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Eric¡¦s Bits & Bites   Issue 28    April 2003

Dear friends,

Hong Kong is now waging a war against SARS, a war that involves all nations, all races and all people, be they rich or poor. Losing this battle means far more than losing business and trade, it means the loss of precious human lives. Hong Kong is not just fighting for herself. She is fighting in the interest of all mankind. I want to pay the highest tribute to all frontline medical workers for their courage and bravery.

Apart from concentrating our efforts on saving lives, we have to give our full support to frontline workers to minimize their risk of infection. What is more, we need to remember that in order to win this war against SARS, we must be ready to engage ourselves in information warfare, psychological and publicity warfare. So far, Hong Kong is fighting hard all by herself. No international assistance has been offered to Hong Kong. There is not a single word of encouragement or any material support. Not a single country has offered to send us their medical expertise or their medical equipment. None of them has expressed their care for our frontline medical workers. Are these the reward we get for daring to take on an enemy that is a threat to the entire human race?

I wish, therefore, to make an urgent appeal to our local media. It is time we all fulfil our civic responsibilities. Please ensure that the correct message will reach the local and the international community. We must work as a team and rise to nature¡¦s formidable challenge to us. Help us rebuild the international image of Hong Kong.

Eric Li

Awarded Fellow by the Australian Society of Certified Practising Accountants (Hong Kong Branch).
Delivering a speech at the launching ceremony of a programme run jointly by the Society of Chinese Accountants and Auditors and the National Accounting Institute.
Receiving an Honorary Fellowship conferred by the Hong Kong Polytechnic University at its 8th Congregation Ceremony.
At a seminar organized by the Department of Accountancy of the Hong Kong Polytechnic University.
At the spring dinner of the Association of Chartered Certified Accountants (ACCA).
As officiating guest at the 2nd anniversary dinner of the Asian Institute of Intelligent Buildings.
Officiating and delivering a speech at the graduation ceremony of St Stephen¡¦s College.
Signing the guestbook at the Charity Premiere of The Lord of the Rings: The Two Towers, sponsored by the Dragon Foundation.



¡¯Endless road works, endless nightmares

Question raised by the Hon. Eric Li regarding ¡§Road excavation works on the pavements along Nathan Road in Tsim Sha Tsui¡¨ at the LegCo meeting on 18 December 2002.

The Apple Daily reported on 19 December 2002 that in her written reply submitted to the Legco on the previous day, Dr Sarah Liao, Secretary for the Environment, Transport and Works, pointed out that along the 2.5 km road section of Nathan Road in Tsim Sha Tsui, there were 97 road openings in the first 10 months of the year 2002.

At the same time, the Editorial of the Apple Daily suggested that introducing road works charges would encourage better co-operation between different public utilities on the co-ordination of road works so as to save and share costs. The predicament of ¡§endless road works, endless nightmares¡¨ in Tsim Sha Tsui and other districts could then be eased.

¡¯ Poor financial management in school results in $4 million funding unused

Question raised by the Hon. Eric Li regarding ¡§Funding Arrangement of ¡¥Operating Expenses Block Grant¡¦ for Aided Schools¡¨ at the Legco meeting on 11 December 2002.

The Sing Tao Daily reported on 12 December 2002 that in his written reply submitted to the Legco on the previous day concerning the questions raised by the Hon. Eric Li, Professor Arthur Li, Secretary for Education and Manpower, revealed that 80 schools had an average cumulative reserve of $2 million while an aided primary school held the highest cumulative reserve of $4 million. A primary school principal criticized the poor financial management of the school and said that the reserve left was ¡§high enough to buy a luxury house¡¨.


Serve as member of two Bills Committees and attend two Subcommittees (from January to April 2003):

¡¯ Bills Committee on Stamp Duty (Amendment) Bill 2002

¡¯ Bills Committee on National Security (Legislative Provisions) Bill

¡¯ Subcommittee on Solicitors (Group Practice) Rules

¡¯ Subcommittee on Karaoke Establishments (Licensing) Regulation and Karaoke Establishments (Fees) Regulation

Questions raised and Debates

Important Speeches (For full text, please go to: http://www.ericli.org)

¡¯  Debate on the Policy Address (Vibrant Economy) on 15 January 2003

¡¯  Debate on the Policy Address (Enlightened People with a Rich Culture) on 16 January 2003

¡¯  Speech at the tabling of the PAC Report No. 39 at a Legco meeting (19 February 2003)

¡¯  Speech delivered as Chairman of the Bills Committee on Inland Revenue (Amendment) (No. 2) Bill 2001 (26 February 2003)

1 oral question, 10 written questions, and 1 question at the Chief Executive's Question and Answer Session

¡¯  ¡§Access to the Mainland aviation market¡¨ (oral question raised at the Legco meeting on 19 March 2003)

¡¯  ¡§Schools operating on block grants¡¨ (written question raised at the Legco meeting on 11 December 2002)

¡¯  ¡§Road excavation works on the pavements along Nathan Road in Tsim Sha Tsui¡¨ (written question raised at the Legco meeting on 18 December 2002)

¡¯  ¡§Outsourcing winding-up cases by the Official Receiver's Office¡¨ (written question raised at the Legco meeting on 15 January 2003)

¡¯  ¡§Handling reports of unknown gases¡¨ (written question raised at the Legco meeting on 22 January 2003)

¡¯  ¡§Cases of obtaining CSSA payments by deception¡¨ (written question raised at the Legco meeting on 12 February 2003)

¡¯  ¡§Income and expenditure of foreign domestic helpers¡¨ (written question raised at the Legco meeting on 19 February 2003)

¡¯  ¡§Nutrient composition and hygiene standard of school lunchboxes¡¨ (written question raised at the Legco meeting on 26 February 2003)

¡¯  ¡§Accreditation charges for overseas academic qualifications¡¨ (written question raised at the Legco meeting on 19 March 2003)

¡¯  ¡§Policies on oil reserves¡¨ (written question raised at the Legco meeting on 2 April 2003)

¡¯  ¡§New tender requirements for gas filling stations¡¨ (written question raised at the Legco meeting on 2 April 2003)


¡¯  The Association of International Accountants thanked Eric Li for participating in video production

The Hon. Eric Li received a thank-you letter from the CEO of the Association of International Accountants in appreciation of his participation in the Association¡¦s video production. The video, which provides an introduction to the Association, will be produced in three languages: English, Putonghua and Cantonese.

Advice for Action

¡¯ Eric Li does not believe that the accounting profession would be involved in any cover-up

The supervision of the accounting profession had become a matter of grave concern recently. Eric Li Ka-cheung, representing the accounting sector, yesterday emphasized that the recent bribery scams of listed companies were criminal offences which fell outside the scope of self-regulation of the profession. No members of the accounting sector, therefore, would have the power to cover-up for their peers. However, he held an open attitude towards further and tighter regulation of the profession and agreed that the Hong Kong Society of Accountants (HKSA) should devise an effective and comprehensive solution as soon as possible.

Cases involving bribery fall outside the scope of self-regulation

Eric Li yesterday clarified some of the points he made in his recent speeches. Regarding the recent criminal behavior of listed companies involved in bribery scams, Eric Li said that there was no evidence so far of any breach of professional code of conduct or guidelines for accountants. These cases seemed to be bribery scams pure and simple, and should not be regarded as repetitions of the Enron case.

¡¯ Slow progress in investigation due to lack of resources

Legislator Eric Li Ka-cheung, representing the accounting sector, told our reporters that if the Government insisted on setting up an independent investigation committee, such a committee should deal only with the conduct of accountants who were auditors of listed companies.

¡§The HKSA¡¦s proposal to set up an Independent Investigation Board does not aim at exerting any pressure on the Government. Rather, it aims to show the public that we have no intention of protecting our members from charges of wrongdoings: the HKSA has a total of 20,000 members, and only a few companies engage in auditing business with listed companies. It is unreasonable to ask all members of the HKSA to share the cost of the Independent Investigation Board.¡¨ said Eric Li.

Investigation has reached an impasse

Eric Li admitted that under the existing structure, even though there was an increase in the number of non-accountant members in both the investigation committee and the disciplinary committee, investigation still could not be speeded up as the HKSA did not have the resources to press on with the investigation. More importantly, the HKSA did not have the power to obtain records from non-members, for example, from companies suspected of wrongdoings.

However, it was highly unlikely that the Government would amend the legislation and grant such a power to the HKSA. Even if the HKSA did have the power, the HKSA would still ask, ¡§Where do the resources come from?¡¨(Hong Kong Economic Times, 6 January 2003)

¡¯ Eric Li likely to introduce a private member¡¦s bill on the supervision of accountants

Frederick Ma, the Secretary for Financial Services and Treasury, said that the Government was considering inviting Eric Li, legislator for the accounting industry, to introduce a private member¡¦s bill in the Legco to speed up legislation procedure. (Apple Daily, 14 January 2003)

News Digest

A Wake Up Call (Letter to Hong Kong)

Eric Li criticized the international community for looking on with folded arms (For full text, please go to: http://www.ericli.org)

Legislator Eric Li Ka-cheung (photo) criticized the international community, except the WHO, for not lending Hong Kong a helping hand in fighting against SARS. He was disappointed by their apathy, in particular, by their discriminatory and hostile attitude towards Hong Kong. He suggested that the Chief Executive should appoint a senior government official to clarify the misunderstandings among the international community.

In the RTHK programme ¡§Letter to Hong Kong¡¨, Eric Li said that SARS hit us like the 911 terrorist attack had hit New York. Totally unprepared, Hong Kong people became panic-stricken. The rumour that Hong Kong had become an epidemic city started by a hoax bulletin posted on a news website, triggered a wave of fear and people rushed to stock up on face masks, gloves, bags of rice, air tickets and Chinese herbal tea.

No medical assistance from other countries

He criticized the international community for being biased, selfish and even hostile at times towards Hong Kong. For example, after the outbreak of SARS some countries forbade Hong Kong people to participate in international activities. Apart from the professional assistance from the WHO, not a single country had offered to send us their medical expertise or medical equipment.

Eric Li also criticized a few mass media for blowing up the situation of SARS and making it like it was the end of the world. He suggested that the Chief Executive should appoint a senior government official to fill a post similar to that of the former Information Coordinator of the Office of the Chief Executive ¡V held at the time by Stephen Lam Sui-lung, now Secretary for Constitutional Affairs. The appointed official should be responsible for ensuring that accurate information be disseminated to the foreign media and foreign diplomats in Hong Kong. (Sing Pao, 7 April 2003)

Media should take up civic responsibility to overcome nature¡¦s mischief

In yesterday¡¦s RTHK programme ¡§Letter to Hong Kong¡¨, Eric Li Ka-cheung pointed out that Hong Kong had to fight a lonely war against SARS. Our isolation was more total than that faced by the UK-US alliance in their war against Iraq. As far as our relation with the outside world is concerned, our entire population, i.e. all 7 million of us, irrespective of our individual state of health, had been put in quarantine. The situation was not helped by the mass media, a few of which sought to profit from sensational stories about the daily number of new SARS cases and new death toll.

In Eric Li¡¦s opinion, the confusing messages, the half truths and exaggerated stories that saturated some of the news reports in Hong Kong would make it doubly difficult to show the world the real situation in Hong Kong. At the worst, wrong messages might spread overseas, and this may cause great damage to Hong Kong¡¦s reputation and affect our trade.

He stressed that even though the US media is one of freest in the world, they united behind the government after the 911 event. In the war with Iraq, the US media has by and large put aside their differences with President George Bush and supported the nation at war. This proved that the free press can be one of the most important cohesive forces of a nation. He suggested that the Chief Executive should appoint Stephen Lam Sui-lung, the ex-Information Coordinator, to coordinate publicity matters, both locally and internationally. He also called for the local media to take up their civic responsibility. ¡§Don¡¦t shoot at our own soldiers at war. Let us close ranks to overcome nature's mischief and win the opinion of the world,¡¨ he said. (Hong Kong Economic Journal, 7 April 2003)

No money should be spared to fight against SARS

Democratic legislator Cheung Man-kwong, DAB legislator Ip Kwok-him, Breakfast Group legislator Eric Li Ka-cheung, HKPA legislator David Chu Yu-lin, HKCTU legislator Lee Cheuk-yan all supported the allocation of funding for anti-SARS measures. Eric Li said that even if more than $200 million had to be spent on fighting against SARS, it would still be money well spent. (Ming Pao, 26 March 2003)

Postpone tax increases to let the public have some breathing space

Accounting sector legislator Eric Li Ka-cheung yesterday told reporters that the aim of the Budget to relieve the deficit in the long run should not be changed and given up easily in the face of SARS in Hong Kong. However, he added that this is a golden opportunity for the Government to restore the confidence of the middle-class by postponing some tax measures so that the public could have some breathing space. (Hong Kong Economic Times, 4 April 2003)

The car-purchase incident

Let the Financial Secretary make amends for his faults

Eric Li Ka-cheung, convener of the Breakfast Group, said that people in the business sector thought negatively about this incident, but not everyone wanted him (Antony Leung Kam-chung) to get the sack. It was just that most people thought ¡§if he offered to resign, then let him go.¡¨

However, Eric Li pointed out that before asking Antony Leung to go at this moment, we should first consider the impact of such a move on the international image of Hong Kong. In view of the hardships Hong Kong is experiencing financially and economically, the replacement of key government officials at this critical moment would have an adverse effect on the financial stability of Hong Kong. (Hong Kong Economic Times, 20 March 2003)

Leung¡¦s fault not grave enough to cost him his job

Eric Li Ka-cheung, convener of the Breakfast Group, said that the Group still had a number of doubts in mind and these had to be clarified by Antony Leung face to face. If Leung could provide a reasonable explanation, they believed they could still continue to work with him and would not support the setting up of an investigation committee or to call for him to resign.

Eric Li explained that the Antony Leung he knew was not a person without integrity or one with no respect for the law. He was just not sensitive enough to the need to avoid conflict of interests and the flaring of suspicion amongst the public. Few in the business sector demanded him to go, though some believed that if Leung offered to resign, the Chief Executive should accept his resignation. (Hong Kong Economic Journal, 20 March 2003)

Admission of private enterpreneurs to the Party and protection of private property: business sector pleased with Party Charter amendments

Legislator Eric Li Ka-cheung, representing the accounting sector, pointed out that the admission of private enterpreneurs to the Party and the protection of private property have both been written into the Party Charter at the 16th Congress of the Chinese Communist Party. This undoubtedly provided Hong Kong people with a higher-level guarantee than that provided by the Basic Law. It also showed that the Mainland system and the Hong Kong system are drawing closer. Such a positive signal helps to put everyone¡¦s mind at ease. (Wen Wei Pao, 16 November 2002)

New pragmatic leadership a boost to local economy

Legislative Councillor Eric Li of the accountancy constituency said almost all of the ¡§old¡¨ officials have stepped down from leadership to pave way for the new generation and this projected a new image to the world. The nine successors are all pragmatic leaders and this would have a solid impact on boosting the economy of our country. (Ta Kung Pao, 16 November 2002)

Eric Li: Collective succession of mainland leadership produces a positive effect on Hong Kong

Legislative Councillor Eric Li said that the peaceful and stable manner in which the Mainland completed the collective handover of leadership produced a positive effect on the Mainland as well as on Hong Kong. The new leadership, younger in age than those they succeed, would help to stabilize and systematize the policy-making process in the long run. He said it was natural that Hong Kong people would now hope to see a leader well-versed in Hong Kong-Macao affairs ruling Hong Kong. It would be even better if the leader was familiar with the financial and economic affairs of Hong Kong. (Wen Wei Pao, 16 November 2002)

Eric Li: Failure of Telecommunication Bill to define Government intervention clause creates uncertainty

The Legislative Council¡¦s 2002 Telecommunication (Amendment) Bills Committee yesterday discussed the Mergers and Acquisitions Guidelines. Legislative Councillor Eric Li pointed out that the Guidelines focused too much on principles. The Guidelines included all the factors that could affect market competition but did not include any clauses on Government intervention in mergers and acquisitions. This would create uncertainty for those telecommunicators who wish to proceed with mergers and acquisitions.

Li said the overall direction of the Guidelines ¡V to maintain the status quo ¡V will indirectly discourage market integration at a time when the local telecommunication industry needs to integrate.

He suggested that the Mergers and Acquisitions Guidelines should set out clearly in a list all the mergers and acquisitions key points to allow those in the industry to understand them at a glance. (Ming Pao 8 January 2003)

Private enterprises should be permitted to invest in infrastructure

Eric Li Ka-cheung, convener of the Breakfast Group, hoped that the Administration would continue to streamline government departments and permit private enterprises to participate and invest in infrastructure as mismatch of resources had limited the investment opportunities of the private enterprises. He agreed that the Government could increase the revenue in the short term by selling the KCRC, the toll tunnels, and Cyberport etc. (Hong Kong Economic Times, 30 November 2002)

To rely on economic recovery to solve 60 per cent of the Budget deficit is unrealistic

The Hon. Eric Li, legislator representing the accounting sector, felt that it was unrealistic of the Government to say earlier on that 60 per cent of the Budget deficit could be solved by economic recovery.

He pointed out that the Budget deficit exceeded $70 billion, $50 billion or two-thirds of which was structural. Hence he believed that it should be tackled by a cut in government expenditure and an increase of taxes. The introduction of various new taxes could bring $10 billion revenue to the Government. As for the remaining $40 billion, it should be solved by expenditure cuts. (Ming Pao, 26 November 2002)

Eric Li: Private sector already bleeding badly

Eric Li, convenor of the Breakfast Group, entered the debate with the observation that just a mild 10% pay-cut could already enable the Government to save $17 billion. He told Wong Ho, ¡§I know that the civil servants would say this would hurt them. But at most, this is just a knife wound, whereas the private sector is already bleeding badly.¡¨ Eric Li ¡§reminded¡¨ the civil servants: ¡§The Government¡¦s operating expenditure has continuously been rising. The blame should not be put on civil servants. What is at fault is the policy. It cannot be denied, however, that civil servants are the biggest winners under this faulty policy. Isn¡¦t it high time they took their profits, as it were, and let us start the game again on a level playing field?¡¨ (Ming Pao, 16 December 2002)

Profits tax and salaries tax to return to the 1997 level

With regard to the Government¡¦s review on profits tax and salaries tax, the convenor of the Breakfast Group and Legislative Councillor Eric Li suggested that the Government should restore both profits tax and salaries tax back to the 1997 level.

He pointed out that the reason why former Financial Secretary Donald Tsang made substantial tax reductions in 1998 was because the Government coffers were then ¡§overflowing with money¡¨ while the people were suffering terribly from the Asian financial crisis. Now that the Government had to face a huge deficit, it would be ¡§the wrong time for a right policy¡¨ if the Government should continue with such measures. (Sing Tao Jih Po, 30 December 2002).

Setting a time frame for civil service pay cut indicative of Government¡¦s intention to handle the issue

Legislative Councillor Eric Li, representing the accounting sector, also pointed out that the mechanism for civil service pay adjustments would not be completed before the end of 2003. Therefore, it was very likely the present salaries of the civil servants would freeze until April 2004, when the pay cut could be implemented.

He said a lot of people hoped to see a civil service pay cut next year but this was not realistic given the present situation. The Government would need more time to tackle the issue.

Eric Li also pointed out that in the Budget announced in March this year, the Government had already adopted measures used by the commercial sector to implement a pay cut, causing tremendous dissatisfaction from civil servants. If these measures were to be re-adopted, it would certainly provoke great opposition. He said the Government should not set a deadline for the pay cut but should rather make the time frame visible to the international accrediting agencies as this was already indicative of the Government¡¦s intention to handle the issue. (Hong Kong Economic Times, 31 December 2002)

Eric Li: Spend on what is necessary and develop a habit of saving

Practicing accountant Eric Li said that the economy now is plagued by a vicious circle of falling income and falling prices. In view of this, Hong Kong people should spend on what is necessary and purchase daily necessity items to avoid future price increases. At the same time, Hong Kong people should also develop a habit of saving and avoid getting used to overusing their credit cards. And should they consider investing, they should not expect a short-term return, be it an investment in the capital preservation fund, long-term fixed income fund, or in the newly-developed stock market in Hong Kong or Asia, or even in Euros. Rather, they should be prepared to wait at least two or three years for a return. (Ming Pao New Territories East special route, 21 December 2002)

Eric Li: Points system unnecessary for immigrant investors

The convenor of the Breakfast Group and Legislative Councillor, Eric Li, remarked that if the Government was to relax its population policy to allow professionals and immigrant investors to come to Hong Kong, then it should neither fix a quota nor set up a points system. These people should be allowed to come to Hong Kong freely if it can be guaranteed that they would at least pay at cost for the local public resources that they use, such as education and medical facilities.

In an exclusive interview with this newspaper, Eric Li talked about the findings of the population policy review soon to be announced by the Government. He said: ¡§To be an international city, Hong Kong should adopt an open population policy that allows a free flow of talent and money.¡¨ He pointed out that at present, there is not a single international city in the world with an immigration policy that sets a ceiling for the admission of talents and immigrant investors.

All are welcome as long as they don¡¦t come here for our comprehensive social security assistance

As regards a points system for assessing immigrants, Eric Li said this could only serve as a temporary measure. Like most other countries, Hong Kong should in the long run allow a free flow of Mainland talents and investment into and out of the city. Besides, setting up a points system is against the original intent of ¡§one country, two systems¡¨. The Hong Kong Government should welcome any investors who are interested in coming to Hong Kong as long as they do not abuse the immigrant policy to come to Hong Kong to obtain comprehensive social security assistance.

He added, however, that Mainlanders who work or invest in Hong Kong do not pay Hong Kong tax. Using the Mainland terminology, these people are without a ¡§household registration¡¨. They should therefore pay at cost when they use our local medical and education services. But Li remarked critically, ¡§The Government is used to being kind. She does not have the political desire to implement any at-cost charges.¡¨ (Hong Kong Economic Times, 3 January, 2003)

Mainland recognition of professional qualifications of Hong Kong accountants absolutely essential

Legislative Councillor Eric Li, who represents the accounting sector, said the Mainland¡¦s adoption of protectionism for its accounting sector made it difficult for Hong Kong accountants to practice on the Mainland. Although Hong Kong accountants can now apply for a one-off permit to work there, they can only practice temporarily. Therefore, unless their professional qualifications are recognized by the Mainland authorities, it is very difficult for them to compete with their counterparts on the Mainland. (Apple Daily, 6 January 2003)

Give small- and medium-sized accounting firms more business opportunities by reducing the risks involved in assisting private enterprises to get listed in Hong Kong

Legislative Councillor representing the accounting sector, Eric Li, believed that the success of the financial services sector in entering the Mainland market or its ability to serve as a facilitator for Mainland enterprises to come to Hong Kong to raise capital could fasten the pace of the accountancy and legal sectors to export their services and hence stimulate the development of the respective industries. He admitted, however, that in the accounting sector, there would not be a ¡§mad rush¡¨ of people to move north for development in the short run. This is because even though the pace of private enterprises coming to Hong Kong to register as listed companies had quickened in the past two years, negative news about their management and accounting style kept breaking out. In view of the ¡§high risk¡¨ nature of assisting Mainland private enterprises to become listed companies in Hong Kong , there are presently only a few established accountancy firms ready to undertake business of this nature.

Accounting sector should state investment risks

Eric Li said that the Hong Kong government and its regulators should state clearly to investors the risks of investing in Mainland private enterprises listed in Hong Kong. They should not just highlight the advantages but keep quiet about the high risks. He added: ¡§Business opportunities and risks are very much like twin brothers. Because there is a gap between the standard of the Mainland management and legal systems and the international standard, practicing accountants encounter quite a number of constraints in their work. It is necessary for relevant authorities to conduct a review on the overall policy to produce fruitful results.

The Government, the Hong Kong Exchanges and Clearing Limited and The Securities and Futures Commission of Hong Kong are now carefully reviewing the policy governing the listing of private enterprises. Eric Li urged relevant authorities and organizations to define clearly the rights and obligations of all the parties concerned throughout the entire listing process in order to minimize the unnecessary risks. This would give small- and medium-sized firms more business opportunities, prevent the more established accounting firms from monopolising the market, and thus promote a healthier development for the market. (Wen Wei Pao, 6 January 2003)

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