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Speech by Permanent Secretary for Economic
Development and Labour at workshop on Public
Private Partnership


The following is a keynote address by the Permanent Secretary for Economic Development and Labour, Mr Matthew Cheung Kin-chung, today (March 8) at a workshop on public private partnership (English only):

PPP Workshop on staff transfer issues: Learning from the UK experience


Mr Leung, Mr Rayner, Mr Adams, distinguished guests, ladies and gentlemen,

    It gives me great pleasure to address this Workshop and to share with you some key labour-related issues when the Government implements Public Private Partnership (PPP) and other forms of private sector involvement arrangements.  I look forward to learning from the bona fide keynote speaker this afternoon, Mr Lew Adams, the UK's rich and solid experience in transferring manpower resources from the public to the private sector in PPP projects or Private Finance Initiatives (PFI).  I am sure that Mr Adams will tell us the Do's and Don'ts.  

PPP in Hong Kong

    What are PPPs?  PPPs cover a spectrum of contractual approaches between Government and the private sector involving complex projects, large sums of money and long-term arrangements.  In the Hong Kong context, we have used the BOT (build-operate-transfer) approach in the provision of major road tunnels, and the DBO (design-build-operate) approach in the introduction of sophisticated solid waste management facilities.  Recent major PPP projects include the Disney theme park, to be opened on September 12, the AsiaWorld-Expo located at the Hong Kong International Airport, the Tung Chung Cable Car connecting our railway network to the famous bronze Buddha Statue, to name but a few.  Other possible major PPP projects coming on stream include the re-provisioning and operation of the Shatin Water Treatment Work and the redevelopment of the Central Police Station.

    Whilst many associate PPP with cost saving, the Hong Kong Special Administrative Region Government does not implement PPP primarily as a way to balance our book, as PPP should not be used as a quick-fix to budgetary and staffing constraints. The Government considers it worth infusing the entrepreneurial spirit of the private sector into public service, thereby enhancing productivity and flexibility, as well as capitalising on the skills and experience that are not available in-house. The management skills and financial acumen of the business community would hopefully also provide the Government with greater value for money.

Labour issues in PPP

    However, for a PPP project to deliver the desired outcome, there has to be careful planning, proper involvement of the affected staff and effective monitoring of the work of the private company. I would elaborate further on the issue of staff. To ensure smooth implementation of new PPP initiatives, comprehensive staff consultation is a must. It is vitally important that affected staff are fully briefed on the rationale behind the initiative. Their support should be secured from the outset. This would enable them to air their views and for the management to address their concerns in ample time.  Depending on the type of PPP proposal, it is important to consider staffing implications at an early stage. Client departments/agencies should take into account all possible implications on their serving staff who are directly or indirectly affected by the PPP initiative; and explore as well as develop possible solutions to manage surplus staff, such as retraining and internal re-deployment, voluntary retirement, secondment or transfer to the private company. Of these options, the transfer of staff, the theme of this workshop, ranks highest in terms of sensitivity. Open and early dialogue would ease unwarranted suspicion. The management will need to ensure not only the smooth transfer of staff and transition in the delivery of service, but also the full compliance by the private partner with the requirements on employment protection for their transferred staff. In short, openness, fairness, effective communication and transparency all come into play in the lead-up to the handover. These will ensure a smooth and seamless transition. It must be remembered that we are dealing with people: human and industrial relations are fragile and must necessarily be handled with great care.  

Labour issues in outsourcing

    Many of the staff and labour related issues arising from PPPs come into the open when government departments/agencies embark on changes in the way they deliver services.  Poorly prepared and inadequately delivered outsourcing projects can result in staff redundancies - although this has not been a feature of Hong Kong Government outsourcing - and low morale for the residual staff.  Taking short cuts to deliver an outsourcing project quickly is not worth the legacy that may take months or even years to heal.

    The responsibility of government departments/agencies does not end when a service has been outsourced to a private contractor. On the contrary, the work might just begin.  For instance, the labour rights and benefits of workers engaged by government services contractors have always been under the spotlight of the Legislative Council, labour unions and media.  There is a very strong body of public opinion that in outsourcing its services, the Government should not merely be pursuing efficiency and cost-effectiveness, but also equity and fair play for those employed by the contractors.  Members of the public do not accept a cut in the workers' wages and benefits simply to facilitate a tenderer to make a successful bid for government contracts.  Nor would they tolerate government departments and public bodies turning a blind eye to exploitation behind the facade of outsourcing.  In fact, there can be no question of the Government outsourcing its contract management responsibility.

    Indeed, with the Government increasing the pace and scope of outsourcing in recent years, the problem of exploitation of workers, especially at the elementary level, by service contractors has become a matter of public concern.  To tackle the situation, the Government has introduced a number of special measures.  These include a demerit point system against government service contractors employing non-skilled workers who have breached their contractual obligations in respect of wages, working hours and signed written contracts with employees.  Moreover, government service contractors are required to offer non-skilled workers' wages that are not lower than the average wage rates for the relevant industry or occupation in the market.  This aims at protecting the wages of workers at the basic operative level.  

    The Government has also stepped up enforcement against contractors who fail to comply with the mandatory requirements.  To further curb these malpractices or "bad practices", the Labour Department is drafting a standard employment contract to ensure that the employees' basic rights are protected.

Corporate Social Responsibility (CSR)

    Nevertheless, enforcement action should be the last resort in dealing with labour issue.  We hope to cultivate strong and lasting partnerships among the Government, the private sector and labour unions not only by enforcement but also through promoting good practices.  I believe that Corporate Social Responsibility -or CSR in short (by the way this is not Civil Service Regulation) -- is definitely a good starting point for private companies.  CSR is not a new phenomenon, yet it is gaining much attention from the business, government and non-government organisations in recent years.  Poverty, human rights abuse, environmental degradation and globalisation of world economies have made CSR a hot topic.  

    There is still a heated debate on whether companies should incorporate CSR into their business decisions, and if so, whether CSR does have a "business case".  Many business leaders may still subscribe to the view of the famous economist and Nobel Laureate Milton Friedman's that 'the business of business is business'.  However, I gather that more than 80% of the Fortune 500 companies address CSR on their websites.  This certainly augurs well for CSR.

    CSR emphasises that stakeholders exist both within a company and outside.  Apart from the shareholders or investors, these stakeholders also include employees, suppliers (and their employees), consumers, the local community, the society and the natural environment.  Indeed, a key aspect of CSR is employee support which incorporates safety, job security and employee involvement, etc.  Thus, "CSR companies" are more likely to attract and retain talented employees, cut recruitment costs and remain ahead of the competition.  The ability to attract and retain the best human capital at all levels is becoming ever more important to securing a competitive advantage in the globalised business environment.


    In conclusion, to effect a successful PPP, both the Government and the private sector have to maintain harmonious labour relations and provide adequate protection for their employees.  I would also urge our enterprises to embrace CSR as a starting point.  

    Finally, I would like to congratulate the British Consulate General and the British Chamber of Commerce of Hong Kong on organising this workshop.  I am sure that participants including colleagues from various bureaux/departments will come away with much food for thought.  If handled properly, PPP can be a win-win situation for all.  Thank you.

Ends/Tuesday, March 8, 2005


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