LEGISLATIVE COUNCIL ― 2 June 2021 6653

OFFICIAL RECORD OF PROCEEDINGS

Wednesday, 2 June 2021

The Council met at thirty-four minutes past Eleven o'clock

MEMBERS PRESENT:

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

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

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

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

THE HONOURABLE WONG TING-KWONG, G.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, G.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 LAU SUK-YEE, G.B.S., J.P.

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

6654 LEGISLATIVE COUNCIL ― 2 June 2021

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, S.B.S., J.P.

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

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

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

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

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

THE HONOURABLE KWOK WAI-KEUNG, J.P.

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

THE HONOURABLE ELIZABETH QUAT, B.B.S., J.P.

THE HONOURABLE CHEUNG-KONG, G.B.S., J.P.

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

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

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

THE HONOURABLE CHUNG KWOK-PAN

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

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

THE HONOURABLE HOLDEN CHOW HO-DING

LEGISLATIVE COUNCIL ― 2 June 2021 6655

THE HONOURABLE SHIU KA-FAI, J.P.

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

THE HONOURABLE YUNG HOI-YAN, J.P.

DR THE HONOURABLE PIERRE CHAN

THE HONOURABLE CHAN CHUN-YING, J.P.

THE HONOURABLE CHEUNG KWOK-KWAN, J.P.

THE HONOURABLE LUK CHUNG-HUNG, J.P.

THE HONOURABLE LAU KWOK-FAN, M.H.

THE HONOURABLE IP-KEUNG, B.B.S., M.H., J.P.

DR THE HONOURABLE CHENG CHUNG-TAI

THE HONOURABLE VINCENT CHENG WING-SHUN, M.H., J.P.

THE HONOURABLE TONY TSE WAI-CHUEN, B.B.S., J.P.

PUBLIC OFFICERS ATTENDING:

THE HONOURABLE FAN, J.P. SECRETARY FOR TRANSPORT AND HOUSING

PROF THE HONOURABLE SIU-CHEE, J.P. SECRETARY FOR FOOD AND HEALTH

THE HONOURABLE TANG-WAH, G.B.S., J.P. SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT

THE HONOURABLE MICHAEL WONG WAI-LUN, J.P. SECRETARY FOR DEVELOPMENT

6656 LEGISLATIVE COUNCIL ― 2 June 2021

THE HONOURABLE ALFRED SIT WING-HANG, J.P. SECRETARY FOR INNOVATION AND TECHNOLOGY

THE HONOURABLE CHING-YU, J.P. SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY

DR RAYMOND SO WAI-MAN, B.B.S., J.P. UNDER SECRETARY FOR TRANSPORT AND HOUSING

CLERKS IN ATTENDANCE:

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

MS DORA WAI, DEPUTY SECRETARY GENERAL

MS ANITA SIT, ASSISTANT SECRETARY GENERAL

MS MIRANDA HON, ASSISTANT SECRETARY GENERAL

LEGISLATIVE COUNCIL ― 2 June 2021 6657

PRESIDENT (in Cantonese): The regular Council meeting now commences.

LAYING OF PAPERS ON THE TABLE OF THE COUNCIL

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

Papers

Employees Retraining Board Annual Report 2019-20 (including Financial Statements and Independent Auditor's Report)

Report No. 17/20-21 of the House Committee on Consideration of Subsidiary Legislation and Other Instruments

Report of the Bills Committee on Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021

Report of the Bills Committee on Revenue (Stamp Duty) Bill 2021

Report of the Bills Committee on Securities and Futures and Companies Legislation (Amendment) Bill 2021

Report of the Bills Committee on Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021

ORAL ANSWERS TO QUESTIONS

PRESIDENT (in Cantonese): Questions. First question.

Traffic problems in the Southern District

1. MR TONY TSE (in Cantonese): President, quite a number of personnel from the architectural, surveying, town planning and landscape sectors as well as residents in the Southern District on the Island have pointed out that 6658 LEGISLATIVE COUNCIL ― 2 June 2021 currently during peak hours, not only are the Aberdeen Tunnel and major roads in the Southern District quite congested, the train compartments of the MTR South Island Line are also very crowded. They are worried that with the gradual completion of a number of residential developments and industrial building conversion projects in the District, coupled with the forthcoming implementation of the "Invigorating Island South" initiative by the Government, the traffic congestion problem in the District will further deteriorate. In this connection, will the Government inform this Council:

(1) of the specific measures to improve the external and local transport of the Southern District, and the timetable for implementing such measures;

(2) of the latest progress of the study on the MTR South Island Line (West) project, and the implementation timetable of the project; and

(3) whether it will conduct a study on the construction of the fourth road harbour crossing to connect the Southern District with the Kowloon Peninsula directly, so as to alleviate the traffic congestions at the Aberdeen Tunnel and the Cross-Harbour Tunnel?

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): President, having consulted the Development Bureau, the Government's reply to Mr Tony TSE's question is as follows:

(1) and (2)

The existing peak-hour traffic flows of major external roads in the Southern District, such as Wong Chuk Hang Road, Aberdeen Praya Road, Pok Fu Lam Road and Aberdeen Tunnel, etc., are mainly northbound traffic in morning peak and southbound traffic in evening peak on weekdays. With the commissioning of South Island Line (East) in December 2016, which provides the residents with another transport means for travelling to and from the Southern District, the traffic of the major external roads mentioned above has been alleviated. For example, the average traffic flows of Aberdeen Tunnel and Pok Fu Lam Road (section between Sassoon Road and Chi Fu Road) decreased by 5.6% and 4.4% respectively in LEGISLATIVE COUNCIL ― 2 June 2021 6659

2017, and the traffic flows of the concerned road sections also remained stable thereafter.

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

The Transport Department ("TD") has all along been committed to improving the local traffic conditions in the Southern District, which includes setting up loading and unloading area for large vehicles at the periphery of the Aberdeen centre area so as to reduce the access of large vehicles to the Aberdeen centre area, establishing no-stopping restriction zones in the district to avoid traffic obstruction, installing adaptive traffic signals at the Dam section of Tai Tam Road, and arranging the installation of traffic signals to regulate the traffic at the junction of Pok Fu Lam Road and Pok Fu Lam Reservoir Road. On the other hand, in view of the new development projects within the district, TD has actively requested the project proponents to implement traffic improvement measures, including improving the traffic capacity at the junction of Pok Fu Lam Road and Victoria Road in the context of the Pok Fu Lam South housing development, and providing U-turn facilities within the Ocean Park Water World so as to improve the traffic of Shum Wan Road.

In order to facilitate early planning of the South Island Line (West) ("SIL(W)"), the Government invited the MTR Corporation Limited ("MTRCL") to submit a project proposal in June 2019. We received the project proposal submitted by MTRCL in late December last year. Relevant departments are considering the proposal and will duly consider the way forward taking into account the growth in transport demand from the development at the south of Pok Fu Lam near Wah Fu, the redevelopment timetable of Wah Fu Estate and the Invigorating Island South ("IIS") initiative.

We expect that the population of Pok Fu Lam will remain stable in the near future and have a more significant growth only after the completion of the redevelopment of Wah Fu Estate. The relevant 6660 LEGISLATIVE COUNCIL ― 2 June 2021

works of SIL(W) can only be carried out after the residents have gradually moved from Wah Fu Estate to the reception estates at Pok Fu Lam South, thereby vacating the relevant space within Wah Fu Estate as the construction site of the railway project. We will endeavour to coordinate with the redevelopment of Wah Fu Estate and adjust public transport services as appropriate. Before finalizing the railway scheme for SIL(W), the Government will consult the public in line with established procedures.

The objective of the IIS initiative is to transform the Southern District into a place of vibrancy for people to work, live and explore. When planning major development projects, the project proponents should conduct traffic impact assessments for the proposed developments in order to review the cumulative traffic impacts of their developments as well as other planned and committed development projects within the district, and they should also propose and implement appropriate traffic improvement measures whenever necessary. Relevant Policy Bureaux and departments will carefully assess the potential traffic impacts arising from the development projects and measures so as to ensure that the capacity of road network is sufficient to support the relevant projects. The Government will continue to closely monitor the external and local traffic conditions of the Southern District.

(3) The Government proposed to take forward a group of priority transport corridors connecting the coastal area of Tuen Mun, Lantau, Kau Yi Chau Artificial Islands and Hong Kong Island under the Lantau Tomorrow Vision. The transport corridors included the fourth cross harbour road tunnel, the completion of which could help divert and alleviate the traffic conditions of the existing three cross harbour tunnels and their connecting roads. The Legislative Council had approved the funding application for the "Studies related to Artificial Islands in the Central Waters". The studies are envisaged to commence in June this year.

Moreover, the Highways Department ("HyD") and TD commenced the "Strategic Studies on Railways and Major Roads beyond 2030" in December last year. Based on the final development strategy of LEGISLATIVE COUNCIL ― 2 June 2021 6661

the "Hong Kong 2030+: Towards a Planning Vision and Strategy Transcending 2030" planning study which will soon be published by the Development Bureau, the studies will explore the layout of railway and major road infrastructure and conduct preliminary engineering and technical assessments for their alignments and supporting facilities, so as to ensure that the planning of large-scale transport infrastructure will complement or even reserve capacity to meet the overall long-term development needs of Hong Kong. The studies will also examine the impact of the proposed transport infrastructure on the existing transport network in order to formulate the corresponding strategies. The focus of the "Strategic Studies on Railways and Major Roads beyond 2030" is on the areas other than those to be studied under the studies related to the Lantau Tomorrow Vision, and this will include the Southern District.

HyD, TD, the Civil Engineering and Development Department, the Planning Department, etc. will closely communicate and coordinate in respect of the above studies.

MR TONY TSE (in Cantonese): Deputy President, just now in his main reply, the Secretary mentioned many infrastructural projects that can improve the traffic in the Southern District, but many of them still remain at the stage of study. Certainly, due to the epidemic, there has been no tourist coming to Hong Kong. This has been coupled with the intermittent opening of Ocean Park, the patronage of South Island Line ("SIL") has been on the low side. However, with the abatement of the epidemic, the opening of the Ocean Park Water World, the gradual occupation of the residential developments in the district and the return of the tourists in the future, I believe the SIL train, which only has three train compartments, will soon be filled with people. Has the Government directed MTRCL to make early preparation for the problem so that MTRCL can quickly increase as appropriate the train compartments and frequency of SIL? Can the Government tell us the details of the related plans?

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, I thank Mr TSE for his supplementary question. Basically, we have already implemented quite a lot of traffic improvement measures for the Southern 6662 LEGISLATIVE COUNCIL ― 2 June 2021

District. Just now, I only gave a brief account of them to Members. We have coordinated with Ocean Park on the opening of the Ocean Park Water World. First of all, shuttle buses will be provided by Ocean Park at the MTR Ocean Park Station to take tourists to the Water World area, and franchised bus routes will be extended to the location of the Water World. We have liaised with the related green minibus operators to ensure that the transport arrangement will be smooth and comprehensive. Moreover, MTRCL will suitably adjust the train frequency in response to passenger carrying rate.

We hope that with the concerted and multi-pronged efforts of Ocean Park, government departments and transport operators, we can provide sufficient carrying capacity to meet people's transport needs while minimizing the impact on the Southern District residents through transport management.

MR CHEUNG KWOK-KWAN (in Cantonese): Deputy President, I notice from the Secretary's main reply that he has named three projects in relation to the transport problem in the Southern District. The first one is SIL(W) and this project is closely related to the redevelopment timetable of Wah Fu Estate. The redevelopment of Wah Fu Estate has been progressing at a snail's pace, so much so that I believe we will not see the commissioning of SIL(W) before 2030. The second project is the studies related to the Lantau Tomorrow Vision. These studies will commence in June this year. The third project is the "Strategic Studies on Railways and Major Roads beyond 2030" which just started in December last year. We probably will not see any results from these three projects in the coming 10 years. They are long-term projects.

I wish to ask the Secretary a question. Is he very satisfied with the traffic condition in the Southern District in the coming 10 years, so much so that he does not have any plan for now to address the traffic problems to be brought about by the population growth in the Southern District in the coming 10 years? I want the Secretary to clarify this point.

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, I thank Mr CHEUNG for his supplementary question. Perhaps, allow me to use a little time to explain the situation. Regarding the traffic improvement measures for the Southern District, basically we talk about those for LEGISLATIVE COUNCIL ― 2 June 2021 6663 the external traffic, which have been implemented. For example, we have constructed a grade-separated carriageway at the junction of Pok Fu Lam Road and Sassoon Road; established a passing bay at the Pok Fu Lam Road bus stop to facilitate the traffic flow; launched a park and ride scheme at the Ocean Park Station; optimized the passing bay at the Island Road bus stop near Deep Water Bay Bathing Beach to avoid traffic being affected by buses at the bus stop; and installed adaptive traffic signals at the Dam section of Tai Tam Road.

And of course, as I just mentioned, there are many planned improvement measures as well. For example, we have arranged to install traffic signals at the junction of Pok Fu Lam Road and Pok Fu Lam Reservoir Road; to widen the junction of Pok Fu Lam Road and Victoria Road in the context of the Pok Fu Lam South housing development to enhance the southbound Pok Fu Lam Road and the Victoria Road carriageway; and to enlarge the passing bay at the Wong Chuk Hang Road bus stop near the Aberdeen Tunnel.

Regarding local traffic in the district, we have also conducted a series of work. Examples of planned and to-be-implemented projects include enhancing a number of junctions within Pok Fu Lam area (including the junctions between Pok Fu Lam Road and Sassoon Road, between Victoria Road and Sha Wan Drive, between Pok Fu Lam Road, Victoria Road and Shek Pai Wan Road; and between Victoria Road and Sandy Bay Road). These projects will be conducted in the context of the Cyberport Expansion Project. And another point I have already mentioned just now, and that is the U-turn facilities within the Ocean Park Water World, which will be provided to improve the traffic of Shum Wan Road; and prohibited zones, road signs and road markings will be added in Shum Wan Road to tie in with the opening of the Ocean Park Water World. We will continue to closely monitor the situation and I thank Mr CHEUNG for his reminder just now. We will try our best to proceed with the work.

MR CHAN KIN-POR (in Cantonese): Deputy President, in its response, the Government says it has already received the project proposal on SIL(W) submitted by MTRCL, and that it will consult the public in line with established procedures. I believe residents in the district will have many good ideas and proposals on how to speedily and smoothly complete the project at a low cost. I thus hope that the Government can conduct the consultation early so as to 6664 LEGISLATIVE COUNCIL ― 2 June 2021 expeditiously take on board their views before anything is finalized. It should not conduct the consultation when everything is already finalized, as this would give people the impression that the Government is notifying rather than consulting the residents.

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, I thank Mr CHAN for his reminder. Given that railway projects often involve a large financial investment and these projects will substantially improve the traffic in the district, in taking forward these railway projects, we will surely consult the public in line with the mechanism and consult Members' views at the Legislative Council after the Government has received and is satisfied with the final proposal from MTRCL. The purpose is to, first, take in views; second, to do a better job; and third, to bring commute convenience to residents in the district and along the railway route after the commissioning of the railway. If the railway project is located in a new development area, it will also release the development potential of the land along the railway line and provide more land for the construction of housing, public facilities and commercial areas for Hong Kong.

MR CHAN CHUN-YING (in Cantonese): Deputy President, in early 2020, when the Government planned to seek $10.6 billion from the Legislative Council for the expansion of Ocean Park, it mentioned that two piers would be constructed along the coast of the Park to improve the sea traffic to and from the Park as well as the entire Southern District.

The funding for the expansion subsequently became two sums of "life-saving" funding. Ocean Park undertook that it would still commit to the construction of these two piers. However, one and a half years have passed and we have not heard any progress from the Government. To date, the public do not know the timetable of the Government nor the latest progress about the construction and commissioning of the two piers. Moreover, will these two piers be open to public use so as to provide an additional transport option for residents in the Southern District?

LEGISLATIVE COUNCIL ― 2 June 2021 6665

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, I thank Mr CHAN for his supplementary question. We support the construction of the piers by Ocean Park to enhance its connecting transport and facilitate the arrival and departure of its visitors. However, I do not have the relevant information at hand since the proposal is put forth by Ocean Park. In any event, as far as transport policy is concerned, our policy is clear. We welcome anyone who is interested in operating ferry services or any water transport to submit their proposals to which we will give active consideration. So basically, after the expansion of the Ocean Park or construction of the piers, if Ocean Park is interested in providing ferry services, we will duly consider its proposal and deal with it in a positive manner under the policy just mentioned.

MR MA FUNG-KWOK (in Cantonese): Deputy President, the Aberdeen Tunnel is always congested, which is often caused by the vehicles stuck in traffic jams in the Cross-Harbour Tunnel in Hung Hom, which often extend to the Southern District. And the Cross-Harbour Tunnel is congested largely because of its low tolls. The tolls of Aberdeen Tunnel are even lower. All types of vehicles are charged at a flat rate of $5, which is even cheaper than taking the MTR. Many drivers thus opt for the Aberdeen Tunnel.

I know that the franchise of the Western Harbour Crossing will expire in two years. Does the Government have given any thought to the tolling arrangements of the three road harbour crossings? A few years ago, I suggested that the Government should consider buying back the Western Harbour Crossing, plus the Eastern Harbour Crossing, and standardizing or abolishing the tolls of the three road harbour crossings, so as to use this innovative approach to rationalize the traffic among the three tunnels. In fact, as of now, the Aberdeen Tunnel seems to be the only option for the motorists in the Southern District. If we can adopt a relatively innovative approach, we may be able to attract some drivers to take another route to use the Western Harbour Crossing. May I ask the Government whether it has ever thought of this relatively long-term and bold idea?

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, I thank Mr MA for his supplementary question. Indeed, as Mr MA said, the Aberdeen Tunnel has not been used to its full capacity, but the traffic 6666 LEGISLATIVE COUNCIL ― 2 June 2021 congestion at Queen's Road East and Happy Valley extended from the Cross-Harbour Tunnel obstructs the northbound traffic flow.

Regarding the traffic rationalization among the three road harbour crossings, which Mr MA just mentioned, the Government did have such a proposal earlier but it failed to secure enough support from the Legislative Council and had to withdraw the proposal. After the expiry of the franchise of the Western Harbour Crossing in August 2023, we will continue with the overall planning. Road Harbour crossings are an indispensable route to many Hong Kong people when they go out. At present, the traffic flows of the Eastern Harbour Crossing, the Western Harbour Crossing and the Cross-Harbour Tunnel are uneven. I believe it will be a safe and widely-accepted option to rationalize the traffic of the three road harbour crossings and allow people to freely choose between them based on the principle of congestion charging. However, regarding the details, we will have to conduct detailed planning on the overall transport arrangement and the actual situation at that time. I believe we will come back and seek Members' views at the Legislative Council when the proposal is ready. I hope Members will still be here at that time.

DEPUTY PRESIDENT (in Cantonese): Second question.

Housing problem

2. MR SHIU KA-FAI (in Cantonese): Deputy President, some members of the community have indicated that after improving the electoral system, the Government may focus on developing the economy, improving people's livelihood and, in particular, resolving the long-standing and deep-seated problems in Hong Kong such as housing problem. However, quite a number of comments have pointed out that land planning work and housing projects have still been progressing at a slow pace. In this connection, will the Government inform this Council:

(1) of the procedures to be gone through currently regarding a housing site from land identification to planning and consultation, and then from the site as a piece of "primitive land" to its being transformed into a "spade-ready site" and, regarding the implementation of a LEGISLATIVE COUNCIL ― 2 June 2021 6667

housing project on the spade-ready site, from the commencement of works to completion, as well as the time taken in general to complete each procedure; whether it knows how such procedures and the time taken respectively compare with those in advanced countries;

(2) as there is a proposal that the Government may explore the construction of housing units on the periphery of country parks to increase land and housing supply, whether the Government will conduct a study on the proposal; if so, of the details; if not, the reasons for that; and

(3) whether it has assessed the deep-seated reasons why the housing problem remains unresolved for a long time, and what new solutions are available?

SECRETARY FOR DEVELOPMENT (in Cantonese): Deputy President, the current-term Government has since long adopted a multi-pronged strategy to strive to develop land. In particular, it announced in early 2019 its full acceptance of the recommendations set out in the report of the Task Force on Land Supply ("TFLS") and is taking forward in full swing the eight land supply options recommended for priority studies and implementation.

After consulting the Transport and Housing Bureau ("THB"), my reply to the various parts of the question is as follows:

(1) At present, it usually takes at least six years to transform a piece of "primitive land" (i.e. land without concrete development plan) into a "spade-ready site" (i.e. land ready for commencement of works). To take the example of rezoning a single land parcel for the development of public housing, the first step is to conduct a technical feasibility study to assess the impact on transport, environment, etc., which takes around two years. Rezoning will then proceed under the Town Planning Ordinance (Cap. 131) ("the Ordinance") (normally requiring 11 months in accordance with the Ordinance), followed by detailed engineering and architectural designs (normally requiring 18 to 24 months), and the gazettal of land resumption and works area under the Lands Resumption Ordinance (Cap. 124) and other ordinances as well as the handling of 6668 LEGISLATIVE COUNCIL ― 2 June 2021

objections if any private lot is involved. When the detailed studies and estimated expenditures are ready, the Government will seek funding approval from the Legislative Council for the works and if approved, the land resumption procedures will commence and rehousing compensation will be arranged for the affected tenants or operators. Afterwards, the land will be cleared for site formation and infrastructural works, which would take around two to three years (depending on site conditions). Some of the above processes will be conducted in parallel and they altogether take around six years or more to complete, while the building of flats requires at least around four to five years.

Given the differences in legal and administrative systems, as well as in public sentiments, it is not appropriate to make direct comparison between the development time frame in Hong Kong and that in other places.

(2) The development of the periphery of country parks is one of the 18 land supply options put forward by TFLS during the public consultation in 2018. After extensive consultation with different sectors in the community, TFLS considered that the option failed to garner majority support from the general public and did not include it as one of the recommended options for priority studies and implementation in the report submitted to the Government in December 2018. This option was also not included in the land supply strategy announced by the Government in February 2019. The Government will continue to focus its resources on taking forward in full steam the various land supply measures announced, including the eight priority options as recommended by TFLS, and there is no plan to restart the study on developing the periphery of country parks for now.

(3) The housing problem of Hong Kong can be attributed to various complex factors. As an open economy, Hong Kong is susceptible to external factors, and asset prices have remained high due to persistent ultra-low interest rates. Also, there had been a lack of progress in Hong Kong's land creation work for a period of time in the past. The current-term Government has spared no efforts in LEGISLATIVE COUNCIL ― 2 June 2021 6669 increasing land supply since taking office, and its work in the recent years is starting to bear fruit. To take land resumption as an example, in just 2019-2020 and 2020-2021, the Government has resumed around 90 hectares of land, which is much more than the 20 hectares resumed over the immediate past five years. Looking ahead, about 700 hectares of land will be resumed from 2021-2022. In addition, various large-scale land supply projects are being launched successively. We are actively taking forward the studies related to the artificial islands in the Central Waters, which are expected to commence this month and take about three and a half years to complete. Subject to the findings of the studies, we expect that the first phase of the reclamation works for the development of the Kau Yi Chau Artificial Islands will commence in 2027. Another large-scale land creation project is the New Territories North ("NTN") Development. We have previously consulted the Legislative Council Panel on Development on the planning and engineering study of the NTN Development, and will submit it to the Public Works Subcommittee shortly. We hope that one of the essential projects of the NTN Development, i.e. the construction of the San Tin/Lok Ma Chau Development Node, will start in 2025.

Besides, the Steering Group on Streamlining Development Control of the Development Bureau ("DEVB") will identify room, if any, for further expediting or streamlining the development processes. This includes the review of statutory procedures, such as the time frame for processing development applications and the handling of representations according to existing legislation, etc. We have also endeavoured to expedite the creation of land while pressing ahead with individual projects. For example, we applied the latest engineering technology of "Deep Cement Mixing" method in the reclamation works for the Tung Chung New Town development, taking only 27 months to deliver the first parcel of land with an area of around 7 hectares. We expect that about 10 000 public housing units can be provided in 2024 at the soonest.

DEVB also set up the Development Projects Facilitation Office in December 2020 to facilitate the processing of development approval applications for private residential developments capable of 6670 LEGISLATIVE COUNCIL ― 2 June 2021

providing 500 flats or more, with a view to ensuring effective processing of development applications.

As for public housing, government departments will, in collaboration with the Hong Kong Housing Authority ("HA") and the Hong Kong Housing Society, explore ways to expedite the development process and optimize the development potential of each and every public housing site. For example, where feasible, we will suitably relax the development restrictions of the sites, or enlarge and/or amalgamate sites in order to create larger site area with a view to increasing the housing production.

In recent years, HA has implemented a series of concrete measures to increase the supply of public housing, including clearing the Shek Lei Interim Housing for public housing development and redeveloping its individual factory estates for housing purpose. In order to expedite the construction time while ensuring site safety and the construction quality, HA will continue to improve its construction technologies and work flow, adopt prefabricated technologies and facilitate the use of other innovative construction methods, such as the use of Modular Integrated Construction, with a view to further enhancing productivity.

In addition, THB has been actively taking forward and facilitating the transitional housing project implemented by non-governmental organizations with a view to providing 15 000 transitional housing units by 2022-2023 to alleviate the hardship faced by families living in inadequate housing while waiting for the public rental housing for a long time.

Deputy President, after taking office, the Chief Executive has immediately indicated clearly that housing is not a simple commodity and that our community has a rightful expectation towards the Government to provide adequate housing. This is fundamental to social harmony and stability. The Government will continue to strengthen its efforts in land creation and housing construction, and will take increasing and expediting housing supply as the foremost objective.

LEGISLATIVE COUNCIL ― 2 June 2021 6671

MR SHIU KA-FAI (in Cantonese): Deputy President, in the main reply, the Secretary has pointed out that up to 90 hectares of land was resumed over the past two years, which is much more than the 20 hectares of land resumed over the immediate past five years, and looking ahead, about 700 hectares of land will be resumed. This sounds like the Government has done a lot of work.

However, I wish to tell the Secretary about the present situation of Hong Kong: Members of the public have to wait for a record six years for the allocation of public rental housing units, while the property prices are ever increasing. Hence, what we need to look at is the result. No matter what the Secretary says about the procedures, he can never make the general public of Hong Kong feel satisfied.

This is particularly so when the Secretary says in part (1) of the main reply that at present, it usually takes at least six years to transform a piece of "primitive land" into a "spade-ready site". He also says that the consultation usually takes two years, the environment assessment takes another two years, the carrying out of some kind of consultation takes 11 months and then site formation takes another two to three years. After these procedures have been completed, the construction process will take four to six years. Therefore, it takes more than a decade for a building to be constructed.

First, do the authorities have any means to shorten all the procedures and processes in order to reduce the number of people waiting for public rental housing? Second, in terms of cost cutting, can the authorities consider importation of workers for housing construction?

SECRETARY FOR DEVELOPMENT (in Cantonese): Deputy President, I thank Mr SHIU for his supplementary question and opinions.

Firstly, I highly agree that we need to further speed up the procedures. I would like to share with Members some simple statistics. In terms of the housing supply target for the coming 10 years, the number of housing units was actually increased from 248 000 the year before last to 272 000 last year, and was further increased to 316 000 this year. But where does the problem lie? As remarked by the Chief Executive, the construction of housing and the expansion of land resources take a very long time. Therefore, in respect of the coming 10 years, there is conspicuous improvement in statistics. However, concerning the 6672 LEGISLATIVE COUNCIL ― 2 June 2021 housing supply in the recent one to two years or in the short term, we must continue to put more efforts in, for example, the construction of transitional housing, which we hope can have certain effects.

I am grateful to Mr SHIU for raising this question. Concerning the whole plan, especially the various procedures in terms of preliminary planning, it takes about six years under the current circumstances. But in fact, DEVB has already put in extra efforts and we have already set up a Steering Group on Streamlining Development Control, which directly reports to the Chief Executive.

In the time to come, we will review the various procedures to see whether they can be further streamlined. As mentioned in the main reply, this will include reviewing the regulations stipulated in the existing legislation. We will seek to amend the legislation when necessary, and wish that Members can give us support. Of course, I must point out here that it always comes with a price.

I now illustrate with an example. At present, before a funding application is submitted to the Legislative Council, all planning procedures must be finished beforehand. But in the future, will it be possible that a funding application can be submitted to the Legislative Council earlier when the planning of the project concerned has already attained a certain stage? The project concerned may not be successful, but the approval of the funding will be conditional. This approach has not been adopted before, but can we give it a try in the future? I think I may need to conduct a proper study with Members in due course.

Finally, as regards the importation of workers asked by Mr SHIU, this currently is still not a measure that we plan to adopt.

MR ABRAHAM SHEK (in Cantonese): Deputy President, the Secretary has given a very good answer to this question. But apart from this, the Secretary is also very honest in telling us that we simply cannot ask for a piece of "primitive land" to be transformed into a "spade-ready site" and for a building to be constructed in less than a decade. The Secretary has also told us the truth in this aspect. The Chief Executive says that it is important to make Hong Kong a better place to live in and work. But at present, 250 000 households are waiting for public rental housing and they are bearing the brunt of sweltering heat―as high as 40℃―during the hot summer inside their current accommodations. LEGISLATIVE COUNCIL ― 2 June 2021 6673

How can they live and work happily? Besides, we also have a high unemployment rate.

People now have to wait for more than 5.5 years for public rental housing, and I think this is a special case that warrants a special arrangement. Given all the restrictions just mentioned by the Secretary, how can we reduce the waiting time and construct more public rental housing? The Government does not need to pay attention to private housing which we will handle ourselves. But in terms of public housing, the Government needs to resolve the problem of long waiting time, and we wish that the waiting time can be quickly reduced to three years as before.

Perhaps the Secretary for Development can leave the answer to my question to THB. In regard to this situation, apart from what the Secretary just said that the construction period could be shortened to 27 months, before that six year period when construction has not yet commenced, will THB consider granting a waiver from strict compliance with certain regulations in the related legislation, such as waiving the consultation work, under special circumstances? My supplementary question is as simple as that. Will the Bureau consider this suggestion? If not, what are the reasons? Will the Bureau try to resolve this problem only after the waiting time of each application is prolonged to six to seven years?

DEPUTY PRESIDENT (in Cantonese): Which public officer will answer this supplementary question? Under Secretary for Transport and Housing, please reply.

UNDER SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): I thank Mr Abraham SHEK for his supplementary question. In fact, the most fundamental way of increasing public housing supply is to identify land actively for the construction of housing. In this regard, Mr Abraham SHEK has also said clearly that the procedure itself is very long. Hence, despite the many kinds of preliminary preparation work, some preliminary processes will be conducted, as far as possible, in parallel with our land creation endeavour so that when the parcel of land is given to HA, the construction works can be commenced as soon as possible.

6674 LEGISLATIVE COUNCIL ― 2 June 2021

The situation of certain parcels of land may be more complicated, but we will try to make use of new technologies and speed up the progress of construction under various circumstances. Under the basic principle of not compromising construction safety, we will try our best to explore different methods, such as increasing the utilization rate of prefabricated components, making use of Modular Integrated Construction technology or encouraging the adoption of robotic approach in construction, with a view to further enhancing productivity.

DEPUTY PRESIDENT (in Cantonese): Mr Abraham SHEK, which part of your supplementary question has not been answered?

MR ABRAHAM SHEK (in Cantonese): Which part has not been answered? I am not asking about the construction matters. Secretary Michael WONG has already pointed out …

DEPUTY PRESIDENT (in Cantonese): Mr SHEK, please directly point out the part of your supplementary question which has not been answered.

MR ABRAHAM SHEK (in Cantonese): I know and I am now pointing it out. Secretary Michael WONG has already said that the construction period could be reduced to 27 months, from four years to 27 months. My supplementary question is that before the construction is commenced, will the authorities consider dealing with this special case with a special arrangement or consider reducing the period of time concerned from six years to two years?

DEPUTY PRESIDENT (in Cantonese): Mr Abraham SHEK, you have already clearly pointed out the part of your supplementary question which has not been answered.

Do public officers have anything to add in this regard?

LEGISLATIVE COUNCIL ― 2 June 2021 6675

UNDER SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Under various circumstances, we will also consider increasing the housing supply as soon as possible. In regard to any method which can reduce the construction period, we will consider it in an open and welcoming manner.

(Mr Abraham SHEK indicated his wish to raise a follow-up question)

DEPUTY PRESIDENT (in Cantonese): Mr Abraham SHEK, please follow up on the question on another occasion. Please sit down.

(Mr Abraham SHEK was still standing and speaking)

DEPUTY PRESIDENT (in Cantonese): Members are very concerned about the housing problem, and yet they must also observe the rules for the question session. Mr SHEK, please sit down.

MR CHEUNG KWOK-KWAN (in Cantonese): Deputy President, as the Under Secretary just said, in order to resolve the housing problem, we need to first resolve the land problem. And the Secretary also gave us an account earlier on the various measures adopted by the Government in increasing land supply over the past few years. As regards land supply in the short-to-medium term, under the multi-pronged strategy, one of the measures introduced by the Government in recent years is the Land Sharing Pilot Scheme ("LSPS") which was open for application since 6 May last year. May I ask the Secretary to tell us about the achievement under LSPS in helping us to increase land supply, and the areas of LSPS which can be improved to facilitate the identification of more land?

SECRETARY FOR DEVELOPMENT (in Cantonese): Deputy President, I thank Mr CHEUNG for his supplementary question. As regards LSPS, in fact, we are currently having initial dialogues with some potential applicants on about 10 projects. Let me give a simple explanation of why the initial dialogues are so important. When a parcel of land itself can be used for the development of private housing, the landowner concerned will usually not discuss the development with us. When a landowner approaches us, it is usually because he 6676 LEGISLATIVE COUNCIL ― 2 June 2021 needs assistance from the Government, and this is also the essence of LSPS. One example is that the road junction outside the piece of private land needs to be widened, but the land where it is situated is not owned by the owner of the private land but owned by us.

In fact, concerning these 10 projects, I believe that some of them have come to the stage of formal application submission, and I expect to have more than one project attaining the stage of formal application submission within this year. We have also undertaken that this is a sunlight policy which is carried out in a fair, equitable and open manner. When applications are formally submitted to us, we will report the progress to society and the Legislative Council.

Mr CHEUNG asked about the conditions concerned. For the time being, we think that since LSPS is still at a rather preliminary stage, we do not intend to change any of its basic conditions. As Mr CHEUNG may also understand, if I say that the existing conditions will be changed, especially to be more relaxed, I think the processing of all the applications submitted has to be suspended. Thus at the present stage, we do not intend to change the conditions.

MR LAU KWOK-FAN (in Cantonese): Deputy President, I am rather disappointed with the earlier reply of the Secretary that there is no plan for the Government to restart the study on developing the periphery of country parks for now. As a matter of fact, since the Donald TSANG era, the area of country parks in Hong Kong has already increased by 2 500 hectares, much more than the 1 700 hectares of land to be created from Lantau Tomorrow Vision. We are now only asking the Government to restart the study on developing a very small portion of the periphery of country parks which has already commenced. I do not understand why the Government is not willing to restart it.

Today, I mainly want to ask the Secretary whether the authorities, given that they are unwilling to study the development of the periphery of country parks, will consider developing the Green Belt ("GB") sites lying between country parks and urban areas. In fact, with the development of urban areas and new development areas, the periphery of many GB sites already have a lot of infrastructural facilities, and the GB sites are no longer afforested. Since these GB sites consist an area of about 16 000 hectares, will the Government consider LEGISLATIVE COUNCIL ― 2 June 2021 6677 conducting a comprehensive study on these 16 000 hectares of GB sites with reference to the study on brownfield sites, so that some suitable land identified can be rezoned for housing or public use purposes?

SECRETARY FOR DEVELOPMENT (in Cantonese): Deputy President, I thank Mr LAU for his supplementary question. I would like to give a brief explanation again about country parks. As I mentioned in the main reply earlier, TFLS considered that this option failed to garner majority support from the general public. If Members refer to the whole report of TFLS, they may also learn from it that since the period of development of country parks will be very long, ecological study has to be conducted and this may take 12 to 18 months. And then the exclusion of some land from the country parks not only involves legal procedures, but may also be subject to judicial review, i.e. the risk of being challenged judicially. Besides, the land concerned is rather close to areas with high ecological values. Even though this issue can be managed by us, the process of development will not be speedy and hence, this will not be an option for housing supply in the short-to-medium term.

In fact, it is not true that nothing about this option has been mentioned by TFLS. Among the 18 options, only the reclamation of Plover Cove Reservoir is truly not recommended by TFLS. In regard to the other options, eight of them are recommended as priority options. As I said earlier, when these eight options are developed to a certain stage, we will then have some capacity to reconsider the remaining nine options, including the conceptual options.

I thank Mr LAU for mentioning GB sites, and let me provide Members with some figures. Concerning the rezoning of individual parcels of land, over 210 parcels of land have already been rezoned and for the remaining 70 parcels of land, in fact, over half of them involve GB sites. Hence, GB sites are definitely not prohibited areas. The total area of the remaining 70 parcels of land can provide about 100 000 housing units. Therefore, will we further explore the feasibility of rezoning more GB sites? We are willing to do so, but we have to deal with these 70 parcels of land in the first place.

6678 LEGISLATIVE COUNCIL ― 2 June 2021

DEPUTY PRESIDENT (in Cantonese): Third question.

Uncertain prospects faced by the import and export trade

3. MR JIMMY NG (in Cantonese): Deputy President, quite a number of Hong Kong businessmen have relayed that under a backdrop of the incessant conflicts on various fronts such as ideology and trade between China and western countries in recent years, the United States ("US") have made a new requirement that goods imported from Hong Kong may no longer use "Made in Hong Kong" as the origin marking, and western enterprises have launched a campaign to boycott Xinjiang cotton, resulting in uncertain prospects faced by Hong Kong's import and export trade. In this connection, will the Government inform this Council:

(1) as the Government instituted in October last year the dispute settlement procedures of the World Trade Organization in respect of US's implementation of the aforesaid new requirement on origin marking, of the relevant progress; whether it has formulated corresponding plans to assist Hong Kong businessmen in coping with the situation where the outcome of the dispute adjudication is unfavourable to Hong Kong;

(2) as the complex and volatile international trade relations have resulted in Hong Kong businessmen not knowing what course to take, of the Government's new measures to help Hong Kong businessmen adapt to the new situations; and

(3) whether it will relay to the Central Authorities the concerns of Hong Kong businessmen, and seek the establishment of a standing mechanism for assisting Hong Kong businessmen in coping with disputes and uncertainties in international trade; if it will, of the details; if not, the reasons for that?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): Deputy President, thank you for the question raised by Mr Jimmy NG. My consolidated reply to the three parts of the question is as follows:

LEGISLATIVE COUNCIL ― 2 June 2021 6679

Under "one country, two systems", the Basic Law confers to Hong Kong Special Administrative Region ("HKSAR") a special status. Pursuant to the Basic Law, HKSAR is a separate customs territory and may, using the name "Hong Kong, China", participate in international organizations such as the World Trade Organization ("WTO") and Asia-Pacific Economic Cooperation ("APEC") as a separate member. Hong Kong's special status has been widely recognized and respected by the international community. Being a founding member of WTO, Hong Kong's economic and trade status is on par with that of other WTO members, and it will not be affected by the actions of an individual country, nor granted or revocable by an individual country unilaterally.

The United States ("US") has imposed a new requirement on the origin marking of all products exported from Hong Kong to US since November last year. This discriminates against goods of Hong Kong origin and attempts to weaken Hong Kong's status as a separate customs territory. It is also blatantly inconsistent with multiple WTO agreements. In accordance with the rules and spirit of WTO, the HKSAR Government has been raising objection with justifications and fully safeguarding Hong Kong's interests.

We have also brought the dispute with US to the WTO agenda. In February 2021, at Hong Kong's request, the WTO Dispute Settlement Body established a panel to consider the dispute raised by Hong Kong with respect to the violation of WTO rules by the US's requirement. Hong Kong filed the first written submission last Friday (28 May) according to procedures, setting out in detail to the panel Hong Kong's position and justifications, and explaining that the US's requirement unlawfully discriminates against goods of Hong Kong origin, and is inconsistent with multiple WTO covered agreements, including the Agreement on Rules of Origin, the Agreement on Technical Barriers to Trade, and the General Agreement on Tariffs and Trade 1994. We understand that a WTO panel would in general require six to nine months to consider a dispute and issue its findings. We will continue to participate in the process and we look forward to a fair and reasonable result.

In respect of the US's origin marking requirement and China-US trade conflict, the HKSAR Government has been maintaining close communication with our business community, in particular through local chambers of commerce, of which some are represented by Mr Jimmy NG, and members of the Trade and Industry Advisory Board, to understand and analyse the impact of the US's requirement on Hong Kong's economy and trade, to review the situation and formulate response measures.

6680 LEGISLATIVE COUNCIL ― 2 June 2021

To assist Hong Kong enterprises to develop markets and to reduce various uncertainties in external trade, the HKSAR Government has been establishing and maintaining close and stable economic and trade relations with trading partners in the world. In the past four years, Hong Kong has signed four free trade agreements ("FTAs") with 13 economies, doubling the number of FTAs signed to eight, and increasing significantly the number of economies covered to 20. In the past four years, Hong Kong has also signed four investment agreements with 13 overseas economies, bringing the total number of investment agreements signed to 22 with 31 overseas economies. These agreements provide Hong Kong enterprises and investors with legal certainty and more favourable market access. It has been proven that these agreements have created more business opportunities for the overall economic and trade environment of Hong Kong and further enhanced trade and investment flows. Despite the challenges brought by the epidemic, Hong Kong's foreign trade, in particular trade with partners with which we have signed agreements, has been rising instead of falling, recording relatively significant growth.

In view of the rise of trade protectionism in recent years, we all the more value the certainty and protection for free trade that regional trade agreements offer. Among them, the Regional Comprehensive Economic Partnership ("RCEP") signed in November last year was an important milestone for international economy and trade. The HKSAR Government has all along been striving to join the agreement early in order to strengthen the trade and investment ties between Hong Kong and member economies in the region and open up bigger and more stable markets in the region for the business community.

(THE PRESIDENT resumed the Chair)

In addition to expanding overseas market, Hong Kong also attaches great importance to grasping more fully the opportunities in the enormous Mainland market. Under the dual circulation development pattern proposed in the National 14th Five-Year Plan, Hong Kong will not only further strengthen its role as a connection platform between the country and the rest of the world in the international circulation but also focus on developing the Mainland market and assisting Hong Kong enterprises to grasp the opportunities brought by the country's domestic circulation strategy, in particular the enormous business opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area ("GBA"). In this regard, the Government has provided additional funding to the Hong Kong LEGISLATIVE COUNCIL ― 2 June 2021 6681

Trade Development Council ("HKTDC") for rolling out a range of measures, including the launch of a one-stop "GoGBA" digital platform and the establishment of the "HKTDC GBA Centre" in Shenzhen.

Based on the support throughout the years for small and medium-sized enterprises to expand externally, the Government will also launch a series of enhancement measures starting from July this year, including enhancing the Dedicated Fund on Branding, Upgrading and Domestic Sales ("BUD Fund"), increasing the cumulative funding ceiling per enterprise and extending the geographical coverage, to support enterprises in developing more diversified markets. We have allocated $1 billion from the Anti-epidemic Fund to support the convention and exhibition industry. When the epidemic situation improves and the convention and exhibition industry resumes, the subsidy will assist the trade to continue to develop business and strengthen marketing.

The HKSAR Government will continue to maintain close contacts and communication in the coming times with the Hong Kong business community to tackle all the challenges, including those arising from the trade disputes.

MR JIMMY NG (in Cantonese): There is a saying which goes, "even if you do not want to get involved in politics, politics will affect you", and this has precisely reflected the current situation faced by Hong Kong businessmen. Although they only want to do business with their business partners overseas, some foreign governments and external anti-China forces still exhaust all possible means to wantonly interfere in and obstruct normal international trade exchanges under all sorts of political excuses. There is thus a pressing need for the Central Government or the SAR Government to act in response to these thorny international political disputes, and take the initiative to resolve problems and provide strong support for Hong Kong businessmen.

In this connection, I hope the authorities can explain further whether they have received directly or through chambers of commerce any requests for assistance concerning the above mentioned political suppression since the outbreak of China-US trade war in 2018, as well as the procedures for processing such requests. Have government agencies, especially the Economic and Trade Offices overseas, encountered concrete difficulties in handling such cases, and can they genuinely assist Hong Kong businessmen in resolving their problems?

6682 LEGISLATIVE COUNCIL ― 2 June 2021

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, what Mr Jimmy NG mentioned are exactly the problems we have been endeavouring to address over the past few years. In the face of the trade policies in the international community, especially those adopted by the US Government of the last term, which put the interests of US absolutely above all else in disregard of the principles of international trade, we took early action back then when the current-term Government had just assumed office to reiterate the stance of Hong Kong in certain international fora including WTO and APEC. Hong Kong is the most open and freest market in the world, and while encouraging the upholding of principles in this regard, we strive to maintain international standards at the same time. Therefore, being a member of WTO, apart from bringing up the issue of unfair treatment from US through the WTO dispute settlement mechanism, Hong Kong has also joined forces systematically and internationally in recent years with other countries in opposing the rise of such trade protectionism.

Secondly, as far as bilateral relations are concerned, we have been making use of various channels, including the US Government and business community such as its chambers of commerce or bilateral chambers of commerce and think tanks, to elaborate to the US that its trade protectionism will not only harm its intended targets, such as the country or Hong Kong, but also its own interests. It has been proved that since the outbreak of China-US trade war, the US side did pay a price because with the decline in trade volume between China and US, trade between Hong Kong and US is also affected, thus reducing the amount of US's surplus with the territory.

In addition, with regard to the issue raised by Mr NG concerning the problems faced by individual enterprises in export trade, the Trade and Industry Department will assist in handling such cases but fortunately, the volume of goods directly exported from Hong Kong to US is relatively small, accounting for only about 0.1% of our export volume. However, we will tackle the issue even if only one such case is involved.

Finally, this is a battle involving not merely the governments of both places. As I have said just now, and as all chambers of commerce (including many Members present here who have background in such chambers) may be aware, we often share with them within a very short time various response strategies, measures and information received, so as to deal with the situation together with all stakeholders. As meetings will be convened by the panel LEGISLATIVE COUNCIL ― 2 June 2021 6683 established under the WTO Dispute Settlement Body to consider the dispute, we will continue to seek the views of chambers of commerce when necessary.

MR CHUNG KWOK-PAN (in Cantonese): I wonder if the Secretary is aware that many Hong Kong businessmen are now engaging in international trade, and apart from running factories in Hong Kong or Guangdong Province, they have also established factories in many places in Southeast Asia. There are currently many factory owners engaging in export trade in Southeast Asia, and although their operating accounts may not necessarily be included in the export trade figures of Hong Kong, they are in fact Hong Kong enterprises. Hence, how well does the SAR Government actually know about the operating difficulties faced by Hong Kong businessmen now in different Southeast Asian places?

Take the recent internal political conflicts in Myanmar as an example, as many Hong Kong businessmen have set up factories there, they simply do not know what they should do now and may even face the disastrous consequence of a total loss of their investment. Has the SAR Government taken the initiative to offer assistance to these enterprises, which have established factories elsewhere and their operating accounts may not be included in the trade figures of Hong Kong?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I will respond to this question in several different aspects. First of all, with regard to overseas investment made by Hong Kong businessmen, there will be less protection for their investment if no investment protection agreements have been signed with the authorities concerned in the relevant places. Therefore, as I can recall, when trade and investment agreements were signed with the Association of Southeast Asian Nations ("ASEAN") in the year before last, we had already explained to Members that certain terms and conditions similar to national treatment clauses were included in such agreements. Under such terms and conditions, if government compensation is available to nationals of a country affected by war and riots, Hong Kong businessmen as investors in that particular country shall receive similar protection. This is a viewpoint from the legal perspective.

Certainly, in times of social turmoil, or as cited by Mr CHUNG just now, when Hong Kong businessmen are affected indirectly apart from being subject to 6684 LEGISLATIVE COUNCIL ― 2 June 2021 the direct impact of the turmoil, our representatives in ASEAN, especially our Economic and Trade Offices in Jakarta and Bangkok will maintain communication with Myanmar, relevant chambers of commerce and investors when necessary, and closely monitor the situation there in the hope that they will receive appropriate care and protection.

As mentioned by the Member just now, more and more Hong Kong businessmen who previously engaged in manufacturing business have moved their production lines to different places all over the world, and complete data may not always be available in this respect. This exactly is a fact which can demonstrate that as I have stated in the main reply, by signing more free trade agreements or investment agreements with other economies, we will be in a better position to provide Hong Kong investors overseas with more extensive protection and more favourable market access.

MS YUNG HOI-YAN (in Cantonese): President, I think all professional service providers of Hong Kong attach great importance to the huge market in the Mainland. As mentioned by the Secretary just now, under the dual circulation development pattern proposed in the National 14th Five-Year Plan, Hong Kong will further strengthen its role as a connection platform between the country and the rest of the world in the international circulation, and grasp the opportunities brought by both the domestic and the international circulations. In this connection, I understand that the Government will launch a one-stop "GoGBA" digital platform, which will be ready for rolling out in these few months.

However, it seems that there is still no precise information on how professional service providers can make use of the platform of "GoGBA" to develop such businesses as legal and accounting services. How can we make use of this platform to develop the Mainland market, so that Mainland people will be made aware of the types of services offered by professional service providers of Hong Kong? Will the Secretary give an explanation here on the implementation, timetable and details of the measures taken through the platform of "GoGBA" to provide information concerning professional services?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Ms YUNG Hoi-yan for her supplementary question. First of all, the work of developing the Mainland market does not start just today, but LEGISLATIVE COUNCIL ― 2 June 2021 6685 the policy support in this regard has been very obvious over the past two or three years, and this includes the provision of greater development opportunities by the country to GBA under the entire development plan of the region, and Hong Kong is well placed to grasp such opportunities.

Secondly, it can be said that the country's domestic circulation strategy specifically put forward under the National 14th Five-Year Plan has created the world's greatest business opportunity. Against this background as mentioned above and regarding the overall market access of professional service or service industries as mentioned by Ms YUNG, we have all along been striving to create opportunities in the last two years by updating the Mainland/Hong Kong Closer Economic Partnership Arrangement ("CEPA"). As a result, many trades and industries, including those cited just now or the professions represented by many Members present here, have been given the chance to access the Mainland market and start negotiating on various arrangements like recognition of professional qualifications.

However, apart from market access conditions, in order to practically assist individual trades and industries, enterprises or professions in their business operations after accessing the market, we very often need to seek cooperation with chambers of commerce. In this connection, as far as the development of GBA is concerned, market access for professional services will provide not only business opportunities but also adequate professional support for the development of the region, and hence both sides wish to cooperate.

Additional funding provided recently by the Government to HKTDC aims exactly to target at the domestic circulation strategy, and provide services in GBA that can genuinely assist enterprises and professions. As the name suggests, the overall plan for launching the platform of "GoGBA" is to provide services to Hong Kong businessmen in developing businesses in GBA, while at the same time spearhead their development in conjunction with HKTDC's established network in the Mainland. For example, HKTDC has set up offices in more than 10 different places throughout the country, and it has also established some retail outlets and a mode of publicity, including an electronic mode of payment or its own method of promotion. We therefore hope that after the launching of the platform, all trades and industries including the professional service sector can enter GBA as early as possible to commence their market development work.

6686 LEGISLATIVE COUNCIL ― 2 June 2021

DR JUNIUS HO (in Cantonese): The Secretary said in the main reply that at Hong Kong's request, the WTO Dispute Settlement Body established a panel to consider the dispute raised by Hong Kong with respect to the US's requirement, and that it would in general require six to nine months to consider a dispute and issue the relevant findings, meaning that the result is expected to be available at approximately the end of this year.

My supplementary question is: Everything will of course be fine if US, such an arrogant and overbearing opponent we are now facing, is willing to accept the ultimate findings to be issued by the panel established under the WTO Dispute Settlement Body and recognize again Hong Kong's status as a separate customs territory, but what countermeasures does the Government have if US refuses to accept the result? It seems that the Secretary has suggested in the latter part of the main reply that efforts should be made by Hong Kong to develop other markets, but this actually runs contrary to the original spirit because all tariff agreements should be concluded on a reciprocal basis. If US is really so arrogant and overbearing and refuses to accept the findings of the panel, what countermeasures does the Government have and what punishments it can impose with respect to US investment in Hong Kong? Have reciprocal punitive measures been correspondingly put in place by the authorities?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, WTO is an organization with member countries and regions as its backbone, and its rules and regulations are formulated within the organization by 164 members on the basis of mutual respect and under the spirit of consensus. Apart from formulating rules and regulations, including agreements and rules which I have cited, WTO has also put in place a dispute settlement mechanism. In other words, a dispute between members will be considered in accordance with legal principles under a dispute settlement mechanism which is similar to a litigation mechanism, and findings will be issued accordingly. WTO expects that all its members will follow the findings issued, and an appeal mechanism is also in place.

It will of course be difficult for a very small economy like Hong Kong to defend its own rights and interests when fighting on its own with a big country which, as described by Dr HO, is arrogant and overbearing. Hence, we have been placing special emphasis on using the platform of WTO to deal with the dispute in question.

LEGISLATIVE COUNCIL ― 2 June 2021 6687

Simply put, under the relevant process, we are now taking the step in which a panel under the WTO Dispute Settlement Body is established and personnel and experts with experiences in this regard are identified to serve as panel members, so that justifications presented by both sides will be heard under procedures that are similar to litigation proceedings, and findings of the panel will then be issued. As revealed by previous findings, there are precedent cases in which the US won, but there are also those where the US lost. US should of course follow the findings issued, and WTO has also put in place an appeal mechanism.

I agree with Dr HO and concur that US is not a very responsible member of WTO, because with regard to the dispute settlement mechanism, it is now resorting to other means to obstruct the subsequent appointment of members under the appeal mechanism. In this connection, we have been criticizing and denouncing the US in different occasions over the past few years because on the one hand, we have to rely on this mechanism which WTO members have established together to settle disputes but on the other hand, the US has sought to hinder the normal operation of some other procedures under the same mechanism. This is a typical example of cherry picking. However, all WTO members enjoy the same rights and have an equal status, and no single country can have the final say.

PRESIDENT (in Cantonese): Fourth question.

New norm of the tourism industry

4. MR YIU SI-WING (in Cantonese): President, it has been reported that the Chief Executive Officer of the International Air Transport Association indicated in April this year that no trend of recovery could be seen in the international tourism market for the moment. There are comments that various countries are opening up their borders only to those international travellers who have been vaccinated against the Coronavirus Disease 2019 and have obtained a negative result of virus testing, and such practice will become a new norm of the tourism industry. In this connection, will the Government inform this Council:

(1) given that the Development Blueprint for Hong Kong's Tourism Industry promulgated in 2017 formulated the short, medium and long term tourism initiatives and measures for the coming five years, 6688 LEGISLATIVE COUNCIL ― 2 June 2021

whether the Government will update the Blueprint in the light of the blow dealt by the epidemic, so as to help members of the tourism industry to prepare adequately for the new norm of the industry and seize the opportunities; if so, of the details; if not, the reasons for that;

(2) whether it has assessed the long-term impacts of the epidemic on the cross-boundary sea, land and air transport as well as the tourism, hotel and retail industries, and the difficulties that such industries will face in the coming few years under the new norm of the tourism industry; if it has assessed, of the details; if not, the reasons for that; and

(3) whether it has formulated measures to provide appropriate support for members of the tourism industry under the new norm of the industry; if so, of the details; if not, the reasons for that?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, affected by the COVID-19 epidemic, cross-border/boundary travel around the world has been grounded to a halt, which consequentially dealt a heavy blow to tourism and other related industries such as cross-border/boundary transportation, hotel, and retail industries. Over the past year, there were only about 200 visitor arrivals per day on average, much lower than the previous level of 150 000 visitor arrivals per day.

In order to assist the travel trades in tiding over this challenging time, the Government has implemented various measures through the Anti-epidemic Fund ("AEF") and other different channels and increased the funding commitment of such schemes as the Travel Agents Incentive Scheme and the Green Lifestyle Local Tour Incentive Scheme ("GLIS"). The cumulative commitment for supporting the trades, which amounts to about $2.6 billion, has generally assisted over 1 700 travel agents, around 21 000 practitioners (including travel agent staff, tourist guides, tour escorts, and drivers of tour service coaches), 2 100 guesthouses and hotels, and even the cruise industry, which has been a focus of our recent discussions. Recently, noting that some practitioners may not have jobs at the moment, the Government has also provided over 1 700 short-term jobs for practitioners in the travel trades to assist at the community vaccination centres.

LEGISLATIVE COUNCIL ― 2 June 2021 6689

In consultation with the relevant Policy Bureaux, my reply to the three parts of the question raised by Mr YIU Si-wing is as follows:

(1) The Government promulgated the Development Blueprint for Hong Kong's Tourism Industry ("Development Blueprint") in October 2017 with a view to strengthening the competitiveness of Hong Kong as a major tourist destination in the region. The Development Blueprint sets out some development strategies and various measures in the short, medium to long term. The directions set out in the Development Blueprint have certain roles to play in the tourism development of Hong Kong in the medium to long term and still remain meaningful for the post-epidemic recovery. Yet, in view of the blow caused on the tourism industry by the epidemic, we have made adjustment under the framework of the Development Blueprint, such as strengthening the work on promoting cultural, heritage, green, and creative tourism in the recent two years, with a view to meeting the general public's keen demand for local tourism at the moment.

Looking ahead, both the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area and the Culture and Tourism Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area promulgated in February 2019 and December 2020 respectively provided additional business opportunities and directions for the development of tourism. The Government will follow the relevant development directions and upgrade and enhance local tourism resources, with a view to further strengthening Hong Kong's position as a hub for multi-destination tourism and international tourism when the epidemic stabilizes.

In addition, the Hong Kong Tourism Board ("HKTB") has been constantly adjusting their promotion and marketing strategies with innovative ideas according to the development of the epidemic. Before the resumption of cross-border/boundary travel, HKTB will continue to leverage the "Holiday at Home" platform for promoting discounts and experiences offered by local retailers, dining establishments, attractions, hotels, etc., and boosting local travel consumption. Over the past year, HKTB has maintained Hong Kong's exposure in the international travelling market through various means in order to bring back visitors as quickly as possible when the outbreak subsides, an example of which was the "#Miss 6690 LEGISLATIVE COUNCIL ― 2 June 2021

You Too" promotion campaign rolled out in April 2020, which had successfully reached 35 million viewers worldwide.

In the medium to long term, HKTB will continue to collaborate with other Guangdong-Hong Kong-Macao Greater Bay Area ("GBA") cities to pool resources to build the GBA tourism brand. HKTB is also conducting a holistic review of Hong Kong's tourism brand and positioning, so as to formulate long-term promotion strategies and launch new products and promotional campaigns in source markets worldwide to re-build Hong Kong's tourism image.

(2) and (3)

As to other travel-related sectors, the Government has launched various relief measures, including the provision of a one-off subsidy of $80,000 to eligible retail stores through AEF amounting to a total of about $5.5 billion, the provision of one-off subsidies to local airlines, aviation support services and cargo facilities operators, as well as waiver or reduction in various fees and charges by the Government and the Airport Authority Hong Kong totalling $9.5 billion, and the provision of non-accountable subsidies of $280 million for eligible cross-boundary coaches, hire cars and ferries, as well as subsidies for drivers of cross-boundary coaches.

On the other hand, with the stabilization of the epidemic, the Government is striving to explore bigger opportunities for operation of the tourism trades by striking a balance between fighting the epidemic and resuming economic activities. For example, as all can see, we have been working towards the resumption of cross-border/boundary travel and the establishment of Air Travel Bubble, the resumption of local group tours, the continued launch of the "Free Tour" programme, and the extended implementation of the two aforementioned incentive schemes, as well as the reopening of theme parks so that more tourist spots are available for tourism promotion. We have recently announced the resumption of "cruise-to-nowhere" itineraries in July 2021 at the earliest. These are all the short-term measures to bring temporary relief for the tourism trade. The Government will continue to closely monitor the epidemic situation worldwide and liaise with the trade, with a view to preparing for the recovery of tourism industry.

LEGISLATIVE COUNCIL ― 2 June 2021 6691

MR YIU SI-WING (in Cantonese): President, first of all, I am very grateful to the Government for providing several rounds of funding to meet the urgent needs of the tourism industry. However, tourism, both inbound and outbound, has actually remained frozen since the Government's last round of funding expired at the end of February. The Secretary mentioned just now that local tours and cruises would be gradually opened up, but these would still be a drop in the bucket for the tourism industry and travel agents would still face great difficulties in their operation. With the resumption of travel still a distant prospect, the tourism industry remains in dire straits. If the situation persists, a wave of closures will be inevitable. I would like to ask the Secretary: will the Government reconsider providing appropriate support to help the travel agency industry tide over the difficult times?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): As I have just mentioned in the main reply, over the past year or so, we have been helping the tourism industry … It is precisely because we understand that, as Mr YIU mentioned, this industry has been hardest hit and finds it difficult to fully resume business due to the temporary scarcity of tourists. Therefore, we have worked on two fronts: on the one hand, our $2.6 billion provision for the past four rounds of support has been largely allocated in the hope of being helpful to the tourism industry, and we will keep an eye on the situation; on the other hand, we have been working to get the industry ready by gradually adopting such initiatives as local tours, subsidized local tours or preparations for cross-border/boundary travel as far as practicable and on the premise of pandemic prevention and control. We understand that this is a difficult time, but we will continue to liaise closely with the industry to see what more can be done. We will certainly do our best at it.

MR POON SIU-PING (in Cantonese): President, due to the impact of the pandemic, global cross-border tourism has been paralysed and the industries concerned have been hard hit―the Secretary has just made this point. The average number of visitor arrivals in Hong Kong has dropped from 150 000 per day to only about 260 at present. As the volatility of the epidemic causes delays to the travel bubble arrangements, there is no date for the full resumption of cross-border/boundary travel. Although the Secretary has just said that the Government has provided support to the industry through the Anti-epidemic Fund, the Travel Agents Incentive Scheme and even the Green Lifestyle Local Tour Incentive Scheme, actually many practitioners began to lose their jobs 6692 LEGISLATIVE COUNCIL ― 2 June 2021 during the social incidents in 2019 and have ended up in financial and livelihood difficulties. The Government has earlier launched the 100% Personal Loan Guarantee Scheme to provide loans to those who are unemployed during the epidemic, but many tourism practitioners may not be eligible for application because they had already lost their jobs before January 2020. In fact, I would like to ask the Government or the Secretary: what follow-up measures can assist in the loan applications by these tourism practitioners who had lost their jobs before the epidemic?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I understand the pressure on the industry as mentioned by Mr POON. That is why the measures that we have just mentioned are not targeted solely at the epidemic. The first batch of support measures we have taken for the industry is, in fact, precisely a response to the riots in the second half of 2019. Regarding the individual cases mentioned by Mr POON, we can follow up and study them if necessary. However, in the meantime, apart from what I have just mentioned in my main reply, for example the additional temporary jobs that we have offered to the industry, namely the 1 700 jobs to assist in our vaccination efforts, I know that the Labour and Welfare Bureau has commissioned the Employees Retraining Board to launch special training schemes, hopefully for the tourism industry to carry out retraining while receiving allowances. We will examine the situation to see if there are other needs. As I said earlier, we will do our best.

MR FRANKIE YICK (in Cantonese): President, the Secretary has mentioned in his main reply that the Government has been working towards the resumption of cross-border/boundary travel. I think this is the wish of all Hong Kong people. Here I would also like to appeal to the people of Hong Kong to get vaccinated as soon as possible.

Recently, some friends of mine asked me if I had received any news that cross-border/boundary travel seemed likely to resume soon. When I said I had not heard of it, they showed me a video. As the Secretary also knows, due to the closure of Hong Kong's borders and boundaries, all tourist coaches have stopped running for more than 10 months. Some of them are parked in Kwai Chung and the Mainland, and the industry refers to those places as "bus cemeteries". As it turns out, some people saw tourist coaches coming from the Mainland, so they LEGISLATIVE COUNCIL ― 2 June 2021 6693 got the false impression that cross-border/boundary travel would probably resume. After coming back, I asked members of the industry. They told me that, as it turned out, the drivers had to drive Euro IV tourist coaches back to Hong Kong for scrapping, so that those drivers could apply to the Environment Bureau for an ex gratia payment and continue to eke out an existence.

At present, the problem faced by the industry is that even if cross-border/boundary travel resumes in Hong Kong, it must be complemented by public transport, but now that members of the industry have holes in their pockets, if cross-border/boundary travel is to resume, they need some financial support, namely the "business resumption fund" that I often mention in this Council, because vehicles and vessels without maintenance cannot be used at all. Therefore, may I ask the Secretary whether he will help by asking the two Secretaries of Departments to seriously consider providing a so-called "business resumption fund" before the resumption of cross-border/boundary travel, so that the industry can prepare the vessels and vehicles to provide service to the general public?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): I thank Mr Frankie YICK for the suggestion. I will relay it to the relevant authorities.

As far as the resumption of cross-border/boundary travel is concerned, I believe that we share the same goal. The Chief Executive has also briefly pointed out in her earlier response that different bureaux and departments are actually working on it every day. Different departments may have different counterparts, but their goals are the same. In fact, we have to go against all odds to make preparations for resumption of travel with not just the Mainland, but also foreign countries. Therefore, I understand that, as Mr YICK mentioned, even though the resumption of cross-border/boundary travel may not be achieved today or tomorrow, all preparatory work must be done early.

I will look into the issues raised by Mr YICK, but I do not believe that it is necessarily possible to fully meet the demands of every industry. Nevertheless, meanwhile, as in the case cited by Mr YICK, given that the Government has different funds, if other funds apart from the Anti-epidemic Fund can help the industry, we will do our best with them.

6694 LEGISLATIVE COUNCIL ― 2 June 2021

MR CHAN CHUN-YING (in Cantonese): President, we have heard that there are more and more travel bubbles across the world, and the Secretary has also mentioned in his main reply that he is negotiating Air Travel Bubble, but so far we have heard about only one bubble, which is the travel bubble between Hong Kong and Singapore. I have no idea why we have failed to create even one bubble despite working for so long. Now it is said that the travel bubble with Singapore will be reviewed again in June. May I know what the latest situation is and whether we will continue to negotiate other bubbles after securing this one, so that Hong Kong people can have more choices of bubbles?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I thank Mr CHAN Chun-ying for his supplementary question. Let me take this opportunity to elaborate on something. When bubbles are mentioned, many people fret about the prospect of bursting and suggest that we change the name. If a change of name was the solution, of course that would be the easiest thing to do, but as the name suggests, the travel bubble is not a soap bubble, but rather something in the form of a bubble to hopefully protect the places therein where travel resumes and to make traffic and passenger movements possible on the premise of pandemic prevention. The first place in the world where the idea of bubbles has been floated is not Hong Kong, but the region of Australia and New Zealand. We see that a bubble has been implemented in the region of Australia and New Zealand, but there have also been pauses. Just last week, the bubble between Melbourne and New Zealand was put on hold.

Mr CHAN asks with how many places Hong Kong has been discussing ways to resume bilateral cross-border travel. In fact, since the middle of last year, I have been discussing related matters with many countries in Europe, Asia and the Pacific region. However, the basis of discussion is that people of both Hong Kong and the place concerned feel at ease with anti-pandemic safety measures in place. Therefore, first off, I especially consulted the health authorities about how many places in the world would enable us to allow their residents to come to Hong Kong without quarantine? Indeed, to date, there are not many. The places we feel more comfortable with are the Mainland or those close to us, but there are not many such places further afield. Nevertheless, just because we have discussed with the authorities of one place does not mean that we will not discuss with those of another. The system we have discussed with Singapore in the past has been shared with other places. When bombarded with questions, we always point out clearly that if we want to establish a safety bubble LEGISLATIVE COUNCIL ― 2 June 2021 6695 for bilateral travel, there are many conditions to meet. For example, the epidemic situations in both places must be similar, testing is mandatory before departure and upon arrival, flights are subject to epidemic inspection and, as we have recently advocated, Hong Kong people should take good precautions to protect themselves against the epidemic if they want to be a part of the bubble. These conditions are all preliminary and we welcome the authorities of any place to discuss them.

As for the negotiation with Singapore, we will have to see how fast Singapore is turning the corner on the recent community outbreak. We will look into the situation there and review it in consultation our health authorities before continuing with this effort. While it is our hope to resume travel as soon as possible, we need to be well prepared for the possible ups and downs in such arrangement as it will also be affected by the epidemic situation.

MR LUK CHUNG-HUNG (in Cantonese): Given that the global pandemic situation has not yet stabilized, all travel bubbles are actually quite fragile. Even though our country is the best in the world in handling the pandemic, the resumption of cross-boundary travel between the Mainland and Hong Kong is still a long way off. I therefore anticipate, albeit reluctantly, that it will be very difficult for Hong Kong's tourism industry to recover in the near future, which is especially the case with physical tourism.

The Development Blueprint for Hong Kong's Tourism Industry proposed by the Government in 2017 includes the concept of smart tourism, but it only focuses on some Wi-Fi facilities and the enhancement of traditional tourism services through information technology. Now, because of the pandemic, it is basically very difficult to relax the restrictions on isolation and quarantine within a short period of time. That is why our trade union has all along been asking the Government to develop virtual tourism, which can create not just many business opportunities, but also many job opportunities. Through big data analysis of visitors' preferences, and through online and offline interaction, it can leave tourists with a good impression of Hong Kong, thus attracting them to come to Hong Kong for travel consumption as soon as the pandemic is over.

I would like to ask the Government: what efforts has it made to explore virtual tourism? In fact, efforts are already afoot in other places, maybe more in other areas such as culture and the arts. In the past, some performances 6696 LEGISLATIVE COUNCIL ― 2 June 2021 might require the presence of an audience. Nowadays, online global broadcast can also generate proceeds. As for tourism, traditionally it is of course necessary for tourists to arrive at the destination, but the way things are now, what is the Government doing in terms of pushing forward virtual tourism?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Cantonese): President, I thank Mr LUK Chung-hung for his views. I also agree with the example he cited just now, which is exactly the way out of the pandemic for the tourism industry or many other industries. Let us take a look at the Development Blueprint. Back then when we proposed to develop smart tourism, apart from upgrading Wi-Fi equipment to facilitate visitors' accommodation, communication and access to information upon their arrival, we had also explored using smart technology to connect with tourist attractions. Let me give you an example. Despite the current pandemic, we have launched the City in Time tourism project, which uses augmented reality to display the old and new elements of some attractions, so that tourists can see the current and historical scenes with their mobile phones when they arrive at the tourist attraction. I remember that Mr YIU Si-wing has also asked a question about this here.

At present, this technology has been adopted at a few dozen tourist attractions in Hong Kong, thus also setting the stage for future virtual tourism as mentioned just now by Mr LUK. Virtual tours do not necessarily have to be conducted fully online, but can be conducted both online and on the spot to work in concert with each other. Just to give a brief example, with these methods, the probable differences in scenery between the Central waterfront of today and that of 50, 100 or 150 years ago can also be represented by smart means. In addition, it provides plenty of informational materials that, as Mr LUK said, offer tour guides richer information and means to guide tours in the current context of themed tourism. In this regard, we will also make a push in our overseas promotions, so that even though visitors have not yet returned today, we can still increase and maintain Hong Kong's exposure in international tourism by means of such information and newly added software.

PRESIDENT (in Cantonese): Fifth question.

LEGISLATIVE COUNCIL ― 2 June 2021 6697

Re-industrialization in Hong Kong

5. MR HOLDEN CHOW (in Cantonese): President, the Government put forth the re-industrialization initiative in the 2016 Policy Address, with the aim of revitalizing traditional industries using new technologies and developing emerging industries. In this connection, will the Government inform this Council:

(1) whether it had, in developing the re-industrialization initiative, considered following the practice of Singapore to set a target on the share of the manufacturing industry in the gross domestic product;

(2) as the Government has indicated that its industrial support policy aims at creating an environment conducive to industrial development instead of determining the pace or specific direction of industrial development, yet quite a number of economies have a clear development direction under the concept of re-industrialization, whether the Government will, when promoting re-industrialization, be more proactive in spearheading the development of industries and act not just as a facilitator; and

(3) apart from launching the Re-industrialization Funding Scheme and the Re-industrialization and Technology Training Programme as well as developing the Advanced Manufacturing Centre, what measures the Government has put in place to encourage traditional industries to gradually move towards smart production, and whether it will introduce new measures to encourage re-industrialization, such as providing more tax concessions for research and development expenditures and capital investment, increasing the supply of industrial sites, and strengthening the training for relevant technical staff?

SECRETARY FOR INNOVATION AND TECHNOLOGY (in Cantonese): President, the Government has been actively promoting re-industrialization and developing advanced manufacturing, which is less land or labour-intensive, based on new technologies and smart production. With Hong Kong's strong capabilities in research and development ("R&D") and advantages of 6698 LEGISLATIVE COUNCIL ― 2 June 2021 internationalization and marketization, the promotion of re-industrialization is conducive to further stimulating the demand for R&D, bringing new impetus for economic growth and creating quality employment opportunities. The focus of promoting re-industrialization is not to revitalize traditional industries, but to enhance the competitiveness of the manufacturing industry in Hong Kong through innovative technologies, having regard to our relative advantages. The Government set up the Committee on Innovation, Technology and Re-industrialisation chaired by the Financial Secretary in April 2017, which advises the Government on matters related to the promotion of innovation and technology ("I&T") development and re-industrialization in Hong Kong. In addition, we report the progress of work in various areas to the Panel on Commerce and Industry of the Legislative Council from time to time.

My consolidated reply to the various parts of Mr CHOW's question is as follows:

The Innovation and Technology Bureau, established in 2015, adopted the key performance indicators ("KPIs") proposed by the Advisory Committee on Innovation and Technology in 2017, which comprises members from the higher education, I&T and industry sectors, to foster the creation of a thriving I&T ecosystem. Among them, the target we set for KPI on the manufacturing sector's contribution to Gross Domestic Product ("GDP") is to reverse its declining trend. Subsequently, the Government has been working towards this goal and promoting re-industrialization in five areas, namely infrastructure, talent, capital, technology and scientific research.

On infrastructure, the Hong Kong Science and Technology Parks Corporation has been developing and providing plenty of specially designed space and facilities in the industrial estates ("IEs") over the past few years, with a view to fostering high-tech smart production. They include:

― the Precision Manufacturing Centre, which was converted from a factory in the Tai Po IE in 2017. It is fully occupied at present, and the enterprises that have settled down consist of industries such as precision engineering and assembly, manufacturing of new materials, eco-friendly yarns, etc.;

― another building, a centre for manufacturing medical products in the Tai Po IE. It is also expected to be completed within this year;

LEGISLATIVE COUNCIL ― 2 June 2021 6699

― the Advanced Manufacturing Centre in the Tseung Kwan O IE, which is also under construction. Upon completion next year, it will provide enterprises of different scales with scalable, efficient and serviced manufacturing space, and assist them in embarking on technological innovation and high value-added production with the application of advanced manufacturing processes;

― also, the Microelectronics Centre in the Yuen Long IE, which will be completed in 2023. It attracts manufacturers of microelectronic products and related industries.

On talent, the Government launched the Re-industrialisation and Technology Training Programme ("RTTP") in 2018, which funds local enterprises on a 2 (Government): 1 (Enterprise) matching basis for their staff to receive training in advanced technologies, especially those related to Industry 4.0. As at the end of April this year, RTTP has approved nearly 1 300 applications for registering public courses and provided over 5 400 training sessions in advanced technologies with total funding exceeding $35 million.

On capital, the Government launched the Re-industrialisation Funding Scheme in 2020, which subsidizes manufacturers, on a 1 (Government): 2 (Company) matching basis, to set up new smart production lines in Hong Kong. The funding for each project is capped at $15 million. As at the end of April this year, we have received 15 applications. The Vetting Committee has agreed in principle to support nine applications, with the remaining four being processed.

On technology, the Hong Kong Productivity Council ("HKPC") is fully committed to assisting enterprises in moving towards high value-added production and gradually upgrading to Industry 4.0. HKPC established The Hatch in collaboration with the pioneer of Industry 4.0 worldwide―the Fraunhofer Institute for Production Technology of Germany―to assist the industry in accelerating the adoption of technologies related to Industry 4.0. Meanwhile, HKPC has been implementing the Industry 4.0 Upgrade and Recognition Programme to assist enterprises in setting up smart production lines, and organizing a wide range of training programmes and seminars to encourage the industry to leverage I&T.

On scientific research, the five R&D centres established by the Government will also continue to work on applied R&D related to re-industrialization in close collaboration with the industry, thereby fostering the commercialization of R&D outcomes. In addition, the Government has been providing a series of financial support to encourage R&D, including amending 6700 LEGISLATIVE COUNCIL ― 2 June 2021 the Inland Revenue Ordinance so as to provide a two-tiered enhanced tax deduction regime for expenditure on qualifying R&D activities incurred by enterprises. The claims for tax deduction on R&D expenditure for the year of assessment 2019-2020 amounted to about $3.2 billion, which is over a double of the amount in the year of assessment 2017-2018, prior to the implementation of the measure. Moreover, many schemes under the Innovation and Technology Fund provide vigorous support for R&D centres, universities, other designated public R&D organizations and private companies to carry out R&D work.

Although it may take some time for the above initiatives to show visible results completely, we notice that the trend on the manufacturing sector's contribution to GDP has remained horizontal and largely stable in recent years, as opposed to the continuous decline in the past two decades or so. Many entrepreneurs have also expressed interests in investing in smart production, and friends from the industry have been proactively upgrading their existing production lines towards Industry 4.0. These good momentums demonstrate that we are on the right track in promoting re-industrialization, and our work has gradually delivered results. Despite the fact that circumstances such as the COVID-19 epidemic in the past year or so have more or less affected our work in promoting I&T and re-industrialization, the optimism and support from the industry have fully recognized the Government's effort in promoting I&T and re-industrialization. We are therefore fully confident about the future of I&T development.

The National 14th Five-Year Plan and the development of the Greater Bay Area provide Hong Kong with endless opportunities. We will continue to work in close collaboration with the industry, the academia and research institutes, proactively integrate Hong Kong into national development, and continuously enhance our work in promoting I&T and re-industrialization. In the long run, the Government remains open to the suggestion of drawing up a target for the manufacturing sector's contribution to GDP, and will look into further support measures that are applicable to the actual situation in Hong Kong. We will also consult other relevant stakeholders on this front as appropriate.

MR HOLDEN CHOW (in Cantonese): President, in the last paragraph of his main reply, the Secretary has expressed an open attitude towards my proposal of setting a target percentage for the manufacturing sector's contribution to GDP. I hope that it will really be adopted by the authorities one day, because, as you know, Secretary, the aim of setting this target is to spur the Government to work harder, as well as to gauge the effectiveness of its work.

LEGISLATIVE COUNCIL ― 2 June 2021 6701

Today, as I noted in the main reply, the authorities have given much importance to the traditional industries' move towards smart production. This will actually be able to show results quite soon.

Regarding my supplementary question, I mainly wish to ask the Government to tell us something more clearly. To cater for the traditional industries' move towards smart production with the installation and adoption of smart production lines, can the Government provide more special industrial sites, along with full logistics support for the formation of a cluster of industrial sectors to give convenience to the relevant sectors? I mean, can the Government provide more industrial sites for this purpose in addition to the IE sites (e.g. the Advanced Manufacturing Centre) which were mentioned just now?

SECRETARY FOR INNOVATION AND TECHNOLOGY (in Cantonese): Many thanks for Mr CHOW's supplementary question. President, actually, the Government has spared no effort to support industrial development. Our three existing IEs occupy more than 200-odd hectares of precious land in Hong Kong. In the future, we will continue to support the development of I&T and re-industrialization. With land resources playing an important part in this regard, we will continue to find appropriate land sites in the future.

In our planning, there are different pieces of land available for development. For example, the land sites adjacent to the Hong Kong-Shenzhen Innovation and Technology Park in Lok Ma Chau, Liantang/Heung Yuen Wai, and Yuen Long are all included in our planning. We hope to increase the number of industrial sites in these places, so as to provide strong support for the development of I&T. I am really grateful for Mr CHOW's reminder. We will endeavour to find appropriate sites to cater for the development of I&T and re-industrialization in Hong Kong, thereby adding more impetus to Hong Kong's economy.

MR WONG TING-KWONG (in Cantonese): President, Hong Kong has been reluctant to provide special industries with any concession or facilitation measure before. In recent years, in order to develop our status as a wealth management centre and the aircraft leasing business, the Government has introduced a number of tax concessionary measures. That said, under the specific development direction set for the manufacturing industries in Hong Kong, will the Bureau introduce any targeted positive measures and concessionary subsidies, including the provision of more specific tax 6702 LEGISLATIVE COUNCIL ― 2 June 2021 arrangements for relevant industries, capital investment and R&D activities, to incentivize re-industrialization?

SECRETARY FOR INNOVATION AND TECHNOLOGY (in Cantonese): My thanks go to Mr WONG for his supplementary question. President, simplicity, and low tax rate, and certainty are the key advantages of Hong Kong's tax regime. In order to keep promoting R&D effectively and, in turn, support our re-industrialization efforts, we have, as mentioned in my main reply, added a "super tax concession" scheme which provides a very strong impetus for our R&D.

However, as Mr WONG mentioned, apart from providing general support for different re-industrialization-related R&D, will we make some targeted efforts to support different industries? Among our R&D activities, we can see that universities in Hong Kong have their particular advantages in a number of areas. For example, healthcare technologies, artificial intelligence and robotics technologies are the areas in which our R&D excels. So, how can R&D results be actually be commercialized? Our support is available in various aspects which, of course, cover taxation measures, and our Information and Technology Fund will also provide subsidies targeting the industries concerned.

In addition, taking advantage of Hong Kong's internationality and the relatively unique advantages of the relevant R&D projects in the international community, we encourage and secure collaboration between local universities and overseas top-notch R&D organizations. This also underlies our existing InnoHK Research Clusters. At present, we have two InnoHK Research Clusters: one concerning healthcare technologies while the other being about artificial intelligence and robotics technologies as mentioned just now. Apart from promoting R&D through tax concessions, we also hope to provide comprehensive support for our R&D enterprises and industrialists through the Information and Technology Fund, so as to foster commercialization of their R&D results, turning them into new impetus for Hong Kong's economy.

IR DR LO WAI-KWOK (in Cantonese): President, the Secretary has mentioned in his main reply that the Government launched RTTP which funds local enterprises on a matching basis for their staff to receive training in advanced technologies, and encouraged universities to offer programmes of study to nurture talents. But the training of I&T talents probably should not wait until the university stage. Instead, it should start earlier than that, i.e. at the stages of LEGISLATIVE COUNCIL ― 2 June 2021 6703 primary and secondary education, to arouse students' interest in I&T, and to eradicate the long-standing mentality of emphasizing financial skills and underplaying technologies in society. This will then make the younger generation willing to pursue their careers in I&T. Secretary, what specific measures and promotion strategies does the Government have in this regard?

SECRETARY FOR INNOVATION AND TECHNOLOGY (in Cantonese): President, I thank Ir Dr LO for his question.

Over the past period of time, many members of the industry and Members in the legislature, just like Ir Dr LO, have sincerely reminded us that the promotion of R&D should actually start at a young age. Therefore, having adopted their views, we have rolled out two programmes which target primary and secondary school students respectively over the past year or two, providing specialized training in I&T or information technology. Take the newly-launched "Knowing More About IT" Programme as an example. It is a programme which helps primary school students to appreciate the benefits brought by information technology at an earlier stage through the provision of subsidies. Moreover, a year earlier, we also implemented the "IT Innovation Lab in Secondary Schools" Programme. Through different subsidy arrangements together with the participation of the industry, these two programmes enable primary and secondary school students to have their knowledge of information technology enhanced through some effective extra-curricular activities at an early stage. Here, I would like to thank Members for their support for these two programmes again.

In addition, as regards universities, certainly, we will not wait until university students enter the job market upon graduation to provide them with support. Therefore, we have regularized the STEM Internship Scheme for universities, a scheme which was launched on a pilot basis, after we gained Members' support for the proposal in the Budget of this financial year. Last year, this scheme subsidized university students, especially those in STEM programmes, to engage in internship work, because many people told us that the very reason for students in STEM programmes to work in other industries after graduation was their insufficient understanding of the development of I&T industry. After all, Hong Kong's financial and trading industries are really vibrant, and this explains why graduates of STEM programmes may work in the financial industry or other traditional industries. So, how can we keep them in I&T industry and enable them to gain an understanding of the opportunities in 6704 LEGISLATIVE COUNCIL ― 2 June 2021

I&T industry while they are still studying at universities? This is precisely where the STEM Internship Scheme for universities comes in.

Here, I am happy to report to Members that there were 1 600 students participating in the pilot scheme last year, with 1 000 enterprises providing internship opportunities for them. Eighty-eight percent of the students who completed their internship expressed strong interest in I&T and they were interested in joining the relevant industries upon graduation. Among the 1 000 enterprises, over 99% of them found those students to be outstanding, and were willing to let them join their enterprises later. All these statistics prove that young people in Hong Kong can vigorously contribute to the development of I&T as long as they are given appropriate support and opportunities.

MR HOLDEN CHOW (in Cantonese): President, I wish to raise another supplementary question. Recently, I have communicated with some factory operators and stakeholders. As learnt, food processing factories in Hong Kong actually have a promising prospect and an advantageous position, because they have already put smart production lines in place.

As both the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area and the National 14th Five-Year Plan have highlighted the issue of food safety, we can actually focus on developing the field of food processing. I wish to know whether the Bureau will consider doing something more for the food processing industry. With Hong Kong's advantages in the area of food safety, will the Bureau put in more effort to support the use of smart production lines by the industry? Regarding re-industrialization, will the Bureau do some more work for the relevant industries?

SECRETARY FOR INNOVATION AND TECHNOLOGY (in Cantonese): President, Mr CHOW is really well-acquainted with the conditions of Hong Kong's market. It is particularly true that some of our industries, like the food processing industries mentioned just now, have their unique advantages indeed. So, the food processing industry has participated in the two schemes which I just mentioned in my main reply, namely, the Re-industrialisation Funding Scheme and RTTP which concerns employees. In fact, given Hong Kong's advantages in professional services such as quality control arrangements and marketing, our food processing industry is actually quite competitive in different fields. So what should we do to support the industry to thrive? We have particularly noted the constraints facing Hong Kong, including shortage of land and occasional LEGISLATIVE COUNCIL ― 2 June 2021 6705 manpower shortage. How can these constraints, irrespective of space or manpower resources, be generally minimized through turning the production lines into smart ones by, for example, using Internet of Things and robotics, I mean human-robot coordination? This is of paramount importance to the development of industries, including the food processing industry. For this reason, members of the food processing industry have been actively participating in these two schemes, making effective use of our schemes to cater for their development needs.

PRESIDENT (in Cantonese): Last oral question.

Coronavirus Disease 2019 vaccines

6. MR PAUL TSE (in Cantonese): President, from the commencement of the COVID-19 Vaccination Programme on 26 February this year to the middle of last month, only about 1.2 million members of the public in Hong Kong received the first dose of the vaccines, accounting for less than 20% of the population aged 16 or above in Hong Kong, and such a vaccination rate was far below the level needed to achieve herd immunity. Some members of the public have indicated that while the Government has appealed to the public from time to time to receive vaccination, they are worried about the side effects of the vaccines and have no confidence in government policies at all, and therefore they have still adopted a wait-and-see attitude. It has been reported that the Governments of the Mainland and many countries have encouraged their nationals to receive vaccination through a wide variety of preferential policies and measures, such as reducing property tax, giving away tickets of ball game matches and food, and holding grand draws. On the contrary, the SAR Government has not offered any incentive in this regard so far. In this connection, will the Government inform this Council:

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

(1) as it has been reported that a nasal vaccine, currently being researched and developed by the University of Hong Kong ("HKU") with relatively less side effects, is not expected to be available for use in Hong Kong until three years from now, whether the 6706 LEGISLATIVE COUNCIL ― 2 June 2021

Government has gained an understanding of the reasons for the need for such a long time (including the difficulties faced);

(2) as it is learnt that HKU has commenced phase 1 clinical trial of the nasal vaccine and the preliminary results have shown that the vaccine has not caused serious adverse effects, whether the Government will render appropriate manpower or financial assistance to HKU, in order that the research and development of the vaccine can be completed expeditiously and the vaccine can be used in Hong Kong to provide the public with an additional choice of vaccine; and

(3) whether it will, by following the practices of the Governments of the Mainland and many countries as well as local commercial organizations, offer incentives to encourage members of the public to receive vaccination, such as tax relief measures as well as handing out cash, travel tickets and admission tickets for cultural and leisure facilities?

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, my reply to the various parts of the question raised by Mr Paul TSE is as follows:

(1) and (2)

Research and development to market use of a new vaccine typically takes 5 to 10 years. In response to the Coronavirus Disease 2019 ("COVID-19") pandemic, drug manufacturers around the world have raced against time and pooled together resources to develop vaccines, with a view to compressing the development timeline for effective vaccines on the premise that safety and quality are ensured. Currently, there are around 10 COVID-19 vaccines being used in large scale around the world, including eight vaccines listed for emergency use by the World Health Organization ("WHO")(1). Furthermore, according to information by WHO, there are more than 100 types of COVID-19 candidate vaccines worldwide still in the

(1) WHO has listed the Pfizer/BioNTech, AstraZeneca-SK Bio, Serum Institute of India, Astra Zeneca EU, Janssen, Moderna, Sinopharm and Sinovac vaccines for emergency use. LEGISLATIVE COUNCIL ― 2 June 2021 6707 clinical development stage, and there are nearly 200 still in the pre-clinical development stage. From time to time, there are drug manufacturers which announce the halting of the development of their candidate vaccines for various reasons.

The Department of Microbiology of the University of Hong Kong ("HKU") has partnered with Xiamen University and Beijing Wantai Biopharmaceutical Company to develop a nasal spray COVID-19 vaccine called "VectorFlu™ ONE". The development of this vaccine has received funding of around $20 million from the Health and Medical Research Fund ("the Fund") under the Food and Health Bureau to support the first phase safety clinical trial so as to evaluate the safety and immunogenicity of the vaccine. Before the vaccine can be authorized formally for emergency use, it needs to pass various tests, including conducting first to third phase clinical trials and obtaining the relevant certification, in order to ensure the safety and efficacy of the vaccine.

The successful development of a vaccine hinges upon various circumstantial factors. As far as the above nasal spray vaccine is concerned, if the third phase clinical trial is to commence, the research team needs to recruit at least 10 000 volunteers as research participants. The trial also needs to be conducted in places where there is continuous transmission of COVID-19, so as to evaluate the efficacy of the vaccine. As the population size of Hong Kong is small and the epidemic situation is very mild, we cannot fully support clinical trials of such scale. Hence, the research team needs to recruit research participants from outside of Hong Kong. According to our understanding of HKU's current arrangement, the research team will first recruit around 100 voluntary research participants in Hong Kong, 30 of whom have started the first part of the trial. The second part will commence in July.

There are currently no manufacturers of vaccines in Hong Kong. Based on our understanding, the research team has commissioned a company in Mainland China to produce the nasal spray vaccine which has undergone the first phase safety clinical trial in Hong Kong. Last year, the Government rendered support to the HKU research team in its application for a permit to enable cross-province and cross-boundary transport of vaccines. The development 6708 LEGISLATIVE COUNCIL ― 2 June 2021

process of a drug is often confronted by different challenges and uncertainties. The Government has all along welcomed vaccine development in Hong Kong. The Fund will also provide additional resources in a timely manner to support local research and development so as to tie in with the Government's anti-epidemic efforts.

(3) Since the start of the COVID-19 Vaccination Programme, about 2.4 million doses of vaccines had been administered and about 1.37 million of them were the first dose, accounting for 21% of the population aged 16 or above in Hong Kong. To further encourage members of the public to get vaccinated as soon as possible, the Government and different sectors in the community will roll out various measures and reward programmes.

Facilitating vaccination

From 1 June to 31 August, government employees will be entitled to a day of vaccination leave for each vaccination dose received. Moreover, all government employees who were vaccinated on or before 31 May will be allowed to apply for one day of authorized absence for each dose already received. The Government appeals to statutory bodies or public organizations, as well as employers of enterprises, to encourage their staff to get vaccinated, and to arrange vaccination leave or other facilitation measures for them.

Facilitating gatherings

The Government will further relax social distancing measures with the vaccine bubble concept as the basis, including a relaxation of the maximum number of persons allowed at premises and group gatherings, the maximum capacity of premises and operation hours, the types of activities allowed, the distance among groups, and the mask-wearing requirement. Among them, the authorities are considering allowing vaccinated persons to bring children and elderly persons who are not vaccinated to dine together at Type D catering businesses, and raising the number of persons allowed to be seated at the same table in bars/pubs, clubs/nightclubs and karaoke establishments.

LEGISLATIVE COUNCIL ― 2 June 2021 6709

Vaccination in lieu of regular testing

The vaccination in lieu of regular testing approach is being implemented for frontline government employees to safeguard their health. Frontline government employees who have received the first dose of a vaccine and provided their vaccination record could be exempted from regular testing.

Vaccination promotion activities

The Government welcomes the incentives actively provided by the commercial sector and organizations to encourage members of the public to receive COVID-19 vaccines. We understand that the commercial sector and many organizations are considering the idea of organizing lucky draw activities for this. In order to facilitate their applications for the relevant licence(s), the Government will provide consultation services for licence applications, and will expedite the processing of the relevant applications.

The fourth wave of the local epidemic has basically come to an end. However, the community must stay vigilant amid the current situation and prepare well for a possible fifth wave of the epidemic that could strike at any time. The fifth wave of the epidemic will probably hit with higher transmissibility and more serious infectious mutant strains. The two vaccines provided by the Government fulfil the criteria of safety, efficacy and quality. Only through the "Early Vaccination for All" campaign can Hong Kong build a barrier for protection with no delay.

MR PAUL TSE (in Cantonese): Deputy President, I am afraid that the "Early Vaccination for All" campaign launched by the authorities is too late. Why didn't the authorities launch such campaigns earlier until now? Let us take a look at the comments in the community. Deputy President, why is the vaccination progress so slow? Why is there a lukewarm response only? Basically, apart from the distrust of the vaccines' efficacy or the fear for any side effects, people's distrust of the Government or their discontent with its policies is certainly a major reason.

6710 LEGISLATIVE COUNCIL ― 2 June 2021

The Chief Executive's words in reply to Members' questions this morning seemed to have repeatedly implied that the Government would not do anything else other than spending money on procuring vaccines. It looked like she thought that it would already suffice as long as "the Government provided the chicken and the community offered the soy sauce". But I must make it a point to say that after the Government provides the chicken, it can actually offer dark soy sauce even if the community has already provided its soy sauce, so as to add some more colours. Or, it may even add seasonings to enrich the flavour. In order to achieve vaccination for all, it is necessary to create noise and a huge momentum. I am afraid that the current efforts will prove futile in making up for the huge discrepancy between the rates of 20% and 70%.

In this connection, I wish to ask the Secretary one question, even though it may not fall within her policy portfolio. Deputy President, speaking of incentives, can the Government really discard … When it comes to the principle of spending, the Government is unable to explain the difference. In the case of the broadcasting right of the Olympic Games, Hong Kong Disneyland, Ocean Park and even the airliner concerned, the Government can offer enormous subsidies amounting to hundreds of millions of dollars. But why is the line drawn by the Government so very rigid this time around? Why is it only willing to foot the bill for the vaccines? And why does it refuse to bear the expenditures in other respects? Are any reasons or policies involved here? Or is it due to some special thoughts on the part of the Chief Executive herself, ones that are incomprehensible to us as our IQ is low?

Deputy President, can the Government consider the suggestions raised by the community, such as offering compensation through its indemnity fund without having to prove the presence of a causal relationship? This means that whenever an incident takes place, the person involved may receive compensation. This can give people greater peace of mind. Here is another example. Can the Government offer concessionary measures such as tax deductions, tax exemptions or preferential MPF measures to all people of Hong Kong after the vaccination rate in Hong Kong has reached a certain percentage, in a bid to encourage people to receive vaccination in large numbers? By that time, we will be able to see everybody get vaccinated instead of "early vaccination for all".

LEGISLATIVE COUNCIL ― 2 June 2021 6711

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, many thanks to Mr Paul TSE for his views.

I have talked about various facilitation measures just now, but I actually have not mentioned one point and this is, the Chief Executive has already written to various large organizations with the intention of urging them to join hands with the authorities in achieving early vaccination for all. She has also expressed the hope that they can render support and motivate people by their own means. We have received their swift response, and their response is also very positive.

Actually, Ocean Park and Hong Kong Disneyland mentioned by Mr TSE just now have likewise offered some concessions. Various organizations will issue their own press releases to inform the community of their respective provision of concessions or incentive rewards.

(Mr Paul TSE indicated that his supplementary question had not been answered)

DEPUTY PRESIDENT (in Cantonese): Mr Paul TSE, I know which part of your supplementary question has not been answered.

Secretary, you have not answered Mr TSE's question of whether the Government will offer any incentives on its own initiative. In this regard, do you have anything to add?

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, the incentives offered by the Government actually are not monetary ones. Rather, they include shortening the quarantine period for those already vaccinated (whether they are inbound passengers or close contacts), vaccination in lieu of regular testing, and a "vaccine bubble". We will continue to take forward all such initiatives.

IR DR LO WAI-KWOK (in Cantonese): Deputy President, we received enquiries from some people recently, who said that as summer vacation was fast-approaching, many Hong Kong students studying abroad were planning for their return to Hong Kong, and a majority of them had already received vaccination overseas. They went on to say that such students did not know 6712 LEGISLATIVE COUNCIL ― 2 June 2021 whether the vaccines they had received were recognized by the Department of Health ("DH") in Hong Kong.

Second, some electronic systems have now been launched whereby people may store information as proof, such as the "LeaveHomeSafe" mobile application. But speaking of the vaccines available for injection in overseas places, there is no system that is comparable to Hong Kong's QR code system. In that case, how can they make use of our systems? I hope the Secretary can answer my supplementary question.

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Many thanks to Ir Dr LO Wai-kwok for his supplementary question.

As far as we understand it, some Hong Kong people have already received vaccination in overseas places. In the case of those who return to Hong Kong from certain overseas places, DH may shorten their quarantine period. At present, the authorities have maintained a list of vaccines approved by Hong Kong, by WHO, by the National Medical Products Administration, by other places of the world with vaccine regulation and control, and so on. Generally, we will recognize all such vaccines.

Under the major premise of requiring the provision of vaccination proofs for visiting certain premises, the Innovation and Technology Bureau will hold ongoing discussions with us on ways for the more convenient inspection of vaccination certificates. Before we can deal with this by electronic means, we will also recognize printed copies of certificates carried by the relevant individuals. Speaking of such premises as restaurants or bars, the Food and Environmental Hygiene Department has also designed a form, so that they may fill in the types of vaccines they had received. Therefore, I will say there is a way to handle this at present. But we will continue to explore other more convenient arrangements.

MR HOLDEN CHOW (in Cantonese): Deputy President, today, Members have invariably expressed concern about more effective ways to motivate the whole city to receive vaccination more expeditiously, and they have put forth many recommendations, such as the provision of financial or leave incentives. But will the Secretary consider one thing? As the Chief Executive has also said that LEGISLATIVE COUNCIL ― 2 June 2021 6713 the authorities will keep driving private companies (especially large enterprises) to encourage their staff to receive vaccination, I wonder if the Secretary also knows whether companies will provide a timely report on their staff vaccination rates. Enterprises are large employers. If their staff vaccination rates are high, and if the Government has also grasped the relevant figures, will the Government give the public a timely announcement, so as to create a motivation effect and play a leading role?

The Government can tell people that a certain large enterprise has achieved a staff vaccination rate of 70% or 80%. And when the whole community gets to know that people from different walks of life have already received vaccination, this can truly generate momentum. In my view, this task requires a multi-pronged approach. May I ask whether the Secretary will consider the idea?

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, many thanks to Mr CHOW for his supplementary question and suggestion.

In my view, this is a very good suggestion. The Food and Health Bureau has also told DH or the Hospital Authority that when their staff vaccination rates have reached a certain level, they may make an announcement, so as to take the lead in setting an example and enable the public to know that the staff vaccination rates of various organizations have reached a certain level. I believe that in the days ahead, we will encourage different organizations to adopt this practice as far as possible.

MR PAUL TSE (in Cantonese): Deputy President, tax deduction is precisely one way to push up the rate to a certain level.

Parts (1) and (2) of the Secretary's main reply talk about vaccine research and development. Around the world, 100 types of candidate vaccines have reached the clinical development stage, and 200 are still in the pre-clinical development stage. That is to say, there are altogether 300 types of vaccines. In the case of Hong Kong, the Government has allocated $20 million to HKU as research funding, but HKU seems to have encountered two inherent difficulties: First, insufficient samples, with less than 10 000 research participants; and second, the absence of any vaccine manufacturers in Hong Kong. I have no 6714 LEGISLATIVE COUNCIL ― 2 June 2021 intention to disseminate a negative message to HKU or its research personnel. But my feeling is that we seem to be doing all this for the mere sake of doing so, rather than having a genuine target. Due to such inherent difficulties, its looks like our efforts will be in vain. While the process is time-consuming and plagued by many difficulties, some of the difficulties are even insurmountable and unresolvable.

The Government has allocated funding of only $20 million. The Government should either increase its funding to assist HKU in overcoming those insurmountable difficulties, or simply refrain from allocating any funding at all. The present case is like a token attempt, and we are doing it merely because others are doing it as well. Does the Secretary have the same feeling?

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, I understand the point of Mr TSE. But I must say that the reality is in fact not like that because the Government has always supported and welcomed academics' research and development of COVID-19 vaccines. The reason is that actually, the successful research and development of vaccines may somehow contribute to the alleviation of the epidemic worldwide.

In my view, the constraint faced by Hong Kong is that research, except phase one research in particular, must be undertaken in places where the numbers of cases remain high. At present, the epidemic in Hong Kong is relatively mild, so it is difficult to obtain all the necessary samples here in Hong Kong. On this major premise, the research team is nonetheless confident that it can recruit research participants from other places.

Apart from the Fund, we may also offer support if they need it. As in the previous case where they needed a permit for the cross-province and cross-boundary transport of vaccines, we also offered them our support. From this, the Honourable Member can see that we will continue to welcome and support the research and development of vaccines in Hong Kong, and when necessary, we will allocate additional resources in a timely fashion to support local research and development.

DEPUTY PRESIDENT (in Cantonese): Oral questions end here.

LEGISLATIVE COUNCIL ― 2 June 2021 6715

WRITTEN ANSWERS TO QUESTIONS

Services of the psychiatric wards in public hospitals

7. DR CHENG CHUNG-TAI (in Chinese): President, some members of the public have relayed to me that the healthcare personnel of public hospitals have not explained to the patients of the psychiatric wards in the hospitals and their family members the provisions regarding the reception, detention and discharge of patients under the Mental Health Ordinance (Cap. 136), and have only placed the relevant information in inconspicuous areas inside the wards. As a result, the lawful rights and interests of those patients cannot be safeguarded. Regarding the services of the psychiatric wards in public hospitals ("psychiatric wards"), will the Government inform this Council if it knows:

(1) the respective general procedures involved in (i) the admission of voluntary patients to the psychiatric wards, and (ii) the detention of patients by public hospitals in such wards for observation or treatment under Cap. 136;

(2) the number of admissions to the psychiatric wards in the past five years and, among them, the respective numbers of those to which the following circumstances applied: (i) the patients completed and submitted by themselves the form called "Application for reception as a voluntary patient" ("VP Form"), (ii) the patients' guardians completed and submitted the VP Form on their behalf and (iii) the hospitals detained the patients for observation or treatment under the authority of Cap. 136, together with a tabulated breakdown by name of hospital;

(3) whether the Hospital Authority ("HA") has put in place measures to ensure that when patients are admitted to the psychiatric wards, the healthcare personnel under HA will clearly explain to them the provisions regarding the reception, detention and discharge of patients of the psychiatric wards under Cap. 136, and to ensure that they understand the contents; if HA has, of the details (including the relevant procedures);

(4) the maximum and minimum numbers of days for which patients were detained in the psychiatric wards for observation in the past five years; among these patients, the respective numbers of those who 6716 LEGISLATIVE COUNCIL ― 2 June 2021

were subsequently (i) discharged directly, (ii) categorized as voluntary patients after they had completed and submitted by themselves the VP Form, (iii) categorized as voluntary patients after their guardians had completed and submitted the VP Form on their behalf, and (iv) proved to be certified patients under Cap. 136 and hospitalized for one year or more for treatment, together with a tabulated breakdown by name of hospital;

(5) among the applications for discharge made in the past five years by psychiatric ward patients themselves or their family members on their behalf, the respective numbers of those approved and rejected, together with a tabulated breakdown by name of hospital;

(6) the number of complaints received by HA in the past five years about members of the public being misled into consenting to be admitted to the psychiatric wards, as well as how HA followed up such complaints, and set out such information in a table by name of hospital;

(7) the details of the current mechanism adopted by HA for handling complaints lodged by patients of the psychiatric wards about the following: (i) the approach of the treatments provided to them, or the assessments of their mental conditions made, by their attending doctors, and (ii) non-compliance with the procedures for the detention of patients under Cap. 136 by healthcare personnel; and

(8) whether HA issued guidelines in the past five years on the admission of patients to the psychiatric wards for the hospitals under HA; if HA did, of the date on which such guidelines were last revised, and whether HA has put in place measures to monitor the compliance with these guidelines by the hospitals under HA; if HA did not issue such guidelines, the reasons for that, and whether HA will consider issuing relevant guidelines to enhance the management of the administrative work of admitting patients to the psychiatric wards?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, having consulted the Hospital Authority ("HA"), I provide the consolidated reply to the question raised by Dr CHENG Chung-tai as follows:

LEGISLATIVE COUNCIL ― 2 June 2021 6717

Generally speaking, patients in need of psychiatric inpatient services of HA will be sent to designated mental hospitals under HA. The designated mental hospitals under the Declaration of Mental Hospital (Consolidation) Order (Cap. 136B) include Castle Peak Hospital, Kwai Chung Psychiatric Observation Unit, Pamela Youde Nethersole Eastern Psychiatric Observation Unit, New Territories East Psychiatric Observation Unit and Kowloon Psychiatric Observation Unit.

For a patient who has been assessed by doctors of HA to be in need of psychiatric inpatient services and has indicated his/her consent for hospitalization, HA will ask him/her (or his/her parent if the patient is under the age of 16) or his/her guardian to sign the "Application for reception as a voluntary patient" ("VP form") in accordance with section 30 of the Mental Health Ordinance. Upon receipt of the VP form, the medical superintendent of the mental hospital concerned will admit the patient as a voluntary patient.

Separately, according to section 31 of the Mental Health Ordinance, HA may make an application to a District Judge or magistrate for detention of a patient who is suffering from mental disorder of a nature or degree which warrants his/her detention in a mental hospital for at least a limited period for observation in the interests of the patient's own health or safety or with a view to protecting other persons. A patient detained in a mental hospital by virtue of section 31 of the Mental Health Ordinance may make an application to the Mental Health Review Tribunal to seek a review of his/her case under section 59B of the Mental Health Ordinance.

The number of admissions to psychiatric wards of HA through the above mentioned routes in the past five years is set out in Table 1.

Table 1: Number of admissions to psychiatric wards of HA through various routes 2020-2021 2016- 2017- 2018- 2019- Year (Provisional 2017 2018 2019 2020 figures) Number of admissions for which the 9 850 9 650 10 010 9 100 8 970 VP forms were completed and lodged by the patients themselves Number of admissions for which the 180 200 210 250 350 VP forms were completed and lodged by the patients' guardians 6718 LEGISLATIVE COUNCIL ― 2 June 2021

2020-2021 2016- 2017- 2018- 2019- Year (Provisional 2017 2018 2019 2020 figures) Number of admissions for 3 180 3 320 3 320 3 330 3 600 observation in accordance with section 31 of the Mental Health Ordinance

Notes:

(1) Figures are rounded to the nearest 10.

(2) Due to the emergence of the COVID-19 epidemic in Hong Kong since early 2020, HA has stepped up infection control measures and adjusted its services according to the epidemic situation. Hence, its service throughput across a wide range of services might have been reduced when compared with that of previous years.

The length of stay of patients admitted to psychiatric wards varies from a single day to more than a year depending on their conditions. Doctors will assess the patients' conditions from time to time and arrange services such as community rehabilitation for patients who are suitable for discharge. In the past five years, the number of patients discharged each year remained at around 16 000 to 18 000.

For patients who need to be admitted to psychiatric wards, the healthcare personnel will explain to them and their family members the contents of the VP form and the operation of the psychiatric wards concerned, such as rules that patients must comply with and the procedures and arrangements for discharge. The healthcare personnel of the psychiatric wards will also explain the details to the patients upon their admission and provide them with information such as hospitalization notes and Patients' Charter, so as to ensure that the patients and their family members understand the relevant inpatient arrangements.

If patients admitted to psychiatric wards have any views on the services of HA, including dissatisfaction towards the treatments or mental assessments by the attending doctors, they may lodge complaints with HA.

HA has put in place a two-tier complaint mechanism for handling public complaints against its hospitals. At the first tier, all complaints will first be handled by the respective public hospitals. Upon receipt of a complaint case, the Patient Relations Officer will pass it to the department concerned for LEGISLATIVE COUNCIL ― 2 June 2021 6719 follow-up and investigation. The patient will be informed of the results after investigation. If the complainant is not satisfied with the investigation results and the reply of the hospital, he/she may file an appeal to HA's Public Complaints Committee ("PCC") (i.e. the second tier of the complaint mechanism). PCC is a committee under HA, comprising members from different sectors of the community and responsible for handling and considering all appeals for HA in an independent, fair and impartial manner.

The number of complaints received by HA clusters in the past five years about members of the public being misled into giving consent for admission to psychiatric wards is set out in Table 2.

Table 2: Number of complaints about being misled into giving consent for admission to psychiatric wards Cluster/Year 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Hong Kong East 0 0 0 0 0 Cluster Hong Kong West 0 0 0 0 0 Cluster Kowloon East 1 0 1 0 2 Cluster Kowloon West 1 0 0 2 3 Cluster Kowloon Central 0 0 0 0 0 Cluster New Territories East 0 0 0 0 1 Cluster New Territories 0 0 0 0 0 West Cluster Total 2 0 1 2 6

Number of appeals 0 1 0 1 1 lodged to HA's PCC

HA issues from time to time guidelines on the operation and administration of wards (including psychiatric wards) to improve the management of hospital wards. HA will keep in view the operational arrangements of psychiatric inpatient services, and make appropriate improvement as and when necessary.

6720 LEGISLATIVE COUNCIL ― 2 June 2021

Assisting brownfield operators in reprovisioning their operations

8. MR LAU KWOK-FAN (in Chinese): President, as shown in the report of the Study on Existing Profile and Operations of Brownfield Sites in the New Territories published in 2019, among the about 1 580 hectares of brownfield sites in Hong Kong, 90% were used for various types of industrial and commercial activities. The Government projected last year that over 860 hectares of brownfield sites would be redeveloped for housing and other uses in future. Some brownfield operators and their employees are worried that they will not be able to identify sites for reprovisioning their operations, making it difficult for them to sustain their living. In this connection, will the Government inform this Council:

(1) whether it will set up a task force on the reprovisioning of brownfield operations to be responsible for work such as assisting brownfield operators affected by land resumption in identifying sites for reprovisioning their operations, applying for ex-gratia allowances and drawing up business resumption plans; if not, of the reasons for that;

(2) as the Government indicated last year that those affected brownfield operators whose operations could not operate in multi-storey buildings might consider relocating to the sites zoned "Open Storage" in other areas in the New Territories, and after excluding those Open Storage sites which had been included in the Hung Shui Kiu/Ha Tsuen, Yuen Long South and New Territories North New Development Area projects, there were still 171 hectares of Open Storage sites, whether it has assessed if such sites are sufficient for accommodating all of such affected brownfield operators; and

(3) given that as at December 2017, about 16 000 hectares of land in Hong Kong were zoned "Green Belt", whether the Government will conduct a comprehensive study on the use and existing profile of such belt, so as to facilitate the identification of suitable sites for brownfield operators to reprovision their operations; if not, of the reasons for that?

LEGISLATIVE COUNCIL ― 2 June 2021 6721

SECRETARY FOR DEVELOPMENT (in Chinese): President, the reply to the various parts of Mr LAU Kwok-fan's question is as follows:

(1) Brownfield operations are business undertakings. As in the case for other business undertakings affected by development projects, the Government's policy is to provide eligible business operators with monetary compensation, so as to assist their relocation. They may receive a statutory compensation, or an ex gratia allowance alternatively. The Finance Committee approved in July 2018 the substantially-improved arrangement for ex gratia allowances, the disbursement of which now being centrally administered by Lands Department ("LandsD")(1).

While the Government does not make reprovisioning arrangements for affected brownfield operators, the Development Bureau ("DEVB") and relevant departments are offering them advice on planning and land issues in relation to relocation sites they have identified. Under the First Phase development of the Kwu Tung North and Fanling North New Development Area ("NDA") for example, DEVB has indicated to affected operators that the Government stands ready to provide assistance on planning and land matters arising from relocation, as well as to help expedite the approval process of related planning applications through coordination of comments from different responsible departments which administer the established statutory and administrative procedures respectively. This approach is quite effective as we now see some planning applications being approved successively and will do the same in NDAs. If necessary, we may strengthen dissemination of information about the facilitation to affected brownfield operators.

(2) Currently, brownfield operators may consider moving their businesses to other locations zoned "Open Storage" ("OS") in the New Territories. In addition, if a site identified for relocation is under another zoning, the operator may submit a planning application to the Town Planning Board ("TPB"), which will assess

(1) Affected business operators may obtain information on the compensation arrangements and contact information of relevant offices through LandsD's website, introduction video and pamphlet (website: ). 6722 LEGISLATIVE COUNCIL ― 2 June 2021

such applications with reference to the criteria contained in a set of revised Guidelines (TPB PG-No. 13F)(2) promulgated in March last year.

In accordance with the TPB PG-No. 13F, rural areas in the New Territories covered by statutory plans are classified into four categories (Category 1 to 4) so as to channel open storage and port back-up uses to specific areas, thereby preventing them from proliferating haphazardly into the unsuitable areas. Category 1 (mainly including areas zoned "OS", "Other Specified Uses" annotated "Port Back-up Uses", "Industrial" or "Industrial (Group D)") and Category 2 (mainly including areas without a clear planning intention or fixed development programme, and areas to be gradually developed along major upcoming infrastructural projects nearby) cover about 585 hectares(3) and 281 hectares of land respectively. In general, there are good chances for TPB to approve relevant planning applications within areas under these two categories, if government departments do not hold adverse comment on the uses applied for, or if the concerns of nearby residents may be mitigated through TPB imposing approval conditions.

The above two categories involving a total of around 866 hectares of land do not include areas to be redeveloped for logistics and port back-up uses in NDAs (including Kwu Tung North/Fanling NDA, Hung Shui Kiu/Ha Tsuen NDA, and Phases 1 and 2 of Yuen Long South Development Area). Prior to the implementation of the said NDAs, existing open storage and port back-up uses in relevant areas may warrant TPB's sympathetic consideration under usual circumstances until the relevant land is due for resumption for redevelopment. In this regard, departments would, according to the works programme, endeavour to address the reasonable concerns of

(2) The full name of the Planning Guidelines is "Town Planning Board Guidelines for Application for Open Storage and Port Back-up Uses under Section 16 of the Town Planning Ordinance" (website: ).

(3) The area zoned "OS" outside various NDA projects, after the exclusion of part of the land recently included in San Tin/Lok Ma Chau Development Node and the Remaining Phases of Public Housing Developments at Wang Chau, has been adjusted from 171 hectares to about 152 hectares. This 152 hectares of land is part of the 585 hectares of land under Category 1. LEGISLATIVE COUNCIL ― 2 June 2021 6723

affected brownfield operators and allow them to move out in an orderly manner by batches.

Separately, LandsD is making available suitable vacant government sites for letting to eligible business operators affected by the land resumption and clearance exercises for NDA or other relevant government development projects, by way of short-term tenancy through tender. Tenders of the three pieces of government land in Yuen Long and Fanling in the first batch were awarded at the end of last month. The next batch of three other pieces of government land in Tuen Mun and Kwu Tung North would be put to tender in the same manner within this month. LandsD would continue to identify suitable vacant sites, and plan to roll out the third batch later for eligible business operators to rent with priority by way of short-term tenancy through tender.

(3) In general, the planning intention of the "Green Belt" ("GB") zone is primarily for defining the limits of urban and sub-urban development areas by natural features. Mainly naturally vegetated areas and slopes, most of the land within the "GB" zone is classified as Category 4 under TPB PG-No. 13F. If the land in question remains within the "GB" zone, applications for open storage and port back-up uses are generally not supported unless under exceptional circumstances.

The Government keeps an open mind on the idea of rezoning suitable "GB" sites for other uses (e.g. residential including public housing) to supply developable land, and has been doing so. Indeed, among more than 210 sites identified last few years by the Government with potential for housing development in short to medium term, around one thirds of them (77 sites) are within the "GB" zone. That said, as explained in my response to part (2) above, our current planning direction is to consolidate existing brownfield operations at appropriate locations with less environmental impacts. Rezoning "GB" sites for open-air industrial uses is not in line with this direction.

The current large-scale open-air operations on brownfield sites may not be the most optimal use of land for sustainable development. Expecting the Government to make available land of a similar size 6724 LEGISLATIVE COUNCIL ― 2 June 2021

for affected brownfield operators to re-establish their existing operations is not a practicable option. At a macro planning level, we have reserved in the Hung Shui Kiu/Ha Tsuen NDA and Yuen Long South Development Area a total of 72 hectares of land (some of which for development of multi-storey buildings ("MSB")) to provide planned and concentrated accommodation to consolidate brownfield operations in a manner achieving better land use efficiency. We expect that a concrete proposal in respect of the development models of the first batch of MSB sites would be in shape next year, to meet the completion of the site formation works for this batch of sites as early as in 2023. In addition, we would continue to reserve land at suitable locations, including exploring feasible locations in other major development projects, for consolidating brownfield operations.

Opening up School Facilities for Promotion of Sports Development Scheme

9. MR MA FUNG-KWOK (in Chinese): President, the Home Affairs Bureau and the Education Bureau have, since the 2017-2018 school year, jointly implemented the Opening up School Facilities for Promotion of Sports Development Scheme ("the Scheme"). To encourage schools to participate in the Scheme, schools which open up their school facilities for sports organizations to hold sports programmes will be provided an additional subsidy. In this connection, will the Government inform this Council:

(1) of the details of the sports programmes held under the Scheme in (i) the last school year and (ii) the current school year (up to the 31st of last month) (set out separately in tables of the same format as the table below);

School year: ______Name of Name of School Number of Type of Number of sports school facilities programmes sports participants organization (District) hired

Total: Total: Total: Total: Total: Total:

LEGISLATIVE COUNCIL ― 2 June 2021 6725

(2) of the measures in place to encourage more schools and sports organizations to participate in the Scheme;

(3) given that schools which have hired out their facilities to sports organizations under the Scheme may apply for grants catering for (i) Capital Works Project and (ii) Special Project under the Sir David Trench Fund for Recreation (Main Fund), of the respective numbers of schools whose applications for the two grants were approved in the past two school years, and the amount of the grant approved for each school;

(4) of the respective numbers of sports programmes scheduled for the last and current school years under the Scheme which were cancelled due to the epidemic; whether such programmes have been allowed to be postponed to other time slots or the following school year, and whether the schools concerned have been required to return to the authorities part or all of the additional subsidies provided for them under the Scheme;

(5) whether the authorities allow the sports programmes under the Scheme to be held during the partial resumption of face-to-face classes of schools; if not, of the circumstances or conditions under which the authorities will allow such programmes to be held;

(6) of the current number of sports organizations eligible for participating in the Scheme; whether the authorities will expand the lists of such organizations; if so, of the details; if not, the reasons for that; and

(7) given that sports organizations participating in the Scheme are required to take out, on their own, insurance with adequate coverage (including third party risks insurance) for the sports programmes to be held by them in schools, whether the authorities will consider afresh collectively purchasing the required insurance or providing an insurance subsidy for such sports organizations so as to increase the incentives for sports organizations to participate in the Scheme; if so, of the details; if not, the reasons for that?

6726 LEGISLATIVE COUNCIL ― 2 June 2021

SECRETARY FOR HOME AFFAIRS (in Chinese): President, the Education Bureau ("EDB") and Home Affairs Bureau ("HAB") launched the Opening up School Facilities for Promotion of Sports Development Scheme ("Scheme") in 2017-2018 school year to encourage schools to open up their facilities, with a view to enhancing the sporting culture in school. Under the Scheme, sports organizations are encouraged to hold sports activities in schools to provide students with more opportunities to participate in sports and develop a healthy habit of exercising.

The Scheme provides financial incentives to encourage schools to open up their facilities. Apart from levying hire charges, schools that hire out their facilities to sports organizations under the Scheme will receive an extra subsidy up to a maximum amount of $130,000 from EDB and HAB to cover relevant expenses incurred.

To facilitate the cultivation of a strong sporting culture in schools and increase students' participation in sports activities, sports organizations using school facilities under the Scheme are required to reserve one fourth of the places in each programme for priority enrolment of the students, teachers and/or parents of the school concerned, subject to their fulfilment of the qualification(s) of that activity, if any.

The Scheme has been well received by the sports sector and schools since its launch.

In consultation with EDB, the consolidated reply to the questions raised by Mr MA Fung-kwok is as follows:

(1) The details of the programmes organized under the Scheme in the 2019-2020 and 2020-2021 school years are at Annex.

(2) Since the launch of the Scheme, EDB and HAB has been collecting feedback from the participating schools and sports organizations of the Scheme at the end of every school year to facilitate the review of the Scheme and implementation of corresponding enhancement measures, with a view to attracting greater participation from schools and sports organizations. The enhancement measures implemented include:

LEGISLATIVE COUNCIL ― 2 June 2021 6727

- In the 2018-2019 school year, we extended the Scheme from public sector schools to schools under the Direct Subsidy Scheme; increased the upper limit of subsidy for each participating school from $80,000 to $130,000 a year; and expanded the list of eligible sports organizations;

- In the 2019-2020 school year, we allowed non-profit-making organizations with ability, experience and a track record of organizing sports programmes in schools and the community to join the Scheme on a pilot basis; at the same time, participating schools were made eligible to apply for the grant under the "Special Project" category of the Sir David Trench Fund for Recreation ("Fund") for constructing or improving their sports facilities, or purchasing sports equipment; and

- Starting from the 2020-2021 school year, we allowed participating schools of the Scheme to apply for grant under the "Capital Works Project" category of the Fund to construct new sports facilities; and we gave schools more flexibility in the use of subsidies to replace or acquire equipment/appliances needed, in addition to the permitted use for hiring extra manpower, strengthening security measures, defraying additional utility costs, and carrying out urgent minor repair works in relation to the approved programmes.

(3) In the past two years, a total of 12 participating schools of the Scheme have submitted funding applications for the "Special Project" or "Capital Works Project" categories of the Fund. Applications from seven schools were approved. These schools were given an average grant of $2.32 million.

(4) In the 2019-2020 school year, a total of 143 sports programmes was cancelled due to various reasons including the social unrest and COVID-19 pandemic. As for the 2020-2021 school year (as at 30 April 2021), 23 sports programmes were cancelled due to the pandemic. The rest of the affected programmes will be postponed to the remaining part of the school year or the summer holidays.

6728 LEGISLATIVE COUNCIL ― 2 June 2021

If an approved programme was cancelled due to the pandemic or other reasons, the sports organization may liaise with the relevant school to reschedule the programme to another time slot within the school year concerned. If some of the affected programmes could not be rearranged within the same school year, the schools concerned should return the unspent balance of the subsidies as at 31 August every year (i.e. the last day of the school year) to EDB.

(5) As the pandemic gradually subsides, sports organizations may hold the sports programmes under the Scheme, while abiding by the infection control and social distancing measures imposed by law.

(6) Currently, the Scheme is opened for national sports associations recognized by the Sports Federation and Olympic Committee of Hong Kong, China, and their affiliated club members, district sports associations, sports organizations subvented by the Leisure and Cultural Services Department, and other non-profit-making organizations with ability, experience and a track record of organizing sports programmes in schools and the community.

As mentioned in part (3) of the reply, we have extended the eligibility criteria in 2019-2020 school year to include non-profit-making organizations with ability, experience and a track record of organizing sports programmes in schools and the community. We do not have any plans to further expand the scope of eligible organizations at the moment.

(7) Participating sports organizations of the Scheme are required to take out adequate insurance policy for the use of school facilities, including third party liability insurance, and include the school as the insured as appropriate to ensure adequate protection for staff, property and facilities in the school premises. Given the scale, type of sports, risks involved and numbers of participants of the programmes vary, and that the facilities hired are also different, it is more prudent and practical for sports organizations to procure suitable insurance separately having regard to the nature of the programmes organized.

LEGISLATIVE COUNCIL ― 2 June 2021 6729

Annex

Opening up School Facilities for Promotion of Sports Development Scheme Details of programmes in school year 2019-2020 and 2020-2021

School year: 2019-2020

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Hong Kong Queen 1 Rope Hall, 10 Rope Elizabeth skipping Covered Skipping School Old playground Association, Students' China Association Secondary School (Yuen Long) Explorer HKSKH 5 Handball Playground, 240 Sports Club Bishop Hall Sports Secondary room School (Kwun Tong) The Hong Yu Chun 1 Table tennis Hall, 382 Kong Table Keung Playground Tennis Memorial Association College No. 2 (Southern) South China HKTA Ching 1 Handball Playground 30 Athletic Chung Association Secondary School (Kwun Tong) Tai Po Lam Tsuen 3 Balance Covered 20 Balance Bike Public Wong bike playground Team Fook Luen Memorial School (Tai Po) Tai Po Baptist 3 Balance Covered 100 Public School bike playground (Tai Po) 6730 LEGISLATIVE COUNCIL ― 2 June 2021

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Hong Kong Yan Chai 1 Rope Activity 16 Rope Hospital Wong skipping room Skipping Wha San Association, Secondary China School (Sai (Co-organized Kung) with the Hong Maryknoll 6 Rope Covered 150 Kong Rope Fathers' skipping playground Skipping School (Sham Club) Shui Po) PLK Tong Nai 1 Rope Hall 25 Kan Junior skipping Secondary College (Sham Shui Po) HKKKWA 2 Rope Covered 100 Sun Fong skipping playground Chung Primary School (Tai Po) Catholic Ming 1 Rope Covered 16 Yuen skipping playground Secondary School (Sai Kung) SKH Li Fook 3 Rope Hall 16 Hing skipping Secondary School (Eastern) Tin Shui Wai 3 Rope Hall 60 Methodist skipping Primary School (Yuen Long) LEGISLATIVE COUNCIL ― 2 June 2021 6731

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Hong Kong 2 Rope Covered 20 and Kowloon skipping playground Chiu Chow Public Association Secondary School (Yau Tsim Mong) Tsuen Wan 2 Rope Covered 18 Chiu Chow skipping playground Public School (Tsuen Wan) S.K.H. St. 1 Rope Hall 8 Benedict's skipping School (Wong Tai Sin) Lung Cheung 1 Rope Hall 8 Government skipping Secondary School (Wong Tai Sin) HKSYC & IA 2 Rope Hall, 25 Chan Nam skipping Covered Chong playground Memorial College (Kwai Tsing) Mu Kuang 3 Rope Hall 20 English School skipping (Kwun Tong) Heung To 3 Rope Covered 35 Middle School skipping playground (Sham Shui Po) Physical St. Joseph's 1 Physical Hall, 15 Fitness Anglo-Chinese fitness Classroom Association of School (Kwun Hong Kong Tong) 6732 LEGISLATIVE COUNCIL ― 2 June 2021

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Leap Judo Yan Chai 2 Judo Activity 60 Club Hospital Wong room Wha San Secondary School (Sai Kung) Unicycling PLK Chong 1 Unicycling Playground 25 Association of Kee Ting Hong Kong Primary School (Sha Tin) HKFEW 1 Unicycling Hall 32 Wong Cho Bau School (Islands) Chan's 1 Unicycling Hall 25 Creative School (Hong Kong Island) (Eastern) Kwok Man 1 Unicycling Playground 40 School (Islands) Fukien 1 Unicycling Hall 25 Secondary School Affiliated School (Kwun Tong) Hong Kong Yan Oi Tong 1 Ice hockey Playground, 128 Ice Hockey Tin Ka Ping Synthetic Association Primary ice rink School (Sai Kung) Central Islamic Kasim 2 Baseball Playground 51 Baseball Club Tuet Memorial College (Eastern) LEGISLATIVE COUNCIL ― 2 June 2021 6733

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants SKH Li Fook 2 Baseball 5-a-side 147 Hing soccer Secondary pitches School (Eastern) Eastern Force Cheung Chuk 3 Archery Covered 99 Archery Club Shan College playground (Eastern) I Robot The Yuen 6 Handball Playground, 240 Yuen Institute Sports MFBM Nei room Ming Chan Lui Chung Tak Memorial College (Yuen Long) EVO Sports St. Francis 6 Handball Playground, 240 Organisation Xavier's Sports School, Tsuen room Wan (Tsuen Wan) Central & Lok Sin Tong 3 Basketball Playground 175 Western Leung Kau District Kui College Recreation (Central and and Sports Western) Association Tuen Mun Ching Chung 3 Football Basketball 160 Sports Hau Po Woon court Association Secondary School (Tuen Mun) Ho Ngai 3 Football Hall 120 College (Sponsored by Sik Sik Yuen) (Tuen Mun) 6734 LEGISLATIVE COUNCIL ― 2 June 2021

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Chinese Chinese 3 Walking Pitch 126 YMCA of YMCA football Hong Kong College (Sha Tin) Rhino Hockey Tung Koon 3 Hockey Playground 125 Club District Society Fong Shu Chuen School (Yau Tsim Mong) Handball HKTA Ching 1 Handball Playground 30 Association of Chung Hong Kong, Secondary China School (Kwun Tong) Hamazing Chinese 1 Korfball Basketball 40 Korfball Club YMCA court Primary School (Yuen Long) HK Rugby YMCA of 6 Rugby Artificial 743 Union Hong Kong turf football Christian pitch College (Islands) International Queen 3 Taekwondo Activity 250 Taekwondo Elizabeth room HK School Old Association Students' Association Secondary School (Yuen Long) Hong Kong Chinese 1 Shuttlecock Badminton 14 Shuttlecock YMCA court Association College (Sha Tin) LEGISLATIVE COUNCIL ― 2 June 2021 6735

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Hong Kong True Light 1 Bodyweight Rooftop 19 China Middle School workout sports Bodybuilding of Hong Kong ground and Fitness (Wan Chai) Association Sha Tin HKTA Shun 3 Baseball Baseball 153 Sports Yeung field Association Primary Hong Kong School (Sha 1 Baseball Baseball 56 Baseball Tin) field Association HK Islamic 2 Floor Hall 82 FloorCurling Dharwood Pau curling Association Memorial Primary School (Wong Tai Sin) Islamic 1 Hall 54 Primary School (Tuen Mun) HK Chido Kwok Man 2 Taekwondo Activity 60 Taewondo School room Association (Islands) InspiringHK Lok Sin Tong 1 Roller Covered 121 Sports Leung Kau skating playground Foundation Kui College (Central and Western) Tin Shui Wai 1 Fencing, Covered 15 Methodist Basketball playground, Primary Playground School (Yuen Long) Kowloon 3 Cross Playground 178 Technical country School (Sham running, Shui Po) shuttlecock 6736 LEGISLATIVE COUNCIL ― 2 June 2021

Sports School Number of Type of School Number of Organization (District) Programmes sports facilities participants Father 2 Shuttlecock Covered 179 Cucchiara playground Memorial School (Kwai Tsing) SKH Tsoi 1 Dodgebee Covered 18 Kung Po playground Secondary School (Kowloon City) Fung Kai Liu 2 Fencing Activity 15 Yun Sum room Memorial School (North) Confucius Hall 2 Boxing, Classroom 32 Secondary Dancing School (Wan Chai) Fortress Hill 1 Tchoukball Playground 16 Methodist Secondary School (Eastern) Total: Total: Total: Total: Total: 5 207 28 sports 48 schools 123 27 types 14 types person organizations programmes

School year: 2020-2021 (as at 30.4.2021)

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Central Islamic 3 Baseball Playground 66 Baseball Kasim Tuet Club Memorial College (Eastern) LEGISLATIVE COUNCIL ― 2 June 2021 6737

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants SKH Li 3 Playground 66 Fook Hing Secondary School (Eastern) Central & Lok Sin 6 Basketball Playground 210 Western Tong Leung District Kau Kui Recreation College and Sports (Central and Association Western) Handball HKTA 3 Handball Playground 90 Association Ching of Hong Chung Kong, China Secondary School (Kwun Tong) The Judo SKH Li 3 Judo Activity 48 Association Fook Hing room of Hong Secondary Kong, China School (Eastern) Hong Kong HKTA The 2 Cycling Cycling 40 Cycling Yuen Yuen room Association Institute No. 3 Secondary School (Sai Kung) The 2 Activity 40 Salvation room Army William Booth Secondary School (Wong Tai Sin) 6738 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants St. Francis 2 Activity 40 of Assisi's room College (North) Hong Kong Queen 3 Rope Hall, 156 Rope Elizabeth skipping Covered Skipping School Old playground Association, Students' China Association Secondary School (Yuen Long) The PLK 1 Gymnastics Covered 15 Gymnastics Riverain playground Association Primary of Hong School (Sha Kong, China Tin) Hamazing Chinese 6 Korfball Playground 120 Korfball YMCA Club Primary School (Yuen Long) Yuen Long Buddhist 4 Football Playground 100 Football Club Wing Yan School (Yuen Long) Yuen Long Tin Shui 2 Athletics Fitness room 20 Sports Wai Association Methodist 2 Long jump 40 College sand pit (Yuen 2 Playground 40 Long) LEGISLATIVE COUNCIL ― 2 June 2021 6739

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Tuen Mun Ching 6 Football Basketball 180 Sports Chung Hau Association Po Woon Secondary School (Tuen Mun) Ho Ngai 6 Hall 120 College (Sponsored by Sik Sik Yuen) (Tuen Mun) I Robot The Yuen 6 Handball Ball court, 228 Yuen Fitness room Institute MFBM Nei Ming Chan Lui Chung Tak Memorial College (Yueng Long) Sha Tin HK Taoist 6 Baseball Baseball 150 Sports Association court Association Shun Yeung Primary School (Sha Tin) Byjoss PLK 1 Fencing Hall 200 Limited Riverain Primary School (Sha Tin) 6740 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Eastman Pui Ching 2 Archery Covered 30 Archery Club Middle playground School 2 Gymnasium 30 (Kowloon City) Eastern Force Cheung 6 Archery Covered 96 Archery Club Chuk Shan playground College (Eastern) South China HKTA 3 Handball Playground 90 Athletic Ching Association Chung HK Secondary School (Kwun Tong) Chinese Chinese 2 Badminton Hall 24 YMCA of Y.M.C.A. Hong Kong College 4 Walking Playground, 120 (Sha Tin) football Fitness room 1 Basketball Playground, 20 Hall 1 Physical Fitness room 15 fitness Hong Kong Yan Oi 6 Ice hockey Playground, 300 Ice Hockey Tong Tin Synthetic ice Association Ka Ping rink Primary School (Sai Kung) Fukien 3 Hall 90 Secondary School Affiliated School (Kwun Tong) LEGISLATIVE COUNCIL ― 2 June 2021 6741

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Hong Kong Yan Chai 1 Rope Covered 20 Rope Hospital skipping playground Skipping Wong Wha Association, San China Secondary (Co-organized School (Sai with the Kung) Hong Kong Tin Shui 6 Covered 120 Rope Wai playground Skipping Methodist Club) Primary School (Yuen Long) Catholic 7 Covered 140 Ming Yuen playground Secondary School (Sai Kung) Heung To 6 Covered 120 Middle playground School (Sham Shui Po) Tsuen Wan 3 Covered 60 Chiu Chow playground Public School (Tsuen Wan) HKKKWA 6 Covered 120 Sun Fong playground Chung Primary School (Tai Po) 6742 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Hong Kong 3 Covered 60 and playground Kowloon Chiu Chow Public Association Secondary School (Yau Tsim Mong) SKH Li 3 Hall 60 Fook Hing Secondary School (Eastern) Maryknoll 6 Covered 120 Fathers' playground School (Sham Shui Po) Mu Kuang 6 Hall, 120 English Playground School (Kwun Tong) Hong Kong Cheung Sha 2 Woodball Fitness room 36 Woodball Wan Association Catholic Secondary School (Sham Shui Po) Hong Kong The Chinese 8 Dodgebee Playground 120 Ultimate Foundation Players Secondary Association School (Eastern) LEGISLATIVE COUNCIL ― 2 June 2021 6743

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Buddhist 6 Playground 90 Chi King Primary School (Kwun Tong) South Tuen 6 Playground 240 Mun Government Secondary School (Tuen Mun) HKSYC & 6 Playground 90 IA Chan Nam Chong Memorial College (Kwai Tsing) Assembly 5 Playground 200 of God Leung Sing Tak Primary School (Sai Kung) Lok Sin 2 Playground 80 Tong Wong Chung Ming Secondary School (Wong Tai Sin) 6744 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Hong Kong Tin Shui 1 Boxing Covered 20 Boxing Wai playground Association Methodist Primary School (Yuen Long) Lok Sin 1 Activity 20 Tong Wong room Chung Ming Secondary School (Wong Tai Sin) Hong Kong Heung To 3 Rope Covered 60 Rope Middle skipping playground Skipping School (Tin Association, Shui Wai) China (Yuen (Co-organized Long) with the Islamic 3 Hall 60 Hong Kong Kasim Tuet Rope Memorial Skipping College Academy) (Eastern) HHCKLA 1 Hall 20 Buddhist Chan Shi Wan Primary School (North) LEGISLATIVE COUNCIL ― 2 June 2021 6745

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Unicycling PLK Chong 3 Unicycling Covered 60 Association Kee Ting playground of Hong Primary Kong School (Sha Tin) HKFEW 3 Hall 75 Wong Cho Bau School (Islands) Chan's 3 Hall 75 Creative School (Hong Kong Island) (Eastern) Kwok Man 3 Playground 60 School (Islands) Fukien 3 Hall, 75 Secondary Playground School Affiliated School (Kwun Tong) HK Chido Kwok Man 3 Taekwondo Activity 60 Taekwondo School room Association (Islands) Hong Kong Salesians of 1 Lacrosse Playground 15 Lacrosse Don Bosco Association Ng Siu Mui Secondary School (Kwai Tsing) 6746 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Buddhist 1 Playground 15 Chi King Primary School (Kwun Tong) Assembly 1 Playground 15 of God Leung Sing Tak Primary School (Sai Kung) Hong Kong C.U.H.K. 2 Baseball Covered 80 Baseball F.A.A. playground Association Thomas Cheung School (Sha Tin) HKTA 7 Baseball 536 Shun Yeung court Primary School (Sha Tin) Scout S.K.H. 2 Physical Activity 120 Association Good fitness and room of Hong Shepherd Ball games Kong―120th Primary 4 Training Hall 240 Kowloon School Group (Kowloon City) Hong Kong Yan Chai 1 Rope Hall 45 Rope Hospital skipping Skipping Lan Chi Pat Association, Memorial China Secondary LEGISLATIVE COUNCIL ― 2 June 2021 6747

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants (co-organized School (Sai with the Kung) Hong Kong Rope Skipping Union) Hong Kong Ho Ngai 4 Climbing Rock 40 Top College climbing Climbing (Sponsored wall Limited by Sik Sik Yuen) (Tuen Mun) HK Rugby YMCA of 15 Rugby Artificial turf 1 385 Union Hong Kong football pitch Christian College (Islands) De La Salle 5 Grass pitch 130 Secondary School, N.T. (North) EVO Sports Saint 6 Handball Playground, 240 Organisation Francis Exercise Xavier's room School Tsuen Wan (Tsuen Wan) Whasanian Saint 3 Handball Playground, 90 Sports Club Francis Exercise Xavier's room School Tsuen Wan (Tsuen Wan) 6748 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Wong Tai Lok Sin 3 Basketball Playground 230 Sin District Tong Wong Recreation & Chung Sports Ming Council Secondary School (Wong Tai Sin) Tycoon Concordia 3 Basketball Hall 60 Basketball Lutheran Team School (North Point) (Wan Chai) Fencers Club HKTA The 5 Fencing Fencing 75 HK Yuen Yuen training area Institute No. 1 Secondary School (Kwai Tsing) Fencers Club PLK 4 Fencing Activity 40 HK―Kowloon Riverain room Primary School (Sha Tin) InspiringHK Sam Shui 2 Karatedo Activity 30 Sports Natives room Foundation Association Lau Pun Cheung School (Kwai Tsing) LEGISLATIVE COUNCIL ― 2 June 2021 6749

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Sam Shui 2 Rope Covered 46 Natives skipping playground Association Huen King Wing School (Tai Po) Yan Chai 3 Fencing Hall 48 Hospital Chiu Tsang Hok Wan Primary School (Kwai Tsing) Confucius 1 Boxing Classroom 18 Hall Secondary School 1 Dancing Classroom 18 (Wan Chai) PLK Lee 2 Boxing Playground 40 Shing Pik College (Tsuen Wan) E.L.C.H.K. 4 Softball Playground 112 Hung Hom Lutheran Primary School (Kowloon City) Father 2 Shuttlecock Covered 40 Cucchiara playground Memorial School (Kwai Tsing) 6750 LEGISLATIVE COUNCIL ― 2 June 2021

Estimated Sports School Number of School Type of sports number of Organization (District) Programmes facilities participants Lok Sin 1 Roller-skating Covered 23 Tong Leung playground Kau Kui College (Central and Western) Tak Sun 2 Rope Covered 40 School (Yau skipping playground Tsim Mong) Olymspirit Lok Sin 3 Shuttlecock Covered 100 Shuttlecock Tong Wong playground Chung Ming Secondary 1 Hall 100 School (Wong Tai Sin) Lingnan Concordia 2 Basketball Hall 40 Basketball Lutheran School (North Point) (Wan Chai) Total: Total: Total: Total: Total: 9 176 38 sports 60 schools 301 30 types 18 types organizations programmes

Arrangements for primary schools to cease operation

10. MR CHEUNG KWOK-KWAN (in Chinese): President, it has been reported that with the population of school-aged students in the Primary One ("P1") school net to which the Island Road Government Primary School ("IRGPS") belongs decreasing continuously in recent years, the Education Bureau ("EDB") has decided that IRGPS will cease operating P1 classes starting from the 2022-2023 school year and cease operation fully in the 2024-2025 LEGISLATIVE COUNCIL ― 2 June 2021 6751 school year. For those students currently studying P1 and Primary Two in IRGPS as well as those to be admitted to IRGPS in the 2021-2022 school year, arrangements will be made for such students to transfer to other schools in the same district in the 2024-2025 school year. Regarding the arrangements for primary schools to cease operation, will the Government inform this Council:

(1) whether it has assessed (i) the supply and demand figures for P1 places in each District Council ("DC") district (set out in a table), and (ii) if there will be a surplus in such school places, in each of the coming six school years; if it has assessed and the outcome is that there will be, until when such trend will last;

(2) of a list of the government/aided primary schools which ceased/will cease operating classes of all/certain grades in the past six school years, the current school year and the coming six school years, and set out in the table below the relevant information by the DC district to which such schools belonged/belong;

School year in which Name School type Reason for DC operation ceased/will of (Government/ cessation of district cease, and the school aided) operation grade(s) involved

(3) of the justifications for EDB not waiting until all students of IRGPS have graduated before closing down the school; whether EDB has assessed what difficulties in study and adaptation to be faced by IRGPS students during school transfer in the future, as well as the support to be provided for them in this regard;

(4) of the time when EDB learnt of a surplus in school places in the P1 school net to which IRGPS belongs; why EDB had not made the relevant arrangements at an earlier time so as to obviate the need for IRGPS students to change school for completing their primary school education;

(5) whether EDB will consider, when making a decision on whether or not to cease the operation of a school in the future, making the following its prime consideration: allowing all students to graduate 6752 LEGISLATIVE COUNCIL ― 2 June 2021

from their original school so as to spare them facing the difficulties arising from changing school; and

(6) of the compassionate and job transfer arrangements to be made by EDB for teachers and staff of those primary schools that will soon cease operation?

SECRETARY FOR EDUCATION (in Chinese): President, the reply of the Education Bureau ("EDB") to the question raised by the Member is as follows:

(1) With reference to the "Hong Kong Population Projections 2020-2069" released by the Census and Statistics Department ("C&SD") in September 2020 and the "Projections of Population Distribution 2021-2029" released by the Planning Department in March 2021, it is projected that the school-age population aged 6 residing in Hong Kong in the next six years (from 2022 to 2027) will decrease from 58 500 to 48 500. The projected mid-year school-age population by district is at the Annex. Those age groups are considered appropriate for Primary One ("P1") education from the 2022-2023 to 2027-2028 school years.

Under the Primary One Admission ("POA") System, the 18 districts in Hong Kong are currently demarcated into 36 school nets. Regarding the demand for school places, the number of applicant children for POA and the demand for school places in each district and each school net for every cycle will be affected by a number of factors such as the demographic changes, number of newly arrived children and parental choices (e.g. whether to get admission to public sector schools or other types of schools). EDB will continue to keep in view the changes in student population, maintain close communication with the sector and encourage the sector to plan ahead, with a view to sustaining the overall development of school sector and ensuring prudent use of resources while maintaining the quality of education.

(2) In the school years between 2014-2015 to 2020-2021, an aided primary school in Kowloon City District ceased operation in the 2019-2020 school year. In the coming six school years (i.e. from the 2021-2022 to 2026-2027 school years), apart from the Island LEGISLATIVE COUNCIL ― 2 June 2021 6753

Road Government Primary School ("IRGPS"), five other public sector primary schools will cease operation. They include one aided primary school in the Eastern District on Hong Kong Island ceasing operation in the 2021-2022 school year; two time-limited aided schools in Kwun Tong District and one time-limited aided school in Yuen Long District ceasing operation in the 2023-2024 school year; and one time-limited aided school in Tai Po District ceasing operation in the 2026-2027 school year.

(3) to (5)

According to EDB's earlier projection, the overall demand for public sector P1 places would reach its peak in the 2018-2019 school year and then decline gradually. Given the declining trend in the population of school-aged primary students in the Southern District (School Net 18) on Hong Kong Island, there will be an excessive supply of primary school places over demand in the district.

Being the school sponsoring body ("SSB") of government schools, EDB, having carefully considered various factors including government policies, demographic changes, demand and supply of school places, overall development needs of government schools and utilization of government resources, has decided to cease the operation of IRGPS in an orderly and gradual manner. EDB has already explained the background and related arrangements to the stakeholders in different occasions and will continue to provide support to the related parties as needed.

The interest of students is the prime concern of EDB. From an educational point of view, an exceedingly low number of students will affect the effectiveness of students' learning and development through group activities. The provisions of manpower and other resources will decrease following the reduction in the number of classes. Therefore, a school will normally cease operation in three years from the school year it stops operating P1 classes.

To minimize the impact on students currently studying at IRGPS, the school will officially cease operation in the 2024-2025 school year to allow its current Primary Three to Primary Six students to finish their primary stage of school education at the school. In the coming three school years, IRGPS will continue to cater for the needs of its 6754 LEGISLATIVE COUNCIL ― 2 June 2021

students in relation to curriculum, extra-curricular activities and other aspects as far as practicable and make sure that the students will not be affected. As for P1 and Primary Two students, the school and EDB will provide appropriate assistance to refer them to other primary schools in the same school net, i.e. the Southern District (School Net 18), to continue their study. Their new schools will also provide necessary support to help the students adapt to their new school life as soon as possible.

Besides, for students who have been allocated to IRGPS under the POA System in this school year, if their parents wish to seek admission of their children to other primary schools in the same school net, they may first register with IRGPS and then approach the School Places Allocation Section of EDB from 11 June to 31 August 2021. EDB will re-allocate the students concerned to schools with vacant P1 places in the Southern District (School Net 18). Parents may also apply to their preferred schools for admission by themselves.

(6) Being SSB of government schools, EDB has a mechanism in place for the deployment of teachers to cater for the development needs of its schools. Regarding IRGPS, EDB will arrange suitable staffing to cater for the learning and development needs of students, having regard to the operational needs and actual circumstances of the school in the next few years. When the school ceases operation in the 2024-2025 school year, EDB will redeploy the teaching and non-teaching staff appointed on civil service terms to other government schools. As for contract staff, the school will make appropriate arrangements according to the terms of their contracts.

For aided primary schools, according to EDB's guidelines, SSBs operating more than one school should in the first instance arrange to redeploy surplus staff of a school which will cease operation to fill the available vacancies in other schools under their sponsorship, including teaching posts within and outside the approved staff establishment. Besides, EDB will also upload information of teaching vacancies reported by aided primary schools on its website for general information of interested teachers. In fact, there will be a certain number of teaching vacancies arising from natural wastage every year, which can help absorb the affected teachers.

LEGISLATIVE COUNCIL ― 2 June 2021 6755

Annex

Projected mid-year school-age population aged 6 who are residing in Hong Kong by district, 2022 to 2027

District 2022 2023 2024 2025 2026 2027 Central and Western 1 200 1 400 1 400 1 300 1 300 1 400 Wan Chai 900 1 000 1 000 1 000 1 000 1 000 Eastern 3 800 3 700 3 300 3 100 2 800 2 800 Southern 2 000 1 700 1 600 1 500 1 400 1 400 Yau Tsim Mong 2 000 2 500 2 300 2 200 2 100 2 100 Sham Shui Po 4 100 3 900 3 700 3 400 3 100 3 100 Kowloon City 3 100 3 000 2 700 2 800 2 700 2 800 Wong Tai Sin 3 000 3 000 2 900 2 800 2 500 2 400 Kwun Tong 5 800 5 300 4 900 4 600 4 400 4 300 Sai Kung 4 000 3 500 3 200 3 300 3 100 3 200 Sha Tin 5 300 5 100 4 600 4 400 3 900 3 900 Tai Po 2 200 2 600 2 700 2 500 2 400 2 500 North 3 000 3 100 2 900 2 900 2 800 3 000 Yuen Long 5 500 5 000 4 500 4 400 4 100 4 100 Tuen Mun 3 800 4 300 4 100 4 000 3 800 3 800 Tsuen Wan 2 400 2 200 2 000 1 900 1 800 1 800 Kwai Tsing 4 600 4 300 4 000 3 900 3 500 2 800 Islands 1 800 1 600 1 600 2 000 2 000 2 200 All Districts 58 500 57 300 53 300 52 000 48 700 48 500

Notes:

(1) The projections of school-age population residing in Hong Kong are compiled based on the 2019-based Population Projections released by C&SD in September 2020 and the "Projections of Population Distribution 2021-2029" released by the Planning Department in March 2021. The projections have taken into account a number of factors and assumptions. Any deviations in the assumptions from the eventual situation may render the projected figures different from the actual turnout figures.

(2) School-age population aged 6 is considered appropriate for primary education (i.e. Primary One).

(3) Figures refer to the projected number of local children (i.e. Hong Kong usual residents) aged 6 residing in the districts concerned. The projected figures should not be taken as the projected number of students attending schools in the districts concerned. The latter would be affected by the prevailing distribution of school places, demand for school 6756 LEGISLATIVE COUNCIL ― 2 June 2021

places and parental choices. Students under or over the age of 6 may also enrol at primary education (i.e. Primary One).

(4) Figures are rounded to the nearest hundreds and may not add up to the respective totals due to rounding.

Legal aid cases related to judicial review

11. MRS REGINA IP (in Chinese): President, some members of the legal sector have relayed that in recent years, quite a number of legal aid cases related to judicial review ("JR") have not been assigned in accordance with the principle of fairness to counsels who are on the Legal Aid Panel ("the Panel"). Moreover, some of the cases involved exorbitant legal costs, which often amounted to several million dollars and had to be paid out of public coffers. In this connection, will the Government inform this Council:

(1) of the respective numbers of (i) counsels and (ii) solicitors who are currently on the Panel, and the respective numbers of counsel's chambers and solicitors firms from which they come;

(2) of the following information about the JR-related legal aid cases in each of the past three years (set out in tables):

(i) the number of counsel's chambers from which the counsels who were assigned such cases came; the respective numbers of cases taken up by the top five chambers whose counsels were assigned the highest numbers of such cases,

(ii) the longest, shortest and average years of experience of the counsels who were assigned such cases,

(iii) a breakdown of such cases by nature (e.g. those involving torture claims, human rights, and the Basic Law),

(iv) the average time taken for hearing each of such cases, and

(v) the average amount of legal aid expenditure incurred for each of such cases; and

LEGISLATIVE COUNCIL ― 2 June 2021 6757

(3) whether it has reviewed if JR-related legal aid cases have been assigned mostly to certain solicitors/counsels; if it has reviewed and the outcome is in the affirmative, whether it has any improvement measures in place; if so, of the details; if it does not have any improvement measures, the reasons for that?

CHIEF SECRETARY FOR ADMINISTRATION (in Chinese): President, the policy objective of legal aid is to ensure that no one with reasonable grounds for taking or defending a legal action is denied access to justice because of lack of means. The Legal Aid Ordinance (Cap. 91) ("LAO") provides that legal aid will only be granted to applicants who have satisfied both the merits test and the means test. After legal aid is granted, the Director of Legal Aid ("DLA") may act for an aided person through in-house professional lawyer of the Legal Aid Department ("LAD") or assign any lawyer in private practice selected from the Legal Aid Panel ("the Panel") by DLA or the aided person. When an aided person nominates a lawyer according to LAO by himself/herself, having regard to the interest of an aided person, LAD normally gives weight to such a nomination. However, LAD may also reject the nomination if the lawyer nominated by the aided person is considered not appropriate on grounds such as having previous records of unsatisfactory performance, disciplinary actions taken against the nominated lawyer by his/her regulatory body, or language requirements of the proceedings which are likely to undermine the aided person's interest in the proceedings; or the aided person has made repeated or late requests for change of lawyer without reasonable grounds.

My reply to each part of the question is as follows:

(1) As at March 2021, there were 2 485 solicitors involving 821 solicitors' firms and 1 171 counsel on the Panel. LAD does not maintain information about the number of counsel's chambers involved.

(2) (i) LAD does not maintain the number of legal aid cases assigned on the basis of counsel's chambers.

(ii) Information on the years of experience of the counsel who were assigned with legal aid cases related to judicial review ("JR"):

6758 LEGISLATIVE COUNCIL ― 2 June 2021

The average years of The least The most experience (calculated Year years of years of on the basis of the total experience experience number of all JR- related legal aid cases) 2018 3 44 14.7 2019 3 36 15 2020 3 29 12.7

(iii) The breakdown of JR-related legal aid cases by category:

Immigration Decisions of Government matters (including the Government Year policies and non-refoulement and other related matters claims) organizations 2018 18 39 3 2019 13 65 3 2020 13 62 7

(iv) As the time required for court hearing is subject to a number of factors, LAD, after granting legal aid, will not set limitations on the time required for assigned lawyers to complete each case. As such, LAD does not maintain information about the time taken for hearing of JR-related legal aid cases.

(v) The legal expenditure on JR-related Financial year legal aid cases ($ million) 2018-2019 29.5 2019-2020 37.6 2020-2021 34.0

The total annual legal expenditure on JR-related cases is the total relevant expenditure of the same year, including the expenditure on cases approved in the same and previous years. LAD does not maintain the average amount of expenditure on JR-related legal aid cases.

LEGISLATIVE COUNCIL ― 2 June 2021 6759

(3) LAD's assignment criteria set the limit on the number of assignments for each lawyer. Regarding the assignment of civil legal aid cases, the limits for each solicitor and counsel are 35 legal aid cases and 20 legal aid cases respectively in the past 12 months. As for JR-related legal aid cases, the numbers of solicitors and counsel assigned with such cases in the past three years are tabulated below:

Number of Number of Number of counsel Year JR-related solicitors assigned assigned with legal aid cases with legal aid cases legal aid cases 2018 60 17 22 2019 81 22 27 2020 82 15 25

LAD will closely monitor the work performance of the assigned counsel and solicitors and review the assignment limits set for each lawyer when appropriate.

Financial situation of the Airport Authority Hong Kong

12. MR CHUNG KWOK-PAN (in Chinese): President, the Airport Authority Hong Kong ("AAHK") has indicated that the Coronavirus Disease 2019 epidemic has made an unprecedented impact on the business of the Hong Kong International Airport ("HKIA"). In the light of the drop in operating surplus and the income from airport construction fee ("ACF") due to air traffic slump, AAHK raised a series of financings in the last financial year for general corporate purposes and to meet its capital expenditure, including that of the Three-Runway System project. In this connection, will the Government inform this Council if it knows:

(1) whether AAHK has assessed the short-term impacts of the decrease in passenger and cargo throughputs of HKIA due to the outbreak of the epidemic on the operation and financial situation of AAHK; whether AAHK has projected how the passenger and cargo throughputs in the coming three years compare with those in the three years before the epidemic;

6760 LEGISLATIVE COUNCIL ― 2 June 2021

(2) whether AAHK has projected the income from ACF and its percentage in AAHK's total income, in each of the coming three years;

(3) the measures put in place by AAHK to increase its operating income in the coming three years, so as to compensate for the reduction in income due to the epidemic;

(4) whether AAHK has assessed if AAHK can achieve a surplus of operating income over expenditure in the coming three years; if AAHK has assessed and the outcome is in the negative, of AAHK's corresponding plans; and

(5) whether, given the uncertain outlook of the aviation industry amid the epidemic, AAHK has formulated a financing plan for the coming three years?

SECRETARY FOR TRANSPORT AND HOUSING (in Chinese): President, Hong Kong's aviation traffic has been significantly impacted by the Coronavirus Disease 2019 pandemic. In 2020, the Hong Kong International Airport ("HKIA") handled a total of 8.8 million passengers and 160 655 flights, which represent year-on-year decreases of 87.7% and 61.7%, respectively. The cargo and air mail throughput remained relatively stable but still registered a year-on-year decline of 7.1% to 4.5 million tonnes.

The financial performance of the Airport Authority Hong Kong ("AAHK") depends largely on HKIA's air traffic volume. The pandemic has seriously impacted the revenue and hence operating surplus of AAHK. Due to the passenger traffic slump, the Airport Construction Fee ("ACF") collected by AAHK in the first half of 2020-2021 financial year amounted to a mere HK$56 million, representing a decrease of 97.2% when compared with the same period in 2019-2020 financial year. On the other hand, HKIA has since the beginning of the pandemic launched several rounds of relief measures for the airport community, including waiver or reduction of rents and fees, thereby drastically reducing HKIA's income. In response to the uncertain air traffic outlook and market condition, AAHK has implemented various cost control measures, including re-prioritizing capital expenditure, freezing headcounts and pay raise to preserve its liquidity. As for AAHK's future income, depending on the progress of the control of the pandemic around the world, passenger LEGISLATIVE COUNCIL ― 2 June 2021 6761 throughput may gradually recover to pre-pandemic levels in three to four years. However, the pace of resumption of global air traffic still faces many uncertainties. As AAHK's financial position is largely dependent upon the extent of recovery of the air traffic, it is difficult for AAHK to make an accurate estimation of the operating surplus, which is largely traffic driven, and the ACF collection.

AAHK is taking forward the Three-Runway System ("3RS") project and other development projects which have commenced according to plan. AAHK has revisited and updated the 3RS project's financial arrangement, and will continue to adjust the arrangement as and when necessary. AAHK will continue to finance the 3RS project through retaining its operating surplus, collecting ACF and raising funds from the market. Among these sources, the AAHK projects that the total amount of funds to be raised from the market would include: (i) HK$89 billion of debt, an increase from the original plan's HK$69 billion; and (ii) US$1.5 billion (or HK$11.6 billion equivalent) of perpetual capital securities (accounted as equity) issued. In view of the traffic slump and the drop in revenue, the contributions from the operating surplus and the ACF collection to finance the 3RS project would be reduced inevitably. So far, AAHK has maintained a strong credit rating of "AA+" by Standard & Poor's Global Ratings, and its cost of borrowing remains at a low level. AAHK is confident that it can continue to leverage on its strong credit profile to raise funds from the market at reasonable cost, and does not require any form of financial guarantees from the Government in funding the 3RS project.

We believe that the aviation industry and air traffic will gradually recover as the pandemic subsides. AAHK will continue to closely monitor the market situation in devising its long-term development strategy in accordance with prudent commercial principles.

Law enforcement for anti-epidemic measures

13. IR DR LO WAI-KWOK (in Chinese): President, under the Prevention and Control of Disease (Compulsory Testing for Certain Persons) Regulation (Cap. 599J), the Secretary for Food and Health may issue a compulsory testing notice ("CTN") requiring a specified category or description of persons to undergo compulsory Coronavirus Disease 2019 testing by a specified deadline, and a prescribed officer may make a compulsory testing order ("CTO") to require a person who have failed to comply with a requirement under a CTN to undergo 6762 LEGISLATIVE COUNCIL ― 2 June 2021 the testing by a revised deadline. A specified person who fails to comply with a requirement under a CTN commits an offence and is liable on conviction to a fine at level 3 (i.e. $10,000), and such person may discharge liability for the offence by paying a fixed penalty of $5,000. A person who fails to comply with a requirement under a CTO commits an offence and is liable on conviction to a fine at level 4 (i.e. $25,000) and to imprisonment for six months. Besides, the Prevention and Control of Disease (Disclosure of Information) Regulation (Cap. 599D) empowers a health officer or an authorized officer to require a person to furnish or disclose information relevant to the handling of the public health emergency. A person who fails to comply with the requirement commits an offence and is liable on conviction to a fine at level 3 and to imprisonment for six months. In this connection, will the Government inform this Council:

(1) of (i) the number of persons who were issued a fixed penalty notice for failure to comply with a requirement under a CTN, and the respective numbers of persons who were convicted due to failure to comply with a requirement (ii) under a CTN, (iii) under a CTO and (iv) of disclosing the aforesaid type of information, since the outbreak of the epidemic, with a breakdown by the penalty imposed on the convicted persons; and

(2) whether it will consider amending the legislation to raise the penalties for the aforesaid offences, thereby enhancing the deterrent effect; if so, of the details; if not, the reasons for that?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, the global epidemic situation remains severe with mutant variants ravaging many parts of the world. Although cases involving mutant variants have not yet caused an outbreak in the community, we should not let our guard down. It is essential for us to take all necessary measures to strengthen epidemic control by guarding against the importation of cases and the resurgence of domestic infections, and to further enhance the precision of the control measures to be taken in a bid to achieve the target of "zero infection" with the support and cooperation of the general public.

My reply to the various parts of the question raised by Ir Dr LO Wai-kwok is as follows:

LEGISLATIVE COUNCIL ― 2 June 2021 6763

(1) Strengthening COVID-19 testing is an integral part of the epidemic control strategy of the Special Administrative Region ("SAR") Government, which can help slow down the transmission of the virus by early identification, early isolation and early treatment. To further strengthen testing, the SAR Government enacted the Prevention and Control of Disease (Compulsory Testing for Certain Persons) Regulation (Cap. 599J) ("the Regulation") in November 2020 to provide a legal framework for the Government to specify by compulsory testing notice ("CTN") published in the Gazette a category or description of persons who are required to undergo a test for COVID-19, taking into account the epidemic development.

Under the Regulation, persons who fail to comply with CTN may be fined a fixed penalty of $5,000. If a prescribed officer has reason to believe that a person has failed to undergo a specified test in compliance with the requirement under a CTN, the prescribed officer may, within 30 days after the deadline of CTN, by written order served on the person (compulsory testing order ("CTO")) to require that person to undergo a specified test. Persons who fail to comply with a CTO is liable on conviction to a fine of $25,000 and to imprisonment for six months.

Insofar as CTNs are concerned, the Department of Health has processed 1 532 CTOs and 251 fixed penalty notices as at 23 May 2021. Thus far, there has not been any conviction cases relating to non-compliance with CTOs.

On the other hand, pursuant to the Prevention and Control of Disease (Disclosure of Information) Regulation (Cap. 599D):

(a) if a health officer/an authorized officer reasonably believes that any information is within the knowledge, in the possession or under control of a person and is relevant to the handling of the public health emergency or identification and tracing of any person who may have been exposed to the risk of contracting the disease, the health officer/authorized officer may require that person to give the information. Any person who fails to comply with the requirement or gives any false or misleading information to a health officer/an authorized officer in a material particular commits an offence; and

6764 LEGISLATIVE COUNCIL ― 2 June 2021

(b) Any person, when attended by a medical practitioner acting in the course of professional practice, knowingly gives to the medical practitioner any false or misleading information of the person that is relevant to the risk of exposure or contracting the disease, commits an offence.

Offenders are liable on conviction to a fine of $10,000 and to imprisonment for six months.

As at 23 May 2021, two persons have been sentenced to community service for 120 and 100 hours by the magistrate's courts respectively for contravening Cap. 599D.

(2) Generally speaking, most persons have complied with the requirements of CTN and CTO in undergoing testing, or have provided information requested by health officers or authorized officers. The violations mentioned above are isolated cases. The Government will continue to closely monitor any further violations, and will timely review relevant measures and regulations.

Secondary market of subsidized sale housing

14. MR WONG KWOK-KIN (in Chinese): President, under the Home Ownership Scheme Secondary Market Scheme implemented by the Hong Kong Housing Authority ("HA") and the Flat-For-Sale Scheme Secondary Market scheme implemented by the Hong Kong Housing Society ("HS"), HA's subsidized sale housing ("SSH") flats (including flats under the Home Ownership Scheme ("HOS") and the Green Form Subsidized Home Ownership Scheme, collectively referred to as "HOS flats") as well as flats in the housing courts under HS's Flat-For-Sale Scheme and SSH projects may be resold to eligible buyers with premium unpaid. Eligible buyers include (i) tenants currently residing in HA's public rental housing ("PRH")/interim housing and HS's housing estates (collectively referred to as "PRH tenants"), (ii) holders of a valid Green Form Certificate ("GFC") (certifying holders' eligibility for buying HOS flats with Green Forms) ("GFC holders"), and (iii) persons who are eligible for buying HOS flats with White Forms and have been allocated with quotas after the drawing of lots ("WF buyers"). Regarding the secondary market of SSH, will the Government inform this Council:

LEGISLATIVE COUNCIL ― 2 June 2021 6765

(1) among the sold SSH flats in the territory at present, of the respective numbers and percentages of those which have ever been resold under the aforesaid two secondary market schemes;

(2) of the respective (a) numbers of flats with premium unpaid and (b) average prices of such flats bought under each secondary market scheme by (i) PRH tenants, (ii) GFC holders and (iii) WF buyers, in each of the past five years;

(3) of the following details of PRH tenants and GFC holders buying flats with premium unpaid under each secondary market scheme in each of the past five years: (i) the number of cases in which HA issued a GFC, (ii) the number of cases in which HA/HS issued a Certificate of Eligibility to Purchase ("CEP"), (iii) the number of flats bought in the secondary market, and (iv) the number of rental units recovered by HA/HS from such persons (set out in Table 1);

Table 1 Year (i) (ii) (iii) (iv) 2016 ... 2020

(4) of the following details of WF buyers buying flats with premium unpaid under each secondary market scheme in each of the past five years: (i) the quota for WF buyers, (ii) the number of applications for such quota received by HA (and the over-subscription rate), (iii) the number of cases in which HA/HS issued a CEP, and (iv) the number of flats bought in the secondary market (set out in Table 2); and

Table 2 Year (i) (ii) (iii) (iv) 2016 ... 2020

6766 LEGISLATIVE COUNCIL ― 2 June 2021

(5) whether it has explored measures to further vitalize the SSH flats secondary market; if so, whether such measures will include (i) providing additional mortgage loan guarantee for HOS flats completed over 20 years ago, and (ii) increasing the quotas for WF buyers or dispensing with the quota restrictions; if these will not be included, of the reasons for that?

SECRETARY FOR TRANSPORT AND HOUSING (in Chinese): President, my reply to the question raised by Mr WONG Kwok-kin is as follows:

(1) For the resale of subsidized sale flats ("SSFs") in the Secondary Market of various SSF Schemes(1) under the Hong Kong Housing Authority ("HA") and the Flat-For-Sale Scheme ("FFSS") Secondary Market under the Hong Kong Housing Society ("HKHS"), the statistics kept by HA and HKHS are in number of transactions instead of units. Generally speaking, each transaction involves one unit. If the relevant unit is not resold again in a short period of time, the number of transactions can be used as a reference for the number of units resold.

(2) The number of transactions and average unit price under HA's SSF Schemes Secondary Market and HKHS' FFSS Secondary Market in the past five years are set out in Table 1 and Table 2 respectively.

(3) Information regarding the purchase of flats with premium unpaid in HA's SSF Schemes Secondary Market and HKHS' FFSS Secondary Market by Green Form applicants(2) in the past five years are set out in Tables 3, 4 and 5.

(1) SSF Schemes is a collective term, which includes HA's Home Ownership Scheme, Private Sector Participation Scheme, Middle Income Housing Scheme, Mortgage Subsidy Scheme, Buy or Rent Option, Tenants Purchase Scheme, and Green Form Subsidised Home Ownership Scheme.

(2) Green Form applicants consist mainly of eligible households of HA's Public Rental Housing ("PRH") estates and HKHS's rental estates, as well as the PRH applicants who have passed detailed eligibility vetting and obtained Green Form Certificate. LEGISLATIVE COUNCIL ― 2 June 2021 6767

(4) Information regarding the purchase of flats with premium unpaid in HA's SSF Schemes Secondary Market and the HKHS' FFSS Secondary Market by White Form applicants(3) in the past five years are set out in Table 6.

(5) To assist the purchasers of SSFs to obtain better mortgage terms, HA provides a mortgage default guarantee for a period of 30 years from the date of first assignment to the authorized banks and financial institutions which have entered into a Deed of Guarantee with HA. HA does not require that the mortgage repayment period offered by the authorized banks and financial institutions must end together with the mortgage default guarantee period provided by HA. HA only specifies that the maximum repayment period should not be over 25 years. The default guarantee period provided by HA is only one of the factors considered by the banks and financial institutions when approving mortgage loans. Depending on their own lending policies and the actual situation of each loan application (e.g. factors such as the repayment abilities and repayment history of the mortgage loan applicants), individual authorized banks and financial institutions would offer different mortgage terms to the mortgage loan applicants of SSFs.

In response to the demand for SSFs from White Form applicants of low-to middle-income families, HA endorsed in November 2017 the regularization of the White Form Secondary Market Scheme ("WSM"). Considering that the supply of SSFs with premium unpaid had been and would likely remain limited (HA issued about 2 900 Certificate of Availability for Sale each year at that time), and an annual quota would enable some control over the effects of WSM on the SSF Schemes Secondary Market, HA decided to continue setting an annual quota after regularization. In view of the persistently strong demand for WSM, HA further increased the annual quota of WSM 2020 to 4 500 in order to meet the home ownership demand from White Form applicants. HA will continue to closely monitor the market response to WSM 2020 as well as the views of other stakeholders in considering whether it is necessary to further increase the annual quota of WSM.

(3) White Form applicants are households which are not the PRH tenants and meet the eligibility criteria for buying SSFs. 6768 LEGISLATIVE COUNCIL ― 2 June 2021

Table 1

HA's SSF Schemes Secondary Market(1) Green Form(2) White Form Total Average Average Average Year Number of Unit Number of Unit Number of Unit Transactions Price(3) Transactions Price(3) Transactions Price(3) ($) ($) ($) 2016 1 274 3.4M 1 491 3.0M 2 765 3.2M 2017 2 032 3.9M 102 3.4M 2 134 3.9M 2018 1 385 4.3M 410 3.8M 1 795 4.2M 2019 1 517 4.7M 964 4.2M 2 481 4.5M 2020 1 290 4.8M 1 130 4.1M 2 420 4.5M Average (from 1 500 4.2M 819 3.7M 2 319 4.1M 2016 to 2020)

Notes:

(1) SSF Schemes is a collective term, which includes HA's Home Ownership Scheme, Private Sector Participation Scheme, Middle Income Housing Scheme, Mortgage Subsidy Scheme, Buy or Rent Option, Tenants Purchase Scheme and Green Form Subsidised Home Ownership Scheme, etc.

(2) Green Form applicants consist mainly of eligible tenants of HA's PRH and HKHS' rental estates, as well as the PRH applicants who have passed the detailed eligibility vetting and obtained a Green Form Certificate.

(3) The figures are rounded to the nearest $0.1 million.

Table 2

HKHS' FFSS Secondary Market Green Form(1) White Form Total Average Average Average Year Number of Unit Number of Unit Number of Unit Transactions Price(2) Transactions Price(2) Transactions Price(2) ($) ($) ($) 2016 28 4.1M 20 3.5M 48 3.9M 2017 38 4.9M 3 3.5M 41 4.8M LEGISLATIVE COUNCIL ― 2 June 2021 6769

HKHS' FFSS Secondary Market Green Form(1) White Form Total Average Average Average Year Number of Unit Number of Unit Number of Unit Transactions Price(2) Transactions Price(2) Transactions Price(2) ($) ($) ($) 2018 33 5.4M 0 / 33 5.4M 2019 45 5.5M 40 5.0M 85 5.2M 2020 51 6.1M 54 4.9M 105 5.5M

Notes:

(1) Green Form applicants consist mainly of eligible tenants of HA's PRH and HKHS's rental estates, as well as the PRH applicants who have passed the detailed eligibility vetting and obtained a Green Form Certificate.

(2) The figures are rounded to the nearest $0.1 million.

Table 3

Number of Certificate of Number of successful Number of Eligibility to Purchase transaction by Green Form Green Form Year ("CEP") issued to Green Applicants(1) to Purchase a Certificates Form Applicants(1) by Flat in HA's SSF Schemes issued by HA HA Secondary Market 2016 287 2 755 1 274 2017 172 3 258 2 032 2018 280 2 447 1 385 2019 317 2 996 1 517 2020 210 2 637 1 290

Note:

(1) Green Form applicants consist mainly of eligible tenants of HA's PRH and HKHS's rental estates, as well as the PRH applicants who have passed the detailed eligibility vetting and obtained a Green Form Certificate.

6770 LEGISLATIVE COUNCIL ― 2 June 2021

Table 4

Number of CEP issued to Number of successful transaction by Year Green Form Applicants(1) Green Form Applicants to Purchase a Flat by HKHS in HKHS' FFSS Secondary Market 2016 97 28 2017 116 38 2018 78 33 2019 152 45 2020 137 51

Note:

(1) Green Form applicants consist mainly of eligible tenants of HA's PRH and HKHS's rental estates, as well as the PRH applicants who have passed the detailed eligibility vetting and obtained a Green Form Certificate.

Table 5

Number of PRH Flats Number of Rental Estate Units Recovered(3) by HA from PRH Recovered by HKHS from Rental Year Tenants Upon Purchasing a Estate Tenants Upon Purchasing a Flat Unit from the SSF Schemes(1) in HKHS' FFSS Secondary Market or Secondary Market(2) HA's SSF Schemes Secondary Market 2016 800 26 2017 1 500 36 2018 1 500 20 2019 1 100 19 2020 1 000 24

Notes:

(1) SSF Schemes is a collective term, which includes HA's Home Ownership Scheme, Private Sector Participation Scheme, Middle Income Housing Scheme, Mortgage Subsidy Scheme, Buy or Rent Option, Tenants Purchase Scheme and Green Form Subsidised Home Ownership Scheme, etc.

(2) HA does not keep statistics on the number of PRH flats recovered from HA's PRH tenants who purchased flats in HKHS' FFSS Secondary Market.

(3) The figures are rounded to the nearest hundred.

LEGISLATIVE COUNCIL ― 2 June 2021 6771

Table 6

HA's White Number Number of Number of Number Form Number of CEP Successful Applications of CEP Secondary of issued Purchase in Received by HA issued Market Quota by Secondary (Over-subscription) by HA(1) Scheme HKHS(1) Market(2) First Interim 5 000 66 157 3 923 1 031 2 405 Scheme 2013 (about 12 times) Second 2 500 43 934 2 477 881 1 616 Interim (about 17 times ) Scheme 2015 2018 2 500 60 534 2 397 1 359 1 418 (about 23 times) 2019 3 000 134 403 2 615 1 610 1 192(3) (about 44 times) 2020 4 500 117 419 HA has issued the approval letters (about 25 times) on 21 May 2021 inviting successful applicants to apply for CEP.

Notes:

(1) Each successful applicant may submit the CEP applications to HA and/or HKHS to purchase a flat in HA's SSF Schemes Secondary Market or HKHS FFSS Secondary Market.

(2) Including the figures of HA and HKHS.

(3) Figures as at end-April 2021.

Quarantine arrangements

15. MS STARRY LEE (in Chinese): President, earlier on, the Government implemented stringent quarantine arrangements for initially confirmed or confirmed cases involving variants of the Coronavirus Disease 2019, including transferring all residents of the buildings concerned to the quarantine centres for a 21-day compulsory quarantine. It has been reported that various problems arose during the evacuations, including that staff members at the scene failed to answer residents as to when they would be transferred to the quarantine centres, 6772 LEGISLATIVE COUNCIL ― 2 June 2021 calls to the enquiry hotline remained unanswered for a long time, residents had to wait for a prolonged period of time before staff members conducted door-to-door specimen collections for virus testing and arranged their transfer to the quarantine centres, and some residents had not yet been issued quarantine orders a number of days after they had been transferred to the quarantine centres. It is learnt that one of the reasons for the slow evacuation process was the cumbersome procedure for issuing quarantine orders: staff members at the scene took pictures of the personal data of the residents and then sent such pictures to the Contact Tracing Office ("CTO") via instant messaging apps; staff members at CTO then performed word processing work, compiled name lists and handed over such name lists to relevant government departments (including the Customs and Excise Department, the Immigration Department and the Hong Kong Police Force) for verification; finally, the quarantine orders prepared were delivered to doctors of the Department of Health at the evacuation spots for issuance. In this connection, will the Government inform this Council:

(1) given that relevant government departments have held an inter-departmental meeting to sum up the experience gained from the aforesaid operations with a view to formulating measures to improve the arrangements, of the details of the experience summed up and the improvement measures;

(2) of the measures in place to enable staff members at the scene to grasp timely and accurate quarantine information for disseminating to residents who are required to undergo quarantine; and

(3) whether it has reviewed the arrangements for issuing quarantine orders at the evacuation spots; if so, of the review outcome and the improvement measures; if not, the reasons for that?

SECRETARY FOR FOOD AND HEALTH (in Chinese): President, the Government has been taking comprehensive and effective measures to combat the COVID-19 epidemic. In general, the Centre for Health Protection ("CHP") of the Department of Health ("DH") arranges close contacts of confirmed cases to be sent to designated quarantine centres to undergo quarantine. Quarantine helps to cut the community transmission chain as far and as early as possible, and is extremely important in safeguarding the well-being and interests of our community as a whole.

LEGISLATIVE COUNCIL ― 2 June 2021 6773

My consolidated reply to the three parts of the question raised by Ms Starry LEE is as follows:

(1) The Government has been attaching great importance to the safety and quality of food in the quarantine centres. In light of the experience gained from recent large-scale operations, DH has re-examined the arrangements, including tendering requirements, logistics and meal distribution, regarding the catering provision for quarantine centres with a view to further securing food safety and quality. Taking into consideration the location of the catering service provider, delivery time and arrangement, and the provider's relevant experience on provision of meals for quarantine centres, DH has engaged Cathay Pacific Airways as the catering service provider for the Penny's Bay Quarantine Centre ("PBQC") to provide three meals a day for PBQC starting from 24 May 2021.

Specific provisions outlining the quality required for the catering service provider, including meal variety, portion size, storage temperature and hygiene, were included in the contract. Furthermore, the Civil Aid Service ("CAS") will be procuring additional equipment to assist its frontline staff at the quarantine centres in performing their duties, which could further guarantee timely delivery of meals to the rooms of quarantinees.

With regards to the Internet connection issue, making reference to the statistics on data usage, DH will provide free data sim cards with larger capacity to quarantinees. On the other hand, to further improve the wireless network at PBQC, the Food and Health Bureau is proposing the installation of an additional radio base station at PBQC. Consultation with relevant departments on the detailed implementation plan is in progress, and works are expected to commence by June the earliest.

With regards to the maintenance and repair of the quarantine centres, DH is currently conducting improvement works at PBQC, including retrofitting works on the existing quarantine units with a view to providing more family rooms for families under quarantine. In addition, to further improve the environment at quarantine centres, the Architectural Services Department will carry out improvement works at Lei Yue Mun Park and Holiday Village from June to 6774 LEGISLATIVE COUNCIL ― 2 June 2021

August 2021. The scope of works includes the installation and improvement of water proofing provisions, renovation of existing facilities.

In response to an upsurge in quarantinee that need to be transferred to PBQC in the large-scale evacuation operation, the Auxiliary Medical Service, CAS and DH had immediately deployed additional manpower and supporting staff to cope with and expedite the evacuation process in order to minimize the waiting time. CAS had also immediately enhanced the hotline support service by increasing the original 6 hotlines to 16 hotlines to cope with the needs of the quarantinees.

(2) and (3)

Close contacts, in general, are sent to designated quarantine centres to undergo quarantine by vehicles arranged by CHP of DH. Upon the receipt of information of the quarantinees, CHP will arrange escorting as early as possible. Notwithstanding this, owing to the large number of evacuaees and enormous demand for transportation vehicles in the simultaneous evacuation operation for multiple buildings, challenges were encountered on the transfer of the evacuaees. The actual transfer time might also be affected by other factors, for instance, the arrangement for pet-sitting.

Collaboration of different departments, including the District Offices of the Home Affairs Department, DH and the Hong Kong Police Force, are required for evacuation operations. DH will maintain communication with the various departments to enhance exchange of information, thus ensuring that an accurate evacuaee list, number of evacuaees and their corresponding quarantine centres could be ready quickly, such that the issuance of quarantine orders and subsequent admission to quarantine centres could be arranged as early as possible. In order to expedite data collection and enhance data accuracy, DH is studying the use of auxiliary equipment, including identity card readers and QR codes, to enable frontline staff to collect and verify information by electronic means, and input data to the Case Handling and Information Sharing Portal, so as to expedite the evacuation process.

LEGISLATIVE COUNCIL ― 2 June 2021 6775

The Government attaches great importance to the quarantine arrangement for close contacts. DH has deployed additional manpower to cope with large-scale evacuation operations, and will closely monitor the situation and timely arrange corresponding and sufficient manpower for the relevant preparation work. DH will continue to work closely with relevant government departments to ensure the smooth evacuation and admission of quarantinees to quarantine centres.

Lantau Closed Road Permits

16. MR FRANKIE YICK (in Chinese): President, at present, the roads in South Lantau are designated as closed roads. Vehicles travelling on those closed roads must possess valid Lantau Closed Road Permits ("LCRPsˮ) issued by the Transport Department ("TDˮ). It has been reported that outside MTR Tung Chung Station during holidays, some people make use of vehicles with LCRPs for illegal carriage of passengers for reward, taking members of the public to places like Pui O and Cheung Sha via the closed roads in South Lantau for leisure activities. In this connection, will the Government inform this Council:

(1) of (i) the number of LCRPs (excluding those issued under the Driving on Lantau Island Scheme) issued by TD, with a breakdown by vehicle class and whether the applicant was issued LCRP for the first time, and (ii) the number of LCRPs revoked by TD, with a breakdown by reason of revocation, in each of the past five years;

(2) given that only the residents and business operators in South Lantau may apply for LCRPs (with each residential or commercial unit being issued a maximum of one LCRP), but it has been reported that some of the successful LCRP applications were lodged by ineligible persons using borrowed residential addresses of the residents in South Lantau, of the new measures in place to eradicate such practice; and

(3) of the respective numbers of persons who were prosecuted and convicted for illegal carriage of passengers for reward using 6776 LEGISLATIVE COUNCIL ― 2 June 2021

vehicles with LCRPs, the penalties imposed on those convicted, and the number of the relevant LCRPs revoked, in the past five years; the new measures in place to eradicate such illegal activity?

SECRETARY FOR TRANSPORT AND HOUSING (in Chinese): President, currently, the roads on South Lantau are designated as closed roads. All vehicles travelling on the closed roads on Lantau have to possess valid Lantau Closed Road Permits ("LCRPs") issued by the Transport Department ("TD"), while drivers of the vehicles concerned shall comply with the conditions stated in LCRPs and the relevant approval letters.

After consulting TD and the Hong Kong Police Force ("the Police"), my reply to the various parts of Mr Frankie YICK's question is as follows:

(1) The number of LCRPs issued by TD (including long-term and temporary ones, but excluding LCRPs issued under the Driving on Lantau Island Scheme) with a breakdown by class of vehicles between 2018 and the first quarter of 2021 are tabulated below:

Number of LCRPs (Percentage to the Class of Vehicles total number) 2018 2019 2020 Q1 2021 Private cars About About About About 8 800 9 400 8 800 2 500 (53%) (54%) (58%) (53%) Light goods vehicles About About About About 2 700 3 000 2 100 700 (16%) (17%) (14%) (15%) Public transport vehicles About About About About (e.g. franchised/ 2 400 2 000 1 500 900 non-franchised buses, (15%) (11%) (10%) (19%) taxis) Goods vehicles (except About About About About light goods vehicles) 800 1 400 1 300 200 (5%) (8%) (8%) (4%) Other types of vehicles About About About About (e.g. motorcycles, 1 800 1 700 1 500 400 government vehicles) (11%) (10%) (10%) (9%) LEGISLATIVE COUNCIL ― 2 June 2021 6777

Number of LCRPs (Percentage to the Class of Vehicles total number) 2018 2019 2020 Q1 2021 Total About About About About (i) First application 16 500 17 500 15 200 4 700 (ii) Renewal (i) 9 500 (i) 9 500 (i) 7 100 (i) 2 800 (ii) 7 000 (ii) 8 000 (ii) 8 100 (ii) 1 900

Note:

TD has started to take stock and keep the number of LCRPs issued with a breakdown by vehicle classes each year since 2018, and hence does not have the relevant figures before 2018.

In general, the main reason for revocation of LCRPs is that the holder returns LCRP to TD after moving out from South Lantau. In addition, some non-franchised bus companies may return their LCRPs, while some LCRP holders may return their original LCRPs as they request to change the particulars on their LCRPs. TD does not keep the number of LCRPs revoked.

(2) All along, TD approves and issues LCRPs having regard to the genuine needs of the applicants to enter the closed roads in accordance with established vetting criteria. For instance, residents and business operators on South Lantau would normally be issued with long-term LCRPs (valid for 12 months) to enter South Lantau. Applicants have to submit valid supporting documents, e.g. bill issued by the electricity company or the Rating and Valuation Department, land search document issued by the Land Registry or rental receipt together with the stamped tenancy agreement, as address proof. Each residential or business unit on South Lantau, regardless of whether the occupier is an owner or tenant, can only be issued with one LCRP, which can be used on more than one designated vehicle provided that only one vehicle is allowed at a time.

In addition, TD also issues temporary LCRPs to those who have genuine needs to enter South Lantau temporarily (e.g. indigenous villagers going to South Lantau for tomb sweeping, residents of South Lantau moving home and those carrying out works on closed 6778 LEGISLATIVE COUNCIL ― 2 June 2021

roads, etc.). When submitting applications, applicants have to state detailed reasons for entering South Lantau and provide relevant supporting documents; they also have to make related declaration on and sign the applications.

When examining each application, TD will review if the applicant has submitted a completed application form according to the requirements, the nature and needs of the application and the adequacy of supporting documents submitted, e.g. verifying the particulars such as the name of applicant against the submitted identity document and address proof, so as to consider whether an LCRP can be issued. If it is found that an applicant has made a false declaration in applying for LCRP, TD would refer the case to the Police for follow-up actions.

(3) Upon receiving complaints on suspected unlawful use of LCRPs (including using LCRPs for illegal carriage of passengers to South Lantau for hire or reward), TD would refer the case to the Police for investigation and enforcement actions. The Police would arrange patrol, intercept vehicles for checking, or arrange decoy operation if necessary, to combat against the use of LCRPs for illegal carriage of passengers for hire or reward. The Police does not maintain the prosecution figures and relevant sentence records in respect of vehicles, issued with LCRPs, involving illegal carriage of passengers for hire or reward. Where there is a conviction for unlawful carriage of passengers for hire or reward with the use of an LCRP by a particular vehicle, in addition to the penalty for that conviction, TD will also revoke the relevant LCRP.

Provision of subsidies for the "N have-nots households"

17. MR VINCENT CHENG (in Chinese): President, last year, the Government launched a subsidy programme under which low-income households not living in public housing and not receiving Comprehensive Social Security Assistance ("CSSA") (commonly known as the "N have-nots households") are provided a one-off living subsidy ("one-off subsidy"). The first two rounds of the subsidy programme commenced in July last year and January this year respectively. Moreover, the Government will launch a three-year Cash LEGISLATIVE COUNCIL ― 2 June 2021 6779

Allowance Trial Scheme to disburse, starting from July this year, a cash allowance on a monthly basis to those N have-nots households who are not living in public housing and not receiving CSSA and have waited for public housing for more than three years (not including non-elderly one-person public housing applicants) ("monthly allowance"), until such households are offered the first public housing allocation. In this connection, will the Government inform this Council:

(1) of the total number of applications received by the Government under the second-round of the subsidy programme when applications closed on the 31st of last month, as well as the estimated total expenditure and total number of members in the beneficiary households;

(2) in respect of the beneficiary households under the first-round of the subsidy programme:

(i) a breakdown of the number of such households by the District Council district to which their places of residence belonged,

(ii) a breakdown of the number of such households by household size and type of accommodation as provided in Table 1 (set out in Table 1),

Table 1 Type of accommodation

Total Household number of size building households Others Homeless Board vessel Singleton hostel Private Temporary housing Temporary Industrial building unit Commercial buildingCommercial unit 1 2 3 4 5 6780 LEGISLATIVE COUNCIL ― 2 June 2021

Type of accommodation

Total Household number of size building households Others Homeless Board vessel Singleton hostel Private Temporary housing Temporary Industrial building unit Commercial buildingCommercial unit 6 or above Total:

(iii) the median household income ("A") of each group of such households grouped by household size as provided in Table 2, and the percentage of A in the monthly household income limit ("B") for that group of households in applying for the one-off subsidy (set out in Table 2), and

Table 2 Household size A B A/B (%) 1 2 3 4 5 6 or above All households: - -

(iv) the median monthly rent ("C") of each group of such households grouped by household size as provided in Table 3, and the percentage of C in the monthly rent limit ("D") for that group of households in applying for the one-off subsidy (set out in Table 3);

Table 3 Household size C D C/D (%) 1 2 3 LEGISLATIVE COUNCIL ― 2 June 2021 6781

Household size C D C/D (%) 4 5 6 or above All households: - -

(3) among the N have-nots households who are eligible for applying for the one-off subsidy, of the respective numbers and percentages of those households who are (i) eligible and (ii) ineligible for applying for the monthly allowance, as estimated by the Government;

(4) given that the Government will lower the working hour requirements under the Working Family Allowance Scheme for the period from June this year to May next year, whether it has estimated, among those N have-nots households who are eligible for applying for the one-off subsidy but ineligible for applying for the monthly allowance, the number and percentage of those who may benefit from this arrangement; and

(5) as some of the N have-nots households who are eligible for applying for the one-off subsidy are ineligible for applying for the monthly allowance, whether the Government will consider launching a third-round of the subsidy programme, so as to benefit such households; if so, of the details; if not, the reasons for that?

SECRETARY FOR HOME AFFAIRS (in Chinese): President, the main objective of the Community Care Fund ("CCF") is to provide assistance to people with financial difficulties, in particular those who fall outside the social safety net or those within the safety net but still have some special needs that are not covered. In addition, CCF may also consider programmes on a pilot basis to help the Government identify those measures that can be considered for incorporation into its regular assistance and service programmes.

Under the existing mechanism, bureaux would consider proposals on new assistance programmes according to their policy areas. If any new programmes are considered suitable to be implemented under CCF, bureaux should submit proposals of these new programmes to the CCF Task Force and the Commission 6782 LEGISLATIVE COUNCIL ― 2 June 2021 on Poverty ("CoP") for deliberations. The relevant bureaux would be responsible for implementing the approved programmes. The CCF Task Force, chaired by the Secretary for Labour and Welfare, comprises CoP members, co-opted members and representatives from relevant bureaux, etc. It advises CoP on CCF's various arrangements (including investment, finance and administrative operations, etc.), as well as formulating assistance programmes, coordinating and overseeing the implementation of assistance programmes and evaluating their effectiveness, etc. The CCF Secretariat, which is set up under the Home Affairs Bureau ("HAB"), provides secretariat support service to CCF.

Regarding the two rounds of the "One-off Living Subsidy for Low-income Households Not Living in Public Housing and Not Receiving Comprehensive Social Security Assistance" Programmes ("One-off Living Subsidy Programmes"), the CCF Task Force, having considered the implementation arrangements, submitted the proposal to CoP for deliberations and approval. The Programmes are implemented by the CCF Secretariat. They are not related to any policy profolio under HAB.

Having consulted the Labour and Welfare Bureau ("LWB") and the Transport and Housing Bureau ("THB"), a consolidated reply to the question raised by Mr Vincent CHENG is provided as follows:

(1) CoP endorsed the launch of the One-off Living Subsidy Programmes under CCF to relieve the financial pressure on low-income households. The application period of second round of the One-off Living Subsidy Programmes started on 4 January 2021 and closed on 31 May 2021. As at 26 May 2021, over 110 000 applications were received. As it takes time for the service units to carry out initial processing of applications, the actual number of applications received by the CCF Secretariat has yet to be confirmed. The estimated expenditure of the second round of the One-off Living Subsidy Programme is $1,813.15 million, which is expected to benefit around 177 800 households.

(2) The preliminary relevant statistics of the first round of the One-off Living Subsidy Programme as at 26 May 2021 are at Annex.

(3) Applicant households are not required to provide information on whether they are on the waiting list of public rental housing ("PRH") LEGISLATIVE COUNCIL ― 2 June 2021 6783

when making applications for the One-off Living Subsidy Programmes, as such information is not an eligibility criterion under the said Programmes. Therefore, the CCF Secretariat does not have any information on whether the applicant households will meet the eligibility criteria under the Cash Allowance Trial Scheme.

Under the three-year Cash Allowance Trial Scheme, cash allowance will be provided to eligible PRH General Applicant ("GA") households (i.e. families with two or more persons and elderly one-person applicants) who are not living in public housing, not receiving the Comprehensive Social Security Assistance ("CSSA") and have been waiting for PRH for more than three years without being given the first PRH flat offer. THB estimates that upon launch of the Cash Allowance Trial Scheme, around 90 000 GA households may be eligible to apply for the cash allowance.

(4) Having regard to the COVID-19 pandemic and the latest employment condition, the Government has, on a time-limited basis, substantially reduced the working hour requirements of the Working Family Allowance ("WFA") Scheme for non-single-parent households, viz. the working hour requirement for Basic Allowance is reduced from 144 to 72 hours per month and the working hour requirement for Medium Allowance is reduced from 168 to 132 hours per month. This arrangement is for one year, and applicable to the claim months from June 2021 to May 2022. For the purpose of financial planning, it is roughly estimated that about 24 000 additional households will benefit from this arrangement.

The objectives of and eligibility criteria for different cash assistance schemes vary. As far as the WFA Office is concerned, it does not maintain information on whether a WFA recipient is also receiving allowances not related to WFA.

(5) The Chief Executive announced in the 2019 Policy Address the initiative to offer relief for low-income households not living in PRH and not receiving CSSA, including people on the PRH waiting list, by providing a cash allowance. As it took time to devise a scheme to provide the cash allowance, the Chief Executive invited CCF to launch two rounds of "one-off living subsidy" for the above 6784 LEGISLATIVE COUNCIL ― 2 June 2021

low-income households who were missed out from the relief measures announced by the Financial Secretary. This would allow time for the Government to complete the relevant study towards the end of 2020. Against such a background, CCF has launched two rounds of the One-off Living Subsidy Programmes.

At present, CCF has no plan to launch the One-off Living Subsidy Programme again. In fact, the Government will launch a three-year Cash Allowance Trial Scheme in late June 2021 to provide cash allowance to eligible PRH GA households who are not living in public housing, not receiving CSSA and have been waiting for PRH for more than three years without being given the first PRH flat offer.

Annex

Preliminary Relevant Figures(1) of the First Round of the "One-off Living Subsidy for Low-income Households Not Living in Public Housing and Not Receiving Comprehensive Social Security Assistance" Programmes (Implemented from July to November 2020) (as at 26 May 2021)

(i) Distribution of residential districts of beneficiary households

District Number of households Yau Tsim Mong 18 094 Sham Shui Po 16 796 Yuen Long 14 757 Northern 10 488 Kowloon City 8 243 Tsuen Wan 7 413 Kwun Tong 6 089 Tuen Mun 5 844 Eastern 5 295 Tai Po 4 535 Kwai Tsing 3 567 Sha Tin 2 894 LEGISLATIVE COUNCIL ― 2 June 2021 6785

District Number of households Wong Tai Sin 2 607 Central and Western 2 413 Wan Chai 2 004 Islands 1 590 Sai Kung 1 564 Southern 1 063 Total 115 256

Note:

(1) As applications are still being processed, the relevant figures are preliminary only. Adjustments may need to be made in future.

(ii) Type of accommodation of beneficiary households

Type of accommodation

Total Household number of size hostel Board households Others vessels Private housing building Singleton Homeless Industrial Temporary Temporary Commercial building unit building unit 1 31 708 811 367 201 3 417 18 1 223 111 37 856 2 27 879 443 216 0 2 645 6 11 138 31 338 3 22 459 204 123 0 1 872 5 6 119 24 788 4 15 101 98 61 0 1 312 3 2 113 16 690 5 3 381 19 23 0 332 0 0 31 3 786 6 or above 718 1 3 0 69 0 0 7 798 Total 101 246 1 576 793 201 9 647 32 1 242 519 115 256

(iii) Income of beneficiary households

(A)/(B)(%) Percentage of (A) (B) median monthly Median monthly Monthly household Household size household income to household income income limit the Programme's ($) ($) monthly household income limit 1 8,000 15,100 52.98% 2 13,000 22,000 59.09% 3 16,772 26,800 62.58% 6786 LEGISLATIVE COUNCIL ― 2 June 2021

(A)/(B)(%) Percentage of (A) (B) median monthly Median monthly Monthly household Household size household income to household income income limit the Programme's ($) ($) monthly household income limit 4 20,000 33,500 59.70% 5 21,615 36,900 58.58% 6 or above 25,626 40,800 62.81% All households 12,853 Not applicable Not applicable

(iv) Rent paid by beneficiary households(2)

(C)/(D)(%) Percentage of (C) (D) median monthly Median monthly Monthly household Household size household rent to household rent rent limit the Programme's ($) ($) monthly household rent limit 1 4,000 7,550 52.98% 2 5,200 11,000 47.27% 3 6,500 13,400 48.51% 4 7,900 16,750 47.16% 5 8,700 18,450 47.15% 6 or above 9,500 20,400 46.57% All households 5,300 Not applicable Not applicable

Note:

(2) Only applicable to renting accommodation in private housings, industrial buildings, commercial buildings or social housing.

Pilot Scheme for Arbitration on Land Premium

18. MS ALICE MAK (in Chinese): President, in October 2014, the Government introduced the Pilot Scheme for Arbitration on Land Premium ("the Pilot Scheme") under which an additional avenue is provided for applicants of lease modification/land exchange ("LM/LE") and the Lands Department LEGISLATIVE COUNCIL ― 2 June 2021 6787

("LandsD") to expedite the conclusion of negotiations on the amounts of land premium by both sides in LM/LE cases. Given the lukewarm response of the trade to the Pilot Scheme, the Government introduced refinements to the Pilot Scheme in August 2020, setting upper and lower limits for the amount of land premium payable for cases under the Pilot Scheme. In this connection, will the Government inform this Council:

(1) of the respective numbers of LM/LE applications received and handled by LandsD (a) in each of the five years before and (b) since the aforesaid refinements came into effect and, among them, the number of cases in which the applicants were invited to participate in the Pilot Scheme; among the latter cases:

(i) the respective numbers of cases in which the invitation were accepted by the applicants, arbitrations are being/were conducted, and arbitrations were concluded;

(ii) the respective shortest, longest and average arbitration time taken for those cases in which arbitrations were concluded; and

(iii) the number of cases in which those applicants who had declined such invitations subsequently reached a consensus with LandsD over the amount of land premium, as well as the respective shortest, longest and average negotiation time taken for such cases;

(2) of the number of LM applications for rezoning agricultural lands in the New Territories as residential sites handled by LandsD in each of the past five years, and the land area involved and the number of units proposed to be built in each application; the respective shortest, longest and average time taken for handling such applications; and

(3) as the Government indicated in its reply to a question raised by a Member of this Council on the 5th of last month that considering that the issuance of provisional basic terms offer as well as premium offer were respectively two key milestones in the handling of a LM application, the Steering Group on Streamlining Development 6788 LEGISLATIVE COUNCIL ― 2 June 2021

Control would follow up with LandsD on shortening the time required for these two procedures, of the progress of the relevant work?

SECRETARY FOR DEVELOPMENT (in Chinese): President, to increase land supply, the Government has been making all-out efforts to identify and produce land as well as to expedite the land development process, which includes reviewing the approval procedures for applications related to private development projects from time to time and introduction of new operation models to streamline the approval process. To this end, the Government launched the Pilot Scheme for Arbitration on Land Premium ("the Pilot Scheme") in October 2014. Furthermore, since September 2018, the Lands Department ("LandsD") assigned its Valuation Section in the Headquarters to handle the premium assessment of all land transactions (including lease modification and land exchange) centrally. In order to further expedite the processing of lease modification and land exchange applications, LandsD also established the Land Supply Section in April 2019 dedicated to handling cases under the Government's Land Sale Programme and lease modification and land exchange cases involving large-scale development. Subsequently, the Government promulgated refinement measures to the Pilot Scheme in August 2020, including the setting of upper and lower limits of premium payable. The Pilot Scheme will run until 23 October 2022.

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

(1) (a) LandsD had received 256 lease modification and land exchange applications (including simplified and technical lease modifications) between January 2015 and July 2020. Within the period, LandsD had considered 57 lease modification and land exchange cases which would be eligible for arbitration under the Pilot Scheme and proactively invited 14 applicants to participate in the Pilot Scheme. One of the applicants accepted the invitation to participate in the Pilot Scheme and the premium was settled through arbitration in 2015. The arbitration process took about 11 weeks from the formation of the Arbitral Tribunal to the award by the Tribunal.

For the remaining 13 cases, applicants chose to make appeals through the established mechanism and 10 of the cases LEGISLATIVE COUNCIL ― 2 June 2021 6789

reached agreement with LandsD on the premiums in the end. For these 10 cases, the premium negotiation process took about 2 to 33 months (9 months on average) from invitation to participate in the Pilot Scheme to accepting the premium offer.

(b) Since implementing the refinement measures of the Pilot Scheme in August 2020, LandsD has further invited applicants of 16 eligible cases to settle premium negotiations through arbitration under the Pilot Scheme. So far, no such application has been received. Other applicants of lease modification cases eligible for the Pilot Scheme may also take initiative to invite LandsD to conduct arbitration.

(2) In the past five years (i.e. from 2016 to 2020), LandsD had completed and executed 18 land exchange and lease modification cases involving change of land use from agriculture to domestic purpose in the New Territories. The concerned site area is about 909 000 sq m providing about 13 900 flats(1). The processing of such cases from receipt of a valid application to the execution of the lease involves many different procedures, including premium negotiations etc., and the processing time of each application varies depending on the complexity of the case and the issues involved. Since the period from receiving the application to execution of the lease often involves some time beyond the control of the department (for example, the applicant needs time to prepare technical assessments), LandsD does not have readily available statistics concerning the processing time of such cases.

(3) Given that the issuance of provisional offer with basic terms as well as premium offer are two key milestones in a lease modification application, the Development Bureau ("DEVB") and LandsD are following up on how best to shorten the time required for these two procedures, including setting different priorities and target timetables for different categories of cases. The proposals will be submitted to the Steering Group on Streamlining Development Control convened by DEVB and the related industry group for discussion in due course.

(1) The number of flats is estimated based on relevant lease conditions. The actual number of flats would depend on the actual design of the proposed development projects. 6790 LEGISLATIVE COUNCIL ― 2 June 2021

Primary One places allocation system

19. MR CHAN HAN-PAN (in Chinese): President, under the existing Primary One Admission System ("POA System"), Primary One ("P1") places are allocated in two stages. At the "Discretionary Places Admission" ("DPA") stage, parents may apply to one government or aided primary school for the admission of their children to P1, and then the schools will allocate their places in accordance with the criteria set by the Education Bureau ("EDB"). Those parents whose applications are unsuccessful and those who have not submitted any application may, at the "Central Allocation" ("CA") stage, complete a Choice of Schools Form ("Form") and return it to EDB, and then EDB will allocate P1 places based on school nets, parents' choices and random numbers. Those parents who do not want their children to attend the schools allocated to them at the CA stage may "door-knock" their preferred schools. It is learnt that quite a number of the more popular schools have set a "1-1-1" screening condition for door-knocking applications, giving priority consideration to those applicants who have applied for admission to those schools at the DPA stage and have entered those schools as their first choices in both Parts A and B of the Form (to be proved by the parents' submission to such schools a Parent's copy of the Form ("Parent's copy") which has been stamped). Some parents have relayed that in January this year, the CA Centres in certain districts (e.g. Sham Shui Po) made special arrangements in the light of the severe epidemic situation, under which they only placed drop boxes for collecting the Forms, and did not stamp the Parent's copies as they did before. In this connection, will the Government inform this Council:

(1) as some parents are worried that when they door-knock their preferred schools, the schools will not accept the Parent's copies without a stamp, whether EDB will, before announcing the places allocation results of the CA stage in June this year, (i) issue a circular memorandum to the schools covered by the POA System, requiring such schools to accept the Parent's copies without a stamp in considering P1 door-knocking applications, or (ii) arrange for the Parent's copies without a stamp to be stamped retrospectively; if so, of the details and the timetable; if not, the reasons for that;

(2) as some parents have relayed that, due to the epidemic, EDB issued new Forms by mail to parents who had made mistakes when completing the Forms but did not get back the old Forms, and they are worried that some parents may use two Forms to increase their LEGISLATIVE COUNCIL ― 2 June 2021 6791

chance of success in door-knocking, of the measures EDB has put in place, on the premise of not increasing school administrative work, to ensure that all parents will be given a fair chance when they door-knock; and

(3) as quite a number of parents have criticized that the existing P1 places allocation system is unfair, and door-knocking preferred schools has exhausted quite a number of parents and students, whether EDB will review and improve the existing P1 places allocation system; if so, of the details and the timetable; if not, the reasons for that?

SECRETARY FOR EDUCATION (in Chinese): President, the Primary One Admission ("POA") System is divided into two stages, namely, the Discretionary Places Admission ("DP") stage and the Central Allocation ("CA") stage. This allocation mechanism, which is based primarily on parental choices of schools as well as the demand and supply of school places, centrally manages matters relating to admission to Primary One in all government and aided primary schools in Hong Kong under the principles of openness and fairness. The entire procedure is effective, transparent and orderly. After the release of POA allocation results in early June every year, some parents, due to various reasons such as moving to a new home or seeking admission to a preferred school for their children, may approach other schools directly to apply for admission for their children (a phenomenon commonly known as "door-knocking"). The schools will decide whether to admit these students in light of their school-based circumstances (such as the availability of vacant school places).

Our reply to Mr CHAN Han-pan's question is as follows:

(1) and (2)

Parents whose children have joined the POA System but have not secured a place at the DP stage have to complete the Choice of Schools Form ("the Form") in order to join CA. Normally, parents who apply for CA for their children are required to make their choice of schools at a designated CA Centre on the submission dates of the Form at the CA stage. After confirming that the Form is duly completed, staff of the CA Centre will keep the Education Bureau's 6792 LEGISLATIVE COUNCIL ― 2 June 2021

("EDB") copy of the Form and give the stamped parent's copy to the parents for retention.

In light of the development of the COVID-19 epidemic situation, some CA Centres have been arranged to use drop boxes for collecting the Forms this year for compliance with epidemic control and social distancing measures. Under this special arrangement, parents only needed to put EDB's copy of the Form and the Letter of Authorization―Making School Choices (if applicable) into the drop box at the CA centre and keep the parent's copy in order to complete the procedure. In this regard, we have put up notices at the related CA Centres to clearly inform parents of the special arrangement.

The Form is a document used by EDB during the CA stage and once CA is completed, the Form will not have any other uses. This is not a document specified by EDB that parents have to bring along for "door-knocking". In fact, it is entirely an arrangement made by individual schools on their own whereby parents, when applying directly to their preferred school for admission, are required to meet certain requirements in relation to their choices of school in the POA System i.e. entering the concerned school as their first choices in DP as well as both Part A and Part B of the Form for CA, and that parents are required to present the Form during the application. Owing to the epidemic situation, special arrangement has been made for the submission of the Form this year, leading to the situation that some of the parent's copies may not have been stamped. In view of this, we have reminded the school sector not to request parents to provide the stamped parent's copies for reference during "door-knocking". For parents who have difficulties in the related matters, they may contact the School Places Allocation Section of EDB (Tel no.: 2832 7700) for assistance.

(3) The current POA mechanism, which was introduced according to the recommendation of the Education Commission after extensive public consultation, has been in place for Primary One admission since the 2002-2003 school year. On the whole, the current mechanism has strived to strike a right balance between the expectations of various stakeholders and is generally accepted by the public. For the time being, EDB has no plan to conduct a comprehensive review on the POA mechanism. We will continue to closely monitor the LEGISLATIVE COUNCIL ― 2 June 2021 6793

implementation of the POA System and welcome any feasible and specific recommendations to improve the operation arrangement as needed.

Product placement within television programmes

20. MR CHAN CHUN-YING (in Chinese): President, since July 2018, the Communications Authority ("CA") has relaxed the regulation of the inclusion of indirect advertising within television ("TV") programmes by domestic free TV programme service licensees ("licensees"), including the permission for product placement on the conditions that the exposure or use of products or services concerned within a programme is presented in a natural and unobtrusive manner having regard to the programme context and genres and that there is no direct encouragement of purchase or use of the products or services concerned. In this connection, will the Government inform this Council if it knows:

(1) whether CA has drawn up clear guidelines on the meaning of natural and unobtrusive manner of presentation; if CA has, of the details;

(2) the number of complaints about product placement received by CA since the relaxation of regulation and, among such complaints, the number of those found to be substantiated; and

(3) whether CA has grasped the data regarding the licensees' financial position having been improved due to the inclusion of product placement within their TV programmes; whether CA has studied if the licensees have made use of the additional revenue generated from product placement to produce programmes of a higher quality to benefit their audiences; if CA has studied, of the outcome?

SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT (in Chinese): President, the Communications Authority ("CA") regulates domestic free television programme service licensees in accordance with relevant ordinances and codes of practice. According to the Generic Code of Practice on Television Programme Standards issued by CA, indirect advertising is defined as the mingling of programme and advertising material or the embedding of advertising material within programme content. The type of indirect advertising where licensees receive payment or other valuable consideration for exposure or 6794 LEGISLATIVE COUNCIL ― 2 June 2021 use of products or services within a programme is referred to as "product or service sponsorship" (commonly known as "product placement").

CA relaxed the regulation of indirect advertising in television programme services on 27 July 2018 to allow product placement by licensees. The general principles regulating product placement are that the latter must be presented in a natural and unobtrusive manner having regard to the programme context and genre, and that there must be no direct encouragement of purchase or use of the products or services.

Our reply to the various parts of the question raised by the Member is as follows:

(1) CA will take into account a number of factors in considering whether a product placement is natural and unobtrusive, including whether the product placement is relevant to the context and genre of the programme, whether the integrity and natural flow of the programme is impacted, whether the product placement is naturally integrated into the programme, and whether there is excessive exposure or highlighting of the products or services. CA will consider all relevant facts and context on a case by case basis.

A set of frequently asked questions on the regulation of indirect advertising has been uploaded to CA's website for reference of the licensees and the public.

(2) Since the relaxation of the regulation of indirect advertising within TV programmes in July 2018, CA has received a total of 178 cases (involving 340 complaints) on complaints about indirect advertising (including product placement), of which 5 cases (involving 21 complaints) were substantiated.

(3) CA does not require the licensees to provide a breakdown of their advertising revenue. As free TV services have been facing fierce competition from other media in recent years, CA considers that the relaxation of the restrictions would help TV stations diversify sources of advertising revenue. The measure can also remove some of the outdated regulatory requirements for the licensees, improve their long-term sustainability and facilitates their continuous production of high-quality programmes for TV viewers.

LEGISLATIVE COUNCIL ― 2 June 2021 6795

Fire safety of mini-storage facilities and old industrial buildings

21. MR CHAN HAK-KAN (in Chinese): President, after a major fire in a mini-storage facility ("MSF") in Kowloon Bay which broke out in 2016 and claimed the lives of two firemen, the Government enacted legislation to enhance the fire safety of MSFs and the old industrial buildings ("IBs") housing such MSFs, and has stepped up law enforcement efforts. It has been reported that there are still many MSFs not meeting the fire safety requirements. In this connection, will the Government inform this Council:

(1) whether it knows the current number of MSFs in the territory and the number of operators involved; of a breakdown of the number of such MSFs by (i) the District Council district in which the IBs housing such MSFs are located and (ii) the year of completion of the IBs concerned;

(2) of (i) the number of inspections of MSFs conducted and (ii) the number of Fire Hazard Abatement Notices ("FHANs") issued to MSFs, by the Fire Services Department in each of the past five years, as well as a breakdown of the latter by the contravention involved (set out in a table); the number of MSFs which have been issued with a FHAN situated on a site the land lease of which does not include "godown" as one of the permitted uses;

(3) of (i) the respective numbers of prosecutions and convictions in respect of MSF operators' violation of the relevant fire safety legislation, and the penalties imposed on the convicted persons, as well as (ii) the number of cases in which the Lands Department ("LandsD") found the MSFs concerned had violated the permitted uses under the land leases and the details of LandsD's follow-up actions, including the number of cases which involved the registration of warning letters at the Land Registry (commonly known as "imposing an encumbrance"), in each of the past five years;

(4) of the latest progress of fire safety enhancements of old IBs since the Fire Safety (Industrial Buildings) Ordinance (Cap. 636) came into operation on 19 June last year, and the number of IBs which have implemented fire safety enhancements in accordance with the Ordinance; and

6796 LEGISLATIVE COUNCIL ― 2 June 2021

(5) whether the Government will introduce a licensing regime to step up the regulation of the operation of MSFs; if so, of the details; if not, the reasons for that?

SECRETARY FOR SECURITY (in Chinese): President, since June 2016, relevant departments such as the Fire Services Department ("FSD"), Buildings Department ("BD") and Lands Department ("LandsD") have been taking enforcement actions under the current legislation against irregularities identified in mini-storage premises ("MSPs") in the territory. The departments require MSP operators and owners to abate potential safety hazards as quickly as possible, in order to improve the safety level of MSPs.

After consulting the relevant departments, my reply to various parts of the question is as follows:

(1) As revealed from the inspections of relevant departments, there are currently 690 MSPs operated by around 130 companies.

The distribution of the location of the existing MSPs (by District Council district) is as follows:

District Council district Number of MSPs Central and Western 38 Eastern 144 Southern 38 Kowloon City 35 Kwun Tong 76 Sham Shui Po 33 Wong Tai Sin 39 Yau Tsim Mong 20 Kwai Tsing 69 North 11 Sha Tin 57 Tai Po 14 Tsuen Wan 56 Tuen Mun 49 Yuen Long 11 Wan Chai, Islands, Sai Kung 0 Total 690

LEGISLATIVE COUNCIL ― 2 June 2021 6797

Information on the year of completion of the industrial buildings ("IBs") in which the above mentioned MSPs are located (by year of completion) is as follows:

Year of completion of IBs in Number of IBs involved(2) which MSPs are located(1) Before 1973 96 1974 to 1987 123 After 1987 30 Total 249

Notes:

(1) Before 1973, the Code of Practice for Minimum Fire Service Installations and Equipment ("Code of Practice") of FSD did not require all IBs to install sprinkler system. FSD issued a circular letter in 1973, requiring the business areas (excluding common corridor and staircase) of all IBs with two storeys or above to install sprinklers. The Code of Practice was amended in 1987, requiring all IBs with more than 230 sq m of total gross floor area to install sprinkler covering also the staircases, common corridors and washrooms. The required standard is very similar to that in the current Code of Practice, and hence we suggest presenting the year of completion of IBs in which MSPs are located into the three categories of the above table.

(2) There are more than one MSP in some of IBs.

(2) From June 2016 to end-April 2021, FSD has inspected a total of 1 166 MSPs (some of which have wound up), and issued 3 154 Fire Hazard Abatement Notices ("FHANs") to 927 MSP operators under the Fire Services Ordinance (Cap. 95). The number of FSD's inspection to MSPs, the number of FHANs issued and the types of fire hazards by year are as follows:

2016 2017(3) 2018 2019 2020 2021(4) Number of inspection 1 654 6 910 2 729 2 730 1 505 544 to MSPs Number of FHANs 994 1 845 135 103 51 26 issued

6798 LEGISLATIVE COUNCIL ― 2 June 2021

Types of fire hazards in MSPs covered by 2016 2017(3) 2018 2019 2020 2021(4) FHANs(5) (i) Potential safety 271 524 38 25 20 5 risk of undesirable arrangement of storage cubicles (ii) Obstruction 269 524 39 25 12 4 to/insufficient number of windows (iii) Insufficient 94 117 5 9 3 3 coverage of hose reel system (iv) Insufficient exit 247 451 27 25 11 7 signs and directional signs (v) Escape doors 113 229 26 19 5 7 locked or with undesirable types of locking devices Total 994 1 845 135 103 51 26

Notes:

(3) Both the number of FSD's inspections to MSPs and the number of fire hazards identified in 2017 were comparatively higher. It was because FSD inspected around 800 MSPs across the territory from the second half of 2016 to the end of 2017.

(4) The figures are up to 30 April.

(5) Each FHAN covers one type of fire hazard. FHANs re-issued due to extension of time for compliance would not be double-counted.

Furthermore, in the past five years, the operating locations of a total of 186 MSPs which have received FHANs before are suspected to be in breach of relevant lease conditions, amongst which 90 MSPs have wound up.

(3) FSD, BD and other related government departments have been taking enforcement actions under current legislation against LEGISLATIVE COUNCIL ― 2 June 2021 6799 irregularities identified in MSPs in the territory. For example, FSD would issue FHANs to MSPs requiring the operators to abate fire hazards within specified periods. BD would issue statutory orders under the Buildings Ordinance (Cap. 123) to owners of MSPs requiring them to comply with the orders within specified periods. In this regard, FSD and BD would review the circumstances and progress of each individual case for considering whether extension of time for FHANs issued by FSD and/or the statutory orders issued by BD may be granted, in order to facilitate the MSP operators and owners to complete the corresponding rectification works. FSD and BD may also prosecute MSPs operators and owners who fail to comply with FHANs and/or the statutory orders without reasonable excuse.

In the past five years, FSD has instigated prosecutions against 247 MSPs operators who failed to comply with FHANs. Amongst which, there were 37 conviction cases with a total fine of $572,600. In respect of BD, it has instigated prosecutions against the owners of 17 MSPs who failed to comply with the statutory orders. Amongst which, there were 9 conviction cases with a total fine of $199,995. The relevant numbers of prosecutions, convictions and total amount of fines in the past five years are tabulated as follows:

Relevant figures on the prosecutions, convictions and fines for non-compliance with FHANs issued by FSD

2017(7) 2018 2019 2020 2021(8) Number of 3 69 96 69 10 prosecutions Number of 2 16 4 11 4 convictions(6) Total amount of $40,000 $239,000 $95,000 $164,400 $34,200 fines(6)

Notes:

(6) The figures do not necessarily correspond to the prosecutions instigated in the same year.

(7) The inspection commenced since June 2016, and therefore there was no case of prosecution and conviction in 2016.

(8) The figures are up to 30 April.

6800 LEGISLATIVE COUNCIL ― 2 June 2021

Relevant figures on the prosecutions, convictions and fines for non-compliance with the statutory orders issued by BD

2017(10) 2018 2019 2020 2021(11) Number of 0 0 1 10 6 prosecutions Number of 0 0 0 4 5 convictions(9) Total amount of 0 0 0 $127,170 $72,825 fines(9)

Notes:

(9) The figures do not necessarily correspond to the prosecutions instigated in the same year.

(10) The inspection commenced since June 2016, and therefore there was no case of prosecution and conviction in 2016.

(11) The figures are up to 30 April.

As for breach of uses as permitted in land lease by MSPs, from July 2016 (when LandsD started to maintain the relevant statistics) to mid-March 2021, there were 238 cases of breach of uses specified in land lease by MSPs located in IBs. LandsD has issued warning letters to the relevant owners, requiring them to rectify the breaches of uses, and rectification has been completed in 35 cases. For 202 cases, as the owners concerned failed to rectify the breaches by the deadline, LandsD has sent the warning letters to the Land Registry for registration, and reserved the right to take further action. LandsD is following up on the remaining one case.

(4) The Fire Safety (Industrial Buildings) Ordinance (Cap. 636) ("the Ordinance") was gazetted for taking effect on 19 June 2020. The purpose of the Ordinance is to enhance the fire safety of IBs constructed or those with building plans first submitted to the Building Authority for approval on or before 1 March 1987, in order to provide better protection for the public. Under the Ordinance, the enforcement authority in relation to any fire service installations or equipment of IB is the Director of Fire Services; while the LEGISLATIVE COUNCIL ― 2 June 2021 6801

enforcement authority in relation to the planning, design and construction of IB is the Director of Buildings. FSD and BD will issue Fire Safety Directions ("Directions") to owners and/or occupiers with regard to fire safety measures of buildings under their respective purview and specify the required fire safety improvement works.

According to the records, about 1 100 target IBs are regulated by the Ordinance. FSD and BD are implementing the Ordinance in two phases, starting with about 400 target IBs which were constructed in or before March 1973 in the first phase. The remaining 700 target IBs would be included in the next phase.

FSD and BD have commenced the relevant enforcement actions in the fourth quarter of 2020. As of end-April 2021, the departments have inspected 18 target IBs and issued Directions to the owners and occupiers of 3 target IBs, requesting the relevant parties to complete the improvement works within the specified time limit.

(5) The majority of MSPs are located in IBs. IBs are required to comply with the fire and building safety requirements applicable at the time of completion of the building. The operation of MSPs cannot be in breach of the requirements of the lease conditions as well. If a MSP is located in a commercial or composite building, it will also be subject to the corresponding legislation on fire and building safety. In respect of fire safety, FSD would issue FHANs to operators for fire hazards in MSPs according to the Fire Services Ordinance (Cap. 95), requesting them to conduct improvement works to abate fire hazards. In respect of fire safety construction, BD would issue statutory orders under the Buildings Ordinance (Cap. 123) to owners requiring them to carry out rectification works for irregularities on the provisions of means of escape, fire-resisting construction, means of access for firefighting and rescue, etc. in the MSPs. The enforcement authorities may instigate prosecutions or take other enforcement actions according to relevant legislation in case of non-compliance.

6802 LEGISLATIVE COUNCIL ― 2 June 2021

On the basis of the above mentioned enforcement actions which have all along been taken under current legislation, many trade members have generally understood the relevant requirements. As at end-April 2021, among the operating MSPs, 216 of them have fully complied with all FHANs issued by FSD, and 139 of them fully complied with all the statutory orders issued by BD. Among which, 99 MSPs have complied with the requirements of both departments. With regard to those started up in recent years, there are 104 MSPs fully complying with FSD's requirements and 99 fully complying with BD's requirements. Among which, 68 MSPs have complied with the requirements of both departments. In overall terms, among the 690 existing MSPs in the territory, there are a total of 167 MSPs complying with both departments' requirements. Relevant government departments will continue to follow up on the requirements pending for compliance by the relevant MSPs, and to take enforcement actions against irregularities identified in the MSPs under current legislation.

Student Guidance Officers in government primary schools

22. MR LUK CHUNG-HUNG (in Chinese): President, it is learnt that the posts of Student Guidance Officers ("SGO") in government primary schools, which belong to a non-graduate grade, are responsible for providing school-based student guidance service. Some SGOs have relayed to me that since the early 1990s, they have been trying to negotiate with the government departments concerned (including the then Education Department and the current Education Bureau ("EDB")) over the issue of upgrading the SGO posts to the degree level. However, when the Government announced in 2019 the all-graduate teaching force policy for public sector schools across the territory, it did not upgrade the SGO posts to the degree level at the same time. They have pointed out that EDB has undertaken to further study the issue of upgrading the SGO posts to the degree level (including permitting the staff affected to take part in the reform exercise) and to create Inspector grade posts to absorb those SGOs who are willing to change posts, but no progress has been heard of so far. In this connection, will the Government inform this Council:

(1) why the Government did not upgrade the SGO posts to the degree level at the same time in 2019;

LEGISLATIVE COUNCIL ― 2 June 2021 6803

(2) of the progress of its work to create Inspector grade posts to absorb those SGOs who are willing to change posts; whether the measure of zero growth in the civil service establishment in this financial year as announced earlier by the Government has affected such work; if so, of EDB's proposal to resolve the problem; and

(3) whether it will consider making use of the vacancies of graduate teacher posts in government schools to absorb those SGOs who are willing to change posts; if so, of the implementation details and timetable; if not, how EDB will resolve the problem of different pay for the same work between SGOs and personnel of other guidance grades in schools (such as Student Guidance Teachers)?

SECRETARY FOR EDUCATION (in Chinese): President, Student Guidance Officer ("SGO") is a non-graduate grade under the establishment of the Education Bureau ("EDB"). In the 1980s and early 1990s, SGOs offered on-site services to different primary schools for providing individual or group counselling services for students in need. Thereafter, the Government had continued to enhance the student guidance service and created Student Guidance Teacher ("SGT") posts starting from 1992 to provide school-based student guidance service in aided primary schools, with a view to strengthening the preventive guidance work and the participation of all school staff. Since then, the demand of schools for the services provided by SGOs has decreased and the Government has ceased recruiting new SGOs since 2000. Starting from the 2002-2003 school year, the Government has further increased the resources for schools to hire SGTs or social work services according to their needs in order to implement the Comprehensive Student Guidance Service. The Government has also, starting from the 2018-2019 school year, provided additional resources for public sector primary schools to implement the policy of "one school social worker for each school" according to school-based circumstances. With changes in the relevant policy, the duties and roles of SGOs have been adjusted with time. Currently, their main duties are to provide guidance and discipline services in the form of school-based support, ranging from one to five days per week for dozens of schools in need, and also assist EDB handle and follow up students' non-attendance cases as well as enforce the Education Ordinance and administrative procedures.

Our reply to the questions raised by Mr LUK Chung-hung is as follows:

6804 LEGISLATIVE COUNCIL ― 2 June 2021

(1) The SGO grade, which is under EDB's establishment, is not under the staff establishment of any schools. The Chief Executive announced in the 2018 Policy Address that the all-graduate teaching force policy would be implemented in public sector primary and secondary schools in the 2019-2020 school year. Schools might, taking into account their school-based circumstances, achieve full implementation by the 2020-2021 school year. The arrangements for implementing the all-graduate teaching force policy have been made primarily according to the teacher establishment and operational needs of public sector schools. As SGOs have all along been outside the school establishment and their work arrangement and nature are different from that of SGTs, the SGO grade is therefore not covered by the all-graduate teaching force policy.

(2) and (3)

EDB has all along attached importance to the professional development and career prospects of staff of different grades, expecting them to unleash their potential in different posts and exploring new paths for staff in need. As mentioned above, the Government has ceased recruiting new SGOs since 2000. For years, most of SGOs have retired, transferred to other grades or left the service. With the encouragement of EDB, some of SGOs have successfully transferred to the graduate posts in EDB. At present, there are less than 40 serving SGOs in EDB.

Since SGOs do not perform teaching duties in EDB, it is inappropriate to deploy them to government schools directly for taking up teaching duties. Nevertheless, if there are vacancies in government schools, EDB will recruit teaching staff to fill the vacancies in accordance with the existing procedures. Serving SGOs may apply for these teaching posts if they are interested and have obtained the relevant qualifications. In addition, recruitment exercises are conducted every year according to the vacancy situation of various grades (including Inspector) in EDB. All serving EDB staff, including SGOs, are welcome to apply for these posts. For SGOs who do not meet the entry requirements of the vacant graduate posts, they are encouraged to obtain the relevant qualifications through continuing education. EDB will continue to communicate with SGO grade members to explain the relevant policies and offer advice according to their needs.

LEGISLATIVE COUNCIL ― 2 June 2021 6805

GOVERNMENT BILLS

First Reading and Second Reading of Government Bill

First Reading of Government Bill

DEPUTY PRESIDENT (in Cantonese): Government Bill: First Reading.

MEDICAL REGISTRATION (AMENDMENT) BILL 2021

CLERK (in Cantonese): Medical Registration (Amendment) Bill 2021.

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

Second Reading of Government Bill

DEPUTY PRESIDENT (in Cantonese): Government Bill: Second Reading.

MEDICAL REGISTRATION (AMENDMENT) BILL 2021

SECRETARY FOR FOOD AND HEALTH (in Cantonese): Deputy President, I move the Second Reading of the Medical Registration (Amendment) Bill 2021 ("the Bill").

The Bill aims to create a new pathway for admission of non-locally trained doctors who are Hong Kong permanent residents and meet specific requirements to register and practise in Hong Kong, in a bid to relieve the problem of doctor shortage in Hong Kong which will help to improve public medical services.

For many years, it is an indisputable fact that Hong Kong has been facing an overall shortage of doctors. Regarding the per capita doctor ratio, there are 2 doctors per 1 000 population in Hong Kong currently, lagging far behind that in other advanced economies, including Singapore, Japan, the United States, the United Kingdom and Australia. According to the Healthcare Manpower 6806 LEGISLATIVE COUNCIL ― 2 June 2021

Projection 2020 we promulgated earlier, the shortage of doctors will remain in the foreseeable future even after taking into account the number of local medical school graduates with the projected shortfall of doctors reaching 1 610 and 1 949 in 2030 and 2040 respectively. The problem of doctor shortage is particularly serious in the public healthcare sector. Although there has been a net increase of 700 doctors in the Hospital Authority ("HA") in the past five years, and the latest wastage rate of doctors has dropped, the demand for medical services keeps rising due to the ageing population of Hong Kong, so we need more doctors to meet the demand. The shortage of doctors in the public healthcare system is also one of the main factors contributing to the long waiting time of specialty services in HA and the Department of Health ("DH"). The waiting time for routine cases of some individual specialty services even exceeds 100 weeks. The situation is worrying.

Although the Government has devoted substantial resources to training local doctors, and the number of medical training places has increased more than one fold in the past 15 years, we cannot keep relying on increasing the number of local training places solely to address the manpower problem given the lead time required for training local doctors and the practical constraints in further enhancing the training capacity of medical schools.

In the past, in order to increase the number of doctors in Hong Kong, we have all along hoped to attract more non-locally trained doctors to obtain full registration by passing the Licensing Examination, or work in specified public medical institutions under the limited registration scheme. However, the actual situation reveals that the current mechanism is not effective, and less than 10% of the doctors have obtained qualifications to practise in Hong Kong through the Licensing Examination, mainly because of the numerous hurdles presented by the Licensing Examination. As for the registration system, although the validity period of registration has been extended from one year to three years after the amendment to the Medical Registration Ordinance ("MRO") in 2018, the restriction to work in a specified institution and the renewal of registration every three years still pose uncertainties to their career development, which has inevitably discouraged them from participating in the scheme. So far, only 100-odd doctors with limited registration serve in Hong Kong.

In view of the above situation, the Government sees an imminent need to create a new pathway under MRO for qualified non-locally trained doctors to LEGISLATIVE COUNCIL ― 2 June 2021 6807 obtain full registration in Hong Kong without passing the Licensing Examination, subject to certain criteria being met to ensure professional quality.

The main proposals in the Bill are summarized below.

(1) Adding a new category of "special registration"

We propose to add a new category called "special registration" under MRO. In order to be eligible for special registration by the Registrar of Medical Practitioners, a non-locally trained doctor has to fulfil the following criteria:

1. the applicant must be a Hong Kong permanent resident;

2. they must hold a recognized medical qualification;

3. they must possess medical registration in any countries/regions where the qualifying medical schools concerned are located;

4. they must be engaged in full-time employment as a medical practitioner in any of the specified institutions (i.e. HA, DH, the University of Hong Kong or The Chinese University of Hong Kong); and

5. they must be of good character and have good professional conduct.

(2) Allowing eligible medical practitioners with special registration to apply for full registration

In order to give doctors with special registration a more positive career prospect so as to strengthen the attractiveness of the special registration scheme, and in turn enhance the stability and continuity of their services in the local healthcare system, the Bill proposes to allow doctors with special registration to apply for full registration, subject to certain criteria being met to ensure professionalism and capabilities. Such requirements include:

1. the applicant has been engaged in full-time employment as a medical practitioner with special registration in the aforesaid specified institution for a total of at least five years after obtaining a specialist qualification awarded or recognized by the Hong Kong Academy of Medicine ("HKAM");

6808 LEGISLATIVE COUNCIL ― 2 June 2021

2. they must be certified by HKAM to have satisfied the necessary continuing medical education requirements during the above service period; and

3. they must be considered by the employing institution(s) to have served satisfactorily and competently as a medical practitioner during the above service period.

It can be seen that doctors with special registration are subject to multiple supervision to ensure their professional quality. Comparing with locally trained doctors who can get a full registration after completing their internship, the Government imposes stricter requirements on non-locally trained doctors.

(3) Establishing a Special Registration Committee ("SRC") to determine a list of recognized medical qualifications

The Government respects the statutory role of the Medical Council of Hong Kong ("MCHK") to assess and confess professional medical qualifications, and to regulate medical practitioners. In fact, the Bill only introduces special registration as a new pathway to expand the scope of qualified persons who may apply for registration as doctors. In future, doctors with special registration, like other registered doctors, need to register under MCHK, and will be subject to the disciplinary regulation of MCHK and the regulatory control of MRO. Once complaints involving professional misconduct are found substantiated, MCHK has the power to exercise disciplinary actions on the doctors concerned. The Bill will not compromise the statutory status of MCHK nor its role in the registration and disciplinary regulation of medical practitioners in Hong Kong.

In addition, the Bill proposes to establish SRC under MCHK to determine a list of recognized medical qualifications that persons applying for special registration need to possess. According to the proposals in the Bill, among the 10 members of SRC, 6 of them (i.e. more than half) are prominent figures of the medical profession, including Chairman of MCHK, President of HKAM, Deans of the two local Faculties of Medicine, Chief Executive of HA or his/her representative and Director of Health or his/her representative. This fully demonstrates the importance that the Government attaches to the medical profession. The remaining four members will be appointed by the Chief Executive, three of whom must be members of MCHK though they can be lay LEGISLATIVE COUNCIL ― 2 June 2021 6809 members from other professional or patient organizations; and the chairman of SRC will be appointed from the aforesaid members by the Chief Executive.

The Bill also stipulates that in determining the list of recognized medical qualifications, SRC should take into account the curriculum and the medium of instruction of the medical programmes concerned, international rankings of the concerned medical school and any other aspects that SRC deems appropriate. The level of the recognized medical qualifications should be comparable to that of the two local medical schools. The list of recognized medical qualifications determined by SRC will be submitted to the Registrar of Medical Practitioners direct for promulgation by legal notice. There will not be any discretionary power for the Registrar to vary the list, and the legal notice will be subject to negative vetting by the Legislative Council. Meanwhile, parents and students can get more information through the legal notice before making decision on further studies. The list will be reviewed by SRC at three-year intervals.

Although the Bill proposes that the Secretary for Food and Health ("SFH") can issue directives to SRC, such action will only be taken when public interest so requires and the directives must be related to the functions of SRC. For instance, if SRC fails to draw up a list of recognized medical qualifications within a reasonable period of time, SFH may issue a directive to SRC requiring the latter to complete the list within a specified time frame. In other words, SFH's directives will not change SRC's power of determining the list of recognized medical qualifications, and SFH will not use the power of issuing directives to affect the list.

We consulted the Legislative Council Panel on Health Services on the legislative proposal in early February this year. Members supported the admission of more non-locally trained doctors. We then had meetings with different shareholders from February to April this year, including MCHK, HKAM, the two local medical schools and their students, medical associations, frontline doctors' unions, patient groups, as well as the education sector and parents' groups to brief them on the legislative proposal and to gauge their views.

We fully understand that apart from the problem of doctor shortage, the public healthcare system is facing different kinds of challenges that need to be solved by other means so as to fundamentally improve public medical services. In this connection, we will continue to adopt a multi-pronged approach, including 6810 LEGISLATIVE COUNCIL ― 2 June 2021 retaining HA doctors, promoting the Public-Private Partnership Programme, upgrading hardware facilities under the two 10-Year Hospital Development Plans, and enhancing primary healthcare services. However, all these measures must be built on sufficient supply of doctors. Currently, there is an overall shortage of doctors. As I said earlier, Hong Kong has a ratio of only 2 doctors per 1 000 population at present, far below that in other advanced economies. On the one hand, we need to stop the brain drain of HA doctors by proactively retaining them, on the other hand, we need to bring in new blood by attracting eligible non-locally trained doctors to come and serve in local public healthcare institutions. Members of the medical profession think that the Government can allocate more resources to promote the public-private partnership so as to relieve the pressure on public hospitals, yet, strengthening public-private partnership when we are short of doctors may aggravate the wastage of HA doctors, and render the fees of private healthcare services more unaffordable. Therefore, the Government must pull firewood out of the stove by increasing the overall supply of doctors in Hong Kong. Only by doing so can we fundamentally solve the current problems in our healthcare system.

Details of the Bill have been set out in the Legislative Council Brief. Deputy President, the problem of doctor shortage in Hong Kong is imminent. We sincerely hope that Members can support the Bill so that more eligible non-locally trained doctors can come back and serve in Hong Kong in response to the challenges brought to the healthcare services by population growth and an ageing population in Hong Kong. We will do our utmost to complement the work of the Legislative Council in scrutinizing the Bill so that the Bill can be passed as early as possible.

I so submit. Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Medical Registration (Amendment) Bill 2021 be read the Second time.

In accordance with the Rules of Procedure, the Second Reading debate is adjourned and the Bill is referred to the House Committee.

LEGISLATIVE COUNCIL ― 2 June 2021 6811

Resumption of Second Reading Debate on Government Bill

DEPUTY PRESIDENT (in Cantonese): This Council resumes the Second Reading debate on the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021.

REVENUE (FIRST REGISTRATION TAX AND LICENCE FEES FOR MOTOR VEHICLES) BILL 2021

Resumption of debate on Second Reading which was moved on 17 March 2021

DEPUTY PRESIDENT (in Cantonese): Mr CHAN Kin-por, Chairman of the Bills Committee on the Bill, will first address the Council on the Bills Committee's Report.

MR CHAN KIN-POR (in Cantonese): Deputy President, in my capacity as the Chairman of the Bills Committee on Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bills Committee"), I submit the Committee's Report to this Council.

The Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill") seeks to amend the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330) and the Road Traffic (Registration and Licensing of Vehicles) Regulations (Cap. 374E) and to give effect to the proposals made by the Financial Secretary on 24 February 2021 in the 2021-2022 Budget, that is: to increase the first registration tax ("FRT") rates and the vehicle licence fee ("VLF") for private cars by 15% and 30% respectively from 11:00 am on 24 February 2021. At the same time, the Bill also makes a consequential amendment to the Road Traffic (Registration and Licensing of Vehicles) (Amendment) (Fee Concessions) Regulation 2019.

The Bills Committee has held two meetings with the Administration to scrutinize the details of the Bill. Moreover, the Bills Committee has also invited written views from the public on the Bill.

6812 LEGISLATIVE COUNCIL ― 2 June 2021

Members held different views on the Bill. Some members considered the increase reasonable, having regard to the fact that the FRT rates and VLF levels for private cars had not been increased for many years. Nevertheless, some members were deeply concerned about the substantial increase of the FRT rates and VLF levels for private cars. They considered such increase not opportune in view of the present economic situation. They urged the Administration to roll out more relief measures to support the trade during difficult times, since the increase in the FRT rates and VLF levels would aggravate the operating difficulties of the trade.

The Administration advised that the Bill sought to curb growth of private cars and to alleviate road traffic congestion at its roots by increasing the FRT rates and VLF levels for private cars. To ensure the efficient use of limited road space, the Government had been encouraging the public to use public transport instead of driving private cars for commuting. However, considering the existing private car fleet size and its continued rise, road traffic congestion would be further aggravated. To partly catch up with the inflation and taking into account such factors as public acceptability, the Administration had proposed in the Bill to increase the FRT rates and VLF levels for private cars as fiscal disincentives to curb car growth.

Some members considered that the Administration's proposals to increase the FRT rates and VLF levels might not be effective in curbing the growth of private cars. They considered that the large franchised bus fleet might have in fact contributed more to the congestion problem. In addition, illegal parking and shortage of parking spaces for private cars and using of motor vehicles for illegal carriage of passengers for hire or reward were also major causes of road traffic congestion. While not fully convinced that the proposed increase in the FRT rates and VLF levels could reduce the growth of private cars in the mid- and long-term, members urged the Administration to formulate a comprehensive plan to tackle road traffic congestion effectively.

Furthermore, the Administration provided for members' reference the numbers and growth of licensed private cars in the past 10 years as well as the annual vehicle-kilometres travelled by private cars. The information showed that in tandem with the continuous growth in the number of private cars, their usage had also been on the rise. The Administration therefore reckoned it necessary to take decisive measures to contain the growth of private cars. In LEGISLATIVE COUNCIL ― 2 June 2021 6813 addition, The Administration had all along adopting a multi-pronged strategy to alleviate road traffic congestion, encompassing efforts to improve transport infrastructure, manage the use of roads and enhance the public transport system.

Some members suggested deferring the effective date of the proposed increase in the FRT rates and VLF levels for private cars by one year, with a view to relieving the burden of vehicle owners and minimizing the impact on the relevant trades, or making provisions in the Bill so that the FRT rates in force immediately before the Commencement Time would continue to apply to private cars which had been imported into Hong Kong but had not yet been sold before 24 February 2021 and private cars which had already been shipped on board for export to Hong Kong in March 2021.

In response to the suggestion of deferring the effective date of the proposed increase in the FRT rates and VLF levels for private cars by one year, the Administration advised that it would in effect incentivize prospective private car buyers to make early purchases before 24 February 2022 in order to enjoy a lower tax rate or fee level. This suggestion, if implemented, would lead to a surge in car sales and hence a substantial increase in the number of licensed private cars in the next few months. The Administration understood that the proposed increase in the FRT rates might affect the sales of private cars, unavoidably causing adverse impact on the automotive retailing market. The Administration reiterated that the policy objective of the proposed increase in the FRT rates was to contain the overall private car fleet and its growth. The Administration also understood that the transport industry was facing significant difficulties in running business for the time being, a series of relief measures had been rolled out to support the industry.

Deputy President, the above is the report on the work of the Bills Committee. The following is my personal views on the Bill.

I support the Bill this time around. I understand that the increase will affect car owners and the car retail sector to a certain extent, but the FRT rates and VLF levels for private cars have not been adjusted for 10 and 30 years respectively, and the Government has also stated that the objective of the increase is to curb the growth of private cars. From the point of view of the community as a whole, we have no alternative but to accept the increase.

6814 LEGISLATIVE COUNCIL ― 2 June 2021

However, I believe that the increase in fees alone will not solve the traffic problem. The Government should also study other ways, and it should also balance different needs in the community. As a matter of fact, the Government should face squarely one issue, that is, due to the high property prices in recent years, many people have to move to new towns. As new towns are far away from the urban areas, it will naturally give rise to the need for private cars, which will unavoidable result in traffic congestion. Even though people living in new towns may use public transport to commute between their homes and workplaces, they would prefer to travel by private cars for holiday family activities.

The Government has been adopted a public transport-oriented policy with railway as its backbone. This approach is certainly reasonable. But as Hong Kong is a densely populated city, under this mindset, the Government should not underestimate the actual demand for private cars in the community and subsequently slow down the expansion of trunk roads, resulting in road capacities failing to meet the actual needs. The Government should address traffic problems with new technologies, including the use of smart traffic control systems and automated parking systems.

Moreover, people are also concerned about the impact on the transport industry. We can have good business prospects only if cross-boundary and cross-border travel is resumed which will help the economy recover. I believe the Legislative Council will urge the Government to improve the business environment and various supporting measures for transport infrastructures, which will hopefully facilitate the development of the industry. Thank you, Deputy President.

MR TONY TSE (in Cantonese): Deputy President, I speak in support of the passage of the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill"), so as to implement the proposal made in this year's Budget to increase the first registration tax ("FRT") rates and the levels of the vehicle licence fee ("VLF") for private cars by 15% and 30% respectively from 24 February this year. After checking the records, I have found that the last time private car FRT rates were adjusted was already 10 years ago in 2011; while the VLF levels were last adjusted 30 years ago in 1991. For that reason, the review and adjustment this time around are quite reasonable as far as the timing is concerned.

LEGISLATIVE COUNCIL ― 2 June 2021 6815

As Hong Kong was hit by riots and epidemic one after another, the Government had launched a host of anti-epidemic measures to help various trades and people affected by the epidemic during the financial year 2020-2021, with a view to alleviating the difficulties of the people and the financial pressure on various trades. As a result, the Government had a budget deficit of over $230 billion last year. For that reason, in my budget proposals for this year to the Financial Secretary, I have suggested that the FRT rates for private cars, especially the rates for luxurious ones, should be increased, so as to generate more income for public coffers and reduce expenditure under the "affordable users pay" principle.

Apart from bringing in more tax revenue, the Bill can also cool down the growth of private cars seen in recent years through using tax increase as fiscal disincentives. Over the past decade, the number of licensed vehicles has increased substantially by about 32% to over 800 000 in Hong Kong. Among the nearly 200 000 additional vehicles, 80%, that is, around 160 000 are private cars. Yet the total length of public roads over the years has grown by just 3.7%, and the ratio of parking spaces to vehicles has dropped to 1.02 (that is almost 1 parking space: 1 vehicle), which is a new low in 10 years. The growth of roads and parking spaces has failed by far to catch up with the growth of vehicles, which has resulted in traffic congestion and the ubiquitous illegal parking. Hong Kong is a densely populated city with limited road space. It is widely known that the number of passengers carried by private cars is far lower than that of public transport. With the same number of passengers, if many people use private cars, traffic congestion will be inevitable. For that reason, reducing the growth of private cars can help to alleviate the worsening traffic congestion problem, reduce emission, improve roadside air quality and reduce the total carbon emissions of Hong Kong.

Some Members opined that the tax increase should be deferred by one year in view of the current economic condition. This suggestion, if implemented, will incentivize people to make early purchases before the upward adjustment of the tax rates, resulting in an indirect sales promotion, which will lead to an increase instead of decrease in the growth of cars. It will also run counter to the usual practice of the Government concerning tax increases which will take immediate effect and the original intent of cooling down the growth of cars. Moreover, some suggested that the FRT rates in force should continue to apply to private cars which have already been shipped on board for export to Hong Kong. I consider that the proposal contravenes the principle of fairness. It is because 6816 LEGISLATIVE COUNCIL ― 2 June 2021 the order time for new cars, their number and models by different car dealers vary from one to another, and the proposal will benefit the dealers who have placed a large number of orders for new cars, which will be unfair to others.

Actually, the increase of FRT rates this time around will affect luxury cars with a price tag of over $500,000 because the FRT rates are levied on a progressive scale. That is, the higher the price of the car the higher rate the buyer has to pay. It therefore reflects the "affordable users pay" principle. Moreover, Members should not overlook the fact that the Government's current policy is to encourage the public to switch to electric vehicles ("EVs"). For that reason, regardless of the buyers who purchase EVs under the "One-for-One Replacement" Scheme, or those who purchase a brand new EV, the FRT rates for EVs are lower than those of their fossil fuel counterparts. Even EVs are also subject to tax increase this time around; the impact is less significant as their base rates are very low. For example, the annual licence fee for an EV not exceeding one tonne unladen weight is only $572. The increase in rates and levels will facilitate the switch to EVs.

Some considered that the Bill would have very little effect on curbing the growth of vehicles, I agree with that to a certain extent. Hong Kong's traffic congestion problem is worsening; the increase in FRT rates and VLF levels alone will not solve the problem. The Government published in 2014 the Report on Study of Road Traffic Congestion in Hong Kong, which had put forward short-, medium- and long-term measures, but the proposed Electronic Road Pricing ("ERP") has been dragging on for years. Deputy President, you should also know that the pilot ERP scheme for Central has not yet been implemented. If we are to address the traffic congestion problem, we cannot solely rely on increasing the levies. We should adopt a multi-pronged approach, including improving the quality of public transport which will reduce the need for people to use private cars and encourage the use of public transport, so as to enable people to experience the "smart mobility" the Government has been repeating all along.

Deputy President, I can see that the Government has the determination to resolve the traffic congestion problem, but it lacks a comprehensive plan. I had asked the Government about the figures concerning the shortage of parking spaces but it turned out that the Government had never done the relevant statistical projection. For that reason, I have all along been urging the Government to conduct the Fourth Comprehensive Transport Study so as to have LEGISLATIVE COUNCIL ― 2 June 2021 6817 a comprehensive and in-depth review on Hong Kong's public mass transport development strategies, road use situation as well as town planning, with a view to resolving Hong Kong's congestion and traffic problems in the long run.

With these remarks, Deputy President, I support the Bill.

MR FRANKIE YICK (in Cantonese): Deputy President, I speak in opposition to the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill"). It is because the Liberal Party does not subscribe to the Government's justifications for increasing the first registration tax ("FRT") for private cars by 15%, and also we think that it is definitely not the opportune time to do so.

The Government thinks that the worsening of traffic congestion is attributed to the ever-increasing number of private cars, and hence it is necessary to curb the growth of private cars through fiscal measures. The Liberal Party reckons that the Government is making the wrong diagnosis and prescribing the wrong medication.

First of all, while the population in Hong Kong keeps on increasing, new towns continue to be developed. Owing to the lack of land for development in the urban areas, new development areas are usually located in the New Territories where many people from the middle class live. Compared with the population in 2009, the population of the New Territories has increased by 10% in 2019. It is unfortunate that our Government has not realized the development concept of infrastructure first. As a result, there is a lack of transport facilities in new development areas and the residents there have no other alternative but to purchase cars as their means of transportation. The Government should understand that nowadays, private cars have already become necessities rather than luxury items. If the Government increases the cost of purchasing new vehicles, the number of first registered vehicles will undoubtedly be reduced within a short period of time. However, the people who need to purchase vehicles can still turn to the market of second-hand vehicles. With the waxing and waning in the two markets, even though the increase in FRT can help reduce the number of new vehicles in the short term, it does not mean that the number of licensed vehicles will be reduced, as those who need to purchase vehicles will still make such purchases.

6818 LEGISLATIVE COUNCIL ― 2 June 2021

In fact, there are many reasons leading to traffic congestion. We should absolutely not merely look at the growth in the number of private cars and then simply think that traffic congestion can be resolved by curbing the growth of private cars.

Over the past five years, the number of registered motor vehicles has indeed increased by about 11.72%, whereas the number of licensed vehicles, namely those vehicles which can be driven on roads, has actually only slightly increased by 6.9%. Compared with 2019, the number of licensed vehicles even dropped by 0.16% in 2020. Hence, traffic congestion is not purely caused by the increase in the number of registered vehicles. Moreover, Hong Kong is a rather affluent society. One of my friends bought a new car last year. He has a total of five private cars at home but each day, he can only drive one car out at one time. Mr SHIU Ka-fai, who is present here, has an elector. He once told me that he liked collecting vintage cars very much. He has over 10 of them at home, but likewise, he can only drive one out at one time. Therefore, the increase in the number of private cars is not necessarily the cause of traffic congestion.

I believe that Members will agree that there are too many franchised buses on the roads in Hong Kong, especially during rush hours, and there is duplication of routes for most of the bus routes. I think Members are very familiar with the scene captured in the photo that I am now holding. It is because on Hennessy Road on Hong Kong Island and Nathan Road in Kowloon, we can see the long queues of buses leading to traffic congestion at these areas almost every day. Hence, the foremost task for the Government is to expedite the rationalization of bus routes and also to introduce appropriately the bus-bus interchange arrangement. This can firstly alleviate traffic congestion and secondly reduce the operating costs of bus companies. At the end, bus fares can be lowered for the benefit of the general public.

Deputy President, in this Council, we have criticized the Government many times for its mistakes in the parking space policy. The Government unilaterally thinks that if parking spaces are not provided, the public will naturally not purchase private cars, and the consequence in reality is a severe shortage of parking spaces. A decade ago, the ratio of private cars to parking spaces in Hong Kong was 1:1.45. But today, the ratio has already fallen to 1:1.09, which is my information on hand, or even to 1:1.02 according to Mr TSE, and is basically 1:1, meaning that you cannot find a parking space on the roads. When people drive their vehicles out and cannot find any parking space, this will give LEGISLATIVE COUNCIL ― 2 June 2021 6819 rise to the situation of serious illegal parking. Given that illegal parking will lead to traffic congestion, the Government has undertaken that it will conduct a study on the demand for parking spaces, but hitherto, it still has not given an account on the study results and improvement proposals to the Council.

At present, one of the major reasons for traffic congestion is the Government's inaction towards the illegally operated "white licence car services". Generally, the daily mileage of a private car is about 30 km on average, but that of a taxi is 450 km on average, which is 15 times of the mileage of a private car. In the market, one car-calling platform claims that it has as many as 30 000 registered drivers. Please listen carefully that this is only one of the platforms. Hence, I believe that currently in the market, there should be no less than 50 000 "white licence cars" operating illegally. Let us assume that a "white licence car" travels only 150 km per day (i.e. about one third of the mileage of a taxi). Then one "white licence car" is tantamount to five private cars, and 50 000 "white licence cars" are tantamount to 250 000 private cars running on the roads. It will thus be very strange if there is no traffic jam. Instead of going to great lengths to introduce some measures to curb the growth of private cars with a view to resolving the traffic congestion problem, the Government should seriously crack down on "white licence car services", a measure which will be effective enough to reduce drastically the number of vehicles on the roads. In fact, condoning these illegally operated "white licence cars" is absolutely unfair to the legal operators who have genuinely paid a large sum of money to the Government for a taxi licence.

At the present moment, traffic congestion is not a territory-wide problem. It happens every day mainly during rush hours in the morning and afternoon at certain trunk roads and road harbour crossings, and also at some commercial and shopping areas. If the Government wants to resolve the traffic congestion problem, it should roll out some targeted measures. In addition to the various points mentioned above, the Government can also expeditiously implement some measures like introducing special lanes for public vehicles, charging traffic congestion levy, as well as reintroducing its toll adjustment plan for rationalizing traffic among the three cross-harbour tunnels after it has taken back the ownership of the Western Harbour Crossing in 2023, with a view to effectively diverting the traffic flow instead of applying the tax increase across-the-board to all those members of the public who need to purchase vehicles.

Deputy President, another reason why the Liberal Party opposes the increase of FRT for private cars is that now is definitely not the opportune time to do so. Hong Kong has experienced the trade war between China and the United 6820 LEGISLATIVE COUNCIL ― 2 June 2021

States which began in the second half of 2018, the "black-clad riots" in 2019 and the COVID-19 pandemic since 2020. During this period of time, various trades and occupations have been hit hard, and the motor vehicle sales and the related trades, such as vehicle repair and maintenance, supply of component parts and car detailing, have been facing operational difficulties. However, the Government aggravates their plight with an irrational reason. Besides, on the basis of the revenue of $6.1 billion from FRT in 2020-2021, the extra tax money obtained by the Government from the increase of FRT for private cars will only be about $900 million at the most, which cannot substantially help address the fiscal deficit, but will instead seriously affect the livelihood of some tens of thousands of people in the trades. Is it worth it?

History has already clearly told us that the effect of raising FRT for private cars is very limited and short-lived in reducing the number of private cars. In the 9 to 12 months after FRT was raised in 2011, the number of newly registered vehicles was only reduced by 1.3%. But two years later, the number of newly registered private cars rose sharply by 8% in 2013. We can thus see that the method of curbing the growth of vehicles through increasing the cost of vehicle purchase is ineffective. Even Singapore, in which the cost of owning a private car is relatively high, is also facing car growth problem, although its traffic congestion situation is a lot less severe than Hong Kong as the Singapore Government has rolled out many different measures to alleviate traffic congestion. If Hong Kong is to resolve the traffic congestion problem, it may as well learn from Singapore.

Deputy President, I reiterate that the Liberal Party opposes the increase of FRT for private cars. In the event that the Second Reading of the Bill is passed, the Liberal Party will move our amendments. I so submit.

MR CHAN HAN-PAN (in Cantonese): Deputy President, the impact of a tax rise during the pandemic, with two of the three tax rises this year related to motor vehicles, is rather big to car owners. It is said that the proposed tax rise seeks to control the growth of motor vehicles, but actually it is meant for increasing revenue. It is unwise to kill the goose that lays golden eggs; nor is it a good time to do so. The motor vehicle service industry is on its last gasp. I believe the Government, or everyone, knows that the motor vehicle service industry has been seeking help from the Government due to the impact of the pandemic. Instead of offering a helping hand, the Government has stamped its foot on the industry. I believe the motor vehicle service industry is doomed.

LEGISLATIVE COUNCIL ― 2 June 2021 6821

I believe we can imagine the hardship faced by the motor vehicle service industry. First of all, the "black-clad riots" in 2019 clouded the prospect of the industry. Statistics show that vehicle sales in that year dropped dramatically. Cross-border/boundary travel has been suspended since 2020. Many Mainland-Hong Kong vehicle owners cannot replace their vehicles. With so few people wanting to buy new cars, how could vehicle sales be good? Car dealers fail to sell their cars which were shipped here in advance for sale. So, we can imagine their difficulties in meeting their obligations to pay rents and wages under the twin blows of the pandemic and the riots. They have to fork out a large sum of cash every month to settle the rents and staff salary. They sought help from the Government but it turned a deaf ear to their request. And now two tax rises are related to them, making their prospects very uncertain.

According to the Government, the proposed tax rise seeks to curb the growth of vehicles. Let me provide some data for Members to consider. In 2017-2018, the rate of increase in the number of vehicles dropped by 3%; and in 2019 and 2020, the rates of increase respectively dropped by 8% and 5%. We can see there is a year-on-year drop in the growth of vehicles. Actually, the vehicles growth rate has been slowing down even if the Government has not rolled out any measures to curb it. A few years ago, the economy was good; the condition was good and property prices remained high. People would buy a new car to go around the territory. However, when the economy was bad, people would naturally refrain from buying new cars. This is a matter of choice by the people and also driven by the economic cycle. This tax rise is not about whether the increase is too much or too little, but rather it is about giving people the impression that the Government is too mean. Why does it pick this time to raise tax and rub salt into their wounds?

Can the tax rise successfully curb the growth of motor vehicles? Something happened after the tax rise this year. We can see such scenes in many large shopping malls, where a large number car sale promotions are launched. It is evident from government statistics that motor vehicles have increased rather than decreased in number since the Government's proposed tax rise was announced. The number of registered vehicles has surged. I believe this is something unexpected to the Government.

The reason is actually very simple. In anticipation of booming in 2020-2021, car dealers purchased cars in advance for sale in 2021. However, these cars will become old models a year later and car dealers will sell these models at discounted prices. The dealers were thus driven to desperation when they learnt about the Government's proposed tax rise. A tax rise will dampen 6822 LEGISLATIVE COUNCIL ― 2 June 2021 people's desire to buy new cars and it will be very difficult for car dealers to be able to sell the cars concerned. They have to sell the vehicles at cut-throat prices due to their pessimistic views about the future.

The Government did not expect that a tax rise would have forced car dealers to slash prices to promote car sales. Indeed car dealers have been suffering losses, serious losses, and now they have to further absorb the 15% tax rise. They have not raised the prices of their cars. They would suffer further losses because the tax rise has been incorporated into the prices of the cars. This is why I speak out for the industry today. I am not working in this industry. But when I learn about their situation, I can feel their plight.

Brand-new cars are imported by car dealers in the hope of selling them at good prices, but the prices will start to drop after one year. Their hope for an economic recovery is dashed. Their next hope is the resumption of travel. The values of their cars may have already dropped by 20% as a result of depreciation, and the Government's proposed tax rise will further eat into their values by 10%. That is why these car dealers have suffered serious losses, and that is why increasing tax has expedited the growth of cars. This reminds me of a Chinese saying, and that is, "Administering a large country is like cooking seafood". What does it mean? It means that when you cook seafood, you do not use a rod to stir the seafood; otherwise, the seafood will turn into broken pieces. If the Government aimlessly formulates policies, car dealers will have no choice but slashing the price to sell their cars. People who did not intend to buy cars would buy one at shopping malls when they saw these old-model cars being sold at cut-throat prices. These cases do happen.

The growth of cars has slowed down in Hong Kong. But the Government insists on curbing the growth with a tax rise and let car dealer industry bear the brunt of it. A member of the industry complained to me several days ago. He said he felt like working in an obnoxious business having experienced the series of suppression and smearing from the Government. As a matter of fact, over 90% of Hong Kong people use public transport. What does it mean? It means that we basically use public transport carriers, rather than private cars, as our means of transportation. That is to say less than 10% of the people use private cars. With such a usage rate, I wonder if the Government wants 100% of the people to use public transport.

Can the Government truly curb the growth of vehicles by raising tax? I fail to see such an effect since the implementation of the tax rise. And based on past experience, I do not believe that raising tax can curb car growth. Only the LEGISLATIVE COUNCIL ― 2 June 2021 6823 economic cycle will affect car growth. Besides, the Government truly needs to review its ability in assessing the prevailing situation. For instance, the Government has tried to control car growth with the supply of car parking spaces. When the Government rolled out this policy, we already said that it was a serious mistake. Why did we say so? If the Government does not provide enough parking spaces, people will have to park their cars illegally; when illegal parking becomes common, these cars will block the traffic and cause traffic congestion; and when the traffic is congested, it will be even more difficult for the Government to tackle the traffic congestion problem. This is straightforward. In the end, the Government used a wrong concept to formulate the Hong Kong Planning Standards and Guidelines which in turn led to a dramatic drop in the supply of parking spaces in the past decade.

In my opinion, another serious mistake is about the topside properties at railway stations of the MTR Corporation Limited ("MTRCL"). Some of these topside properties should be able to provide parking spaces for motorists to park their cars there and then take the railway. However, due to the assumption that people will take the train when they go out, parking spaces atop MTR railway stations are further reduced by 20%. Besides, there are usually shopping malls at MTR railway stations; and a long line of cars blocking the traffic can often be seen at the entrances of the MTR shopping malls due to insufficient parking spaces. This policy exposes the Government's serious shortcomings in handling the issue of parking space.

Regarding how to tackle traffic congestion, I hold that Hong Kong should draw reference from the Mainland because they have effectively tackled their traffic congestion problems. Ten years ago, Guangzhou or Hangzhou was often associated with heavy traffic congestion; but now the traffic conditions in Hangzhou have improved a lot. Why? It is because instead of raising tax and reducing parking spaces, they use innovative technologies and super computers to calculate the time intervals of traffic lights and the duration that a car can park at a certain place, in order to speed up the traffic flow.

Hence, I am very disappointed at the Government's decision to raise tax and its indifference to the industry despite the pandemic. I hope that in its future policies, the Government can pay greater attention to the survival of the industry because many members of the industry are small business operators. Their survival is more of a matter of livelihood rather than business operation. I hope the Government will learn a lesson from its mistake today.

Deputy President, I so submit.

6824 LEGISLATIVE COUNCIL ― 2 June 2021

MR SHIU KA-FAI (in Cantonese): Deputy President, I oppose the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021. Despite proposing over $100 billion worth of relief measures, this year's Budget has singled out two industries as targets for attack, one being the securities industry represented by Mr Christopher CHEUNG, where the rate of stamp duty on stock transfers will be raised by 30%, and the other being the automotive service industry represented by me, hence an impact on all middle-class car owners across Hong Kong. Coincidentally, the Second Reading debates on the two relevant Bills will be resumed in Council today.

I understand that, in the past, the Hong Kong SAR Government provided a lot of support to small businesses affected by "black-clad violence" in society. During the epidemic, the SAR Government has also opened the public coffers to help many people in need. We would like to thank the Government, as well as the Financial Secretary, on behalf of many friends who have benefited from its efforts.

However, as I always say, nothing is 100%. Under such difficult circumstances, why does the Government still want to levy more tax on these two industries? Levying a stamp duty on stock transfers is just about understandable, given that the transaction volume is now on the order of one to two hundred billion dollars per day, compared with several tens of billion dollars in the past. Since so much money is invested in speculation, can taxes be levied to boost the public coffers? This is just about comprehensible. Nevertheless, on the automobile service front, car sales have in fact fallen dramatically over the past two years. A tax increase cannot be justified in such a difficult situation, and it is also for this reason that I cannot support this motion.

The Financial Secretary's announcement on 24 February of a massive 15% increase in first registration tax and 30% increase in vehicle licence fees for private cars came as a shock to the whole automotive service industry. On the next day, Mr Frankie YICK and I immediately and urgently met with members of the Motor Traders Association of Hong Kong representing 42 car brands. I thank the Secretary for Transport and Housing, Mr Frank CHAN, for coming that evening to engage in an exchange with the industry. I am grateful that he was there to listen to our views. Afterwards, on 15 March, Mr Frankie YICK and I held a press conference, together with representatives of 15 trade associations and federations of the automotive service industry, to point out that the tax increase currently proposed by the Government is unreasonable and unfair.

LEGISLATIVE COUNCIL ― 2 June 2021 6825

The Government's argument is twofold. The first point is, of course, to solve the road congestion problem by means of a significant tax increase. Secondly, it hopes that the tax and fees catch up with inflation, considering that they have not been increased for many years. These two major reasons are understandable to me but the question is whether the timing is right. Is it really necessary to raise tax at a time when the whole industry is operating in such difficult circumstances? This is the biggest reason why I have reservations.

The Government indicates that the first registration tax on private cars has not been increased since 2011, nor have the vehicle licence fees been adjusted upwards since 1991. Of course, I understand that the Government has not made any adjustment for many years and needs to catch up with inflation, but as I said just now, right timing is essential even for catching up with inflation. Now is obviously the wrong time to propose an increase in fees, ignoring the current difficulties faced by the industry and its practitioners.

In the past couple of years, Hong Kong has been hit by the US-Sino trade war, social incidents of "black-clad violence" and COVID-19. As a result, the economy is in the doldrums. All trades and industries have been badly hurt for a long time, and the car sales trade is no exception. According to the statistics of the Transport Department, the number of new vehicle registrations has dropped every year since 2018. It has reduced from 42 287 to 37 036 over a period of three years, registering a cumulative fall of 12.4%. If only the sales of conventional vehicles are counted, taking those of electric vehicles out of the equation, the drop is even greater, reaching 22.5%.

In the past two years, the industry has been in truly dire straits, but the Government has not provided much support and the landlords have refused to reduce rents. We all know that the industry is struggling hard for survival. Nevertheless, even under such circumstances, I know that many employers in the industry insist on avoiding layoffs as far as practicable so as to keep the jobs for their staff, hoping for the light at the end of the tunnel. However, they have been caught off guard by the fact that the Government has not just failed to shore up support for them, but, on the contrary, even singled them out as targets for attack, hence exacerbating the plight of many in the industry. While the car sales trade is certainly the first to bear the brunt, a host of related trades are not spared, including a variety of after-sales services, such as repair and maintenance, car detailing, financial and insurance services, as well as those dealing in car parts and accessories, tyres, batteries, etc. The pressure for layoffs, pay cuts and even 6826 LEGISLATIVE COUNCIL ― 2 June 2021 closures has increased. It may eventually hit the livelihoods of tens of thousands of families.

As for the other point, actually the industry is quite unhappy about being unfairly blamed for the problem of traffic congestion. Traffic congestion is always a complex issue, with many causes inextricably linked to the number and age of vehicles, supply and design of roads, tolls at the three harbour crossings, shortage of parking spaces, poor management of public transport schedules, rising number of "white licence cars" and so on. However, the Government is unfairly biased towards blaming the industry for the traffic congestion problem.

Moreover, the Motor Traders Association of Hong Kong offered the Administration two proposals separately in 2017 and 2020 for solving the traffic congestion problem, but the Government has ignored them ever since, nor has it discussed them with the association. This, in fact, cannot be justified either.

Likewise, the growth of vehicles is not driven by new cars. Secretary CHAN said in his First Reading [sic] speech on 17 March: "The simultaneous increases in the first registration tax and vehicle licence fees can create a synergy to restrain the growth of private cars and even bring down the overall number of private cars." But I would like to point out that the growth of vehicles in Hong Kong is not primarily driven by new car sales. In fact, the number of first registrations of private cars has been falling since as early as 2017, from 43 642 in 2017 to 37 036 in 2020, showing that the number of new cars has been declining. However, the number of licensed private cars has been rising instead, from 552 710 in 2017 to 573 000 in 2020. The increase in the overall number of vehicles in contrary to the drop of new cars proves that the launch of new cars is irrelevant.

In addition, there is a practical need for members of the public to drive. We all know that as the population continues to move towards the northwest, private cars have become a necessity for many people. Data shows that the population of the New Territories in 2019 has increased by 10% over 2009. Besides, according to the Planning Department's report "Hong Kong 2030+: Towards a Planning Vision and Strategy Transcending 2030", about 41% of Hong Kong's population lives in the New Territories, but the majority (76%) of jobs are in the urban areas. Therefore, actually the uneven distribution of homes and jobs will also create problems in terms of traffic flow and handling capacity.

LEGISLATIVE COUNCIL ― 2 June 2021 6827

All things considered, although the Government says that areas inhabited by more than 70% of the population in Hong Kong will be brought into the railway catchment area upon completion of the Shatin to Central Link, I believe that the number of people who need private cars will remain high.

The Government says that the number of private cars has increased, but in fact some car owners, as Mr Frankie YICK said, have several cars instead of having one car per family or per person, and many of them only drive once or twice a week. So, is traffic congestion really caused by private cars? I quite disagree.

On the contrary, the increasing number of "white licence cars" is, I believe, also one of the factors contributing to the traffic congestion problem. It is important to understand that "white licence cars", or "Uber" as some people call them, are private cars often driven around town like taxis without finding a place to park. At present, probably more than 30 000 cars are involved in such unregulated operation, but the Government still falls short in cracking down on "white licence cars", so this is also a cause of traffic congestion. In any event, I cannot agree to unfairly ascribing the cause of traffic congestion to the number of new cars.

Lastly, I would also like to talk about the problem of insufficient parking spaces. As Mr Frankie YICK has mentioned earlier and many members of the public are aware of, parking spaces in Hong Kong are totally insufficient. According to an Audit Commission report and information prepared by the Research Office of the Legislative Council Secretariat, despite a 53% growth in private cars during 2006-2018, parking spaces increased only by 11% over the period. It is evident that, with this rate of increase, the number of parking spaces will be far from sufficient and, as a result, many private cars will flood the roads, causing traffic congestion. Therefore, the industry's launch of new cars is irrelevant.

I believe that the currently proposed increase in licence fees and first registration tax will not really help to solve the traffic congestion problem, but will have an impact on the industry, whose business is now in the doldrums, as well as on the livelihood of fellow practitioners in peripheral industries. Therefore, Deputy President, I do not agree with the Bill. Besides, Mr Frankie YICK and I will propose two different amendments later. Thank you.

6828 LEGISLATIVE COUNCIL ― 2 June 2021

MR CHAN CHUN-YING (in Cantonese): Deputy President, given that Hong Kong is a small and densely-populated city, the Government has adopted a multi-pronged strategy over the years that encompasses efforts to improve transport infrastructure, expand and enhance the public transport system, and introduce fiscal measures such as the first registration tax ("FRT") and annual licence fees ("ALF") for vehicles, in an attempt to alleviate traffic congestion in Hong Kong. It has also been encouraging the public to take public transport as far as possible to ensure the efficient use of limited road space. However, during peak hours, it feels like walking must be faster than driving in certain road sections or areas, such as Tuen Mun Road, Tolo Highway, the Kwun Tong Industrial Area or the old Cross-Harbour Tunnel.

The enormous size and continuous growth of vehicles is a major contributor to road traffic congestion. The Transport Advisory Committee issued a report on road traffic congestion in 2014, which considered that increases in FRT and ALF were the most direct and effective means to suppress car growth. Yet, the effects appeared to be rather short-lived and depended on the level of increase. For instance, the number of newly registered private cars plunged immediately following the doubling of FRT and tripling of ALF in 1982. Yet, the number began to rebound in 1985. When FRT and ALF were increased again in 1990 and 1991, the number of newly registered private cars rose rather than fell. After the last FRT increase in 2011, FRT rates already ranged from 40% to 115%, but there was only a short-lived slowdown of growth in the number of newly registered private cars. From 2010 to 2020, the number of licensed vehicles increased substantially by about 32% from about 609 000 to about 803 000. Amongst the newly added vehicles, 80%, i.e. around 160 000, were private cars. As a result, the number of licensed private cars substantially increased by about 38% during the above period from about 415 000 to about 573 000. Moreover, the annual vehicle-kilometres travelled by private cars increased considerably by 41% in the past 10 years, while that travelled by buses and light buses remained fairly stable during the same period. This shows that in tandem with the growth in the number of private cars, their usage has also been on the rise.

Deputy President, FRT has not been adjusted for 10 years since the increase in 2011, and ALF, as mentioned by some Members earlier, has not been increased for 30 years since it was increased in 1991. Since then, the Composite Consumer Price Index has increased by 28% and 113% respectively, whereas the median monthly income of households has increased by 46% and 218% respectively. The lack of timely adjustments to FRT and ALF has undermined LEGISLATIVE COUNCIL ― 2 June 2021 6829 the effectiveness of the fiscal disincentives to curb private car growth. As a result, traffic congestion persists.

Government figures show that the number of licensed private cars has increased by 5 000 in the first three months of this year and now stands at a record high of 578 000. At this rate of growth, it is estimated that nearly 20 000 private cars will be added this year. Therefore, if we do not act decisively to curb the growth trend, we will face even greater challenges in the implementation of measures to alleviate traffic congestion in the future.

In fact, many major cities have their ways to deal with traffic congestion. For example, apart from a variety of vehicle taxes, London has implemented its London Congestion Charging Scheme since 2003, under which a daily rate of about HK$140 is charged for driving into the charging areas during the charging period. Beijing introduced the "odd-even scheme" prior to the Olympic Games in 2008 and then rolled out a vehicle quota system based on lottery in 2011 to directly cap the growth of private cars. Singapore has also put in place a similar vehicle quota system, coupled with the upward adjustment of taxes and introduction of electronic road pricing; since the implementation, the growth in private cars has continued to decline, achieving the goal of long-term control of the growth in the number of vehicles.

It is therefore my hope that, apart from continuing to use fiscal tools and other measures, the Government can actively draw on the successful experience of other regions and take into account the actual circumstances of Hong Kong to adopt various measures that can help alleviate traffic congestion, including, of course, tackling the problem of "white licence cars" mentioned by Mr Frankie YICK.

Deputy President, curbing the overall number of private cars and their growth is fundamental to relieving traffic congestion. Raising FRT and ALF, which have not been adjusted for many years, is a necessary and effective fiscal measure. Therefore, I support the passage of the Bill. As for the amendments, a one-year postponement of implementation, or exemption for vehicles shipped before the tax increase, would lead to a surge in vehicle sales during the transition period, or as Mr Tony TSE mentioned earlier, the unfairness caused by the differences in the number of vehicles pre-ordered by individual car dealers, and would not achieve the originally intended effect, so I will not support them.

I so submit. Thank you, Deputy President.

6830 LEGISLATIVE COUNCIL ― 2 June 2021

MR MICHAEL TIEN (in Cantonese): Deputy President, this time round, the Government introduces the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 with a view to raising the vehicle licence fees which have not been increased for three decades, and using a substantial increase of the first registration tax to reduce the number of people who drive to work, thereby alleviating traffic congestion during the peak hours. I have always encouraged the public to use public transport more often, especially during the peak commuting hours.

At the meeting of the Bills Committee on Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 held on 13 April, I already pointed out that increasing the first registration tax on private cars can in no way resolve the problem of traffic congestion. Let me start with the increase of the licence fees. Now that the Government tries to catch up with some 30 years of inflation with the fee increase, the people who will take the brunt of it are definitely commercial vehicle drivers. They have to do their jobs regardless of whether the licence fees are increased or not. Under the current economic environment and the pandemic, they have already been living in hardship with their income substantially reduced, but the Government still chooses to deal them a further blow at this moment. This is simply unjustifiable. I do not mean that the licence fees should not be raised, but simply insist that it should be withheld for the current year. After all, the Government has not increased the fees for three decades already, so why should it insist on doing so this year? Is it trying to make a belligerent gesture towards us? Or does the Government mean to increase the licence fees annually subsequent to the increase this year? But the authorities have said nothing about it. So why is it a problem to defer the increase of the licence fees and do it over a period of two years? The Government has no cash flow problem, but still maintains its stance with no regard for public sentiment. In this case, I really have difficulty giving my support.

That said, it is even more difficult for the Government to convince me to accept its substantial increase of the first registration tax. As I stated, the Government has got the wrong end of the stick, as ownership and usage are two different things. An increase in tax may not result in a reduction in the number of vehicles on roads. Maybe, the tax increase will reduce the number of newly registered vehicles within one to two years, but subsequently―from experience in the past―it will go up again. Anyway, in my view, the number of vehicles in Hong Kong and the presence of traffic congestion during the peak hours have no LEGISLATIVE COUNCIL ― 2 June 2021 6831 direct relationship with the increase of first registration tax at all. Traffic congestion can still be alleviated in the absence of any tax increase, whereas increasing the tax may not necessarily reduce the number of vehicles.

To put it simply, the Government has put in considerable resources to improve the road conditions in recent years, and as we can observe, it will soon deliver results. For New Territories West, the franchise of Tai Lam Tunnel will be taken back by the Government in 2025―I guess the Government will definitely let the public use the tunnel free of charge―and then, there will be Route 11―of course, with a few more years to go―so Tuen Mun Road will soon be less congested. At the moment, as Tai Lam Tunnel is tolled, vehicles all flock to Tuen Mun Road, causing traffic congestion there as a result. The Government then claims that there are too many vehicles in Hong Kong and it calls for a tax increase which will, in turn, reduce the number of vehicles and make people who drive to work via Tuen Mun Road switch to commuting by rail or by bus. Actually, the solution is very simple. With the Government taking back the franchise of Tai Lam Tunnel, the problem concerned can already be resolved, and it is just a matter of a few years. As for Hong Kong Island, the Government will take back the franchise of the Western Harbour Crossing in 2023. This, together with the Central-Wan Chai Bypass and the launch of the Electronic Road Pricing Pilot Scheme, will make it easier to achieve rationalization of traffic on Hong Kong Island then. New roads such as Tuen Mun-Chek Lap Kok Link, Tuen Mun Western Bypass, Road P1, and Route 11 will also be commissioned successively, thus adding to the number of roads. Apart from facilitating bus and minibus services, doesn't the Government also aim at enabling members of the public to drive without causing congestion by building these many highways?

Here, allow me to digress a little. One day, I met a friend's wife in an elevator. She seldom talks politics with me, but then she stated that she noticed what you, Secretary, had said when watching television one day. She found it really strange that the Government built more and more roads while arguing for the need to increase the motor vehicle first registration tax. To her, this suggests that the Government just wants to discourage people from buying so many vehicles, and if this is the case, why is it necessary to build so many roads? What does the Government actually aim at when it now increases the tax after having built so many roads? Being an ordinary person, she simply has no idea what is going on. This shows the big problem with the basic logic of this measure. Most people buy their vehicles because … During the peak hours, 6832 LEGISLATIVE COUNCIL ― 2 June 2021 people will commute by public transport if the Government has properly addressed public transport issues. When driving to the urban areas, people really have difficulty parking their vehicles due to a lack of parking spaces there, and this is why many people have actually changed their travelling patterns. But very often, people would like to have their own vehicles to take their children and other family members to different places to enjoy themselves on Saturdays and Sundays. It is quite fun to be able to go here and there, and to visit their elders. From this perspective, what is wrong with buying a vehicle? Severe traffic congestion is rare on weekends, except for places like the beaches. The Government ought to find out whether all car buyers intend to drive to work during the peak hours. It must give careful thought to this point first.

Most importantly, Deputy President, the one point which I have insisted for years concerns the vast piece of land at the Tuen Mun Road Bus-Bus Interchange. In her Policy Address, the Chief Executive has mentioned the need to promote what is referred to as park-and-ride ("PnR") concessions, I mean PnR, so as to encourage people to drive somewhere to switch to public transport during the peak hours. If the Government builds a multistorey car park there, the problem concerned can be resolved as many people will be spared the need to drive to work. They can take buses after parking their vehicles there, and come back after work by bus to drive their vehicles home. For some people, they may not be living at places where there are bus or minibus stops downstairs. They have to be well-dressed or besuited when they go to work. What does the Government think they can do during the sweaty summer months? This is a very simple matter. That piece of land is readily available there, and the Development Bureau has stated that the piece of land has not yet been assigned for any special purpose. Even the Chief Executive has expressed her wish to promote this type of PnR facilities, and has written it down in her Policy Address. But then, nothing has been done thus far.

Regarding the Electronic Road Pricing Pilot Scheme―I assume that the Government really intends to launch it―when the franchise of the Western Harbour Crossing is taken back―the Central-Wan Chai Bypass has been completed―the Government should not act as if nothing has happened then. It has built so many new roads, and talked about implementing various measures for alleviating traffic congestion. Now, it even asks for a substantial increase of the tax on vehicles, thinking that this can be a solution to traffic congestion. But it has chosen to increase the tax at the worst time in decades, the time when the worst crisis in a century arises, thus making this measure tantamount to adding LEGISLATIVE COUNCIL ― 2 June 2021 6833 insult to injury in effect. Notwithstanding, Deputy President, the most crucial point is that this measure is not the right remedy to the problem concerned.

The measure which is truly the right remedy is the construction of PnR facilities and the introduction of electronic road pricing. Just now, some Members also mentioned that the Government should synchronize the traffic light signals, so as to avoid poor coordination of traffic signal timing which causes traffic congestion. Moreover, various tunnels fail to achieve diversion of traffic. The most convenient tunnel charges the lowest toll, whereas the toll of the most inconvenient one is the most expensive. I supported the proposal for the rationalization of traffic distribution among the three road harbour crossings, but there was nothing I could say as the Government was unable to secure enough votes of support. Anyway, I am a supporter of the proposal for the rationalization of traffic distribution among the three road harbour crossings. When the Government gets back the franchises of the tunnels on Route 3, and the tunnels become toll-free, there will no longer be any congestion on Tuen Mun Road. These are the very measures which can resolve the problem of traffic congestion. What is the use of increasing the motor vehicle first registration tax by the Government? A few years later, people will buy vehicles all the same again. This is very simple, and that is about it.

Regarding this Bill, I cannot find any reason to support it, and therefore I will not support it.

MR MA FUNG-KWOK (in Cantonese): Deputy President, the purpose of the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill") is to mainly give effect to the Financial Secretary's proposals in the Budget for the 2021-2022 financial year of raising the rates of the first registration tax ("FRT") for private cars and the licence fees for motor vehicles by 15% and 30% respectively, as a fiscal means to curb the growth of vehicles.

Deputy President, in Hong Kong where there is a scarcity of land but a large population, even though an overwhelming majority of citizens mainly rely on public transport services to travel, the problem of traffic congestion still continues to worsen. The paper provided by the Government says that the ever-growing number of private cars is the main cause of traffic congestion. Over the last decade, the number of licensed private cars has increased by 40% from 415 000 to 576 000, accounting for about 71% of the total number of 6834 LEGISLATIVE COUNCIL ― 2 June 2021 vehicles in 2020. If the Government's measures can really curb the growth of private cars and can even reduce the total number of vehicles so that the problem of traffic congestion can be finally resolved or at least be alleviated, considering from the perspective of public interests, the suggestions in this Bill are worth our support in principle.

Nevertheless, I noticed that during the deliberation by the Bills Committee, some members have raised some queries on, for instance whether raising the rates of FRT for private cars and the licence fees for motor vehicles are the effective means to curb the growth of vehicles. In this respect, from past experience, increase in fees seemed to be a disincentive to car growth in a certain period of time, but the effect might not last long. Besides, a car owner usually has a basket of factors to consider before making his decision of purchasing a car. Therefore, some members have reservations about the effectiveness of this increase in tax rates and fees.

Some members have also suggested that the Government should have a holistic and comprehensive policy to address the traffic congestion problem. In addition to improving transport infrastructure, expanding and enhancing the public transport system, stepping up road management and increasing the supply of parking spaces are also important measures. As a matter of fact, the traffic congestion problem in not a few areas has worsened due to the increase in illegal parking. These views given by members are also very reasonable.

On the other hand, the policy objective of this increase in tax rates and fees is to curb the growth of vehicles. But at the same time, the impact of the increase on the promotion of electric vehicles is also worth exploring. Despite the quite significant rate of increase of FRT, the FRT waiver for general electric private cars is still capped at $97,500, while the latest FRT concession under the "One-for-One Replacement" Scheme introduced in the Budget is capped at $287,500. Under the circumstances, the increase in FRT rates will drastically increase the cost of owning traditional vehicles running on fossil fuel, while electric vehicles will stand to benefit greatly in terms of pricing.

This situation gives rise to two issues. Firstly, not a few car owners have an inherent need for using vehicles and will regard them as necessities. If more car owners switch to electric vehicles, it certainly is desirable in terms of environmental protection, but the problem of traffic congestion may not be greatly redressed. On the other hand, according to the Budget, electric vehicles LEGISLATIVE COUNCIL ― 2 June 2021 6835 will continue to be promoted and the registration of new fuel-engined private cars is planned to stop in or before 2035. However, among the present 600 000-odd private cars in Hong Kong, electric vehicles only account for 2.7%, falling far behind the target previously set by the Government. Fully replacing fuel-engined vehicles in about 15 years' time is easier said than done. Besides, Hong Kong has been in lack of sufficient charging facilities. In this regard, the Government must speed up the plentiful provision of charging facilities in response to the future demand for switching to electric vehicles due to the increase in tax rates and fees.

Concerning this increase in tax rates and fees, apart from car owners, some members are also concerned about the impact on car dealer companies and the related trades. Although the rates of FRT for private cars and licence fees for motor vehicles have not been adjusted since 2011 and 1991 respectively, the Hong Kong economy has been in doldrums since 2019. The trades relating to vehicle services have been hit hard, and many car owners are also facing the problems of unemployment or underemployment. The increase in tax rates and fees at present will truly further affect the income of the practitioners in the related trades and will add to the burden of car owners.

At the stage of deliberation by the Bills Committee, Mr Frankie YICK and Mr SHIU Ka-fai have fully expressed their views for many times and moved their amendments respectively. In principle, they do not oppose the Government's proposals but only aim to postpone the effective date of the Bill for one year, and to continue the applicability of the old FRT rates to the private cars which, within a designated period of time, have been shipped on board a vessel for export, and have entered Hong Kong but not yet been sold, with a view to lessening the impact of the Bill on the trades concerned. I highly understand the intent of these two proposals. However, the passage of these amendments may bring forth many problems in future.

Deputy President, the issues related to the proposals of this Bill are rather complicated. If tax increase is the only means to deal with the traffic congestion problem, I am afraid that the effect will be very limited. In the Bills Committee, the Government has mentioned that it will not rely on the sole means of fees increase to alleviate traffic congestion, and has undertaken that a multi-pronged approach will be adopted to improve transport infrastructure, strengthen the management of road usage and enhance the public transport system, and that it will make use of technologies to step up the effectiveness of law enforcement and 6836 LEGISLATIVE COUNCIL ― 2 June 2021 the enforcement action against "white licence car services", with a view to alleviating traffic congestion. This Council has been urging the Government to resolve these problems for many years. I hope that the Government can show us its determination and genuine efforts to expedite the implementation of the related measures in order to convince Members and to respond to Members' support towards the Government.

With these remarks, Deputy President, I support the passage of the Bill.

MR LUK CHUNG-HUNG (in Cantonese): Deputy President, I rise to speak in support of the Budget proposal for raising the first registration tax ("FRT") and vehicle licence fee ("VLF") levels for motor vehicles. FRT for motor vehicles is a tax charged on a progressive basis, and motor vehicles that are more expensive are subject to higher tax rates. When it comes to private cars' prices, the tax rate for the first $150,000 of their taxable value will actually be increased by six percentage points only, and the second $150,000 by 11 percentage points. In the case of those private cars that are more expensive, the tax rates for the next $200,000 and the remaining value are to be raised by only 15 percentage points and 17 percentage points respectively.

In fact, the imposition of a higher FRT on expensive private cars under a progressive tax regime can fully manifest the fairness principle of "affordable users pay". An increase of FRT can generate more income for the Treasury, and particularly, in view of the current financial deficit, it is all the more necessary to create additional income sources and reduce spending. Besides, a progressive tax is target-specific. In the case of compact private cars with a small engine capacity, an FRT of only around $70,000 will be levied based on its original price of some $100,000 under the new tax rates. Even speaking of seven-seater cars with a larger engine capacity, whether they are Japanese cars or less pricey European cars, their prices will fall within the range of $250,000 and $300,000 only. The prices I have mentioned already include FRT, and I have checked the latest price lists this morning. Therefore, the tax to be paid based on the new tax rates merely amounts to some $100,000, and two tax bands are mainly involved here. It is only expensive private cars that are subject to a higher FRT.

But those who can afford a private car priced at $700,000, $800,000 or even over $1,000,000 are definitely able to afford a higher FRT because they generally belong to high-income groups. They purchase a luxurious car not LEGISLATIVE COUNCIL ― 2 June 2021 6837 purely because they live in remote districts and therefore have transport needs, but because of their wish for some life enjoyment with a better and opulent quality. So, they should deserve our congratulations for their ability to afford FRT and keep a luxurious car. Amidst an economic downturn and a decline in government income, an increase of tax for luxurious commodities is actually a reasonable move.

From another perspective, trade unions also support an increase of FRT this time around as a means to curb the growth of private cars. On the increase of the FRT and VLF levels this time, I have sought the views of the Motor Transport Workers General Union under the Hong Kong Federation of Trade Unions ("FTU"). As relayed by the general union, professional drivers invariably support an increase of the FRT and VLF levels as this can hopefully curb the growth of private cars. The excessive number of private cars in Hong Kong has often caused traffic congestion and hindered professional drivers in making a living. In the case of drivers of light goods vehicles, for example, they earn their income on a trip-by-trip basis, so they naturally need to race against the clock. Besides, in the event of slight delay in the delivery process, the driver will be bombarded with questions and reproaches from the customer. Furthermore, if transportation time increases, they will be unable to do a few more trips, and their income will therefore be affected.

Speaking of private cars, in contrast, some inconsiderate car owners―well, they may also have their difficulties―often park their cars illegally in the morning or at night and occupy traffic lanes. This has posed much danger and road safety risks. As some bus drivers once told me, their frequent encounters with traffic congestion or illegal parking have significantly added to their mental pressure and burden in the course of driving. Members can imagine how much economic loss has been caused by traffic congestion in Hong Kong.

Let me come back to the problem of traffic congestion in Hong Kong. The root cause is that the growth of road space is way behind vehicle growth. As Members all know, Hong Kong is a small city packed with people, and its road space is very limited. In 2009, the total length of roads (including flyovers and tunnels) in Hong Kong was 2 050 km, and it only increased to 2 127 km in 2019. Over a period of 10 years, it merely increased by 3.75%, or less than 4%. Nevertheless, the growth of private cars was startling. Figures of the Transport Department ("TD") show that in 2010, there were around 450 000 private cars, 6838 LEGISLATIVE COUNCIL ― 2 June 2021 but the number increased to 630 000 in 2019, an increase of over 40%. I must reiterate that the growth of road length is less than 4%.

We understand that those who want to buy a car may have various needs, such as practical needs in daily life. Some time ago, the Secretary put forth one point, saying that as young people were unable to afford residential properties for the time being, they turned to buy a car as they wished to have some personal space. I think this is understandable. They wish to have some personal space and drive their families and friends around during holidays. There honestly exists this kind of demand. But the Government must come up with ways to manage demands and do something about it. Actually, even if a family sees the need to buy a car, it is not necessary to buy a brand new car. It may buy an entry-level car or even a second-hand car, and mind you, second-hand cars will not be subject to the FRT increase this time around. For this reason, I think the impact of the FRT increase is very limited to such families.

Let me come back to the present trend of vehicle growth. In particular, as the epidemic may have barred people from travelling abroad, they can only go on outings here in Hong Kong―of course, it is best to do so in their own cars―and as a result, the number of private cars has increased. During the period from January to February 2020 (that is, early last year), the number of vehicles registered for the first time merely ranged from 1 000 to 2 000. But the figure for November alone was already quite astonishing, and it stood at 4 153. And, in December, the number was also as much as 3 965. That is to say, the number of vehicles registered for the first time in a single month was already close to 4 000. Vehicle growth in the first four months of this year was likewise substantial, and almost 12 000 private cars were registered for the first time. This has created a serious shortage of parking spaces. As the supply of parking spaces is way behind the demand arising from large numbers of vehicles, car owners have no alternative but to park their cars illegally every day―I actually know that this is probably against their wish. Despite what I have said, illegal parking actually causes traffic congestion and poses potential safety hazards as illegally parked vehicles often obstruct the sight of pedestrians crossing the streets and drivers at night and cause traffic accidents.

I have asked some drivers persistently involved in illegal parking, and I have noticed two mindsets among them. The first mindset is marked by a sense of helplessness, and the other is that even if they are ticketed 10 times a month, they will treat the fine of merely $320 for each ticket as "rent for parking". The LEGISLATIVE COUNCIL ― 2 June 2021 6839 shortage of parking spaces is the most frustrating problem among professional drivers because they have to keep their vehicles. The spending on parking, whether speaking of the fines for illegal parking or the exorbitant rents for parking spaces due to speculation on the latters, will increase their operating costs and affect their income. The Government floated the idea of developing smart car parks many years ago. But so far, we are unable to see its actualization. May I ask the Secretary what they are supposed to do then? FTU hopes that the Government can impose regulation in the near future and designate more night-time roadside parking spaces in remote districts, so that professional drivers may park their vehicles legally overnight in such parking spaces. This can help alleviate the relevant problem in the short run.

Members certainly know that in order to solve the conflicts arising from traffic congestion, we cannot solely rely on demand management. In the medium-to-long term, the Government must also increase the supply of roads and parking spaces. Therefore, land supply must be able to catch up with demand. This will require concerted cooperation between the Transport and Housing Bureau and also the Development Bureau.

Finally, in view of the necessity to curb vehicle growth, FTU will not support two amendments. Both Mr Frankie YICK and Mr SHIU Ka-fai have proposed amendments. One amendment seeks to postpone the commencement date by two years, and another proposes tax exemption for two types of vehicles: first, private cars that were already delivered to Hong Kong before the announcement of the Budget (also known as "last-batch cars"); and second, private cars that were already shipped on board a vessel for export to Hong Kong in March. The amendments propose that such vehicles should be exempted.

FTU opposes these two amendments because after all, we support an increase of FRT as a means to curb the growth of vehicles on roads and traffic congestion. Besides, just as I said earlier, the FRT increase will not have much implication on the industries concerned. If Members check TD's figures, they will see that the numbers of private cars registered for the first time in January, February and March (after the proposed increase of FRT was announced) in the first four months of this year stood at 2 622, 2 517 and 3 518 respectively. It can be seen from this that after the proposed increase of FRT was announced, there was instead a rise in the number of private cars registered for the first time. For this reason, I do not think the proposal will create much impact. That said, I also believe that it will have some impact in the long run, and I also hope that the 6840 LEGISLATIVE COUNCIL ― 2 June 2021 initiative can produce its desired effects. Therefore, I will support the original proposal of the Government and oppose the amendments put forth by the two Members.

Deputy President, increasing both the FRT and VLF levels is for the sake of the overall situation. I hope Members can consider its implication on the overall transport, transportation and economy of Hong Kong with a macroscopic mindset.

FTU will support the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 and oppose the amendments.

Thank you, Deputy President.

MR STEVEN HO (in Cantonese): Deputy President, I thank the SAR Government for introducing this relatively overdue tax increase proposal. Upon hearing this, you may think that I am very supportive of the proposal, but there are in fact divided views in the political party to which I belong.

What I am expressing now are my own opinions. The Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill") introduced by the SAR Government involves two items of fees and charges. Firstly, as the name suggests, it seeks to increase the tax payable for buying a new private car by 15%; and secondly, the annual licence fee levels for private cars are also increased, meaning that apart from new cars, a higher annual fee is payable for old ones for using roads.

According to the explanations made by the SAR Government in the past, including those to the Bills Committee, the main objective of doing so is to immediately curb the demand for motor vehicles, thereby reducing the number of private cars. However, as elaborated by Mr LUK Chung-hung just now, while there were 2 000 odd newly purchased private cars in January and February, the number has risen to over 3 000 after the tax increase, reflecting that such measures may not be effective in achieving the results expected by the SAR Government. I think there is a need for the SAR Government to examine whether its prediction made internally beforehand is accurate, or fully explain to Members the basis for its prediction at meetings of the relevant bills committee next time when introducing other tax increase measures. I consider that there is LEGISLATIVE COUNCIL ― 2 June 2021 6841 a slight miscalculation on the part of the Government this time, but I do agree that increasing the rates of first registration tax will make some people who intend to purchase a new private car think twice before making a decision, with some of them having to shelf their plans in this respect due to insufficient financial means.

However, as I have said earlier, two items of fees and charges are involved, and since the licence fee levels are also increased, existing car owners are affected and have to pay a higher licence fee for their old private cars. Basically, if the objective of effecting the fee increase is to reduce the number of motor vehicles as suggested by the SAR Government, the measure concerned serves to make it difficult for owners of old private cars to meet even their daily expenses, and they will then be forced to sell their cars. I therefore consider that the rationales behind the increase in these two items of fees and charges are slightly different, and while the increase in the rates of first registration tax seeks to make potential buyers immediately give up the idea of purchasing a new private car, the aim of increasing the licence fee levels is to encourage car owners to consider parting with their vehicles in the long run, although I cannot rule out the possibility that it would produce some immediate effects too. Yet, by introducing the second measure to increase the annual licence fee levels, the Government will catch many small and medium-sized families off guard, which may have to consider whether they should sell their cars under the epidemic, and whether there would be a drop in car prices.

I was told by trade members and even recent new car buyers that for new cars which were originally sold at a price of over $1 million, they have a price tag of only $500,000 odd to $600,000 after the recent tax increase, and why is that so? It is because what they bought are actually old stock items which had all along remained in warehouses after they were imported into Hong Kong in as early as 2018 and 2019. If car dealers choose to continue keeping such old stock items in warehouses without selling them, they may not even be able to recover the storage fees. Furthermore, after the introduction of new car models in 2022, the demand for vehicles of previous models manufactured in 2020 will decline, which will in turn increase the costs to be borne by car dealers in this respect, and they will certainly try to have such vehicles sold as soon as possible by slashing their prices. Hence, by introducing the measure to increase the rates of first registration tax, the SAR Government has conversely stimulated the sales of private cars in the short term, and I hope the Government will re-examine its future strategies after the passage of the Bill.

6842 LEGISLATIVE COUNCIL ― 2 June 2021

Regarding the measure to increase the licence fee levels mentioned just now, since it is not very effective in immediately reducing the number of private cars, can further consideration be given by the authorities under the epidemic to reduce the impact to the general public in their planning for the next few years? I am living in the New Territories and according to what I have heard from many of my friends, one of the reasons why people have moved from the urban areas to the New Territories is that under the Park and Ride Scheme, they can drive to MTR stations, park their vehicles in the parking facilities provided there, and then travel on MTR. They can also choose to use their private cars only on Saturdays and Sundays, because there are still parking spaces available in the New Territories. With the sudden increase in the licence fee levels by the Government, car owners who are financially stretched will in fact be forced to sell their vehicles because they can no longer afford the cost of owning a car, although they have already moved to the New Territories with their whole family.

Therefore, will the Government let them revise their planning and make alternative arrangements on the understanding that the annual licence fee will be gradually increased in the next few years? Assuming that there will be an increase of as high as 50%, a year-on-year increase of 10% will enable the authorities to catch up with the inflation rates recorded previously, and existing car owners to plan for their future life and prepare for the transformation of themselves and their family. By specifically pointing out that the Bill is consisted of two parts, namely the increase in the rates of first registration tax and that in the licence fee levels, I wish to point out that the SAR Government should actually introduce into this Council two different bills to respectively effect the increase in these two fee items. Only by doing so can the Government give people some breathing room at such a critical moment, and save them the trouble of having to make urgent arrangements in respect of their private cars before the passage and commencement of the Bill. Since car owners are required to pay vehicle licence fee annually, this definitely is a factor for consideration by all vehicle buyers, and any future increases should not make much difference.

I would also like to specifically remind the SAR Government that since it has, as explained at meetings of the Bills Committee, decided to introduce the tax increase proposal at this critical moment to discourage people from driving, I hope it would also take action to reduce the use of motor vehicles by various government departments, or at least urge them to think twice before buying vehicles. Although tax increase measures have been introduced, government vehicles are not required to pay tax, and the Government can therefore use public money to purchase vehicles in an unrestrained manner. I have discussed this LEGISLATIVE COUNCIL ― 2 June 2021 6843 with government officials, who replied that the Government had to take into account the need for efficiency, and since government officials needed to attend all sorts of meetings, it might not be feasible for many officials at the middle and higher levels to use public transport.

The number of vehicles owned by each government department is of course different, and the Police Force may have the greatest number of vehicles, because there is a practical need to equip the Force with a fleet of hundreds of vehicles in order to ensure that police officers will arrive at the scene within nine minutes as pledged, but is there also such a practical need for government officials to travel to and from different meeting venues by car? Will measures be formulated by the authorities to show that they are willing to ride out the difficulties with Hong Kong people together? When the Government increases the vehicle license fee by 30% in an attempt to discourage people from driving their own cars and encourage the greater use of public transport, can government officials set a good example also in this respect? The SAR Government should at least demonstrate ideologically that it will ride out the storm together with the public, but instead of advising us what measures it has taken accordingly, it has only replied that it would continue urging government officials to make more use of public transport. In this case, the Government might as well call on the people of Hong Kong to use public transport more often, but is this approach feasible? I do not consider it effective.

Finally, I would like to specifically mention that I hope the SAR Government will make more accurate prediction in the future, because there were over 3 000 vehicles registered for the first time after the announcement of the tax increase measures in March, and it seems that the Government's measures have failed to achieve the expected results. I share similar views with Mr Frankie YICK and agree that there is a practical need for some people to have their own cars, not purely for enjoyment. Assuming that there is a difference of $100,000 to $200,000 in the prices of the standard and luxury versions of a particular vehicle, potential buyers may choose to purchase the standard version instead of the luxury one when a decision is made by the Government to increase tax, and there will thus be no change in the number of registered vehicles or the public space occupied. I therefore agree with Mr LUK Chung-hung also and consider that the Government does have a need to re-examine the whole issue from such perspectives as the provision of parking spaces, public transportation system, road design, etc., and this will provide more concrete and effective relief to many problems concerning public transportation or road use.

6844 LEGISLATIVE COUNCIL ― 2 June 2021

In the final analysis, how can people be discouraged from buying their own cars? It is after all my views that the problem cannot be tackled solely by increasing public transport services, and efforts should also be made to explore how the public can be convinced that using public transport is more convenient than driving their own cars, thereby essentially reducing their demand for private cars. Frankly speaking, being a resident of a village house, it is indeed very inconvenient for me if I do not have my own car. I have been living in a village house for more than 20 years, and there was a time when the operation of residents' coach services was not approved by the Transport Department, thus making it very inconvenient for me as I had to walk for almost half an hour every day to a West Rail station. For those who have to spend more than 20 minutes every day walking to a West Rail station, they will of course prefer having their own cars. Then, how can the Government convince them that using public transport is more convenient than driving their own cars? The authorities have so far failed to put forward some very strong arguments in this respect.

Moreover, when the number of train cars used for trains serving the East Rail Line is reduced from 12 to 9, I can feel that passengers are packed like sardines in train compartments, and how will the SAR Government address this problem? As some Members have indicated to me today, the rail line running to Ocean Park in the Southern District on Hong Kong Island has nearly reached its full capacity, which is served by trains with only a few train cars, why the traffic in the Aberdeen Tunnel is still so congested? This implies that the SAR Government has not been far-sighted enough when making planning to cater for certain demands. As projects may be delayed, when infrastructural facilities are finally commissioned 10 years later, the demand for such facilities may have already exceeded the original forecasts made today. I therefore consider it necessary for the SAR Government to take the opportunity of the current discussion to review afresh issues in this regard, while I will follow the voting decision made by the political party to which I belong. Thank you, Deputy President.

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

(No Member indicated a wish to speak)

LEGISLATIVE COUNCIL ― 2 June 2021 6845

DEPUTY PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Transport and Housing to reply. Then, the debate will come to a close.

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Deputy President, first I have to express my heartfelt thanks to Mr CHAN Kin-por, the Chairman of the Bills Committee, members of the Bills Committee as well as the Legislative Council Secretariat staff for their efforts and support, so that the scrutiny of the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 ("the Bill") can be smoothly and speedily concluded.

Hong Kong is a densely populated city with scarce land resources, and the Government has all along been encouraging the public to use public transport instead of commuting by private cars, with a view to better using the limited road space. Over the years, the Government has been adopting a multi-pronged approach, including the improvement of the transport infrastructure, the expansion and enhancement of public transport system, as well as the management of road use in order to ease the traffic congestion problem.

As a matter of fact, Hong Kong is ranked high among all global metropolis with regards to public transport's quality, utilization rate and the fare affordability.

With regards to the transport infrastructure, besides launching various transport infrastructure projects and widening existing roads, the Government is currently conducting the study in promoting roads and railway infrastructure projects, with a view to complementing Hong Kong's long term development.

The Government has all along been endeavouring to enhance the public transport systems and to boost the coverage of public transport. Our measures include expanding the railway networks, fostering bus route rationalization and service adjustment, encouraging public transport operators to disseminate real-time arrival information, encouraging various organizations to promote the concession and study the expansion of park-and-ride scheme, and constantly streamlining the non-means-tested Public Transport Fare Subsidy Scheme and so on.

Nevertheless, we hope Members in this Chamber will understand that there is limitation if we rely on measures such as enhancing public transport ancillary facilities and building infrastructures to address traffic congestion problems. 6846 LEGISLATIVE COUNCIL ― 2 June 2021

Other matching policies and measures should be put in place in conjunction with building infrastructure projects, enhancing public transport ancillary facilities and improving road management work and so on, before we can alleviate traffic congestion problems in the long run.

Just now a number of Members have pointed out that the growth of private cars has slowed down for a period of time in the past, but I hope Members will understand that we are talking about the total number of private cars. If we look at the past figures, except a slight decrease in the number in one year (2020), the overall trend was actually going upwards. Even though the number of licensed private cars had decreased in the past from 2010 to 2020, the overall increase was as high as 40%. At present, the total number is about 580 000, which is a record high, and they account for more than 70% of the total number of vehicles in Hong Kong. Moreover, about 90% of the total passenger trips are made on public transport. Frankly speaking, private cars only account for about 10% of the total passenger volume. However, the share of private cars in the total traffic flow on major roads was about 45% to 74% (the correct figure should be 70%), which is adequate to highlight the fact that the passenger capacity of private cars is small but they occupy a significant portion of road surface―these are figures, and figures do not lie―thereby creating traffic congestion. We should adopt a multi-pronged approach to encourage the public to make use of public transport, and at the same time, we should reduce their desire of purchasing and using private cars, in conjunction with other road management measures, then traffic congestion on road surface can be alleviated. When vehicles run smoothly and the public are making use of public transport, their daily commute will become more swift and convenient. In so doing, we will also be able to make Hong Kong a more liveable place.

(THE PRESIDENT resumed the Chair)

The fiscal measure is one of the methods to curb the growth of private cars. Just now Members have clearly expounded on the fact that the rates of first registration tax ("FRT") and the levels of vehicle licence fee ("VLF") had not been adjusted since 2011 and 1991 respectively. In order to reduce the growth of private cars, we propose to increase the FRT rates and VLF levels for private cars by 15% and 30% respectively. The above adjustment came into effect upon gazettal from 11:00 am on 24 February 2021 ("the Commencement Time"), that is, on the same day that the budget was delivered. During the formulation of the LEGISLATIVE COUNCIL ― 2 June 2021 6847 proposed increase, we have already considered the current economic situation, public acceptance and other factors and we have struck a balance between all the considerations.

At the same time, we have waived the increase on private cars already ordered and purchased by buyers or imported for self-use by their owners before the Commencement Time and private cars with licences eligible for renewal on or before 24 February 2021, so as to make the new rates or levels not applicable to these private cars. Thus we have struck a balance between the impact of the increase on the public and the trade.

Just now a number of Members have raised their views on road management, I am now replying to them one after another. Currently, the Government is adopting a series of short, medium and long-term measures to modestly increase the supply of car parking spaces, to study the implementation of "congestion charging" and the Electronic Road Pricing ("ERP") Pilot Scheme in Central ("the Pilot Scheme") and so on, with a view to making a more effective use of our road surface.

To ensure our limited road space is used in a more effective way, the Government encourages the public to commute by public transport. At present, the Government also understands the question that some Members have pointed out just now, that is, commercial vehicles also have parking needs. As far as the Government's parking space policy is concerned, we will accord priority and provide complementary measures for the parking needs of commercial vehicles as Members have pointed out just now. Besides, if the overall development permits, we will also provide appropriate parking spaces for private cars. But we do not encourage the public who have been using public transport to switch to private cars so as to prevent worsening of the loading of our road surface.

In recent years, the Government has heard voices from the legislature and society, and we have formulated and kept on taking forward a host of medium and long-term measures in order to increase the supply of vehicle parking spaces, including the provision of night-time road side parking spaces in appropriate locations, the provision of additional public parking spaces in suitable "Government, Institution or Community" facilities and public open space projects according to the "single site, multiple use" principle, as well as taking forward automated parking system pilot projects. Twenty projects are under planning, which could provide about 5 100 parking spaces in phase. The automated parking systems in Tsuen Wan will be commissioned in the latter half of this year.

6848 LEGISLATIVE COUNCIL ― 2 June 2021

The Government also supports the idea of providing park-and-ride facilities in suitable railway stations or nearby sites. Just now a number of Members have raised their views that we should encourage motorists to park their cars and ride the trains with a view to reducing the need to drive their vehicles to congested districts. Currently, 24 car parks in Hong Kong provide concessions for people using the park-and-ride facilities, with a total of 9 700 vehicle parking spaces. Moreover, the park-and-ride facilities at West Rail's Kam Sheung Road Station will be permanently relocated to the MTR Kam Sheung Road Station Project Phase 1, which is anticipated to be commissioned in 2025 and will provide 610 park-and-ride parking spaces. The Government will keep on encouraging different organizations, including the MTR Corporation Limited, to promote their existing park-and-ride facilities, and to study the possibility of extending the concession to other car parks which have not yet provided park-and-ride concession. In taking forward individual railway, urban renewal and new development projects, the Government will also consider the introduction of park-and-ride facilities at suitable locations, with the objective of encouraging the public to make better use of public transport.

Just now several Members have pointed out that we should crack down on the use of motor vehicles for illegal carriage of passengers for hire or reward. The Government has been adopting a multi-pronged approach, including enforcement, education and publicity. The Police have been adopting targeted enforcement campaigns, including the gathering of intelligence, conducting sting operations, and conducting investigation and follow-up actions on referral and complaint cases. The Transport Department continues to endeavour in the publicity work and to exchange information with the Police in order to curb the use of motor vehicles for illegal carriage of passengers for hire or reward.

With regards to the study on "congestion charging", since the current epidemic of the COVID-19 may affect the public's commuting habits, the Transport Department is reviewing the progress in the study on "congestion charging", including the conducting of traffic survey in order to compile the latest information and data. The Transport Department will consult the stakeholders on the relevant proposal in due course.

The Transport Department is following up the views and recommendations proposed by the international expert panel formed in 2020 for the Pilot Scheme, and it will keep on formulating the specific proposals. The Transport Department will take into consideration the latest social and economic situation LEGISLATIVE COUNCIL ― 2 June 2021 6849 of Hong Kong before considering the timely introduction of the Pilot Scheme once the epidemic is under control and life in society is brought back to normal again.

Moreover, a number of Members have mentioned that the Government was considering bringing a better commuting experience for the public via the re-distribution of traffic among the three tunnels as well as the gradual completion of a fuller railway and road network.

Just now some Members have pointed out that the Government should do more for alleviating the traffic congestion problem by reducing the use of motor vehicles. With regards to that proposition, the Government has laid down established mechanism in the use and procurement of motor vehicles, and the purpose of the use of motor vehicles is to support the operations of various government departments, the transport of goods and personnel who discharge their duties. Certainly, the Government will keep on encouraging our staff to make use of motor vehicles for official business only where necessary. We hope that Members who are present in this Chamber will understand that the overall traffic congestion problems in Hong Kong should not be mixed up with the use of motor vehicles by the Government's supporting branches and personnel.

President, in order to resolve Hong Kong's traffic congestion on roads, besides adopting a multi-pronged approach to alleviate traffic congestion, we should also take decisive measures to alleviate traffic congestion at its roots. I implore Members to support the Bill, so as to curb the growth of private cars and enable the public to enjoy a smoother travelling experience and to make Hong Kong a more liveable city.

I so submit. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

6850 LEGISLATIVE COUNCIL ― 2 June 2021

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

(Members raised their hands)

Mr Frankie YICK rose to claim a division.

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

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

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

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Ms Starry LEE, Mr CHAN Kin-por, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Steven HO, Mr YIU Si-wing, Mr MA Fung-kwok, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Mr Christopher CHEUNG, Ms Elizabeth QUAT, Mr Martin LIAO, Mr POON Siu-ping, Ir Dr LO Wai-kwok, Mr Jimmy NG, Dr Junius HO, Mr Holden CHOW, Mr Wilson OR, Ms YUNG Hoi-yan, Mr CHAN Chun-ying, Mr CHEUNG Kwok-kwan, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Kenneth LAU, Mr Vincent CHENG and Mr Tony TSE voted for the motion.

Mr Michael TIEN, Mr Frankie YICK, Mr CHUNG Kwok-pan, Mr SHIU Ka-fai and Dr CHENG Chung-tai voted against the motion.

THE PRESIDENT, Mr Andrew LEUNG, did not cast any vote.

THE PRESIDENT announced that there were 37 Members present, 31 were in favour of the motion and 5 against it. Since the question was agreed by a majority of the Members present, he declared that the motion was passed.

LEGISLATIVE COUNCIL ― 2 June 2021 6851

CLERK (in Cantonese): Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021.

Council became committee of the whole Council.

Consideration by Committee of the Whole Council

CHAIRMAN (in Cantonese): This Council now becomes committee of the whole Council to consider the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021.

Members may refer to the Appendix to the Script for the debate and voting arrangements for the Bill.

REVENUE (FIRST REGISTRATION TAX AND LICENCE FEES FOR MOTOR VEHICLES) BILL 2021

CHAIRMAN (in Cantonese): Members have been informed that the committee will conduct a joint debate on the clauses and amendments (including the amendment to the long title).

I now propose the question to you and that is: That the following clauses stand part of the Bill.

CLERK (in Cantonese): Clauses 1 to 7.

CHAIRMAN (in Cantonese): Mr SHIU Ka-fai will move two groups of amendments: the first group of his amendments seeks to amend clauses 1, 2 and 4 to 6, and to delete clause 3 and Part 4 (namely clause 7); the second group of his amendments seeks to amend the long title.

Mr Frankie YICK will also move amendments which seek to amend clause 3.

Members may refer to the Appendix to the Script for details of the amendments.

6852 LEGISLATIVE COUNCIL ― 2 June 2021

CHAIRMAN (in Cantonese): Members may now proceed to a joint debate on the clauses and amendments (including the amendment to the long title).

CHAIRMAN (in Cantonese): I will call upon Mr SHIU Ka-fai and Mr Frankie YICK to speak one after the other, but they may not move amendments at this stage. Then I will call upon other Members to speak.

Upon the conclusion of the joint debate, the committee will deal with the amendments according to the arrangements set out in the Appendix to the Script.

MR SHIU KA-FAI (in Cantonese): Chairman, the amendments that I propose today mainly concern two parts: first, to defer by one year the commencement of the Government's current proposal of increasing the rate of first registration tax ("FRT") for private cars by 15 % and the levels of vehicle licence fee ("VLF") for private cars by 30%; second, consequential to the aforesaid amendments, to defer the commencement of the transitional provisions originally proposed by the Government, which will continue to apply a year later.

As I have pointed out in my speech during the Second Reading debate, the Government is simply doing the wrong thing at the wrong time by introducing drastic tax increase at this particular point in time. Blaming the vehicle sales industry for causing the problem of traffic congestion will, at the end of the day, only deal a blow to the livelihoods of tens of thousands of industry practitioners and their families while hitting those middle-class people who intend to buy cars.

In fact, apart from the practitioners in the industry, we all know that over 75% of the cars now owned by middle-class people have engines with a cylinder capacity not exceeding 2 500 cc, meaning that a lot of the middle-class people will be greatly affected by the tax increase proposed this time. Given that the local economy has yet to recover, where the tourism industry is still at a standstill and the resumption of cross-boundary travel between Hong Kong and the Mainland is not expected for the foreseeable future, many of the middle-class people do not have stable income. Yet, instead of lending them a helping hand, the Government has proposed to raise tax and VLF levels at this critical moment―a clear-cut act of putting the boot in. Nowadays, cars are no longer a LEGISLATIVE COUNCIL ― 2 June 2021 6853 luxury but a real necessity to many people, in particular those who live in remote areas without infrastructure facilities. They do have the practical need to use cars.

Past experience has shown that increasing FRT and VLF will only have a short-term effect on reducing the number of private cars. In the long run, the number of private cars will be on the rise again in six to nine months' time as long as people still need them. During this short period of time, however, the industry will be seriously affected and a wave of layoffs may even be triggered.

Therefore, if the Government introduces a drastic tax increases at this moment, not only will it fail to achieve the intended policy objectives in the long run, the interests of the industry practitioners will also be sacrificed for nothing. It is an ill-time, unreasonable and unjustifiable move. Therefore, I hope that all Members will support my amendments so as to provide a respite for both the industry and members of the public at this very difficult time.

Finally, in case my amendments are not passed, I urge Members to support Mr Frankie YICK's amendments that seek to extend the scope of application of the transitional arrangements for FRT, so that the old tax rate will still apply to private cars which have been imported into Hong Kong but have not yet been sold before 24 February 2021 and private cars which have already been shipped on board for export to Hong Kong in March 2021. By proposing these second-best amendments, I hope to, as far as possible, fight for some breathing space for the industry with a view to minimizing the impact of the tax increase on them.

Here, I would like to respond to a point just raised by Mr LUK Chung-hung. According to him, car sales in the first four months have kept going up even if FRT has been raised now. What I want to say is, as compared with 2020, car sales in the first four months of this year (2021) has actually increased. However, we should be aware that the economy was declining during the first four months of 2020 and the border/boundary-closing measures were just implemented at that time. As for this year's first four months, I know that many car sellers were forced to reduce car prices significantly in preparation for the tax increase, and so the cars were actually sold at a loss.

6854 LEGISLATIVE COUNCIL ― 2 June 2021

If we really want to know whether car sales in the first four months are normal, we only need to compare the sales for the same period in 2019 and 2018 to find out the answer. It is because while 11 748 cars were sold in the first four months of this year, 12 228 cars were sold in 2019 and 12 914 in 2018. Hence, comparison should not be made with that of 2019. In the absence of "black-clad violence" and the pandemic, car sales will still drop quite sharply even if car prices are drastically reduced. Therefore, I hope Members will support the amendments that I am going to move.

Thank you.

MR FRANKIE YICK (in Cantonese): Chairman, as I have pointed out in my speech during the Second Reading debate, the Government's decision to propose increasing the first registration tax ("FRT") for motor vehicles this time is untimely because the vehicle sales industry and related downstream industries/trades have already been hard hit by the Sino-US trade war in 2018, the "black-clad violence" in 2019 and the COVID-19 pandemic (since early 2020 up to now).

Local vehicle sales have been on the decline, gradually down from 43 642 in 2017 to 37 036 in 2020, representing a drop of 15% or 22% (excluding electric vehicles). Sales are expected to fall further in 2021 as the epidemic situation is still volatile and the business environment remains challenging, but still, the Government proceeds to introduce the tax increase despite adverse market conditions, which will definitely further affect the livelihoods of over 50 000 households of practitioners in the vehicle sales industry.

After the Financial Secretary ("FS") announced the introduction of the FRT increase, members of the industry met with Secretary Frank CHAN as arranged by Mr SHIU Ka-fai to explain to the Secretary their plight and implore him to convey to FS their request for leniency in deferring by one year the tax increase, so that the industry could make contingency preparations to minimize the impact on industry practitioners. Nevertheless, the Government insisted on introducing the tax increase, and so both Mr SHIU and I will propose amendments to the Bill.

Mr SHIU's amendments are rather simple and straightforward, that is, seeking to defer the increase by one year in response to the request by members of the industry. If Mr SHIU's amendments fail to be passed, I hope that Members will support the amendments that I am going to move. My LEGISLATIVE COUNCIL ― 2 June 2021 6855 amendments seek to defer the effective date (proposed by FS) by about three weeks from the day on which the Budget Speech was delivered (i.e. 24 February 2021) to 19 March 2021, and that the original FRT rate which is lower will still apply to private cars having been shipped on board a vessel for export to Hong Kong or arrived in Hong Kong on or before 19 March 2021.

Next, I will explain why these amendments have to be proposed and the reasons for deferring the effective date by about three weeks. All car dealers are, according to my understanding, generally required to discuss with the car manufacturers one year in advance the quantities of cars to be ordered for the following year and are only allowed to make adjustments of no more than ±10% within that year. Thereafter, dealers are required to confirm with the manufacturers on a monthly basis the scheduled orders for the next two to three months and deliver irrevocable letters of credit. This means vehicles of that particular quantity are under the dealer's ownership once production is confirmed.

Since production takes time and delivery has to be arranged upon completion of production, which normally takes about three weeks, I propose that 19 March 2021 be made the cut-off date so that the original FRT rate (which is lower) will still apply to vehicles shipped to and arrived in Hong Kong on or before that day. Such information as the quantities, models, engine numbers and chassis numbers of all vehicles manufactured and shipped on board the vessels will clearly be set out in the cargo manifests, and as the engine numbers and chassis numbers will also be specified on the vehicle registration documents later on, there will be no confusion.

Given that the retail prices of these vehicles have already been announced, it is just impossible for the new tax burden to be passed on to consumers. Dealers are thus at the receiving end of the various consequences of the tax increase, and they have to sell the vehicles at a loss. And even making 19 March 2021 the cut-off date would only help minimize the pain to be suffered by the industry for those vehicles manufactured and shipped thereafter will still be subject to the new FRT rate. Apparently, vehicle sales will shrink and room for the industry's survival will further diminish due to this.

If Mr SHIU's amendments are not passed, I implore Members to support my amendments so as to minimize the impact of the current proposed FRT increase on the vehicle sales industry and related downstream industries/trades.

I so submit, Chairman.

6856 LEGISLATIVE COUNCIL ― 2 June 2021

MR HOLDEN CHOW (in Cantonese): Chairman, concerning the amendments proposed by Mr SHIU Ka-fai and Mr Frankie YICK, while I do understand that, upon listening to their presentation of reasons, the automotive retailing sector has been in great difficulties during this period, we have to consider the matter from a holistic perspective.

We all understand that where a policy involving taxation matters is concerned, it is often implemented immediately after the decision is made and allows no complications, or there will be great uncertainty. It is noted that we do not allow too much uncertainty in making arrangements for tax increase/cut in respect of vehicles, properties, securities, etc.

I understand Mr SHIU Ka-fai's or Mr Frankie YICK's good intention of helping the automotive retailing sector, which is in a very difficult position. However, I must bring up the point: judging from a holistic perspective, if their amendments are really passed, I am afraid that it will set a precedent that leads to uncertainty in the Government's future arrangements for taxation on other related commodities, properties, securities and the like. Once the door is opened, it may give rise to serious problems in society as a whole. Therefore, despite the fact that I do appreciate the good intentions of Mr SHIU and Mr YICK, I cannot support their amendments because I must consider the matter from a holistic perspective.

Here, I would also like to briefly discuss the Government's current proposal for increasing the first registration tax ("FRT") for motor vehicles. A number of Members have pointed out just now that the Government should take corresponding actions concerning its transport policy to resolve the problem. I certainly hope that the Bureau will listen to the views in this regard. At this time of financial stringency, the proposed tax increase will generate nearly $1 billion of revenue for the public coffers. We often say that the Government has to support the community on the one hand and explore new sources of revenue on the other. Here, I can only tell the Government that while I understand that it is proposing the tax increase for the purpose of raising revenue this time, I do hope that it will heed the views expressed by various Members today, including the need for putting in place other complementary measures to tackle the traffic problems, and that it cannot rely solely on increasing FRT for motor vehicles as the solution to the problems.

LEGISLATIVE COUNCIL ― 2 June 2021 6857

With these remarks, I express the overall views of and the stance taken by myself and the Democratic Alliance for the Betterment and Progress of Hong Kong ("DAB") on the Bill proposed by the Government.

Thank you, Chairman.

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

Mr SHIU Ka-fai, please speak.

MR SHIU KA-FAI (in Cantonese): Chairman, I support the amendments to be moved by Mr Frankie YICK, which propose that the old rate of first registration tax ("FRT") for motor vehicles be still applicable to those private cars that have been shipped on board a vessel for export to Hong Kong before 19 March 2021.

However, some of my friends have reminded me that there might be cheating by a very small number of unscrupulous people who would produce false documents (e.g. those with dates altered). Therefore, I suggest that the Government should base on relevant shipping documents in enforcing the Bill once it is passed because the documents issued directly by shipping companies have more recognition and very few people will doubt their authenticity. This is the first minor suggestion of mine.

Besides, Chairman, I would also like to relay the views of some members of the public. One of them called to ask me why some of those from the pro-establishment camp opposed the Bill proposed by the Government through proposing amendments and even voicing our objection. He queried whether we meant to play the role of those who had already left the legislature.

Here, I would like to make clear one point: I trust that all along, all Members of this Council have been acting in accordance with the principle of supporting what is right and opposing what is wrong, and it is our duty (in particular the duty of Members returned by functional constituencies ("FC")) to speak on behalf of the sectors that we represent. Hence, we are duty-bound to do so. Despite all the pressure and criticism from outside, we will continue to, as we have done in the past, convey to this Council the difficulties faced by the sectors.

6858 LEGISLATIVE COUNCIL ― 2 June 2021

This may be different from the opinion held by the majority of people, but it is the very reason why FCs exist. Otherwise, this Council will only become a monolithic body with only one single voice in future. However, I believe that neither the people of Hong Kong, the Central Government nor the SAR Government would want this to happen. After all, it is necessary to have different voices and opinions in society. It is precisely for this reason that we need to express different views and aspirations for certain sectors and people.

Chairman, the remarks above are the views that I wish to express.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): If not, I now call upon the Secretary for Transport and Housing to speak. After the Secretary has spoken, I will call upon Mr SHIU Ka-fai and Mr Frankie YICK who have proposed amendments to speak again. Then, the debate will come to a close.

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): Chairman, I can understand the intentions of Mr SHIU and Mr YICK in proposing the amendments, and I also appreciate their efforts in speaking up for the sectors concerned. But regrettably, the amendments proposed by them run counter to the Government's policy direction of curbing the growth of private cars.

Mr SHIU Ka-fai's amendments seek to defer the commencement of the measure of increasing the first registration tax on private cars and the vehicle licence fees for one year, i.e. amending the commencement time from 11:00 am on 24 February this year to 24 February 2022.

The purpose of increasing the first registration tax and vehicle licence fees is to curb the growth of private cars. At present, the total number of private cars is close to 580 000, and we expect it to increase by a larger magnitude once the pandemic further subsides. We thus need to take resolute and immediate actions to curb the growth of private cars.

LEGISLATIVE COUNCIL ― 2 June 2021 6859

In our view, the proposal for deferring the commencement time of this measure of increasing the first registration tax and vehicle licence fees for one year will incentivize prospective private car buyers to make early purchases before 24 February 2022 in order to enjoy a lower tax rate. This will result in a significant surge in car sales and subsequently the number of licensed private cars in the next 9 to 10 months. Even if the increase of the first registration tax and vehicle licence fees from 2022 onwards will lead to a subsequent slowdown in car sales, the effectiveness of the measure in curbing the growth of private cars will still be offset by the last-minute car sales this year.

If the increase of the tax and licence fees is deferred, we may have to propose a more substantial increase to maintain the effect of curbing the growth of private cars then as a result of inflation and the growth in the number of vehicles. I believe Members should understand that there is no such thing as the best timing for increasing the tax and the licence fees in reality, and it is impossible to keep the licence fees at the same level forever.

With the number of private cars repeatedly hitting record high, there should be no more delay in implementing measures to curb their growth, or more stringent measures will become necessary to further control of the size of vehicle fleet in the future. This will have an even more significant impact on the public and the sectors concerned. Therefore, we urge Members to vote down the proposal to defer the adjustment to the first registration tax and vehicle licence fees.

As regards Mr YICK's amendment, it seeks to give exemptions to private cars proved by registered importers or distributors as having been shipped on board a vessel for export to Hong Kong on or before 19 March 2021, so that the old rates of the first registration tax will still be applicable to them. Under the arrangements of the present proposal, exemptions from the new tax rates have been given to private cars on order, or those imported for personal use and arranged by the vehicle owners for shipment to Hong Kong prior to 11:00 am on 24 February 2021, i.e. the "commencement time" provided in the Bill. Mr YICK's amendment will further exempt private cars which have not been sold before the tax increase from the increased tax rate. This will significantly dampen the effect of this adjustment of the first registration tax on private cars.

The Government considers that an undesirable precedent will be set if this amendment is passed. The sectors concerned may hold the expectation that additional exemptions of similar nature will be provided when the Government 6860 LEGISLATIVE COUNCIL ― 2 June 2021 makes similar tax increase proposals in the future, which will be detrimental to the effectiveness of tax measures. What is more, the amendment may also prompt importers or distributors to place advance shipment orders in anticipation of a future tax increase having regard to the precedent of the amendment, so as to reduce the impact of the upward adjustment to the tax rates. Furthermore, it is the Government's principle that the first registration tax is charged on the prices of the vehicles concerned at the time of first registration and the prevailing tax rates then. But Mr YICK's amendment will allow the old tax rate to be applicable to private cars imported but having yet done first registration in Hong Kong. This is contrary to the objective of first registration tax.

This amendment also consists of unfairness. There is no clear basis for the amendment's proposal to set the deadline as 19 March 2021. The extent to which individual importers or distributors will be benefited or affected also depends on whether they happen to have arranged for the vehicles to be shipped to Hong Kong prior to that date. This is neither fair nor proper.

Based on the above reasons, I implore Members to vote against the amendments proposed by Mr SHIU Ka-fai and Mr Frankie YICK. We must bear in mind the overall interest of the community and pragmatically address the issue of traffic congestion in Hong Kong, which has stemmed from its dense population and scarce land resources.

Thank you, Chairman.

CHAIRMAN (in Cantonese): Mr SHIU Ka-fai, do you wish to speak again?

MR SHIU KA-FAI (in Cantonese): Chairman, again, I wish to thank those colleagues who have spoken today. Basically, the Government seeks to catch up with inflation by increasing the motor vehicle first registration tax and licence fees which have not been adjusted for years. I have no objection to it, except that I think it is an inopportune moment to do so. Secretary, as I have repeatedly stated, if the economy is booming right now, increasing the tax and the fees concerned is actually not a problem at all, considering that the Government has not increased them for a long time. So, the debatable point is always about the timing only.

LEGISLATIVE COUNCIL ― 2 June 2021 6861

Second, I do not agree with the Secretary's argument that traffic congestion problem is related to the number of first registered vehicles. I just wish to say that the statistics show a continuous decline in the number of first registered vehicles from 43 642 in 2017 to 37 036 in 2020. While the number has dropped from 43 000 to 37 000, why was there still an increase in the total number of private cars from 550 000 in 2017 to 570 000 in 2020 then? Secretary, do you find these statistics strange? The Government often claims that it is necessary to increase the tax on new vehicles, but the number of new vehicles is actually on a decline. Then, why has the total number of vehicles increased? Actually, it has something to do with vehicles providing illegal car hire service.

Secretary, you should pay attention to the fact that the problem of traffic congestion actually stems from illegal car hire service. Ordinary vehicle owners like us, office workers, always need to work in the office and attend meetings. How much time do we have for driving our vehicles? Only those vehicles providing illegal car hire service are out there running on the roads. In the past, when the Government substantially increased the tax and licence fees, everyone would immediately give up their vehicles due to the high cost, but now, some people use their private cars as "business tools" which they will drive morning, noon and night. This explains why traffic congestion in certain areas is not alleviated much. In light of this, the Government's plan to tackle the root of the problem by increasing the tax on new vehicles is basically unworkable. As regards the increase in licence fees, this will affect other private car owners who will also be required to pay the new licence fees without any choice. This is especially the case for the lower middle class who live in remote areas without rail coverage. With driving as their only means to commute, they cannot evade paying the licence fees.

I wish to reiterate that there are actually a considerable number of vehicles providing illegal car hire service in Hong Kong. In the past, once people saw any change in circumstances, they would give up their vehicles―the old ones―if they found it uneconomical after calculating the cost involved. Why is the second-hand vehicle business so vigorous now? The reason is that some people will start doing business upon purchase of a second-hand vehicle, and this has resulted in traffic congestion. As long as the problem of illegal car hire service remains unresolved by the Government, Secretary, I believe the Government is 6862 LEGISLATIVE COUNCIL ― 2 June 2021 simply making a wrong diagnosis and prescribing a wrong medicine by adopting this tax increase as the solution. Thank you.

CHAIRMAN (in Cantonese): Mr Frankie YICK, do you wish to speak again?

MR FRANKIE YICK (in Cantonese): Chairman, first of all, I wish to thank Mr SHIU Ka-fai for explaining to the Secretary once again that illegal car hire service is mainly to blame for road congestion. During the Second Reading debate just now, I have pointed out another key issue: excessive number of overlapping bus routes. It is necessary for the Government to implement a bus route rationalization plan. In the absence of these actions, increasing the motor vehicle first registration tax can never resolve the problem concerned, and I am not going to repeat what I said in the Second Reading debate.

Anyway, Secretary, you just talked about unfairness and the likelihood of some people ordering more vehicles in advance in the hope of a possible deferment of the tax increase. When I explained my amendment just now, I have already pointed out that this is simply impossible. Why should I want to pre-order a batch of vehicles to be shipped to Hong Kong? Can they certainly be sold out? If not, what should I do then? The payments for the vehicles have been fully settled, while the rentals for warehouse remain payable. So, this is not going to happen. The Secretary's argument just does not hold water. That said, Secretary, I am not going to argue with you about this point in detail in this Chamber. If you are interested, I am most willing to explain to you how the industry operates at length, so that your Bureau will be able to do a better job in policy formulation in the future.

Thank you, Chairman.

CHAIRMAN (in Cantonese): This committee now deals with the amendments. The voting arrangements are set out in the Appendix to the Script.

CHAIRMAN (in Cantonese): Mr SHIU Ka-fai, you may move your first group of amendments.

LEGISLATIVE COUNCIL ― 2 June 2021 6863

MR SHIU KA-FAI (in Cantonese): Chairman, sorry, I have to read this sentence from the Script. I am sorry.

I move my first group of amendments, which includes the amendments to delete clause 3 and Part 4 (namely clause 7), as set out in the Appendix to the Script.

Proposed amendments

Clause 1 (See Annex I)

Clause 2 (See Annex I)

Clause 3 (See Annex I)

Clause 4 (See Annex I)

Clause 5 (See Annex I)

Clause 6 (See Annex I)

Part 4 (See Annex I)

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the first group of amendments moved by Mr SHIU Ka-fai be passed

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

(Members raised their hands)

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

(Members raised their hands)

6864 LEGISLATIVE COUNCIL ― 2 June 2021

Mr Holden CHOW rose to claim a division.

CHAIRMAN (in Cantonese): Mr Holden CHOW has claimed a division. The division bell will ring for five minutes.

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

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

Functional Constituencies:

Mr Frankie YICK, Mr CHUNG Kwok-pan and Mr SHIU Ka-fai voted for the amendments.

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Ms Starry LEE, Mr CHAN Kin-por, Mr Steven HO, Mr YIU Si-wing, Mr MA Fung-kwok, Mr Christopher CHEUNG, Mr POON Siu-ping, Ir Dr LO Wai-kwok, Mr Jimmy NG, Mr Holden CHOW, Dr Pierre CHAN, Mr CHAN Chun-ying, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Kenneth LAU and Mr Tony TSE voted against the amendments.

THE CHAIRMAN, Mr Andrew LEUNG, did not cast any vote.

Geographical Constituencies:

Dr CHENG Chung-tai voted for the amendments.

Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Michael TIEN, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Ms Elizabeth LEGISLATIVE COUNCIL ― 2 June 2021 6865

QUAT, Mr Wilson OR, Ms YUNG Hoi-yan, Mr CHEUNG Kwok-kwan and Mr Vincent CHENG voted against the amendments.

Dr Junius HO abstained.

THE CHAIRMAN announced that among the Members returned by functional constituencies, 23 were present, 3 were in favour of the amendments and 19 against them; while among the Members returned by geographical constituencies through direct elections, 14 were present, 1 was in favour of the amendments, 12 against them and 1 abstained. Since the question was not agreed by a majority of each of the two groups of Members present, he declared that the amendments were negatived.

MS STARRY LEE (in Cantonese): Chairman, I move that in the event of further divisions being claimed in respect of any provisions of or any amendments to the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021, this committee of the whole Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the motion moved by Ms Starry LEE be passed.

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

(Members raised their hands)

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

(No hands raised)

6866 LEGISLATIVE COUNCIL ― 2 June 2021

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of each of the two groups of Members present, that is, those returned by functional constituencies and those returned by geographical constituencies through direct elections.

I declare the motion passed.

I order that in the event of further divisions being claimed in respect of any provisions of or any amendments to the Bill, this committee of the whole Council do proceed to each of such divisions immediately after the division bell has been rung for one minute.

CHAIRMAN (in Cantonese): As the first group of amendments moved by Mr SHIU Ka-fai has been negatived, he may not move his second group of amendments.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That clauses 1, 2 and 4 to 7 stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

CHAIRMAN (in Cantonese): Mr Frankie YICK, you may move your amendments.

LEGISLATIVE COUNCIL ― 2 June 2021 6867

MR FRANKIE YICK (in Cantonese): Chairman, I move my amendments as set out in the Appendix to the Script.

Proposed amendments

Clause 3 (See Annex I)

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the amendments moved by Mr Frankie YICK be passed.

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

(Members raised their hands)

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

(Members raised their hands)

Mr Frankie YICK rose to claim a division.

CHAIRMAN (in Cantonese): Mr Frankie YICK has claimed a division. The division bell will ring for one minute.

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

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

6868 LEGISLATIVE COUNCIL ― 2 June 2021

Functional Constituencies:

Mr Frankie YICK, Mr CHUNG Kwok-pan and Mr SHIU Ka-fai voted for the amendments.

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Mr CHAN Kin-por, Mr YIU Si-wing, Mr Christopher CHEUNG, Mr POON Siu-ping, Ir Dr LO Wai-kwok, Mr Jimmy NG, Dr Pierre CHAN, Mr CHAN Chun-ying, Mr LUK Chung-hung, Mr Kenneth LAU and Mr Tony TSE voted against the amendments.

Ms Starry LEE, Mr MA Fung-kwok, Mr Holden CHOW and Mr LAU Kwok-fan abstained.

THE CHAIRMAN, Mr Andrew LEUNG, did not cast any vote.

Geographical Constituencies:

Dr CHENG Chung-tai voted for the amendments.

Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Michael TIEN, Ms Alice MAK, Mr KWOK Wai-keung, Ms YUNG Hoi-yan and Mr CHEUNG Kwok-kwan voted against the amendments.

Mr LEUNG Che-cheung, Ms Elizabeth QUAT, Dr Junius HO, Mr Wilson OR and Mr Vincent CHENG abstained.

THE CHAIRMAN announced that among the Members returned by functional constituencies, 22 were present, 3 were in favour of the amendments, 14 against them and 4 abstained; while among the Members returned by geographical constituencies through direct elections, 14 were present, 1 was in favour of the amendments, 8 against them and 5 abstained. Since the question was not agreed LEGISLATIVE COUNCIL ― 2 June 2021 6869 by a majority of each of the two groups of Members present, he declared that the amendments were negatived.

CHAIRMAN (in Cantonese): I now put the question to you and that is: That clause 3 stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

PRESIDENT (in Cantonese): All the proceedings on the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 have been concluded in committee of the whole Council. Council now resumes.

Council then resumed.

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): President, I now report to the Council: That the

Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 has been passed by committee of the whole Council without amendment. I move the motion that "This Council adopts the report".

6870 LEGISLATIVE COUNCIL ― 2 June 2021

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for Transport and Housing be passed.

In accordance with the Rules of Procedure, this motion shall be voted on without amendment or debate.

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

(Members raised their hands)

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

(Members raised their hands)

Mr Frankie YICK rose to claim a division.

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

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

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

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Ms Starry LEE, Mr CHAN Kin-por, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Steven HO, Mr YIU Si-wing, Mr MA Fung-kwok, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Mr Christopher CHEUNG, Ms Elizabeth QUAT, Mr POON Siu-ping, Ir Dr LO Wai-kwok, Mr Jimmy NG, LEGISLATIVE COUNCIL ― 2 June 2021 6871

Dr Junius HO, Mr Holden CHOW, Mr Wilson OR, Ms YUNG Hoi-yan, Mr CHAN Chun-ying, Mr CHEUNG Kwok-kwan, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Kenneth LAU, Mr Vincent CHENG and Mr Tony TSE voted for the motion.

Mr Michael TIEN, Mr Frankie YICK, Mr CHUNG Kwok-pan, Mr SHIU Ka-fai and Dr CHENG Chung-tai voted against the motion.

Dr Pierre CHAN abstained.

THE PRESIDENT, Mr Andrew LEUNG, did not cast any vote.

THE PRESIDENT announced that there were 37 Members present, 30 were in favour of the motion, 5 against it and 1 abstained. Since the question was agreed by a majority of the Members present, he declared that the motion was passed.

Third Reading of Government Bill

PRESIDENT (in Cantonese): Government Bill: Third Reading.

REVENUE (FIRST REGISTRATION TAX AND LICENCE FEES FOR MOTOR VEHICLES) BILL 2021

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): President, I move that the

Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 be read the Third time and do pass.

6872 LEGISLATIVE COUNCIL ― 2 June 2021

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021 be read the Third time and do pass.

Does any Member wish to speak?

(Mr Frankie YICK stood up and indicated his wish to claim a division instead of making a speech)

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

(Members raised their hands)

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

(Members raised their hands)

Mr Frankie YICK rose to claim a division.

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

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

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

Mr Abraham SHEK, Mr Tommy CHEUNG, Mr Jeffrey LAM, Ms Starry LEE, Mr CHAN Kin-por, Dr Priscilla LEUNG, Mr WONG Kwok-kin, Mrs Regina IP, Mr Steven HO, Mr YIU Si-wing, Mr MA Fung-kwok, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Mr Christopher CHEUNG, Ms Elizabeth QUAT, Mr POON Siu-ping, Dr CHIANG Lai-wan, Ir Dr LO Wai-kwok, Mr Jimmy NG, Dr Junius HO, Mr Holden CHOW, Mr Wilson OR, LEGISLATIVE COUNCIL ― 2 June 2021 6873

Ms YUNG Hoi-yan, Mr CHAN Chun-ying, Mr CHEUNG Kwok-kwan, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Kenneth LAU, Mr Vincent CHENG and Mr Tony TSE voted for the motion.

Mr Michael TIEN, Mr Frankie YICK, Mr CHUNG Kwok-pan, Mr SHIU Ka-fai and Dr CHENG Chung-tai voted against the motion.

Dr Pierre CHAN abstained.

THE PRESIDENT, Mr Andrew LEUNG, did not cast any vote.

THE PRESIDENT announced that there were 38 Members present, 31 were in favour of the motion, 5 against it and 1 abstained. Since the question was agreed by a majority of the Members present, he declared that the motion was passed.

CLERK (in Cantonese): Revenue (First Registration Tax and Licence Fees for Motor Vehicles) Bill 2021.

Resumption of Second Reading Debate on Government Bill

PRESIDENT (in Cantonese): This Council resumes the Second Reading debate on the Revenue (Stamp Duty) Bill 2021.

REVENUE (STAMP DUTY) BILL 2021

Resumption of debate on Second Reading which was moved on 17 March 2021

PRESIDENT (in Cantonese): Mr CHUNG Kwok-pan, Chairman of the Bills Committee on the Bill, will first address the Council on the Bills Committee's Report.

6874 LEGISLATIVE COUNCIL ― 2 June 2021

MR CHUNG KWOK-PAN (in Cantonese): President, in my capacity as Chairman of the Bills Committee on the Revenue (Stamp Duty) Bill 2021 ("Bills Committee"), I would like to report the major deliberations of the Bills Committee

The Revenue (Stamp Duty) Bill 2021 ("the Bill") mainly seeks to amend the Stamp Duty Ordinance to give effect to the proposal in the Budget introduced by the Government for the 2021-2022 financial year to increase the rate of stamp duty for sale, purchase and transfers of Hong Kong stock from the current 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively.

The Bills Committee has held two meetings and invited written views from the public on the Bill. Members noted that in the past year, government expenditure had grown substantially to combat the epidemic and roll out relief measures. Most of the members have expressed their understanding of the Government's proposal to raise the rate of stamp duty on stock transfers in order to increase government revenue. Nevertheless, some Members are opposed to the proposal concerned.

In the course of deliberation, some members have expressed concern about the effect the proposed increase in stamp duty on stock transfers will have on the stock market of Hong Kong and its status as an international financial centre. They have pointed out that the proposed increase in the rate of stamp duty will increase the transaction costs of stock trading, which will affect not only securities brokers but also millions of stock investors in Hong Kong.

The Administration has advised that stock trading activities are driven by a combination of factors, such as market conditions. Transaction costs of stock trading, comprising stamp duty and other types of levy, is only one of them. The Administration takes the view that the competitiveness of Hong Kong's securities market is premised on many unique institutional strengths including free flow of capital, internationally-aligned regulatory framework, established financial infrastructure, quality of the assets being traded as well as its connectivity with, and the enormous opportunities presented by the expanding Mainland economy. The Administration has remarked that continued efforts will be made to consolidate Hong Kong's fundamental strengths, enhance market quality, expand mutual market access and update the listing mechanism, so that LEGISLATIVE COUNCIL ― 2 June 2021 6875 the Hong Kong stock market can continue to remain vibrant, providing ample business opportunities to the financial services sector.

On a member's concern that the proposed increase in stamp duty on stock transfers may cause retail investors to turn to the derivatives market, the Administration has explained that at present, the trading of derivatives under the Hong Kong Exchanges and Clearing Limited ("HKEX") is cash-settled and therefore is not subject to stamp duty. However, the nature of derivatives is different from that of stocks. For example, derivative products investors do not have rights such as dividend payment and voting rights. The secondary market price of derivatives is also affected by other factors such as the time value of the derivative products and the volatility of the underlying stocks. It is therefore not appropriate to compare the trading activities of stocks with those of derivative products.

A member is concerned that investors will turn to invest in depositary receipts of Hong Kong listed companies in the stock market in the United States after the implementation of the proposed increase in the rate of stamp duty on stock transfers in Hong Kong. The Administration has responded that the trading hours of overseas stock market is one factor which investors may take into consideration when deciding which market to invest. The numerous homecoming listings of China Concept Stocks on HKEX show that Hong Kong's stock market enjoys clear advantages over those in other jurisdictions.

Some members are worried that the proposed increase in the rate of stamp duty on stock transfers will render the operating environment of the small and medium-sized securities brokers more difficult. In response, the Administration has advised that various measures have been introduced to provide assistance to the securities industry. For instance in 2020, a Subsidy Scheme for the Securities Industry under the Anti-epidemic Fund was launched to provide cash subsidies to support small and medium-sized intermediaries and brokers. The Securities and Futures Commission has waived the annual licensing fees payable by all licensed corporations, registered institutions, responsible officers and representatives for the financial years of 2020-2021 and 2021-2022 to relieve the cost burden on the securities and futures industry. HKEX also offered $10,000 invoice credits to each eligible exchange participant in 2020 to provide relief to the securities industry amidst the economic downturn and global financial 6876 LEGISLATIVE COUNCIL ― 2 June 2021 turmoil. The Administration undertakes to continue to work with the trade to create an operating environment conducive to the sustainable development of the industry.

Some members have asked the Administration to consider levying the proposed new rate of stamp duty on only one side of transactions (i.e. either buyers or sellers) or lowering the proposed increase in the rate of stamp duty. The Administration has advised that the policy objective of the Bill is to increase government revenue. Levying the new rate of stamp duty on stock transfers on one side of transactions or lowering the increase in the rate will significantly undermine the objective of the Bill to increase government revenue. Besides, imposing different rates of stamp duty on stock transfers on buyers and sellers will entail a fundamental and structural change to the stamp duty regime, thereby affecting the current ecology of the stock market in Hong Kong.

A member has suggested that the Administration should add a "sunset clause" to the Bill so that the stamp duty on stock transfers will be reverted to the current rate (i.e. 0.1%) when the economy recovers. The Administration has responded that it does not agree to adding a "sunset clause" to the Bill. A wide range of factors, including economic, fiscal and the market situation, will have to be taken into account in determining whether any changes will need to be made to the rate of stamp duty on stock transfers in future. The Administration will continue to strike a balance between increasing government revenue and sustaining the development of the financial market in Hong Kong.

A member has asked the Administration about the reason for setting the commencement date of the Bill on 1 August 2021, and another member has requested the Administration to postpone the commencement date of the Bill to end of 2021. The Administration has advised that any stamp duty increase can only be implemented on a prospective basis, and the proposed commencement date on 1 August 2021 has taken into account the time required for the legislative process and the need for HKEX and the industry to make necessary adjustments to their operation systems.

The Bills Committee has noted that the Administration will not propose any amendment to the Bill. Mr Christopher CHEUNG has submitted to the Bills LEGISLATIVE COUNCIL ― 2 June 2021 6877

Committee his draft amendments to the Bill which seek to add a "sunset clause". After consideration, the Bills Committee decided not to move under its name the amendments concerned.

President, the following are my views on the Bill. President, the proposal of raising the rates of the first registration tax ("FRT") for private cars and the licence fees for motor vehicles that we discussed earlier can increase government revenue by about $900 million, and it is one of the proposals for seeking new revenue sources for the Government. As regards this amendment to the Stamp Duty Ordinance, it can increase government revenue by about $30-odd billion, on which I will give a brief analysis in due course.

The Government of course says that it does not have any surplus. Last year, it has spent $300 billion in fighting the virus and in providing funding support to the public and the enterprises. After spending so much money, it must get some revenue back. In the short term, how can it create some revenue? In terms of tax categories or tax increase, the overall revenue of the Government last year was about $564 billion, in which the revenue from income tax was about $75 billion, accounting for 13% of the overall revenue of the Government. The biggest source of revenue was naturally the profits tax, which was about $135.5 billion, accounting for 24% of the overall revenue of the Government. Nonetheless, under the current economic environment, most of the enterprises are also facing difficulties. While the profitability of many enterprises may be eroded, some enterprises even have to close their business. I thus believe that it is absolutely difficult to raise the rate of profits tax or to expect that $135.5 billion of profits tax can be received this year.

Some Members have mentioned raising the rate of betting duty. Last year, the Government's income from betting duty was about $22 billion. Even if the rate of betting duty is increased by 30%, meaning an increase of revenue by $6 billion per year, it is still not enough to be of significant help, though it will still be better than nothing. Hence, before the consultation exercise was conducted by the Financial Secretary on the Budget, we asked him to consider increasing the rate of stamp duty on stock transfers even by 100%, from 0.1% to 0.2%. On the basis of the Government's income of $33 billion from stamp duty on stock transfers last year, the income will immediately jump to $66 billion this year with such a substantial rate of growth. Of course, I think if the rate of stamp duty on stock transfers is increased by 100% from 0.1% to 0.2%, the trade 6878 LEGISLATIVE COUNCIL ― 2 June 2021 that Mr Christopher CHEUNG represents will strongly oppose it. Even though the current proposal suggests an increase of 30%, he already opines that it is excessive.

Let me do some calculations. Last year, the daily turnover value of stock transactions was about $129.8 billion, i.e. nearly $130 billion, and the Government's income from stamp duty on stock transfers was $33 billion. If the rate of stamp duty is increased by 30%, the income concerned will be increased by $10 billion. However, we now notice that the daily turnover value of stock transactions is relatively less, with only about $150 billion to $160 billion. Before the Lunar New Year, the daily turnover value of stock transactions was over $200 billion, and even reached $300 billion to $330 billion on certain days. I have done some calculations. In case the daily turnover value of stock transactions is $200 billion on average in a year, the Government can have extra revenue of $30-odd billion, meaning that the Government may have revenue of $67-odd billion from stamp duty on stock transfers, and this can greatly boost the fiscal revenue of the Government.

Frankly speaking, when many trades are languishing at present, the financial sector is the only one that continues to prosper. Of course, someone may ask why the rate of stamp duty on stock transfers has to be raised when the financial sector is flourishing, and why it appears that this sector has to shoulder more responsibilities for society. However, under the current circumstances, we believe that the Hong Kong stock market will not be too bad in the future. I think if the financial sector, when it is flourishing, can help slightly boost the revenue of the Hong Kong Government, this is a worthwhile move.

Honestly speaking, if you ask stock buyers, especially members of the public or minor investors, how much stamp duty they need to pay for their daily transactions, I believe most of them do not know the answer. What is their purpose of buying stocks? It is for gaining profits through the increase in stock values or dividends. At present, many traditional stocks can have a dividend yield of 6% to 7% per year, which is a very attractive rate of investment return. We can imagine that even if the rate of stamp duty is now increased by 30% to 0.13%, an investor only needs to pay an extra $30 for his purchase of $100,000 worth of stocks. This will not pose any impact on most investors. Hence in this respect, I think overall speaking, this is absolutely acceptable.

LEGISLATIVE COUNCIL ― 2 June 2021 6879

Admittedly, at the Bills Committee, Mr Christopher CHEUNG has expressed his strong dissatisfaction. It was normal that he expressed dissatisfaction on behalf of his sector. He also said that he would propose many amendments, but weird enough, he has not proposed any amendment during the Council meeting today. Initially, he said that a "sunset clause" should at least be added to the Bill. During the earlier discussion on FRT, we all knew very clearly that the amendments concerned were unable to be carried. But as we have observed, for the sake of responding to the aspirations of the industries concerned, Mr SHIU Ka-fai and Mr Frankie YICK still moved the amendments and also had to accept when their amendments were vetoed at the end. Thus, I am puzzled about the disappearance of a series of amendments today which Mr Christopher CHEUNG said at the Bills Committee that he would move.

Finally, President, there was a rather special occurrence at the last meeting of the Bills Committee. On that day, Mr Christopher CHEUNG mentioned his proposal of adding a "sunset clause" and requested that the question of moving the related amendments in the name of the Bills Committee be put to the vote at the meeting. The attendance rate was rather high on that day with 12 members present. The result was that four members were in favour of it, four against it and four abstained from voting. In terms of voting at the Bills Committee, this was a rather unique voting result, as I believe that the votes have never been so evenly divided before.

President, on behalf of the Liberal Party, I support the Bill. Thank you, President, I so submit.

MR TONY TSE (in Cantonese): President, I speak in support of the Revenue (Stamp Duty) Bill 2021 ("the Bill") to resume its Second Reading. Under the impact of the suppression of the US, the "black-clad" riots and the COVID-19 pandemic, economy has been plunged into a serious recession, which has significantly affected government revenue. In addition, the few rounds of anti-epidemic and relief measures have cost the Government hundreds of billions of dollars and resulted in a fiscal deficit for two consecutive years. For instance, the fiscal deficit for 2020-2021 reached a record-breaking $232.5 billion. It is projected that the Government will record another deficit exceeding $100 billion for 2021-2022. Some $350 billion is gone in just three years. Our fiscal reserves will probably drop from the peak of over $1,100 billion to about 6880 LEGISLATIVE COUNCIL ― 2 June 2021

$800 billion by the end of March next year, which is equivalent to one-odd year of Government spending.

In order to ensure that the Government will continue to have the capability to tackle the epidemic and maintain public services, as well as launch further targeted measures to relieve people's hardship and boost the economy, I suggest in my Budget proposal submitted to the Financial Secretary early this year that the Government can introduce new taxes and raise tax rates based on the "earning more, paying more" principle. These include the first registration tax for private cars, which just went through its Third Reading and passed, and the stamp duty on stock transfers prescribed under the Bill. Regarding the stamp duty on stock transfers, I proposed that the stamp duty for both the buyers and sellers be raised by 0.025% each side. Ultimately, the Financial Secretary decided to raise the rate by 0.03%.

After submitting my tax rise proposal, I received many calls from people of the financial sector saying that they did not support a tax rise. In response to media enquiries, our Member from the Financial Services constituency, Mr Christopher CHEUNG, also criticized that the proposal was killing the goose that laid golden eggs and expressed concern that the proposal might undermine Hong Kong's position as an international financial centre. Coincidentally, after the proposed tax rise was announced, the Hong Kong stock market followed the external markets with a major correction. Some people mocked the Financial Secretary for creating a stock market crash himself and should be held accountable. Fortunately, the stock market later quickly rebounded and recently surged above 29 000 points again. The trading turnover has maintained at a high level. A number of big stocks are waiting to be listed on the Hong Kong stock market to raise capital. The financial market has become a marvel in Hong Kong despite the pandemic and sluggish economy, which has comprehensively defeated the argument that raising tax will undermine our position as a financial centre.

As many experts and scholars have pointed out, stamp duty is only one of the many costs in stock trading; and the trading costs are one of the many factors that investors will consider when they buy or sell stocks listed on the Hong Kong stock market. In fact, according to statistics from the Hong Kong Exchanges and Clearing Limited ("HKEX"), the average daily turnover of the Hong Kong stock market in 2020 reached $129 billion, a sharp increase of 48% over 2019. The average daily turnover in the first quarter of this year reached $224.4 billion, showing a massive increase of 85% as compared with the same quarter last year. LEGISLATIVE COUNCIL ― 2 June 2021 6881

If the stock market is the goose that lays golden eggs, then the eggs it laid over much of last year have doubled, but the stamp duty for that period has not been adjusted at all. People thus question whether there is a strong correlation between the stamp duty rate and the market turnover.

The market turnover in Hong Kong has repeatedly broken new records amidst of the pandemic. This is believed to be largely related to the relentless US suppression against China in recent years. Many Mainland corporations which have originally intended to seek listing on the US stock markets have changed their mind and gone to Hong Kong for listing, thus stimulated the overall turnover of the Hong Kong stock market. With the Stock Connect mechanisms between Hong Kong and Mainland cities getting mature and covering a more extensive area, more and more capital has flowed into Hong Kong from the north. It is believed that a slight upward adjustment on our stamp duty rate will not cause these corporations and capital to move to the US or other overseas markets.

President, stamp duty on stock transfers has been an important source of revenue for the Government. For instance, the tax revenue concerned for 2019-2020 exceeded $33.2 billion. Based on market turnover from the second half of last year to the first quarter of this year, the total stamp duty on stock transfers for this year is projected at $50 billion to $60 billion. According to a conservative estimation made by the Government, this proposed tax rise will roughly bring about an additional $12 billion in revenue.

What can we do with this $12 billion? The Finance Committee of the Legislative Council had a heated debate in the meetings over the past two Fridays on a proposal to inject funding into the Lotteries Fund. The funding proposal was ultimately passed by a slim margin of one vote. How much money did the funding proposal seek? It was about $1.1 billion and the funding will be used on more than 40 welfare projects and facilities. It is believed that the proposed increase in the stamp duty rate on stock transfers can significantly benefit government revenue and social welfare. Instead of killing the goose that lays golden eggs, the proposal will provide food to feed the goose well. When the goose is able to lay a few more eggs, the extra eggs will become the much needed food for the grass roots.

During deliberation of the Bill, a Member considered proposing an amendment to introduce a "sunset clause" to the proposed tax rise, such that the proposed rate increase would lapse in one year and the stamp duty on stock transfers would be reverted to its current rate, so as to force the Government to 6882 LEGISLATIVE COUNCIL ― 2 June 2021 review this issue within one year. In the end, however, the Member did not propose the amendment, possibly because he gave more consideration to the big picture. But I believe even in the absence of the amendment or the "sunset clause", the Financial Secretary will constantly review the tax rate concerned and roll out different policies to consolidate and enhance the position of Hong Kong as an international financial centre.

In addition to reviewing the stamp duty rate on stock transfers, I hope the Government will also review and perfect the existing taxation system and tax types in the light of the latest development of Hong Kong, of the country and of the global economy. I also hope that the Government will consider levying a higher stamp duty rate on property transactions of super-luxurious flats based on the principles of "earning more, paying more" and "higher tax for higher-priced properties and lower tax for lower-priced properties" and look into the justification for introducing other tax types, including digital tax, etc. to increase government revenue and broaden the tax base. By so doing, it is hoped that the Government can provide better and more effective services for the public and more tax concession and supportive measures for the middle class and small and medium enterprises.

Moreover, compared to the $20-odd stamp duty levied for every $10,000 stock transaction, investors are more concerned about the appreciation potential of the stock they have bought; whether they have bought any "swindler stocks"; whether they will be timely notified if the company concerned has any irregular activities; and whether the Government, HKEX and the related regulatory bodies have a sound regulatory system.

Different types of investment fraud cases have increased in number over recent years in Hong Kong. In some cases, it was a complete falsehood. The investment companies and products concerned did not exist. However, some fraud cases and scams involved licensed companies or individuals, and senior management of listed companies; or involved the two parties colluding together to deceive investors and the regulatory bodies. These irregularities are the prime factor that affects investors' confidence and tarnishes the reputation of Hong Kong as an international financial centre to the greatest extent. Here, I hope and call on the related authorities in the Government to continue to step up enforcement and continue to perfect the regulatory system on the Hong Kong financial market.

With these remarks, President, I support the Bill.

LEGISLATIVE COUNCIL ― 2 June 2021 6883

MR MICHAEL TIEN (in Cantonese): President, the economic downturn ever since the outbreak of the epidemic has led to a drastic reduction in the income of the Treasury. While offering support for the public and enterprises, the Government has also introduced countercyclical measures. As a result, the two financial years of 2019-2020 and 2020-2021 have recorded a financial deficit. For this reason, it must come up with ways to increase revenue. I absolutely understand all this and have no reason to raise objection.

Today, we are discussing the Revenue (Stamp Duty) Bill 2021. The increase in stamp duty on stock transfers this time around is purely intended as a means to increase revenue, and no other policy justification is involved. I have discussed with the Government and the Financial Secretary many times before, and I have told them that despite the need to increase revenue, "treating the head in case of a headache" like this will not always work. If the Government increases stamp duty on stock transfers due to its failure to make ends meet this year, then what is it supposed to do in case of a financial crisis next year or next time? Everybody regards stock trading as a long-lived goose that can definitely lay golden eggs in Hong Kong. Therefore, whenever problems arise, they will hasten to look to this goose for more golden eggs at their disposal. This is very often the very reason why a good thing begins to show big problems. Just now, a Member said that a stock investor would only need to pay $30 more if he bought stocks worth a certain sum, adding that it was no big deal at all. He went on to say that even a few years later, he would only need to pay an additional $30 all the same.

I am okay with the proposal if it is only a one-off. But Members should come to think about one question: What are we supposed to do in the future if we only have this goose that can lay golden eggs without any achievement in the development of other areas? Therefore, a genuine solution to the root problem is to reform the tax regime by broadening the tax base and open up new income sources, as stated in the relevant papers. We have held discussions on this issue over the past couple of years, and the authorities have also set up offices and recruited the necessary staff, who have already received their salaries for a few years now. But then, why is there no progress, to speak less of a guiding direction for discussion?

For every year in the past, Roundtable has recommended that the Government should examine a reform of the tax regime and an expansion of the tax base. Over the past year, we have realized the destructiveness of a gigantic wave, so we think that the Government should take this matter more seriously. 6884 LEGISLATIVE COUNCIL ― 2 June 2021

Has the Government ever studied those wealth taxes in other countries and regions, such as a progressive capital gains tax, a progressive dividend tax levied on dividends of a significant rather than small amount, and also a progressive luxurious commodity tax? Is it true to say that the Government will not consider the imposition of any such taxes at all? Introducing new tax types and a slight increase in tax rates as a means to share out the burden among various social sectors should be the way to create additional income sources for society and the Hong Kong Government in the long run. The most important of all is a stable income source.

The above concerns the principle. In the following, I will discuss some side effects of the stamp duty on stock transfers. To investors participating in frequent transactions such as fund investors, increasing the tax rate will drive up their cost substantially, and it is not simply an "insignificant increase in the ones place". This proposal will give rise to two possible scenarios: First, investors may switch to other markets for investment―this seems unlikely to happen now; and the other possible scenario is that investors may switch to investing in other tax-free derivatives involving relatively high risks. This is not a desirable outcome.

Simply put, I think this proposal for increasing the tax rate stands a 99% or even 100% chance of passage. But I wish to take this opportunity to call upon the Government to begin serious consideration of the issue about broadening the tax base. Personally, speaking of the Government's proposed increase of the stamp duty this time around, apart from the issue of principle I brought up just now―meaning that the use of the most booming industry in Hong Kong at present to make up for its revenue shortfall will work for now only rather than forever―I hope the Government can consider a structural reform of the tax regime and proceed with it expeditiously.

I basically have no objection to this amendment.

DR CHIANG LAI-WAN (in Cantonese): President, in this exercise, the Government intends to adjust upwards the rate of stamp duty on stock transfers to be paid separately by the buyer and the seller from the existing 0.1% to 0.13%, and the rate of increase is as much as 30%. That is to say, the Government will charge both the buyer and the seller a combined stamp duty of 0.26% of each LEGISLATIVE COUNCIL ― 2 June 2021 6885 transaction value. I have much reservation about this proposal out of three reasons. First, should the Government seek to increase tax revenue for the Treasury at this particular moment? Is it really true to say that the Treasury has run out of money? Undeniably, Hong Kong's economy has indeed been badly affected by the epidemic over the past two years. But Hong Kong's GDP over the recent months has rebounded from declines, and the Treasury now has around $800 billion. I do not remember the exact total figure, but our computation shows that even if Hong Kong has no income at all from now on, it can still meet its spending for one and a half years or two years without any problems. Besides, it is utterly impossible that the Government will have no revenue at all. Therefore, we have much reservation about the proposed increase of the tax rate at this very moment.

Second, is it the right moment to increase the rate of stamp duty on stock transfers now? Many businessmen have invariably said that a little more tax payment will not matter much to them if they can make profits. But the point is that stock trading will not always yield profits, and losses are also possible. In the previous month, how many people suffered losses with their money tied up in stocks? But when they sell their stocks, they will also have to pay stamp duty on stock transfers, which will be increased by 30%. This is their cost rather than a profit under the profits tax.

Third, Members all know that around one third of the adults, or roughly 2 million people, in Hong Kong are stock investors, and the vast majority of them are middle-class people. Should the Government target on them at this very moment? Raising the tax rate is tantamount to increasing their costs, their transaction costs, to be precise. At present, many people engage in stock trading every day, and it has even become a profession. The Government's proposed increase of the tax rate is tantamount to increasing their business costs, right? Therefore, we think that, undeniably, the number of people that will be affected may be as many as 2 million.

Just now, a Member put forth an opposite view. He argued that despite the announcement on increasing the tax rate, the stock market had remained thriving. Well, this is correct, just because the time has not come―the tax rate will not be increased until the Bill is passed and takes effect in August. So, it may well be that many people are now selling their stocks, right?

6886 LEGISLATIVE COUNCIL ― 2 June 2021

I have also heard some news reports saying that some will stop engaging in stock trading every day after the tax rate is raised. Actually, trading in stocks is comparable to operating a trading business involving the sale and procurement of products. The buyer will not always make money. Am I right? Sometimes, if the buyer procures too many of the same product, he will have to face the overstock problem. If the product depreciates in the future, the selling price will also drop. Just as certain Members pointed out in the debate on the preceding bill, many motor vehicles that were imported some time ago have to be sold at a loss due to overstock.

Just now, Mr TIEN talked about the definite passage of this particular bill today, and he seemed to be questioning Members' need to speak. Despite his assertion, I also have to put forth my views. President, I am frightened, and I often think … President, you also started out as an industrialist. I wonder if the President still remembers what happened back then. Back in those years, Hong Kong's industrial development was booming with good business prospects, but it was very difficult to recruit enough workers. In the end, the Government agreed to the idea of labour importation. At the time, the minimum wage for a local worker was some $10,000―I am talking about the time between late 1980s and early 1990s―but the cost of importing a worker from the Mainland was nearly $20,000. As so doing was even more costly than employing a local worker, it was utterly impossible to import a Mainland worker. This resulted in the moving out of industries from Hong Kong. Today, Hong Kong has no traditional industry to speak of, and there is only the financial industry. The financial industry is like a goose that can lay golden eggs, so we must take good care of it. The reason is that we must rely on it to compete with others for business.

Earlier on, Mr TSE said that things had turned worse recently due to American suppression. In that case, we should work even harder. Why should the Government increase their costs at this moment? Charles LI, the former Chief Executive of the Hong Kong Exchanges and Clearing Limited, once said that for the sake of development, we must ensure the satisfactory development of Hong Kong's stock exchange, and this explained why he had resorted to every possible means to reduce the stamp duty on stock transfers. He was literally stunned to hear the upward adjustment of stamp duty on stock transfers proposed by the Government this time around. Of course, the Government must treasure this particular industry because the proposal will have implications on stock LEGISLATIVE COUNCIL ― 2 June 2021 6887 trading to a certain extent. Mind you, the Government has even said itself that the growth, the substantial growth, of the stock market every year is hard to come by.

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

Members may listen to the following figures and then do some thinking. Hong Kong's revenue from stamp duty on stock transfers in 2016-2017, 2017-2018 and 2018-2019 amounted to $23.6 billion, $37 billion and $33.1 billion respectively and recorded sustained growth all along. But due to American suppression, revenue from stamp duty on stock transfers in 2019-2020 merely stood at $33.2 billion. The Government must treasure this industry and conceive ways to compete with others.

Members may pay attention to the situation of major financial markets worldwide. No stamp duty on stock transfers is levied in the stock markets of the United States, Japan and Australia. Of course, the Government may rebuke me, saying that they may have imposed a profits tax or other levies. But Members should not forget one thing. The profits tax in the Government's words is a tax to be charged after profits are made rather than at a time when it is still uncertain whether a transaction will yield any profits. Therefore, I honestly have much reservation about the appropriateness of this proposal. And in fact, I am also worried about its possible impact on Hong Kong's financial market.

The Government will not withdraw the Bill anyway, but I hope the Government can withdraw it. I will remain hopeful about this, even though there is only a glimmer of hope.

I so submit.

MR WONG TING-KWONG (in Cantonese): Deputy President, caught in a the predicament caused by huge fiscal deficit, the HKSAR Government will inevitably have to explore ways to cut expenditure and increase income so as to increase government revenue. However, given that Hong Kong is in economic recession with a general depression in all trades and industries, raising traditional direct taxes, such as salaries tax and profits tax, will add to the burden of the 6888 LEGISLATIVE COUNCIL ― 2 June 2021 general public, while introducing new indirect taxes, such as consumption tax and service tax, will deal a further blow to the already-ailing retail consumer market, which may cause a serious backlash of public sentiment. Therefore, I believe that raising the rate of stamp duty on stock transfers is the option that will cause minimal disturbance in society as far as various ways to increase income are concerned.

According to the information provided by the Administration, annual government revenue from stamp duty on stock transfers ranged from about $20 billion to $37 billion in the past decade. The Revenue (Stamp Duty) Bill 2021 ("the Bill") proposes to increase the rate of such stamp duty from 0.1% to 0.13%, an increase of 0.03 percentage point. It is expected that it will generate an extra $12 billion in revenue each year approximately.

No doubt, the impact of increasing the rate of such stamp duty on the general public is relatively little, and it can increase government revenue effectively, so I think it is a more feasible way given the present situation.

Raising the rate of stamp duty on stock transfers will definitely have impact on the relevant industry and investors. It is natural that they are discontented with the Bill. Industry representative Mr Christopher CHEUNG once stated that he would make amendments to the Bill by asking for a postponement of the effective date of the Bill or an inclusion of a sunset clause.

I do not know why Mr CHEUNG gave up making amendments to the Bill in the end. Yet, looking from another angle, the industry understands the difficulties faced by the Administration, so they are willing to put aside their discontent temporarily in order to expedite the scrutinizing process so that the Bill can take effect as soon as possible. I think that their willingness to take into account the overall well-being of the community is worth recognition and support. I hope that the Government will be grateful to the industry's virtue of sacrificing themselves for the greater good, and will try its best to create greater room for development for the industry, and consider reducing the rate of stamp duty on stock transfers once the government revenue becomes more stable in the future, so as to relieve the pressure on the industry.

Deputy President, with these remarks, I support the Bill.

LEGISLATIVE COUNCIL ― 2 June 2021 6889

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

(No Member indicated a wish to speak)

DEPUTY PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to reply. Then, the debate will come to a close.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Deputy President, first of all, I would like to thank Mr CHUNG Kwok-pan, Chairman of the Bills Committee, and other committee members for their efforts in completing the scrutiny work of the Revenue (Stamp Duty) Bill 2021 ("the Bill") in a smooth manner. I also thank Members who gave their speeches just now, including those who support the Second Reading of the Bill.

The objective of the Bill is to give effect to the proposal in the 2021-2022 Budget to increase the rate of stamp duty on stock transfers from the current 0.1% to 0.13% for both buyers and sellers. The adjustment will come into effect on 1 August this year.

As I have emphasized on many occasions, the main reason for the Government's decision to adjust the rate of stamp duty on stock transfers is to increase government revenue so as to maintain a stable public finance. We believe that Members also understand that given the estimated fiscal deficit of $101.6 billion in 2021-2022, and operating deficits ranging from $22.4 billion to $40.7 billion for four consecutive financial years from 2022-2023 to 2025-2026, there is an apparent and continuous need to improve the Government's fiscal position in the light of increasing pressure on public finance. Based on the average daily turnover of $177 billion from end of February to end of May, the proposed adjustment in the rate of such stamp duty will bring an extra $18.7 billion in revenue to cover our expenditure annually.

Deputy President, I thank Members for their support for the increase in the rate of stamp duty on stock transfers in general during the scrutiny of the Bill by the Bills Committee and in their speeches. They also agree with the Government's move to increase revenue by such means in a bid to improve its fiscal position given its current budget constraints. Yet, we have also heard 6890 LEGISLATIVE COUNCIL ― 2 June 2021 different opinions during the process, especially the possible consequences of increasing the rate of such stamp duty on the development of local financial industry, so I wish to take this opportunity to make clear the Government's stance in this regard.

After the announcement of increasing the rate of stamp duty on stock transfers, we often hear concerns about the competitiveness of the stock market being undermined by the proposal. I wish to point out that the competitiveness of Hong Kong's securities market is built on our institutional strengths, including our established financial infrastructure, quality of the assets being traded and our increasingly frequent economic connection with the Mainland market which has brought us enormous development opportunities. In addition, our free flow of capital, rule of law and solid legal system, and internationally-aligned regulatory framework are also our unique and irreplaceable advantages.

In recent years, we have been committed to taking forward policy reforms, including enhancing various mutual market access schemes, allowing pre-revenue biotech and new economy companies with weighted voting rights structures to list in Hong Kong, and facilitating Greater China companies to seek secondary listing in Hong Kong. Our efforts in promoting the development of financial market is also delivering results gradually: the average daily turnover of Hong Kong stock market remained stable from $69 billion in 2010 to $69.5 billion in 2014 (i.e. before Shanghai-Hong Kong Stock Connect was launched), and has increased drastically since then to $130 billion in 2020. In the first five months this year, our average daily turnover was as high as $197.1 billion. There has been an 80% increase in the number of listed companies in a decade from 2010 to 2020, and the combined market capitalization of listed companies has increased from $21 trillion to $48 trillion, representing a 129% increase.

This year's budget has also proposed various measures to develop the financial market, including developing green and sustainable finance, bond market, asset management, wealth management and insurance risk management. The "Outline of the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Objectives Through the Year 2035" also acknowledges the significant functions and positioning of Hong Kong in the overall development of the country. Moreover, the cross-boundary wealth management connect pilot scheme, which will be launched soon, will open up new room for the development of the wealth management sector in the Guangdong-Hong Kong-Macao Greater Bay Area. It LEGISLATIVE COUNCIL ― 2 June 2021 6891 shows that Hong Kong market has unlimited potentials with the push and support from appropriate policies. The Government will continue to press ahead with various kinds of work to enhance the depth, breadth and liquidity of the financial market, thereby bringing in more trading activities.

Some Members are worried that increasing the rate of stamp duty on stock transfers will lead to a rise in transaction cost, thereby affecting the turnover, while some think that the transaction cost in Hong Kong will be higher than that in other major international financial centres. In fact, the transaction cost structure of stock markets around the world varies. Unlike some markets which charge dividend tax and capital gain tax, Hong Kong does not charge such taxes, so the transaction cost of different markets cannot be compared directly. Besides, low transaction cost is never the selling point of the Hong Kong stock market. The status of Hong Kong as an international financial centre is not founded on such a single factor as Stamp Duty.

Another point that Members raised in the Bills Committee and mentioned quite a lot in their speeches is that they think our proposal this time "hurts" small investors; some even think that our policies are unfair to small and medium securities dealers. According to the Cash Market Transaction Survey conducted by the Hong Kong Exchanges and Clearing Limited ("HKEX"), a large proportion of turnover of the Hong Kong stock market comes from institutional investors (around 80%), while other retail investors (such as individual investors) account for less than 20%. If we look at the figures in detail, overseas institutional investors are the largest contributors (around 36.6%), while local retail investors account for 13.6% approximately. In other words, the main sources of the stamp duty on stock transfers are institutional investors or overseas investors.

After adjusting the rate of stamp duty on stock transfers, for every transaction of $100,000, the increase in stamp duty is $30 each side only. I believe that general investors want to have more than $30 return for every $100,000 stock investment. I think that as long as we maintain a high-quality market, a mere increase in the tax rate to the current proposed level will not greatly dampen investors' enthusiasm in trading.

Some Members are also concerned that increasing the rate of stamp duty on stock transfers will deal a blow to the business of the securities sector and throttle the room for survival of small and medium-sized securities dealers. The Government appreciates the continuous contribution of small and medium-sized 6892 LEGISLATIVE COUNCIL ― 2 June 2021 securities brokers over the years, and recognizes their operating difficulties. The Government and regulators will continue to roll out measures to alleviate their burden and help the industry in upskilling, including launching the Subsidy Scheme for the Securities Industry under the Anti-epidemic Fund to provide cash subsidies to support small and medium-sized intermediaries and brokers, and holding an Fintech Development Roundtable Meeting for Securities Industry for small and medium-sized securities brokers to facilitate the adoption of Fintech by the securities sector for upgrading and transforming. I held a briefing chaired by Mr CHEUNG before to brief the industry on a series of upcoming funding schemes in Hong Kong. I will soon invite Mr CHEUNG and other industry practitioners to visit Cyberport and take a look at how our funding schemes can help the industry, such as the effectiveness of the Fintech Proof-of-Concept Subsidy Scheme. Noting that there is a request for lowering the fees charged by HKEX, we will follow up this issue with HKEX proactively.

Deputy President, we have struck a balance between the necessity to increase government revenue and the need to promote the development of financial market when we decided to increase the rate of stamp duty on stock transfers. We will continue to spare no efforts in introducing measures to facilitate the development of the securities market, so as to bring the development of Hong Kong's financial industry to a new and higher level, and keep enhancing the competitiveness of the Hong Kong stock market.

Deputy President, I move that the Second Reading of the Bill be resumed, I sincerely implore Members to support the Bill.

I so submit. Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): I now put the question to you and that is: That the Revenue (Stamp Duty) Bill 2021 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

LEGISLATIVE COUNCIL ― 2 June 2021 6893

Mr CHUNG Kwok-pan rose to claim a division.

DEPUTY PRESIDENT (in Cantonese): Mr CHUNG Kwok-pan has claimed a division. The division bell will ring for five minutes.

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

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

Mr Tommy CHEUNG, Mr WONG Ting-kwong, Mr CHAN Hak-kan, Mr CHAN Kin-por, Mr WONG Kwok-kin, Mrs Regina IP, Mr Michael TIEN, Mr Steven HO, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Ms Elizabeth QUAT, Mr POON Siu-ping, Mr CHUNG Kwok-pan, Dr Junius HO, Mr Holden CHOW, Mr SHIU Ka-fai, Mr Wilson OR, Ms YUNG Hoi-yan, Mr CHAN Chun-ying, Mr CHEUNG Kwok-kwan, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Vincent CHENG and Mr Tony TSE voted for the motion.

Mr Abraham SHEK, Mr Christopher CHEUNG and Ir Dr LO Wai-kwok voted against the motion.

Mr Jimmy NG and Dr CHENG Chung-tai abstained.

THE DEPUTY PRESIDENT, Ms Starry LEE, did not cast any vote.

THE DEPUTY PRESIDENT announced that there were 35 Members present, 29 were in favour of the motion, 3 against it and 2 abstained. Since the question was agreed by a majority of the Members present, she declared that the motion was passed.

6894 LEGISLATIVE COUNCIL ― 2 June 2021

CLERK (in Cantonese): Revenue (Stamp Duty) Bill 2021.

Council became committee of the whole Council.

Consideration by Committee of the Whole Council

DEPUTY CHAIRMAN (in Cantonese): This Council now becomes committee of the whole Council to consider the Revenue (Stamp Duty) Bill 2021.

REVENUE (STAMP DUTY) BILL 2021

DEPUTY CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Bill.

CLERK (in Cantonese): Clauses 1 to 3.

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

MR CHRISTOPHER CHEUNG (in Cantonese): Deputy Chairman, I talked about the three amendments that were likely to be proposed previously in the meeting of the Bills Committee, but the Government simply rejected them. I have heard and felt that some Members still did not understand why I opposed this Bill concerning stamp duty, and they did not understand why the trade was having a difficult time, and why this international financial centre was unable to support the livelihood of several hundred local brokers. However, it will be meaningless if we keep on arguing. Deputy Chairman, I consider it unfair for us to vote on this Bill. For that reason, I strongly oppose the Bill, even though I did not speak during the Second Reading of the Bill, I will cast my unwavering vote against this Bill on behalf of our sector and more than 1 million investors in Hong Kong.

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

(No Member indicated a wish to speak)

LEGISLATIVE COUNCIL ― 2 June 2021 6895

DEPUTY CHAIRMAN (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to speak.

(The Secretary for Financial Services and the Treasury indicated that he did not wish to speak)

DEPUTY CHAIRMAN (in Cantonese): I now put the question to you and that is: That the clauses read out by the Clerk stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(A Member raised his hand)

DEPUTY CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

DEPUTY PRESIDENT (in Cantonese): All the proceedings on the Revenue (Stamp Duty) Bill 2021 have been concluded in committee of the whole Council. Council now resumes.

Council then resumed.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Deputy President, I now report to the Council: That the

Revenue (Stamp Duty) Bill 2021 has been passed by committee of the whole Council without amendment. I move the motion that "This Council adopts the report".

6896 LEGISLATIVE COUNCIL ― 2 June 2021

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for Financial Services and the Treasury be passed.

In accordance with the Rules of Procedure, this motion shall be voted on without amendment or debate.

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

(Members raised their hands)

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

(A Member raised his hand)

DEPUTY PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

Third Reading of Government Bill

DEPUTY PRESIDENT (in Cantonese): Government Bill: Third Reading.

REVENUE (STAMP DUTY) BILL 2021

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Deputy President, I move that the

Revenue (Stamp Duty) Bill 2021 be read the Third time and do pass.

LEGISLATIVE COUNCIL ― 2 June 2021 6897

DEPUTY PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Revenue (Stamp Duty) Bill 2021 be read the Third time and do pass.

Does any Member wish to speak?

Mr LUK Chung-hung, please speak.

MR LUK CHUNG-HUNG (in Cantonese): Deputy President, at the Third Reading stage, I wish to say a few words to explain why we, the Hong Kong Federation of Trade Unions, will give our vote of support in the end. Currently, with the Government running a fiscal deficit―a deficit of some $250 billion has been recorded―there is every need to increase revenue and reduce expenditures. For those who have the means to make investments, I believe they will not mind paying an extra stamp duty of $30 for every transaction of $100,000 worth of stocks they invested in. Hong Kong's status as a financial centre is underpinned by our talents, legal system and our market which is open and with high liquidity. I believe this measure will neither affect Hong Kong's status as an international financial centre nor our competitiveness.

Regarding practitioners in the sector, I have actually consulted them about this matter. All they want is that: first, our stock market thrives; and second, the relevant parties can make regulations on the standard minimum commission for the sector, something that the practitioners earnestly hope for. At present, many practitioners engaging in stock transactions earn zero or nearly zero commission, so their income relies on derivatives and other financial products. Actually, commission from stock transactions should be included as part of the reasonable income of stock brokers. Therefore, if I put myself into the shoes of the practitioners, I will also want the Government and the sector to consider establishing a minimum commission system for practitioners in the sector in respect of stock transactions, thereby ensuring that they can earn relatively reasonable returns from the financial market in which they serve.

To conclude, I hope that this tax measure can realize wealth redistribution and the principles of ability to pay, fairness and justice. I think this is an important step and attempt when it comes to reforming Hong Kong's tax system. For this reason, we will support this Revenue (Stamp Duty) Bill 2021. Thank you, Deputy President.

IR DR LO WAI-KWOK (in Cantonese): Deputy President, the Business and Professionals Alliance for Hong Kong ("BPA") has serious reservations about the 6898 LEGISLATIVE COUNCIL ― 2 June 2021

Government's current proposal to increase the stamp duty on stock transfers. Actually, Mr Christopher CHEUNG, the "Fat Boss" of BPA and a veteran practitioner in the industry, has made many detailed analyses to us on the issue. In fact, the impact of stamp duty on the transaction cost of stock transfers cannot be underestimated so lightly because the amount of money lost or earned in stock trading may not be very large, but an increase in the rate of stamp duty must have some impact. Therefore, I think it would be unfair and misleading to forcefully ignore the possible impact.

Deputy President, there is no need for us to repeat here today the importance of Hong Kong's status as a financial centre, which can be said to be a goose that lays the golden egg for society as a whole. We have taken great pains to raise our concern time and again since we do not want to see any attempt to kill the goose that laid the golden egg. And also, Mr Christopher CHEUNG has just given a not very long speech to express his grave concern about this issue.

Therefore, Deputy President, it seems that the Bill will be read the Third time today, but BPA still hopes that the Government will treasure this goose that lays the golden egg for the sake of healthy development of our financial industry. We should not disregard the impact to be brought about by an increase in the transaction costs. What we have to do now is to find ways to "make a bigger pie" in order to facilitate the healthy development of our financial industry. That way, not only the industry practitioners but also all members of the public will benefit. This is what BPA has been looking forward to and also Fat Boss's wish. Thank you, Deputy President.

MR ABRAHAM SHEK (in Cantonese): Deputy President, I do understand why Mr Christopher CHEUNG is so angry. He did not speak during the Second Reading debate just because he knew it so well that no matter what he said in his speech and how he made use of his speaking time, no one here would listen to him except those Members from the Business and Professionals Alliance for Hong Kong. I would like to say to the Secretary, who is the official responsible for the healthy development of local finance market, that he and other ignorant people should have a better understanding of how big the impact will be. This has nothing to do with the perception of redistribution of wealth. Rather, it is about Hong Kong being deprived of its position in the financial market. It is both illogical and irresponsible for the Secretary to do this with his own hands. Moreover, I can tell him that he should not think that the Bill will be passed today with so many people's support. I just cannot begin to understand how he will face those people who work in the financial market.

Thank you, Deputy President.

LEGISLATIVE COUNCIL ― 2 June 2021 6899

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

(No Member indicated a wish to speak)

DEPUTY PRESIDENT (in Cantonese): Secretary for Financial Services and the Treasury, do you wish to speak?

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Deputy President, I have heard the views voiced by Members just now. But at the same time, I believe that I am not going to take Members' support in this Chamber for granted. It is because for a period of time in the past, my colleagues or colleagues from different departments have all along been maintaining communication with the industry on all levels.

The simplest example is―Mr CHEUNG also knows that―we have conducted a briefing session recently to explain in details a host of policies to support the financial market, including four major funding schemes. Later on, we will conduct an exchange session with the industry at the Cyberport and hope to let those from the industry know how to make better use of our funding schemes to upgrade themselves. It is because I believe that is more than a matter of cost―as several Members have said just now, it is about making a bigger pie―local securities sector is an integral part of our financial industry, and we are concerned about its development. We also hope everyone will work hard together, including making self-improvement, upgrading and transforming ourselves in order to improve incessantly the market.

We have heard the speeches delivered by Members who are present in this Chamber, including those who opposed the Bill. We will work hard together. Thank you, Deputy President.

DEPUTY PRESIDENT (in Cantonese): I now put the question to you and that is: That the Revenue (Stamp Duty) Bill 2021 be read the Third time and do pass. Will those in favour please raise their hands?

(Members raised their hands)

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

(Members raised their hands)

6900 LEGISLATIVE COUNCIL ― 2 June 2021

Mr Abraham SHEK rose to claim a division.

DEPUTY PRESIDENT (in Cantonese): Mr Abraham SHEK has claimed a division. The division bell will ring for five minutes.

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

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

Mr Tommy CHEUNG, Mr CHAN Hak-kan, Mr CHAN Kin-por, Mr WONG Kwok-kin, Mrs Regina IP, Mr Paul TSE, Mr Michael TIEN, Mr Steven HO, Mr Frankie YICK, Mr YIU Si-wing, Mr MA Fung-kwok, Mr CHAN Han-pan, Mr LEUNG Che-cheung, Ms Alice MAK, Mr KWOK Wai-keung, Ms Elizabeth QUAT, Mr POON Siu-ping, Mr CHUNG Kwok-pan, Dr Junius HO, Mr Holden CHOW, Mr SHIU Ka-fai, Mr Wilson OR, Ms YUNG Hoi-yan, Dr Pierre CHAN, Mr CHAN Chun-ying, Mr CHEUNG Kwok-kwan, Mr LUK Chung-hung, Mr LAU Kwok-fan, Mr Vincent CHENG and Mr Tony TSE voted for the motion.

Mr Abraham SHEK, Mr Christopher CHEUNG and Ir Dr LO Wai-kwok voted against the motion.

Mr Jimmy NG and Dr CHENG Chung-tai abstained.

THE DEPUTY PRESIDENT, Ms Starry LEE, did not cast any vote.

THE DEPUTY PRESIDENT announced that there were 36 Members present, 30 were in favour of the motion, 3 against it and 2 abstained. Since the question was agreed by a majority of the Members present, she declared that the motion was passed.

CLERK (in Cantonese): Revenue (Stamp Duty) Bill 2021.

LEGISLATIVE COUNCIL ― 2 June 2021 6901

Resumption of Second Reading Debate on Government Bill

DEPUTY PRESIDENT (in Cantonese): This Council resumes the Second Reading debate on the Securities and Futures and Companies Legislation (Amendment) Bill 2021.

SECURITIES AND FUTURES AND COMPANIES LEGISLATION (AMENDMENT) BILL 2021

Resumption of debate on Second Reading which was moved on 24 March 2021

DEPUTY PRESIDENT (in Cantonese): Mr Christopher CHEUNG, Chairman of the Bills Committee on the Bill, will first address the Council on the Bills Committee's Report.

MR CHRISTOPHER CHEUNG (in Cantonese): Deputy President, in my capacity as Chairman of the Bills Committee on the Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bills Committee"), I report the salient points of the deliberation of the Bills Committee.

The Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bill") seeks to amend the Securities and Futures Ordinance, the Companies Ordinance and other enactments to facilitate the implementation of an uncertificated securities market ("USM") regime in Hong Kong, and to refine the scope of certain regulated activities relating to over-the-counter derivative transactions. The Bills Committee has held one meeting to discuss the Bill with the Administration and the Securities and Futures Commission ("SFC"), and members of the Bills Committee in general support the Bill.

Noting that the first phase of the USM regime will cover shares of Initial Public Offerings ("IPOs") of Hong Kong companies, the Bills Committee has enquired about the timetable for implementing the USM regime in Hong Kong in full and the considerations involved.

According to the Administration, it plans to adopt a phased approach and start implementing the USM regime from around end 2022, first with listed shares of Hong Kong companies and then listed shares of non-Hong Kong 6902 LEGISLATIVE COUNCIL ― 2 June 2021 companies. In terms of processes, the plan is to focus first on IPOs, to be followed by converting existing shares to uncertificated form. The pace and timetable for migrating to a full USM regime will be stipulated in subsequent subsidiary legislation and contingent on the then prevailing circumstances, market readiness and, for listed shares of non-Hong Kong companies, the compatibility of the respective companies laws of their places of incorporation with the proposed USM regime. It is the Administration's plan to start from three main jurisdictions, namely the Mainland, Bermuda and Cayman Islands, and commence discussion with their relevant authorities on the matter.

The Bills Committee has enquired about the measures to be taken by the Administration and SFC to facilitate investors in understanding the details of the USM regime, as well as to help investors, particularly the elderly who prefer to hold securities in certificated form, to migrate to the USM regime.

The Administration has pointed out that the Federation of Share Registrars Limited is looking into establishing a centralized platform to facilitate investors, so that it will not be necessary for them to approach individual approved securities registrars when signing up for the relevant feature to hold securities in their own names. The Administration understands that some investors may need time to adapt to the USM regime, and will thus take into account market readiness in deciding the specific pace and timetable for the full implementation of the regime. The Administration will also collaborate with SFC to conduct publicity work to promote the benefits of the USM regime.

Some Bills Committee members have expressed concern that implementing the USM regime may increase the operating costs of the securities industry, especially the small and medium-sized securities firms, and enquired if the Administration will consider providing financial assistance to these firms to help them upgrade their systems to tie in with the implementation of the regime. These members have urged the Administration to continue discussing the details for implementing the USM regime with the securities industry, and help the industry migrate to the new regime.

The Administration and SFC have responded that the initial development costs of the new systems to support the implementation of the USM regime will largely be borne by Hong Kong Exchanges and Clearing Limited ("HKEX") and share registrars. As the existing operating procedures of securities firms will remain largely unchanged under the USM regime, the cost implications for LEGISLATIVE COUNCIL ― 2 June 2021 6903 securities firms will be limited. The implementation of the USM regime will also help reduce the operating costs of securities firms in the long run through streamlining some of their administrative procedures.

Given that the holding and transfer of securities under the USM regime will be made through electronic means, the Bills Committee has enquired about the room for lowering fees payable by investors with the implementation of the regime.

According to the Administration, if investors maintain their existing approach in holding securities, there will be no additional cost involved upon implementation of the USM regime. If investors opt to hold securities in their own names and in uncertificated form, the relevant fees will be determined by the share registrars and sponsoring clearing/custodian participants. There may be room for lowering the fees on investors in the long run with increased adoption of the regime.

The Bills Committee and the Administration will not propose amendments to the Bill. Deputy President, the following are my views on the Bill.

It has been 20 years since the proposal to implement a USM regime in Hong Kong was first put forward. The securities market of Hong Kong has a long history, and during the era when there was no computer, securities transactions were recorded in papers by floor traders wearing a red vest. After the unification of the four exchanges in the 1980s to form the Stock Exchange of Hong Kong, the new exchange commenced trading and clearing through a computer-assisted system but even so, the stock market of Hong Kong has all along adopted a paper-based securities regime up until today.

In this Internet age when money has evolved to digital form and virtual assets have become popular, there is a need to improve the current paper-based securities regime for conducting securities transactions.

As reflected by the consultation conducted jointly by SFC and HKEX earlier, the implementation of a USM regime will bring about three major advantages as follows: to enable securities to be moved into and out of the clearing and settlement system much more efficiently; to address concerns about settlement efficiencies being compromised and its potential impact on market participants' funding needs; and to result in less market disruption and costs.

6904 LEGISLATIVE COUNCIL ― 2 June 2021

Deputy President, implementing a USM regime will of course bring about many benefits, but at the same time, the Government should not ignore the concerns of the most important market participants, namely investors and trade members of the securities industry. Let me talk about investors first. It is true that most investors who buy and sell securities through securities firms or banks nowadays are actually holding dematerialized share certificates, but there are still a small group of investors who are particularly fond of holding shares in certificated form. Some elderly investors even prefer to effect a legal title transfer so that they can hold securities in their own names, and they have already developed a habit of taking their share certificates out to have a look when they have time and making a rough calculation of their fortunes. By holding securities in their own names and in certificated form, they will also be saved from the trouble of paying transfer fees whenever dividend payouts are received. As a matter of fact, securities firms have from time to time received complaints from their clients, who alleged that the amounts of transfer fees and handling charges paid for receiving dividend payouts from limited shares of penny stocks they held through securities firms had often exceeded the amounts of dividend income, making them pay more than what they receive.

In order to cater for the needs of these small investors, especially the elderly who are computer illiterate, the Government should formulate effective transitional policies in the process of implementing the USM regime, including reducing as far as possible the handling charges levied on individual securities investors for receiving dividend payouts, and step up its efforts to promote the convenience, safety and benefits of the USM regime.

As for securities firms, they were concerned that the previous model proposed by the authorities would increase the workload and the operating costs of the industry, but as the revised proposal has taken into account the feedback from the industry, trade members are generally in support of the proposal to promote the implementation of a USM regime in Hong Kong. However, I would like to point out once again that not all listed companies will immediately migrate to the new regime during the transition period, and it will have cost implications for securities firms as they will have to handle the clearing and settlement of securities transactions with two different systems concurrently over a long period of time.

I hope the Government will advise us as soon as possible of the timetable for implementing the USM regime in full, and in addition to shares of listed companies registered in Hong Kong, discussions should also be conducted with LEGISLATIVE COUNCIL ― 2 June 2021 6905 other jurisdictions (including the Mainland and Cayman Islands) about having the listed shares in the territory of those companies which are registered in these jurisdictions converted to uncertificated form, thereby implementing a truly USM regime in the securities market of Hong Kong.

With these remarks, Deputy President, I support the passage of the Bill.

MR CHAN CHUN-YING (in Cantonese): Deputy President, being a member of the Bills Committee on the Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bills Committee"), I would like to express my views here on the Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bill").

The securities market is a unique market which serves to realize and promote the liquidity of securities, and the existing rules governing securities transactions have been gradually developed to meet the needs of the securities market. Paper securities have formed the basis for the formulation of conventional securities law, with the holding and transfer of paper securities adopted as the basic model in the relevant law. Under such a transaction mode which has previously been put in place, Hong Kong's securities market is currently largely paper-based. However, investors can hold and transfer securities in electronic form through the Central Clearing and Settlement System ("CCASS"), which is an immobilized securities settlement system operated by Hong Kong Securities Clearing Company Limited ("HKSCC").

HKSCC is a subsidiary company of Hong Kong Exchanges and Clearing Limited ("HKEX"). All securities held within CCASS are registered in the name of a single nominee, i.e. HKSCC Nominees Limited. Investors who hold securities within CCASS hold only the beneficial interest in the securities, i.e. they are not the registered legal owner of such securities and do not hold legal title to the securities. It can thus be seen that even though with the wide introduction of computer technology into the modern securities market, the theoretical foundation of conventional securities law has not been shaken, and neither has the internal influence of traditional rules on securities transactions conducted in modern times been eliminated.

Having entered an information society, paper securities will ultimately be replaced by their uncertificated form. It has been a common trend for international financial centres in the world to move towards uncertificated securities markets ("USM"). The implementation of a USM regime in Hong 6906 LEGISLATIVE COUNCIL ― 2 June 2021

Kong will ensure that its development of financial market infrastructure is in line with that in other major international financial centres and capital markets.

Further to the previous legislative work in 2015 concerning the implementation of a USM regime in Hong Kong, and in view of market concerns about the limitations of the operational model formulated in 2010, the Securities and Futures Commission ("SFC"), HKEX and the Federation of Share Registrars Limited have developed a revised operational model with further feedback from the industry and the continuous evolvement of the market for implementing the USM initiative. The key features of the revised operational model are: the existing nominee structure and the two options for holding securities are retained; share registrars will become participants of the HKEX's clearing and settlement system, thus essentially creating an electronic interface between their respective systems; SFC should strengthen its regulation of the securities registration mechanism; and a phased approach will be adopted to implement the USM regime. With the introduction of this revised model, we can finally resolve the numerous problems that have been plaguing the implementation of a USM regime in Hong Kong for so many years.

The USM regime seeks to do away with the current paper-based transaction arrangements and replace them with a digitalized environment for the holding and transfer of securities, thereby enhancing market efficiency. The implementation of the USM regime will provide the option for investors to hold securities in their own names and in uncertificated form, and as compared with the current paper-based regime, such option will enable investors to enjoy both better legal protection and greater convenience.

Deputy President, with regard to the implementation of the USM regime, I have expressed to the Government at the Bills Committee meeting my opinions in three aspects as follows: Firstly, specific measures should be formulated to assist elderly investors to move from a paper certificated regime to the USM regime with peace of mind; secondly, efforts should be made to ensure that with regard to securities held through CCASS, the costs and levies involved will remain unchanged; thirdly, a concrete timetable should be drawn up for the full implementation of the USM regime, and it is unacceptable for the Government to feel its way as it goes.

The Bill introduced by the Government to this Council seeks to amend the Securities and Futures Ordinance, the Companies Ordinance (Cap. 622) and other enactments to facilitate the establishment and implementation of a USM regime in Hong Kong; provide for a regulatory regime for persons providing securities LEGISLATIVE COUNCIL ― 2 June 2021 6907 registrar services; refine the scope of certain regulated activities relating to over-the-counter derivative transactions; make minor miscellaneous amendments. I consider that all these are necessary and appropriate amendments which will provide the legal framework for implementing the USM regime, and will therefore support them all.

Deputy President, I so submit.

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

(No Member indicated a wish to speak)

DEPUTY PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to reply. Then, the debate will come to a close.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): Deputy President, I would first of all like to thank Mr Christopher CHEUNG, Chairman of the Bills Committee on the Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bill Committee") and members of the Bills Committee for their hard work, as well as Mr CHAN Chun-ying who has spoken just now. They have all contributed to the smooth completion of the scrutiny of the Securities and Futures and Companies Legislation (Amendment) Bill 2021 ("the Bill").

The Bill seeks mainly to amend certain existing legislation like the Securities and Futures Ordinance and the Companies Ordinance to provide the legal framework for the full implementation of an uncertificated securities market ("USM") regime, and to refine the over-the-counter derivative licensing regime.

Given the continuous evolvement of the financial market in recent years, various places all over the world have made strenuous efforts to upgrade their market infrastructures in order to enhance their competitiveness. The full implementation of the USM regime is one of the important measures to elevate Hong Kong's financial market infrastructure.

As stated by Mr CHEUNG just now, it has been almost 20 years since the proposal in question was first raised, then taken forward and finally implemented, 6908 LEGISLATIVE COUNCIL ― 2 June 2021 and I am most happy to see that we are finally approaching the finishing line today after this long-distance run for 20 years. With the full implementation of the USM regime, in addition to holding and transferring the beneficial interest in securities through nominees, investors may also choose to hold and transfer legal title to securities in a digitalized environment. Apart from enabling investors to enjoy better legal protection and improving corporate governance, this option will also serve to enhance the efficiency and competitiveness of our market, elevate further our financial market infrastructure, and consolidate our status as a modern international financial centre.

(THE PRESIDENT resumed the Chair)

The main objectives of the Bill are to provide for the broad framework of the USM regime, and empower the Securities and Futures Commission ("SFC") to make rules providing for various operational and detailed regulatory matters under the USM environment. We will adopt a phased approach to implement the USM regime in full, so as to ensure that both the market and investors are ready, and the new operational arrangements of the market will function in a smooth and orderly manner. We have strong will and determination to implement the USM regime in full as early as possible, and our objective is to have the system come into full implementation within two years after the first batch of uncertificated securities is available in the market.

Besides, the Bill also seeks to introduce technical amendments to the scope of certain regulated activities relating to over-the-counter derivative transactions.

The proposed amendments mainly serve to, under a risk-based approach, carve out clearly activities that are not intended to be covered by the over-the-counter derivative licensing regime to better reflect the policy intent.

President, we have already consulted the industry before the introduction of the Bill on the two proposals as mentioned above, and trade members have indicated support for the proposed amendments.

The Bills Committee has completed deliberation on the Bill at its meeting on 12 April this year. We thank the Bills Committee for its support for the Bill, and the Government has also provided detailed explanations on the issues raised by members of the Bills Committee, including the timetable for full implementation of the USM regime, regulation of approved share registrars, etc.

LEGISLATIVE COUNCIL ― 2 June 2021 6909

The early implementation of both the USM regime and the over-the-counter derivative licensing regime will further enhance the financial market infrastructure and regulatory system of Hong Kong. I earnestly hope that the Legislative Council will support and pass the Bill, which will mark another important milestone in the full implementation of a USM regime, and enhance further the competitiveness of Hong Kong as an international financial centre. SFC will then immediately proceed with the enactment of relevant subsidiary legislation to give effect to the two initiatives mentioned above.

I so submit. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Securities and Futures and Companies Legislation (Amendment) Bill 2021 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

CLERK (in Cantonese): Securities and Futures and Companies Legislation (Amendment) Bill 2021.

Council became committee of the whole Council.

Consideration by Committee of the Whole Council

CHAIRMAN (in Cantonese): This Council now becomes committee of the whole Council to consider the Securities and Futures and Companies Legislation (Amendment) Bill 2021.

6910 LEGISLATIVE COUNCIL ― 2 June 2021

SECURITIES AND FUTURES AND COMPANIES LEGISLATION (AMENDMENT) BILL 2021

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Bill.

CLERK (in Cantonese): Clauses 1 to 90.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): If not, we now proceed with the voting.

I now put the question to you and that is: That the clauses read out by the Clerk stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

PRESIDENT (in Cantonese): All the proceedings on the Securities and Futures and Companies Legislation (Amendment) Bill 2021 have been concluded in committee of the whole Council. Council now resumes.

Council then resumed.

LEGISLATIVE COUNCIL ― 2 June 2021 6911

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I now report to the Council: That the

Securities and Futures and Companies Legislation (Amendment) Bill 2021 has been passed by committee of the whole Council without amendment. I move the motion that "This Council adopts the report".

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for Financial Services and the Treasury be passed.

In accordance with the Rules of Procedure, this motion shall be voted on without amendment or debate.

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

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

Third Reading of Government Bill

PRESIDENT (in Cantonese): Government Bill: Third Reading.

6912 LEGISLATIVE COUNCIL ― 2 June 2021

SECURITIES AND FUTURES AND COMPANIES LEGISLATION (AMENDMENT) BILL 2021

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I move that the

Securities and Futures and Companies Legislation (Amendment) Bill 2021 be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Securities and Futures and Companies Legislation (Amendment) Bill 2021 be read the Third time and do pass.

Does any Member wish to speak?

(No Member indicated a wish to speak)

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

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

CLERK (in Cantonese): Securities and Futures and Companies Legislation (Amendment) Bill 2021.

LEGISLATIVE COUNCIL ― 2 June 2021 6913

Resumption of Second Reading Debate on Government Bill

PRESIDENT (in Cantonese): This Council resumes the Second Reading debate on the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021.

INLAND REVENUE (AMENDMENT) (MISCELLANEOUS PROVISIONS) BILL 2021

Resumption of debate on Second Reading which was moved on 24 March 2021

PRESIDENT (in Cantonese): Mr Holden CHOW, Chairman of the Bills Committee on the Bill, will first address the Council on the Bills Committee's Report.

MR HOLDEN CHOW (in Cantonese): President, in my capacity as Chairman of Bills Committee on Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("the Bills Committee"), I report to the Legislative Council on the major deliberations of the Bills Committee.

At present, the Inland Revenue Department ("IRD") makes assessment on qualifying amalgamation cases in accordance with an assessment practice published on IRD's website. The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("the Bill") seeks to codify the practice into the legislation and enhance the statutory framework for furnishing tax returns and foreign tax deduction.

The Bills Committee has examined the restrictions on and conditions for the set-off of unutilized pre-amalgamation losses against the assessable profits of the amalgamated company under the proposed special tax treatment. Regarding the "good commercial reasons" condition, members have enquired how IRD would determine whether there are "good commercial reasons" for carrying out the qualifying amalgamation and whether avoidance of tax is not the main purpose or one of the main purposes of carrying out the qualifying amalgamation.

6914 LEGISLATIVE COUNCIL ― 2 June 2021

The Administration has advised that in order to determine whether the relevant companies have "good commercial reasons" for a qualifying amalgamation, IRD will consider all relevant facts and circumstances, such as the reasons and circumstances for the amalgamation, what result the amalgamation is intended to achieve or has achieved, the non-tax purpose of the amalgamation, whether there are alternative ways to achieve the non-tax purpose, etc. As the facts of each case are different, IRD will carefully consider all relevant facts and circumstances specific to the case.

Another concern of members is the "same trade" condition. Some deputations have advised that if a loss-making company changes its business model (e.g. a Japanese restaurant is converted into an Italian restaurant) after amalgamating with another group company, it may not be considered as carrying on the "same business" and hence its pre-amalgamation tax loss cannot be utilized after amalgamation. The deputations consider that the condition is unduly restrictive and hinders commercial practicality. Members have also pointed out that the condition may give rise to uncertainties, and that the authorities may have too narrow a stance in considering whether an amalgamation meets the "same trade" condition, so much so that it in effect stifles commercial flexibility.

The Administration has advised that the "same trade" condition is to prevent the transfer of losses between group companies through amalgamation. An amalgamation is the combination of two or more companies into a larger single company, and the amalgamating company's business should be succeeded by the amalgamated company. In the absence of the "same trade" condition, an amalgamated company may avoid tax simply through making use of the loss of the amalgamating company by closing the business of the amalgamating company after amalgamation.

The "financial resources" condition for the set-off of pre-amalgamation loss as provided under the Bill is that the amalgamated company must have adequate financial resources immediately before the amalgamation to purchase the trade, profession or business carried on by the amalgamating company immediately before the date of amalgamation. Members are concerned that the condition may unduly limit the deployment of financial resources within the group.

The Administration has explained that the group is free to choose any wholly-owned subsidiary as the amalgamated company. If the "financial LEGISLATIVE COUNCIL ― 2 June 2021 6915 resources" condition is removed or relaxed, an amalgamated company may make use of its losses to set off the profit of an amalgamating company to avoid tax even if the amalgamated company has no financial ability to carry on business. In applying the condition, IRD will consider whether the amalgamated company has sufficient capital, liquid assets or cash on the date of amalgamation to carry on business as well as its ability to raise funds from independent third parties having regard to its own credit rating status.

Regarding the penalty provisions against service providers' failure to perform a statutory act, as the Bill defines the role of a service provider engaged by a taxpayer to furnish returns as "furnishing returns", members have sought clarification as to whether the service providers include parties performing tasks in preparation for the furnishing of tax returns, e.g. preparing profits tax computations and other supporting documents, filling in the return forms, etc.

The Administration has clarified that, by defining the role of service provider as "furnishing returns", it is intended to refer only to the person who furnishes the tax return on behalf of the taxpayer (i.e. the one signing the return). In other words, a person engaged by a taxpayer for undertaking only preparatory work is not a service provider for the purpose of the Bill unless he also furnishes the tax return on behalf of the taxpayer.

Overall speaking, members of the Bills Committee have not raised objection to the Bill.

President, the following are my personal views on the Bill.

President, first of all, I would like to express my sincere thanks to several members of the Bills Committee, including Ms Starry LEE, Mr WONG Ting-kwong and Mr Wilson OR, for scrutinizing this Bill with us in the Bills Committee. I am particularly grateful to Ms Starry LEE, who is an accountant, for her invaluable input at the Bills Committee meetings because scrutiny of the Bill requires a lot of professional advice, especially in the area of accounting.

President, the Bill appears to be rather complicated, but after spending some time examining it, I have found that, in short, actually it focuses on some qualifying amalgamations. That is to say, it primarily deals with the amalgamation of subsidiaries of a group company. To put it simply, the relevant 6916 LEGISLATIVE COUNCIL ― 2 June 2021 provisions actually focus on how to handle the taxation matters of these subsidiaries of the same group after their amalgamation, and whether pre-amalgamation losses can be offset against profits in accordance with some standards. Simply put, the tax liability can be relatively reduced after the amalgamation. This is a simple way to put it.

In the course of scrutiny of this Bill, we have received views from some industry stakeholders and professional bodies in the accounting sector. There are several main points. First, regarding the determination of tax treatments for qualifying amalgamations, there are several pre-set conditions to meet, including the "same trade" condition we have just mentioned. Members may have noticed that I have highlighted in my speech just now the meaning of the "same trade" condition, which is that the amalgamated company must carry on the same business as before the amalgamation in order to be able to deal with taxation by means of the so-called off-set against profits, that is, to slightly reduce the tax liability. Nevertheless, during the scrutiny of the Bill, actually some industry stakeholders told us that if the "same trade" condition was too restrictive, with too narrow a definition, it would stifle the development of business operations. As in the example I mentioned earlier, if a restaurant operating as a Japanese restaurant before the amalgamation still operated as a restaurant after the amalgamation, but as an Italian restaurant instead, it would be too harsh and too strict to say that the restaurant does not meet the "same trade" standard, and such allegation would hinder the normal business operations of the amalgamated company.

Another point is that, in the Bills Committee, we have spent quite some time discussing the definition of having the so-called "good commercial reasons" for a qualifying amalgamation as stated in the Bill. However, as I and other colleagues have also pointed out in the Bills Committee, while some companies may enjoy tax deduction as a result of amalgamation, our greatest concern is whether the authorities will take for granted the interpretation that the company's amalgamation is a means to avoid tax because it will be followed by an arrangement to reduce tax liability. If that is the case, it is again too narrow an interpretation of the relevant provisions. Therefore, by mentioning at that time of the so-called condition that there must be "good commercial reasons" for a qualifying amalgamation, we hope, most importantly, to ensure that the Bureau is informed of the reasons and does not make a far-fetched claim that the two companies want to avoid tax simply because they would enjoy tax deduction after the amalgamation, while in fact they have many other reasons to support the LEGISLATIVE COUNCIL ― 2 June 2021 6917 amalgamation as they are also engaged in commercial operations. Just because the Bureau sees that they will enjoy tax deduction after the amalgamation does not mean that it should make a far-fetched claim that they want to avoid tax. It is inevitable that they will enjoy tax deduction, but the thing is, they have many reasons to justify the amalgamation. I hope that the Bureau understands our viewpoint when considering the good commercial reasons. The Bureau has also repeatedly explained these circumstances in detail in the Bills Committee and provided written responses to the views of stakeholders.

Another point is about the arrangements for tax return service providers. Under the Bill, the future tax return service providers will be subject to certain statutory liabilities, so some stakeholders or professional bodies in the industry have raised the following questions. What exactly is the definition of tax return service providers? Are they only the professionals signing the returns, or do they include the many staff members who undertake preparatory work beforehand? If these staff members have in fact also provided services, will they be defined as service providers? If defined as service providers, they will be subject to a lot of liabilities, which will give rise to some uncertainties. Therefore, during the scrutiny of the Bill, the Administration has also made it very clear that the so-called service providers are explicitly defined in the Bill as the professionals who furnish the tax returns (i.e. signing the return) and do not include other persons who undertake preparatory work beforehand.

Lastly, despite having repeatedly indicated at the Bills Committee meetings that there is no timetable, the Bureau has said that it will be possible under the Bill to require in the future, by notice published in the Gazette, that some small and medium enterprises ("SMEs") use mandatory e-filing of returns. Regarding this arrangement, members of the Bills Committee have highlighted that if one day the Government really has to implement mandatory e-filing of returns, it must allow sufficient time for adaptation by industry players running SMEs, and this is better than a hasty implementation. In this regard, we have made our views very clear to the Administration. In addition to confirming having listened to our views, the Administration has repeatedly stated that there is no timetable for the official implementation of mandatory e-filing of returns for SMEs at the moment.

President, I so submit.

6918 LEGISLATIVE COUNCIL ― 2 June 2021

MS STARRY LEE (in Cantonese): First of all, I would like to thank the Chairman of the Bills Committee on Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("Bills Committee") and the Administration for having diligently scrutinized the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("the Bill").

I remember vividly that when the Bill was submitted to the Legislative Council, I said to my party members that the Bill was probably about simple subject matters because the title of the Bill was about amending miscellaneous provisions. However, after a careful perusal of the Bill, I found that it was about tax treatment in relation to company amalgamation and transfer of capital assets. We thus decided to support the Legislative Council to form a bills committee to scrutinize the Bill. Thanks to the participating members, the Bills Committee held a total of two meetings; and deputations expressed their views on the Bill in writing. Actually, the Secretary can consider whether it is appropriate to use "Miscellaneous Provisions" in the heading, given that the Bill is about concrete subject matters. Having read the title, Members may presume from the "Miscellaneous Provisions" that the Bill only involves simple technical amendments, but I do not think that the amendments involved are simple technical amendments. This is my suggestion for the Secretary's consideration.

President, I speak in support of the Bill and I agree in principle with the tax treatment in relation to court-free amalgamation of companies and the transfer or succession of specified assets without sale, as well as the legislative proposal on the furnishing of tax returns. The Bill will render a clearer treatment and in turn facilitate business operation.

I rise to speak to express some views. First, regarding whether the same trade test is too narrow, I will not repeat the viewpoints expressed by Mr Holden CHOW, Chairman of the Bills Committee. But in brief, the authorities say that in order to prevent the transfer of losses between group companies and the acquisition of loss-making companies to reduce tax liabilities, specific conditions will be introduced to allow the set-off of pre-amalgamation losses under the special tax treatment.

President, I understand that the arrangement seeks to prevent tax avoidance by way of loss transference between group companies through amalgamation. The authorities also point out that in the absence of the same trade condition, an LEGISLATIVE COUNCIL ― 2 June 2021 6919 amalgamated company may avoid tax simply through making use of the loss of the amalgamating company by closing the business of the amalgamating company after amalgamation. However, we hold that the authorities' existing interpretation of same trade may not have taken the actual situation into consideration. I hope that the authorities will consider more about the actual situation in applying the condition, given that the Bureau has responded to our question on this point. According to the Bureau's reply to our question at the Bills Committee, even if two companies both operating catering business with one operating a Japanese restaurant and the other operating an Italian restaurant, the two companies will not pass the same trade test, according to the authorities' interpretation.

I notice from the Bureau's reply to our question that the Inland Revenue Department ("IRD") will not regard the businesses operated by two companies as different merely because of differences in their cuisines; it will consider other factors such as their business models before reaching a conclusion. However, regarding queries on the same trade test, I hope the Secretary can later reiterate his position on this matter to enable the industry, as well as enterprises, to have a clearer understanding of the test.

In fact, as the Secretary may be aware that a number of professional bodies and members of the sector have expressed concern over the arrangement. These include the Hong Kong Institute of Certified Public Accountants, the Joint Liaison Committee on Taxation, the PricewaterhouseCoopers Limited and the Taxation Institute of Hong Kong. They are of the view that the post-entry and financial resources conditions for the set-off of pre-amalgamation loss are too restrictive. They point out that the corresponding legislation in Singapore does not contain such restrictions and is more competitive. They hope that the Bureau can take their views into consideration. I know that the Bureau has responded to this point at the Bills Committee. It says that the tax deduction arrangements for group companies adopted in Singapore and Hong Kong are different and that it has also taken into account Hong Kong's simple low tax regime. I thus feel that these reasons have led the Secretary to adopt a more restrictive approach for Hong Kong than the one adopted in Singapore. On the whole, I agree that it is necessary to prevent tax avoidance. However, on the premise of tax avoidance prevention, the approach should not be too harsh and restrictive, otherwise, it may hinder normal business activities. I hope that the 6920 LEGISLATIVE COUNCIL ― 2 June 2021

Secretary can also explain in his reply the factors which the Bureau will consider in applying the conditions.

Second, it is about the mandatory e-filing of tax returns. One of the purposes of the Bill is to provide the legislative backing to IRD's plan to enable more businesses to voluntarily e-file profits tax returns in 2023, with the ultimate goal of implementing e-filing of profits tax returns through the newly developed Business Tax Portal. President, Hong Kong is indeed relatively slow and lags behind others in this regard. Although the sector has expressed some concern, we agree that the Government needs to have this legislative backing.

Suitable application of technology can, in principle, reduce the compliance cost of companies. Some organizations have expressed concern over the proposed section 51AAB of the Inland Revenue Ordinance which empowers the Commissioner to specify through subsidiary legislation the classes or descriptions of taxpayers who must furnish their tax returns by e-filing in a gazette notice. Given that e-filing tax returns may represent a major change to the process of furnishing tax returns, the authorities should proceed gradually and prudently, taking into account the actual situation, so as to render sufficient time for businesses, as well as practitioners and professionals, to adapt to the new mechanism and make appropriate arrangement for it. Actually, representatives from IRD and the Bureau have agreed and undertaken at the Bills Committee to do so. I hope that the Secretary can later respond again in his reply that at the implementation phase, the Bureau will communicate with the stakeholders to allow sufficient preparation time for them.

President, the authorities have not, at the present stage, set the timetable for implementing mandatory e-filing, but it has agreed that it will consider the actual situation and feasibility, including whether taxpayers and tax practitioners have sufficient time to adapt to the new e-filing mechanism. We agree with the authorities that it should adopt the approach of "doing the easier part first and tackling the difficult part later" to implement e-filing. In other words, the authorities may require large businesses or businesses in certain sectors to make their filings electronically first, and then consider extending the requirement to other enterprises. As for micro enterprises, I hope the Bureau can allow some flexibility for them. All in all, President, I support the resumption of the Second Reading of the Bill.

LEGISLATIVE COUNCIL ― 2 June 2021 6921

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

(No Member indicated a wish to speak)

PRESIDENT (in Cantonese): If not, I now call upon the Secretary for Financial Services and the Treasury to reply. Then, the debate will come to a close.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, to begin with, I wish to take this opportunity to thank Chairman of the Bills Committee on Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("the Bills Committee") Mr Holden CHOW and its various members―including Ms Starry LEE, who has just risen to speak―for offering a great deal of professional legal and accounting advice during their participation in the scrutiny of the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 ("the Bill") and also for supporting the resumption of Second Reading debate on the Bill.

The Bill proposes amendments to the Inland Revenue Ordinance (Cap. 112) in four areas, namely:

(i) the tax treatment for companies' amalgamation under the court-free procedures as provided for under the Companies Ordinance;

(ii) the tax treatment for the transfer and succession of specified assets under specific circumstances;

(iii) the enhancement of the legal framework for the furnishing of tax returns; and

(iv) the improvement of the arrangements for the deduction of foreign tax.

During the scrutiny of the Bill, Bills Committee members expressed concern mainly about the tax treatment for companies' amalgamation under the court-free procedures and also the enhancement of the legal framework for the furnishing of tax returns. My reply is as follows.

6922 LEGISLATIVE COUNCIL ― 2 June 2021

First, speaking of the tax treatment for companies' amalgamation under the court-free procedures, the Bill stipulates that taxpayers may select special tax treatment to qualifying amalgamations, so as to deal with such taxation matters as the succession of trading stock, the succession of capital assets, the claiming and clawback of deductions and allowances in respect of certain capital expenditures, and the set-off of pre-amalgamation losses. An election made is irrevocable.

Under the mechanism for special tax treatment, the set-off of pre-amalgamation losses against the assessable profits of the amalgamated company must fulfil certain conditions. Certain Bills Committee members and the industries were concerned about the criteria to be adopted by the Inland Revenue Department ("IRD") for determining a company's eligibility.

The purpose of introducing specific conditions is to prevent the transfer of losses between group companies or tax avoidance through the acquisition of companies making a loss. In fact, the interim administrative assessment practice implemented by IRD since 2015 generally encompasses such conditions. In our observation, the administrative practice has been operating smoothly without any enforcement problems since publication. If the Bill is passed, IRD will issue a Departmental Interpretation and Practice Note upon the commencement of the relevant amendment ordinance and set out examples of permissible set-off or otherwise of pre-amalgamation losses together with the factors for consideration involved.

Just now, Ms LEE and Mr CHOW talked about the "same trade" condition. In considering whether two companies can fulfil the "same trade" test, IRD will examine all the facts, such as the operational mode, business style and registered brands of the two companies. Speaking of the example involving the catering industry cited by the two Members just now, IRD will not conclude that they engage in different business operations purely because they offer distinctive dishes. Instead, it will consider other factors, such as the operational mode of the companies, before making a decision.

Speaking of enhancing the legal framework for the furnishing of tax returns, the Bill allows a taxpayer to engage a service provider to furnish a return for or on behalf of the taxpayer. We notice the concern raised by some industry representatives about the definition of "service provider". Just now, Mr CHOW LEGISLATIVE COUNCIL ― 2 June 2021 6923 clearly explained and relayed the concerns raised by the market and the relevant industries about this. The proposed section 51AAD(8) of the Bill defines "service provider" as a person engaged to carry out a taxpayer's obligation under section 51(1) of the Inland Revenue Ordinance, and the obligation therein refers to the furnishing of tax returns within a specific time frame. While a taxpayer needs to undertake such preparatory work as preparing profits tax computations and other supporting documents and also filling in the return form before fulfilling his obligation of furnishing his tax returns, such preparatory work is not an obligation of the taxpayer under section 51(1) as the obligation imposed by section 51(1) on taxpayers is irrelevant to the question of how and who is to conduct such preparatory work.

In order to allay industries' concern, I now make it clear that irrespective of the way in which a tax return is furnished (including paper form, electronic means or a mix of the two), only the person furnishing the return on behalf of the taxpayer, namely the one signing the return, is to be regarded as a service provider. In other words, anyone engaged by a taxpayer to undertake preparatory work, such as preparing profits tax computations and other supporting documents, and also filling in the return form, is not a service provider for the purpose of the Bill. It follows that the corresponding penalties on any service provider that fails to perform a statutory act will not be applicable.

The Bill also seeks to empower the Commissioner of Inland Revenue to specify the classes or descriptions of taxpayers in a gazette notice upon deciding on the adoption of mandatory e-filing in the future. Some Members were concerned about the arrangements for implementing mandatory e-filing, and they also mentioned this in their earlier speeches. I now make it clear that before the implementation of mandatory e-filing, IRD will fully consult stakeholders and consider the actual situation and its feasibility, including whether taxpayers and tax practitioners have sufficient time to get familiar with the new e-filing mechanism. IRD's preliminary thinking is, at an appropriate time, to require large businesses or businesses in certain sectors (such as financial institutions) to make their filings electronically first, and to consider afterwards the gradual extension of the relevant requirement to other classes of businesses or entities. The Government may also consider allowing micro-enterprises to continue filing tax returns in paper form. If the Government decides to implement e-filing on a mandatory basis, it will consult the Legislative Council again on the implementation plan. The Commissioner of Inland Revenue must publish a 6924 LEGISLATIVE COUNCIL ― 2 June 2021 gazette notice, which must undergo the negative vetting procedure in the Legislative Council.

With these remarks, I hope Honourable Members can support the Bill. Thank you, President.

PRESIDENT (in Cantonese): I now put the question to you and that is: That the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 be read the Second time. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

CLERK (in Cantonese): Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021.

Council became committee of the whole Council.

Consideration by Committee of the Whole Council

CHAIRMAN (in Cantonese): This Council now becomes committee of the whole Council to consider the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021.

LEGISLATIVE COUNCIL ― 2 June 2021 6925

INLAND REVENUE (AMENDMENT) (MISCELLANEOUS PROVISIONS) BILL 2021

CHAIRMAN (in Cantonese): I now propose the question to you and that is: That the following clauses stand part of the Bill.

CLERK (in Cantonese): Clauses 1 to 20.

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

(No Member indicated a wish to speak)

CHAIRMAN (in Cantonese): If not, we now proceed with the voting.

I now put the question to you and that is: That the clauses read out by the Clerk stand part of the Bill. Will those in favour please raise their hands?

(Members raised their hands)

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

(No hands raised)

CHAIRMAN (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

PRESIDENT (in Cantonese): All the proceedings on the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 have been concluded in committee of the whole Council. Council now resumes.

6926 LEGISLATIVE COUNCIL ― 2 June 2021

Council then resumed.

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I now report to the Council: That the

Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 has been passed by committee of the whole Council without amendment. I move the motion that "This Council adopts the report".

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the motion moved by the Secretary for Financial Services and the Treasury be passed.

In accordance with the Rules of Procedure, this motion shall be voted on without amendment or debate.

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

(Members raised their hands)

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

(No hands raised)

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

LEGISLATIVE COUNCIL ― 2 June 2021 6927

Third Reading of Government Bill

PRESIDENT (in Cantonese): Government Bill: Third Reading.

INLAND REVENUE (AMENDMENT) (MISCELLANEOUS PROVISIONS) BILL 2021

SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese): President, I move that the

Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 be read the Third time and do pass.

PRESIDENT (in Cantonese): I now propose the question to you and that is: That the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 be read the Third time and do pass.

Does any Member wish to speak?

(No Member indicated a wish to speak)

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

(Members raised their hands)

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

(No hands raised)

6928 LEGISLATIVE COUNCIL ― 2 June 2021

PRESIDENT (in Cantonese): I think the question is agreed by a majority of the Members present.

I declare the motion passed.

CLERK (in Cantonese): Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021.

SUSPENSION OF MEETING

PRESIDENT (in Cantonese): I now suspend the meeting until 9 am tomorrow.

Suspended accordingly at 6:34 pm.

LEGISLATIVE COUNCIL ― 2 June 2021 6929

Annex I

NOT PROCEEDED WITH

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED

NEGATIVED 6930 LEGISLATIVE COUNCIL ― 2 June 2021

NEGATIVED

NEGATIVED