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Eric’s Bits and Bytes   Issue 32

Dear friends,

The political reform of Hong Kong should long have been listed on the Council agenda. In my response to the Chief Executive’s Policy Address in as early as 1997, I already voiced my views that “Evasion of political reform takes the color off the blueprint”. I said then that “without a parallel political development, the beautiful blueprint for our economy and livelihood is like a picture without color.”

To achieve the anticipated outcome of the local political reform, a pre-requisite is to untie a knot formed by the relationship of the Central Government and the Special Administrative Region Government on the one hand and the democratic party on the other. Without this pre-requisite, the splitting up of society and the confrontation of ideology will not be solved. Universal suffrage could be resorted to as a weapon of the political war and an excuse to attack the opposite party. This is not a blessing either for Hong Kong or mainland China.

Mr Cheung Bing Leung has published an article in the newspaper and I echo his sentiments that those in the political arena should possess not only a sense of mission for the country and society, but also a breadth of mind broad enough to “eliminate hatred and revenge with a smile”. The fable of “The Sun and the Wind”* clearly indicates that what Hong Kong needs is the warm sunshine in the political arena and not the shivering cold of the north wind in the severe winter.

Stepping into a new year, I shall commission the academic field to design independently a questionnaire on the political reform and invite the Hong Kong Society of Accountants to join hands to conduct an extensive consultation within the industry. I urge you all to show your concern for the political development of Hong Kong and to actively express your views on the issue.

Here, I wish you all a happy and fruitful new year!

Eric Li

* The Sun and the Wind both believed that they had enormous power. They made a bet that whoever could take the clothes off the people was the one with more strength. The Wind blew with all his might, hoping that it would blow the clothes off the people. However, the more he blew, the more the people fastened their clothes against their bodies. The Wind blew for half a day but still could not make people take off their clothes. The Sun, however, slowly cast its sun rays on the people who, when hot, unanimously took their clothes off.


Signing at the 30th anniversary banquet of the Hong Kong Society of Accountants.

Attending the 30th anniversary banquet of the
Hong Kong Society of Accountants.

Officiating at the Qualification Programme promotion of the Hong Kong Society of Accountants.

Eric Li is conferred the title of honorary member at the 2003 Canadian Certified General Accountants
Association of Hong Kong banquet.

Touring the LegCo building with members of the accounting profession.

Officiating at the high table dinner of the Hong Kong Society of Accountants’ Prospective Student Society.

 


Foresight

Hong Kong’s Political Reform (For details, please refer to www.ericli.org/legco/legco06.htm)

Eric Li: Universal suffrage – first for Chief Executive, then for Legislative Council

Achieve ultimate target within a span of 10 to 20 years

In an interview, Eric Li suggested reaching the ultimate target of universal suffrage for the Chief Executive and the Legislative Councillors within a span of 10 to 20 years. He supported direct elections for the Chief Executive in 2007 but suggested that the nomination threshold should be lowered progressively in order not to scare off the business and industrial sectors with democratization. (Hong Kong Economic Times, 22 December 2003)

Not standing for election through functional constituency in 2008

Personally speaking, I have been adopting an open attitude towards the progression of the democratization of the political system.… I have mentioned that I would not stand for election through the functional constituency in 2008. This is already my attitude towards functional constituency seats, my attitude towards appointed seats needs no further description. (Debate on “Appointing the least number of District Board members” motion at the LegCo meeting on 3 December 2003)

Government should lead discussions on mild political reform proposal

Eric Li, LegCo member representing the accounting profession, pointed out that it is good for the Government to lead extensive discussions on political reform. “But it is best for the Government to provide only a platform for discussions and not make any appointments. Discussions on the political system do not necessarily have to involve ‘authority’,” he said. If the Basic Law Consultative Committee model is to be followed, then the Government can appoint more than 100 representatives from different sectors. He also pointed out that quite a number of people from the commercial sector are of the view that “there are at present only two voices – one for universal suffrage and the other for maintaining the status quo for the existing political system. In fact, there is room for the development of a mild political reform proposal. The government should spark discussions on this.” (Hong Kong Economic Times, 6 December 2003)

Discussions on political reform not exclusive to political parties

Eric Li, convener of the Breakfast Group, is of the view that discussions on political reform should not be limited to political parties. He is worried that this would in the end lead to a situation whereby different parties get a slice of the political cake, which is undesirable for the overall development of Hong Kong. (Sing Tao Daily, 5 December 2003)

800-member election committee as nomination committee

Both Tsang Yok-sing of DAB and Eric Li suggested continuing to use the 800-member election committee as the Nomination Committee. However, they both proposed raising the threshold. Li said the suggested requirement that Chief Executive candidates be nominated by 200 members of the Nomination Committee before they can run for the election would set the mind of the Central Government at ease. According to this proposal, only four candidates would be allowed to run for election at the most. (Hong Kong Economic Times, 9 December 2003)

Open attitude on views of Mainland scholars

Breakfast Group Eric Li adopts an open attitude with regard to the views of Mainland scholars. However, representatives of the Central Government should not lead the discussions on political reform. (Hong Kong Economic Times, 9 December 2003)

Establish partnership-mode alliance. Gain support from opposition party

Breakfast Group convener Eric Li believed that the Government’s stance would become very dangerous after the fall of the “pro-Government Party” and getting LegCo support for controversial policies and bills would become all the more difficult. Two consequential actions thus need to be taken: (1) to establish a partnership with the pro-Government group instead of adopting an “executive-led” model to force members of the ruling alliance to support the Government in all matters and to get political parties involved in the policies; (2) Chief Executive Tung Chee Hwa should personally make up with the democratic party to gain their support in order to maintain effective rule. (Ming Pao, 26 November 2003)


COMMITMENTS AT THE LEGISLATIVE COUNCIL

Membership of the following newly formed Bills Committee

Bills Committee on Hong Kong Sports Development Board (Repeal) Bill


Questions and Debates

*Research grant applications received by Hong Kong Research Grants Council

(Written question raised at the LegCo meeting on 26 November 2003)

*Political review should be conducted as a whole

(Debate on “Appointing least number of District Council members” motion, 3 December 2003)

*Education should be developed as properties

(Debate on “Education policy” motion, 3 December 2003)

Eric Li: In the long run, education should be developed as properties. What we need to consider is the overall resources invested by society in this aspect, including the tuition fees, community donations as well as other overall contributing resources. If the overall resources are not reduced, then this kind of community investment may not be a burden on society in the future, but rather may become an investment item.

*One-off item for pay-cut legislation

(Resumption of Second Reading debate on “Public Officers Pay Adjustments (2004/05) Bill”, 10 December 2003)

Eric Li: I have already spent quite a lot of time voicing my views at last year’s debate or when we debated on similar issues. Initially when I read about this motion, I felt that it was not easy to vote for a decision. So, like most other councillors, I also read about the views I made last year and I read them in detail. I saw that the first sentence that I made in the speech was not only directed to Secretary Joseph Wong, but also to the Chief Executive as well as the public.

I said then: “Resorting to the legislation in support of pay reduction should definitely be a one-off thing and should not be repeated.” My views had taken into consideration factors such as the harmony of society and whether the Government had reached a consensus with the civil servants. Many councillors had mentioned this point as well.

While I agree that to a certain extent, the degree of controversy of this motion has lessened and that the present situation has slightly improved, it does not mean that I am for the legislating of the pay cut.

Insignificant civil service pay cut adds tax increase pressure

Independent LegCo member Margaret Ng of the legal sector, independent LegCo member Audrey Eu and Eric Li of the accounting profession are those few councillors who cast an opposition vote. The three of them are of the view that the Government has insufficient reasons to legislate for the pay cut and has therefore abused the legislative procedure. (Hong Kong Economic Times, 11 December 2003)

*Independence of Audit Department

(Supplementary question raised at the LegCo meeting on 17 December 2003)

Eric Li: I feel that the Government has evaded the first part of the question, which relates to the Director of Audit auditing his relatives or his former departments. If we refer to the principles of the International Professional Accountants, in addition to the acquisition of professional qualifications, the moral guidelines also require the auditors to follow the following two guidelines when they deal with self-related issues: (1) auditors are not allowed to audit departments which they have formerly worked in; and (2) they are not allowed to audit their relatives or people with whom they are closely associated business-wise.

Of course I am aware that local civil servants are not required to follow these auditing standards. However, many of Hong Kong’s company laws and securities and futures laws have explicitly forbidden such practices. However, in the main reply, I cannot see how the Director of Audit is not allowed to audit his relatives or the staff members of the former departments which he headed (or his former colleagues whom he supervised). The only relatively relevant point is the 6th paragraph of the main reply which pointed out that “The Audit Department has also enacted detailed internal ‘auditing standards’.” I would like to ask the Government if it can make public these internal standards to prove that these standards are kept in pace with the society, are comparable to the general international auditing guidelines, and can prohibit the Director of Audit from auditing his own relatives or departments that he once served as head?


Advice for Action

Public Accounts Committee hearing: senior officials apologizing one after another

Director of Food and Environmental Hygiene Gregory Leung Wing Lup, Director of Buildings Department Wu Moon Hoi and Light Rail Director Jonathan Yu Hoy Gin respectively apologized to LegCo members and the public at the LegCo meeting or in public for their mistakes or incorrect assessment, creating a ripple of “apologies” among Government officials.

Chairman of the Public Accounts Committee of the Legislative Council, Eric Li, said it is better for the officials to admit their mistakes than to make unconvincing explanations. If this is called the apology culture, then it has been in existence for a long time. (The Sun, 9 December 2003)

In its “Kung Fu Tea” column on 9 December 2003, Oriental Daily accused the Buildings Department of having words louder than action. It said the Department has set too high a target but in reality could only achieve one-fourth of its target. The Department’s failure to deliver has widened the gap between its goal and its achievements, reflecting that it is a paper tiger which fails to exert any deterrent effect on people building illegal additions.

The editorial of The Sun on 9 December 2003, headlined “Apologies reflect low quality of Government management”.

Director of Food and Environmental Hygiene Gregory Leung Wing Lup made repeated numerical mistakes when he explained the markets vacancy rate at the LegCo Public Accounts Committee meeting yesterday morning. When questioned and criticized by the LegCo members, Gregory Leung said he was only half awake and made an immediate apology.  Director of Buildings Department Wu Moon Hoi also appeared at yesterday’s Public Accounts Committee to explain reasons for the backlog in clearing illegal buildings cases. He said a $20 million computer system was installed early last year but because of the manpower allocation problem, they have not been able to input new data to keep track of the latest situation. Director Wu admitted that it was the responsibility of the management to monitor the situation and apologized to the LegCo members.

Invest more resources to raise prosecution figures

When criticized by legislator Eric Li at yesterday’s Public Accounts Committee meeting that the Buildings Department was a “paper tiger” which failed to keep its promise made to the public earlier, the Department’s newly-appointed Director Wu Moon Hoi said they would now invest more resources to increase the prosecution figures – from this year’s 500 cases to 1,000 next year and even to 2,000 cases in the year 2005. (Sing Pao, 9 December 2003)

Legislator Eric Li doubted the execution effectiveness of the Buildings Department which led to the public’s contempt of its clearance orders. He sneered: “(The Buildings Department) is a paper tiger with no substance.”

Legislator Eric Li criticized the Department of Food and Environmental Hygiene for making repeated changes regarding the overall targeted rental rate of market stalls, making it suspectable to false accounting from a financial management point of view. Li pointed out the inseparable link between the setting of a targeted rental rate and the usage of public money. The Government, he said, should not change the calculation method to make the figures look more appealing. (Oriental Daily, 9 December, 2003)

A number of LegCo members expressed their dissatisfaction towards the Department’s frequent changes in setting the markets’ targeted vacancy rate. Eric Li, Chairman of the Public Accounts Committee, criticized that the market vacancy rate standard was too loose – from the overall vacancy rate of 15% in January 2000 to the revised 16% in January 2001. Besides, the vacancy rate has not taken into account the stalls for storing goods, the markets to be cleared/abolished and the markets to be renovated, thus making the announced vacancy rate unable to reflect the real situation. (Sing Pao, 9 December 2003)


Universities should find a way out through privatization

In its editorial on 17 November 2003, headlined “Universities should find a way out through privatization”, Apple Daily pointed out that the privatization of universities would not only allow the Government to save a substantial amount of subsidies and expenditure, it would also allow more room for development for the universities.

In addition to making the suggestion to “open up university admission to attract international talents” at the Chief Executive’s Q&A Session on 9 January 2003, Legislator Eric Li also stressed at the Debate on the Policy Address 2003 on 16 January 2003 that “tertiary education field in Hong Kong must take immediate action to catch up with other countries. The closed-door policy should be abandoned and the universities should open their doors wide to overseas students. The presence of a large number of overseas students will certainly help to bring vitality to the local tertiary education.”

“Hong Kong people are expressing their discontent with the education system by their action. And yet, every year our Government spends as much as HK$55.3 billion on education. From the point of view of investment in industry, therefore, this simple but staggering figure shows how completely lacking the concept of competitiveness is in education in Hong Kong. Indeed, where the market for the provision of international education services is concerned, Hong Kong has already lost a decisive battle.”


MTRC “swallows” KCRC, KCRC “turns” listed

According to a report of The Sun on 18 November 2003, the HKSAR Government has decided on the merger of the two railway corporations and planned on having the listed MTRC “swallow” the unlisted KCRC. An academic has pointed out that the MTRC is already a listed company and to have a listed company to merge and acquire an unlisted company is a common practice that requires the shortest preparation time. The MTRC can issue new shares and use the diluted shares to acquire KCRC. After all, the Government is the biggest shareholder and it is not necessary for MTRC to raise a substantial amount of funds.

As early as 11 March 1998, Legislator Eric Li has pointed out at the Debate on the Budget that the Government has made huge investments in the airport, railways and mortgage companies. These investments, together with the commercial activities of various Government trading funds, can be turned into revenue-generating tools. On 29 May of the same year, Eric Li even made a public appeal in the main local newspapers to sell out part of the three railways and airport shares.

On 10 February 1999, Eric Li pointed out in the newspaper again that if the Government wished to list the two railway companies, the first and foremost thing is to enhance their existing business plans. For example, the West Rail has completely overestimated the traffic flow and the ability of the passengers in shouldering the fare. The Government should face these problems head-on. Li said the MTRC had already started streamlining its structure and costs to pave the way for becoming a listed company. He estimated that it would take MTRC about two to three years of preparation while it would take KCRC about three to four years. (Hong Kong Economic Times, 10 February 1999)


Consider de-freezing Government charges in stages

Financial Secretary Henry Tang has recently repeatedly hinted that the Government is reviewing the 3,000-plus Government charges/fares that have been frozen for years. He also disclosed that the Government is considering increasing some of the charges that do not affect public livelihood.

Legislator Eric Li opined that in view of the existing severe budget deficit, the de-freezing of charges can be considered in stages. The public should approach this issue with a long-term vision and set their heart at ease in order to show those overseas that we have confidence in ourselves.

Eric Li pointed out that if investors should lose confidence in Hong Kong, it would have an adverse effect on the local economy. The Government should therefore be responsible and self-disciplined, and should provide a desirable business environment. It should also maintain consistence in its policies and should not be indecisive with regard to the implementation of policies. “We should first have confidence in ourselves before those overseas will have confidence in Hong Kong.” (Hong Kong Commercial Daily, 3 November 2003)

In a radio interview yesterday, Eric Li pointed out that the local economy has shown signs of recovery. He believed that the unemployment rate would gradually lower and that it is an appropriate time to increase Government fees and charges. However, it will still take some time for the unemployment rate to witness an overall improvement. The increase in charges should therefore not be across the board. He suggested that the increase in charges should first start off with commercial and non-public livelihood items. Those that affect the livelihood of the grassroot level should be dealt with at a later stage. He also pointed out that the Government should communicate with various political parties and gain their support when reviewing the increase in charges.

Eric Li opined that to solve the budget deficit, the foremost action to take is to reduce the civil service salary expenditure and departmental costs, and to adhere to the principle of “user pays” as closely as possible. (The Sun, 2 November 2003)


Activities

Appreciation letter from Lee Kai-fat

In a reply letter to Eric Li on 4 December 2003, the outgoing Chief Executive and Registrar of the Hong Kong Society of Accountants, Mr. Lee Kai-fat, thanked Li for his letter of 2 December 2003 which praised him for his good performance. He also thanked him for his support for the past three-and-a-half years, especially in promoting the professional qualification process and gaining both international and Mainland recognition. (Chief Executive and Registrar of the Hong Kong Society of Accountant, Lee Kai-fat.)


News Digest

     Director of Audit’s professional background doubtful

Legislator representing the accounting profession, Eric Li, was greatly dissatisfied with the Government’s appointment of Commissioner of Insurance Benjamin Tang Kwok Bun as Director of Audit, saying that the arrangement was regretful.

Eric Li pointed out that the work of the Department of Audit relies heavily on professional skills. Administrative officials generally lack relevant professional qualifications and are unaware of the professional standards of the auditing work. He questioned why the Government had not appointed any of its many professional accountants to take up the post and cast serious doubt on the Government’s decision.

Li also expressed his concern on the appointment of someone who is not fully independent of the civil service to assume this post as it may prevent the appointee from carrying out his work effectively. He pointed out that the Director of Audit will criticize other Government departments or even criticize top officials. And if he has the opportunity to return to the civil service in the future, he will certainly be outcast. Eric Li is of the view that the post of Director of Audit should be assumed by someone who is completely independent of the civil service or who will not be able to work in the civil service in the future. In that way, he will do his utmost without any hindrances in executing his duties. (Ta Kung Pao, 20 November 2003)

Administrative officer to steer audit department unconvincing

Administrative officer Benjamin Tang Kwok-bun, who lacks professional accounting qualifications, will take up the post of Director of Audit. Although he promised to leave the administrative post and will not return to the civil service, Chairman of the Public Accounts Committee and legislator, Eric Li, who represents the accounting profession, described the appointment as “faulty”. Account auditing is a very professional, independent and important job. It is unconvincing to both the public and the professionals that the Government should abandon the use of a relevant professional civil servant or a private accountant and to appoint an administrative officer to take up the position of Director of Audit. (Hong Kong Economic Journal, 20 November 2003)

Conflict of interest should be avoided

With regard to Benjamin Tang’s promise, Chairman of the Public Accounts Committee, Eric Li, stressed that it is the responsibility of the Director of Audit to audit public accounts and as such, it is essential for him to possess the professional qualifications and the required experience. He is not receptive to Tang’s statement that he would prove his impartiality through his work. Li pointed out that even Public Accounts Committee members would absent themselves from the meeting should there be a conflict of interest. He said this is not a matter of not trusting oneself, but rather to project an image of impartiality. He said: “It will be too late if he begins to realize the problems after he assumes his post.” (Ming Pao, 30 November 2003)

Open recruitment a must

Legislator representing the accounting sector, Eric Li, pointed out that the Chief Executive Tung Chee Hwa’s explanation that the appointment of Benjamin Tang as the Director of Audit was due to the inability to find a suitable professional was not substantiated. He said the Government cannot say that it has not been able to find a suitable professional before it conducts an open recruitment. Li also pointed out that as the rank of Director of Audit is a D6 grade with attractive salary and perks as well as housing allowance, it is not necessary to upgrade the rank to attract outside talents. (Ming Pao, 5 December 2003)


    Not reasonable for Government to give a treat (setting up of an investigation bureau) while we foot the bill

Legislator Eric Li representing the accounting profession said since it is the Government’s decision to set up an investigation bureau and appoint the candidates, the Government should of course shoulder the responsibility. “It is not reasonable for the Government to give a treat while we have to foot the bill.”

Eric Li pointed out that if in future, the investigation bureau continues to expand, the accounting sector would not be able to shoulder the cost. He said under the existing political climate, the Government should gain the support of the professionals instead of taking a contrary course. He added: “The Government has always indicated that it will consult with an open attitude. I hope it means what it says.” (Apple Daily, 29 December 2003)


     Eric Li: Constructing LegCo Building needs to consider budget deficit

Breakfast Group convener Eric Li felt that as the Government was facing serious budget deficit problems, the LegCo cannot “merely focus on its own interest”. He said he has developed a strong sense of attachment to the existing LegCo Building and finds it acceptable not to relocate for the time being. If additional seats are to be required in 2008, he believed that it can be dealt with by means of renovation. (Wen Wei Po, 20 November 2003)


     Exchange fund allows easy allocation. Government’s cost-cutting speed reduced

Eric Li of the accounting sector said the Government can get a share of the investment income of the exchange fund because its fiscal reserves have played a part in the exchange fund investments. It is therefore not an unconditional allocation of funds to the Government. Although it is not illegal to ask the exchange fund to make extra allocations, it is not suitable to ruin the mutual understanding of both parties, causing the Government to slow down its cost-cutting efforts as it is too easy for it to tap new resources. (Ming Pao, 9 December 2003)

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     Appointment of professionals can supplement inadequacy in administrative experience and professional knowledge

Legislator Eric Li said the Government’s appointment of more professionals to the District Board is an improvement. Of course the fact that the Government has not made the appointment in accordance with the ratio of elected political parties members and independent members has left room for further improvement, the appointed members should be allowed to take part in the actual operation and then review the outcome. “Appointed members are not here to fight against the views of elected members but to supplement the inadequate administrative experience and professional knowledge of the elected members so as to make the decisions of the District Board more mature.”

According to Eric Li, it is normal for the Government to get support through the appointment of members. But he believed that this group of professionals is not yes-men. “They should think from the perspective of the public and should not blindly protect the Government. And they should have the integrity and special qualities of professionals,” he said.

Li also hoped that the pro-democratic people could give this batch of appointed District Board members a chance to “practice” instead of voicing opposition from the very start. (Wen Wei Po, 28 December 2003)


     Delay in releasing accrual-based accounts understandable

Legislator Eric Li, who represents the accounting constituency, indicated that the Financial Secretary Henry Tang once explained to him that as some of the information would need more time for compilation and that the presentation method was still not yet satisfactory, the release of the accrual-based accounts would need to be postponed.

Eric Li is of the view that as this is the Government’s first set of accrual-based accounts, it is acceptable that the data compilation will need more time. He believed that the Government is not intentionally avoiding the present politically sensitive period. He said: “It is of prime importance to enable the Government to have confidence because this is a major move. Besides, this is a rather embarrassing time as everybody is criticizing the government departments for the high costs and severe budget deficit. To release the accrual-based accounts now poses a difficulty to the Government. It is understandable that the Government needs a bit more time to come up with more comprehensive data.” (Hong Kong Economic Journal, 2 December 2003).

 

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