Speech by Dr Hon Eric LI Ka-cheung, GBS, JP
Chairman, Public Accounts Committee
in tabling the PAC Report No. 41
in the Legislative Council on 25 February 2004
On behalf of the Public Accounts Committee, I have the honour to table our Report No. 41 today.
The Report corresponds with the Report of the Director of Audit on the Accounts of the Government of the Hong Kong Special Administrative Region for the year ended 31 March 2003 and his Report No. 41 on the results of value for money audits, which were submitted to you on 30 October 2003 and tabled in the Legislative Council on 26 November 2003.
The Committee’s Report contains three main parts:
(a) the Committee’s assessment of the actions taken by the Administration in response to our recommendations made in the Committee’s previous Reports Nos. 38 and 39;
(b) our observations on the Report of the Director of Audit on the Accounts of the Government for the year ended 31 March 2003; and
(c) the conclusions reached by the Committee on the Director of Audit’s Report No. 41.
As in previous years, the Committee has selected for detailed examination only those chapters in the Director of Audit’s Report which, in our view, referred to more serious irregularities or shortcomings. Our Report covers deliberations on five of the six subjects selected. To allow more time to consider the various issues involved and the additional information provided by the witnesses, we have decided to defer a full report on the subject “The acquisition and clearance of shipyard sites”. We will endeavour to finalise our report to the Council at the earliest opportunity.
The Committee’s assessment of the actions taken by the Administration in response to the recommendations in the Committee’s Reports Nos. 38 and 39
The Committee’s consideration of the actions taken by the Administration in response to the recommendations made in our previous reports is an integral part of our work. We have documented in this Report our concerns about the Administration’s actions in response to our Reports Nos. 38 and 39 and the Administration’s response.
I should like to mention the Committee’s views on the Administration’s handling of the subject “Relocation of the General Post Office (GPO)”, which was first examined in our Report No. 31 published in February 1999.
In that Report, the Committee expressed dismay that although the Government Property Agency was fully aware of the fact that the GPO was occupying a prime site worth billions of dollars and had been operating for a long time at a high opportunity cost, the relocation of the GPO had not been given priority. The Committee recommended that the Administration should accord a higher priority to the redevelopment of the GPO site. In view of the repeated delays in the release of the GPO site, the Committee also recommended that the Property Strategy Group, chaired by the then Secretary for the Treasury, should take a proactive approach to ensure that the latest relocation exercise at that time would be completed as scheduled.
Since the publication of Report No. 31, the Committee has kept on pursuing the progress of the project for relocating the GPO. However, the Administration informed the Committee, in the Government Minute of May 2003, that it had abandoned the project. The reason was that in 2000, the land use planning of the Central District was comprehensively reviewed. As a result, the GPO site was included as part of a Comprehensive Development Area and subject to a height restriction of 50 metres above principle datum on the approved Central District (Extension) Outline Zoning Plan. The new planning criteria drastically reduced the plot ratio of the site from 15 to about 3.6 only (representing a substantial reduction of 76%). In the meantime, the property market continued to fall. Having conducted the costs and benefits analysis for the relocation project in October 2002, the Administration decided to abandon the project because there was no economic case to proceed further. It considered that even if the property market would rebound in future, the land sale proceeds might not cover the reprovisioning costs, given that the plot ratio had been reduced by 76%.
The Committee is disappointed that the relocation project has subsequently been abandoned due to the changes in circumstances, rendering it no longer economically viable. The Committee considers that if the Administration had promptly carried out the relocation exercise in early 1999 as recommended by the Committee, the GPO site might have been released for redevelopment while it still had high capital value.
We hope that the Administration will learn a lesson from this case and take expeditious actions to conclude without delay other issues that have been outstanding for quite some time.
I now turn to the Committee’s conclusions on the subjects covered in the Director of Audit’s Report No. 41.
Public markets managed by the Food and Environmental Hygiene Department
On the subject “Public markets managed by the Food and Environmental Hygiene Department (FEHD)”, the Committee is dismayed that the FEHD has not given a full and frank account of the operating conditions of public markets, including the real demand for the markets and the total amount of tangible and hidden government subsidies, such as the use of government land and buildings. The Committee considers that these are all important factors which decision makers take into account in assessing the viability of each of the public markets vis-à-vis the private ones.
The Committee is seriously dismayed that the FEHD had attempted to conceal the true market stall vacancy rate (MSVR) of public markets by different means. It changed the target overall market stall occupancy rate of 85%, which was set in January 2000, to 84% in January 2001. As a result, the overall MSVR which should not be exceeded was revised from 15% to 16%. The FEHD deducted the number of purposely frozen market stalls from the calculation of the overall MSVR, thereby reducing the MSVR for its markets from 22.7% to 11.8%. The latter figure thus compared more favourably with the overall vacancy rate of 10.7% for private commercial premises used for retail business. Moreover, the FEHD only issued verbal or written warnings to stall lessees for cessation of stall business in excess of the permitted non-trading period, instead of terminating the tenancy agreement. The existence of many non-trading market stalls has distorted the true vacancy position of market stalls.
The Committee notes that the Director of Food and Environmental Hygiene has apologised for the misunderstanding caused by the FEHD’s approach of expressing the MSVR based on available space, that is, excluding those market stalls that had been frozen. We also note that he will review how best to express the MSVR and present a full picture.
Provision of noise barriers for mitigating road traffic noise
I now turn to the subject “Provision of noise barriers for mitigating road traffic noise”. When considering the provision of noise barriers for planned residential developments in Pak Shek Kok (PSK), the Committee is seriously concerned that although there were indications at the time of award of the Tolo Highway widening works contract that the planned land uses in PSK would not take place for a few years after the completion of the contract, and that changes to the planning parameters of the land uses might be expected, the Territory Development Department and the Highways Department did not use an incremental approach to provide the noise barriers for PSK. As a result, the Government had to pay the contractor $13 million for deleting the noise barrier works for PSK from the contract. The Committee also rejects the Director of Highways’ assertion that by paying $13 million for deleting the works, which would have cost more than $50 million, the Government had made a saving of nearly $40 million which would otherwise have been spent on the works.
Regarding the provision of noise barriers for planned developments in Tai Po Area 39, the Committee is seriously dismayed that the Highways Department had not allowed sufficient time in the implementation plan of the Tolo Highway widening works contract to complete the procedures relating to a variation of the environmental permit (EP) for deferring the noise barrier works. In addition, as a result of the removal and trimming down of the installed noise barriers for the planned developments in Tai Po Area 39, about $13 million had been wasted. The Government had also incurred an unnecessary cost of $24 million for prolonging the contract.
The Committee notes that the Highways Department will adopt an incremental approach to provide noise barriers for new roads, so that the installation works can tie in with the programme of the planned developments.
Buildings Department’s efforts to tackle the unauthorised building works problem
In examining the subject “Buildings Department (BD)’s efforts to tackle the unauthorised building works problem”, the Committee notes that the BD was allocated $167 million in 2001-02 and $205 million annually from 2002-03 onwards for implementing the comprehensive strategy for building safety and timely maintenance. The Committee considers that the BD was expected to implement the strategy as a matter of urgency to protect life and property when it was allocated the funds. However, as pointed out by the Secretary for Housing, Planning and Lands, the BD’s performance in enforcing the removal of unauthorised building works has been unsatisfactory. The Committee concurs with the Secretary’s comment, particularly taking into account the large amount of additional funding allocated to the BD for this purpose.
The Committee is seriously dismayed that the BD had failed to put to use the Buildings Condition Information System (BCIS), which was introduced at a cost of $20 million. This has contributed to a backlog of outstanding section 24 orders. We are also seriously concerned about the large number of long outstanding section 24 orders and the delays in taking action to ensure that all such orders are complied with. Moreover, follow‑up action in some complaint cases had not been promptly taken or duly recorded.
The Committee notes that the BD has put in place a procedure to monitor the progress of follow‑up action at both operational and management level. It has also set up a dedicated Backlog Team to clear the backlog of outstanding section 24 orders issued before 1996.
Regarding the BD’s prosecution policy and practice, the Committee is seriously dismayed that, despite the large number of outstanding section 24 orders, the BD had only instigated 476 prosecutions in 2002. This figure falls far short of the Director of Buildings’ pledge of 2,000 prosecutions a year. There has still been reluctance on the part of BD staff to initiate prosecution action.
We note that the Director of Buildings has undertaken to deploy additional resources with a view to instigating 1,000 prosecutions in 2004 and meeting the pledge of 2,000 prosecutions in 2005.
Planning and provision of public secondary school places
Turning to the subject “Planning and provision of public secondary school places”, the Committee is concerned that there were 145 vacant classrooms in public secondary schools as at September 2002. We note the Permanent Secretary for Education and Manpower’s comment that the 145 vacant classrooms amounts to only 1.4% of all classrooms available in the public secondary schools, and that the situation of vacant classrooms is not serious. However, the Secretary for Education and Manpower agrees that the persistent under‑utilisation of classrooms needs to be tackled.
On the issue of unfilled places in public secondary schools, the Committee is concerned that many eligible students could not be admitted to Secondary Six due to the limited number of places, yet many of those admitted chose not to study in Secondary Seven. Moreover, while there were some 20,300 unfilled places in public secondary schools, the Government had spent some $246 million on buying 7,300 school places from caput schools in the 2002‑03 school year.
The Committee notes that the Secretary for Education and Manpower has undertaken to critically review the demand for caput schools in different districts. He will consider reducing the number of places bought from the caput schools which have a substantial number of unfilled places.
Funding of tertiary education
Regarding “Funding of tertiary education”, the Committee is concerned that the higher-education institutions were not given clear and full information on how funds were distributed to them by the University Grants Committee (UGC). We are also concerned about the lack of objective criteria agreed among the institutions for the allocation of funds by the UGC. Also, the funding methodology adopted by the UGC is not well understood by the public.
The Committee is concerned about the views of the Secretary for Education and Manpower and the Secretary-General of the UGC that there is a possible danger of misinterpretation or misuse of data if the full results of the Research Assessment Exercise are disclosed to the public.
The Committee notes the institutions’ view that the UGC’s funding methodology should be made more transparent. We also note that the Secretary-General of the UGC will implement Audit’s recommendations on enhancing the transparency of the funding methodology.
Madam President, as always, in performing our duty, the Committee is mindful of our role in safeguarding the public interest by continuing to prod for the delivery of high quality public services in an efficient and cost-effective manner.
I wish to record my appreciation of the contributions made by members of the Committee. Our gratitude also goes to the representatives of the Administration and the UGC who have attended before the Committee. We are grateful to the Director of Audit and his colleagues as well as the staff of the Legislative Council Secretariat for their unfailing support and hard work.