The world celebrated the New Millennium in style and the Y2K alert
is now being dispelled as a hoax. Life returned to normal in no
time and then, it was the possibility of a structural budget deficit,
suggestion of new taxes and the high profile IT stock listings and
mergers that had captured the imagination of the People of Hong
I predicted correctly these trends in my last report but the real
changes had materialised even quicker and in certainly much more
dramatic forms. I took the decision to resign from the Exchange
Fund Investment Limited after SmarTone was unexpectedly included
as part of the updated Hang Seng Index. I explained in a press statement
at the time that it was to avoid a possible conflict of role and
that I preferred to stay closely in touch with what could be described
as the third economic restructuring of Hong Kong rather than to
hold onto a restrictive Government appointment. I was also appointed
a Director of the Hang Seng Bank on 25-2-2000.
The Financial Secretary came out boldly to warn the community of
our narrow tax base and the possible erosion of our conventional
tax nets by new technology. Accountants had done exactly the same
even earlier. Although the community is perhaps still not ready
to accept new taxes before the Government can demonstrate that it
has made all the necessary efforts to economise, a more balanced,
true and fair picture of our public finances has now been painted
in the public's minds.
The recent Tom.com listing and PCCW-HKT merger had raised a storm
in the emotional rush for IT stocks. When the dust settles, I will
take an active lead in LegCo to sort out its implications.
II. Committees and Panels
||Public Accounts Committee (PAC):
||The Committee held 16 meetings and 5 days of public hearings
before I tabled the PAC Report No. 33 at LegCo on 16 February
2000. During the public hearings, the Committee heard evidence
from a total of 27 witnesses, including 6 six Bureau Secretaries
and 11 Heads of Department.
The Report recommends, amongst other measures, wider disclosure
of Government Accounts. It received extensive support and
Examination of three other subjects ("The Refuse Collection
Service of the Urban Services Departments", "Water
Purchased from Guangdong Province" and "Management
Practices of the Vocational Training Council") has commenced.
We have held two further days of public hearings to receive
evidence on these three subjects and are making the best endeavours
to finalise our report to the LegCo at the earliest opportunity.
||Financial Affairs Panel:
||The Panel held 2 meetings since the last report and the relevant
agenda are attached as Appendix I.
On 14 February 2000, Chairman of the Securities and Futures
Commission (SFC), Mr. Andrew L T SHEUNG, and Chief Executive
of the Stock Exchange of Hong Kong, Mr. Alex TUSI have provided
the Panel with a report on the trade disruption in the Stock
Exchange of Hong Kong (SEHK) as well as the recent performances
of the information technology-related stocks. The meeting
was widely reported and in particular, SEHK apologised for
the system failure which led to a 20-minutes suspension of
trading and the cancellation of more than $100 million in
A proposed list of future agenda items is also attached as
Appendix II for reference.
||Welfare Services Panel:
||The Panel held 2 meetings since the last report. The Panel
focused on the Computerised Social Security System, the Consultancy
Study on the Review of Day Care Centres, the Multi-services
Centres for the Elderly, and the progress report on Social Networking
for the Elderly.
It also discussed the implementation of the policy of one
school social worker for each school. Manpower shortage of
Social Security Assistants, as well as the report of the Working
Group on Dementia.
||Economic Services Panel:
||The Panel held 3 special meetings since the last report. The
Panel discussed the CLP Power Hong Kong Limited's generating
capacity, the insurance requirements in respect of civil aircraft
in Hong Kong and Hong Kong Motor Gasoline, Diesel and LPG Markets.
It also studied the Hong Kong Disneyland (Disney Theme Park),
the Safety Certification of household electrical products
and the terminal handling charge)
||Information Technology and Broadcasting Panel:
||The Panel held 2 meetings since the last report. The Panel
mainly focused on the Y2K monitoring and co-ordinationg arrangements
for roll-over to 1 January 2000, the increase in service fees
by mobile telephone operators and the Hong Kong Supplementary
It also studied the progress of the Cyberport projects, the
Broadcasting Bill, the proposed merger of Cable & Wireless
Hong Kong Telecom with Singapore Telecommunications as well
as the Entertainment Special Effects Bill.
||Finance Committee and House Committee:
||There were 4 meetings of Finance Committee and 6 meetings
of House Committee. The Special meeting of Finance Committee
to examine the draft Estimates of Expenditure 2000-2001 will
be held from 21 to 24 March 2000.
TD of HKSA was kept informed of progress on all bills on
a weekly basis. The introduction of Government Bills in the
current legislative session dated 3 March 2000 is attached
as Appendix III. A mutual understanding has been reached between
LegCo and the Administration that no further Bills will be
tabled after 15th of March unless it is urgent
III. Bill Committees Joined
||Telecommunication (Amendment) Bill 1999
||There were 5 meetings (19-1-00, 26-1-00, 17-2-00, 23-2-00,
1-3-00) held since the last report.
This Bill proves to be very controversial but represent a
significant step of the Government in liberalising the telecommunications
market. HKSA had made a strong submission which is being followed
up. It looks like that there will be some significant amendments
to provide better check and balance on the 'draconian' powers
given to the Administration. We are awaiting the Government's
Committee Stage Amendments very shortly.
||Electronic Transaction Bill
||The Bills Committee held a total of 10 meetings. It has received
written submission from 11 organisations and 3 individuals,
and met representatives from 6 of the organisations.
To address the concerns of the HKSA, the Administration has
agreed to move Committee Stage amendments to Clause No. 2,
No. 18, 19 (3)(b)(i), 19(4) and (5), 37, 41(2)(a) and introduce
a new Clause 14A.
Clause No. 2 is to better define the term "trustworthy
system"; No. 18 is to more clearing define the point
of receiving electronic message in the conclusion of a transaction.
Clause No. 19 (3)(b)(i), 19(4) and (5) are to make clear the
provisions whereby the certification authority may apply to
the director for recognition. Clause No. 37 is to remove the
references to the word 'audit' and to replace it with words
like report to avoid confusion with statutory audits; Clause
41 is to tighten the provision on obligation of secrecy. The
new Clause 14A is to provide flexibility for persons who are
not non-Government entities to agree amongst themselves as
to whether electronic record / digital signature should be
used in satisfying a requirement under a rule of law for one
party to provide information or to sign a document for presenting
to the other party.
These changes have given the Accountants a key role to play
in the development of electronic transactions well ahead of
other professions such as the engineers and even the IT professionals.
The Bill was passed by the LegCo on 5 January 2000.
||Arbitration (Amendment) Bill 1999
||There were 3 meetings held since the last report. The purposes
of the Bill are to amend the Arbitration Ordinance (Cap. 341)
(the Ordinance) - (a) to give effect to what Hong Kong has agreed
in the "Arrangement Concerning Mutual Enforcement of Arbitral
Awards Between the Mainland and the Hong Kong Special Administrative
Region" (the Arrangement); and (b) to adapt the Ordinance
to bring it into conformity with the Basic Law and with the
status of Hong Kong as a Special Administrative Region of the
People's Republic of China.
Since the refusal of enforcement of Mainland arbitral awards
in Hong Kong and vice versa after 1 July 1997, business and
arbitration communities have expressed grave concerns. Given
the great impact on the commercial world, this Bill warrants
detailed scrutiny urgently.
The Bill was finally passed by the LegCo on 5 January 2000
and came into operation on 1 February 2000 as appointed by
the Secretary for Justice by notice in the Gazette.
||Mass Transit Railway Bill
||The Bills Committee held a total of 15 meetings with the Administration
and MTRC. It has received written submissions from 8 organizations/academic,
and met the representatives from 6 of them. The Administration
has arranged for 5 financial/railway experts to appear before
the Bills Committee to give their opinions in relation to the
proposed privatisation of MTRC and the associated regulatory
framework including the fare determination mechanism.
Under the Bill, all assets and liabilities of the existing
Mass Transit Railway Corporation (MTRC) will be vested in
the MTR Corporation Limited (MTRCL) on a date to be appointed
by the Secretary for Transport. The new company will be granted
a 50-year franchise to operate the Mass Transit Railway (MTR)
and to construct and to operate any extension to the railway.
The Bill requires MTRCL to maintain a proper efficient service
in accordance with an Operating Agreement (OA). The OA will
be a legally binding document entered into between the Government
and MTRCL, similar to the franchise documents for buses and
I suggested that the arbitration report of the external auditors
to be appointed by the MTR Corporation Limited under (Mass
Transit Railway Bill) Clause 15 of the Principal Headings
of the Operating Agreement be made final and conclusive. The
Administration has agreed to my suggestion and decided to
amend that provision of the Operating Agreement accordingly.
The Bill was finally passed in a marathon session in the
morning hours of 23 February 2000.
||Subcommittee on Resolution under Section 3 of the Dogs
and Cats Ordinance (Cap. 167) and Dogs and Cats (Amendment)
Ordinance 1997 (97 of 1997) Commencement) Notice 1999
||There was 1 meeting (25-2-00) held since the last report.
The purpose of the Subcommittee is to seek the Legislative Council's
approval of the Dangerous Dogs Regulation ("the Regulation")
which provides for the control and regulation of fighting dogs,
large dogs and known dangerous dogs. I received a number of
representations from dog-owners within the Accountancy Functional
Constituent. The deliberation of this Bill is at its final stages.
||Subcommittee on Securities and Futures Bill
||The Subcommittee is held in abeyance and unofficial exchanges
in conversation suggested that the Bill is unlikely to be moved
within this LegCo session.
||Securities (Amendment) Bill 1999
||The Bills Committee held 2 meetings with the Administration
since the last report.
The purpose of the Bill is to amend the Securities Ordinance
(Cap. 333) to provide for the regulation of short-selling
activities, being one of the 30-Point Programme announced
by the Financial Secretary in early September 1998. The most
controversial part of the Bill is to criminalise stock lenders
and all intermediaries i.e. investment bankers, fund managers
and stock brokers for failure to disclose short-selling activities
of their client. The Government is, in my view, taking a totally
unnecessary strong stance in this matter.
||Companies (Amendment) Bill 2000
||The Bills Committee held 2 meetings with the Administration
since the last report.
The objective of the Bill is to amend the Companies Ordinance
(Cap. 32) ("the Ordinance") in order to - (a) implement
the recommendations of the Law Reform Commission of Hong Kong
("CRC") in its Report on Corporate Rescue and Insolvent
Trading; (b) implement the recommendations of the Standing
Committee on Company Law Reform ("SCCLR") and (c)
effect miscellaneous amendments to various sections of the
Ordinance for various purpose including, inter alia.
The Bill does make significant changes to the existing regime
of corporate rescue, the law governing personal liabilities
of company directors and management, and in view of the possible
effect on the corporate business environment and the interests
of all parties affected. The Committee will have to take some
time to reach conclusion. I am liaising with the Secretariat
to co-ordinate our response to this wide-ranging Bill.
||Building Management (Amendment) Bill 2000
||The Bills Committee has held 2 meetings with the Administration.
The Bill is to amend the Building Management Ordinance (Cap.
344) ("the Ordinance") to provide for: (a) specification
of building management and maintenance standards for compliance
by owners' corporations ("Ocs"); (b) mandatory management
of buildings with serious management and maintenance problems;
(c) simplifying the manner for owners of new building to convene
meetings to appoint management committees; and (d) miscellaneous
matters relating to insurance, auditing of OC's accounts, notice
of owner's meeting and quorum at a meeting of OC.
HKSA made a written submission to the Bill. HKSA had proposed
technical amendments to section 27(1A) concerning audit reporting
requirements. These amendments have now been accepted by the
Administration and CSA's will be moved in due course.
||Legislative Council (Amendment) Ordinance 1999 (Amendment)
||The objective of the Bill is to amend the Legislative Council
(Amendment Ordinance 1999 (48 of 1999) to provide that only
registered social workers are eligible to be registered as electors
of the social welfare functional constituency and make other
related amendments. These were the exact intentions of my Private
Members Bill which was defeated by one vote earlier. It passed
uneventfully on the 1 March 2000.
V. Motion Debate
List attached as Appendix IV. Speeches on my Web Page and highlights
will be published in my circulars to members.
I have asked 2 questions (the progress of the investigation into
the collapse of Peregrine group of companies and the mechanism to
ensure independence of the Director of Audit's work), since the
last report which are attached as Appendix V. The relevant HKSA
Committees may wish to be advised and to consider the replies further.
VII. General Political Background
The Budget to be announced tomorrow should be quite unsensational.
With the LegCo election coming up in September, the Administration
would probably prefer to remain low-key. Council's views welcome.
I have written an article to the Hong Kong Economic Journal (published
on 3-3-2000) calling for a close look to better risk management
of IT stocks. Many accountants have expressed their concerns to
me on the possible audit risks if we, and the Government, failed
to wake up the public early on their 'IT price / dreams.' I look
forward to discussing with Council what forward looking initiatives
the accountancy professionals can take in building public confidence.
I will be chairing a LegCo Financial Affairs Panel to look into
the recent incidence on 13-3-2000 and also intends to move a Motion
Debate on 3-5-2000.
LegCo voters registration is now in the ernest and Council's help
is needed to keep our voters registration rate high. The present
session must end on or before 30 June 2000 because of the Basic
Law and we need to work hard to complete all Bills and the Public
Accounts Committee's Reports on hand. Hard work and quick response
is clearly needed in the next quarter from all sides.
The Administration is also making some real, commendable efforts
in their study to improve the Government's accounting methods. I
hope HKSA will also devote the necessary resources in contributing
to this important area of Public Sector Accounting.