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9th Legco Report to HKSA Council By Eric K.C. Li


I. Highlights

The maiden policy address of the HKSAR's first Chief Executive sparked off, as expected, lively debates on many domestic issues including housing, education and investments in technology. On the political front, we were also kept very busy by the planning and adoption of the legislative framework required for the HKSAR Legislature elections (to be held in May 1998) and, more recently, by the NPC elections. With the Asia Pacific currency crisis leading to a significant economic downturn, the overall economic situation is, as you can well imagine, at the very centre of our current preoccupations. Our financial operators and economists are still analysing and planning the best ways to shore up Hong Kong's beleaguered economy and to defend the Hong Kong's dollar against relentless currency speculators.

II. Committees and Panels
1. Public Accounts Committee (PAC):
@ On 19 November 1997, the Director of Audit tabled his Report No. 29. The two inches thick document actually contained fifteen reports, most of which reaching, from our perspective, highly contentious conclusions. The Committee will meet about four times a week throughout the holiday season, in the hope of finalizing on time i.e. 21 January or 11 February 1998, our own independent report.
2. Financial Affairs Panel:
@ The Panel held 5 meetings (Agenda attached as Appendix I). On 31 October 1997, I sought clarifications from the Administration on their controversial handling of the crisis affecting the Hong Kong dollar and the Hong Kong Stock Market.
@ In essence, I pressed the Administration to make a realistic assessment of Hong Kong's current economic situation, to enhance transparency of information within the market place and to enlist the support of local businesses in defending the Hong Kong dollar. I also urged a comprehensive review of the derivative markets in order to ensure that local financial operators are not disadvantaged because of deficient market rules e.g. stock lending in overseas markets, raising the costs of speculation by imposing higher margin deposits in extreme circumstances, add further blue chips to the Hang Seng Index and by restricting the trading volume of hedging tools vis a vis the trading of actual stock and securities.
@ On 11 December 1997, during a Deposit Taking Companies Advisory Committee meeting, I advised the Administration to understand and react to the predicament of our financial institutions: because of volatile interest rates, our institutions must face uncertain fund management costs as well as difficult risk management decisions because of the gradual erosion of their securities value e.g. property and taxi. I urged the Administration to speed up the development of long term debt markets and securitization of property loans etc. in order to make more long term borrowings available to financial institutions.
@ The Government is now taking action on much of the above.
3. Welfare Services Panel:
@ The Panel held 4 meetings; the proposed fixed sum subvention system was discussed and it soon became apparent that the Administration would have to substantially revise the proposed system before it would receive acceptance.
4. Education Panel:
@ The Panel held 4 meetings. Major debates on language issues are to be expected. I shall continue to support a strong policy aimed at enhancing the standard of English language as well as the level of information technology in schools. I feel that this is consistent with the role Hong Kong must continue to play as an International Financial Centre.
5. Finance Committee and House Committee:
@ There were 10 meetings of the Finance Committee and 11 meetings of the House Committee. I supported the funding necessary to the creation of the permanent post of Deputy Commissioner of Inland Revenue.

III. Bill Committees Joined
1. Legislative Council Bill:
@ The Bills Committee met 12 times; on 27 September 1997 the Legislative Council Bill was passed leaving the Accountancy Functional Constituency intact. Being the Chairman of the Hong Kong Council of Social Services I also took side with the Social Welfare sector in opposing an amendment proposed by the DAB. Overall, public reaction to my stance was highly favorable. I also supported the bid of the Higher Education sector to secure an independent functional constituency seat. The bid failed. Some extracts of my arguments are included in my recent circular sent to members.
2. Resolution under section 29I(2) of the Stamp Duty Ordinance:
@ I was elected Chairman of this Bills Committee. The Committee met twice. I took into account the advice of the HKSA tax committee and supported the preservation of the Stamp Duty tax regime. This will generate a valuable audit trail facilitating the task of making profits tax assessments on property speculation. I also supported the Liberal Party's (LP) suggestion to only extend for three months this temporary punitive anti-speculation tax measure (instead of the proposed two years), pending further analysis of a weakening property market. Although this proposal eventually failed under heavy Government lobbying, it did force the Administration to reconsider its original intention of turning, in two years time, this temporary measure into a permanent one.

IV. Motion Debates

List attached as Appendix II - Highlights of speeches will be published in my circular to members.

V. General Political Background

Following the intense media interest in the NPC elections, the choice of the upcoming NPCC selection is likely to attract more speculation. With campaign activities increasing however, the focus will remain on the May 24 election of the first HKSAR Legislature. The ambitious Government programmes on housing, education, social welfare for the elderly, importation of labour, support of industry also provide good debate opportunities.

 

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