26TH LEGCO REPORT TO HKSA COUNCIL
By Hon. Eric K.C. Li
To present orally on political responsibility system, civil services
pay, investigation on KCRC, anti-terrorism Bill and Drug Trafficking Bills.
On 3 April 2002, the heads of thirteen active accounting bodies (including
HKSA) of Hong Kong and I met with Mr. Stephen IP, Secretary for Financial
Services, and proposed to him a number of recommendations on how to strengthen
Hong Kong's status as an international financial centre, attract foreign
investment, and support local businesses in their bid to enter the mainland
market. The recommendations include, for instance, the abolition of estate
duty, which brings in little revenue but will adversely affect small and
medium enterprises and middle-class families, in addition to deferring
big investors from investing in Hong Kong. A summarised text will
appear in "The Hong Kong Accountant" in the June issue.
II. Committees and Panels
1. Public Accounts Committee (PAC):
On 24 April 2002, the Director of Audit tabled his Report No. 38 in
the Legislative Council. The Committee, after holding 7 public hearings
to receive evidence from Controlling Officers and numerous close door
meetings, have now finalized our own report. I intend to present
it to LegCo on 10 July 2002.
2. Financial Affairs Panel:
The Panel held 6 meetings (including 3 special meetings - to receive
a briefing by the Legislative Council Secretariat on "Practices of
overseas jurisdictions in building up or maintaining their fiscal reserves"
and to study the initiatives to strengthen Hong Kong's corporate governance
regime (see below - special meeting); to study the Hong Kong Population
Projections 2002-2031; and to receive a briefing by the Financial Secretary
on Hong Kong's latest economic situation as well as to discuss the consumer
protection in the banking sector) to date and the relevant agenda are
attached as Appendix I.
On 14 March 2002, the Hong Kong
Society of Accountants (HKSA) was invited to attend a special meeting
on the initiatives to strengthen Hong Kong's corporate governance regime
(with specific references to the 'Enron event'). At the meeting,
the President Mr. Alvin WONG gave an oral presentation, setting out the
HKSA's contributions and plans in corporate governance and related issues,
as well as the Council's current position with respect to the areas of
standard-setting; auditor's role and audit independence; regulatory framework;
corporate governance practices and financial reporting models - looking
into the future. The briefing received very positive repsonse from
both LegCo Members and the media.
A proposed list of future
agenda items is attached as Appendix II for reference.
3. Economic Services Panel:
The Panel held 4 meetings since the last report.
The Panel focused on the proposed Airport Authority (Permitted Airport-Related
Activities) Order, financial implication of the decommissioning of Cheoy
Lee Shipyard at Penny's Bay, the reconstruction of Public Piers at Kat
O Chau, Peng Chau, Cheung Chau and Wu Kai Sha as well as Merchant Shipping
(Local Vessels) (General) Regulation and Merchant Shipping (Local Vessels)
(Safety Survey) Regulation.)
It also discussed the "Flag State Quality Control System"
- An update, the regulation of beauty products and services provided by
beauticians, Merchant Shipping (Local Vessels) (General) Regulation and
Merchant Shipping (Local Vessels) (Safety Survey) Regulation as well as
the retail prices of petrol as well as the Regulation of beauty products
and services provided by beauticians
4. Information Technology and Broadcasting
The Panel held 3 meetings to date.
The Panel studied the institutional arrangements for future management
of the Cyberport project, the creation of Class Licence for In-building
Telecommunications Systems under Section 7B(2) of the Telecommunications
Ordinance (Cap. 106) as well as the online booking services under the
Electronic Services Delivery Scheme.
It also discussed Telecommunications (Amendment) Bill 2002, the Licence
Renewal Exercise for Asia Television Limited and Television Broadcasts
Limited, the Digital Divide, the progress of interconnection issues, progress
report on publicity and public education campaign on availability of new
telecom and broadcasting services and operators' in-building access as
well as the increase in commitment under the Capital Account in 2002-03
for hosting the ITU TELECOM ASIA 2002.
5. Education Panel:
The Panel held 8 meetings to date.
The Panel mainly focused on the Capital Works projects of University
Grants Committee-funded institutions, the supervision of the administration
of University Grants Committee-funded tertiary education institutions,
the research report on "Education Voucher System".
It also studied the data collected from the Hong Kong 2001 Population
Census on education as well as the Capital Works projects of University
Grants Committee-funded institutions and research support for the education
There were 4 special meetings (to receive a briefing on the Higher Education
Review; to discuss the City University of Hong Kong - Review and appeal
mechanism for non-renewal of contract, the harmonisation of kindergartens
and child care centres as well as to receive views from deputations on
the report of the University Grants Committee entitled "Higher Education
in Hong Kong") and an informal meeting discuss the drafted research
report on "Education Voucher System".
6. Finance Committee and House Committee:
There were 12 meetings of Finance Committee and 12 meetings of House
Committee (including six special meetings consisting of 18 sessions from
25 to 27 March 2002 to examine the draft Estimates of Expenditure 2002-03
and a special House Committee meeting to o discuss the Chief Secretary
for Administration's visit to Beijing and cooperation between Guangdong
and Hong Kong as well as the Government's policy on legislation and administration
measures.) TD of HKSA were kept informed of progress on all Bills
on a weekly basis.
The updated list of Government Bills in the current legislative session
dated 13 March 2002 is attached as Appendix III.
III. Bill Committees Joined
1. Inland Revenue (Amendment) Bill
The Bills Committee is now waiting to recommence on the Administration's
request and subject to the availability of a Bills Committee slot at the
2. Drug Trafficking and Organized Crimes
(Amendment) Bill 2000
There were 4 meetings held since the last report.
Originally, the Administration highlighted to the Bills Committee
the need to close legal loopholes relating to money-laundering.
However, after two year's effort, to address the concerns of the HKSA,
the Government has finally dropped the controversial proposal to amend
S.25 and S.25A of the money laundering laws to compel disclosure on information
by an untested 'objective' test as described before. The decision
to drop the proposal came as the Government pushed forward with its anti-terrorism
The Committee is now entering the last phase of resolving LegCo's
3. Bills Committee on Securities and Futures
Bill and Banking (Amendment) Bill 2000
The Bill was passed on 13 March 2002, ending 10 years of debate
over one of Hong Kong's most controversial piece of financial legislation.
The Bill replaces 10 securities and futures ordinances and brings Hong
Kong into line with international practice.
The Bill protects accountants who report alleged fraud uncovered
during audits from being sued by their clients. The legislation
passed is in line with the Administration's agreement with HKSA.
4. Companies (Corporate Rescue) Bill
At the House Committee meeting on 7 December 2001, the Bills Committee
recommended that the scrutiny of the Bill should be held in abeyance to
allow time for the Administration to conduct consultation on, and work
out the details of, a new proposal based on ideas initiated by myself
and refined by HKSA. The House Committee agreed to the Bills Committee's
5. Bills Committee on Medical and Health Care
(Miscellaneous Amendment) Bill 2001
The Bills Committee has held 2 meetings with the Administration.
It has also met with representatives of the Dental Council of Hong Kong,
the Midwives Council of Hong Kong, the Nursing Council of Hong Kong and
the Radiation Board and the relevant professional associations.
The objective of the Bill is to propose amendments to the Dentists
Registration Ordinance (Cap. 156), Midwives Registration Ordinance (Cap.
162), Nurses Registration Ordinance (Cap. 164), Hospitals, Nursing Homes
and Maternity Homes Registration Ordinance (Cap. 165), Radiation Ordinance
(Cap. 303) and Chinese Medicine Ordinance (Cap. 549).
The Bill was finally passed on 24 April 2002.
6. Subcommittee on Matters Relating to the Implementation
of Railway of Development Projects
There were 2 meetings held since the last report. The purpose
of the meetings is to receive a briefing by the Kowloon-Canton Railway
Corporation Chairman on the findings of the investigation of the West-Canton
The independent report criticised the KCRC management for not
altering the managing board sooner, and put the blame on the management's
method of reporting problems. KCRC chief executive, Mr. Yeung Kai-yin,
has apologiesed for "errors of judgment".
Although the report recommends strengthening communication between
the board and management, there is no intention of making a scapegoat
either of Mr. Yeung Kai-yin or other senior staff.
A subcommittee decided not to form a select committee to investigate
the scandal. It urged the KCRC to make progress reports on improvements
7. Subcommittee on Draft Subsidiary Legislation to be
Made under the Securities and Futures (Ordinance)
There were 4 meetings held since the last report. The Subcommittee
was formed to study the some 38 sets of draft subsidiary legislation to
be made under the Securities and Futures Ordinance (SFO) for its commencement.
The SFO was passed by the Legislative Council (the Council) on 13 March
2002. The Administration's target is to bring the SFO into operation
by end 2002.
According to the work plan of the
Subcommittee endorsed at the meeting on 28 March 2002, the Administration
will submit the draft subsidiary legislation in four batches for scrutiny
of the Subcommittee at meetings to be held at the end of April and May,
in July and September 2002. The grouping of draft subsidiary legislation
in each batch and the meeting schedules of the Subcommittee will be adjusted
in the light of progress made in drafting, public consultation and deliberations
The last meeting of the House Committee in the current session
will be held on 28 June 2002. The Subcommittee would then have deliberated
18 sets of draft subsidiary legislation (i.e. three sets at its meetings
in April and 15 sets in June). Having regard to the lead time required
by the Administration and the SFC to prepare the revised draft subsidiary
legislation, the Subcommittee may not be able to report its deliberations
on these subsidiary legislation at that House Committee meeting.
The Administration or the SFC may gazette the scrutinized draft subsidiary
legislation during the summer break. The gazetted subsidiary legislation
will be tabled at the second Council meeting in October 2002. The
subsidiary legislation will be subject to the normal 28 plus 21 days¡¦
scrutiny period. The HKSA has not made any substantive submission
on these subsidiary legislations.
8. Bills Committee on Employees Compensation
Assistance (Amendment) Bill 2002
The Bills Committee has held 10 meetings with the Administration.
The Bills Committee has met with representatives from the Board, the General
Insurance Council (GIC) of The Hong Kong Federation of Insurers, the Employers'
Federation of Hong Kong and The Hong Kong Construction Association Ltd.
The Bill seeks to amend the Employees Compensation Assistance Ordinance
("the Ordinance") with a view to improving the financial stability
and viability of the Employees Compensation Assistance Fund ("the
Fund"). The Bill also seeks to amend the Employees' Compensation
Insurance Levies Ordinance (Cap. 411) and the Employees' Compensation
Insurance Levy (Rate of Levy) Order (Cap. 411 sub. Leg.) to increase the
rate of levy on the premium of employees' compensation insurance from
5.3% to 6.3% from 1 July 2002, and to adjust the distribution of such
levy income amongst the Board, the Occupational Safety and Health Council
and the Occupation Deafness Compensation Board.
The Panel on Manpower, the Board, the Labour Advisory Board and the
Occupational Deafness Compensation Board have been consulted on the financial
arrangements of the rescue package. Members of the Panel generally
expressed support for the proposed package of measures to restore the
long-term viability of the Scheme.
The Second Reading debate
on the Bill will be resumed at the Council meeting on 26 June 2002.
9. Bills Committee on Prevention of
Child Pornography Bill
There were 4 meetings held since the last report. The objectives
of the Bill are to:
(a) create offences of making, producing, publishing,
importing, exporting, distributing, advertising and possessing pornography
that depicts children under the age of 16;
(b) create an offence for any person who uses,
procures or offers another person who is under the age of 18 for making
pornography, or for a live pornographic performance, in which that other
person is pornographically depicted;
(c) extend the application of certain sexual
offence provisions to acts committed against children outside Hong Kong
and prohibiting the making of any arrangement relating to commission of
those acts and advertisements for such arrangement; and
(d) make consequential amendments to various
According to the Administration, a public consultation on the Bill was
conducted in November 2001. The majority of comments received generally
support the proposals in the Bill. There are, however, some diverse
comments on the coverage and clarity of the definition of child pornography,
and whether artistic merit and genuine family purpose should be defences.
The Administration also consulted the LegCo Security Panel about the
proposals in the Bill at its meeting on 6 December 2001. Members
generally supported the principles and spirit of the legislative proposals
which offer better protection to children. Members also raised several
concerns, including enforcement difficulties, over the Bill.
10. Bills Committee on United Nations (Anti-Terrorism
There were 10 meetings held in very close succession since the last
report. The Bill seeks to implement certain mandatory elements of
the United Nations Security Council Resolution 1373 relating to measures
for the prevention of terrorism and three recommendations of the Financial
Action Task Force on Money Laundering.
The Bill provides anti-terrorism measures such as specification of terrorists,
terrorist associates and terrorist property; freezing of funds; prohibition
of activities related to terrorism; disclosure of knowledge or suspicion
of terrorist property; and obtaining of evidence and forfeiture of terrorist
There are similar proposals on dealing with property and disclosure
of knowledge or suspicion based on the Drug Trafficking and Organized
Crimes (Amendment) Bill 2000. As the result of strong opposition by myself
and other legislators, the Administration eventually reversed all the
controversial amendments. The Administration intends to push for
the final reading of the Bill on 10 July 2002.
11. Subcommittee to Study the Proposed System of Accountability
for Principal Officials and Related Issues
The Subcommittee, comprising 34 members, has held a total of 15 meetings
(equivalent to 27 two-hour sessions) with the Administration. The
Subcommittee is to study the proposed accountability system and related
issues such as powers and functions of CE and his accountability, legislative
measures to give effect to the accountability system, a new system of
employment of principal officials etc.
The Subcommittee also received representations from 126 organisations
and individuals. A total of 89 organisations and individuals also
appeared before the Subcommittee to present their views.
To quote from 'A Letter to Hong Kong', your representative's position
was "In an ¡¥executive-lead¡¦ Government, the most important outcome
that has to be achieved with this change is effective leadership. In the
context of Public Governance, this does not necessarily equal to allowing
a one-man dictatorship. I would rather hope to see a better balance of
power that will ensure the least internal conflicts between the Executives,
the civil servants and the Legislature".
12. Bills Committee on Public Officers Pay Adjustment
There were 6 meetings held since the last report. This Bill seeks
to provide a one-off reduction of the pay of, and the amounts of certain
allowances payable to, public officers. The one-off reduction will,
with effect from 1 October 2002, affect all civil servants, including
the Director of Audit and ICAC Officers and all public officers whose
pay is pegged to civil service pay scales, but exclude those on a starting
salary not linked to annual service pay adjustment and judicial officers.
The percentages of reduction are specified for different salary bands
as set out in the Bill.
The Bill also seeks to provide for an interpretation of the employment
relationship between public officers and the Government so as to allow
the proposed reduction. Clause 9 provides that contracts of employment
of public officers are to be read as expressly authorizing the adjustments
to pay and amount of the allowances made by the Bill. However, clause
8 provides that the adjustments made by the Bill to the pay and amounts
of allowances payable to public officers do not prohibit or affect any
adjustment to the pay or the adjustment of allowances payable to public
officers after 1 October 2002.
The policy aspects of the Bill were discussed at the meetings of the
LegCo Panel on Public Service ("PS Panel") on 23 May and 29
May 2002. A majority of Panel Members present at the meetings queried
the need to implement civil service pay reductions by legislation.
I had strong reservations about implementing the civil service pay cut
decision through legislation on July 10. In an open letter to the
Secretary for Civil Service, Mr. Joseph Wong Wing-ping, six other independent
legislators joined me to urge the Government to withdraw the bill which
forces a civil service pay cut and at the same time, made it almost impossible
for civil servants to seek fair judgement mediation or litigation.
We asked him to propose a permanent, workable civil service pay adjustment
mechanism instead. I also wrote "A Letter to Hong Kong"
on 23 June 2002 which will be launched on my website very soon.
V. Motion Debate
List attached as Appendix IV. In addition, I have written two
'Letters to Hong Kong' on 31 March 2002 and 22 June 2002 for the RTHK.
Speeches on my Web Page and highlights will be published in my circulars
I have asked only 1 question - (questions for disciplinary proceedings
against civil servants) 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
To present orally.