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31ST LEGCO REPORT TO HKSA COUNCIL By Hon. Eric K.C. Li

I.     Highlights

To present this report orally.


II.    Committees and Panels

1. Public Accounts Committee (PAC):

The Committee held a total of 18 meetings and 2 public hearings before I tabled the PAC Report No. 40 at LegCo on 9 July 2002 (full copy on my website).  During the public hearings, the Committee heard evidence from a total of 10 witnesses, including 2 Directors of Bureau and 1 Head of Department.

The Report also contains the Public Accounts Committee's Supplemental reports on chapter 10 ¡§Primary Education ¡V The administration of primary schools¡¨ of Report No 39 of the Director of Audit on the results of value for money audits which was tabled in the Legislative Council on 20 November 2002.

To allow ourselves more time to examine the issues in the Director of Audit¡¦s Report No. 40 which relate to the University Grants Committee funded institutions (PAC Report 40 Chapter 8 ¡V Governance, strategic planning and financial and performance reporting, Chapter 9 ¡V General administrative services and Chapter 10 ¡V Staff remuneration packages and stipends), the Committee has decided to defer a full report on these three chapters.  The Committee will endeavour to finalise our report to the Council at the earliest opportunity.

2. Financial Affairs Panel:

There has no meeting held since the last report.

3. Economic Services Panel:

The Panel held 3 meetings since the last report.  The Panel studied the Technical Study on Increasing Power Interconnection in Hong Kong: Consultancy Findings as well as the progress in the development of a Digital Trade and Transportation Network System.

There were also a joint meeting including a joint meeting with the Panel on Environmental Affairs to continue discussion with the Administration on the policy on the development and wide-scale application of renewable energy as well as a special meeting to study the proposed Merchant Shipping Limitation of Shipowners Liability (Amendment) Bill and the cross-boundary passenger ferry services between Hong Kong International Airport and the Pearl River Delta.

4. Information Technology and Broadcasting Panel:

The Panel held only 1 meeting to date.

The Panel discussed the progress of Cyberport Project, the E-government Programme, the review of the funding strategy for HongKong Post¡¦s certification authority service as well as the free e-Cert on Smart Identity Card.

5. Education Panel:

The Panel held a special meeting to study the arrangements for surplus laboratory technicians of aided secondary schools since the last report.

6. Finance Committee and House Committee:

There was only 1 meeting of Finance Committee since the last report.

TD of HKSA was kept informed of progress on all Bills on a weekly basis. 


III.   Bill Committees Joined

1. Inland Revenue (Amendment) Bill 2000

The Administration has just finalized the draft Committee Stage amendments (CSAs) after two rounds of consultation with the industry, professional bodies, the Securities and Futures Commission and the Hong Kong Monetary Authority.

The Bills Committee, subjecting to the agreement of the House Committee, will be re-activated to resume the scrutiny of the Bill when there is a slot vacated upon conclusion of the work of an existing active Bills Committee during the new LegCo session.                   

2. 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 recommendation.

In the PAC Report No. 39 delivered of LegCo on 19 February 2003, I made a passing remark to urge the Administration to expedite this task.  In response to my concern, the Administration said that it would take time to consult the market to figure out the issue of the employees¡¦ claims.  It was still working out new proposals for the bill.

3. Bills Committee on Prevention of Child Pornography Bill

The Bill was passed on 9 July 2003.

4. Bills Committee on Telecommunications (Amendment) Bill 2002

The Bill was passed on 9 July 2003

5. Bills Committee on National Security (Legislative Provisions) Bill

After a historic mass rally on 1 July 2003 and a dramatic change in the political arena, the Government deferred the Second Reading debate originally scheduled for the meeting on 9th July 2003.

The Government will conduct the next round of consultation on National Security (Legislative Provisions) Bill.  It will be a very comprehensive one.  The purpose is to win the maximum support and understanding of the community.  It has not set a timetable for the legislative process.

6. Bills Committee on Betting Duty (Amendment) Bill 2003

The Bill was passed on 9 July 2003

7. Bills Committee on Deposit Protection Scheme Bill

There was only 1 meeting held since the last report.  The objectives of the Bill are to provide for the establishment of a mandatory Deposit Protection Scheme (DPS) for the purpose of providing compensation to depositors under specified circumstances, a DPS Board and a DPS Fund; to provide for contributions to the Fund for the entitlement to and payment of compensation from the Fund; and to provide for incidential and consequential matters.

The Hong Kong Monetary Authority (HKMA) would be the executive organ of the DPS Board.  The costs and expenses incurred by MA would be paid out of the Exchange Fund (ExF) and ExF would in turn be reimbursed by the DPS Fund.  HKMA would also be the authority to decide when compensation is to be paid from the DPS Fund.  The DPS would be mandatory.  The DPS Fund would be accumulated from contributions from the banks.

The Financial Affairs Panel was consulted on the legislative proposal at its meeting held on 6 January 2003.  While Panel supported the proposed DPS in general, some members expressed the following concerns:

  1. The proposal to exempt an overseas bank that has a comparable scheme in the bank¡¦s home jurisdiction that protects deposit taken by its Hong Kong office would encourage depositors to move their deposits to overseas banks;

  2. As contributions towards the DPS Fund would be based on the ¡§CAMEL rating¡¨ of banks, lower rates banks might be forced to undertaken businesses with higher risks in order to recover the higher cost involved;

  3. There would be the problem of moral hazard associated with the scheme and banks might increase charges to customers to recover the cost for the scheme; and

  4. The proposal of appointing Hong Kong Monetary (HKMA) as the agent for day to day administration of the scheme would undermine the credibility and independence of the scheme.  There would be conflict for HKMA as the regulator of banks to take up the role.  In the event of a large bank failure, HKMA might not be able to deploy adequate staff to take up the necessary duties.

The Bill signifies an important step in the protection of deposits.  It may also alter the legal and business environment in which the banking industry operates.

8.  Bills Committee on Companies (Amendment) Bill 2003

The Bill seeks to amend provisions in the Companies Ordinance (Cap. 32) (¡§the Ordinance¡¨) which relate to (i) prospectuses; (ii) group accounts; (iii) overseas companies and incorporation procedures; and (iv) shareholders¡¦ remedies.

The Bill proposes to amend the Ordinance in various areas, including:

  1. the regulation of the scope, application, contents, registration, amendment, construction and the advertisements of prospectus;

  2. the requirements for the contents and form of a company¡¦s balance sheet and profit and loss account and the contents of group accounts;

  3. the regulation of the management, registration of charges, publication of accounts and filing of annual return etc. of a non-Hong Kong company and provisions relating to the incorporation procedures of a company; and

  4. the rights of a member of a specified corporation to bring or intervene in proceedings before the court on behalf o the specified corporation and inspect the records of a specified corporation.

At the meeting of the LegCo Panel on Financial Affairs on 7 April 2003, the Administration briefed Members on the proposed amendments to the Ordinance to facilitate offers of shares and debentures, enhance shareholder remedies, define ¡§subsidiary¡¨ for the purpose of group account, enable electronic incorporation and the update the provision on partner limit.  At the Panel meeting, Members raised the following the concerns and request:

  1. checks and balances to be put in place to prevent abuse of shareholders¡¦ access to company records;

  2. protection for investors against misleading or false information disclosed by companies on their business and performance in its marketing materials;

  3. propriety of the approach of making reference to company laws of different overseas jurisdictions; and

  4. to facilitate Members¡¦ scrutiny of the Bill, Members urged to Administration to provide comparison between the legislation of overseas jurisdictions and the present proposals when introducing the Bill into the Council.


V.     Motion Debate

List attached as Appendix I.  In addition, I have written two ¡¥Letters to Hong Kong¡¦ on 19 July 2003 and 24 August 2003 for the RTHK respectively.  Speeches on my Web Page and highlights will be published in my circulars to members.


VI.    Questions

During the LegCo of 2002-03 session, I have totally asked 15 questions (1 oral and 14 written questions).


VII.   General Political Background

To present this Report orally.

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