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Following is the transcript (English only)of the Question and Answer session given by the Financial Secretary, Mr Antony Leung, after the British Chamber of Commerce Luncheon today (January 23):

Question (Martin Spurrier): Mr Leung, you talk of reducing the size of government, as has the Chief Executive in his Policy Address, but in fact nobody in government will be losing their job at all, because the reduction is being made through natural wastage and through the Voluntary Retirement Scheme, I understand. Why will government not grasp the nettle and reduce government size now?

Financial Secretary: The Government is indeed determined to reduce its own size on two counts; one is in reducing the number of civil servants. As the Chief Executive has said, we are targeting to reduce it by around 10% by the year 2006/07. I have also announced, last year, to reduce the size of the public sector expenditure as a percentage of GDP, from currently 23% down to 20% or below by the year 2006/07. Now, there are many ways to do this but I think, firstly, we should try out the natural attrition as well as the voluntary retirement. After all, if you look at the rate of attrition and also the experience of the voluntary retirement last time, there is a good chance that we will be able to reduce the size of the Civil Service by about 10%.

I fully recognise that in the private sector you would tend to do it some other ways and do it much quicker. However, as I said earlier, there are many rigidities and many institutions that the public sector would have to respect. You may or may not know that there are quite many unions in the government and we have collective bargaining arrangements with them. So, do bear with us. In any case, we have a clear goal and we are determined to meet it.

Question (K.C. Kwok): Mr Leung, much has been said about the co-operation between Hong Kong and the Pearl River Delta region and the CEPA. Is there anything concrete that you can share with us? What the progress is like in the negotiations in relation to the CEPA, as well as the governments in the Pearl River Delta region in general?

Financial Secretary: Well, I am sure you have dealt with the Mainland and dealt with other governments. The SAR Government is clearly working very hard on those initiatives that you have mentioned but there is a Cantonese saying, "Gin gwong sei", meaning if you expose it too early it may not be helpful to those initiatives. So, I would rather tell you when we have reached agreement and announce the results then.

Question (James): The debate as to whether Hong Kong has seen an improvement or a deterioration in spoken English and English language skills and its desire to continue to position itself as the east-meets-west Asia's world city, that debate seems to continue. In that light, what is your view on the proposal to look at the subsidies as a means of reducing the deficit, look at the subsidies for the English Schools Foundation?

Financial Secretary: James, I thought you worked for a financial organisation rather than ...

Question (Chris): Could I just add to that? Because actually, I think quite often there is a slight misperception. The English Schools Foundation is not the only subvented part of education here in Hong Kong, there is the broader case of also the subvented semi-private schools which are in the Chinese medium as well. So could you perhaps address both of them, please?

Financial Secretary: I had better tread very carefully, otherwise the media is going to have a field day tomorrow. Clearly, we wish to further enhance the language skills of our students in Hong Kong. Now, as the former Chairman of the Education Commission, I can attest that in English, in general the language ability of our top students remains as good as those in the past, if not better. However, nowadays we do not only require the top one-third of the students to be able to speak English and Putonghua well. We are requiring that more students, if not all, can master a certain level of English proficiency. So this issue is attracting a lot of attention and yesterday, in the LegCo, there was a motion debate exactly on this topic. And right now, SCOLAR, which is the committee that advises the Government on the teaching of language in Hong Kong, has a paper consulting all of you, consulting the public on what should be done. So I wish, actually, all of you will be able to tell us how, in Hong Kong, we can further improve the English proficiency of our students.

Now, all schools, not just the English Foundation Schools, would like to do that, to improve the standard of English. It is not just relating to the subsidy of the ESF. But as far as whether the subsidy of the Government to the ESF will be changed, I believe the Secretary for Education and Manpower is considering various possibilities. However, the Chief Executive and the entire Administration of the SAR Government are great believers in education because Hong Kong's economy is a knowledge economy, and the only competitive edge in a knowledge economy is knowledgeable workers. So the Chief Executive has said many times that we will continue to invest heavily in education, in our human resources, and so I hope that all of you will be convinced by us that we are not going to shy away from investing in our future generation.

Question (David Palmer - Construction Industry Group of the British Chamber): Financial Secretary, you will no doubt be aware of the term of 'PPP' - 'Public-Private Partnership'. The Construction Industry Group in Hong Kong and many other interested groups have been trying to discuss with the Government for some time now the way to take this initiative forward with respect to capital works projects in Hong Kong. But to date, frankly, we have not been able to find a way. Could you please discuss this and explain to us if we will be able to go forward in that direction in the near future?

Financial Secretary: Well, thank you, David, for that question - in a way giving me the opportunity to stress to you how important I see this topic. 'PPP' - 'Public-Private Partnership' in various forms: PFIs, BOTs, PSPs, all kinds of acronyms, are really ways for the private sector to participate in various kinds of infrastructure and other public projects. I am a great believer in these initiatives. Not only will it reduce costs, but it will also shorten the time and deliver better quality. Because you can really get away from a lot of the processes and, if I may say, bureaucracies that exist in the public sector. I am a great believer in that. Sarah Liao, the Secretary in charge of Environment, Transport and Works; Fred Ma, the Secretary in charge of Treasury and Financial Services, we are all great believers in this. We are all trying to find ways to promote PPP, to increase PFIs and so on and so forth.

Indeed, when I was in London I was talking to Lord Levine who formerly was advising Prime Minister Margaret Thatcher on a lot of these initiatives. I was talking to Lord Levine to find ways and to learn from them how, in Hong Kong, we can do better. Indeed, I understand that later on, in March, there will be a symposium organised by the British Consul-General to promote this concept in Hong Kong. So while within the Administration we are looking at ways to promote PPP. If you have good ideas, feel free to make suggestions to Sarah, Fred or myself, and we will see how we can promote it together. We do not have a fixed formula. We do not have a way that we are somehow kind of determined to go one form or another, but we are determined to push in this direction. So any ideas that you may have, please give them to us.

End/Thursday, January 23, 2003

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