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LCQ5: Outlying island ferry services

    Following is a question by the Hon Alan Leong and a reply by the Secretary for Transport and Housing, Ms Eva Cheng, at the Legislative Council meeting today (May 14):


    The Government's recent re-tender of the operating rights of four existing outlying island ferry routes has aroused grave concern among outlying island residents and the community. Quite a number of members of the public consider that there are quite a number of loopholes in the Government's planning on outlying island ferry services, resulting in the existing problems such as high fares and poor service quality, etc.  In this connection, will the Government inform this Council:

(a) given that there have been comments that setting the validity period for the current outlying island ferry service licences at three years has resulted in ferry service operators not willing to put in resources for long-term investments to enhance service quality, and has indirectly prompted the operators to drastically increase the fares to achieve the return set out in their contracts, whether the Government will reconsider extending the validity period of such licences; if it will, of the details; if not, the reasons for that;

(b) given that the enterprises currently holding franchises of other public transport services in Hong Kong have been granted rights and interests in respect of development of land or properties to maintain their income and stabilise the fares of the transport services concerned, whether the Government will consider adopting similar arrangements for outlying island ferry services; if it will, of the details; if not, the reasons for that; and

(c) whether the Government will consider adopting the mode of operation in which services are purchased from operators of outlying island ferry services, so that outlying island ferry fares can be set at a reasonable level affordable to passengers; if it will, of the details; if not, the reasons for that?


Madam President,

(a) The present situation that most of the outlying island ferry services are facing is not merely an issue relating to the operating period. Basically, most of the outlying islands have a relatively small population which limits the patronage. The soaring fuel price has made it even more difficult to maintain the existing service level. Therefore, although the current licences have not set any pre-determined return, the pressure for substantial fare increases does exist. To solve this problem, the first thing is to provide viable financial incentives, enabling operators to make longer-term investment plans, so as to maintain stable services in a longer operating period.

(b) For the second part of the question, first of all, I would like to clarify that not all franchised public transport operators other than that of ferry services are granted rights and interests in respect of development of land or properties. In the area of franchised bus services, normally bus companies acquire land for depot construction in two ways: either by purchasing land at their own cost from the market or through public auction; or by leasing land from the Government under short term tenancy at market rate. Therefore, bus companies have not been granted rights and interests in respect of development of land or properties under the service franchises.

    As for railway services, development projects involve huge capital expenditure. While there will be patronage demand and economic benefits for a railway project, and the operating revenue would be able to cover the operating expenses, the railway project however will still not be financially viable without provision of the funding gap in the construction cost even after the railway corporation has invested in the project. The Government will consider on a case-by-case basis whether and how a railway project should be implemented. Granting property rights to railway companies is only one of the approaches that may be adopted and the objective is to make the railway project, which requires huge investment, financially viable. As regards ferry services, the Government has, in terms of hardware, provided the operators with piers and taken responsibility for the maintenance work. If the proposal of adding one floor to Central Piers No. 4, 5 and 6 is implemented, the Government will also bear the construction costs for the relevant works. In considering how to offer assistance to different modes of public transport services, the Government has to take into account the actual circumstances and needs in adopting appropriate measures. 

(c) Under the Government's public transport policy, public transport services should be operated by the private sector through the market mechanism for better cost effectiveness and higher operating efficiency. It is inappropriate to use public fund to subsidise public transport services lightly as this would result in the operators losing their incentive to maintain the financial viability of the services and eventually affect the service quality and efficiency. Purchasing services from ferry operators is equivalent to subsidising their daily operation with public fund and is not in line with the existing transport policy.

    In fact, in order to help the ferry services operators reduce their operating costs and increase their non-fare box revenue, the Government has implemented a series of measures including taking over pier maintenance responsibility, waiving fuel duty, reimbursing pier rentals and exempting the vessel licence fees for ferry services under the Elderly Concessionary Fares Scheme, and allowing the operators to sub-let premises at piers for commercial and retail activities. The ferry operators are required to cross-subsidise the operation of ferry services with their non-box revenues to alleviate the pressure of fare increase.

    To further help ferry operators enhance their ability to generate non-fare box revenue, the Government implemented more measures in mid last year. These measures include obtaining the Town Planning Board's approval to relax land uses at Central Piers No. 4, 5 and 6 so that the operators can sub-let the upper deck of these piers for commercial activities such as restaurants, fast food shops, retail shops and service trades, streamlining the procedures for approving applications for sub-letting premises at the piers, and retrofitting the piers with fire prevention facilities. Moreover, the Government has decided to waive the vessel-related fees of the "Central-Mui Wo", "Central-Peng Chau", "Central-Yung Shue Wan" and "Central-Sok Kwu Wan" routes during the three-year term of the new licences with effect from July 1, 2008, with a view to helping reduce the operating costs of these ferry services as far as possible. We will continue to provide operators of outlying island ferry services with appropriate assistance in the light of actual circumstances.

Ends/Wednesday, May 14, 2008
Issued at HKT 16:02


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