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LCQ11: Start-up Loan Scheme

     Following is a question by the Hon Cheung Man-kwong and a written reply by the Secretary for Education, Mr Michael Suen, in the Legislative Council today (May 16):


     Regarding the Start-up Loan Scheme (SLS) implemented since 2001, will the Government inform this Council:

(a) of the institutions which had applied for the loans since the introduction of SLS; the respective loan amounts, annual amounts of loan repayment, interests, outstanding loan amounts and loan repayment due dates in respect of the various institutions being granted the loans; which parties own the ultimate titles to the college premises constructed on such loans and the rights to use them;

(b) whether it knows the respective numbers of places that the various institutions planned to offer in relation to the programmes involved in the loans applied and those places currently provided by them, together with a list of such information broken down by the academic level of the programmes;

(c) whether it knows the respective percentages of the average unit costs of different programmes of the various institutions concerned under SLS and the annual loan repayments of the institutions in the tuition fees charged by the community colleges which offer such programmes;

(d) whether the institutions may change the titles to, the rights to use or the uses of the relevant college premises before or after full repayment of the loans; if they may, whether the relevant changes are subject to the authorities' approval; whether it knows if any institution has already changed or plans to change such titles, rights to use or uses;

(e) whether it knows how the institutions, after extending the loan repayment periods or repaying all the loans, make use of the resources previously used for loan repayment to benefit students (including lowering the levels of tuition fees or charging tuition fees on the principle of cost recovery), in order to relieve students' burden;

(f) given that the original purpose of SLS is to provide loans to institutions offering full-time locally accredited self-financing post-secondary programmes for construction of college premises with a view to promoting the development of post-secondary education, which parties own the titles to the college premises after the institutions have repaid all the loans; whether the owners may sell the college premises; how the authorities prevent the institutions from using the college premises for other activities unrelated to post-secondary education or even for profit-making purpose; and

(g) whether, before full repayment of the loans, the institutions may charge those community colleges using the college premises rent or continue to rent the college premises to the community colleges after full repayment of the loans; if they may, whether it knows the names of the institutions concerned, the justification for making such arrangements, the monthly rents charged and the uses of the rentals received; if not, whether the authorities will take action against those institutions which receive rentals from the community colleges under them, so as to ensure that the institutions will not use the college premises to earn rentals and other income while the students have to bear the relevant rental burden?



     The Start-up Loan Scheme (SLS) was launched in 2001 as part of a basket of measures to support the development of the self-financing post-secondary sector in Hong Kong.  The SLS provides interest-free loans to non-profit-making post-secondary education providers for purchasing, renting or building campuses to operate full-time accredited post-secondary programmes.  Under the SLS, short-term loans are offered to institutions for renting premises for two years.

     In May 2008, the Finance Committee (FC) of the Legislative Council approved a modification of the SLS to permit the offer of loans for enhancing teaching and other ancillary facilities to improve students' learning experience, without requiring the borrowing institutions to provide additional student places.  The FC also approved the extension of the loan repayment period under the SLS from no more than 10 years to no more than 20 years for existing borrowing institutions with proven financial difficulties, subject to the payment of interest at the no-gain-no-loss rate after the first 10 years.  Institutions applying for an extension of the loan repayment period are required to submit progress reports once every three years.  Starting from 2008, institutions granted land sites or vacant school premises under the Land Grant Scheme (LGS) are also required to submit annual progress reports to the Government after the premises come into operation.

(a), (b), (d) and (f)

     As at April 2012, the FC had approved 25 loans to 14 institutions, amounting to about $5,121 million in total.  The Secretary for Education had approved under delegated authority a total of seven loan applications amounting to $69 million in total.  Details of start-up loans approved are set out at Annex A.

     All premises built, purchased or renovated with a start-up loan, regardless of ownership, should be used to operate self-financing post-secondary programmes during the repayment period in accordance with the development proposal submitted by the institution concerned when applying for the loan.  Premises rented with start-up loans are also subject to the same restriction during the two-year rental period.  No change of use of the premises is allowed without the prior approval of the Education Bureau (EDB).  For premises built on land sites granted under the LGS, they should be used to operate self-financing post-secondary programmes in accordance with the institution's Education and Site Development Proposals both before and after full repayment of the loan.  Applications for change of use of premises will be considered by the EDB on a case-by-case basis.  For premises built on land owned by the institution or sponsoring body concerned, they should still be used for the purposes specified in the land lease, such as operation of a post-secondary institution, after the loan is fully repaid.

     Out of the 32 loans granted, some were for renting premises.  In all these cases, the two-year rental period has expired.  In some other cases, the premises have not yet come into operation.  Regarding the remaining 17 loans granted, the numbers of school places involved, ownership, authorised users of the premises, and change of use of the premises approved by the EDB are set out at Annex B.  It is worth noting that the 2011/12 academic year is a gap year between the new and old academic structures, and the school places offered by the institutions in this year may be affected.  To date, no institutions granted start-up loans have changed the ownership of their premises.

(c) The Government does not have data on the average unit costs of self-financing programmes.  As we understand, institutions generally operate such programmes on the basis of a balanced budget.

     Regarding repayment of loans, institutions often finance campus development projects with the funds or financial reserves of themselves and/or their sponsoring bodies, as well as other donations.  The SLS provides interest-free loans to alleviate the financial pressure facing post-secondary education providers in meeting their initial start-up costs.  Campus developments are long term capital investments.  Construction costs and loan repayment are normally amortised over a long period of time.  Therefore, loan repayment in a given year is not borne directly by tuition fee income from students in that year.  As such, it would not be appropriate to provide the percentages of tuition fees of individual self-financing programmes used by institutions for the repayment of start-up loans.

(e) Setting the fee levels for self-financing programmes is the internal affair of institutions.  As we mentioned in the paper submitted to the Legislative Council Panel on Education on April 20, 2012 (LC Paper No. CB(2)1694/11-12(08)), when setting the fee levels for self-financing programmes, most institutions plan on the basis of a balanced budget and adopt a prudent approach, taking into account a basket of factors, including expected enrolment, similar programmes offered in the society, and affordability of the target group.  To cater for possible year-on-year volatility and uncertainties, an adequate level of reserves is critical to serve as a buffer to sustain the healthy operation of the programmes, avoid any financial burden on the institutions concerned or affect the programme quality.  Any surpluses in a year will be kept in their reserves and ploughed back in support of teaching and learning activities, curriculum development, student scholarships, research activities, and the maintenance, replacement and improvement of teaching and learning facilities for the benefit of students.

     As regards concerns over the surpluses generated from the self-financing operations of individual institutions funded by the University Grants Committee and the use of such surpluses, the Government has earlier on undertaken to bring them for discussion by the newly established Committee on Self-financing Post-secondary Education and invite the Committee to discuss possible measures to promote transparency and good practices.

(g) The charging arrangements (including sharing of libraries, recreational and teaching facilities) between a sponsoring body and its institutions are matters between them.  As far as those operating premises built/purchased/renovated from vacant school premises are concerned, according to the information provided by sponsoring bodies, there are four loan cases where the sponsoring bodies charge their institutions rent for using such premises.  The rent levels, justifications for charging rent, and the use of rent received are set out at Annex C.

Ends/Wednesday, May 16, 2012
Issued at HKT 13:01


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