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LCQ19: Measures to address the challenges brought by demographic changes

     Following is a question by the Dr Hon Lam Tai-fai and a written reply by the Secretary for the Civil Service, Mr Paul Tang, in the Legislative Council today (January 28):


     In his 2015 Policy Address, the Chief Executive put forward measures to unleash the potential of local labour force, as well as recruit talent and professionals from outside Hong Kong etc., in order to address the challenges brought by demographic changes.  Such measures include the extension of the retirement ages of new recruits for the civilian grades and the disciplined services to 65 and 60 respectively as from the middle of this year.  However, the extension of the employment of serving civil servants beyond retirement age will be subject to operational needs, succession planning and recruitment situation of departments.  Moreover, the Government suspends the Capital Investment Entrant Scheme (CIES) with immediate effect.  In this connection, will the Government inform this Council:

(1) whether it has assessed how far the local labour force can be unleashed by extending the retirement age of civil servants; if it has assessed, of the details and set out the relevant figures for each of the next 10 years; if not, the reasons for that;

(2) of the number, as estimated by the authorities, of serving civil servants who will be willing to have their retirement age extended, with a breakdown by department;

(3) whether it has assessed how internal promotion opportunities in government departments will be affected by the extension of the retirement age of civil servants, and whether this measure will dampen people's desire to join the Government's work force; if it has assessed, of the details; if not, the reasons for that;

(4) whether it has assessed which government departments will make arrangements for the extension of the retirement age of serving civil servants due to operational needs, succession planning or not being able to recruit the manpower required, as well as of the respective grades and numbers of such civil servants; if it has assessed, of the details; if not, the reasons for that;

(5) of the impact, as estimated by the authorities, on the Government's expenditure brought by the extension of the retirement age of civil servants, including the annual additional expenses to be incurred by various departments in future for civil service remunerations and fringe benefits such as medical, housing and retirement protection benefits;

(6) whether it has assessed the impact of the extension of the retirement age of civil servants on the turnover of civil servant quarters, including whether the average waiting time of staff of various disciplined services for allocation of quarters will be longer; if it has assessed, of the details;

(7) given that the staff of disciplined services have to meet specific requirements for physical fitness in order to cope with the operational needs, whether it has assessed the impacts of the extension of the retirement age of disciplined services on the quality of their service; if it has assessed, of the details; if not, the reasons for that;

(8) of the number of meetings held by the Government with civil servant groups and disciplined services unions on the proposal to extend the retirement age of civil servants, as well as the Government's follow-up actions and responses;

(9) of the average annual economic gains brought about by CIES to Hong Kong since its implementation;

(10) of the total investment in Hong Kong made by persons permitted to reside in Hong Kong under CIES in the past decade, with a breakdown by country/place of origin of such persons;  

(11) whether it has compiled statistics on the number of enterprises which have benefited from the investment projects under CIES; whether it has assessed if the suspension of the scheme will affect the employment rate and types of jobs available in Hong Kong, as well as whether the suspension will dampen overseas investors' desire to invest in Hong Kong;

(12) why the authorities had not considered enhancing CIES but decided to suspend it, and whether the reasons include that the scheme was ineffective in the past;

(13) whether it has assessed the annual economic losses to Hong Kong as a result of the suspension of CIES, and the respective annual decreases in the amounts of overseas and mainland capital investments in Hong Kong in the coming five years; if it has assessed, of the details; if not, the reasons for that; and

(14) of the new specific plans in place for recruiting talent and professionals from outside Hong Kong who meet the needs of Hong Kong's economy and long-term development, as well as the industries which will mainly be covered by the relevant measures?



     With regard to the question, the reply of the Civil Service Bureau (CSB) concerning extension of the service of civil servants (1-8) and that of the Security Bureau concerning the Capital Investment Entrant Scheme (CIES) (9-14) are as follows respectively:


     As announced in the Policy Address published on January 14, 2015, the Government has decided to extend the service of civil servants. CSB sent a letter to all civil servants to explain the details of the relevant initiatives on the same day.  Before formulating the initiatives, CSB released a consultation paper on "Extension of the Service of Civil Servants" (the Consultation Paper) on April 3, 2014 for a four-month consultation up to August 2, 2014. During the consultation period, we received a total of 371 submissions from the public (including individuals claiming themselves as civil servants), the grade/departmental management, the staff side of Departmental Consultative Committees (DCCs), civil service staff bodies and non-civil service parties through different consultative platforms (including the Central Consultative Councils, DCCs, civil service staff bodies, etc.). Having thoroughly considered the feedback received during the consultation and the examination of relevant issues (including the financial implications), the Government has decided to adopt the initiatives proposed in the Consultation Paper with suitable refinements and/or appropriate mechanisms.  

     The initiatives for extending the service of civil servants enable the Government, as an employer, to take early actions in responding to the demographic challenges arising from an ageing population in the coming years, while ensuring operational effectiveness of bureaux/departments in the meantime. We believe that the initiatives would also help to set an example for the private sector and other public bodies to follow. It is difficult to quantify the extent to which the initiatives for extending the service of civil servants could unleash the labour force, as the whole labour force is subject to a number of variables.

     One of the initiatives for extending the service of civil servants is to raise the retirement age of new recruits joining the Civil Service from mid-2015 to 65 for the civilian grades and 60 for the disciplined services grades (regardless of their ranks).  Having regard to the job nature and distinct physical requirements of the disciplined services grades, a difference of five years will be maintained between the retirement ages of the disciplined services and civilian grades. This arrangement has duly taken into account the feedback received through the consultation and relevant management considerations (including the job requirements of disciplined services) of the disciplined services departments.  

     As regards the allotment of quarters, from June 1, 2000 onwards, non-disciplined staff appointed on new terms of appointment will not be provided with quarters except for post-tied quarters. As for disciplined services staff, since the future waiting time for departmental quarters is subject to a host of factors, it would be difficult to assess at this juncture the long-term impact arising from the adoption of a higher retirement age for new recruits. Relevant departments will continue to closely monitor the demand situation for quarters.

     Under the existing Civil Service Provident Fund (CSPF) Scheme, the Government's contribution rate will increase from 5 per cent to 25 per cent upon an officer's completion of 30 years of continuous service. If the existing contribution scale of the CSPF Scheme remains unchanged, the new recruits who would be subject to a higher retirement age of 60/65 would have a longer period of time to enjoy the higher contribution rates.  According to the results of an actuarial study, the Government's expenditure on annual Mandatory Provident Fund (MPF)/CSPF contributions is projected to increase by the peak of $12.8 billion to $106.5 billion in 2084, representing an annual Government contribution rate of 19.6 per cent (i.e. the percentage of the Government's overall contribution over the overall salary cost) for that year.  The long-term average contribution rate will increase from the current level of 18.0 per cent to 19.2 per cent, exceeding the 18 per cent endorsed by the Executive Council in 2001. Having regard to the Government's long-term financial implications, we will adjust the CSPF contribution scale for new recruits so that the Government's long-term MPF/CSPF contribution rate would remain at 18 per cent. As regards civil service allowances/benefits (such as medical benefits), since the expenditure concerned will be subject to various factors (including the circumstances of individual civil servants), it is difficult to provide an accurate assessment of the financial implications. That said, we expect that the financial implications would be insignificant in the long term.

     As far as serving civil servants are concerned, the Government will adjust the existing mechanism on further employment so as to provide departments with more flexibility to retain civil servants beyond retirement age taking into account operational needs, succession planning and recruitment situation, which vary from grade to grade and from time to time. This initiative can strike a balance among various considerations, including meeting the operational needs, avoiding promotion blockage and maintaining healthy turnover of the Civil Service. As the number of further employment cases will be affected by a number of factors, including operational needs, succession planning and recruitment situation of individual grades/departments, which would vary from time to time, the Government is unable to project the numbers of applications and approved cases of individual grades/departments.    

     Insofar as civil service new recruits are concerned, having regard to the population projection which shows that nearly one-third of the population in Hong Kong will be 65 or above in 2041, there is a clear case to extend the working life of civil servants and indeed the whole labour force. Generally speaking, it may possibly take longer for future civil servants to be promoted to the next higher rank (where applicable). Nonetheless, we believe that it should not affect the overall attractiveness of civil service jobs. And civil service jobs would still remain generally attractive in terms of job nature, remuneration and fringe benefits, etc.

(9) Since the implementation in October 2003 to the end of 2014, CIES has brought about $216 billion of capital investment into Hong Kong. The yearly breakdown is as follows :

                              Capital investment
Year                             (HK$ million)
----                        -----------------------
2003                                 145
(October to December)
2004                               2 015
2005                               2 176
2006                               2 659
2007                               5 828
2008                              11 024
2009                              18 221
2010                              21 248
2011                              31 576
2012                              34 927
2013                              37 486
2014                              48 747
-------                        ---------
Total                            216 052

(10) In the past ten years (2005 to 2014), 25 213 applicants were granted formal approval under the CIES, investing a total of about $213.9 billion. The breakdown by nationality/region is as follows :

                                Applicants granted
Nationality/region              with formal approval
-----------------------------   --------------------
Chinese Nationals with                 22 680
Permanent Residence Overseas
(majority from Gambia, Guinea
Bissau and Vanuatu)
Canada                                   373
Macao SAR                                363
Taiwan                                   333
The United States                        206
Australia                                188
The Philippines                          135
Japan                                    100
Indonesia                                 99
The United Kingdom                        88
France                                    83
New Zealand                               77
Malaysia                                  64
Others                                   424
--------                             ---------
Total                                  25 213

(11) As an international financial centre, Hong Kong's financial services are very well developed and diverse. As such, we believe that suspending the CIES will have minimal impact on the financial services sector and its employees. For example, for investment in equities under the Scheme, in 2014, about $19.5 billion was invested in equities which accounted for a very small proportion of the turnover of the Hong Kong Stock Exchange (in 2014, the average daily turnover of the securities market was $69.5 billion). Furthermore, there are over 12 000 CIES applications under processing.  The applicants will make the required investment in the next two to three years upon approval.

(12) The Administration has considered different options when reviewing the CIES, including increasing the investment threshold and personal asset requirement.  After deliberation, we consider that Hong Kong does not lack capital investment and attracting capital investment entrants should no longer be our priority.  Instead, in view of the global competition for talent, our focus should be on attracting global talent, professionals and entrepreneurs to enhance our competitiveness. Therefore, we have decided to suspend the CIES and enhance the investment category under the General Employment Policy (GEP) to focus on attracting entrepreneurs to come to Hong Kong to develop their business.

(13) See reply to (11).

(14) To meet the population challenges of an ageing population and declining workforce, we must build up human capital by complementing our local workforce with non-local talent, professionals and entrepreneurs. In line with this policy objective, we plan to implement the following enhancement measures in the second quarter of this year :

(i) implement a pilot scheme to attract the second generation of Chinese Hong Kong permanent residents who have emigrated overseas to return to Hong Kong;

(ii) relax the stay arrangements for entrants under the GEP and the Admission Scheme for Mainland Talents and Professionals to facilitate the entry and stay of professionals and entrepreneurs;

(iii) relax the stay arrangements for entrants under the Quality Migrant Admission Scheme, adjust the scoring scheme to attract quality migrants with an outstanding education background or international work experience; and

(iv) list clearly the factors to be considered under the GEP investment stream and favourably consider applications to establish or join in start-up businesses supported by government-backed programmes.

     The above admission schemes for talent, professionals and entrepreneurs, including the pilot scheme, are not sector-specific.

Ends/Wednesday, January 28, 2015
Issued at HKT 16:44


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