Chief Secretary for Administration, Mrs Anson Chan,
in introducing the Government Minute in the
Provisional Legislative Council

Wednesday, September 10, 1997


Madam President,

Laid on the table today is the Government Minute responding to Report No. 28 of the Public Accounts Committee. The Minute sets out the measures the Government has taken, or is planning to take, on the conclusions and recommendations contained in the Report. I do not propose to go over the Government's response on each of the subjects covered.

I am pleased to note that Mr Eric Li has been elected once again as the Chairman of the Public Accounts Committee. In his capacity as the Chairman of the Public Accounts Committee of the previous legislature, Mr Li spoke on June 11, 1997 when tabling the Report. Referring to some of the subjects covered in the Report, he made certain key observations regarding the implementation of public policy and the Government's accountability. I would like to respond to those observations.

Mr Li considered that while the Government establishes publicly-funded bodies with the objective of improving public services to the community, it is incumbent upon the Administration to ensure that the huge public resources placed under these bodies are giving good value for money. We agree with this, especially when subventions to these non-government public bodies now account for some 37 per cent of total government recurrent expenditure. However, in discharging this responsibility, we have to strike a balance between proper control of public money and allowing these publicly-funded organisations adequate flexibility in resource management. Otherwise, we may undermine the efficient and effective delivery of public services by these bodies.

In the case of departmental quarters retained by the Hospital Authority, we agree that these quarters are valuable assets which should be put to good use at all times. The inter-departmental working group set up in April this year to monitor the utilisation of these quarters has made good progress. Of the 542 vacant quarters at the time, 170 have been or will be converted for non-clinical uses by the Hospital Authority, such as offices and overnight restrooms and 190 will be used for providing social welfare services or let out commercially for residential purpose. The Hospital Authority is actively looking at the future use of the rest.

Also on the operation of publicly-funded organisations, Mr Li suggested that the time has perhaps come for the Administration to take a fresh overall view of the manner in which these organisations relate to the Government and the remuneration packages they offer. In making this suggestion, Mr Li observed that while we need to ensure the proper use of public resources, we should also ensure that these publicly-funded organisations meet the situations of the modern day labour market of Hong Kong. I agree with his remarks. Publicly-funded organisations operate independently of Government and need a degree of flexibility in setting their own terms and conditions of employment. We feel that Government should not interfere in this provided that the terms are in line with our subvention principle that the overall remuneration for staff in organisations receiving Government subventions should not be superior to those provided by Government to comparable grades in the civil service.

We share the concern of the Public Accounts Committee on the implementation of the double housing benefits. Since there are different types of publicly-funded organisations, we need first to review the criteria governing the application of the double housing benefits rules. We will then take steps to ensure that those which should be subject to the rules are implementing the rules.

On the suspension of pensions for retired civil servants in publicly-funded organisations, we note Mr Li's remarks that our existing policy on suspension of monthly pensions for retired civil servants employed in certain gazetted publicly-funded organisations "may have inadvertently placed the publicly-funded organisations in a disadvantageous position when recruiting retired civil servants". We will undertake an in-depth review of the policy, having regard to its original rationale and objectives, and their relevance to present circumstances.

Finally, the Committee expressed concern over the relocation of a private cargo pier under the West Kowloon Reclamation Project only a few years after its establishment as a result of the Airport Core Programme (ACP). The ACP is the largest and most important package of infrastructure development in Hong Kong's recent history. Against an extremely tight time schedule, it is almost inevitable that its implementation would impact on other projects or planned facilities. Nevertheless, we accept the need for a fuller assessment of such potential impact on our overall planning of such major infrastructure projects and will, as a general rule, do so in future.

Madam President, I wish to express my sincere thanks to the Chairman and Members of the former Public Accounts Committee. I am sure their good work will continue in the current Public Accounts Committee under the Chairmanship of Mr. Li. I look forward to your positive comments and sound advice, which will help the public service of the Hong Kong Special Administrative Region maintain high standards of openness and accountability.

THE GOVERNMENT MINUTE IN RESPONSE TO THE

PUBLIC ACCOUNTS COMMITTEE REPORT NO. 28

DATED JUNE 1997

REPORT ON THE RESULTS OF VALUE FOR

MONEY AUDITS

GENERAL REVENUE ACCOUNT

CIVIL SERVICE BUREAU

(Paragraphs 5.1 - 5.22 -- The implementation of policies on the prevention of double housing benefits and the suspension of pensions for retired civil servants in publicly-funded organisations)

Prevention of double housing benefits in publicly-funded organisations

There are different types of publicly-funded organisations subject to different funding principles and different funding methods. Civil Service Bureau (CSB) and Finance Bureau, in consultation with the relevant Policy Bureaux, are conducting a review on the various types of publicly-funded organisations to determine which of these should be subject to the prevention of double housing benefits rules.

2. CSB will then investigate whether the prevention of double housing benefits rules have been implemented in these organisations and will keep the Committee informed of progress.

3. At the same time, CSB will liaise with, and assist, the relevant Policy Bureaux in ensuring proper interpretation and implementation of the rules by publicly-funded organisations under their purview. To this end, CSB will continue to circulate relevant rules and guidelines pertaining to the prevention of double housing benefits to Policy Bureau as well as the publicly-funded organisations concerned.

4. The Administration takes note of the suggestion that publicly-funded organisations which are subject to the prevention of double housing benefits rules should check with the Director of Accounting Services and the Director of Housing the receipt of civil service housing benefits and public housing benefits by their employees and their spouses. We believe that a cost-effective way of taking this forward is to require the housing benefit recipients in these publicly-funded organisations to declare any previous housing benefits they enjoyed or are enjoying that are caught by the prevention of double housing benefits rules and to ask the organisation concerned to conduct random checks. We will be putting this suggestion to the publicly-funded organisations concerned for their consideration.

Suspension of pensions for retired civil servants in public-funded organisations

5. The Administration notes the concerns of the Public Accounts Committee (PAC) over the implementation of the existing policy on the suspension of monthly pensions for retired civil servants re-employed in publicly-funded organisations. We also note the Committee's observations (as conveyed by the Hon. Eric LI Ka-cheung, Chairman of PAC, when tabling Report No. 28) that the policy may have "placed the publicly-funded organisations in a disadvantageous position when recruiting retired civil servants", and that the merits of the existing policy, vis-*-vis the possible disadvantages, should be re-examined.

6. In response to these observations, CSB will undertake an in-depth review of the policy on pension suspension, having regard to the original rationale and objectives of the policy and their relevance to present circumstances.

7. As part of the review, CSB will, as the Committee has recommended, examine the criteria for determining publicly-funded organisations as public service for the purpose of pension suspension. We will also examine the application of any modified criteria that may be recommended in the light of the review.

8. In the meantime, CSB has, as recommended by the Committee, reviewed the existing procedures for waiving pension suspension in respect of retired civil servants re-appointed to the public service on a part-time or temporary basis, in conjunction with the Director of Accounting Services and the Director of Education. We are satisfied that the criteria for waiving pension suspension have been clearly set out, i.e. the waiver applies only to retired civil servants who are re-employed in a gazetted public service for no more than three months, or are taking up part-time jobs of less than 24 hours per week. We are also satisfied that proper monitoring procedures have been put in place to ensure that the waiver is applied only in accordance with the established criteria. In this regard, the Director of Accounting Services, in processing requests for a waiver, will require the retired officer to supply proof of the duration and working hours of his/her post-retirement employment. We will also take steps to regularly remind retiring and retired civil servants of the requirement to report to the Administration any post-retirement employment in the public service.

HEALTH AND WELFARE BUREAU

(Paragraphs 5.23 - 5.68 - Departmental quarters retained by the Hospital Authority)

9. The Administration recognises that the 2,641 quarters managed by the Hospital Authority (HA) are valuable resources which should be put to appropriate and beneficial use at all times. These quarters will provide the potential for expansion or redevelopment for hospitals in the longer term. Meanwhile, they provide an opportunity for the hospitals to improve their direct patient services by decanting some of their non-clinical activities to these vacant premises. In cases where there are no short-term alternative hospital uses, the Administration will actively consider renting out the vacant units for residential use or making them available for welfare uses.

Renting out for residential use

10. An inter-departmental Working Group chaired by the Health and Welfare Bureau was set up in April 1997 to monitor the utilisation of the quarters retained by HA. The Working Group includes representatives of HA, Government Property Agency (GPA) and Architectural Services Department (Arch SD). Of the 2,641 quarters managed by the HA at that time, 2,099 units were put to hospital uses or rented out for residential purposes. The current position of the remaining 542 quarters is as follows -

Number of units

(a)  converted to other hospital uses            93
     since April 1997

(b)  to be converted to other hospital           77
     uses during 1997-98

(c)  unlettable because of very                  97
     dilapidated conditions (to be
     demolished/redeveloped)

(d)  not suitable for letting                    85
     out to the public because of
     operational and security reasons 
     (future uses being actively
     assessed by HA)

(e)  to be rented out for residential or         190
     welfare uses
                                                 ____

                                   Total         542

11. The HA has engaged a consultant to conduct an independent rental valuation for all the quarters currently let or to be rented out in future. The consultant's report will be available around mid September 1997 and will form the basis of the rental for charging incoming tenants as well as existing tenants on the expiry of their lease. GPA has tendered advice to HA on the valuation parameters to be adopted for incorporation in its brief to the consultant.

Block E, Prince of Wales Hospital

12. Of the 80 quarters in Block E of PWH which HA agreed to return to Government, three are being used as HA's call rooms and four have been let out to Youth Outreach. GPA has also reserved some other units on the lower floors for welfare uses. GPA will lease out the remaining units, on a short-term basis, at market rate pending a final decision on the ultimate usage of the quarters. Meanwhile, GPA is touching up these units for letting in the open market.

13. To resolve the carpark problem associated with the use of these quarters, HA has started constructing 80 additional carparks within the PWH. The first batch, totalling 52 carparking spaces, will be completed in mid September 1997, with the remainder in October 1997. HA will pay for the construction costs and hand over the carparks to GPA upon completion. To expedite the leasing process, HA has undertaken to provide designated carparking spaces to any tenant who moves in during the period the new carparks are under construction.

Use of quarters as welfare premises

14. The Administration agrees that some of the vacant quarters may be suitable for welfare services. Indeed, GPA has let out four quarters in Block E of PWH to Youth Outreach for the provision of youth counselling services. GPA will continue to explore opportunities for letting out other vacant quarters in Block E and in the Pamela Youde Nethersole Eastern Hospital for welfare uses.

Use of quarters as storerooms

15. The Administration agrees that we should consider other more economical options for storing the furniture and equipment not required by the HA on a day-to-day basis. In this connection, HA is critically examining how best to meet the storage requirements of individual hospitals. The Working Group will follow up on this issue.

Fire service installations in quarter-converted offices

16. HA and Arch SD have completed a survey of the fire prevention facilities in the quarter-converted offices and is carrying out upgrading works in some of these offices. The Working Group will closely monitor the situation to minimise the risk of fire in these converted offices.

CIVIL SERVICE TRAINING AND DEVELOPMENT INSTITUTE

(Paragraphs 5.69 - 5.78 - The provision of training courses by the Civil Service Training and Development Institute)

17. Since the PAC hearing held in April 1997, the Administration has taken the following measures to address Members' concerns.

Utilisation of training centres and mismatch of class size and seating capacity

18. Civil Service Training and Development Institute (CSTDI) accepts the PAC recommendation that utilisation statistics of classrooms should be compiled to facilitate better planning, control and use of training accommodation. Since May 1997, the Institute has computerised the classroom booking procedures at Wing On Centre and, based on these records, prepared monthly reports on classroom booking and usage rates to monitor the utilisation level.

19. Computerisation of the booking system also improves the scheduling of classes, thereby making better use of the classrooms available. CSTDI has also adopted other measures to improve the utilisation level such as inviting more trainees than the intended class size to maximise attendance rates where appropriate, and letting out the classrooms to other departments for training purposes.

20. The Administration agrees that there should be a better match between the size of training classes and the available seating capacity. However, while we are conscious of the need to make full use of space in training rooms, we are equally concerned about the training quality and effectiveness. The optimum class size must take into account the nature of the training course, the trainer to trainee ratio and the extent of interaction required of trainees in the course of training. CSTDI has reviewed the class size of all training courses and considered that the class sizes of some written communication courses can be increased from 21 or 22 to 24.

Output statistics for the civil service training courses

21. CSTDI has since April 1997 compiled monthly reports on the response rates and the attendance rates of the training courses. Based on this information, CSTDI will monitor the actual output of training activities for future reference in setting performance targets, and planning and evaluating training courses.

Cost comparison of in-house training and external training courses

22. CSTDI has revised the monthly progress reports of each training unit to include information on the cost comparisons of in-house training and external training courses. The Institute will review these figures annually to decide whether there is any scope for further contracting out some of the training programmes.

New accommodation at the North Point Government Offices (NPGO)

23. A working team comprising representatives from CSTDI, Government Property Agency (GPA), Civil Service Bureau (CSB) and Finance Bureau has been formed to review the accommodation requirements of CSTDI in the NPGO. The working team has noted that CSB and CSTDI are now reviewing the civil service training needs in the medium term. The results of this review will have a bearing on the training activities to be included in the annual training programme for 1998-99 and thereafter, and hence CSTDI's accommodation requirements in the NPGO. Thus, the working team considers it more appropriate to conduct an accommodation review for CSTDI in December 1997, as by then the 1998-99 training programme will be finalised. If any accommodation originally earmarked for CSTDI in the NPGO is found to be in excess of its actual requirements, GPA will allocate the surplus space to other users on a temporary basis so as to preserve the flexibility to cater for CSTDI's expansion in future.

24. Meanwhile, CSTDI is also exploring the possibility of converting conventional self-learning packages to media-based programmes to save accommodation as the former require more classrooms for holding guidance sessions.

25. GPA has reviewed the existing procedures for departments to submit their accommodation requests. The Agency will revise applicant departments' submission forms to ensure that all applications will have to be routed through the proper management level of the department and relevant supporting documents are enclosed to justify their requests for accommodation. GPA has also tightened its internal vetting procedures by putting in place a three-tier vetting and approval system. Under this three-tier system, GPA officers at assistant professional level will first vet requests for accommodation and, where necessary, carry out site visits to verify the accuracy of the information submitted. Officers at professional level will approve requests in compliance with the prevailing space standards/entitlements, while senior professional officer's approval is required for those requests which deviate from the normal standards.

RADIO TELEVISION HONG KONG

(Paragraphs 5.79 - 5.84 - Employment of departmental contract staff)

26. The employment of departmental contract staff (DCS) by the Radio Television Hong Kong (RTHK) is to suit the operational needs of RTHK being a broadcaster. This is in line with the industry practice. The Administration wishes to assure the Committee, as it had during the PAC hearing, that it is certainly not a means to circumvent proper resource allocation procedure to meet increases in workload.

27. RTHK has issued a questionnaire to all local electronic media organisations to gather more information on the industry practice in employing "temporary staff". In parallel, it is carrying out a review to determine the most desirable conditions for the employment of DCS, the optimum combination of permanent and freelance staff and the need to turn some of the temporary staff positions into permanent establishment.

28. In the light of the findings on industry practice and the review, RTHK will seek approval from the relevant authorities for the modification of the conditions of employment of DCS to address any anomalies. RTHK may also reduce the number of DCS Category I, redefine the Category II staff to include only freelancers on artistic and creative work, and redefine the Category III staff as "temporary staff".

29. Meanwhile, RTHK has updated the contract forms for both DCS Category I and II to incorporate essential elements of the guidelines issued by CSB. Since April 1997, RTHK has been offering contracts to all DCS Category I new recruits for duration not exceeding one year. RTHK will review the performance of these staff on an annual basis.

(Paragraphs 5.85 - 5.91 - Royalties for radio broadcasting of copyright musical works)

30. The Administration is of the view that there can be no question of the Government breaching a contractual obligation to recover the apparent "overpayment" of royalties to the Composers and Authors Society of Hong Kong Limited (CASH). The use of a fixed percentage mutually agreed between CASH and RTHK to calculate the annual royalty payments, in place of the formula, is provided for in the Licence Agreement. The current fixed 4.233 per cent was agreed between RTHK and CASH.

31. That said, the Administration fully recognises the need to renegotiate a new formula which will relate payment to the usage of the CASH music. RTHK has started officially the first round of re-negotiation with CASH in July 1997. Both parties have agreed to -

(a) conduct a monitoring exercise to measure the actual CASH music usage in August 1997;

(b) use the monitoring results as a basis for calculating royalties; and

(c) consider the CASH music usage, the expenditure on radio broadcasting and the total broadcasting hours of RTHK in any new formula to be adopted.

32. In the next round of negotiations, RTHK intends to explore a simpler and more equitable means of measuring the CASH music usage, seek the agreement of CASH on the addition of a dispute resolution clause in the current licence and on the conduct of periodic reviews of the royalty formula and the licence. RTHK will also conduct another monitoring exercise on CASH music usage in late November to mid December 1997 to capture the effects of the racing and sports season.

33. We will keep the PAC informed of progress.

TRANSPORT DEPARTMENT

(Paragraphs 5.92 - 5.103 - Monitoring of franchised public bus services)

34. The Administration accepts PAC's recommendation that as far as possible, targets should be set for all key performance indicators of the bus companies. With the agreement of the bus companies, the Commissioner for Transport has set performance targets for the following nine key indicators: bus availability, bus utilisation, number of Passengers Liaison Group meetings to be convened, number of bus shelters to be constructed, implementation of agreed Route Development Programme items, average bus age, parking capacity of depots per registered bus, approved bus termini spaces for overnight parking per registered bus and number of buses per maintenance pit. Transport Department reported these developments to the Transport Advisory Committee in May 1997.

35. The Commissioner for Transport has expanded the objectives of her surveys to optimise the usefulness of their findings for verifying the returns submitted by the bus companies. The surveys now include the collection of data on vehicle allocation for individual bus routes. The Commissioner has also issued written instructions on the types of data to be verified, the verification procedures to be followed and the records to be maintained. Transport Department staff are now following these instructions in carrying out verification work.

36. The Commissioner for Transport currently does not have any outstanding potential cases for financial penalty under section 22 of the Public Bus Services Ordinance. For future cases, the Commissioner has issued departmental guidelines to ensure that a decision on whether to proceed with a recommendation to the Chief Executive in Council will be made within six months for cases requiring collection of more evidence, and within three months for other cases.

37. The Administration has pursued the matter regarding over-provision of reserve in the Contingency Fund of China Motor Bus Company Limited (CMB). In response to the Administration's request, CMB had appointed an actuary to conduct a comprehensive review of its reserves in respect of third party liabilities as at June 30, 1996. On the basis of the actuary's advice, CMB reduced the amount of provision for third party liabilities in 1995-96 by about 20 per cent from its original estimate of $23.8 million to $19.4 million.

38. In respect of the level of reserves for consequential fire loss, the Administration received CMB's actuarial report on July 22, 1997. The actuarial assessment was conducted in connection with a decision by CMB to take out an external insurance policy to cover consequential fire loss. The actuary has confirmed that the insurance policy taken out by CMB is suitable to cover risks where the claim exceeds $20 million, and has recommended that CMB should adjust the level of reserves downwards from $94.5 million to $20 million after it has taken out the insurance policy.

CAPITAL INVESTMENT FUND

TRADE AND INDUSTRY BUREAU AND FINANCE BUREAU

(Paragraphs 6.1 - 6.18 - The Government's role in the development of electronic data interchange for the business community)

39. Following the PAC hearing on the Government's role in the development of electronic data interchange for the business community, the Administration has made further progress in the implementation of the Community Electronic Trading Service.

40. The Director of Information Technology Services conducted a requirement justification study on cargo manifests in April 1997 and circulated a draft report for review in July 1997. He is finalising the report and will present it to the Computer Strategy Group in due course.

41. The Commissioner of Customs and Excise has been undertaking a review of the systems and procedures involved in handling dutiable commodities permits since April 1997 and a draft report will be ready by September 1997. He will then consider the need for a requirement justification study.

42. On 20 June 1997, the Finance Committee of the Legislative Council approved the funds required to computerise and implement electronic data interchange for certificates of origin.

43. A Preparatory Committee of the Hong Kong Electronic Commerce Association comprising representatives of the Hong Kong Article Numbering Association, Hong Kong Productivity Council, Hong Kong Trade Development Council, Tradelink Electronic Document Services Ltd. and Transportation Community Network Ltd. has been formed. The aim of the Association is to provide the coordination and leadership required for the proper promotion, development and support of electronic commerce in Hong Kong. The Committee produced a first draft proposal in July 1997 and aims to finalise the proposal by September 1997.

CAPITAL WORKS RESERVE FUND

PLANNING, ENVIRONMENT AND LANDS BUREAU,

WORKS BUREAU, CIVIL ENGINEERING DEPARTMENT

AND ENVIRONMENTAL PROTECTION DEPARTMENT

(Paragraphs 7.1 - 7.26 - Beneficial use of construction waste for reclamation)

44. The Administration wishes to report the following progress in the various measures to improve utilization of construction waste for reclamation works.

45. The draft final report of the consultancy on public dumping strategy, commissioned by the Director of Civil Engineering, is expected to be available at the end of September 1997.

46. Meanwhile, the Civil Engineering Department is trying to locate additional public dumping outlets, particularly on Hong Kong Island. The Department is also identifying potential outlets/barging points in Eastern, Central & Western and Southern districts. The possibility of incorporating off-site sorting at outlets/barging points is also being explored.

47. The Works Bureau will shortly issue a Technical Circular requiring on-site sorting of surplus construction materials on demolition sites. In order to maximize the use of construction waste, the Works Bureau will ask works departments to notify the Public Dumping Sub-Committee at an early stage those projects which may incorporate public dumping.

48. As regards the landfill charging scheme, the Administration is working hard on proposals to address the trade's concerns. These proposals include relaxing the deposit requirement and providing a longer credit period. In addition, once procedures on the landfill charging scheme are finalised, the Works Bureau will issue a Technical Circular requiring all government works contractors to pay directly the landfill charge through an account billing system.

LANDS DEPARTMENT AND TERRITORY DEVELOPMENT DEPARTMENT

(Paragraphs 7.27 - 7.39 - Reprovisioning of a private cargo pier under the West Kowloon Reclamation Project)

49. The Administration will cooperate with the Director of Audit in his further enquiries into whether projects similar to the Cheung Sha Wan Cargo Pier may also have been affected by the Airport Core Programme.

50. Over the years, the Works Bureau and the works departments have made significant improvements in project management. The works departments will maintain close liaison with the end-users of facilities that are to be reprovisioned at all stages of design and construction. The works departments have already adopted a proactive approach to ascertaining users' requirements and securing acceptance of any changes to the design or specification of facilities that are to be reprovisioned prior to the award of contracts. We will continue to adopt this approach in future reprovisioning works.