. However, things have changed and society has advanced with the passage of time. If a system can never be changed, the slavery system will remain in human society, right?

Today, as the pro-establishment camp (I refer to it as "the non-democratic camp") has also noticed our refreshed reminder to Members through the amendments, that LEUNG Chun-ying had indulged in talks about "a pen, a notebook and a stool" and made a pledge in the last Chief Executive Election. It was clearly stated in black and white in his manifesto that he would "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". However, it seems that not much has been achieved by the authorities over the past four years. The Labour and Welfare Bureau said that nothing was achieved for there was no consensus in society. They are still repeating such an argument today. Although some considered the employees miserable, they said the employers are miserable and even urged us not to forget the small and medium enterprises. They simply acted like nothing had happened after indulging in loud and empty talk.

I quite like the following wording of the amendment: "this Council strongly condemns the Chief Executive for failing to honour his promise and disregarding employees' rights". This sentence is truly humorous. LEUNG Chun-ying made the aforementioned pledge in the previous election and now he has raised the subject of long service payment, unemployment insurance and the offsetting mechanism once again. Why did he suddenly raise this subject again? He has to test the waters because an election is approaching again. The livelihood issues of Hong Kong are actually manipulated by one single person. With 604 LEGISLATIVE COUNCIL ― 10 November 2016 regard to the MPF System, the "MPF Semi-portability" was implemented as a result of the debate held in the previous term of the Legislative Council and it seems that people have more options now. Ultimately, however, the MPF remains unchanged even though there are more options. The "M" stands for mandatory, which left no room for choices.

It is commonly known that the administration fees of MPF schemes are exorbitant. We cannot help feeling horrified by the huge loss whenever we receive the statements. While we cannot say that the Government has done nothing with regard to the administration fees since there has been a slight decrease in the level of administration fees actually, the original purpose of MPF is providing retirement protection so that our retirement life will be protected. However, in order to introduce the MPF System as soon as possible back then, the authorities said that a tripartite agreement had been reached to establish the offsetting mechanism. The MPF System has been implemented for 15 to 16 years. I urge Members to further review the system rather than repeating the same excuse and saying time and again that it should be done in a gradual and orderly manner and that a consensus is lacking in society (The buzzer sounded) … Thank you.

DR PIERRE CHAN (in Cantonese): Deputy President, I support the motion on "Abolishing the Mandatory Provident Fund offsetting mechanism" moved by Mr WONG Kwok-kin.

Members should not assume that doctors are the middle class detached from reality. In fact, doctors, members of the public and patients are in the same boat. If the handling of the problem of the Mandatory Provident Fund ("MPF") offsetting mechanism is further delayed, it will become increasingly unfair to wage earners while the incentive for employees to raise objection will also become increasingly stronger. If the incumbent Government fails to honour this election pledge, it will undoubtedly make it more difficult for the next-term Government to work on it. For this reason, I sincerely urge the Government to honour the pledge as soon as possible.

In 2015, the authorities handled 40 000-odd cases of offsetting claims and among them, the employers' MPF contributions in 30 000-odd cases were offset. The balance of the MPF accounts of 1 100 low-income wage earners actually became zero after offsetting. Come to think about it. If those 1 000-odd wage LEGISLATIVE COUNCIL ― 10 November 2016 605 earners are middle-aged or even elderly persons with a low level of education and low skills, how miserable their life will become? Under the current mechanism, the longer the period of service, the larger the amount of accrued employers' MPF contributions. In other words, the amount of money which can be used for offsetting will be larger and, therefore, a large proportion of the long service payment to which employees are entitled will be offset. It will result in a situation where the longer the period of service, the smaller the amount of money to be received.

The Government and the private market are increasingly inclined to adopting the system of outsourced contracts. Just now I talked to a female cleaner working in the Legislative Council and learnt that she is also an outsourced worker. Since most of the contract staff will be dismissed or required to sign a new contract every two or three years, their MPF benefits will be offset on a frequent basis.

Therefore, I hope the authorities can resolve the relevant problems as soon as possible and work for the people of Hong Kong. I support the motion moved by Mr WONG Kwok-kin. Thank you, Deputy President.

MS ALICE MAK (in Cantonese): Deputy President, I believe the endeavours and efforts of employees are a key factor contributing to the success of an employer in running a profitable enterprise. It is actually right and proper for employees, having done much for their employers and made lifelong contribution to society, to expect a retirement life in dignity. Any employer with conscience or people-oriented government is duty-bound to assure wage earners of retirement protection. However, the target of retirement protection remains out of reach to members of the public. Wage earners will not know how much money is left in their Mandatory Provident Fund ("MPF") accounts, the only handle of reliance, until retirement.

Every time we talk about retirement protection, the business sector and the Government will be of one mind and shirk the responsibility onto each other. They always claim that the presence of MPF is already enough, and even indicate that no consensus has been forged in society on universal retirement protection. In fact, the existing MPF System is fraught with loopholes and mistakes. It has been in place for 15 or 16 years, but members of the public have suffered losses before they can actually benefit from it. Such drawbacks as high administration 606 LEGISLATIVE COUNCIL ― 10 November 2016 fees and the lack of supervision over funds invested have all along been causes of criticism. But when it comes to the greatest and most unfair impact on wage earners, it is definitely the mechanism of offsetting severance and long service payments.

The original intent of setting up MPF was to offer retirement protection to members of the public. However, given this offsetting, the function of MPF to assure retirement protection has been considerably impaired. Like what Dr CHAN said earlier on, he was not divorced from the people. As a "down-to-earth" middle-class doctor, he knows that many cleansing workers and security guards, bound by contractual terms, have seen their MPF benefits offset every two or three years, leaving them with a meagre balance by the time of retirement. Even the colleagues working in the offices of the Legislative Council Complex, that is, our assistants who write up speech drafts for us, face the same problem. The term of office of a Member is four years. It will be best if a Member can get re-elected. It depends on how many times a Member is re-elected. Otherwise, the MPF benefits of general Member's assistants have to be offset every four years. Those Member's assistants whose service period is as long as 20 years will be even more miserable, after their MPF benefits accumulated over the past 20 years have been offset. As they are entitled to a larger amount of severance payments, with the deduction of such an amount, their MPF balance will be even smaller.

According to the statistics of the Mandatory Provident Fund Schemes Authority, since the implementation of MPF in 2001, the amounts of severance and long service payments paid from MPF accrued benefits have increased progressively over the years. As of 2015, the amount offset reached $3.355 billion, and the accumulated amount offset over the past 15 and a half years totalled some $29 billion.

Faced with the drawbacks of MPF, we have been proposing an abolition of the offsetting mechanism over the years. The relevant background information was already mentioned by Honourable colleagues from FTU earlier on. Now I wish to raise a few points particularly in response to the views expressed by Members from the business sector. First, some Members from the business sector claim that they are very much concerned about the middle class, and even suggest that a middle class commission be established for them. In that case, there is an even stronger ground for them to support the abolition of the MPF offsetting mechanism. We should not think that the abolition of the MPF LEGISLATIVE COUNCIL ― 10 November 2016 607 offsetting mechanism will only affect grass-roots employees. In fact, the longer middle management officers work in their company for a longer service period will be left with an even smaller amount of MPF benefits, after their long service payment, to which they are entitled, has been offset once they are made redundant or retire.

Members may have a good understanding of the textiles industry in Hong Kong. In the past when the textiles and garment industry was in its prime, given the difficulties in recruitment, a number of sizeable garment factories introduced a provident fund called OPS at an early time, which was replaced by MPF by 2000. Middle management officers of a number of garment factories have thus accumulated a large amount of MPF benefits.

Nevertheless, recently, I have received a case about a person in his mid-fifties who has worked in a garment factory for some 30 years. Recently, the proprietor said that given the favourable property market conditions, it would be more profitable to sell the factory. He then sold the factory and made the workers redundant. Having worked hard for the company for some 30 years, the person concerned has accumulated some $200,000 of provident fund benefits plus MPF. But actually, with his severance payment having been offset, he has not got even a single penny of MPF benefits.

These middle management officers, just like grass-roots people, are also affected by the MPF offsetting mechanism considerably. If Members say that they support the middle class, there is an even stronger ground for them to support the abolition of the MPF offsetting mechanism.

According to some in the business sector, the abolition of the MPF offsetting mechanism will increase operating costs and reduce vacancies, leading to the closure of small-, medium- and micro-enterprises. We agree that the existing business environment is difficult in Hong Kong. But the difficult business environment is the result of high rentals. A family member of mine also carries on a business. The rent of a shop will be increased by a shopping mall after a two-year lease term. While they are facing such a business environment, Members from the business sector should speak up for them and find them a solution to tackle the high rentals, instead of helping them oppress wage earners and reap profits by exploiting workers.

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We admit that the existing business environment is poor. As we are in the same boat, we should help the small-, medium- and micro-enterprises improve the business environment, instead of cheating wage earners, exploiting and bullying them, virtually holding a knife against their neck, threatening that the abolition of the MPF offsetting mechanism will result in layoffs. These are not proper acts. I do not wish to say that they are despicable. I hope they will stop holding a knife against the neck of wage earners. In the absence of retirement protection, how can these wage earners lead a retirement life in dignity? Eventually, they will become a social burden. If we want to do good to our society, please act according to our conscience.

As a Chinese saying goes, "After making a fortune, one should act with integrity". There are a bunch of successful businessmen here in this Council. Since they have achieved great success (The buzzer sounded), they should also act with integrity!

DEPUTY PRESIDENT (in Cantonese): Speaking time is up.

(Some Members left their seats and moved about in the Chamber)

DEPUTY PRESIDENT (in Cantonese): Will Members please return to their seats.

MR MA FUNG-KWOK (in Cantonese): Before all else, Deputy President, I would like to thank Mr WONG Kwok-kin for proposing the motion today. An abolition of the Mandatory Provident Fund ("MPF") offsetting mechanism will directly affect the interest of many wage earners, who are the targets of many labour unions. The Chief Executive has, in his manifesto, undertaken that he 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". Hence, insofar as the wage earners are concerned, it is a reasonable expectation of theirs on the current-term Government to facilitate abolition of the offsetting mechanism.

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The outcome of the consultation conducted by the Government was as expected. Of course, employers did not hope to see the abolition of the mechanism, which would result in rising operating costs. In addition, they considered that the Government should provide retirement protection for the public, and employers should not make double contributions. From their own perspective, however, employees hoped to receive compensation when they were retrenched while retaining the pension in their MPF accounts. Since employers and employees insist on holding fast to their own opinions, and the controversy is so great that a small move will change the overall situation, there is still no consensus in society today, which makes it difficult for any policies to be implemented.

Just now, many Honourable colleagues supportive of the abolition of the offsetting mechanism pointed out that since the amounts of MPF contributions made by some low-income employees were very small, with some of them being exempted from making contributions, their MPF contributions were mostly made by the employers. As a result, allowing MPF contributions to be used for offsetting purposes will in effect make wage earners lose their hard-earned money and deny them retirement protection. Although I do not dispute this fact, there are always two faces to a coin. Neither can we overlook the impacts of the abolition of the offsetting mechanism on employers.

As we all know, there are more than 300 000 small and medium enterprises ("SMEs") in Hong Kong, representing more than 98% of the total number of enterprises. Recently, it was pointed out by an SME organization that the business sector has all along failed to make provisions for severance or long service payments. Should the offsetting mechanism be abolished, each SME will probably see its operating cost increase by 6% to 7%. Since the financial pressure faced by some trades and industries employing a larger number of employees, such as the cleaning and catering industries, will be even greater, some of them might be compelled to close down. If this estimate is correct, employees will eventually become victims. Consequently, their loss will outweigh their gain.

During the consultation period, the enterprises expressed their concerns about the retrospective period. Given that the MPF System has been implemented for 16 years, should the offsetting mechanism be abolished and employees be allowed to recover the employers' MPF contributions involved in 610 LEGISLATIVE COUNCIL ― 10 November 2016 many offsetting cases over the past 16 years, I believe it is not difficult to imagine the outcome. For this reason, I consider that any change must be premised on maintaining the stability of enterprises, with a view to pre-empting the closure of a large number of companies and preventing employees from having their loss outweighed their gain. The concept of a retrospective period is therefore unfair and undesirable.

More importantly, prior to the implementation of the MPF System, employers were already allowed by the then Government to, under the Employment Ordinance, use their accrued contributions made under retirement schemes to offset long service and severance payments payable to their employees. Subsequently, when lobbying the business sector to support the establishment of MPF, the Government undertook that the aforesaid arrangement would continue under the MPF System. In other words, the offsetting mechanism was a condition imposed by the business sector in exchange for their support for the MPF System, or the undertaking made by the Government to the business sector. Moreover, this package, which was accepted by employees as one of the parties back then, represented the tripartite consensus reached by the Government, employees and employers.

Given that the MPF System has been implemented for 16 years, I certainly agree that it is necessary to improve the MPF System to bring it abreast of the times. Nevertheless, in considering honouring its promise to employees with regard to the abolition of the offsetting mechanism, the Government should also take into consideration its promise to the business sector back then, with a view to striking a balance between the interests of both parties. As such, even if its policy is to be changed, consent from both parties must be sought. The Government must not take any initiative that is unfair to either party.

In fact, the controversy surrounding this question stems mainly from the failure of the existing System to provide reasonable protection for the living of retirees. This is a social problem, and the Government is obliged to resolve it, or else the Government will have to bear the consequences ultimately. As regards the important question of whether or not there is consensus in society for enhanced protection, the answer is obvious. Since we all approve of enhanced protection, we should formulate reasonable initiatives to solve the problem and put them into implementation decisively.

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In the motion and amendments today, some Members hold the view that the offsetting mechanism should be abolished across the board. I can hardly subscribe to this view before the stability of enterprises is assured. There are also some amendments which oppose the abolition of the mechanism, turning a deaf ear to the voices of some people in society. I also find it difficult to fully subscribe to this view. As for some "middle-of-the-road" amendments, such as those proposing abolishing the offsetting mechanism in tandem with a certain financial commitment made by the Government or abolishing the arrangement of offsetting severance payments with MPF contributions but retaining the arrangement of offsetting long service payments with MPF contributions, I think these amendments can be considered at the present stage.

As regards the other proposals, such as those proposing "adopting a new approach for new members and the old one for old members", or new companies adopting a new system whereby the accrued MPF contributions can be offset only before a specified date, or taking the aforesaid proposals into joint consideration, they should be considered seriously for they are forward-looking with less impact.

In fact, employers and employees are in the same boat. On the abolition of the offsetting mechanism, they should seek a progressive proposal which is beneficial to both parties and capable of achieving a "win-win" situation. I hope the Administration can put forward a proposal expeditiously for further discussion by society, create a favourable atmosphere for discussion between employers and employees, and implement the proposal expeditiously, with a view to genuinely helping employees and enhancing protection while clarifying uncertainties such that the business environment can be improved.

Deputy President, I so submit.

MR HOLDEN CHOW (in Cantonese): Deputy President, regarding this issue of abolishing the Mandatory Provident Fund ("MPF") offsetting mechanism, the Democratic Alliance for the Betterment and Progress of Hong Kong ("DAB") hosted a roundtable meeting on the MPF offsetting mechanism in February this year, which aimed to provide an open platform for representatives from the business and labour sectors to fully express their views on the subject, and to come up with an approach considered desirable and practicable by both sides.

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The DAB supports Dr CHIANG Lai-wan's amendment, hoping that by putting forth an appropriate proposal, various sectors in society will accept a gradual enhancement of the MPF scheme, and that a middle-of-the-road approach fostering a consensus in society will be agreed, so that retirement protection for employees will be enhanced.

When I mentioned "fostering a consensus in society" just now, I meant that the Government must put forth a proposal with common consent and acceptance of various sectors of society, so that the best proposal embracing commitment by the Government, abolition of the MPF offsetting mechanism and implementation of the Employee Choice Arrangement on a full scale will be achieved. Actually, I have learnt of the worries expressed by many members in the business sector and small and medium enterprises ("SMEs"), particularly when public opinions have all along been blaming employers and SMEs as the culprits in setting up the offsetting mechanism. Yet Members must understand that SMEs face an increasingly difficult business environment, and this is particularly so during the global economic downturn in recent years. If a blanket approach is adopted in abolishing the offsetting mechanism, it will inevitably increase the operation burden of SMEs and indirectly induce major enterprises to monopolize the market. If SMEs close down in succession upon the abolition of the offsetting mechanism, I think the general public will be the victims eventually.

In fact, we have to understand the historic background of the setting up of the MPF scheme. In the 1990s, when the Government proposed the Mandatory Provident Fund Schemes Bill, it faced many demands from employers' groups, and eventually a consensus was reached among employers, employees and the Government. One of the major conditions for employers' groups to agree with the implementation of the MPF scheme was the setting up of the offsetting mechanism. Truly, this is the historical fact that the offsetting arrangement was one of the conditions for implementing the MPF scheme back then, which was a consensus reached by employers and employees after negotiation.

Deputy President, as a middle-of-the-road approach, I suggest that Members may consider abolishing the offsetting arrangement for severance payment first. If a blanket approach is adopted to abolish all offsetting arrangements, I think all employers, major or small, in Hong Kong will consider this a violation of the previous promise. If we can settle for a halfway proposal by considering the abolition of the offsetting arrangement for severance payment first, it may be easier to come to a consensus.

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I also suggest the Government consider the conceptual proposal for the setting up of unemployment insurance as a substitute of the MPF offsetting mechanism. If the Government injects a certain sum into a fund to be used as reserve for unemployment insurance, employees may draw money from the reserve in future dismissal to meet their daily expenses during transient unemployment. Under this proposal, the Government will not violate the promise it made to the business sector as a result of the abolition of the offsetting arrangement, whereas employers will not have to bear the pressure of making dual contributions in business operation. I think this is a halfway proposal worthy of consideration.

To compare the offsetting of severance payment and long service payment, it is stated in the information provided by the Mandatory Provident Fund Schemes Authority ("MPFA") that in 2015, there were 31 000 claims for offsetting severance payments and 15 800 claims for offsetting long service payment, which is obvious that a higher number of persons were involved in offsetting severance payment cases. If we are to address the issue with a progressive approach, it seems that the abolition of the offsetting arrangement for severance payment should come first to enable more employees to benefit. Moreover, on the abolition of the offsetting arrangement for long service payment, I think that certain employers may alter the terms of employment contracts in future or switch to shorter contract tenures to avoid paying long service payment, which will be unfavourable to employees.

Deputy President, I would like to take this opportunity to respond to the remarks made by certain Members from the pan-democratic camp. I heard that Mr Nathan LAW had used the word "heartless" a number of times in his remarks today to describe employers in Hong Kong. This is indeed painting all people with the same brush. As far as I know, many employers in SMEs are scrupulous employers. We must understand that if employers cannot continue with their business, employees will inevitably be affected, so they are mutually dependent. Honestly, if SMEs give no regard to the business environment and let the authorities abolish the offsetting arrangement, they may simply close their business in times of difficulties, yet such an act is even more heartless, for they would have chosen to overlook the job security, the "rice bowl", of their employees. Hence, the continuous survival of enterprises must be considered. Many employers in SMEs engaging in small-scale operation are scrupulous and they are concerned about maintaining the livelihood of their employees.

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Lastly, I would like to respond to the remarks made by Ms Claudia MO. I heard her repeated criticisms of LEUNG Chun-ying for failing to deliver in this issue. However, according to my observation, he has been doing a lot on issues concerning MPF. In my view, if one is to adopt this "badmouthing" tactic and accused him of having achieved nothing, I would regard all those remarks unjustified accusations. These are no different from their wrong accusations of the Independent Commission Against Corruption ("ICAC") today, claiming that the termination of the acting appointment of Ms Rebecca LI (The buzzer sounded) … was related to UGL …

DEPUTY PRESIDENT (in Cantonese): Your speaking time is up.

MR HOLDEN CHOW (in Cantonese): … I so submit. Thank you, Deputy President.

MR WU CHI-WAI (in Cantonese): Deputy President, when LEUNG Chun-ying was running for the office of Chief Executive, he undertook to progressively reduce the proportion of accrued benefits attributed to the employer's contribution in the Mandatory Provident Fund ("MPF") account that can be used to offset the employee's long service and severance payments. However, while LEUNG Chun-ying's term of office is now drawing to an end, there is still not any specific plan. I think it is natural that we regard him as having reneged on his promise.

Last month, the Secretary indicated that the Government would come up with a directional proposal in the remaining eight months. In other words, wage earners can stop expecting LEUNG Chun-ying to honour his election promise in this term. However, I am more worried that in the new term of office, the Secretary may no longer hold his post, and the Chief Executive may also be replaced. Will this directional proposal continue to be carried out then? Or will it be similar to the Northeast New Territories development project formulated by the last-term Government which, according to Chief Secretary for Administration Carrie LAM, would adopt the new town development approach, but after the new Secretary Paul CHAN had assumed office, the approach of development was changed, making the development of Northeast New Territories even more difficult?

LEGISLATIVE COUNCIL ― 10 November 2016 615

The MPF offsetting mechanism has an extremely significant impact on low-income employees, especially when employees whose monthly salary is lower than $7,100 actually need not make any MPF contributions. However, it is also because of this particular feature that low-income employees invariably change jobs more frequently. For this reason, the employers' contributions have long since been used to offset long service or severance payment. When these employees retire, very often they will not receive any MPF benefits.

As a matter of fact, during our discussion about universal retirement protection, the Secretary has always emphasized that MPF is one of the several important pillars of retirement protection for the general masses. The Secretary has mentioned time and again that since MPF consists of both the employers' and the employees' contributions, it serves as an important pillar in addressing the problem of retirement protection. However, I did not see the Secretary come up with any method to respond to and deal with this problem faced by the employees.

In many Members' speeches I have heard today, no matter whether they have spoken from the employers' angle or that of employees, or on behalf of the labour sector or the bosses, they have regarded the issue of the MPF offsetting arrangement as antagonism between employers and employees or a conflict between two opposing camps. Actually such a view is quite meaningless.

In fact, the problem will probably be simpler to deal with so long as the Secretary agrees that retirement protection is a system which provides the general masses and wage earners with protection they should enjoy upon retirement, and for which proper arrangements must be made. What the Government should consider is the pledge it made at the very beginning. We should present a united front against the same target, should we not? Employers and employees should jointly state to the Government that both parties agree to abolishing the MPF offsetting arrangement, but regarding the financial commitment, the Government should work out a way to make such commitment as a matter of public policy. This is the most pragmatic approach to dealing with the offsetting issue.

My impression of the whole matter is that in considering the issue, the Government often treats employers and employees as two opposing parties. Back then, when the MPF System was established, we were able to reach a consensus, and the Government had undoubtedly pulled the two parties closer together through this approach during the course of promotion. This is a pledge that needs redemption, and it should not be altered at will. 616 LEGISLATIVE COUNCIL ― 10 November 2016

Meanwhile, however, in society today, retirement protection has indeed caused many wage earners as well as the Secretary enormous worries. For this reason, universal retirement protection, which has been proposed for years, is yet to be achieved. Even though it is yet to be achieved, it remains a responsibility which the Secretary will have to assume ultimately. I believe the Secretary has said on different occasions that arrangements for universal retirement protection should be made respectively by different pillars, one of which, as mentioned by the Secretary from time to time, is MPF. Yet he allows the offsetting arrangement to continue. As such, how should the problem be resolved? How will this argument make any sense?

During the 15 years from 2001 to 2015, the total amount of severance and long service payments offset reached $28 billion. This is not a small sum, but it is not huge either. The Government absolutely has the financial strength to cope with it. The key lies in whether or not the Government considers it necessary to uphold the original intent of establishing MPF, that means enabling employees to save a certain amount of money every month so that the objective of supporting themselves in old age can be practically realized, rather than serving as compensations for severance or dismissal. As a matter of fact, under the labour laws, the protection of long service and severance payments came about much earlier than MPF. It is a system established by the Government at an earlier time to protect employees' interests. However, in implementing the MPF System for retirement protection of employees, the Government jumbled the two together.

Since the implementation of the MPF System, we have focused on employees' interests which certainly merit protection by employers. The spirit which MPF should manifest is to serve as a part of retirement protection for employees. Given that it is such an important pillar, how can the Government allow the contributions to be offset?

Last month, the Secretary said that the Government would shortly―I hope it will really happen within a very short time―come up with a directional proposal. I hope that apart from this directional proposal, the Secretary will also present to us some specific options, and this directional proposal will not only be implemented within the Secretary's term of office but be also carried on in the future. Moreover, it will develop in the direction of achieving the objective of MPF. That means it will enable employees to save a specific amount of money every month as the source of finance needed to support their retirement life in old age, rather than allowing the MPF benefits to continue to be offset. LEGISLATIVE COUNCIL ― 10 November 2016 617

Here I wish to appeal to Honourable colleagues in the Legislative Council, whether they be representatives of wage earners, labour groups or employers. Can we stand up in a united front against the Secretary? This is actually a question of resources: if we agree from the perspective of public policy that these three measures of protecting employees' interests should remain, then we should strive for the necessary resources as a matter of social policy.

Thank you, Deputy President.

MR CHAN KIN-POR (in Cantonese): This motion today is about abolishing the Mandatory Provident Fund ("MPF") offsetting mechanism, which in my view can be a discussion among all stakeholders, in particular employees and employers. However, I would like to do some explaining on the statement in the original motion, namely the point that since the implementation of the MPF scheme in 2000, its effectiveness has been questioned by society.

Unsatisfactory MPF returns are mainly the result of the untimely inception of the scheme, which has undergone multiple economic turmoils, rendering any guarantee on investment returns relatively difficult. Moreover, the rate of MPF contributions in Hong Kong falls way short of the worldwide standards and with its relatively short history of operation, it is still at an embryonic stage that can yet to produce the best economy of scale. In addition, the system calls for extensive compliance work, leading to a very high compliance cost and heavy manpower input to handle monthly transactions. As a matter of fact, it is essential that the introduction of a new system, especially long-term and sizable ones, in society must undergo a long period of adjustment and optimization before results can be observed. Hence, the industry and relevant departments have made numerous proposals for revamping MPF so as to enhance the MPF System.

The latest revamp is the introduction of the default investment strategy approved by the Legislative Council a few months ago, which mandates a rate of fund management fee not higher than 0.75% and that of out-of-pocket expenses not higher than 0.2%. The revamp provides the public with a low-fee option, amid the growing prevalence of low-fee funds in the market. The figures provided by the Mandatory Provident Fund Schemes Authority ("MPFA") indicated that the average fund fee in 2007 was 2.1%, which dropped to 1.57% in 618 LEGISLATIVE COUNCIL ― 10 November 2016

2015 and even lower after deduction of discounts. I believe the industry and relevant departments will continue to strive for revamps and optimization, allowing room for a further reduction of fees.

On the other hand, MPF has been criticized for its poor returns. Nevertheless, let us look at some actual figures. From the establishment of MPF in 2000 to September 2016, the 10-year returns of certain best performing Hong Kong equity funds, calculated in annualized terms and after deduction of all fees―note that after all fees are deducted―amounted to 8.54%, with the worst being 3.26%, far higher than inflation in the same period. In a flagging investment market a few years ago, the public, seeing no gain and even losses in their MPF accounts, went on to criticize MPF. However, MPF is indeed a long-term investment, the success of which should not be determined by only considering its performance in one or two years.

(THE PRESIDENT resumed the Chair)

It is noteworthy that conservative funds which presented the best performance in the same period scored an average return rate of just 0.94%. Therefore, people who still have a long time before retirement will see their investment returns fall behind inflation if they concentrate most of their investments on conservative funds or cash. For this reason, I hope the Government can do a better job of educating the public so that they can understand that better management of their MPF accounts will naturally yield very different returns.

Despite the widespread fierce criticisms of MPF, in reality a phenomenon has emerged in that voluntary contributions have been on the rise both in amount and proportion. According to the figures in the third quarter of 2016 provided by MPFA, the amount of voluntary contributions by employees has increased from $260 million in 2006 to $6,674 million in 2015, representing a growth of 26 times in just nine years. I believe the public are smart to not have invested money in their MPF accounts for no good reason. Therefore, I hope everyone can understand that MPF accounts, if properly managed, can bring benefits indeed.

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As for the offsetting mechanism, I am open about it and I hope all stakeholders, particularly employees and employers, can engage in discussion. At the introduction of MPF, the Government undertook to include the offsetting mechanism in exchange for support from the business sector. The mechanism was passed by the then Legislative Council and enacted into law. Therefore, the remarks made by some Members today, which referred to those employing the offsetting mechanism as unscrupulous employers, are just ignorant, biased and unfair. Even though it is a common belief that the offsetting mechanism is plagued with problems, it should be left to discussion between employees and employers. Today we can see the enormous impact the offsetting mechanism has caused on the grass roots. Yet the offsetting mechanism, once abolished, will also cause an enormous impact on small and medium enterprises ("SMEs"). In this case, both employers and employees have their own rationale for and difficulties in offsetting or otherwise. If no one budges an inch and the Government remains unwilling to provide financial assistance, I do not see any way out. Therefore, both parties should adopt a conciliatory approach and refrain from acting on impulse. We all should look at the big picture … to find a win-win solution.

(Mr LEUNG Kwok-hung stood up)

PRESIDENT (in Cantonese): Mr LEUNG Kwok-hung, what is your point?

MR LEUNG KWOK-HUNG (in Cantonese): I have a point of order.

PRESIDENT (in Cantonese): Please put on your microphone before you speak.

MR LEUNG KWOK-HUNG (in Cantonese): A quorum is likely not present in the Chamber.

620 LEGISLATIVE COUNCIL ― 10 November 2016

PRESIDENT (in Cantonese): Will the Clerk please ring the bell to summon Members back to the Chamber.

(While the summoning bell was ringing, some Members returned to the Chamber but did not return to their seats)

PRESIDENT (in Cantonese): Will Members please return to their seats.

(After the summoning bell had been rung, a number of Members returned to the Chamber)

PRESIDENT (in Cantonese): Mr CHAN Kin-por, please continue with your speech.

MR CHAN KIN-POR (in Cantonese): I will now pick up from where I left off.

Moreover, the Government should also try to seek new solutions to the problem, including the proposal made by Prof Lawrence LAU earlier, that is, the introduction of disability insurance and unemployment insurance by the Government in place of severance and long service payments. Sufficient financial assistance from the Government will definitely help forge a consensus between employees and employers.

Lastly, if the abolition of the offsetting mechanism is to be implemented, I hope there will be no retrospective period because employers already hold the anticipation that severance and long service payments can be offset, and so it will be unfair if they are required to make another payment. Moreover, the abolition should be implemented in phases to minimize the impact on the business sector, especially SMEs. I believe a wave of business closures induced by the abolition of the offsetting mechanism is the last thing the labour sector would wish to see.

I so submit.

LEGISLATIVE COUNCIL ― 10 November 2016 621

MR KWOK WAI-KEUNG (in Cantonese): President, I hope that my voice would not be too unpleasant to the ears. Insofar as labour issues are concerned, the current-term Government has owed the 3 million-odd wage earners in Hong Kong huge debts. Whether it be legislating for standard working hours, abolition of the Mandatory Provident Fund ("MPF") offsetting arrangement, campaigning for retirement protection, or even the review of paternity leave, alignment of statutory holidays with general holidays and the annual review of the minimum wage, the Government has yet "repaid its debts". With regard to these labour interests, apart from the Chief Executive who should be held responsible, the two Policy Bureaux which are represented in this Chamber today can hardly be absolved of the blame.

First of all, on the abolition of the MPF offsetting arrangement, the two Policy Bureaux which are represented in this Chamber today had been most adept at passing the buck to others since the beginning of the current-term Government, and they had kept on doing so for a year or two. Despite repeated urges by Members from the Federation of Trade Unions, the two Policy Bureaux did not cease to shirk their responsibilities. It was only at a later time when the Chief Executive explicitly stated that both Policy Bureaux should follow up these issues that the situation became slightly clearer.

President, MPF has been implemented for over 15 years, and we all know how effective it is in terms of retirement protection. It cannot in the least achieve the desired results in affording wage earners protection. From 1 April 2015 to 31 March 2016 alone, the contributions made by wage earners all came to naught. Why? Because the overall net investment return was -8.2%, that is, a loss totalling as much as $50.9 billion. It means not only losing all the gains made in the past, but the employees even suffered losses of the principals of their contributions, and had to make an extra payment of $2.2 billion.

Besides, the management fee of MPF schemes is another cause of criticism. The management fee of MPF schemes is 1.58% on average. Last year, for instance, the MPF contributions made by wage earners in Hong Kong amounted to $592.5 billion. If we use 1.58% as the basis for calculation, the management fee for last year alone was $9.3 billion, which was close to $10 billion, meaning that a management fee of $3,700 was paid out of the MPF account of each wage earner annually. A more serious problem lies in such fee not being linked with the performance of the fund at all and a management fee of $3,700 is charged indiscriminately. Is there any wage earner who is not 622 LEGISLATIVE COUNCIL ― 10 November 2016 enraged? The wage earners will ask: Why do I not keep the savings myself? I invest my money on a fund managed by other people who even charge me for a management fee and yet, the fund generates no profit and worse still, it is even making a loss. So why do I not deposit my money with banks? Deposits with banks can at least yield a small amount of interest and at least I do not have to suffer a loss. If the Government fails to address and answer these questions, MPF is actually not helpful to protecting the retirement life of employees.

Moreover, some people have said that an MPF scheme yielding a high return naturally entails high risks and high fees. But the reality is that while the fees of MPF schemes are high, the return is on the low side (and they even incurred losses of the principals as I mentioned earlier). After making contributions, the wage earners found that the return falls short of their expectation―I wonder if the Consumer Council will follow up this type of cases. In fact, when the authorities have brought in so many MPF trustees to manage the schemes, they are not only "catching a rat and putting it into the rice urn", but they are catching 18 rats and putting them into the rice urn because currently 18 trustees are engaged in the management of schemes. Earlier on a number of Honourable colleagues already drew attention to the high administrative costs of MPF schemes in Hong Kong and this is an indisputable fact. The reasons include inter alia a lack of competition, a lack of transparency in the fees, and the absence of a public trustee. A number of Honourable colleagues have mentioned these points, and I believe Members must have grown bored listening to these views.

Furthermore, I would like to discuss the cost of dismissing employees. In recent years many employers have claimed that it is difficult to retain talents. In fact, the severance and long service payments are intended not only to protect the job opportunities of employees and provide them with unemployment protection. These payments also serve to incur additional costs for employers in dismissing employees, so that employers have to clearly consider various aspects before making such a decision. Even the employees have to make consideration more thoroughly before tendering resignations, for they may not be entitled to severance payments and long service payments if they resign on their own initiative but they can enjoy these benefits if they are dismissed by the employers. Some employees are, therefore, willing to stay working with the same company. But given the offsetting mechanism, employers are unrestrained in dismissing their employees whereas employees have less worries about resignation, and this is absolutely not a good thing to the business sector. Therefore, if the business LEGISLATIVE COUNCIL ― 10 November 2016 623 sector genuinely wishes to retain talents and complains about a shortage of manpower, they might as well abolish the MPF offsetting mechanism as the first step.

Incidentally, I wish to point out that the Government as the biggest employer in Hong Kong is duty-bound to take the lead to abolish the MPF offsetting mechanism for its employees, in order to answer social aspirations while playing the leading role of setting an example for other employers to follow.

I so submit. Thank you, President.

MR CHAN HAK-KAN (in Cantonese): President, the Mandatory Provident Fund ("MPF") offsetting mechanism has nibbled away the severance payments and long-service payments of employees, robbing them of their well-deserved rewards for a whole life of hard toil. Little remains in the MPF accounts of some grass-roots employees thanks to the offsetting mechanism―it is not just a consensus inside the Legislative Council, but also a commonly recognized phenomenon in society.

However, some Honourable colleagues from the business sector have delivered well-grounded speeches. They stated that the abolition of the MPF offsetting mechanism will encumber some companies, especially small and medium enterprises ("SMEs"), because most of them do not reserve extra funds to meet the payments incurred by the abolition of the offsetting mechanism. I think abolishing the MPF offsetting mechanism will not exert too much of an impact on big corporations as they hoards tremendous strengths and abundant capital. My concern lies in the SMEs operating in Hong Kong. The process of abolishing the offsetting mechanism, if not carefully handled, will constitute enormous financial pressure on SMEs, easily leading to business closures. It will then affect not only employers, but also employees, resulting in a lose-lose outcome, the last thing I wish to see. To pre-empt this scenario, the Government needs to make careful arrangements in respect of handling the abolition of the MPF offsetting mechanism so as to ameliorate the effects thus caused in the course. As regards the abolition of the offsetting mechanism, the Government having an important role to play cannot be just an onlooker and leave everything to discussion between employees and employers.

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I have taken note of the speech made just now by Mr Jimmy NG, which can adequately illustrate the positions of the business sector and employers. His main argument is that abolishing the offsetting mechanism will mean de facto double severance payments and long-service payments borne by employers. He has also pointed out a realistic issue, that is, if the company is about to close down, possibly already insolvent, the abolition of the MPF offsetting mechanism will add hardship to the employer's demise. Lastly, Mr NG mentioned that retirement protection for employees should not be the sole responsibility of employers. As I have just said, the Government and the Secretary have a certain role to play.

I do not entirely subscribe to Mr Jimmy NG's viewpoints, but I find his speech most insightful. He has given a simple summary of the difficulties in abolishing the MPF offsetting mechanism. He pointed out in his speech that abolishing the offsetting mechanism is a small move that is going to cause a sea change across the board, not as simple as suggested by the pan-democrats. Difficult though it is, we cannot halt our progress because of the predicament presented before us. The more difficult it is, the harder the Hong Kong Government and the Secretary should think and the more courage they have to muster to address the issue.

Since the implementation of the MPF scheme, the offsetting mechanism has been a thorn constantly irritating us, causing great discomfort to many workers. The remedy is simple: just pluck it out. Of course, a pang of pain may ensue in the process but we should not give up abolishing the offsetting mechanism just for fear of such pain.

President, Dr CHIANG Lai-wan mentioned just now that earlier this year the Democratic Alliance for the Betterment and Progress of Hong Kong ("DAB") had invited a number of experts and scholars to engage in a discussion on abolition of the offsetting mechanism. Dr CHAING has given a detailed account of the meeting so I would not make any repetition here. Yet I would like to reiterate an important point, that is, the Government has to make a commitment in this regard. It is not a view presented by only DAB and the business sector but one shared by many experts and scholars.

President, regarding the issue of concern to Mr Jimmy NG, Mr Tommy CHEUNG and other Members representing the business sector, Dr CHIANG Lai-wan has given an effective response and DAB's suggestions. The LEGISLATIVE COUNCIL ― 10 November 2016 625

Government only needs to make a commitment to dispel the misgivings of the business sector, especially SMEs; then, in my view, the abolition of the offsetting mechanism is open for discussion. If we take a look at the books, on average $2 billion of MPF contributions has been offset yearly from 2001 to 2016, an amount the Government Treasury is more than capable to cope. But it is an astronomical figure if taken from employees' MPF accounts. One is a deep pocket and a massive pool of wealth whereas the other is a flat wallet of the humble workers―the two are simply incomparable. This $2 billion will be well spent if by earmarking such an amount yearly the Government can afford more protection to the general public and workers, thus making people happier and having more trust in the abilities of the Government. The Government's failure to do so is a result of unwillingness, not inability.

It is noteworthy that other than abolishing the offsetting mechanism, the MPF scheme is in need of improvement. For example, the proposals for the full portability arrangement and "one lifelong account" both have assimilated workers' views: the current MPF scheme still lacks flexibility as it is indeed quite inconvenient to open a new account every time they change jobs.

President, today in the Chamber Members from the pan-democratic and pro-establishment camps can engage in a sensible discussion on a common issue and in the same direction. Therefore, putting whatever conflicts held by these two camps aside, we can get the job done when we have the genuine intention to help people solve their problems. For this reason, I hope the Chamber is going to look like today, where Members engage in serious discussions, not filibusters and opposition. People will hope to see a Chamber like it is today.

Thank you, President.

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

MR SHIU KA-FAI (in Cantonese): President, the Liberal Party opposes the abolition of the Mandatory Provident Fund ("MPF") offsetting mechanism. After Chief Executive LEUNG Chun-ying proposed to reduce the proportion of the offsetting amount in his election manifesto four years ago, many labour unions or organizations have, over the past few years, repeatedly urged the Chief 626 LEGISLATIVE COUNCIL ― 10 November 2016

Executive to honour his promise. I wish to point out that the abolition of the MPF offsetting mechanism will arouse grave concern among many members of the business sector. According to media reports some time ago, the Chief Executive has make the undertaking to a labour union that the problem of the MPF offsetting arrangement would be resolved within the term of this Government, while Chief Secretary for Administration Carrie LAM also expressed the wish for the next-term Government to practically effect the abolition.

Here, I wish to point out once again that if the Government really intends to abolish the MPF offsetting mechanism, it is actually going back on its words, moving the goalposts and generously giving away a gift at the expense of the business sector. The purpose is merely to allow the Government to "hold a banquet" while making the business sector "foot the bill". This is not only unfair, but also most unreasonable. The business sector finds this unacceptable because we would have to pay double the amount.

Why do I say that the Government is moving the goalposts? Because the abolition of the MPF offsetting mechanism is indeed a deviation from the original legislative intent. As we all know, before the enactment of the Mandatory Provident Fund Schemes Ordinance in 1995, there had been long discussions in society before a consensus could be forged. According to the consensus reached back then, the past practices would be primarily followed whereby employers would be allowed to use the gratuity or provident fund paid to employees to offset severance payments or long service payments, so that employers would not have to pay double the amount. It was for this reason that the business sector supported this arrangement back then.

Concerning the current approach adopted by the Government, with due respect, I must say that one cannot feel the pain because the needles are not piercing through his skin. Many small and medium enterprises ("SMEs") in the business sector are paying cold hard cash for the contributions, and in view of the prevailing business environment, this is indeed grossly unacceptable.

Let me cite some figures to Members. At present, the amount of long service payment and severance payment is calculated by multiplying two thirds of the last month's wages of an employee (which is capped at $15,000) with his years of service, and the maximum amount payable to an employee is $390,000. LEGISLATIVE COUNCIL ― 10 November 2016 627

It means that a company not large in scale with a mere 10 employees has to immediately set aside $3.9 million for these payments. How many companies in Hong Kong can produce this amount of money right away? If the Government would legislate for this, what would these companies do to pool funds? Would they immediately sack their employees and enter into new agreements? What is more, under the MPF System, the employers have all along considered that they have made contributions and have hence paid their share. I do not think that they have other reserves for meeting these payments.

SMEs account for 98% of companies in Hong Kong, and the wholesale and retail sector which I represent has taken on a large number of employees. As Members may have learnt from press reports, the value of total retail sales in Hong Kong has recorded a decline for 19 months in a row whereas the rent has remained on the high side. Whenever the Government proposes to take forward development at various sites, there would be people championing for the conservation of sea horses or the preservation of farming activities. When development is out of the question, the rent naturally becomes expensive. This problem is unlikely to be resolved in the short term and as people in the labour sector have been so actively campaigning for the abolition of the MPF offsetting mechanism, what can members of the business sector do?

As we all know, under the electoral system of the Legislative Council, Members returned by direct elections and those returned by functional constituencies ("FCs") each take up 35 seats but not all the FCs are in the business sector. Many pan-democrats often say that we are unscrupulous businessmen and describe us as being heartless. May I ask Members whether they have seen any employer in the business sector having the guts to come forth to voice his view loudly? The business sector is the true minority in Hong Kong and yet, I wish to remind everyone that when the business sector fares ill, the entire Hong Kong will fare in a similar way. This proposal now is not an isolated incident. Just look at how many policies the Government has rolled out to help workers in recent years. Now it is the proposed abolition of the MPF offsetting mechanism and last time it was the setting of a statutory minimum wage. As Mr Jeffrey LAM said earlier, with the implementation of the statutory minimum wage, the cost of eating out has increased from some $20 to $40 or $50, and the management fees have gone up quite a lot too. After the statutory minimum wage is brought into effect, there has not been a substantial increase in wages but inflation has obviously surfaced. The last several years have seen 628 LEGISLATIVE COUNCIL ― 10 November 2016 many people continuously resorting to charging acts to the detriment of Hong Kong's reputation while these laws have also led to a continued decline in the competitiveness of Hong Kong. If the Government continues to toe the populist line, it would be difficult for capitalism to be maintained in Hong Kong.

Here, I wish to remind friends in the labour sector that they have already scored 100 marks in their performance. Many people said that Members of the labour sector have worked very hard, making continuous efforts to fight for initiatives to help workers, including the statutory minimum wage that I mentioned just now, this motion today, and the standard working hours to be discussed later, or even the maximum working hours, cooling-off period, and so on. These are initiatives that the general public would be happy to hear of. A customer who bought a piece of clothing can return it within 14 days if he does not like it. This is certainly good to the consumers and to the working class. But if so many similar measures are drawn up in this capitalistic society of Hong Kong, can we continue to walk down this path?

Therefore, here, I oppose this motion on behalf of the Liberal Party. Thank you, President.

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): Mr WONG Kwok-kin, you may now speak on the amendments. The speaking time limit is five minutes.

MR WONG KWOK-KIN (in Cantonese): President, I have proposed this motion today hoping to create an opportunity for the community to express concerns about and discuss the subject and to reach a consensus, thereby urging the Government to decide and take action expeditiously to abolish the Mandatory Provident Fund ("MPF") offsetting mechanism.

Today, six amendments have been proposed to the motion and 22 Members have delivered speeches. I would like to thank Honourable colleagues who have spoken irrespective of their stances. No matter they are supportive of or LEGISLATIVE COUNCIL ― 10 November 2016 629 opposed to the motion, they have stated the reasons for their stances, and we should leave it to the community and the public to comment which stance is better justified.

Actually, when the Government submitted the specific legislation on MPF back then, we already opposed the inclusion of the offsetting arrangement. At that time, former Member of the Legislative Council CHAN Yuen-han proposed an amendment to delete provisions on the offsetting arrangement, and it was obviously unsuccessful, or else, the arrangement would not have been put in place.

I will now talk about the amendments proposed today.

Mr Andrew WAN urges the Chief Executive to honour his pledge, and we will definitely support this. For the Hong Kong Federation of Trade Unions ("FTU") should be the preferential "debtor" on the top of the list and we are determined to recover the debt by all means.

We also support the suggestion that long service payments should not be offset against MPF benefits. If the MPF offsetting mechanism can be abolished only in conjunction with the abolition of long service payments and severance payments, it is de facto "putting the money in the left pocket to the right pocket". We from the labour sector are not that stupid to accept this arrangement. I think the Government is not stupid either, and it will not offer us such an arrangement to touch base. Some people are saying that the Government has offered to the FTU this arrangement of abolishing long service payments and severance payment as an attempt at soft lobbying, and I would say that these are groundless speculations.

In our view, long service payments and severance payments are costs that should be borne by employers. Yet, during the change of the system, we do not oppose offering interim assistance to employers and the making of financial commitment by the Government. Hence, we will support Dr CHIANG Lai-wan's amendment.

Regarding the amendment proposed by Mr Jimmy NG, which states from the outset that the offsetting mechanism under the MPF scheme is functioning effectively, I think the public at large and wage earners will disagree with this statement, so I will not make further comments on it. We cannot support this amendment. 630 LEGISLATIVE COUNCIL ― 10 November 2016

As for Mr Michael TIEN's amendment, though it fails to give full regard to the interests of wage earners, in which only the abolition of the offsetting arrangement for severance payment but not that for long service payment is proposed, we consider Mr Michael TIEN's amendment an act of goodwill. As an employer himself, he is at least willing to take a step forward to try to strike a balance in the disagreement between employers and employees and break the deadlock. So even though we disagree with Mr Michael TIEN's amendment, we appreciate the effort made by him in this aspect.

Moreover, I would like to clarify our stance concerning Miss LAU Siu-lai's amendment, that is, Members from the FTU will not vote on her amendment. The FTU has written to the President right from the start expressing our doubt about her behaviour in oath taking and considers her disqualified. Moreover, a judicial review and an election petition against her qualification as a Member are now in process, so we will not vote on her amendment till her capacity as a Member is clarified by the Court.

Today, I am looking forward to useful, constructive and specific responses from government officials present, which will enable us to gain a better understanding of the approaches to be adopted by the Government in respect of the offsetting arrangement. I also hope that friends in the business sector will not get too agitated, for we can discuss the issue. If we can come together for rational discussions, I hope we can reach a consensus.

NEXT MEETING

PRESIDENT (in Cantonese): I now adjourn the Council until 11:00 am on Wednesday 16 November 2016.

Adjourned accordingly at 7:57 pm.