Hong Kong Yearbook - Annual Report for the Year 1986

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HONG

K

1987

DVD

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The Territory of HONG KONG

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Built-up Area

Pop Cultivation

Country Park Boundary

Main Road

Secondary Roads

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Kowloon Canton Rallway

Contour (vertical Interval 100 metres with supplementary contour at 50 metres)

Sea depth fint values in metres

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JURBAN COUNCIL PUBLIC LIBRARI

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NG KONG PUBLIC LIBRAR

With the compliments of

HONG KONG

GOVERNMENT INFORMATION SERVICES

HONG KONG 1987

Her Majesty the Queen and His Royal Highness the Duke of Edinburgh visited Hong Kong in October 1986, following their historic visit to China. They arrived in the harbour aboard the Royal Yacht Britannia and were immediately greeted by concrete evidence of Hong Kong's remark- able development since their first visit in May 1975.

On this occasion, the Queen and Prince Philip spent two days in Hong Kong, carry- ing out a wide variety of engagements, and meeting people from all walks of life. Speaki ing at the City Hall, the Queen praised the people of Hong Kong for having built 'a unique city and a unique society".

FÉERON BRASSE K

DILUTURT:

MEDI

TALL KEL.

i

市政局公共圖書館 UCPL

3 3288 00219608 9

HONG KONG 1987

Editor:

Aladin Ismail,

Government Information Services

Designer:

Arthur Hacker,

Government Information Services

Photography: David H. P. Au, Eddie T. K. Cheng and other staff photographers,

Government Information Services

Special

Contributor:

Derek Jones (Chapter 1)

Statistical

Sources:

Census and Statistics Department

The Editor acknowledges all contributors and sources

Copyright reserved

Code No.: F300187 (ISBN 962-02-0015-2)

Price: HK$35.00

US$8.50 UK£6.50

URBAN COUNCIL PUBLIC LIBRARIES

Acc. No. 673863

Class.

WK 9 51.25

Author

HON

HKCY

Cover: Trading Hall - Stock Exchange of Hong Kong Limited. Frontispiece: The Royal Yacht Britannia.

Contents

Chapter

HONG KONG AS A PARTNER IN WORLD TRADE

Page

1

2

CONSTITUTION AND ADMINISTRATION

17

3

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

40

4

THE ECONOMY

44

5

INDUSTRY AND TRADE

63

6

EMPLOYMENT

83

7

PRIMARY PRODUCTION

92

8

EDUCATION

99

9

HEALTH

124

10

SOCIAL WELFARE

141

11

HOUSING

151

12

LAND, PUBLIC WORKS AND UTILITIES

162

13

TRANSPORT

183

14

PUBLIC ORDER

200

15

IMMIGRATION AND TOURISM

222

16

THE ARMED SERVICES AND AUXILIARY SERVICES

228

17

COMMUNICATIONS AND THE Media

234

18

RELIGION AND CUSTOM

249

19

RECREATION AND THE ARTS

254

20

THE ENVIRONMENT

*

274

21

POPULATION

291

22

HISTORY

294

APPENDICES

INDEX

303

356

Frontispiece

Illustrations

Between pages

Royal Visit

vi-1

Tribute to the late Sir Edward Youde

4-5

Hong Kong Scenes

28-9

Accent on Youth

People

Places and Plazas

Leisure

Harbour Views

Festivals

Zoological Gardens

END-PAPER MAPS

Front:

The Territory of Hong Kong

Back:

Hong Kong Buying from the World

60-1

108-9

156-7

188-9

220-1

252-3

284-5

Appendices

Appendix

1

UNITS OF MEASUREMENT

2

OVERSEAS REPRESENTATION

Page

306

307

3-10

THE ECONOMY

310

11-12

INDUSTRY AND TRADE

321

13-16

EMPLOYMENT

325

17-19

PRIMARY PRODUCTION

331

20-23

EDUCATION

333

24-27 HEALTH

335

28

HOUSING

337

29-30

LAND, PUBLIC WORKS AND UTILITIES

338

31-32

TRANSPORT

340

33-36

PUBLIC ORDER

342

37

COMMUNICATIONS AND THE MEDIA

346

38

RECREATION AND THE ARTS

347

39

THE ENVIRONMENT

347

40-43

CONSTITUTION AND ADMINISTRATION

348

44

SOCIAL WELFARE

353

When dollars are quoted in this report, they are, unless otherwise stated, Hong Kong dollars. Since October 17, 1983, the Hong Kong dollar has been linked to the US dollar, through an arrangement in the note-issue mechanism, at a fixed rate of HK$7.80=US$1.

Some figures in the text are estimated; actual figures appear in the appendices.

in October the Queen and

the Duke of Edinburgh made their

second visit to Hong Kong

a moment to remember for

Tung Ho-lun in his family home at Lung Hang Estate

SIVAD...

216

after unveiling a plaque at the Legislative Council building

a stirring Gurkha send-off for Prince Philip at Lyemun Barracks

presentation of gold coins

commemorating two Royal visits

11

1

Hong Kong as a Partner in World Trade

THE most important characteristic of the Hong Kong economy is its almost total dependence on trade with the world outside its borders. This is hardly surprising. How else could a tiny enclave, in size not much more than 1 000 square kilometres and most of that outlying islands, or hilly and not suitable for development, manage to feed, clothe, house, transport and provide other amenities for as many as 5.5 million people? If Hong Kong were isolated and forced to live off its own resources it could only support a very much smaller population - farmers, fishermen, some craftsmen, perhaps a number of small and inefficient industries - and at a very much lower standard of living.

-

Everything that has been developed in present day Hong Kong - the mass of sometimes magnificent buildings, the roads, railways, waterworks, schools and universities, hospitals, the airport and container port, satellite telecommunications and public housing for half the population - has arisen because Hong Kong is not isolated. Rather, and quite the contrary, it has developed over the years into one of the world's greatest trading emporia, with commercial links extending to all the inhabited continents. In terms of goods alone, that is leaving aside the plethora of services in which Hong Kong also conducts trade, it is, with its working population of about 2.5 million, the 13th largest trading entity in the world, with total imports and exports of goods amounting to some 180 per cent of its gross domestic product (GDP), which is roughly the output of the whole economy. If trade in services is included, total trade comes to more than double the GDP.

      So, how is it that, to repeat Lord Palmerston's disparaging and oft-quoted words of some 140 years ago, 'a barren rock with hardly a house upon it' developed, through trade, into one of the greatest and most exciting cities in the world? What factors were responsible and what policies were adopted? Above all, are there any lessons to be learned from the experience that might have some application to the wider world scheme?

There are other reasons, also, why the present may be a particularly appropriate time to examine Hong Kong's role as a partner in trade and the contribution it thereby makes to the health of the world economy. If there was one catalyst which most helped to bring about the successful conclusion of the recent negotiations on the future of the territory, it was probably the agreement of both the governments of the United Kingdom and the People's Republic of China that their common aim was the maintenance of the stability and prosperity of Hong Kong. Furthermore, both sides came to recognise that an important, indeed essential, condition for stability and prosperity would be the continuation of Hong Kong as a free port with its free trade policy, a separate customs territory and indeed a separate capitalist economic and trade system able to decide its economic and trade policies on its own and maintain and develop its own economic and trade relations with the outside world. It was in this spirit and in accordance with the terms of the Joint Declaration that the two governments agreed in April 1986 that Hong Kong should become the 91st

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2

HONG KONG AS A PARTNER IN WORLD TRADE

contracting party to the General Agreement on Tariffs and Trade (GATT), which sets the rules for, and acts as the forum for negotiations on, the conduct of international trade.

The latter months of 1986, also, saw the start of a new round of multilateral trade negotiations under the auspices of the GATT, the eighth such round since the agreement entered into force in 1947. This will be a crucial negotiation whose main task will be to stem, and hopefully to push back, the protectionist forces which have been growing stronger in recent years in the current state of the world economy. Hong Kong will, for the first time, be participating fully in its own right in these negotiations and, given the overwhelming importance of trade for its economy, its overall aim must clearly be to support the forces working towards a further freeing of the channels of world trade.

History

It is important to recognise, first, that Hong Kong has always been a mart of trade. When it came under British administration almost 150 years ago, it was declared a free port, that is, with no duties or other impediments to the free movement of imports and exports, and this has been the keystone of its economic policy ever since. Taking advantage of its location and the possession of one of the best natural harbours in the world, certainly the best by far on the long stretch of the South China coast, Hong Kong quickly established itself as one of the focal points for the conduct of trade between China and the outside world, a true entrepôt port. And along with the trade came the essential backup services: communications, commercial links and finance, necessary to strengthen and lubricate the channels of trade. Regular shipping services were established, commercial houses were formed, and banking, insurance and other financial services quickly followed. In due course, ancillary activities associated with a busy port, such as ship repair facilities, were added.

      The steady growth of the population from its tiny beginnings and, indeed, the expansion of the territory with the acquisition of the Kowloon Peninsula in 1860 and the 99-year lease of the New Territories in 1898, did little fundamentally to alter the nature of these activities, centred as they were on the port and the entrepôt trade flowing through it. Certainly, there was a very considerable expansion of trade in terms of size, composition and destinations and the built up area of the territory grew and spread out. But, essentially, Hong Kong remained an entrepôt centre for 100 years until the Second World War.

Early Post-War Years

The 1940s and early 1950s were undoubtedly one of the most traumatic periods in the whole history of Hong Kong. There were times when the very existence of the territory, both politically and economically, was at stake. The end of the Pacific War and the Japanese occupation in 1945 found Hong Kong battered, looted and run down, with its population reduced to little more than 500 000. The pre-war population rapidly returned, however, and valiant efforts were made to reconstruct and to re-establish normal business and trade. But this was quickly followed by the final stages of the Chinese civil war and the closing of the border and then, almost immediately after, by the Korean War and the United Nations embargo on trade with China. This was a hatchet blow to what had been the central engine of Hong Kong's economy for more than a century, its role as a conduit for trade between China and the outside world. At the same time, the population of the territory had been swelled by refugees fleeing from the civil war in China which raised numbers to well over two million by the early fifties. The future seemed to be bleak in the extreme.

HONG KONG AS A PARTNER IN WORLD TRADE

A Miracle of Economic Growth

3

Yet from this highly unpromising situation a complete transformation of the economy and society was accomplished in less than 35 years. The driving force was economic growth at a speed, sustained over a generation, that had not previously been seen in the history of the world.

By 1985, for instance, the GDP was more than four times larger in real terms, that is after allowing for price rises, than it was in 1966. And in this period, real GDP per head of the population grew by almost three times. This implied an average compound rate of growth in the GDP of almost eight per cent per annum in the 19-year period (Table 1). Very roughly, the economy is probably now over 10 times bigger than it was in the early 1950s, and GDP per head in real terms almost five times higher.

1966

1971

1976

1981

1985

1966-85

Table 1

Growth of Real GDP 1966-85

GDP at 1980

Prices ($ million)

Index

(1966

=

100)

43,417

100

59,921

138

89,887

207

150,139

346

181,282

418

Average compound rate of growth

per annum

(per cent)

66889998

10.8

4.8

7.8

Source: Compiled from Estimates of Gross Domestic Product 1966 to 1985, Census and Statistics Department 1986.

The major impetus to economic growth in Hong Kong over this period was the equally rapid expansion of trade. At current prices, total trade in goods in 1951, before the blow fell on the entrepôt trade, was $9.3 billion (thousand million). In 1985 it was $466.6 billion or 50 times as much. Of course, there was a very considerable rise in prices over the intervening years, but in 1966 total trade was still only $17.7 billion, less than twice the 1951 level. Between 1966 and 1985, trade in real terms (at constant 1980 prices) grew by almost seven times, so in 1985 it was probably about 12 times higher than in 1951. In 1951, however, most exports were re-exports, or entrepôt trade, while in 1985 well over a half consisted of Hong Kong's own manufactured products, which proportionately make a significantly bigger contribution to the GDP. The crude figures, therefore, tend to underestimate the contribution made by the growth in trade to the expansion of the economy.

Early Stages of Industrialisation

Certainly, the going was, at first, not easy. Total exports, which had recovered to $4.4 billion in 1951, dropped to a low of $2.4 billion in 1954, and only slowly recovered thereafter. Imports also fell in line. Even by 1960, total exports were still less than $4 billion and they only exceeded their 1951 level for the first time in 1963. Thereafter, they rose rapidly to, for instance, $17.2 billion in 1971 or almost four times the 1951 level.

      The stagnant overall figures in the fifties and early sixties, however, belied the ferment that was going on behind them. This was the period when the territory was transforming itself from a predominantly entrepôt economy to one which relied mainly on its own exports of manufactured goods to provide the driving force of economic growth. In 1951,

4

HONG KONG AS A PARTNER IN WORLD TRADE

most exports were entrepôt trade. By 1963, domestic exports accounted for more than three quarters of total exports and the figure rose to more than four-fifths in the early 1970s.

      The early stages of industrial development were far from sophisticated. The most important enterprises were the new spinning and weaving mills making cotton yarn and grey cloth. There were also some workshops producing cheap, down market, garments and a range of other small factories turning out products such as plastic flowers and other simple plastic goods, rubber footwear and enamelware. They were soon followed by cheap electrical and metal products, such as flashlights and batteries, fans and accessories such as electrical fitments and the early beginnings of the toy industry.

      Although the production and exports of these industries grew rapidly during the fifties and early sixties and they quickly began to absorb the pool of largely immigrant labour, the whole process had to begin almost from scratch and markets carved out where they could be found, most of them thousands of miles away. The process was not easy and it was not, at the time, inevitable. Certainly it was not planned. But it did depend on a fortuitous coming together of circumstances and a seizing of opportunities.

Land Constraint

A crucial constraint which has done much to shape the development of Hong Kong industry is the shortage of land. It is not the total land area which imposes the constraint, but its configuration. The greater part of the land area, including the whole of the centre of Hong Kong Island itself, is very hilly and unsuitable for development. Much of it is also required for water catchment areas to feed the reservoirs and a goodly part consists of offshore islands. The amount of land suitable for development and intensive use is, therefore, strictly limited, and a considerable part of what there is has had to be reclaimed from the sea. The greater part of the population lives and works in the urban area stretching all round the harbour and back to the Kowloon foothills, or in six new towns in the New Territories. Virtually all the industry is also in these areas.

      The consequence is not only that there is very little, if any, heavy industry in Hong Kong. There is also very little industry that cannot operate in flatted factories in high rise buildings. This has meant that industrial development has largely been confined to light industry, much of it relatively labour intensive. There are special provisions for essential public utilities, such as the electric power stations, and elaborate arrangements to accommodate certain other carefully chosen enterprises that cannot operate in high rise buildings. But, for the most part, industrial land is allocated strictly by the price mechanism, and is auctioned or tendered to the highest bidder. The resulting price ensures that it is only economic to develop high rise.

Into Self-sustaining Economic Growth

It was in the early sixties that the process of transforming Hong Kong into a modern city state really began to take off. It was not just that, by 1963, total exports had recovered to exceed the 1951 level or even that, by then, a state of more or less full employment had been achieved and real wages had begun to move sharply upwards. It was also in this period that the process of physical transformation of the territory, which has since continued almost unabated for a quarter of a century, really made a start. The beginning was probably the change in the building regulations in 1959, which permitted much higher plot ratios than before and thus the construction of high-rise buildings. The first building boom followed, together with the appearance of the first truly modern buildings, including the Hong Kong Hilton and Mandarin hotels.

KONG PUBLIC

this mother and child, signing a book of condolence at the Central Government Offices, were among many thousands from all sectors of the community who mourned the death, on December 5, of the Governor, Sir Edward Youde

th

ליגרך

עדון

the Coldstream Guards contingent

of the funeral procession on arrival

at St. John's Cathedral

FIM

I MI

:

the funeral service in St. John's Cathedral

HONG KONG AS A PARTNER IN WORLD TRADE

5

      Admittedly, there were still plenty of ups and downs and traumas to come along the way. In the mid-1960s, for instance, the over-extension of credit to feed the property boom led to a banking crisis in 1964-5 and this was quickly followed by the 'Star Ferry' riots of 1966 and the disturbances of 1967. The collapse of the stock market bubble in 1973 was followed by the sharp world recession in 1974-5, after the first oil shock. In the early eighties, the puncturing of an even larger property boom coincided with another world recession and the political uncertainties surrounding the commencement of negotiations on the future of the territory. The important lesson to learn, however, is not that these internal and external shocks occurred. They are almost inevitable in a rapidly changing and turbulent world. It is that the Hong Kong economy and Hong Kong society were strong and resilient enough and, above all, flexible enough, to absorb all the shocks, to adjust to them and to emerge beyond them, ready again to resume the upward path of growth.

       In virtually every instance the effect of the shock, whether internal or external, was to produce a coiling and tightening of the competitive springs within the economy, followed by a renewed surge of exports and growth generally. This was true in 1968 and 1969 following the mid-sixties shocks, in 1976 after the oil crisis recession, and in late 1983 and 1984 following the second jump in oil prices and the recession in the early eighties.

      Of crucial importance, however, was that, by the sixties, the economy was generating enough savings to finance from its own resources the capital investment necessary to generate and underpin its growth, above all through the expansion of exports and trade. In other words, it had achieved a state of self-sustaining growth.

Since the mid-sixties, investment (or gross domestic fixed capital formation) has never fallen below 16 per cent of the GDP. It accelerated sharply through the seventies and reached a high of over 33 per cent of the GDP in 1980 and 1981. In particular, investment in plant, machinery and equipment has been on a steadily rising trend in real terms. Although overseas capital and expertise have played an important part, particularly in the introduc- tion of new technology, most of the investment has been generated from domestic sources. It is this capital investment, in an environment of competitive market forces, which has generated the very considerable increases in labour productivity and hence the expansion of output and the rise in real wages which has been witnessed over the period.

       The increase in output, in turn, has expressed itself in an almost continuous increase in exports and, for that matter, also in imports. Only in two years since the early sixties, namely during the world recessions in 1974 and 1982, have total exports dipped in real terms. By 1985, total exports were almost 7.5 times bigger than in 1966. The trend in the development of trade is illustrated in Table 2.

Table 2

Growth in Volume of Trade 1966-85

($ million at constant 1980 prices)

Domestic

Index

exports (1966=100)

Re-exports

Index

Total Exports

Index

Imports Index

1966

16,655

100

5,126

100

21,781

100

27,235

100

1971

30,846

185

7,853

153

38,704

178

45,888

168

1976

44,690

268

13,842

270

58,532

269

62,092

228

1981

73,716

443

38,598

753

112,314

516

125,336

460

1985

91,146

547

70,255

1 370

161,401

741

163,417

600

Source: Compiled from Estimates of Gross Domestic Product 1966 to 1985, Census and Statistics Department 1986.

6

HONG KONG AS A PARTNER IN WORLD TRADE

Despite a growth in domestic exports of 5.5 times in two decades, as shown above, the contributions made by the various industrial sectors have not changed very greatly over this period. In particular, the clothing industry, which started from small beginnings, but before long had overtaken textiles (yarns, fabrics and made up goods) as the major export industry, has maintained that position throughout the period, with a relatively steady share of about 35 per cent of all domestic exports. The major changes have been the rise of the electronics industry, which now accounts for over 20 per cent of domestic exports and, to a lesser extent, toys and games (other than electronics), with about eight per cent. Textile yarns, fabrics and made ups, on the other hand, which led Hong Kong's industrial development in its early stages, now account for only six per cent of total domestic exports. Overall, however, Hong Kong's exports are still heavily dependent on light consumer goods industries and four major industries, namely clothing, electronics, toys and games and textiles, still account for some 70 per cent of the total.

      This picture, nevertheless, belies the tremendous development which has taken place over the years in the quality and sophistication of the products produced by these industries. For instance, the clothing industry has steadily moved up market and much of its output is now at the top end of the ready-to-wear garment market. Indeed, some of its factories are currently at the forefront of technical development in this industry. Likewise, the elec- tronics industry has made tremendous strides since it started with the assembly of cheap transistor radios in the sixties. Such has been the advantage to Hong Kong of concentrating its industrial effort on what it is best able to make and sell competitively in world markets that the tiny territory is now the biggest exporter in the world by value of clothing and toys and, strangely also, of electric hairdressing apparatus, as well as the biggest exporter by volume of watches and radios.

Importance of Imports

     Imports have been as essential to the development of the Hong Kong economy as have exports and, in some respects, more so. Imports and exports are not opposites in the sense of being opposed to each other. They are complementary. It is trade as a whole which helps to make the best use of economic resources and thereby speeds up economic growth and the creation of incomes and wealth. Hong Kong concentrates its resources on making the products which it can export to world markets at the best prices and the best profits. This then provides it with the resources to buy imports from the most advantageous sources at the lowest prices. In other words, Hong Kong exports to live, but lives on imports.

      As it happens, the value of total imports of goods is usually greater than the value of total exports. In other words, there is usually a deficit on visible trade. The records show that, in the whole period since 1947, in only one year, 1985, has there been a surplus. This is partly because, equally consistently, Hong Kong has run a surplus on trade in services - shipping, aviation, tourism, financial services and so on the so called invisible transac- tions, and partly because the territory has usually attracted capital from outside, whether for direct investment or as a safe haven. Trade in goods and services and voluntary capital movements together have usually tended towards balance because of the link- ing of the internal economy to the balance of payments through the operations of the monetary system.

       A glance at the composition of Hong Kong's imports will illustrate their crucial role in the life of the territory. The breakdown for 1985 is given as an example in Table 3.

HONG KONG AS A PARTNER IN WORLD TRADE

Table 3

Hong Kong's Imports by Category in 1985

Commodity Groups

Raw materials and

semi-manufactures

      Consumer goods Capital goods

Foodstuffs

Fuels

Total

7

Total Imports

Retained Imports

Value

Percentage

Value

Percentage

million HK$

share

million HK$

share

Per cent

of total imports retained

97,385

42.1

54,592

43.3

56.1

66,730

28.8

28,325

22.5

42.4

36,228

15.6

17,655

14.0

48.7

20,752

9.0

15,676

12.4

75.5

10,324

4.5

9,902

7.8

95.9

231,420

100.0

126,149

100.0

54.5

From this it is clear that, while Hong Kong's exports may be concentrated in a narrow range of light manufactured, mainly consumer, products, its imports cover the whole spectrum of tradeable goods, from foodstuffs and fuels through raw materials and semi-manufactures to consumer goods and capital goods. In part this stems from the very concentration of local production in a few export products. For the corollary is that the greater part of the needs of the population have to be met by imports. For instance, most consumer goods bought locally are imported, yet less than a half of total imports of consumer goods are retained in Hong Kong and the rest are re-exported. Likewise, three quarters of the food eaten is imported, as is all the fuel used and almost all capital goods, such as plant and machinery for industry and transport equipment.

Perhaps the most interesting point is that all these requirements of the local economy, even including the goods bought in large quantities by the 3.5 million tourists who visit Hong Kong each year, add up to not much more than a half of retained imports and only about a third of total imports. Almost a half of retained imports and around 40 per cent of total imports consist of raw materials and semi-manufactures used by the local manufactur- ing industry and therefore, in effect, re-exported again within the products it makes and exports. And as much as 45 per cent of total imports become re-exports proper, the entrepôt trade. Virtually all Hong Kong exports, therefore, whether domestic exports or re-exports, contain a significant proportion of imported products. In this respect, Hong Kong has all along remained true to the function it knows best, that of being a trading

economy.

      This also means that the distinction between domestic exports and re-exports is not as sharp as the figures imply. The line drawn between them is nevertheless very important because it depends on the definition of Hong Kong origin, that is, those products that can be classified as made in Hong Kong by virtue of possessing sufficient Hong Kong value added or sufficient transformation. Domestic exports, as thus defined, are entitled to privileges pertaining to Hong Kong made products in overseas markets, such as GATT most favoured nation (MFN) treatment, generalised system of preferences (GSP) treatment or, in the case of textile exports, entitlement to Hong Kong quotas.

All other exports are re-exports. But, in practice, there is a spectrum of value added or transformation. There are no exports without Hong Kong content, even if it is only port charges or financing or finding markets. Other products are broken down and re-packaged for different markets or containerised and so on. Still others have some manufacturing

8

HONG KONG AS A PARTNER IN WORLD TRADE

operations done on them, but not sufficient to qualify them for Hong Kong origin. They are all re-exports. As we have seen, however, domestic exports also have an import content, some more than others, but considerable in most cases.

      The Hong Kong economy is, thus, essentially a transformation economy, transforming imports in one way or another into saleable exports or re-exports. Each manufacturer is constantly seeking out the best materials for making his product in terms of price and quality. There is very little vertical integration within industry and manufactures in the later stages of production are just as likely to use imported materials, even if these are also made in Hong Kong. For instance, by now most garment makers use imported cloth even though there is also Hong Kong made cloth; and weavers may use imported yarn. In every case, local production has to compete on equal terms with imports. As an example, although Hong Kong is the world's largest exporter of clothing, it is also the world's largest importer of cotton and man-made fibre fabrics. Another example is that Hong Kong, although the world's largest exporter of watches by quantity and the third largest by value, is also the second largest importer by value, a significant quantity being sold to tourists.

Determinants of Growth

It is worth looking a little more closely at some of the main forces which have lain behind and contributed to the growth of Hong Kong's trade and of the economy so far described. Why was it that tiny Hong Kong, facing the unpromising circumstances of the early post-war years, became the first, the pioneer, of the so called newly industrialising countries (NICs) after Japan - before South Korea and Taiwan or elsewhere in Southeast Asia or, for that matter, anywhere else in the developing world? How was it that Hong Kong was the first developing territory to break into the rich markets of Europe and North America and sell manufactured goods? The relative importance of the factors involved can be subject to argument but the following, although not exhaustive, are among the more important. Each of them has played its part but, together, they have interlocked and reinforced each other in helping to drive forward the engine of the economy. They are:

(1) The existence of the free port and free trade.

(2) A convertible currency and the free movement of money.

(3) Government policies, including relatively low taxation and a prudent fiscal policy. (4) The long accumulation of commercial and financial experience.

    (5) Hong Kong's favourable location and good communications. (6) The hard work and entrepreneurial instincts of the population. (7) The flexibility of the labour market.

       In many ways the first of these, the free port, has been the most important, the bedrock of economic policy in Hong Kong since its inception. Contrary to popular misconception, the main beneficiary of free trade is the economy of the territory actually applying it, for it ensures that all parts of the economic system are subject to, and have to adapt to, the forces of the world market and that, consequently, its resources are used most efficiently and most productively. This, in turn, ensures a faster rate of economic growth and higher standards of living than would otherwise be the case. It is no accident that a recent study of developing countries has shown, on the basis of World Bank figures, that capital has been invested more efficiently in Hong Kong in terms of the resulting increase in production than anywhere else. For none of the other economies studied has been required to adjust so completely or so rapidly to changes in world market forces.

       The second element, the free movement of money, is also essential if the free port is to operate effectively. The Hong Kong dollar is freely convertible into all other currencies and

HONG KONG AS A PARTNER IN WORLD TRADE

9

there is no restriction on the inward or outward movement of funds for any purposes and no exchange controls. There are thus no payments constraints standing in the way of the conduct of trade, and capital can also move in and out of the territory without difficulty. In practice, also, there are no balance of payments difficulties because the net inward or outward movement of funds feeds back into the internal economy through the monetary system and the level of interest rates and, under a flexible exchange rate regime, through movements in the rate of exchange. This, in turn, leads to adjustments which dampen down or offset any excessive inward or outward movements of money.

      Third is the importance of certain crucial and long-standing government policies. The government does not interfere, through excessive controls and regulations, with the conduct of private business. The people are free to conduct their affairs in accordance with the rule of law, including a soundly-based and well-administered body of commercial law, of capital importance for the orderly conduct of trade. No decisions have ever been taken as to which industries or activities might best be suited to Hong Kong conditions, or to attract or subsidise particular industries at the expense of others, and the fortunes of all have been subject to their success or otherwise in a free market.

      Of particular importance has been the government's conduct of its fiscal policy. This has been based on the principle of balanced budgets, with revenue covering all expenditure, including capital expenditure, coupled with a relatively low, simple, certain and easily administered system of taxation. In the 40 years since the Second World War in only six have there been budget deficits, and then usually only of modest proportions. The other 34 years have all registered surpluses, sometimes very substantial. The result has been the accumulation of large fiscal reserves and virtually no public debt.

      This has been accompanied by a relatively low level of taxation which has, nevertheless, been extraordinarily productive of revenue. In the early post-war years total annual government revenue came to around $200 million. In the most recent fiscal year, 1985-6, it amounted to over $40,000 million or 200 times more in money terms. Even taking account of the intervening rise in prices it was probably as much as 35 times larger in real terms. This is another indication of the growth of the economy over the period. Without it, the equally impressive expansion of public services could not have been contemplated.

      What appears to have been the case is that the maintenance over a prolonged period of a low, simple, stable and certain system of taxation, with no loopholes and special deductions, has helped in nurturing incentives to achieve and to create wealth from which the whole community has benefited. This aspect of affairs, indeed, is now beginning to be more recognised in some advanced industrial countries and the tax reforms recently voted in the United States are following a path which has certainly been well trodden by Hong Kong.

      The fourth factor assisting Hong Kong in world markets has been its long accumulation of commercial and financial experience. A whole network of commercial organisations has grown up over the years, ranging from the large trading houses to small import/export firms and these have been able to exploit contacts in distant markets and to seek out new ones. The existence of this network was of particular importance in the earlier stages of industrialisation because it provided ready-made links into overseas markets. A well- established banking and financial nexus was also in place to provide funds for working capital and for machinery and other equipment and to underwrite trade. Finally, a network of shipping lines and other communications links was also already in existence coupled, in Hong Kong itself, with one of the most efficient ports in the world. All these elements together played a big part in helping to give Hong Kong a head start in industrialisation.

10

HONG KONG AS A PARTNER IN WORLD TRADE

Connected with this has been Hong Kong's favourable location in a strategic position within the Pacific basin, athwart the major shipping and air routes, which provide it with convenient connections to all the major world markets. The territory's modern network of telecommunications links with all parts of the world by wireless, cable and satellite has also played a crucial part in recent years in facilitating and speeding business transactions. Of particular importance throughout its history has been Hong Kong's position on the edge of China, which makes it the natural gateway for trade with the world's most populous country. This has been assuming even more significance in recent years, as we shall see.

Next, and not least, are the characteristics of the people of Hong Kong. Swollen by successive waves of immigration as well as by natural increase, the population has increased by about a million every decade since the late 1940s, from just over two million in 1950 to three million at the beginning of the sixties, four million in the early seventies and five million at the start of the eighties. It now totals about 5.5 million. It is a people bustling and active, restlessly in search of opportunities to better themselves, hard working and perceptive. There is a wealth of entrepreneurial and business talent continually bubbling to the surface and, with a gambler's instinct, many are willing to try their hand at starting their own enterprises, often in a very small way. Many have failed on the way, but many have succeeded and have enriched themselves in the process of making their contribution to economic expansion. Of importance, also, has been the cross fertilisation between local business and expatriate enterprises, bringing with them outside investment and know how. Finally, and of particular significance in the workings of the economy, has been the functioning of the labour market. This has operated much closer to free market principles than is the case with most other economies, especially among the advanced countries. Wages have, for the most part, been determined by the supply and demand for labour and have not been greatly influenced by collective bargaining, certainly not by central, industry-wide, collective bargaining between employers associations and powerful trade unions. It has been alleged in the past that this has led to the exploitation of labour; but this is not a charge that can easily be sustained in an expanding economy such as exists in Hong Kong. The fact that real wages have increased by some 40 per cent in each of the decades of the sixties and seventies is evidence that the fruits of economic growth do filter down to the labour force and that the system works. Certainly all this means that the Hong Kong labour market operates very flexibly to induce labour to move from declining to expanding areas of activity and thus to be used most productively. Because of this flexibility, also, it ensures that full employment is the norm and that the continuous adjustments that are taking place in wages and conditions help to maintain full employment.

       Of course, this is not all. There has been a very considerable body of government legislation laying down minimum working conditions and covering health hazards in certain industries, the employment of women and young people, severance pay and so on. Hong Kong has adhered to more International Labour Organisation (ILO) conventions than any other territory in comparable economic circumstances and more than some advanced countries. Very considerable efforts are also being made in education and training to upgrade the skills of the working population. However, the flexibility of Hong Kong's labour market has played a big part in facilitating the continuous adjustment of the economy as a whole to the demands and opportunities of world markets.

Trading Partners

Although Hong Kong conducts trade with all continents and with most countries in the world, the first point to note is that the greater proportion of its trade is carried on with

HONG KONG AS A PARTNER IN WORLD TRADE

11

relatively few trading partners. Well over 80 per cent of its domestic exports, re-exports and imports are sent to, or come from, the top 10 destinations or suppliers and, in each case, more than two thirds are accounted for by the top four destinations or suppliers. Indeed, in 1985, as much as 56.1 per cent of domestic exports and 57.7 per cent of re-exports went to just two markets, the United States and China, and China and Japan between them supplied almost a half of all Hong Kong's imports. All this is clearly illustrated in Table 4.

Table 4

Proportions of Hong Kong's Trade in 1985 Accounted for

by the Top Four and Top Ten Trading Partners

Domestic Exports

Trading Partner

(%)

Re-exports Trading Partner

(%)

Imports Trading Partner

(%)

United States

44.4

China

43.7

China

25.5

China

11.7

United States

14.0

Japan

23.1

United Kingdom

6.6

Japan

5.2

United States

9.5

West Germany

6.2

Singapore

4.2

Taiwan

9.0

Total Top Four

68.9

67.1

67.1

Total Top Ten

83.0

82.4

85.3

Source: Hong Kong Annual Report, 1986.

      For many years the larger part of Hong Kong's domestic export sales have been concentrated in the consumer markets of the developed countries of North America and Western Europe, while her imports of raw materials, foodstuffs and some consumer goods have, in the main, come from neighbouring countries in Southeast Asia. This latter is what might be expected, since raw materials, semi-manufactures and most foodstuffs are more bulky in terms of their value, or more perishable, which tends to give nearby suppliers a competitive advantage. Hong Kong does, however, provide a good market for capital equipment, more sophisticated consumer goods and some foodstuffs from North America and Western Europe, and the convertible currency with which it pays for imports from other sources provides the countries concerned with the foreign exchange to help pay for their own imports from the advanced countries.

Re-exports and the China Dimension

The most dramatic development in Hong Kong's trade in recent years has, however, been the almost explosive growth in trade with China following the opening of the Chinese market to more external trade at the end of the 1970s. Hong Kong has all along been itself a good and expanding market for Chinese exports, both for its own use and for re-export; but, until the late seventies, it had sold little, if any, of its own domestic exports to China. That picture has now changed dramatically, as the following figures of Hong Kong's domestic exports to China since 1980 show:

$ billion

1980

1981

1982

1983

1984

1985

1.6

2.9

3.8

6.2

11.3

15.2

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HONG KONG AS A PARTNER IN WORLD TRADE

Of even more significance has been the growth of the re-export trade in recent years. Some indication of the expansion in the volume of re-exports is given in Table 2, that is, from less than three times its 1966 size in real terms in 1976, to 7.5 times in 1981 and to almost 14 times by 1985. Another measure is the percentage of re-exports in total exports, which has expanded equally dramatically in recent years as follows:

1966

24.2%

1970

19.0%

1976

21.5%

1978

24.5%

1981

34.2%

1985

44.8%

      From a low of less than 20 per cent of total exports in the early seventies, the proportion of re-exports had barely risen to the 1966 level by 1978. Since then, however, re-exports have increased their share very rapidly, to reach almost 45 per cent in 1985, and this despite the very considerable growth in domestic exports that has also taken place.

The greater part of this resurgence of the entreport trade has been China oriented. In other words, no sooner had China begun again to open her trading doors to the outside world than Hong Kong was standing ready to resume its old role as a major conduit for that trade, but this time expanded by the greater dimensions and improved communica- tions of the modern world. Table 5 shows the extent to which Hong Kong's re-exports, now grown to over $100 billion, are dominated by trade to and from China.

Table 5

China's Role in Hong Kong's Re-exports in 1985

Re-exports of China origin goods to rest of the world

Re-exports to China from rest of the world

China origin goods re-exported back to China

Total re-exports involving China

Re-exports from rest of the world to rest of the world

Total re-exports

$ million

Per cent share

31,552

30.0

46,023

43.7

3,076

2.9

77,575

73.7

27,695

26.3

105,270

100.0

Source: Hong Kong Trade Review 1985. Hong Kong Trade Development Council, May, 1986.

China has now become Hong Kong's biggest trading partner, accounting for almost 26 per cent of the territory's total exports and imports compared with 20 per cent for the next largest partner, the United States.

In addition to the growth in trade there has also been a large expansion of investment by Hong Kong enterprises in China, particularly in the new special economic zones and by Chinese interests in Hong Kong. Furthermore, Hong Kong is also acting as the gateway for many Western enterprises to do business with China and is providing expertise to assist in the process. Large numbers of tourists are also entering China through Hong Kong in addition to the millions of visits made to China by Hong Kong residents each year. In general, the economic links between Hong Kong and China are growing steadily in number and complexity and a large part of southern China, especially, is benefiting significantly from its rapidly expanding economic relations with Hong Kong. The growth of the Chinese economy is now beginning to pick up quite rapidly following the economic reforms of recent years. If it continues, it must be accompanied by a similar expansion in foreign trade, from which Hong Kong can only stand to benefit further.

HONG KONG AS A PARTNER IN WORLD TRADE

Trade in Services

13

No survey of Hong Kong's trade would be complete without some mention of trade in services. In 1985, total imports and exports of goods came to almost $467 billion, while trade in services amounted to about $80 billion, or some 17 per cent of the trade in goods. In contrast to the trade in goods, however, where imports almost always exceed exports, it is the other way round with services. Exports always exceed imports, usually by a significant margin. Trade in services is concentrated around Hong Kong's position as a commercial, communications and financial centre and as a tourist destination. Thus, shipping and aviation services, travel, and banking, financial and insurance services together account for as much as 90 per cent of total exports of services. In recent years the surplus on trade in services has ranged between $10 billion and $15 billion and this has gone a long way towards offsetting the deficit on trade in goods. In 1985 there was, exceptionally, also a small surplus on trade in goods and in 1984 only a small deficit. These two years, therefore, registered significant surpluses on total trade in goods and services of $11 billion in 1984 and $17 billion in 1985. In overall balance of payments terms they must have been offset by a net outward movement of capital.

Protectionism and the Multi-Fibre Arrangement (MFA)

      Over the last 40 years there has, on balance, been a very significant reduction in barriers to international trade, largely as a result of the seven rounds of multilateral trade negotiations conducted since the late 1940s under the auspices of the GATT. In particular, import tariffs on manufactured goods in almost all developed countries have, for the most part, been reduced to low levels. This, coupled with improvements in transport and communications over the period, has led to an unprecedented expansion in world trade and in production and standards of living in many countries. It is no accident that expanding trade has gone together with growing prosperity because the two are intimately linked. As we have seen with Hong Kong, a country gains by lowering its own barriers to imported products because this induces it to use its internal resources more efficiently and to concentrate on what it does best.

Unfortunately, following the heady days of rapid expansion in the sixties and early seventies, the world economy has been going through rather choppy waters during the last decade and more and this has led to a resurgence of protectionist pressures. In particular, there has been a marked reluctance on the part of whole economies and their electorates willingly to adapt to rapid and accelerating changes in technology and in market con- ditions. This has led to excessive rigidities in both product and labour markets and, in some cases, to high and growing levels of unemployment.

       Hong Kong has been fortunate in these circumstances because the flexibility of its economy and its complete exposure to world market forces has enabled it to adjust rapidly to all changes, whether externally or internally generated. As a result, its economy has continued to expand and full employment has been maintained.

      A particular manifestation of market rigidity in some developed countries has been the reluctance of certain declining and uncompetitive industries to adjust to market forces, particularly from import competition. Instead, these industries and their supporters have exerted pressure, through the political process and otherwise, to call for increased pro- tection against imports. This has notoriously been the case with the textile and clothing industries, but other industries - steel, vehicles, machine tools, advanced electronics among them are now also joining the queue for protection. Indeed, there are even pressures, particularly in the United States, for attacking its trade deficit through a more general

14

HONG KONG AS A PARTNER IN WORLD TRADE

restriction of imports, an action which would only make things worse by restricting trade all round and lowering production and standards of living.

In Hong Kong's case, the major impact of overseas protection on its trade has, without doubt, been in textiles and clothing. This started with the so called voluntary restraint on exports of cotton yarns and grey cotton fabrics to the United Kingdom in 1958. Thereafter, restraints on exports to most of the main developed country markets grew in coverage and complexity, through the Short Term and Long Term Arrangements on cotton textiles in the sixties and subsequently the MFA, which came into force in 1973 and which has recently been renewed a third time for a further five years to 1991. Hong Kong has therefore faced restraints of one kind or another on its textile exports for almost 30 years. Being, however, one of the first in the field among the developing countries which are subject to these restrictions, it has usually managed to negotiate big quota entitlements, based on its previous export performance, as the restrictions spread to new products and new markets. Another consequence of the quantitative limitations resulting from the quotas has been a steady upgrading of quality by Hong Kong manufacturers in order to move into higher-priced and more profitable market sectors. Despite the undoubted effect of the restrictions, Hong Kong has still managed to become the largest exporter of garments in the world.

Beyond textiles, and of growing importance in the conduct of world trade, has been the tendency for protectionism to spread to other products, as indicated above, not so much through the old fashioned devices of tariffs and import quotas, but through the negotiation of industry to industry arrangements, voluntary export restraints (VERs) and orderly marketing arrangements (OMAs), in other words through arrangements to cartellise or manage trade and to share out markets. Virtually all this new protectionism, as it is coming to be called, is being negotiated and organised outside the GATT system of non- discrimination. Pressures are also increasing for changes in the GATT rules to permit emergency safeguard action, aimed at assisting industries threatened by sharply rising imports, to be directed against the exports of particular suppliers who are alleged to be causing the damage, rather than being applied to imports from all sources on a non- discriminatory basis. Actions of this sort to corral and manage trade and to discriminate between suppliers could be particularly damaging to Hong Kong, which is so dependent on the efficient functioning of a liberal, open and non-discriminatory world trading system. It is, therefore, a particularly important task for Hong Kong within the forum of the GATT, and acting in concert with other like-minded members, to fight against the new protec- tionism and for the continuation of an open, non-discriminatory, world trading system. Given its own completely open market, there is no doubt that it will be in a position to approach this task without ambivalence or hypocrisy.

Is Hong Kong a Laissez-Faire Economy?

People reading all the above and knowing little or nothing about Hong Kong could be excused if they assumed that the territory maintains a completely laissez-faire economy, somewhat along 19th century lines, and which relies completely on the free play of market forces for its functioning. Mention so far of the government's role has been confined to the maintenance of free trade, a convertible currency, low taxation and a balanced budget. This is true as far as it goes, in the sense that the government does allow private business to conduct its affairs without excessive interference and without subsidy. But it is far from being the whole truth. The fact is that the government does operate extensively and effectively in areas which are proper to its role and which, in some cases, are essential for the

HONG KONG AS A PARTNER IN WORLD TRADE

15

functioning of a civilised society. And, because of the efficiency of the taxation system in garnering revenue which has already been mentioned, it manages to raise and to spend over $40 billion a year in doing so.

      The government or, through it, various organisations subvented from public funds, provides, for instance, free or heavily subsidised education from the primary level to university; free or heavily subsidised medical and health and hospital services; social welfare assistance to the old and the needy paid for from general taxation, and a vast network of public housing for roughly half the population. On top of these is a large and growing programme of public works, including water supplies, highways, railways, the building of six new towns for an eventual population of some 2.5 million people, the airport and the harbour. There are large programmes and activities covering recreation, culture and sports and the running of extensive country parks, as well as a growing network of pollution controls. Public utilities, such as electricity and telephones and the banking and securities industries, are regulated. Labour legislation has already been mentioned.

      As regards industry, although the government does not seek to control its activities other than for safety, hygiene and the control of pollution, general assistance is provided in areas where individual firms cannot easily, or economically, provide it for themselves. For instance, there is a trade development organisation, the Hong Kong Trade Development Council, an Export Credit Insurance Corporation and a Productivity Council, as well as facilities such as a standards and calibration laboratory. Industrial training is also organised through a central body, with subsidiary bodies for various industries, each organised in collaboration with the industry concerned.

      All these multifarious activities together, and others not mentioned, play their part in making Hong Kong a modern, forward looking, rounded and, as far as possible, a humane society. A lot of them are essential for the efficient working of the economy and are therefore in every way complementary to the activities of the private sector in producing goods and services. Together they make Hong Kong a free economy but certainly not one dedicated to the extremes of laissez-faire.

Conclusion

The foregoing has tried to tell something of the story of how trade with the outside world, in all its forms, has been the major factor sustaining the economic life of Hong Kong for almost 150 years. The completely open nature of the economy means that it must continuously adjust to world market forces, both at the micro level of the individual firm seeking to sell its products at the best profit or to buy from the most advantageous sources and thus helping to use resources most effectively - right through to the macro level, where the whole balance of the economy adjusts to maintain equilibrium in external payments. It is this process, sustained consistently over many years, which has helped to bolster the economic development of the territory.

Naturally, as in any free economy, there have been ups and downs. There have been occasional bouts of excessive internal credit creation and speculation - the property booms of the early sixties and late seventies for instance - as well as external blows, particularly the world recessions of the mid-seventies and the early eighties. In each case, however, the economy has paused for adjustment and has then moved forward again, with trade leading the way.

       Another feature that emerges clearly is that the economy has been sustained by trade in both directions, by imports as well as by exports. The greater part of its internal consumption and investment has been met by imported goods, its industries have depended

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16

HONG KONG AS A PARTNER IN WORLD TRADE

     on imported raw materials, and all its entrepôt trade, by definition, involves imports as well as exports. There has been absolutely no attempt to boost exports artificially by subsidies or bounties or to restrict imports in order to raise employment, strengthen external reserves or to protect internal economic activities. Taxation is levied impartially on all those earn- ing incomes from, or conducting business in, Hong Kong, and there has been no policy to attract investment through tax holidays or other special inducements.

A further consequence is that the adjustment process, which is continually proceeding between the internal economy and the external balance of payments, tends to push the system towards a balance of trade in goods and services and voluntary capital movements together. So, in general terms, Hong Kong very rarely runs large surpluses or deficits on its external trade and, on the rare occasions that it does so, forces are operating to move the system back towards balance.

      When all these factors are considered together, they form a picture of a very accom- modating partner in world trade. Hong Kong not only provides a free, open and growing import market for a wide range of goods and services from all over the world, but its exports also supply the needs of consumers in many markets at competitive prices and qualities that can only enhance their standards of living. Which only goes to show that international trade, when properly conducted, is not a game of winners and losers. All trading partners gain from trade, and participation in a more open international trading system can but increase growth and prosperity. That is a lesson which Hong Kong, without doubt, has learned very well.

2

Constitution and Administration

[UR

HONG KONG is administered by the Hong Kong Government, and its administration has developed from the basic pattern applied in all British-governed territories overseas. The head of the Hong Kong Government is the Governor. Under the terms of the Joint Declaration of the British and Chinese Governments on the question of Hong Kong which entered into force on May 27, 1985, Hong Kong will become, with effect from July 1, 1997 a Special Administrative Region of the People's Republic of China.

Role of the Governor

The Governor is the representative of the Queen in Hong Kong. He has ultimate direction of the administration of Hong Kong and is also the titular Commander-in-Chief. As head of the government, he presides at meetings of both the Executive Council and the Legislative Council. The Governor is in close touch with the administration of the territory and exerts a major influence over the direction of affairs.

Sir Edward Youde, who had been the Governor of Hong Kong since May 1982, died suddenly in Peking on December 5, 1986. The Chief Secretary, Sir David Akers-Jones, was appointed Acting Governor pending the appointment of a new Governor.

The Governor is appointed by the Queen and derives his authority from the Letters Patent passed under the Great Seal of the United Kingdom. The Letters Patent establish the basic framework of the administration of Hong Kong and, together with the Royal Instructions passed under the Royal Sign Manual and Signet which lay down procedures that must be followed, form the written constitution of Hong Kong. However, there are various well-established practices which substantially modify the operation of this formal constitution, so that there is extensive consultation with the community on all major issues of policy and the conduct of the administration. The combined effect of the constitution and these practices forms the practice of government in Hong Kong.

The Letters Patent create the office of Governor and Commander-in-Chief of Hong Kong, and require him to observe its laws and the instructions given to him by the Queen or the Secretary of State. They also deal with the constitution of the Executive and Legislative Councils, and the Governor's powers in respect of legislation, disposal of land, the appointment of judges and public officers, pardons, and the tenure of office of Supreme Court and District Court judges.

The Royal Instructions deal with the appointment of members of the Executive and Legislative Councils, the nature of proceedings in the Executive Council, the Governor's responsibility to consult the Executive Council and his right to act in opposition to it (a right not exercised in recent times - see below). They also deal with the membership of, and election to, the Legislative Council, the nature of proceedings there, the format of the legislation passed by the council, and the nature of legislation which may not be passed.

18

CONSTITUTION AND ADMINISTRATION

The Standing Orders of the Legislative Council, made under the authority of Royal Instruction XXIII, provide how Bills are to be passed.

Central Government

Executive Council

The Executive Council consists of four ex-officio members - the Chief Secretary, the Commander British Forces, the Financial Secretary and the Attorney General - together with other members who are appointed by the Governor with the approval of the Secretary of State. As at December 31, 1986 there are 12 appointed members, including two official members. Appointed members hold office for fixed periods.

The council meets at least once a week, in camera, and its proceedings remain confidential, although many of its decisions are made public. In theory, the function of the council is to advise the Governor, who is required by the Royal Instructions to consult it on all important matters of policy. Subject to certain procedures being followed, the Royal Instructions allow the Governor to act against the advice of the council and to refuse a member's request that a specific matter be put before the council. There is no instance in recent times of the Governor having done either of these things. In practice, policy is decided corporately. The Governor in Council - the Governor acting in consultation with the Executive Council - is Hong Kong's central and most important executive authority.

      In addition to policy matters, the Governor in Council decides appeals, petitions and objections under those ordinances which confer a statutory right of appeal. The council also considers all principal legislation before it is introduced into the Legislative Council, and is responsible for making subsidiary legislation (regulations) under a number of ordinances. The council's advice on matters of policy involving the expenditure of public funds is subject to the approval of the necessary funds by the Finance Committee of the Legislative Council.

Legislative Council

The Legislative Council is constituted by virtue of the Letters Patent, and its primary function is the enactment of legislation, including legislation for the appropriation of public funds. A Bill passed by the Legislative Council does not become law until the Governor gives his assent to it; after the Governor's assent a Bill becomes an ordinance without being subject to external approval, although the Queen has reserve powers to disallow an ordinance. The power of disallowance has not been used for very many years.

      The Legislative Council has a maximum membership of 57, comprising the Governor, who is the President; three ex-officio members, namely the Chief Secretary, the Financial Secretary and the Attorney General, seven official members, 22 appointed members and 24 elected members.

      The official members and appointed members are appointed by the Governor with the approval of the Secretary of State. Official members normally remain appointed for as long as they hold office under the Crown in Hong Kong. Appointed members can be appointed for up to three years and may be re-appointed for further periods of not more than three years each.

Elected members are elected by nine functional constituencies and 12 electoral college constituencies comprising the members of the district boards, the Urban Council and the Regional Council.

      Each functional constituency represents an occupational or professional group: commer- cial; industrial; financial; labour; social services; medical; teaching; legal; and engineering,

CONSTITUTION AND ADMINISTRATION

19

architectural, surveying and planning. Of these, the commercial, industrial and labour functional constituencies elect two members each while the other six elect one member each. For the electoral college, the 19 district boards are grouped into 10 geographical constituencies, consisting of one, two, three or four district boards, representing roughly 500 000 people. The members of the Urban Council and the Regional Council form two additional constituencies.

Elections are normally held at three-year intervals. The Governor has power to dissolve the council; on dissolution all elected members shall vacate their seats and an election shall be held within three months. A by-election is held should a casual vacancy arise.

      The Legislative Council meets in public once a week. There is a recess of about two months in August and September. Proceedings are bilingual; members may address the council in Chinese and English, and facilities for simultaneous interpretation of the proceedings are provided.

      Legislation is enacted in the form of Bills, which go through three readings and a committee stage. Most business, including Bills, is transacted by way of motions, which are decided by the majority of votes. If a clear majority either for or against any motion is not apparent from a voice vote, the President may order the council or the committee to proceed to a division, when votes will be taken from members individually and recorded by the Clerk to the Council. Official members are expected to vote with the government on all issues, except those where a 'free vote' is expressly permitted. Private Bills, not representing government measures and intended to benefit particular persons, associations or corporate bodies, are introduced from time to time and enacted in the same way. All Bills after passing through the Legislative Council receive the assent of the Governor and are then gazetted as ordinances.

Apart from the enactment of legislation, the business of the council includes two major debates in each legislative session: a wide-ranging debate on government policy which follows the Governor's address at the opening of the new session of the council in October each year, and the budget debate on financial and economic affairs which takes place in February and March during the second reading of the annual Appropriation Bill.

Members may also address questions to the government on policy issues for which the government is responsible, either seeking information on such issues or asking for official action on them. Members may request either oral or written answers to the questions asked, and supplementary questions for the purpose of elucidating an answer already given may also be asked.

      Other business of the council includes motions on subsidiary legislation, statements and policy papers (Green Papers and White Papers) for debate. A complete record of all papers laid before the council together with a verbatim record of proceedings (Hansard) is kept in respect of each legislative session.

Finance Committee

The Finance Committee of the Legislative Council consists of the Chief Secretary (Chairman), the Financial Secretary, one other official member of the council (at present the Secretary for Lands and Works) and all the appointed and elected members of the council. It scrutinises public expenditure, both at special meetings held in March at which members examine the draft Estimates of Expenditure, and at regular meetings held throughout the year to consider requests which entail changes to the provisions agreed by the Legislative Council in the estimates each year, or to note financial implications of new policies. The special meetings have been held in public since 1984 and all regular meetings

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have been held in public since March 1985. The Finance Committee has two sub- committees, the Establishment Sub-Committee and the Public Works Sub-Committee.

       The Establishment Sub-Committee consists of 27 members of the Legislative Council, one of whom is the Chairman, plus the Secretary for the Civil Service and the Deputy Financial Secretary, who are the only public servants on the committee. It examines in detail proposals for directorate posts, the creation of new ranks and changes in salary scales and makes recommendations on them to the Finance Committee. It also considers reports on value for money studies and reports to Finance Committee on changes in departmental establishments and on the size and cost of the Public Service.

       The Public Works Sub-Committee consists of the Financial Secretary (Chairman), the Secretary for Lands and Works and 26 other members of the Legislative Council. It reviews the progress and priority of capital works in the Public Works Programme, and makes recommendations to the Finance Committee on proposals for changes to the programme.

Public Accounts Committee

The Public Accounts Committee, established by resolution of the Legislative Council on May 10, 1978, is a standing committee of the Legislative Council consisting of a chairman and six members, none of whom are official members of the council. Its main function is to examine and report on the findings in the Director of Audit's Report on the audit of the government's annual statements of account prepared by the Director of Accounting Services, and on any matter relating to the performance of his duties and the exercise of his powers under the Audit Ordinance. The prime concerns of the committee are to see that public expenditure has not been incurred for purposes other than those for which the money was granted, that full value has been obtained for the sums expended, and that the administration has not been faulty or negligent in its conduct of financial affairs.

The Director of Audit's report is tabled in the Legislative Council in November. The committee then meets in public and the controlling officers of different heads of expenditure give evidence on the different aspects of public expenditure covered in the Director of Audit's report. The committee's report is laid on the table of the Legislative Council within three months of the laying of the Director of Audit's report. The government's response to the report of the committee is contained in the government minute, which describes the measures taken to give effect to the committee's recommendations or the reasons why acceptance of those recommendations is not considered appropriate. This minute is also laid on the table of the Legislative Council within three months of the laying of the Public Accounts Committee's report each year.

Select Committees

Two select committees were appointed by the Legislative Council in the 1985-6 session. One of them was given the task of considering measures to be taken to resolve the problems involved in the prosecution and trial of complex commercial crimes, including changes in the procedures before and during trial and mode of trial. The other was asked to consider the future administration of the Hong Kong War Memorial Fund, having regard to the relevant legislation, the interests of the beneficiaries of the fund and the public interest. The two select committees were dissolved in July 1986, after reporting their findings to the council.

OMELCO

OMELCO, which stands for Office of the Members of the Executive and Legislative Councils, is the office of the non-government members of the Executive and Legislative

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Councils. Members play a significant role in the administration of Hong Kong. They advise on formulation of government policy, process and enact legislation, consider complaints from members of the public against government departments and agencies, control public expenditure and monitor the effectiveness of public administration. Up to October 1986, members were called 'Unofficials', to distinguish them from government members (Officials) of the two councils. Following a review, it was decided that the title 'Unofficial' should be dropped as it could be misleading to persons not familiar with the operation of the Hong Kong system.

Through their work, members are involved in the major public issues. They study and comment on bills and major policy initiatives proposed by the government, taking into account the views of the public through members' contacts with various constituencies, district boards, as well as representations received from members of the community.

       OMELCO members have 21 specialist panels which monitor the work and needs of different areas of activity, such as education and manpower, health and welfare, the public service, housing, language, transport, trade and industry, public relations, and matters concerning the future of Hong Kong. Besides meeting among themselves, panel members hold regular meetings with senior government officials and interest groups to hear their views. There is also an OMELCO group appointed by the Governor which monitors the handling of complaints against the Independent Commission Against Corruption. In addition, members serve on more than 300 committees and boards dealing with public and community affairs and increasingly are appointed to chair the most important of these.

       Members maintain regular informal contact with district boards and keep in close touch with what is happening throughout the territory by regular visits to government depart- ments and to urban and New Territories districts. They obtain the latest information on development plans and the problems people face, and it is a result of these contacts and visits that many of the questions in the Legislative Council are raised.

      In addition to housing the Council Chamber, the Legislative Council Building also provides accommodation for members and staff of the OMELCO Office. The office is not a government department, although it is funded by the government and includes a number of seconded government officers who provide research and administrative assistance to members. It is also a channel through which the public may express grievances and it handles all public complaints, appeals and representations on behalf of members alleging maladministration by government officers. A full record of the work of OMELCO is contained in its annual report.

Urban Council, Regional Council and District Administration

Urban Council

The Urban Council is the statutory council for the urban areas with a jurisdiction covering the provision of municipal services to almost four million people. As such, the council has considerable executive authority and is charged with full responsibility over a wide range of municipal functions. These functions include street cleansing, collection of refuse, control of general environmental hygiene, and enforcing - through licensing - requirements on the hygienic handling and preparation of food in, among others, restaurants, shops and abattoirs.

       During the year, the council conducted a comprehensive review of the policy governing street traders and public markets. District Boards were consulted widely in the proposals contained in the review. Control of street traders (hawkers) has proved difficult because of the large scale and long tradition of the practice in Hong Kong.

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      Within the urban area, the Urban Council also constructs and manages all public sporting facilities such as swimming pools, parks, playgrounds, indoor and outdoor stadia, tennis courts, football grounds, squash courts, basketball courts and promotes a large number of sports at district level. The council manages museums, public libraries and several major cultural venues and multi-purpose facilities, including the City Hall, Queen Elizabeth Stadium and Hong Kong Coliseum. It is currently engaged in planning for the construction of a major Museum of Science and Technology. Meanwhile, a new Museum of Art is also currently under construction within the Kowloon Cultural Complex area, which will also contain a new concert hall, opera house and theatre to complement facilities already being run by the council elsewhere in the urban area. It promotes cultural performances and runs a comprehensive programme of public entertainment throughout the urban areas.

       The council consists of 30 members, 15 elected from district constituencies and 15 appointed by the Governor. It meets in public once a month, when it passes by-laws, deals with finances, formal motions and questions on its activities. The routine business of the council is conducted by 13 select committees and 16 sub-committees. The council's Standing Committee now conducts most of its business in public, and the Liquor Licensing Board and the Libraries, Food Hygiene and Clean Hong Kong Committees have opened their meetings to the public.

       The council's chief executive is the Director of Urban Services, who controls the operations of the Urban Services Department with a staff of 18 000. The director is charged with carrying out the council's policies and implementing its decisions.

       The council has been financially autonomous since 1973, and during 1986-7 will be spending about $2,000 million on council-controlled activities and projects. The council is financed by a share of the rates which provides about 75 per cent of its income, with the balance coming from various licence fees and other charges.

       The council has individual or collective ward offices spread throughout the urban areas where councillors deal with and answer complaints from the public on a great variety of matters. Although the majority of matters raised lie outside the council's jurisdiction, councillors are often able to assist and obtain redress where appropriate from the various government departments and public bodies.

Regional Council

The new Regional Council, established on April 1, 1986, is the statutory municipal authority for the area outside the jurisdiction of the Urban Council comprising the new towns of Tsuen Wan, Kwai Chung, Sha Tin, Tuen Mun, Tai Po, Fanling/Sheung Shui and Yuen Long and their hinterlands, together with the rural areas of Sai Kung and the Islands. Like the Urban Council, the Regional Council is responsible for all matters concerning environmental hygiene, public health, sanitation, liquor licensing and the provision of recreation and cultural facilities and services within its jurisdiction - the Regional Council area, where 1.8 million people live.

      The Regional Council comprises 36 members. Twelve of the members are elected directly from the 12 constituencies in the Regional Council area. Nine representative members are elected from the nine District Boards in the same area, 12 are appointed by the Governor and the remaining three (the Chairman and two Vice-Chairmen of the Heung Yee Kuk) are ex-officio members.

      The Regional Council's policies are implemented by its executive arm, the Regional Services Department, which has a staff of 8 500.

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       The Regional Council is financially autonomous. It is financed by income from fees, charges and rates collected in the Regional Council area. A one-off setting-up grant of $100 million has been provided from the central government. During its first year of existence in 1986-7, recurrent and non-recurrent expenditure is expected to amount to $850 million. Expenditure on capital works projects, however, is funded by the government under an interim arrangement which will continue to apply until 1988-9.

      The Regional Council has scheduled 13 meetings for 1986-7. In addition, the council has set up three functional select committees, nine geographically based district committees and a liquor licensing board. The three select committees deal with finance, capital works, administration, environmental hygiene, and recreation and culture, while the district committees deal with operational matters for each district. The select committees of the Regional Council meet monthly, the district committees meet bi-monthly and the liquor licensing board meets quarterly. All meetings of the Regional Council, its select committees, district committees as well as the liquor licensing board are open to the public.

      The Regional Council maintains close liaison with the district boards in the Regional Council area and the Heung Yee Kuk to ensure that local aspirations and views are taken into account in its deliberations. Some members of district boards are co-opted to the district committees of the Regional Council to enhance co-operation and communication between the Regional Council and district boards.

District Administration

     District boards are statutory bodies established in 1982 to provide an effective forum for public consultation and participation in administration at the district level.

      There are 19 district boards throughout the territory. They consist of members who are elected from constituencies in each district, or are appointed members, and Urban Councillors or rural committee chairmen who have seats reserved for them on the boards in the urban areas and in the New Territories respectively. There are altogether 237 elected members and 132 appointed members on the boards.

The functions of the district boards as laid down in the District Boards Ordinance are principally advisory. Through the advice they give, the boards have an important contribution to make in the management of district affairs. In monitoring the work of the government at the district level, the boards discuss a wide range of matters affecting the well-being of the people in the district.

      They are also responsible for minor environmental improvements and the promotion of recreation and cultural activities in their respective districts, with funds allocated specifi- cally for this purpose. To this end, $35 million was made available to the 19 district boards in 1986-7.

      In order to keep in close contact with the views of local residents, many board members take part in the meet-the-public scheme. Under this scheme, local residents can make an appointment to meet their board members in the district office and to express their views on local issues and problems.

       In the task of local administration, the boards work closely with district management committees (DMCs) which are chaired by the district officers and comprise representatives from the various government departments working in the districts. The DMCs provide a forum for inter-departmental consultation and discussion to help ensure that action taken by the government is co-ordinated and responsive to local needs and that, as far as possible, the advice of the district boards is taken into account.

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Until 1986, the district offices in Tsuen Wan and Kwai Chung and Tsing Yi were administratively part of one district, under the direction of the District Commissioner, Tsuen Wan. However, in August the two district offices became independent of each another. As a result, the number of administrative districts was increased to 19, equal to the number of district boards.

District offices and their sub-offices operate 66 Public Enquiry Service Centres through- out the territory. These centres provide a wide range of services free of charge to members of the public, including: answering general enquiries on government services, distributing government forms and information materials, administering statutory declarations, and managing the Free Legal Advice Scheme and the Rent Officer Scheme. During the year, these centres dealt with 15 million visits by people making enquiries and seeking assistance.

       In addition to district issues, the district boards' views were also invited on important policy documents with territory-wide implications, dealing with subjects such as the future of broadcasting in Hong Kong, proposals regarding medical services, changes in the law relating to triad society offences, and other proposals relating to law reform.

During the year, the nine district boards in the New Territories elected their representa- tives to the new Regional Council established in April. These nine members became the chairmen of the Regional Council's district committees established in each district to carry out their statutory functions. Each district committee comprises 15 members, of whom four come from the district boards and three come from the community, the rest being Regional Councillors.

Links Between the Representative Institutions

The Urban Council has established a close link with the district boards in the urban areas in that all Urban Councillors sit on district boards: elected councillors are ex-officio members of the boards of the district in which their constituencies lie, while appointed councillors are assigned to various boards. Moreover, through its regular meetings with groups of district board chairmen, the Urban Council is cultivating a closer relationship with the District Boards.

New Territories district boards maintain a close relationship with the Heung Yee Kuk (a statutory advisory body which represents the indigenous population of the New Terri- tories). Seats are reserved on the district boards for rural committee chairmen who are also ex-officio members of the Heung Yee Kuk's executive committee. With the formal establishment of the Regional Council in April 1986, a close link has been created with district boards in the New Territories. Each district board has a representative member on the Regional Council, and district board members are also included in the recently established special district committees under the Regional Council. Through these chan- nels, the district boards are consulted on a wide range of council matters affecting them.

The Regional Council also has a formal link with the Heung Yee Kuk, through the ex-officio membership of the chairman and the two vice-chairmen on the council. Moreover, three of its appointed members have also been chosen from members of the kuk to ensure a strong relationship with the traditional inhabitants of the New Territories.

The Urban Council and Regional Council which cover much the same fields in their respective areas have, during the year, set up liaison meetings between the two bodies and have also instituted joint ventures. In particular the Keep Hong Kong Clean Committee now encompasses both councils. The 1986 Flower Show was also a responsibility of both councils and planning has begun for the first joint Flower Show which will be held in the Regional Council's Shatin Central Park in March 1987.

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In addition, district boards and the Urban Council and Regional Council have links with the Legislative Council. The district boards are grouped into 10 electoral college con- stituencies, each returning one member to the Legislative Council. The Urban Council and Regional Council each forms an electoral college constituency, each returning one member to the Legislative Council.

Electoral System for the Urban Council, Regional Council and District Boards

     Elections to the Urban Council, Regional Council and district boards are on a geographical constituency basis and through a broad franchise. Practically everyone who is 21 years of age or over and who is a Hong Kong belonger, or has been resident in Hong Kong for the preceding seven years, is eligible to apply for registration as an elector in the constituency in which he lives. Registration of new electors is conducted on a voluntary basis annually in August and September. At the end of the year, the electoral roll carried 1 446 212 names, representing 44.2 per cent of an estimated total potential electorate of 3.3 million. Of these electors, 994 530 are resident in the Urban Council area and are entitled to vote at Urban Council elections and at district board elections in the Urban Council area. The remaining 451 682 are resident in the Regional Council area and are entitled to vote at Regional Council elections and at district board elections in the Regional Council area.

For district board elections, there are 145 constituencies, 83 in the 10 districts in the Urban Council area and 62 in the nine districts in the Regional Council area. For Urban Council elections, there are 15 constituencies, each consisting of a number of district board constituencies in the Urban Council area. The Regional Council has 12 constituencies, each covering a number of district board constituencies in the Regional Council area. There are altogether 237 elected district board members, 15 elected Urban Councillors and 12 elected Regional Councillors.

An elector may vote only in the constituency in which he has been registered. He may, however, stand for election to the Urban Council, the Regional Council or a district board in any constituency, provided he has been resident in Hong Kong for the preceding 10 or more years and his nomination is supported by 10 electors in that constituency. Elections are held on a three-year cycle, and voting is by simple majority.

At the Urban Council elections held in March, 39 candidates stood for election in the 15 constituencies. One was elected unopposed and the remaining 38 candidates contested the other 14 seats. Of the 944 844 electors in the contested constituencies, 218 573 cast their vote, giving a turnout of 23.1 per cent. The first Regional Council elections were held concurrently with the Urban Council elections. A total of 40 candidates were nominated in the 12 constituencies. One was elected unopposed and the remaining 39 candidates contested the other 11 seats. Of the 400 375 electors in the contested constituencies, 143 534 cast their vote, giving a turnover of 35.8 per cent.

Electoral System for the Legislative Council

The system for indirect election to the Legislative Council, introduced in 1985, involves an electoral college and nine functional constituencies. The electoral college comprises two special constituencies, the Urban Council and the Regional Council, and 10 district board constituencies, each returning one member to the Legislative Council. The functional constituencies, covering the commercial, industrial, financial, labour, social services, medical, legal, teaching and engineering, architectural, surveying and planning sectors, also return a total of 12 members.

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      The franchise for Legislative Council elections is prescribed accordingly. For the electoral college, an elector must be a member of the Urban Council, the Regional Council or a district board making up the respective special constituencies and district board constituencies. For functional constituencies, an elector who is an individual must have been registered under the Electoral Provisions Ordinance for the Urban Council, Regional Council and district board elections and be a member of an organisation forming part of the relevant constituency. No person may be registered in more than one functional constituency even if he is eligible. An elector who is not an individual must nominate a person not already an elector in his own right in the same constituency to be its authorised representative to vote at an election. That person may not be the authorised representative of another elector in the same or any other constituency. However, if eligible, a person may be registered to vote both in the electoral college and in the functional constituency to which he belongs apart from voting as an authorised representative. For the year, the number of electors registered in the electoral college and the functional constituencies stands at 436 and 42 428 respectively, as compared to the corresponding potential electorate of 439 and 70 678.

      The qualifications for candidature are simple: for an electoral college constituency, any person who is an elector registered under the Electoral Provisions Ordinance (and not necessarily be an elector in any electoral college constituency) and who has been resident in Hong Kong for the preceding 10 or more years, may be nominated if supported by five electors in that constituency. For a functional constituency, any person who is an elector registered under the Electoral Provisions Ordinance, has been resident in Hong Kong for the preceding 10 or more years and has a substantial connection with the relevant functional constituency may be nominated if supported by 10 electors in the constituency concerned.

      Voting is by absolute majority, with the use of a repeated ballot system for electoral college constituencies and a preferential voting system for functional constituencies. Elections are conducted every third year after 1985.

Advisory Committees

The network of government boards and committees is a distinctive feature of the system of government in the territory which seeks to obtain, through consultation with interested groups in the community, the best possible advice on which to base decisions. Thus advisory bodies of one kind or another are found in nearly all government departments. In general, advisory bodies may be divided into five categories: statutory bodies which give advice to a head of department (such as the Endangered Species Advisory Committees); statutory bodies which give advice to the government (such as the Board of Education); non-statutory bodies which give advice to a head of department (such as the Airport Facilitation Committee); non-statutory bodies which give advice to the government (such as the Transport Advisory Committee); and committees which are executive in nature (such as the Chinese Temples Committee).

Government officials and members of the public are represented on these committees. Well over 4 700 members of the public are appointed to serve on a total of 435 boards and committees, and some serve on more than one of these advisory bodies. These members are appointed on account of their specialist knowledge or expertise, or through their record or interest in contributing to the life of the community. Increasing importance has been attached to the contribution they make to the formulation and execution of government policies and, in order to utilise their potential to the full, a systematic and

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regular monitoring of the composition and effectiveness of these bodies is carried out. The government also broadens the cross-section of representation and encourages the constant inflow of new ideas by maintaining, whenever possible, a reasonable turnover of membership.

The Administration

Role of the Chief Secretary

The Chief Secretary is the principal adviser to the Governor on matters of policy, and is principally responsible for its implementation. He is the head of the Public Service. The Chief Secretary, the Financial Secretary and the Attorney General meet regularly with the Governor.

      The Chief Secretary has a very small personal staff. He exercises direction primarily as head of the Government Secretariat, the central organisation comprising the secretaries of the policy branches and their staff. Since 1902, when the office of Lieutenant-Governor lapsed, the Chief Secretary (or his predecessor, the Colonial Secretary) has deputised for the Governor during his absence. He is the Senior Official Member of the Executive Council and the Legislative Council and is the Chairman of the Finance Committee.

Role of the Financial Secretary

The Financial Secretary is responsible for the fiscal and economic policies of the Hong Kong Government, and is an ex-officio member of both the Executive and Legislative Councils. He is, in addition, a member of the Finance Committee of the Legislative Council, and Chairman of the Public Works Sub-Committee of the Finance Committee. As the government officer with primary responsibility for Hong Kong's fiscal and economic policies, the Financial Secretary oversees the operations of the Finance, Monetary Affairs, Trade and Industry, and Economic Services Branches of the Government Secretariat.

      The Financial Secretary is responsible under the Public Finance Ordinance for laying before the legislature each year, the government's Estimates of Revenue and Expenditure. In his capacity as an official member of the Legislative Council, he delivers a major speech each year, outlining the government's budgetary proposals and moving the adoption of the Appropriation Bill, which gives legal effect to the annual expenditure proposals contained in the Budget. He is also personally responsible under a number of ordinances for carrying out various executive duties, such as setting levels of certain charges and remunerations, and overseeing the accounts of certain trust funds and statutory bodies.

Role of the Director of Audit

The audit of all the government's accounts is carried out by the Director of Audit. He also audits the accounts of the Urban Council, the Housing Authority and more than 50 statutory and non-statutory funds and other public bodies, and reviews the financial aspect of the operations of the multifarious government-subvented organisations working in Hong Kong. The director's appointment, tenure of office, duties and powers are prescribed in the Audit Ordinance. To ensure his complete autonomy and independence in the exercise of his functions, the Director of Audit is not a public servant, and the ordinance provides that he shall not be subject to the direction or control of any other person or authority. It also prescribes certain safeguards against his dismissal or premature retirement from office.

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The Administration of the Hong Kong Government is organised into branches and departments. The branches, each headed by a Secretary, collectively form the Government Secretariat. There are currently 12 policy branches, two resource branches concerned with finance and the Public Service, and a branch with special responsibility for co-ordinating measures to implement the terms of the Sino-British Joint Declaration on the question of Hong Kong. There is also an Office of the Deputy Chief Secretary, which co-ordinates work on issues which span the responsibilities of two or more branches and undertakes specific tasks in relation to constitutional development.

      The policy branches whose secretaries report directly to the Chief Secretary are: Administrative Services and Information, City and New Territories Administration, Education and Manpower, Health and Welfare, Housing, Lands and Works, Municipal Services, Security and Transport. The Civil Service Branch, a resource branch, the General Duties Branch and the Office of the Deputy Chief Secretary also come under the aegis of the Chief Secretary. The policy branches whose secretaries report directly to the Financial Secretary are: Economic Services, Monetary Affairs and Trade and Industry. The Finance Branch, a resource branch, is also responsible to the Financial Secretary. The head of the Finance Branch is the Deputy Financial Secretary who, despite his title, is of the same rank and status as the other Secretaries.

      With certain exceptions, the heads of government departments are responsible to the branch secretaries for the direction of their departments and the efficient implementation of approved government policy. The exceptions are such bodies as the Audit Department and the Independent Commission Against Corruption, whose independence is safeguarded by their director and commissioner, respectively, reporting directly to the Governor; the Judiciary, which is the responsibility of the Chief Justice, and the Legal Department, which is the responsibility of the Attorney General. There are currently 59 departments and agencies in this structure.

      To assist in the co-ordination of government policy, there have been established under the umbrella of the Chief Secretary's Committee six policy groups which bring together branch secretaries in related programme areas. The four which are chaired by the Chief Secretary are the Community Affairs; Constitutional Affairs; Lands, Works, Transport and Housing; and Social Services Policy Group. The Legal Affairs Policy Group is chaired by the Attorney General, and the Finance Group is chaired by the Financial Secretary.

Foreign Relations

The Role of the British Government and the Political Adviser Because of Hong Kong's status as a dependent territory, the Secretary of State for Foreign and Commonwealth Affairs is constitutionally responsible to the British Parliament for the actions of the Hong Kong Government and he has authority to give directions to the Governor of Hong Kong. In practice, however, such formal directions have not been issued in living memory, and Hong Kong conducts its affairs with a high degree of autonomy in all domestic matters. The relationship between London and Hong Kong is also essentially one of co-operation. For example, one important task routinely undertaken by the Foreign and Commonwealth Office is to ensure that Hong Kong's interests and views (which are not always identical with those of the United Kingdom) are properly considered within the British Government machinery, particularly when new policies are being formulated by other Whitehall departments.

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Hong Kong's foreign relations are constitutionally the direct responsibility of the British Government. Thus the British Government is internationally responsible for ensuring that the Hong Kong Government fulfils its obligations under the many international conven- tions and agreements which extend to Hong Kong as well as to the United Kingdom. But in the day-to-day conduct of external affairs, Hong Kong in practice enjoys a considerable degree of autonomy, particularly regarding trade matters. It is a contracting party to the General Agreement on Tariffs and Trade in its own right.

The Political Adviser is a senior member of the British Diplomatic Service, seconded to the Hong Kong Government principally to advise the Governor and the Chief Secretary on matters concerning Hong Kong's relations with China. His office is part of the Hong Kong Government. Following extensive involvement in the Sino-British negotiations which culminated in the Joint Declaration, the Political Adviser's office, in conjunction with the General Duties Branch, is closely involved in the work of implementing the Joint Declaration. In addition, the Political Adviser's office continues to offer advice, and, in some cases, to co-ordinate action on a great many more routine matters, notably in promoting the wide range of contacts between Hong Kong Government departments and their counterparts in Guangdong Province, particularly in the Shenzhen Special Economic Zone. Close and effective cross-border co-operation has developed in such diverse areas as opening new border crossing points and transport links, and in coping with environmental pollution and flooding problems, as well as on questions concerning immigration, customs, postal services and telecommunications. The Political Adviser's office is also one of the channels of communication between the Hong Kong Government and foreign and Commonwealth missions in Hong Kong. These missions do, however, deal directly with the relevant departments of the Hong Kong Government over most day-to-day matters.

External Commercial Relations

      Hong Kong possesses full autonomy in the conduct of its external commercial relations. The General Agreement on Tariffs and Trade (GATT), the basic aim of which is to liberalise world trade and protect the most-favoured-nation principle, is the cornerstone of Hong Kong's external trade relations. The Multi-Fibre Arrangement (MFA), which aims at the orderly development and expansion of international trade in textiles, provides the framework within which Hong Kong negotiates bilateral restraint agreements with textiles importing countries.

On April 23, 1986 Hong Kong became the 91st contracting party to the GATT. Hitherto, Hong Kong had already been participating in GATT activities from within the United Kingdom delegation. The United Kingdom spokesman for Hong Kong was invariably a Hong Kong Government official. The arrangement had enabled Hong Kong to take positions that were different from those of the EEC, and, by implication, the United Kingdom. With effect from April 23, 1986, the Head of the Hong Kong Government Office in Geneva has been appointed as the permanent representative of Hong Kong to the GATT.

In the United Kingdom declaration concerning Hong Kong's separate GATT contract- ing party status, the British Government formally informed the Director-General of the GATT that Hong Kong possesses full autonomy in the conduct of its external commercial relations and of the other matters provided for in the GATT. At the same time as the British Government made this declaration, the Chinese Government also made a parallel declaration that, with effect from July 1, 1997, the Hong Kong Special Administrative Region will meet the requirements for a separate customs territory to be deemed to be a

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contracting party and therefore may, using the name of 'Hong Kong, China' continue to be deemed to be a separate contracting party to the GATT. By their respective declarations, therefore, the British and Chinese Governments have taken the necessary concrete steps to secure the continuance of Hong Kong's participation in the GATT and the MFA in the years leading to and beyond 1997.

Hong Kong Government Offices Overseas

The Hong Kong Government maintains representative offices in Geneva, Brussels, Wash- ington, New York, San Francisco and London mainly to safeguard and advance Hong Kong's economic and commercial interests overseas.

The Geneva Office represents Hong Kong in the General Agreement on Tariffs and Trade. The office keeps under review developments arising from the deliberations in the GATT and other international organisations in Geneva and has been heavily involved in the past year in multilateral discussions on the future of the Multi-Fibre Arrangement and the preparatory process on the New Round of multilateral trade negotiations. The Brussels Office represents Hong Kong's economic and related interests concerning the European Community and the governments of Member States (other than the United Kingdom). The New York, Washington and San Francisco offices keep under review economic or other developments, proposed legislation, and other matters in the United States of America that might affect Hong Kong's economic interest in general and two-way trade with the United States in particular. The San Francisco Office was opened in July in recognition of the need to provide a more comprehensive cover of Hong Kong's interests in the United States, in the light of the growth in protectionist sentiments there and the threat which they pose to Hong Kong's trading interests. The New York and San Francisco Offices incorporate the Industry Department's industrial investment promotion offices.

Compared with other overseas offices, the London Office carries a much wider range of functions. It acts as a point of direct contact between Hong Kong and British Government Departments, Members of Parliament, the media and organisations with an interest in Hong Kong and keeps under review British commercial, economic and industrial develop- ments and official thinking on international trade policies, and advises the Hong Kong Government on the likely repercussions of these developments. In addition, the office represents Hong Kong, wherever necessary, in commercial relations consultations for certain European countries, and it incorporates an Industrial Promotion Office to advise United Kingdom firms about opportunities for investment in Hong Kong industries. The office also provides assistance to Hong Kong people in the United Kingdom, including Hong Kong students, supervises the recruitment and training of Hong Kong public servants in the United Kingdom as well as providing publicity services aimed at projecting Hong Kong's image there. In view of Britain's role in the implementation of the Joint Declaration and her constitutional responsibilities for Hong Kong until 1997, the London Office will continue to occupy a special place among Hong Kong's overseas offices.

Details of representation overseas are at Appendix 2.

Public Service

The Public Service provides the staff for all government departments and other units of the Administration. With Hong Kong's centralised form of government, the Public Service operates a wide range of services which in many countries would be administered by other public authorities. These include medical services, public works and utilities, urban

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cleansing and public health, education, fire services and the police force. The departments in charge of these areas, namely, the Medical and Health Department, with an establish- ment of 25 098, the Lands and Works group of departments (22 094), the Municipal Services group of departments (25 796), the Education Department (6 349), the Fire Services Department (6 669) and the Royal Hong Kong Police Force (30 965) account for 64.8 per cent of the establishment of the entire Public Service. During the 1985-6 financial year, the size of the Public Service was stabilised through the redeployment of staff and increased productivity. At April 1, 1986, the total strength of the service was 174 946, more than 98 per cent of this number being local officers.

       Responsibility for the management of the Public Service lies with the Civil Service Branch of the Government Secretariat. The branch deals with such matters as appoint- ments, pay and conditions of service, staff management, manpower planning, training and discipline and is also the focal point for consultation with the principal staff associations.

Recruitment and promotions to the middle and senior ranks of the Public Service are subject to the advice of the Public Service Commission, which is independent of the government. The commission has a full-time chairman and leading citizens serving as members.

       The government is advised on matters relating to pay and conditions of service by two independent bodies. The Standing Committee on Directorate Salaries and Conditions of Service advises on matters affecting directorate officers (the 1 000 or so most senior public servants). The Standing Commission on Civil Service Salaries and Conditions of Service deals with all other public servants. During the year, the two advisory bodies tendered their advice on the pay structure of several individual grades, and monitored the conduct of a pay level survey by an independent firm of consultants, which aimed to establish whether or not the remuneration of public servants, including both salaries and fringe benefits, was broadly in line with that of employees in the private sector doing comparable work. The results of the survey, together with the advice of the two advisory bodies, will be an important guide in determining the level of Public Service remuneration in the future. During the year, leave and passage arrangements for public servants were also reviewed, and, on the advice of the Standing Commission, improvements were made to the current job-related allowances system.

       At the same time, the Home Purchase Scheme and the Housing Loan Scheme for public servants were examined and some improvements were introduced. Arrangements were also made to permit public servants occupying co-operative housing flats to obtain title to these flats.

       The government fully recognises the value of good staff relations in the Public Service. Apart from providing a wide range of welfare and recreational facilities to staff, much effort is devoted to the promotion of effective staff consultation. The formal consultative machinery comprises two service-wide central consultative councils: the Senior Civil Service Council and the Model Scale 1 Staff Consultative Council, a Police Force Council for members of the Police Force, and departmental consultative committees for staff in all other departments. Outside these councils and committees, individual members of the Public Service or staff associations have ready access to their heads of departments or grades and the Civil Service Branch. A major review of the existing consultative machinery is underway to examine how it can be further strengthened.

Continued efforts were made in 1986 to increase productivity and to improve the quality of service to the public. To this end, work improvement studies and value for money studies were carried out in various departments. The outcome of these studies brought about not

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only improvements in the quality of service, but also more effective deployment of staff as well as significant savings in resources.

The government attaches great importance to the training of the public servants to improve their operational efficiency, to prepare them for new challenges and higher responsibilities and to meet the developing manpower requirements of the service. The bulk of the training is carried out locally under the co-ordination of the Civil Service Training Centre. The centre organises management and language skills training, and provides advice and assistance to departments on training matters. The centre also administers the Government Training Scholarship Scheme and various overseas training programmes.

      A series of courses designed to prepare mid-career officers for senior management responsibilities continues to be conducted under the auspices of the Senior Staff Course Advisory Board. Each course lasts for 12 weeks and has up to 40 participants, including a few from the private sector. Since the inception of the programme in September 1984, over 200 participants have attended the courses.

Language

The official languages of Hong Kong are English and Chinese. While the former is used by the expatriate community and in commercial, financial and professional circles, it is also widely understood by the local population whose mother tongue is Chinese. The majority of the local Chinese community speak Cantonese, a South China dialect, and interest in learning to speak Putonghua (Mandarin) is gaining momentum as closer ties with China are being developed. Laws are at present enacted in English, and Chinese translations of selected pieces of legislation are available for reference by the public. Plans are being made to have the laws enacted in both English and Chinese.

The Legal System

Law in Hong Kong

Generally, the law of Hong Kong follows that of England and Wales. The Application of English Law Ordinance was passed in 1966 to declare the extent to which English law is in force in the territory. Section 3 provides that the common law of England and the rules of equity shall be in force in Hong Kong so far as they are applicable to the circumstances of Hong Kong or its inhabitants subject to such modifications as such circumstances may require.

      Additionally, the ordinance applies some English Acts to Hong Kong, such as the Justices of the Peace Act of 1361 and the Habeas Corpus Act of 1679.

       On occasions, English laws are applied to Hong Kong either directly or by order of Her Majesty in Council, the power to make all such law as may appear necessary for the peace, order and good government of the territory being expressly preserved by Article IX of the Letters Patent. In practice, this is largely confined to matters which have a bearing on Hong Kong's international position. For example, the Air Navigation (Overseas Territories) Order 1977 is an Order in Council applying provisions of civil aviation treaties, to which the United Kingdom is a party, to the United Kingdom's overseas territories, including Hong Kong.

       In order to ensure that by 1997 Hong Kong possesses a comprehensive body of law which owes its authority to the Legislature of Hong Kong, it will be necessary to replace such English laws by local legislation on the same topics. A legislative programme has therefore been adopted by the Hong Kong Government to disapply English laws applying

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to Hong Kong and replace them by Hong Kong ordinances. The Hong Kong Act 1985 gave power by Order in Council to confer on the Hong Kong legislature the necessary additional powers in specified fields and the Hong Kong (Legislative Powers) Order 1986 specified the fields of civil aviation, merchant shipping and admiralty jurisdiction. It is anticipated that further orders will be made in future conferring similar powers in other fields.

       Local legislation (that is, ordinances passed by the Legislative Council and assented to by the Governor) usually starts with one of the policy branches of the Hong Kong Govern- ment formulating drafting instructions for the Drafting Division of the Attorney General's Chambers. The instructions are prepared after consultation with the relevant government departments and, if appropriate, with interested public groups, as to the policy to adopt. After a Bill has been drafted it is submitted to the Governor in Council for approval to submit it to the Legislative Council. If the Bill is passed by vote of the Legislative Council, the Governor is empowered to enact by giving his assent to it and it is passed into law.

In much the same way that the common law of England has evolved, so has that of Hong Kong, based on the English common law and rules of equity, following and applying local ordinances and English or United Kingdom Acts where applicable. Hong Kong ordinances are often closely modelled on United Kingdom statutes, or the legislation of Common- wealth countries if considered more appropriate. Cases from Commonwealth countries and the United States of America are quoted in the courts and considered with respect. The Hong Kong courts apply a doctrine of binding precedent similar to that adopted by the English courts. The Hong Kong Court of Appeal is bound by its own previous decisions. Appeal from the Court of Appeal lies to the Privy Council and it was said in a Full Court case in 1969 that the Hong Kong courts were 'clearly bound by decisions of the Privy Council and of the House of Lords'. The Full Court again considered the question of precedent in 1973 and stated that 'any relevant decision of the Privy Council' was binding on the Hong Kong courts.

      The Attorney General's Chambers has assumed responsibility for drafting new laws in both Chinese and English and translating existing laws into Chinese. The Chinese text will be an authentic version of the laws that the courts can look to, with the English text, in ascertaining the meaning of an enactment. A discussion paper, canvassing ways in which laws in both Chinese and English might best be introduced, was issued by the Attorney General's Chambers in May 1986 for public comment. The discussion paper was favoura- bly received. It is expected that following the enactment of necessary enabling legislation, initially only new principal legislation will be enacted bilingually. Translation of existing laws into Chinese will be spread over a number of years. The Chinese language team in the Drafting Division of the Attorney General's Chambers started on the work of drafting laws in Chinese in July 1986.

Judiciary

The Chief Justice is the head of the Judiciary. He is assisted in the discharge of his administrative duties by the Registrar as well as Deputy and Assistant Registrars of the Supreme Court. A review of the administration of the courts was carried out by a senior judicial official from England during the year. It is anticipated that any changes to the administration of the courts recommended as a result of the review will be implemented in 1987.

      The Chief Justice, the Justices of Appeal and the Judges of the High Court are appointed by Letters Patent issued under the Public Seal by the Governor on instructions from the

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Queen, conveyed through the Secretary of State. District Judges are appointed by the Governor, by instrument under the Public Seal, and Magistrates by the Governor by warrant.

       The Judiciary tries all prosecutions and determines civil disputes, whether between individuals or between individuals and the government. The principle of English constitu- tional law, that in the performance of their judicial acts members of the Judiciary are completely independent of the executive and legislative organs of the government, is fundamental in Hong Kong.

       The courts of justice in Hong Kong are the Supreme Court (comprising the Court of Appeal and the High Court), the District Court, the Magistrates' Court, the Coroners' Court, the Juvenile Court, and also include the Lands Tribunal, the Labour Tribunal and the Small Claims Tribunal.

The Lands Tribunal, established in 1974, has three principal judicial functions. First, it determines the sums payable by the government and others for compensation to persons whose land is compulsorily resumed or has its value reduced because of public or private developments. Second, the tribunal has an appellate jurisdiction from the Commissioner of Rating and Valuation. This includes appeals in respect of rateable values under the Rating Ordinance and appeals against certificates of increase in rents and other determinations under the Landlord and Tenant (Consolidation) Ordinance. Third, since 1982, the tribunal's jurisdiction has included all claims for possession of premises under the Landlord and Tenant (Consolidation) Ordinance, and ancillary money claims.

In the exercise of its jurisdiction, the tribunal has the powers of the District Court. In addition, it enjoys the powers of the High Court in relation to certain matters and is empowered, so far as it thinks fit, to follow the practice and procedure of the High Court.

The Small Claims Tribunal deals with monetary claims involving amounts not exceeding $8,000. The procedure followed is simple and informal, and legal representation is not allowed.

       The Labour Tribunal deals with individual money claims arising from contracts of employment. The informal procedure followed is initially directed at reconciling the parties to the dispute.

Magistrates exercise criminal jurisdiction over a wide range of indictable and summary offences. Their powers of punishment are generally restricted to a maximum of two years' imprisonment, or a fine of $10,000, though cumulative sentences of imprisonment up to three years may be imposed for two or more offences tried together.

       Proceedings in all indictable offences originate in a Magistracy. The Attorney General may apply to have a case transferred to the District Court or committed to the High Court depending on the seriousness of the case. Committals to the High Court for trial are usually made by a magistrate if, after hearing the evidence in a preliminary inquiry, he is of the opinion that there is sufficient evidence to put the defendant on trial in the High Court. The exceptions are in cases where the defendant elects to have an automatic committal.

       Lay assessors sit as advisers with newly-arrived magistrates recruited from overseas. Assessors are local residents with a knowledge of local customs, traditions and community feelings. They are drawn from a panel of about 320 assessors.

Five Cantonese-speaking special magistrates, who are not legally qualified but are experienced in judicial work, were appointed to deal with cases of a more routine nature, such as hawking and minor traffic cases. Their powers of punishment, however, do not include the power of imprisonment.

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Two coroners conduct inquiries into the cause of, or circumstances connected with deaths which occur suddenly, by accident or violence, or under suspicious circumstances. They may sit with a jury of three people.

The Juvenile Court has jurisdiction to hear charges against children (aged under 14) and young persons (aged between 14 and 16) for any offence other than homicide.

       The District Court, established in 1953, has limited jurisdiction in both civil and criminal matters. It has civil jurisdiction to hear monetary claims up to $60,000 or, where the claims are for recovery of land, the annual rent or rateable value does not exceed $45,000. In its criminal jurisdiction, the court may try the more serious cases with the exception of a few very serious offences such as murder, manslaughter and rape. The maximum term of imprisonment it can impose is seven years. It also exercise appellate jurdisdiction in appeals against the assessment of stamp duty imposed by the Collector of Stamp Revenue.

The jurisdiction of the High Court is unlimited in both civil and criminal matters. The court also exercise jurisdiction in bankruptcy, company winding-up, adoption, probate and lunacy matters.

The most serious criminal offences, such as murder, manslaughter, rape, armed robbery and drug offences involving large quantities, are tried by a judge of the High Court, sitting with a jury of seven or, where a judge orders, nine. It is the jury which decides whether the accused is guilty or not guilty. The decision of the jury must be unanimous in cases in which the law provides for a death sentence. In other cases, a jury may return a majority vote of five to two.

      The Court of Appeal is the highest court in Hong Kong. It hears appeals on all matters, civil and criminal, from the High Court and the District Court, as well as appeals from the Lands Tribunal. It also makes rulings on questions of law referrred to it by the lower courts.

       Further appeals can be brought from the Court of Appeal to the Judicial Committee of the Privy Council in London. Such appeals are not frequent because of the expense involved and the stringent conditions which govern the grant of special leave to appeal.

Attorney General

The Attorney General is the Governor's legal adviser. The Royal Instructions provide for him to be an ex-officio member of both the Executive Council and the Legislative Council. In addition, he is chairman of both the Law Reform Commission of Hong Kong and the Long Term Prisoners' Board of Review and a member of both the Judicial Services Commission and the ICAC Operations Review and Complaints Committee. He is also titular head of the Hong Kong Bar.

       The Attorney General is Chairman of the Legal Affairs Policy Group, one of several policy bodies established under the umbrella of the Chief Secretary's Committee to bring together branch secretaries in related programme areas. The group plays an important co-ordinating role in legal policy matters and decision-making, including allocation of responsibility for further legislative initiatives which have a substantial legal policy content. Often, the group will call upon the Attorney General to take responsibility as sponsor and spokesman for legislative proposals to be submitted to the Executive and Legislative Councils.

      All government departments requiring legal advice receive it from the Attorney General. He is the representative of the Crown in all actions brought by or against the Crown. He is further responsible for the drafting of all legislation and for the conduct of all prosecutions.

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       The Attorney General's Chambers are divided into four divisions and a Special Duties Unit each headed by a law officer to whom the Attorney General delegates certain of his powers and responsibilities. The Civil Division is headed by the Crown Solicitor, and is responsible for giving all legal advice in civil matters and conducting all civil litigation involving the Crown. The Prosecutions Division is headed by the Crown Prosecutor who is responsible for the investigation and conduct of criminal proceedings. The Law Drafting Division is headed by the Law Draftsman who is responsible for drafting all legislation and subsidiary legislation. The Solicitor General heads the Policy and Administration Division, a part of which consists of the Law Reform Commission Secretariat. The Special Duties Unit has been set up to consider treaties to which Hong Kong is a party and other international obligations in the light of the Sino-British Joint Declaration.

       In the courts, the Attorney General is usually represented by Crown counsel who are members of his chambers. On occasions, the services of outside counsel are obtained.

       It is the Attorney General who is responsible for all prosecutions in Hong Kong, and it is for him alone to decide whether or not a prosecution should be instituted in any particular case, and it is his responsibility to conduct and control the action. In this respect, the Court of Appeal in Hong Kong held in 1979 that the powers and responsibilities of the Attorney General in Hong Kong were mutatis mutandis, the same as those of the Attorney General in England.

The vast majority of minor prosecutions heard before magistrates are routine matters which are dealt with by law enforcement departments along settled guidelines issued under the authority of the Attorney General and without individual reference to the Attorney General's Chambers. Where such cases are complicated matters, or give rise to difficult points of law, then advice is sought from the Prosecutions Division. The advice of the Attorney General's Chambers must be sought in the case of serious offences where the venue of trial will be the District Court or the Supreme Court.

Law Reform Commission

The Law Reform Commission was appointed by the Governor in Council to consider and report on such topics as may be referred to it by the Attorney General or Chief Justice. Its membership includes Legislative Councillors, academic and practising lawyers, and pro- minent members of the community. The commission's proposals on commercial arbitra- tion, bills of exchange, community service orders, contribution between wrong-doers and damages for personal injuries and death have been enacted. Reports on aspects of insurance law, the admissibility of confession statements and the legal effects of age have been published and will shortly be followed by reports on contempt of court and unfair contract terms. The commission is considering hearsay evidence in civil proceedings, breach of confidence actions, coroners, wills and intestate succession, the law relating to bails, arrest and detention, the law of international arbitration, interest on debt and damages and the competence and compellability of spouses.

Legal Aid

To ensure that access to the courts is available to those persons who are unable to bear the cost of protecting their lawful rights and freedom, Hong Kong has developed over the years a fairly comprehensive system of legal aid. This system is administered by the Legal Aid Department and provides legal representation in both civil and criminal courts. In addition to this, the Law Society of Hong Kong operates the Law Society Legal Advice and Duty Lawyer Schemes which provide free legal advice in civil law matters and free legal

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representation to defendants in certain criminal cases in the Magistrates' Courts and Juvenile Courts which are areas not covered by the Legal Aid Department. Both aspects of legal welfare are funded by the Hong Kong Government but the Legal Aid Department is itself a department of the government.

       The report of a review by a working party of the administration on the scope of legal aid and its management was put to the legal profession during the year. Taking into account the views of the profession, the government will issue a document for public consultation.

       Legal aid as administered by the Legal Aid Department is available to both residents and non-residents in Hong Kong who satisfy the Director of Legal Aid on financial eligibility and justification for legal action. The financial limits in both civil and criminal cases are the same. The maximum eligibility limits for legal aid were changed in 1986 to a monthly disposable income of $2,200 and a disposable capital of $15,000. Disposable income and capital are arrived at after allowances have been deducted from actual earnings and capital of applicants. Legal aid is provided either free or on payment of a contribution, depending on the amount of the disposable income and capital. If a legally aided person in civil litigation is successful and legal costs are recovered in the proceedings, then any contribu- tion he may have paid may be refunded. In unsuccessful litigation, the liability for costs of a legally aided person is limited to the amount of the contribution, if any paid by him.

       In addition to financial eligibility, the applicant must satisfy the Director of Legal Aid in civil cases that he has a reasonable chance of succeeding in the litigation for which he seeks aid and in recovering the judgement debt thereafter. Legal aid is available for a wide range of civil proceedings in the District Court, High Court, Court of Appeal and appeals to the Judicial Committee of the Privy Council in London. Traffic accident claims, claims in respect of industrial accidents and employees' compensation, immigration matters and every branch of family law ranging from divorce, separation, maintenance and custody to wardship, all lie within the scope and jurisdiction of the department. Cases such as admiralty, bankruptcy and companies winding-up proceedings are also undertaken together with a large number of general litigation cases involving landlord and tenant, breach of contract and professional negligence. An applicant who is refused legal aid may appeal against such a refusal to the Registrar of the Supreme Court or in Privy Council cases to a committee of review.

       The total estimated expenditure for 1986-7 was $28 million in civil cases. In all, 14 898 applications were received for legal aid in civil matters, of which 5 583 were granted legal aid with a sum of $84 million being recovered for aided clients in civil cases.

       Legal aid is available for criminal proceedings in the District Courts, High Court, Court of Appeal, the Judicial Committee of the Privy Council and for representation at proceedings in the Magistrates' Courts where the prosecution is seeking committal of a defendant to the High Court for trial. The extension of legal aid to the Magistrates' Courts for the more serious offences is now under active consideration.

-

       The majority of accused persons in these criminal courts are legally aided. For such criminal trials, legal aid is invariably given - subject to financial eligibility - because of the serious nature of the charge and the gravity of sentence. Legal aid can also be given to conduct pleas in mitigation of sentence. For appeals against conviction of murder, irrespective of whether there are grounds of appeal, the granting of legal aid is mandatory. For all other criminal appeals, including appeals from the decisions of magistrates, legal aid will be given again subject to financial eligibility, if the Director of Legal Aid is satisfied that there are arguable grounds of appeal. A person who is refused legal aid on a criminal matter may nevertheless be granted legal aid - subject to financial eligibility - by a trial judge or

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by the Court of Appeal or, in relation to appeal to the Judicial Committee of the Privy Council, by a committee of review.

The total estimated expenditure in 1986-7 is $24 million in criminal cases. In all, 3 720 applications were received for legal aid in criminal cases, and 2 040 were granted.

If a person is granted legal aid, the Director of Legal Aid will assign the matter either to a private solicitor, and a barrister where necessary, or to one of his own professional officers. To this end, the department maintains its own litigation section specialising in personal injuries litigation, workers wage claims and family law.

In August 1986, the Headquarters of the Legal Aid Department moved to new premises at Queensway Government Offices. The new building is adjacent to the Supreme Court building, and is much more conveniently located so far as access to the courts and to the registries is concerned.

Supplementary Legal Aid Scheme

The Supplementary Legal Aid Scheme provides legal assistance to those persons in the 'sandwich' class whose means place them outside the financial limits for legal aid but are not sufficient to meet the high cost of conducting litigation on a private basis. This scheme, introduced in October 1984, is limited to claims in the High Court for damages for personal injuries or death. The scheme is administered by the Director of Legal Aid.

Under this scheme, applicants may be granted legal aid if their gross income does not exceed $15,000 per month and their total assets, excluding the value of an owner-occupied residence and other allowances, do not exceed $100,000. The scheme is financed by a fund established by a loan from the Government Lotteries Fund, and it is a condition of being granted legal aid under this scheme that applicants agree to make a contribution of a percentage of any damages recovered for them, such percentage depending on the amount recovered and whether or not the case is settled prior to the trial of the action. This percentage ranges from 10 per cent to 12.5 per cent.

The total estimated expenditure in 1986-7 was $200,000. During that period 86 applications were received of which 36 were granted.

Legal Advice and Duty Lawyer Schemes

     In conjunction with the Bar Association which provides a number of representatives for the executive committee, the Law Society has administered, since 1978, three schemes to provide free legal representation, legal advice, and legal information for people in Hong Kong. Government funds these schemes by subvention which amounted to $17,184,000 in the 1986-7 financial year.

The Duty Lawyer Scheme operates in the eight magistracies and four juvenile courts, and utilises the services of 500 lawyers (barristers and solicitors) through roster and assignment, to provide free legal representation to defendants in criminal cases charged with certain offences. In the Magistrates' Courts these are: membership of a triad society, loitering, unlawful possession, being equipped for stealing, resisting arrest, possession of dangerous drugs for unlawful trafficking, possession of dangerous drugs, possession of apparatus fit for using dangerous drugs and possession of offensive weapons. Additionally, free legal representation is available for extradition proceedings, and in discretionary circumstances, although such cases are necessarily limited in number in view of the overall resources. All but the least serious offences attract free legal representation in Juvenile Courts. There is no means test. During the year, a total of 15 332 adults and juveniles, who faced some 24 779 charges, received advice, and representation at trial.

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       The Free Legal Advice Scheme operates in the evening at centres in Sha Tin, Tsuen Wan, Wan Chai, Eastern, Mong Kok, Wong Tai Sin, Kwun Tong and Yau Ma Tei district offices through 345 volunteer lawyers, 24 of whom are deployed weekly. Some 3 273 people are advised annually, having been referred through 120 agencies. Once the problem is identified, appointments are given within seven to 10 days, and, because details of the problems are written down by the staff of the agencies during their interviews with clients, the lawyers are able to give authoritative advice based on the necessary research done before the meeting. People are assisted on matrimonial and employment matters, landlord and tenant queries, and a host of other subjects.

       In 1984, the Law Society introduced 'Tel-Law' whereby taped legal information on a number of legal topics was made available during working hours and evenings on 10 telephone lines. The tapes are of 24 minutes duration and encourage people who identify legal problems of their own from listening to the tapes, to use the Free Legal Advice Scheme. The tapes, which are frequently updated, concentrate on four principal areas of interest - matrimonial, landlord and tenant, criminal and financial law - but a large number of new tapes have been added, detailing for example, consumer law and employment. There has been an increase in the number of people with queries on these topics. Fifty-four tapes were available, in Cantonese and English, and 47 578 calls were answered during 1986.

3

Implementation of

The Sino-British Joint Declaration

時合中 合甲

bww!

實聲機

      FOLLOWING two years of negotiations, the Sino-British Joint Declaration on the Question of Hong Kong was signed by the British and Chinese governments on December 19, 1984. As a result, the Hong Kong Act 1985, passed by the British Parliament to provide for the ending of British sovereignty and jurisdiction over Hong Kong, received the Royal Assent on April 4, 1985. The Joint Declaration entered into force on May 27, 1985, when instruments of ratification were exchanged in Peking between the two governments. It was then registered at the United Nations by the two governments, simultaneously, on June 12. Briefly, the Joint Declaration and its Annexes provide that Hong Kong will, with effect from July 1, 1997, become a Special Administrative Region (SAR) of the People's Republic of China. The SAR will have its own government and legislature composed of local inhabitants, and will enjoy a high degree of autonomy. However, the Central People's Government will be responsible for Hong Kong's foreign and defence affairs. Hong Kong's social and economic systems, as well as its lifestyle, will remain unchanged for 50 years after 1997, and China's socialist system and policies will not be practised in the SAR.

       Following the ratification of the Joint Declaration, steps were immediately taken by the British and Chinese governments to implement its provisions, the object being that the transition of present day Hong Kong to a Special Administrative Region of China should be smooth and co-ordinated, causing as little disruption as possible to the social, business and administrative environment in Hong Kong. The most important steps taken were the formation of the Sino-British Land Commission and the Joint Liaison Group.

Land Commission

The Sino-British Land Commission was established in 1985 in accordance with Annex III to the Joint Declaration. Its function is to conduct consultations on land leases and other related matters. The commission is composed of three senior officials on each side. It meets regularly in Hong Kong and has had 10 formal meetings up to the end of 1986.

Despite its short history, the commission has made solid progress. It has reached agreement on a series of legal documents to be used in various types of land transaction covered by the provisions of Annex III, and the arrangements for the sharing of premium income from land transactions. The commission has also agreed on the annual land disposal programme for 1985 and 1986. In August 1986, the Chinese side of the Land Commission set up an Investment Committee made up of eminent local bankers and monetary experts to administer the investment of funds from premium income due to the future Special Administrative Region. The amount of premium income credited to the Special Administrative Region's account came to $1,615 million at the end of 1986.

The Land Commission will continue to meet regularly until July 1, 1997.

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

The Joint Liaison Group

41

The Sino-British Joint Liaison Group (JLG) was established in accordance with the provisions of Annex II to the Joint Declaration. Its functions are to conduct consultations on the implementation of the Joint Declaration, to discuss matters relating to the smooth transfer of government in 1997, and to exchange information and conduct consultations on such subjects as may be agreed on by the two sides. As the JLG is an organ for liaison, and not an organ of power, it plays no part in the administration of Hong Kong.

The JLG comprises a senior representative and four other members on each side. Supporting staff and experts also attend meetings as appropriate. It meets in Peking, London and Hong Kong at least once each year. The first JLG meeting was held in London in July 1985, the second in Peking in November 1985, the third in Hong Kong in March 1986 and the fourth in London in July 1986. The last meeting, the fifth, was held in late November 1986 in Peking. The JLG will continue to meet in these three locations until the year 2000 and from July 1988 will have its principal base in Hong Kong.

Since its establishment, the JLG has made significant contributions towards the implementation of the Joint Declaration. Its meetings are conducted in a friendly and co-operative atmosphere. A good working relationship has been established and mutual trust between the two sides is growing steadily. Positive results have been achieved in a number of areas of major importance for the future of Hong Kong.

Hong Kong and the General Agreement on Tariffs and Trade

Annex II to the Joint Declaration refers specifically to the need for the JLG to consider the maintenance of Hong Kong's participation in the General Agreement on Tariffs and Trade (GATT) and the Multi-Fibre Arrangement (MFA). Discussion of Hong Kong's future participation in these important trade agreements was successfully concluded at the third meeting of the JLG where it was agreed that Hong Kong should become a contracting party to the GATT and retain such a status after 1997. To secure this objective, the United Kingdom government on April 23, 1986 made a declaration to the Director-General of the GATT under GATT article XXVI(5)c stating that, in accordance with the terms of that article, Hong Kong would with effect from that date be deemed to be a contracting party. On the same day the Government of the People's Republic of China made a parallel declaration stating that Hong Kong, as a Special Administrative Region of China, would continue to meet the criteria necessary for it to retain its status as a contracting party after 1997, in accordance with article XXVI(5)c. Hong Kong thus became the 91st contracting party to the GATT and in this new capacity reaffirmed its adherence to the MFA. These events were welcomed by many of Hong Kong's major trading partners.

      As a result of this new status, it was no longer appropriate for Hong Kong to participate in the GATT as part of the United Kingdom diplomatic mission in Geneva. Hong Kong's permanent representative to the GATT is now listed separately from the UK Mission, and his office, in accordance with the terms used in the Joint Declaration for such missions, has been retitled the 'Hong Kong Economic and Trade Office'.

Identity Cards and Travel Documents

Agreement was confirmed at the third JLG meeting that British National (Overseas) passports will carry an endorsement to the effect that the holder of the passport has a Hong Kong permanent identity card which states that the holder has the right of abode in Hong Kong - an endorsement which is crucial to the international acceptability of the passport. The new British National (Overseas) passports will be introduced from July 1, 1987.

42

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

At the same meeting it was also agreed that identity cards issued in Hong Kong before July 1, 1997 will remain valid thereafter until replaced by the Special Administrative Region Government. At the fourth JLG meeting the design of the new identity card was also agreed on.

In the case of Certificates of Identity, which are used by about one million Hong Kong residents to travel abroad, agreement was reached at the fourth JLG meeting that such documents issued before July 1, 1997 would continue to have a ten year validity and would carry an endorsement substantially the same as that agreed for inclusion in British National (Overseas) Passports.

Air Service Agreements

Until this year, all air services on routes between Hong Kong and other countries were regulated by Air Service Agreements (ASAs) signed between those countries and the United Kingdom. It being recognised that such agreements will not be valid beyond 1997, a common view was reached at the fourth meeting of the JLG regarding procedures for separating Hong Kong's interests from existing United Kingdom ASAs. This measure would make it possible for separate agreements to remain intact beyond 1997 in accordance with the provisions of the Joint Declaration. On September 17, Hong Kong signed its first 'separate' ASA with the Netherlands Government. It is planned to separate the remaining 22 ASAS applicable to Hong Kong well before 1997.

Hong Kong Shipping Register

Agreement on the principles involved in establishing a Hong Kong Shipping Register was reached at the fourth meeting of the JLG. The plan will involve the establishment of a Register which will be separate from the British Register currently applying to Hong Kong, but which will be based on the internationally recognised high British standards. The plan as agreed with the Chinese Government was published on October 14, and the Hong Kong Government is now engaged in consultation with interested parties, including shipowners and unions in order to implement it.

Localisation of United Kingdom Legislation Applying to Hong Kong

A portion of Hong Kong's laws, for example those governing merchant shipping and civil aviation, are in fact United Kingdom laws applied to Hong Kong either directly or by means of Orders in Council. Before 1997, the provisions of all such laws, which will still be required in Hong Kong, must be 'localised', that is, replaced by similar legislation, but enacted in Hong Kong. As a first step, the Hong Kong (Legislative Powers) Order 1986, made on July 25, 1986, gives the Hong Kong legislature power to amend or repeal legislation which applies to Hong Kong in the fields of merchant shipping, civil aviation and admiralty jurisdiction. The Order also empowers the Hong Kong legislature to make laws having extra-territorial effect in those fields.

Sub-group on International Rights and Obligations

The first standing sub-group set up by the JLG, the Sub-group on International Rights and Obligations, was formally established in the fourth meeting of the JLG to examine and discuss matters relevant to the continued application of international rights and obligations affecting Hong Kong and to report its conclusions to the JLG. The sub-group consists of three experts on each side, supplemented as necessary by other experts and supporting staff. It has its principal base in Hong Kong, although it may meet, if necessary, in Peking or London.

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

43

       The large number of treaties and international obligations relevant to Hong Kong which the sub-group will have to examine individually means that its work will take many years to complete. A good start was made by two expert exchanges in January and May, which paved the way for the agreements reached at the fourth meeting of the Joint Liaison Group on Hong Kong's continued participation in international meteorological and postal affairs after 1997. The two sides agreed that the Hong Kong Special Administrative Region should maintain its own separate postal administration and that its representatives should participate as members of the Chinese delegation in meetings of the Universal Postal Union. They also agreed that the Hong Kong Special Administrative Region should continue to have its own meteorological service and should remain a member of the World Meteorological Organisation.

Following the first meeting of the sub-group held in October, the Joint Liaison Group reached agreement at its fifth meeting on the means for the Hong Kong Special Ad- ministrative Region to maintain its associate member status in the International Maritime Organisation and on the continued application of maritime conventions relevant to Hong Kong. At the same meeting, agreement was reached on how to ensure that the Hong Kong Special Administrative Region would continue to participate in an appropriate capacity in the activities of the International Telecommunications Union, exercising the same autonomy in telecommunications services as at present.

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EH

The Economy

AFTER the sluggish performance in 1985, the Hong Kong economy recovered significantly in 1986. The growth rate in real terms of the gross domestic product (GDP) accelerated from 0.6 per cent in 1985 to an estimated 8.7 per cent in 1986. The strong recovery in domestic exports provided the main impetus to this overall growth.

       The buoyant export demand, coupled with the steady growth in domestic demand, helped to keep the unemployment rate at a low level. With the unemployment rate at 2.2 per cent in the fourth quarter of 1986, the labour force was effectively fully employed. Earnings in most economic sectors rose significantly in real terms. The demand for most types of property strengthened, and trading in the property market was active.

       Despite an acceleration in import prices for many commodities, the rate of increase in consumer prices by the end of 1986 was still moderate. The lower prices of goods from China, due to the devaluation of the Renminbi, had some dampening effect on the increase in consumer prices. For the year as a whole, the Consumer Price Index (A) recorded an average increase of 2.8 per cent over 1985.

Structure and Development of the Economy

Hong Kong, because of its limited natural resources, has to depend on imports for virtually all of its requirements, including food and other consumer goods, raw materials, capital goods, fuel and even water. It must, therefore, export on a sufficient scale to generate the foreign exchange earnings to pay for these imports, and the volume of exports must continue to grow if the population is to enjoy a rising standard of living.

       The externally oriented nature of the economy can be seen from the fact that in 1986 the total value of visible trade (comprising domestic exports, re-exports and imports) amounted to 190 per cent of the GDP. If the imports and exports of services were also included, this ratio would become 221 per cent. Between 1976 and 1986, the average annual growth rate of domestic exports in real terms was about nine per cent, which was roughly twice the growth rate of world trade. As a result, Hong Kong ranks high among the world's trading economies.

Contributions of the Various Economic Sectors

The relative importance of the various economic sectors can be assessed in terms of their contributions to the GDP and to total employment.

      Primary production (comprising agriculture and fishery, and mining and quarrying) is small in terms of its contribution to employment and the GDP.

gas

       Within secondary production (comprising manufacturing; the supply of electricity, and water; and construction), manufacturing accounts for the largest share of the GDP as well as of employment. The contribution of the manufacturing sector to the GDP declined

THE ECONOMY

45

steadily from 31 per cent in 1970 to 21 per cent in 1982, but recovered to about 24 per cent in 1983 and 1984. For 1985, reflecting the fall in domestic exports, the contribution of the manufacturing sector to the GDP declined to 22 per cent. Despite this decline, the manufacturing sector was still the largest in terms of GDP contribution. The share of the construction sector in the GDP increased from four per cent in 1970 to eight per cent in 1981, before decreasing to about five per cent in 1984 and 1985 as building and construction activity slackened.

       The contribution of the tertiary services sectors as a whole (comprising wholesale, retail and import/export trades, restaurants and hotels; transport, storage and communication; financial, insurance, real estate and business services; and community, social and personal services) to the GDP increased from 61 per cent in 1970 to 65 per cent in 1982. Its share in the GDP was stable at around 62 to 64 per cent during 1983 to 1985.

       The tertiary services sectors are highly diversified. The contribution of the wholesale, retail and import/export trades, restaurants and hotels to the GDP was relatively stable during the past 15 years, at around 19 to 22 per cent. The contribution of the transport, storage and communication sector to the GDP was also stable at around seven to eight per cent.

      The share of the financial, insurance, real estate and business services sector in the GDP, however, experienced considerable fluctuations. It increased from 15 per cent in 1970 to 24 per cent in 1981, but fell to 16 per cent in 1984, mainly reflecting the depressing effect of the slump in the property market. In 1985, its contribution to the GDP remained little changed at 16 per cent.

      In terms of employment, the most notable change in recent years was that, whereas employment in the manufacturing sector still accounted for the largest share of the employed workforce, the share declined from 47 per cent in 1971 to 41 per cent in 1981 and further to 36 per cent in 1986. On the other hand, the share of the tertiary services sectors as a whole in the total employment increased from 41 per cent in 1971 to 47 per cent in 1981 and further to 55 per cent in 1986.

Nature and Relative Importance of Manufacturing

     Though the trade statistics indicate that Hong Kong's domestic exports are still dominated by a few major product groups, there has been considerable upgrading of quality and diversification within these product groups. The increasing pressure of pro- tectionism and growing competition from other economies have intensified the efforts of local manufacturers to diversify, not only in respect of products but also in respect of markets. It is estimated that up to 90 per cent of Hong Kong's manufacturing output is eventually exported.

Firms in Hong Kong must be flexible and adaptable in order to cope with the frequent changes in demand patterns and to maintain their external competitiveness. The existence of many small establishments and an extensive sub-contracting system has greatly facili- tated the necessary shifts in production and has helped to increase the flexibility of the economy. Because of the limited amount of usable land, Hong Kong's manufacturing industries are generally those which can operate successfully in multi-storey factory buildings. This, in practice, implies concentration in the production of light manufactures. Since the post-war years, many new industries have emerged and grown, the prominent ones being plastics and electronics. Other new industries include fabricated metal products, watches and clocks, toys, precision and optical instruments, and genuine and imitation jewellery.

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Between 1973 and 1984, the value of net output by the manufacturing sector grew at an average annual rate of 18 per cent, while manufacturing employment grew at an average annual rate of four per cent. Within the manufacturing sector, the most significant change occurred in the textiles industry. The share of this industry in the net output of manufacturing declined from 27 per cent to 14 per cent, and its share in manufacturing employment from 21 per cent to 12 per cent, over the period. This decline was offset by the expansion of the clothing, electrical products and electronics, and professional and scientific equipment (including watches and clocks) industries. Between 1973 and 1984, their shares of the net output in manufacturing increased from 20 per cent to 24 per cent, from nine per cent to 18 per cent, and from one per cent to four per cent respectively, while their shares in manufacturing employment increased from 26 per cent to 31 per cent, from 11 per cent to 15 per cent, and from two per cent to four per cent respectively.

Domestic exports in 1986 consisted principally of wearing apparel and clothing accesso- ries (34 per cent of the total value), electronics (22 per cent), plastic products (eight per cent), watches and clocks (eight per cent), textiles (seven per cent), electrical household appliances (three per cent), and metal products (three per cent). In terms of domestic export shares, the most significant changes in the past ten years had been the decline in the relative importance of clothing (from 44 per cent in 1976 to 34 per cent in 1986) and of textiles (from nine per cent in 1976 to seven per cent in 1986), and the increase in the relative importance of electronics (from 13 per cent in 1976 to 22 per cent in 1986) and of watches and clocks (from four per cent in 1976 to eight per cent in 1986).

       Market diversification, partly as a result of the promotion efforts financed by the government, has long ended the predominance of the United Kingdom and the Common- wealth countries as Hong Kong's main export markets. Since the establishment of the 'Certificate of Origin' system in the late 1950s, the United States has become Hong Kong's largest export market. Gradually, the share of domestic exports going to other countries such as the Federal Republic of Germany, Japan, Canada, Australia and those in Southeast Asia has also increased. In recent years, Hong Kong has diversified further into new markets, particularly China, which is now the second largest market for Hong Kong's domestic exports, and also countries in the Middle East, Eastern Europe, Latin America and Africa.

Nature and Relative Importance of the Financial Sector

The favourable geographical position of Hong Kong, which provides a bridge in the time gap between North America and Europe, together with the strong links with China and the South East Asian countries and assisted by excellent communications with the rest of the world, has helped to develop Hong Kong into one of the world's leading international financial centres. Banks and deposit-taking companies, insurance companies, pension funds, unit trusts and similar operations, foreign exchange and money brokers, stock and commodity brokers, other financial organisations and ancillaries, such as international firms of lawyers and of accountants, combine to provide a wide range of financial and related services in Hong Kong to both local and international customers.

       Under the three-tier structure established since 1981, deposit-taking institutions in Hong Kong are classified into three separate groups, namely licensed banks, licensed deposit- taking companies and registered deposit-taking companies.

Banking licences are granted at the discretion of the Governor in Council in accordance with the provisions of the Banking Ordinance. At present, a domestic company (that is, a company incorporated in Hong Kong and predominantly beneficially owned by Hong

THE ECONOMY

47

Kong interests), in order to be considered for a banking licence, must have a paid-up capital of at least $100 million, have been in the business of taking deposits from and granting credit to the public for at least 10 years, and have at least $1,750 million of deposits from the public and at least $2,500 million of assets. A bank incorporated outside Hong Kong wishing to apply for a banking licence is required to satisfy a separate set of criteria: it must show total assets (net of contra items) of at least US$14,000 million, and its country of incorporation must exercise an adequate form of prudential supervision on banks and offer some acceptable form of reciprocity to banks in Hong Kong.

      At the end of 1986, there were 151 licensed banks in Hong Kong, of which 32 were locally incorporated. They maintained a total of 1 386 offices in Hong Kong. In addition, there were 134 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of the year was $491 billion.

Only licensed banks may operate current or savings accounts. They may also accept deposits of any size and any maturity from the public. The interest rate rules of the Hong Kong Association of Banks (of which all licensed banks are required under their licens- ing conditions to be members) result in the setting of maximum rates payable on bank deposits of original maturities up to 15 months less a day, with the exception of deposits of $500,000 or above with a term to maturity of less than three months, for which banks may compete freely.

Licensed deposit-taking company status is granted at the discretion of the Financial Secretary. Licensed deposit-taking companies are required to have a minimum issued share capital of $100 million and a paid-up capital of $75 million, and to meet certain criteria regarding size, ownership and quality of management. They may also take deposits of any maturity from the public, but in amounts of not less than $500,000. There are no restrictions on the interest rates they may offer. At the end of 1986, there were 38 licensed deposit-taking companies, and their total deposit liabilities to customers was $25 billion.

      The authority to register deposit-taking companies rests with the Commissioner of Banking. Since April 1981, the Commissioner has, at the direction of the Governor, restricted new registrations to companies which, as well as meeting certain basic criteria such as having a minimum paid-up capital of $10 million, are more than 50 per cent owned by banks in Hong Kong or elsewhere. Registered deposit-taking companies are restricted to taking deposits of $100,000 or above with a term to maturity of at least three months. At the end of 1986, there were 254 registered deposit-taking companies, and their total deposit liabilities to customers was $46 billion.

      The Commissioner of Banking is the authority for the prudential supervision of all deposit-taking institutions, as provided for by the Banking Ordinance. The Commissioner's Office also obtains regular returns from and sends examination teams to the overseas branches of Hong Kong incorporated banks and deposit-taking companies (subject to the permission of the local authorities). The principles of the revised concordat issued by the Committee on Banking Regulations and Supervisory Practices, which meets regularly at Basle in Switzerland, and the principles of world-wide supervision of banking groups based in Hong Kong are accepted and practised.

Foreign Exchange, Money and Other Financial Markets

Hong Kong has a mature foreign exchange market in which the local currency and major international currencies are actively traded. Several factors have contributed to the development of the foreign exchange market. First, there are no exchange controls in Hong Kong. Second, international banks may trade through their Hong Kong offices while other

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centres in Europe and North America are closed. Third, the continuous requirements of local industry and commerce in relation to their transactions with the rest of the world have ensured active trading in the local currency.

There is also a well-developed interbank money market, in which wholesale Hong Kong dollar deposits are traded among the deposit-taking institutions. Trading in short-term financial instruments is, however, less than in other centres, partly because the government does not issue such instruments and is not engaged in open market operations in them. Nevertheless, markets in locally-issued certificates of deposit and commercial paper have been growing in significance.

The stock market provides an important source of capital to local enterprises and has continued to attract significant interest from overseas investors. The year 1986 was an important year for the securities industry. The Stock Exchange of Hong Kong Limited, formed by merging the former Far East Stock Exchange, Hong Kong Stock Exchange, Kam Ngan Stock Exchange and Kowloon Stock Exchange, commenced trading on April 2, 1986 after 10 years of planning and preparation. With its modern computerised trading system and efficient management, this new unified stock exchange has opened up a new era in share dealings in Hong Kong. Its formal opening took place on October 6, and was attended by representatives of many overseas stock exchanges.

At the end of 1986, the Stock Exchange had 151 corporate members and 708 individual members, who trade as brokers in partnership with other members of the Stock Exchange, or with non-members. A total of 253 public companies had their securities listed on the Stock Exchange. Their total market capitalisation by the end of the year was $419 billion. The Hong Kong Commodity Exchange Limited, established in 1977 and licensed as the sole company permitted to operate an exchange trading in futures contracts, was reorgan- ised and renamed as the Hong Kong Futures Exchange Limited in 1985. The Futures Exchange has five markets offering contracts in cotton (but no trading in cotton has taken place in recent years), sugar, soyabeans, gold, and more recently, the Hang Seng Index Futures. Trading in the Hang Seng Index Futures contracts, which started on May 6, 1986, has rapidly become a very active market. It allows investors to hedge their share portfolios against adverse price fluctuations. It is now the most active stock index futures market outside the United States. At the end of 1986, the Futures Exchange had 106 members.

The Chinese Gold and Silver Exchange Society operates a gold bullion market which is among the most active in the world. Gold traded through the society is of 99 per cent fineness, and is measured in taels (a Chinese measure of weight, of approximately 1.2 troy ounces) and quoted in Hong Kong dollars. After allowing for exchange rate fluctuations, prices follow closely those in the major markets in London, Zurich and New York. Membership of the society remains closed at 193 member firms.

       There is another active gold market in Hong Kong, in which the main participants are the major international gold trading companies. It is commonly known as the loco-London gold market. Trading in this market has grown significantly in recent years. Dealings principally take place in US dollars per troy ounce of gold of 99.95 per cent fineness, with delivery in London.

       The Commissioner for Securities and Commodities Trading exercises prudential supervi- sion of the securities and commodities futures industry in Hong Kong by administering the Securities Ordinance, the Protection of Investors Ordinance and the Commodities Trading Ordinance.

The Securities Ordinance provides a regulatory framework within which the Stock Exchange operates, requiring registration of dealers, dealing partnerships, investment

THE ECONOMY

49

advisers, investment advisers' partnerships and representatives, and enabling trading practices in securities to be regulated. It also provides, inter alia, for the investigation of malpractices and for the maintenance of a Compensation Fund to compensate clients of defaulting stockbrokers. During the year, amendments were made to the ordinance imposing new financial and qualification requirements for compliance by registered dealers. The Securities (Stock Exchange Listing) Rules 1986, which require the disclosure of shareholdings by directors and chief executives of public listed companies and of other company information, also came into force. These legislative changes bring the practices in Hong Kong, in this regard, into line with those of other major financial centres.

       The Protection of Investors Ordinance prohibits the use of fraudulent or reckless means to induce investors to buy or sell securities, or to take part in investment arrangements, and regulates the issue of publications related to investments.

       The Commodities Trading Ordinance provides a regulatory framework within which the Futures Exchange operates, and within which dealers, commodity trading advisers and representatives and their trading practices are regulated. It also provides, inter alia, for the maintenance of a Compensation Fund to compensate clients of defaulting commodity dealers.

Increasing Economic Links Between Hong Kong and China

      China's adoption of an open door economic policy since 1979 in support of its modernisa- tion programmes has given rise to increased economic links between Hong Kong and China, which have had a significant impact on the growth and development of the Hong Kong economy.

The most conspicuous development has been the rising importance of China as a trading partner of Hong Kong. From a relatively low base in 1979, Hong Kong's trade with China has grown by 724 per cent in value terms in the past seven years. Since 1985, China has been Hong Kong's largest trading partner. In 1986, the value of visible trade between Hong Kong and China amounted to $141 billion. China was the largest supplier of goods to Hong Kong (accounting for 30 per cent of Hong Kong's total import value in 1986), and the second largest market for Hong Kong's domestic exports (accounting for 12 per cent of the total domestic export value). In respect of Hong Kong's entrepôt trade, China was Hong Kong's largest re-export market as well as the largest source of goods re-exported through Hong Kong. In 1986, more than three-quarters of Hong Kong's entrepôt trade was related to China, either as a market or as a source of supply. Although the growth rates of some of these trade flows slowed down in 1986 as a result of China's tightening of control on imports in early 1985, trade with China still occupied an important position in the Hong Kong economy.

Besides merchandise trade, various forms of invisible trade between Hong Kong and China also increased. These included tourism and travel services, transport services, financial services, and professional and other business services.

In 1986, 11.9 million trips were made to China by Hong Kong residents. Another 0.7 million trips were made to China through Hong Kong by foreign visitors, reflecting Hong Kong's position as a convenient gateway to China for business and tourism.

      In line with the growth in trade and in passenger movements, the demand for transport services connecting Hong Kong with China has grown substantially in recent years. For cargo transport, the average annual growth rates in tonnage terms between 1979 and 1986 were about 12 per cent for inward cargo from China and about 55 per cent for China-bound outward cargo. Part of these cargo movements were transhipments. Most of the cargo was

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THE ECONOMY

transported by sea, although an increasing proportion of it was carried by road and by rail. Passenger traffic grew by an average of 21 per cent per annum between 1979 and 1986. The increase was mainly in travel by rail and, to a lesser extent, by sea and air.

       Reflecting the increasing financial links between Hong Kong and China in recent years, external liabilities of Hong Kong's financial institutions to banks in China grew by 127 times from HK$213 million at end 1979 to HK$27.1 billion at end 1986. During the same period, external claims of Hong Kong's financial institutions to banks and other enterprises in China grew by 7.9 times from HK$5.9 billion to HK$46.8 billion. Apart from being a source of funds, Hong Kong also provided China with access to the world's major financial markets. The business of the Bank of China Group in Hong Kong has grown substantially since the late 1970s, as reflected by its much enlarged retail banking network and the increasing variety of financial services offered.

       With regard to investment, Hong Kong's direct investment in China has been concen- trated in hotel and tourist-related facilities, and light manufacturing industries, such as electronics, textiles and wearing apparel. Most of the investment has been in the form of joint ventures with Chinese enterprises. Some Hong Kong manufacturers have maintained compensation trade and outward processing arrangements with Chinese enterprises partic- ularly in the Special Economic Zones and in the Pearl River Delta area. At the same time, enterprises owned by Chinese interests have also increased their investment in Hong Kong, and their activities have diversified from trading to such areas as property development, manufacturing, supermarkets, hotels and infrastructural projects.

       The increasing economic relations between Hong Kong and China have been mutually beneficial, and have added a new dimension to Hong Kong's economic growth.

The Economy

The performance of the Hong Kong economy in 1986 was characterised by a strong recovery in domestic exports, a significant improvement in the growth rate of the GDP, a low rate of inflation, effectively full employment, and a small visible trade gap. Personal incomes increased more rapidly in real terms than in 1985, and consumption demand improved further.

Preliminary estimates show that the growth rate in real terms of the GDP was 8.7 per cent in 1986, representing a significant improvement over the provisional estimate of 0.6 per cent for 1985. Economic growth in 1986 was strongly export-led, with domestic exports providing the main impetus to growth.

External Trade

In 1986, domestic exports grew by 19 per cent in money terms, or about 16 per cent in real terms. This was in sharp contrast to the decline of six per cent in money terms or five per cent in real terms recorded in 1985. One major factor behind the strong export performance was the improved demand for imports in many of Hong Kong's major overseas markets. The depreciation of the Hong Kong dollar, in line with that of the US dollar under the linked exchange rate system, against most major currencies has also helped to improve the price competitiveness of Hong Kong's products. Domestic exports to the United States and to China, which are Hong Kong's two largest export markets, grew by about nine per cent and 16 per cent respectively in real terms. Much faster growth was, however, recorded for domestic exports to other markets, such as the Federal Republic of Germany (at about 35 per cent in real terms), the United Kingdom (about 13 per cent), and Japan (about 32 per cent), the currencies of which were relatively strong against the Hong Kong dollar. The

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51

relatively low growth rate of Hong Kong's domestic exports to China in 1986 was partly a reflection of China's tightening of control since April 1985 over its foreign exchange spending. But the recovery in the growth rate since the second quarter of 1986 suggests that the effect on Hong Kong's exports of the control measures may have been absorbed.

In terms of the major product categories, domestic exports of clothing grew by about 13 per cent and of textiles by about 42 per cent in real terms in 1986; they accounted for 34 per cent and seven per cent respectively of the total value of domestic exports. Substantial increases were also recorded for domestic exports of watches and clocks (about 17 per cent in real terms), domestic electrical appliances (about 12 per cent), and radios (about 27 per cent). As regards domestic exports of other products, the growth rate in 1986 was about 16 per cent in real terms.

At 16 per cent in money terms or about 14 per cent in real terms, the growth rate of re-exports in 1986 was lower than that recorded in 1985, at 26 per cent in money terms or 25 per cent in real terms. This slowdown was largely attributable to reduced re-exports to China, reflecting the measures adopted by China in early 1985 to restrict its imports and control its foreign exchange spending. Apart from China, the other major re-export markets were the United States, Japan, Taiwan, the Republic of Korea and Singapore. Nevertheless, re-exports of China origin through Hong Kong to overseas markets grew substantially in 1986, reflecting China's efforts in promoting its exports and the use of Hong Kong as a shipping outlet. Apart from China, the other major origins of re-exports were Japan, the United States and Taiwan. When analysed by end-use categories, a significant proportion of the re-exports through Hong Kong comprised raw materials and semi- manufactures, and consumer goods, representing 40 per cent each of the total value of re-exports in 1986. Re-exports of textile yarn, fabrics and made-up articles, clothing, travel goods, and miscellaneous manufactured articles showed more rapid increases in real terms compared with other items.

       Imports grew by 19 per cent in money terms or about 14 per cent in real terms in 1986, compared with the corresponding growth rates of four per cent and six per cent in 1985. The major sources of imports were China, Japan, Taiwan, the United States, Singapore and the United Kingdom. With the slowdown in re-export trade, much of this growth was derived from a substantial increase in retained imports, at about 13 per cent in real terms. In particular, retained imports of raw materials and semi-manufactures and of consumer goods grew by about 20 per cent and seven per cent respectively.

       As the value of total exports (domestic exports plus re-exports) exceeded the value of imports, a visible trade surplus of $0.6 billion, equivalent to 0.2 per cent of the total value of imports, was recorded in 1986, compared with the visible trade surplus of $3.7 billion, equivalent to 1.6 per cent of the total value of imports, recorded in 1985. As the growth rate in real terms of total exports was roughly the same as that of imports, the smaller visible trade surplus was largely attributable to a deterioration in the terms of trade following the depreciation of the Hong Kong dollar during the year.

Domestic demand

The growth rate of domestic demand in 1986, at seven per cent in real terms, was higher than that recorded in 1985, at two per cent. Within domestic demand, private consumption expenditure is a major component. Reflecting the improvement in the employment situation and in labour incomes, private consumption expenditure grew by seven per cent in real terms in 1986, compared with a five per cent growth recorded in 1985. Government consumption expenditure grew by five per cent in real terms. This was higher than the two

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THE ECONOMY

per cent growth recorded in the previous year, but was still below the growth rate of the GDP, reflecting the government's policy of keeping public expenditure under control. Investment demand, measured in terms of the gross domestic fixed capital formation, grew by seven per cent in real terms in 1986, after a fall of two per cent in 1985. Among the main components of investment demand, expenditure on building and construction showed little change in real terms in 1986, with the fall in public sector expenditure due to the completion of the MTR Island Line and of some public works projects being offset by an increase in private sector expenditure on some major building projects. In contrast, expenditure on plant, machinery and equipment grew by eight per cent in real terms in 1986, after having decreased by two per cent in 1985. Of this increase, a significant proportion was attributable to higher investment in plant and machinery for use in the manufacturing sector.

The Labour Market

The recovery in the economy generally and in domestic exports in particular resulted in an increase in the demand for labour in 1986. At the same time, there was an increase in the supply of labour due to a higher labour force participation rate and an increase in the population of working age. Because of the tight demand for labour, both the unemployment rate and the underemployment rate declined during the year. In the fourth quarter of 1986, the seasonally adjusted unemployment rate and the underemployment rate stood at 2.2 per cent and 1.2 per cent respectively, compared with the corresponding rates of 3.1 per cent and 2.3 per cent in the same quarter of 1985. These rates are low by historical standards, and reflect virtual full employment in Hong Kong.

Reflecting the strong performance of domestic exports, manufacturing activity experi- enced a significant revival in 1986. The quantity index of industrial production in the first three quarters of 1986 was 15 per cent higher than in the same period in 1985, after a decline of five per cent in 1985 as a whole. At the same time, there was an improvement in labour productivity (defined as output per employee) in the manufacturing sector, attributable partly to increased investment and a higher level of utilisation of plant and equipment, and partly to more overtime work.

Comparing September 1986 with the same month in 1985, manufacturing employment increased by two per cent to 869 800. Employment in the services sectors as a whole. also increased, by four per cent to 983 300. Within the services sectors, employment in the wholesale, retail and import/export trades and in restaurants and hotels both grew by four per cent, and in financial, insurance, real estate and business services by seven per cent. Employment on building and construction (including civil engineering) sites increased by seven per cent over this period, reversing its declining trend (on a year-on-year comparison) since the second quarter of 1981. For the building and construction industry as a whole, employment (covering both site workers and non-site workers) increased by five per cent.

On labour incomes, employees in the manufacturing, trading and services sectors enjoyed a significant increase in earnings (measured by payroll per person engaged) in money terms and in real terms during the 12 months ending September 1986. They are normally the direct beneficiaries during an upswing in external trade. Over the same period, construction wage rates also showed some increase in money terms and in real terms.

The Property Market

The take-up rate for most types of property appeared to have improved or to have remained at a high level in 1986. Against the background of a reduction in the supply of

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new property in the private sector during the year, the vacancy rates for practically all major types of property were lower at the end of 1986 than a year earlier. The demand for most categories of residential property remained strong. This was particularly evident for small and medium-sized flats in convenient locations and in better-planned developments. Moreover, there was renewed interest in the pre-completion purchase of property. Improved economic conditions and the successive reductions in the mortgage rate during the year helped to boost interest in acquiring property. Prices and rentals of residential property firmed up. Prices and rentals of other types of property, particularly commercial property in the main business districts and the main shopping areas, also increased during 1986.

Reflecting the uptrend in prices and rentals of finished property, land prices rose during 1986. Most government land auctions met with favourable responses, indicating continued confidence in the property market among developers.

The Financial Scene

Under the linked exchange rate system, the Hong Kong dollar remained stable against the US dollar during 1986, moving for most of the time within a narrow range of HK$7.775 to 7.825 per US dollar. This was achieved despite general volatility in the foreign exchange market and the substantial depreciation of the US dollar against most major currencies. Over the course of the year, along with the US dollar, the Hong Kong dollar depreciated by 20.1 per cent against the Japanese yen and by 20.6 per cent against the German deutschemark. On the other hand, it appreciated by 16.9 per cent against the Renminbi. Largely reflecting these developments, the trade-weighted exchange rate index of the Hong Kong dollar declined by 8.2 per cent. The depreciation in the value of the Hong Kong dollar, particularly against the European and the Japanese currencies, has greatly helped Hong Kong's export performance in these markets.

One of the consequences of the linked exchange rate system is that the Hong Kong dollar interest rates will be broadly in line with the corresponding US dollar interest rates. In 1986, the interest rates administered by the Hong Kong Association of Banks were adjusted three times. Of these three adjustments, two were downward. Market interest rates were also lower, to the benefit of many sectors, including the property development sector.

Over the year, deposits with deposit-taking institutions and the money supply increased by 25.3 per cent and 24.8 per cent respectively. The foreign currency component of the deposits continued to increase faster than the overall deposits, reflecting in part the devel- opment of Hong Kong as an international financial centre. At the end of 1986, about 44 per cent of the total deposits were in Hong Kong dollars. Loans and advances made by deposit-taking institutions increased by 14 per cent during the year. Of the total outstand- ing loans by these institutions at the end of 1986, 54 per cent were for use within Hong Kong. As part of an international trend towards the securitisation of debt, and taking advantage of the lower interest rates and of liquidity in the monetary sector, financial institutions continued to increase the issue of negotiable certificates of deposit, in particular, fixed rate certificates denominated in Hong Kong dollars. But the outstanding value of these certificates still constituted only a small part of either total deposits or the money supply.

During the year, several money market funds were launched, providing small investors with higher rates of return derived from the wholesale money market.

       In the banking sector, 1986 witnessed difficulties in four local banks. The government intervened on a pragmatic basis, in some cases providing short-term liquidity and in others merely playing a catalytic role while commercial solutions were worked out. These measures were aimed at safeguarding the integrity of Hong Kong's financial system and

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maintaining stability in the exchange rate of the Hong Kong dollar. They also served to protect the interests of the banks' depositors. The actions taken were effective in over- coming these problems.

To promote further the stability and effective functioning of the banking system, a new Banking Ordinance was enacted on May 29, 1986 and came into operation on September 1. The new ordinance, which replaced the previous Banking and Deposit-taking Companies Ordinances, provides a single supervisory framework for both banks and deposit-taking companies, now collectively known as 'authorised institutions'. The ordinance contains new provisions designed to facilitate more effective supervision of banks and deposit-taking companies, in particular, by providing the Commissioner of Banking with sufficient dis- cretion and flexibility to enable him to identify problems at an early stage and take action as the situation demands.

A total of 10 new banking licences were granted to foreign banks in 1986, the highest figure since the moratorium was lifted in 1981. The increasing number of foreign banks conducting business in Hong Kong as well as using Hong Kong as a base for extending their operations elsewhere is a reflection of the growing importance of Hong Kong as an international financial centre. There was, however, a further decrease in the number of registered deposit-taking companies, reflecting a continuing process of adjustment to the three-tier banking system introduced in 1981, and the effect of imposing more rigorous entry requirements. The gradual 'pruning' of the sector, with the majority of the remaining deposit-taking companies now owned by banks, has removed many of the weaker in- stitutions with the result that the sector as a whole is now fundamentally sound.

       In the stock market, the total turnover in 1986 (with turnover on the previous four exchanges and on the unified Stock Exchange combined) amounted to $123 billion, 62.4 per cent higher than in 1985. The Hang Seng Index ended the year at an unprecedented high of 2 568 (July 31, 1964 = 100), compared with 1 752 at the end of 1985.

In 1986, there were nine instances of companies going public and 13 rights issues, raising a total capital of $8,685 million. There were nine reconstructions of companies or re-activations of shell companies.

       The total number of authorised issues of commercial paper and certificates of deposit was 119 on December 31, 1986, compared with 90 at the end of 1985.

       The turnover on the Futures Exchange in 1986 was: for sugar, 273 800 lots of 50 long tons each; for soyabeans, 330 524 lots of 30 000 kg each; for gold, 6 366 lots of 100 troy ounces each; and, for the Hang Seng Index Futures, 825 279 lots.

The price of loco-London gold moved between US$325 and US$445 a troy ounce during 1986, with active trading particularly in the latter part of the year. Movements in the price of gold on the Chinese Gold and Silver Exchange Society were similar to those in the loco-London gold market. The tael price of gold fluctuated between $3,030 and $4,100 during 1986, touching a high of $4,095 on October 7, 1986, before ending the year at $3,629.

Inflation

The rate of consumer price inflation, as measured by the increase in the Consumer Price Index (A), remained low at 2.8 per cent in 1986. Taken together, 1985 and 1986 represent the best two consecutive years since the mid-1970s in terms of this inflation rate. However, towards the end of 1986 the lagged effect of the pick-up in import prices since the second quarter of the year was beginning to affect retail prices. Further, with aggregate demand beginning to exert pressure on the aggregate supply of resources in the latter part of the

THE ECONOMY

55

year, the prices of locally produced goods and services tended to increase more rapidly. Nevertheless, soft world commodity prices generally and the fall in the import prices of goods from China in particular continued to provide some dampening effect on consumer price inflation.

Among the various components of goods and services in the CPI(A), miscellaneous goods and clothing and footwear recorded the most rapid increases in prices in 1986, at an average of 11 per cent and eight per cent respectively. These two components together accounted for 28 per cent of the overall increase in the Index, with another 21 per cent accounted for by the increase in prices of foodstuffs, given the large weighting of this component in the CPI(A).

Government's Involvement in the Economy

Economic Policy

Economic policy in Hong Kong is to a large extent dictated, and constrained, by the special circumstances of the Hong Kong economy. Owing to its small and open nature, the economy is vulnerable to external factors, and government action to offset unfavourable external factors is often of limited effectiveness. The government is of the view that, except where social considerations are regarded as over-riding, the allocation of resources in the economy will normally be most efficient if market forces are relied on and government intervention in the private sector is kept to a minimum.

This basically free-enterprise, market-disciplined system has contributed to Hong Kong's economic success. The narrowly based tax structure with relatively low tax rates provides incentives for workers to work and for entrepreneurs to invest. Both workers and entre- preneurs are highly motivated, given that all individuals have equal opportunity to pursue the goal of individual betterment and accumulation of wealth. The primary role of the government is to provide the necessary infrastructure and a stable legal and administrative framework conducive to economic growth and prosperity.

Monetary Policy

The government has consistently worked towards providing a favourable environment in the financial sector, with sufficient regulation to ensure, as far as possible, sound business standards and confidence in the institutional framework, but without unnecessary impedi- ments of a bureaucratic or fiscal nature.

Unlike most major economies, Hong Kong has no central bank. Most of the functions which might typically be performed by one - such as prudential supervision of financial institutions, managing official foreign exchange reserves, certain types of open market operations, issuing banknotes, and providing banking services to the government - are carried out by different government offices under the Monetary Affairs Branch of the Government Secretariat or by selected commercial banks.

The Hong Kong Government Exchange Fund was established by the Currency Ordin- ance of 1935 (later renamed the Exchange Fund Ordinance). Since its inception, the Exchange Fund has held the backing to the note issue. Hong Kong dollar notes are issued by the two note-issuing banks - the Hongkong and Shanghai Banking Corporation and the Standard Chartered Bank - against their holdings of certificates of indebtedness. These are non-interest-bearing liabilities of the Exchange Fund, and are issued or redeemed as the amount of notes in circulation rises or falls. In 1976, the role of the Exchange Fund was expanded, with the assets of the Coinage Security Fund (which held the backing for coins

URBAN COUNCIL PUBLIC LIBRARIES

Reference Library, City hail

56

THE ECONOMY

issued by the government) as well as the bulk of foreign currency assets held in the government's General Revenue Account transferred to the fund. In both cases, the transfer was made against the issue by the Exchange Fund of interest-bearing debt certificates denominated in Hong Kong dollars. On December 31, 1978, the Coinage Security Fund was merged with the Exchange Fund and all the debt certificates held by the Coinage Security Fund were redeemed.

       The Exchange Fund was further expanded in 1978 when the government began to transfer the Hong Kong dollar balances of its General Revenue Account (apart from the working balances) to the Exchange Fund against the issue of interest-bearing debt cer- tificates. Thus the bulk of the government's financial assets are now held in the Exchange Fund, mainly in the form of bank deposits in certain foreign currencies and in Hong Kong dollars, and of interest-bearing instruments in foreign currencies. The principal activity for the Exchange Fund is the day-to-day management of these assets. Its statutory role as defined in the Exchange Fund Ordinance is to influence the exchange value of the Hong Kong dollar. The Exchange Fund is managed by the Monetary Affairs Branch of the Government Secretariat under the direction of the Financial Secretary, who is advised by a committee comprising prominent members of the banking and financial community.

       Another function related to the Exchange Fund is the supply of notes and coins to the banking system. Currency notes in everyday circulation, of $10, $20, $50, $100, $500 and $1,000 denominations, may only be issued by the two note-issuing commercial banks against holdings of certificates of indebtedness issued by the Exchange Fund (apart from a very small fiduciary issue, which is backed by securities issued or guaranteed by the British or Hong Kong government). When the Hong Kong dollar was pegged to sterling prior to June 1972, certificates of indebtedness were issued and redeemed in sterling at a fixed exchange rate. Between June 23, 1972 and November 24, 1974, when the Hong Kong dollar was pegged to the US dollar, and between November 25, 1974 and October 15, 1983, when the Hong Kong dollar was floating, such payments were made in Hong Kong dollars. Since October 17, 1983, certificates of indebtedness have been issued and redeemed by the two note-issuing banks against payments in US dollars at a fixed exchange rate of US$1 = HK$7.80. The Exchange Fund bears the costs of maintaining the note issue (apart from the proportion of the costs which relates to the fiduciary issue), and the net profits of the note issue accrue to the fund. Coins of $5, $2, $1, 50 cent, 20 cent, 10 cent and five-cent denominations, and currency notes of one-cent denomination, are issued by the government.

       The eleventh of a series of $1,000 gold coins minted to commemorate the Lunar New Year was issued early in 1986. There was another limited issue of $1,000 gold coins in November 1986, to commemorate the second visit to Hong Kong of the Queen and Prince Philip. These gold coins are legal tender, but do not circulate. The total currency in circulation at the end of 1986, with details of its composition, is shown at Appendix 5.

       There are few monetary instruments available to the government for monetary policy purposes. From November 1974 until October 1983, the Hong Kong dollar was a floating currency. During this period, the Exchange Fund's role in directly influencing the exchange rate through intervention in the foreign exchange market was limited to ironing out short-term fluctuations.

       On October 17, 1983, after a period of much instability in the exchange rate, a revised exchange rate system was introduced. Under the new arrangement, certificates of indebted- ness issued by the Exchange Fund, which the two note-issuing banks are required to hold as cover for the issue of Hong Kong dollar notes, are issued and redeemed against payments

THE ECONOMY

57

in US dollars at the fixed exchange rate of US$1=HK$7.80. In practice, therefore, any increase in note circulation is matched by a US dollar payment to the Exchange Fund, and any fall in note circulation is matched by a US dollar payment from the Exchange Fund. The two note-issuing banks in turn extend this fixed exchange rate to their note transactions with all other banks in Hong Kong. The forces of competition and arbitrage have worked to keep the market exchange rate of the Hong Kong dollar against the US dollar stable and close to the fixed rate since October 1983.

This important aspect of Hong Kong's monetary framework means that the exchange rate is no longer a variable in the economy's adjustment process. Under the linked exchange rate system, the interest rates, the money supply and the level of economic activity tend to adjust automatically to balance of payments pressures, without government intervention being necessary. Interest rates have therefore assumed a more passive role than before, changing more frequently in response to the inflows and outflows of funds.

The Hong Kong Association of Banks, which sets the maximum rates of interest payable on deposits (except those of $500,000 or above with a term to maturity of less than three months) with licensed banks, has a statutory obligation to consult the government on the determination of these interest rates. This procedure is designed to ensure that the association takes into account the wider public interest in its decisions, including their effect on the exchange rate. Under the linked exchange rate system, it is neither so necessary nor so desirable as in the past for the government to play an active role in this process.

Through its bankers, the Exchange Fund operates a scheme which enables it to draw short-term funds out of the local interbank market and to ensure that these funds are not recycled back into that market. This arrangement has the effect of tightening up the local money market and putting upward pressure on short-term market interest rates. Thus, despite the change in the monetary framework which took place in October 1983, arrangements whereby the government may influence interest rates through the Hong Kong Association of Banks or the local money market still remain in place.

In response to the rapid development of Hong Kong's financial markets and the in- creasing interaction between them, policy responsibilities within the government were reorganised in 1986 so that the Monetary Affairs Branch of the Government Secretariat is now responsible for the securities, commodities and futures markets and for the insurance industry in addition to its portfolio of banking and monetary policy issues. Vesting policy responsibility for all aspects of the financial sector in a single branch enables the government to keep abreast of changes in the financial markets and facilitates the proper co-ordination of policies towards these markets.

Public Sector and Public Finances

     For expenditure analysis purposes, the public sector is conventionally taken to include the government itself, together with the Housing Authority and the Urban Council and Regional Council. Expenditure by institutions in the private or quasi-private sector is in- cluded to the extent that it is met by government subventions, but expenditure by organ- isations in which the government has only an equity position, such as the Mass Transit Railway Corporation and the Kowloon-Canton Railway Corporation, is not included.

      The government controls its finances through a series of fund accounts. General Revenue is the main account for day-to-day departmental expenditure and revenue collection. Six other funds have been established mainly to finance capital expenditure and to make loans. They are the Capital Works Reserve Fund, the Development Loan Fund, the Home Ownership Fund, the Lotteries Fund, the Mass Transit Fund and the Student Loan Fund.

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The Capital Works Reserve Fund finances the Public Works Programme and land acquisitions. With effect from the entry into force on May 27, 1985 of the Sino-British Joint Declaration, the fund was re-structured to allow for implementation of Annex III to the Joint Declaration dealing with the accounting of premium income obtained from land transactions. The income of the fund is derived mainly from this source and from transfers from General Revenue.

The Development Loan Fund is used mainly to finance social and economic develop- ments including, in particular, loans to the Housing Authority for the construction of public housing estates. Transfers are made from General Revenue to the fund to meet the loan requirements of the Housing Authority. Otherwise the fund's income is derived from interest payments and capital repayments.

       The Home Ownership Fund finances mainly the construction of flats for sale under the Home Ownership Scheme. The Housing Authority is the government's agent for the design, construction and marketing of these flats. The fund was initially established by a transfer from General Revenue, and derives its income from the proceeds of sales of the flats. The fund also finances the recurrent expenditure on the administration and planning of the Private Sector Participation Scheme.

The Lotteries Fund is used to finance the development of social welfare services through loans and grants. It derives its income mainly from a share of the proceeds of the Mark Six lotteries. The Mass Transit Fund is used to finance the purchase of government equity in the Mass Transit Railway Corporation. Its income is derived entirely from transfers from General Revenue.

        The Student Loan Fund is used to finance loans to students at the two universities, the two polytechnics, the Baptist College and other approved post-secondary institutions, and to Hong Kong students studying in the United Kingdom. Transfers are made as necessary from General Revenue to enable the fund to meet its commitments, the only other source of income being loan repayments.

Medium Range Forecast

The main technique used by the government in managing its finances is the Medium Range Forecast. This is a rolling five-year forecast of expenditure and revenue which concentrates on the consolidated financial position of General Revenue and all the funds except the Lotteries Fund. Expenditure projections take account of expected increases in the demand for and supply of government services. Revenue projections reflect expected patterns of collection in the light of fiscal policy, charges for various government services, and the general economic outlook.

Several principles underlie the strategy adopted in the Medium Range Forecast. The first is that the planned rate of growth of public sector expenditure should not exceed the forecast growth rate of the Gross Domestic Product. The second is that there should be a broad balance of revenue and expenditure, with more emphasis being placed on achieving a surplus as opposed to a deficit in order to ensure that the government's fiscal reserves are not eroded. The third is that, to preserve the stability of government's finances, at least half of the capital spending should be financed from the operating surplus, that is, the excess of recurrent revenue over recurrent expenditure. There are also other principles. They are concerned with taxation policy, capital spending, and the size of the Public Service.

The Budget presented by the Financial Secretary to the Legislative Council each year is set within the context of the Medium Range Forecast, thus ensuring that full regard is given to these principles and to longer-term considerations.

THE ECONOMY

The Public Sector

59

Consolidated public expenditure in 1985-6 was $43.4 billion, of which the government itself accounted for $40.7 billion. The growth rate in public expenditure over the preceding year was 8.9 per cent in money terms, or 2.7 per cent in real terms after discounting the effect of inflation. In 1985 the Gross Domestic Product grew by six per cent in money terms or 0.6 per cent in real terms, these actual growth rates being lower than forecast.

      A comparison of the growth rate of consolidated public expenditure with that of the Gross Domestic Product is at Appendix 8. The ratio of consolidated public expenditure to the Gross Domestic Product fell from a high of 19.1 per cent in 1982-3 to 15.9 per cent in 1984-5. It rose to 16.3 per cent in 1985-6 as a result of the low economic growth in that year, and is expected to remain at about the same level in 1986-7.

      The government's consolidated revenue and expenditure were $43.7 billion and $40.7 billion respectively in 1985-6. The consolidated surplus of $3 billion comprised an increase of $1.4 billion in the surplus on General Revenue and of $1.6 billion in the balances of the other funds. The surplus reflected exceptional capital receipts in the year which are not expected to be repeated in 1986-7. Details of the revenue sources and expenditure components for 1985-6 and as estimated for 1986-7 are at Appendix 7. An analysis of expenditure by function is at Appendix 9.

      Some $10.9 billion (or 27 per cent) of the consolidated expenditure in 1985-6 was of a capital nature. The operating surplus for the year was sufficient to finance 61 per cent of this capital expenditure. The remainder was financed from capital revenue including revenue from land sales. The principle that at least half of the capital expenditure should be met from the operating surplus was, therefore, adhered to. It is expected to be maintained in 1986-7.

      There was no recourse to borrowing in 1985-6, and the balance of the government's outstanding borrowings at the end of the year was $1.4 billion.

Public Expenditure

The estimated expenditure on General Revenue is set out in the draft Estimates of Expenditure which are presented by the Financial Secretary to the Legislative Council when he delivers his annual Budget speech. It is the total estimated expenditure on General Revenue for which appropriation is sought in the Appropriation Bill introduced into the Legislative Council at the same time.

The Estimates of Expenditure contain details of the estimated recurrent and capital expenditure of all government departments, including estimated payments to subvented organisations and estimated transfers to the statutory funds. They also provide for the repayment of public debt.

With only four exceptions, General Revenue has shown a surplus of income over expenditure at the end of each year in the past 20 years. The exceptions were 1974-5 when there was a deficit of $380 million, 1982-3 when there was a deficit of $3,500 million, 1983-4 when there was a deficit of $2,993 million, and 1984-5 when there was a deficit of $1,563 million of which $1,004 million was financed by the issue of Government Bonds. The accumulated net surpluses on General Revenue form the government's fiscal reserves. These secure the government's contingent liabilities and ensure that it is able to cope with any short-term tendency for expenditure to exceed revenue.

      The Urban Council and Regional Council, operating through the Urban Services Department and Regional Services Department respectively, draw up their own budget and expenditure priorities. The expenditure of the Urban Council and of the Regional Council

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THE ECONOMY

is financed mainly from a fixed percentage of the rates from property in the Urban Council area (Hong Kong, Kowloon and New Kowloon) and all the rates from property in the Regional Council area (New Territories), and from the fees and charges for services provided by the councils.

       The Housing Authority, operating through the Housing Department, is also financially autonomous. Its income is derived mainly from rents. Where cash flow is inadequate to meet the construction costs of new estates, the authority borrows from the Development Loan Fund on concessionary terms. The Housing Authority is provided with land at nil premium, but the value of the land is shown in its balance sheet as a government contribution. Part of the authority's recurrent expenditure is financed from General Revenue for such activities as squatter control and the management of temporary housing areas. The authority is also responsible for carrying out a programme of squatter area improvements funded from the Capital Works Reserve Fund.

Revenue Sources

There is no general tariff on goods entering Hong Kong, but duties are charged on seven groups of commodities irrespective of whether they are imported or manufactured locally. These are hydrocarbon oil, intoxicating liquor, non-intoxicating liquor, methyl alchohol, tobacco, non-alcoholic beverages and cosmetics. All firms engaged in the import, export, manufacture or storage of these commodities must be licensed and, additionally, a sale licence is also required in certain cases.

Duty is payable on European-type liquor, except beer, cider and perry, at the rate of 20 per cent of the c.i.f. value of the liquor and, in addition, at the relevant specific duty rates. The specific duty rates on alcoholic liquors range from $1.20 a litre on beer to $60 a litre on brandy. On tobacco, the rates range from $40 a kilogram on Chinese prepared tobacco to $210 a kilogram on cigarettes. On motor and aircraft spirits the duty is $2.30 a litre and on diesel oil for road vehicles it is $1.15 a litre. On methyl alcohol the duty is $4 a litre. On non-alcoholic beverages the duty is $60 a hectolitre. There is a 25 per cent ad valorem duty on the c.i.f. price for imported, or on the wholesale price for locally produced, cosmetics.

Rates are levied on the occupation of landed property at a percentage of the assessed rateable value which is, briefly, the annual rent at which the property might reasonably be expected to be let. New valuation lists are prepared periodically as directed by the Governor, enabling the rateable values to be reviewed and updated in line with the market rental levels. The current lists came into effect on April 1, 1984, with all rateable values determined by reference to rents as at July 1, 1983. For newly assessed premises, the rateable values are also based on rental levels as at this reference date. The percentage charges on rateable values are determined annually by resolution of the Legislative Council. For 1986-7 the charge is six per cent. To cushion the impact of the increase in rates on rate- payers following the 1984 revaluation, a relief scheme was introduced on April 1, 1984. Under this scheme, the maximum increase in the rates payable for any property in any year will not exceed a prescribed percentage of the amount payable in the preceding year. The percentage prescribed for 1986-7 is 20 per cent.

Rates are payable quarterly in advance and exemptions are few. However, the govern- ment generally provides financial assistance towards the payment of rates to non-profit- making educational, charitable and welfare organisations if the premises they occupy are being run in accordance with an approved target or policy. No refund of rates is allowed for vacant domestic premises but half of the rates paid may be refunded in the case of vacant non-domestic premises.

1

A

final touches before the show

ballet class tete-a-tete

cellists three by the seaside

7.

ribbon dancers

15

PUBL PUB

B

ARIES

BRAB

voices in harmony

THE ECONOMY

61

      During the year, preparatory work for a general review of all rateable values was initiated, with a view to adopting the new rateable values on April 1, 1988. Approximately 500 000 requisition forms were issued to ratepayers in October and December 1986, and some 250 000 more will be issued between January and April 1987. The purpose is to obtain rental information which will be analysed and used as the basis for the assessment of new rateable values.

      The taxes and duties making up the internal revenue, with the exception of the air passenger departure tax and the Cross-Harbour Tunnel passage tax, are collected by the Inland Revenue Department. These consist of betting duty, entertainments tax, estate duty, hotel accommodation tax, stamp duty, and earnings and profits tax.

      Betting duty is imposed on bets on authorised totalisators and the proceeds of Mark Six lotteries. The rate of duty is either 9.5 per cent or 16 per cent of the amount of the bet, depending on the type of bet placed, and is 30 per cent on the proceeds of lotteries.

      Entertainments tax is imposed on the price of admission to cinemas and race meetings at rates which vary with the prices charged for admission. This averages about nine per cent in the case of cinemas and 29 per cent in the case of race meetings.

      Estate duty is imposed on that part of a deceased's estate situated in Hong Kong. The rates of duty charged range from a minimum of ten per cent on estates valued between $2 million and $2.5 million to a maximum of 18 per cent on estates valued in excess of $4 million. Estates valued at less than $2 million are exempt from duty.

Hotel accommodation tax of five per cent is imposed on expenditure on accommodation by guests in hotels and guest houses.

      The Stamp Duty Ordinance imposes fixed and ad valorem duties on different classes of documents relating to assignments of immovable property, leases and share transfers.

      Earnings and profits tax are levied under the Inland Revenue Ordinance. Hong Kong has a schedular system of taxation whereby persons liable may be assessed to tax on four separate and distinct sources of income, namely business profits, salaries, income from property and interest income. Personal assessment is a form of aggregation superimposed upon the schedular system. The standard rate of tax is 17 per cent.

      Profits tax is charged only on profits arising in Hong Kong, or derived from Hong Kong from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are taxed at 17 per cent whereas profits of corporations are taxed at 18.5 per cent. Assessable profits are determined on the actual profits for the year of assessment. The tax is paid provisionally on the basis of profits of the year preceding the year of assessment. As in many countries, profits assessable to profits tax in Hong Kong are the net profits. Generally, all expenses incurred in the production of assessable profits are deductible. There is no withholding tax on dividends paid by corporations, and dividends received from corporations are exempt from profits tax.

Salaries tax is charged on emoluments arising in or derived from Hong Kong. The basis of assessment and the method of payment are similar to the system for profits tax. Tax payable is calculated on a sliding scale which varies from five per cent to 25 per cent on $10,000 segments of net income (that is, income after deduction of allowances). With effect from the year of assessment commencing on April 1, 1985, the segment to which the 20 per cent rate applies has been widened from $10,000 to $20,000. However, the overall effective rate is restricted to a maximum of 17 per cent of income before the deduction of personal and other allowances.

      Property tax is charged on the owner of land or buildings in Hong Kong at the standard rate of 17 per cent on the actual rent received, less an allowance of 20 per cent for repairs

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and maintenance. A system of provisional payment of tax similar to that under the profits tax and salaries tax applies. Property owned by a corporation carrying on a business in Hong Kong is exempt from property tax but the profits derived from the property ownership are chargeable to profits tax.

      Interest tax is charged on interest arising in or derived from Hong Kong. This is basically a withholding tax deducted at source unless the interest forms part of the profits of a corporation carrying on a trade or business in Hong Kong, in which case it is subject to profits tax. The rate of interest tax on chargeable interest is 17 per cent. Interest payable on foreign and Hong Kong currency deposits placed with financial institutions carrying on business in Hong Kong is exempt from tax. Interest paid or payable by the government and public utilities is also exempt from tax, provided it does not exceed a specified rate, which varies according to the prevailing level of interest rates.

      Business registration fees, which form part of the revenue from fees and charges, are also collected by the Inland Revenue Department. Business registration is compulsory for companies incorporated in Hong Kong, overseas companies with a place of business in Hong Kong and businesses operating in Hong Kong, except those run by charitable institutions and licensed hawkers. The annual registration fee is $500, but exemption from payment is granted where the business is small. Every branch of a business is required to obtain a branch registration certificate and pay an annual registration fee of $15. In addition, a levy of $100, payable to the Protection of Wages on Insolvency Fund, is imposed on each business registration certificate issued to a business or its branch.

      Other revenue arises from taxes on the registration of motor vehicles, fines, forfeitures and penalties, royalties and concessions, yields from properties, investments and land transactions, reimbursements and contributions, government utilities, and from fees and charges for the provision of a wide range of goods and services.

Audit of Public Accounts

The audit of all of the government's accounts is carried out by the Director of Audit. He also audits the accounts of the Urban Council, the Regional Council and the Housing Authority, and of more than 50 statutory and non-statutory funds and other public bodies, as well as reviews the financial aspect of the operations of the multifarious government- subvented organisations working in Hong Kong. The director's appointment, tenure of office, duties and powers are set out in the Audit Ordinance, which also provides that he shall not be subject to the direction or control of any other person or authority.

      The Director of Audit's report on the annual accounts of the government is submitted to the Governor as President of the Legislative Council for tabling. It is then referred to the Public Accounts Committee, comprising a chairman and six members, all of whom are members of the Legislative Council. In the exercise of its authority, the committee may call any public officer or other person concerned to give information and explanations and to produce any documents and records which it may require. The committee holds its meetings in public except where the committee is of the opinion that the public interest requires confidentiality. The report by the Public Accounts Committee on the Director of Audit's report relating to the accounts of the government is also tabled in the Legislative Council. Both are copied to the Secretary of State.

5

Industry and Trade

MANUFACTURING industries generally performed well in 1986. The value of domestic exports during the year amounted to $153,983 million, 19 per cent more than in 1985.

Overall, the major factors that have contributed to Hong Kong's success as a leading manufacturing and commercial centre continued to work well. Among these are the government's consistent commitment to free enterprise and free trade and a simple tax structure, a flexible and industrious workforce, a modern and efficient seaport with the world's third busiest container port, a centrally located airport with a computerised cargo terminal, and excellent world-wide communications.

In its approach to economic policy the government takes the view that, because of the external orientation of the economy and the need to enable it to adjust efficiently, it is normally futile and even damaging to the performance of the economy for the government to attempt to plan the allocation of resources or to frustrate the operation of market forces. The government rarely intervenes and then only where it is clearly in the long-term interests of the economy. In practice, this has meant that, apart from providing the necessary framework within which private enterprise can operate successfully, the government's main concern is to avoid frustrating individual enterprise and to seek to maintain incentives. To this end, the tax regime has been kept low, the size of the public sector has been effectively constrained, and subsidies to business have been avoided.

Manufacturing industries are an important component of the Hong Kong economy, accounting for some 22 per cent of the gross domestic product and 36 per cent of total employment. It is estimated that up to 90 per cent of Hong Kong's manufacturing output is eventually exported. The shortage of usable land has generally prevented diversification into capital and land intensive industries. Accordingly, light manufacturing industries, producing mainly consumer goods and operating in multi-storey factory buildings, predominate. About 65 per cent of the total industrial workforce is employed in the textiles, clothing, electronics, plastic products, and watches and clocks industries. These industries together accounted for 79 per cent of Hong Kong's domestic exports in 1986, a pattern which is likely to continue.

Notwithstanding the concentration in light manufacturing, there has been a continuous process of up-grading in terms of quality and product range. Many new and sophisticated product lines have been introduced and many simpler ones abandoned, partly because of external competition and partly in response to demand in Hong Kong's established main markets.

Trade

     This year, 1986, was an eventful year for trade. In a year when the Multi-Fibre Arrangement (MFA) and most of Hong Kong's bilateral textiles agreements fell due for

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re-negotiation, serious concern was aroused by an increase in protectionist sentiments in some of Hong Kong's major markets, particularly the United States. Indeed, Congressman Ed Jenkins's name became well-known in Hong Kong through his sponsorship of the Jenkins Bill, which would have severely cut back Hong Kong exports to the United States. President Reagan's veto of the bill was narrowly sustained in August, assisted by the agreement to extend the MFA for five years and tight bilateral textile agreements with some major suppliers, including Hong Kong.

      During the year, Hong Kong participated actively in talks in the General Agreement on Tariffs and Trade (GATT) which led to the launching in September of a new round of multilateral trade negotiations in Punta del Este, Uruguay. Parallel negotiations on goods and services are now being pursued.

      The other major development in 1986 was that, following consultations between the governments of the United Kingdom and the People's Republic of China, Hong Kong became a separate countracting party to the GATT. The future Special Administrative Region's continued participation in the GATT is also ensured.

Textiles and Clothing

     Textiles and clothing make up Hong Kong's largest industry, accounting for about 41 per cent of the total domestic exports and about 43 per cent of the industrial employment. Domestic exports of textiles and clothing in 1986 were valued at $63,117 million, compared with $52,735 million in 1985.

The output of cotton yarn in 1986 was 178 million kilograms, compared with 142 million kilograms in 1985. Production of man-made fibre yarn and cotton man-made fibre blended yarn was 13 million kilograms, compared with 15 million kilograms in 1985, and production of woollen and worsted yarn was four million kilograms, compared with four million kilograms the previous year. Most of the yarn produced was used locally.

The weaving sector, with 22 293 looms, produced 781 million square metres of woven fabrics of various fibres and blends, compared with 679 million square metres in 1985. The bulk of the production - 95 per cent was of cotton. Much of the fabric produced was exported in the piece, but local clothing manufacturers used the major proportion of locally woven and finished fabrics.

The knitting sector exported 42 million kilograms of knitted fabrics in 1986 - of which 24 per cent was of man-made fibres or blended cotton man-made fibres, and 76 per cent was of cotton - compared with 22 million kilograms in 1985. In addition, a large quantity of knitted fabric of all fibres was used by local clothing manufacturers.

The finishing sector of the industry provides sophisticated support facilities to the spinning, weaving and knitting sectors. It handles a large amount of textile fabrics for bleaching, dyeing, printing and finishing. The processes include yarn texturising, multi- colour roller and screen printing, transfer printing, pre-shrinking, permanent pressing and polymerising.

Clothing is the largest single sector of the manufacturing industry, employing some 299 373 workers or about 34 per cent of the industrial employment. Domestic exports of clothing in 1986 were valued at $52,162 million, compared with $44,912 million in 1985.

Electronics

The electronics industry is the second largest export-earner after clothing. Domestic exports of electronics products in 1986 were valued at $33,393 million, compared with $27,014 million in 1985. The industry comprises 1090 establishments employing 75 178

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workers. It is well known for its ready adaptability to fast-changing consumer requirements. It produces a wide range of sophisticated and high quality products and components, such as radios, cassette recorders, hi-fi systems, television sets, electronic watches and clocks, TV and handheld games, wired and cordless telephones with built-in memories and automatic dialing functions, telecommunication equipment, calculators, photocopying equipment, microcompu- ters, disk drives, printers, modems, switching power supplies, computer memory systems and subassemblies, read-write magnetic heads, and computer-aided design and testing equipment. It also produces multi-layer printed circuit boards, liquid crystal displays, quartz crystals, and semi-conductor devices, including integrated circuit wafers.

Plastics

The plastics industry accounted for eight per cent of the total domestic exports and 10 per cent of the total industrial employment in 1986. Domestic exports of plastic products during the year were valued at $12,716 million, compared with $10,678 million in 1985. The industry has 5 460 establishments and 89 447 workers. Hong Kong continues to be one of the world's leading suppliers of toys, which represented the bulk of the industry's output.

Watches and Clocks

Hong Kong is an important world exporter of watches and clocks. Domestic exports in 1986 were valued at $11,667 million compared with $9,573 million in 1985. The industry has 1 633 establishments employing 32 805 workers. Production includes both mechanical and electronic watches, clocks, watch cases, dials, metal watch bands, assembled watch movements and watch straps of various materials.

Other Light Industries

Other important light industries produce electrical machinery, apparatus and appliances, metal products, jewellery, optical and photographic goods and travel goods, handbags and similar articles.

Heavy and Service Industries

Hong Kong shipyards provide a competitive repair service and build a variety of vessels. Several large shipbuilding and repair yards on Tsing Yi Island provide services to the shipping industry and construct and service oil rigs.

      The port of Hong Kong, which ranks among the top three container ports in the world, handled approximately 2.7 million TEUS (20-foot equivalent units) in 1986.

      The aircraft engineering industry has a high international reputation and provides extensive maintenance and repair services. Facilities are available for the complete overhaul of airframes and engines for many types of aircraft.

The manufacture of machinery, machine tools and their parts provides support to other local industries and also contributes to Hong Kong's export trade. Of particular import- ance are blow moulding, extrusion, and injection moulding machines of up to 12 256-gram injection capacity for the plastics industry; power presses; lathes, shapers and drilling machines; polishing machines; printing presses; textile knitting and warping machines; and electroplating equipment.

Industry Department

The principal role of the Industry Department is to provide Hong Kong's manufacturing industries with the support they need to achieve growth in productivity and improvements

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in quality, in the form of industrial support services. These services are generally provided following industry-by-industry identification of the demand and supply side determinants of and constraints upon the growth of various industries, and funded by the government on the advice of the Industry Development Board. The Industry Department is also re- sponsible for investment promotion and for monitoring the availability or otherwise of services and facilities on which Hong Kong's manufacturing industries depend, including the supply of trained manpower, industrial land, financial services, freight and cargo handling services, and sources of energy supply.

Industrial Support Facilities and Technical Back-up Services

In respect of industrial support services, in April the government began funding a three-year plan to enhance the capability of the Hong Kong Productivity Council in providing a range of advisory bureau and consultancy services associated with industrial automation and precision tooling. These services are designed to promote productivity growth. In seeking to promote the wider application of quality assurance, the Industry Department generally seeks to provide manufacturing with competent points of reference. Accordingly, to meet the demand for industrial design services, the Hong Kong Design Innovation Company Limited - a company set up with the help of public funds - opened for business in March to provide manufacturers with consultancy services. The department's Standards and Calibration Laboratory which maintains high echelon reference standards traceable to international standards institutions and provides calibration services in respect of elec- tronic and electrical measurements, was accredited by the United Kingdom's National Measurement and Accreditation Service in July. The department's Products Standards Bureau continued to meet growing demand for information and technical advice on overseas product standards. The Hong Kong Laboratory Accreditation Scheme, which seeks to introduce quality assurance in Hong Kong's testing laboratories, assessed eight laboratories for accreditation during the year.

Two of these laboratories were successful in achieving accreditation and the scheme is being expanded to cover the testing of concrete reinforcing steel.

      While industrial support services have the effect of transferring and diffusing technology to manufacturers through advisory bureau and consultancy services, the principal aim of the Industry Department's industrial investment promotion programme is to encourage overseas manufacturers to introduce to Hong Kong, through their investments, new and improved products, new and improved designs and processes and improved management techniques. These investments serve not only to enrich Hong Kong's manufacturing capabilities but also to stimulate local manufacturers to upgrading their own operations. The programme is implemented by a network of five overseas offices located in New York, San Francisco, London, Stuttgart and Tokyo, and supported by a 'One Stop Unit' in Hong Kong. During 1986, under this programme, 24 projects involving more than $515 million worth of investment were brought to fruition with the Industry Department's assistance. In terms of the quality of this inward investment, 1986 witnessed a healthy inflow of technology, notably from the United States and Japan. For example, during the first half of the year, the expansion of Mita, a large manufacturer of photocopiers in Japan, resulted in a number of its contractors concurrently investing in Hong Kong in the production of photo-conductive drums, heavy metal parts and precision metals and plastic components, all of which are new to Hong Kong and which provide an important expansion of Hong Kong's linkage industries. The Industry Department's 'One Stop Unit' has been active in helping these investors to look for suitable labour and industrial accommodation.

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In August, Motorola Incorporated, which has its Asia Pacific Regional Head Office in Hong Kong, set up a large centre for the design of applications-specific integrated circuits to serve the needs of both Hong Kong and the region. This investment, together with similar facilities, constitutes a considerable reinforcement for an important industry upon which Hong Kong's electronics industry will depend in order to progress from assembly- intensive production to higher value added and more innovative output.

      During 1986, the Industry Department and the Industry Development Board continued to monitor the supply of trained manpower. As a result of intensive studies of the electronics industry, proposals for launching a scheme of training grants to provide a pool of people trained in the design of applications-specific integrated circuits have been accepted in principle. Similar studies of the plastic conversion industry have led to proposals for setting up a plastic industry centre providing information and technical services.

As regards industrial land and accommodation, in 1986 the government put up for sale by auction or tender eight pieces of industrial land with a total area of 27 675 square metres. Developers completed 610 000 square metres of flatted factory space. Of the stock available in the market, 780 000 square metres had been taken up.

Industrial Estates

The Hong Kong Industrial Estates Corporation of which the Director of Industry is the chief executive, develops and manages industrial estates intended to accommodate in- dustries with a relatively high level of technology that cannot be operated in ordinary multi-storey factory buildings. The first two stages of the Tai Po Industrial Estate provide 55 hectares of industrial land. The third stage, now under construction, will produce a further 14 hectares by 1987. A second estate at Yuen Long provides 67 hectares of industrial land. Land on the industrial estates is sold by the corporation to applicants at premia based on cost. By the end of 1986, 133 of 271 applications received by the corporation had been approved and sites had been granted to 73 companies at the Tai Po and Yuen Long Industrial Estate, representing a growth rate for sales of 29 per cent over 1985. Besides providing sites to industrialists for the construction of their own purpose- built factory buildings, the corporation also provides pre-built factory premises for those who wish to begin production with a minimum of delay. These standard factories are fully serviced and provide maximum flexibility. Two blocks of four-storey standard factories and four blocks of single-storey standard factories at the Tai Po and Yuen Long industrial estates have been occupied.

External Trade

Total merchandise trade in 1986 amounted to $552,484 million, an increase of 18 per cent over 1985. Imports rose by 19 per cent to $275,955 million and re-exports by 16 per cent to $122,546 million while domestic exports increased by 18.6 per cent to $153,983 million. Domestic exports and re-exports together, valued at $276,530 million, registered an increase of 18 per cent. Appendices 11 and 12 provide summary statistics of external trade. Hong Kong is almost entirely dependent on imported resources to meet the needs of its population of more than 5.5 million and its diverse industries. In 1986, imports of raw materials and semi-manufactured goods totalled $119,518 million, representing 43 per cent of total imports. The principal items imported were transistors, diodes, semi-conductors and integrated circuits ($8,046 million); fabrics of man-made fibres ($13,506 million); iron and steel ($6,865 million); woven cotton fabrics ($7,632 million); plastic moulding materials ($6,892 million) as well as watch and clock movements, cases and parts ($7,193 million).

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Imports of consumer goods, valued at $85,181 million, constituted 31 per cent of total imports. The major consumer goods imported were clothing ($19,667 million); radios, television receivers, gramophones, records, amplifiers and tape recorders ($8,629 million); diamonds ($6,268 million); watches ($5,308 million); baby carriages, toys, games and sporting goods ($4,462 million); handbags ($3,533 million); cameras and photography supplies ($2,623 million).

Imports of capital goods amounted to $39,501 million, or 14 per cent of total imports. Imported capital goods consisted mainly of transport equipment ($4,147 million), office machines ($3,376 million), electrical machinery ($6,483 million), electronic components and parts of computers ($5,259 million) and textile machinery ($2,260 million).

Imports of foodstuffs were valued at $23,484 million, representing nine per cent of total im- ports. The principal imported food items were fish and fish preparations ($4,561 million), fruit ($3,264 million), meat and meat preparations ($2,675 million) and vegetables ($2,509 million).

Mineral fuels, lubricants and related materials worth some $8,271 million were imported in 1986, representing three per cent of total imports.

China and Japan were the two principal suppliers of imports in 1986, providing 30 per cent and 20 per cent, respectively, of the total. China alone supplied 43 per cent of Hong Kong's im- ported foodstuffs. Taiwan ranked third, providing nine per cent of total imports, followed by the United States, the Republic of Korea, Singapore, the United Kingdom and West Germany. Clothing remained the largest component of domestic exports in 1986, valued at $52,162 million or 34 per cent of the total. Exports of miscellaneous manufactured articles consisting mainly of plastic toys and dolls; jewellery; goldsmiths' and silversmiths' wares as well as arti- ficial flowers were valued at $25,430 million, representing 17 per cent of total domestic exports. Telecommunications and sound recording and reproducing apparatus and equipment were valued at $11,681 million (eight per cent of the total). Electrical machinery, apparatus and appliances consisting mainly of transistors, diodes and household type appliances amounted to $11,214 million or seven per cent of the total. Domestic exports of photographic apparatus, equipment, supplies and optical goods, watches and clocks, valued at $13,041 million, con- tributed another eight per cent to the total. Other important exports included textiles (seven per cent) as well as office machines and automatic data processing equipment (five per cent).

The direction and level of Hong Kong's export trade is much influenced by economic conditions and commercial policies in major overseas markets. In 1986, 62 per cent of all domestic exports went to the United States and the European Economic Community. The largest market was the United States ($64,219 million or 42 per cent of the total), followed by China ($18,022 million or 12 per cent), West Germany ($11,003 million or seven per cent), and the United Kingdom ($9,918 million or six per cent). Domestic exports to Japan and Canada increased to $6,212 million and $4,880 million respectively, with Japan representing four per cent and Canada three per cent of total domestic exports. Other important markets were Australia, the Netherlands and Singapore.

Re-exports continued to increase in 1986, accounting for 44 per cent of the combined total of domestic exports and re-exports. The principal commodities re-exported were textiles ($20,094 million); articles of apparel and clothing accessories ($13,366 million); miscellaneous manufactured articles, n e s ($10,343 million); electrical machinery, apparatus and appliances ($9,618 million); telecommunication and sound recording and reproducing apparatus and equipment ($6,680 million) as well as photographic apparatus, equipment and supplies and optical goods, watches and clocks ($5,735 million). The main places of origin of these re-exports were China, Japan, the United States and Taiwan. The largest re-export markets were China, the United States, Japan, Taiwan and the Republic of Korea.

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     Hong Kong believes in free trade. The aims of Hong Kong's external commercial relations policy are thus to safeguard its rights and to discharge its obligations in the pursuit of free trade. The most important of these rights and obligations are contained in the General Agreement on Tariffs and Trade (GATT) and the Multi-Fibre Arrange- ment (MFA).

Textiles

Textiles trade is the major sector that has been hardest hit by restraints. Bilateral agreements negotiated under the MFA govern Hong Kong's textiles exports to Austria, Canada, the European Economic Community (EEC), Finland, Norway, Sweden and the United States.

The 1983-6 textiles agreement between Hong Kong and the EEC which governed Hong Kong's exports of cotton, wool and man-made fibre textile products to the 12 member states of the EEC expired at the end of 1986. Following several rounds of intensive consultations with the EEC during the year, a new five-year agreement was reached covering 1987 to 1991. It contained some useful if modest requirements over the previous agreement.

      The bilateral textiles agreement between Hong Kong and Switzerland which provided for an export authorisation arrangement for Hong Kong's exports of certain clothing items to Switzerland was terminated on April 1. The agreement was first concluded in 1975 and had since been renewed on an annual basis. The termination was secured after bilateral consultations with the Swiss Government.

      The agreement between Hong Kong and Finland expired in December 1986. Negotia- tions in September led to a new agreement of five years' duration.

      The bilateral agreement with Austria is due to expire in January 1987. Negotiations with Austria in November resulted in the extension of the agreement with some improvements for a further period of three years.

      In February 1986, the United States requested Hong Kong to hold bilateral discussions concerning Hong Kong's textile exports to the United States, despite the fact that the existing agreement was not due to expire until December 1987. Following three rounds of negotiations, a new United States/Hong Kong Textiles Agreement was concluded on June 30, 1986. The new agreement, which modifies and extends the 1982-7 bilateral textiles agreement, covers a period of six years with retroactive effect from January 1, 1986. The main features of the agreement are the extension of coverage to silk blends and other vegetable fibres and the introduction of a group structure with individual group limits. The agreement further tightens restraints on Hong Kong's exports of textile products to the United States.

       The Textile and Apparel Trade Enforcement Bill (generally known as the Jenkins Bill) which posed a serious threat not only to Hong Kong, but to world trade in textiles, was vetoed by the US President on December 17, 1985. Subsequently, a vote by the US House of Representatives on August 6, 1986 failed by a narrow margin to override President Reagan's veto. The bill, if enacted, would have reduced Hong Kong's textile exports of cotton, wool and man-made fibre to the United States by about 13 per cent and other fibre textile exports by possibly as much as 70 per cent. The closeness of the vote demonstrated the strength of protectionist feeling in the United States Congress.

      The bilateral textiles agreement between Hong Kong and Canada covering the five years commencing 1982 expired at the end of 1986. Four rounds of consultations were held in

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1986 but no agreement could be reached before the year ended. Further consultations have been scheduled for early 1987. Meanwhile, to avoid disruption in the trade, an interim arrangement has been implemented by Hong Kong to facilitate exports of textiles to Canada in 1987 pending the conclusion of an agreement.

The Multi-Fibre Arrangement was due to expire at the end of July 1986. Following intensive negotiations, agreement was reached to extend the MFA for five years until end-July 1991. An important feature of the Protocol of Extension is that textiles products of vegetable fibres and silk blends are brought under the scope of the MFA for the first time. Hong Kong played an active role in the negotiations leading to the conclusion of the protocol, co-ordinating closely with other developing exporting members - less developed countries (LDCs) - of the MFA to safeguard its trade interests.

Non-textiles Issues

French Quantitative Restrictions: During the year, three products from Hong Kong were subject to unilateral quantitative restrictions when imported into France - digital quartz watches, toys and radios. Restrictions on these three products are to be lifted at the beginning of 1987.

     Generalised Schemes of Preferences (GSP): GSP are operated by most developed countries to promote the exports of goods from developing countries and territories by providing duty-free or reduced import tariff treatment. Hong Kong benefits in varying degrees from these schemes.

     In July, the EEC Commission reviewed the EEC GSP and proposed to exclude 16 Hong Kong products from GSP benefits. Hong Kong made a detailed submission opposing the exclusion to the commission in September. The EEC eventually decided to exclude only seven Hong Kong products from GSP benefits in 1987.

Hong Kong ceased to be a beneficiary of the New Zealand GSP as from July 1, 1986 as a result of the introduction in 1985 of New Zealand's new policy whereby existing benefi- ciaries with per capita GNP equal to or exceeding 70 per cent of that of New Zealand would lose their beneficiary status. However, following bilateral consultations held in April 1986 in Wellington, New Zealand agreed to apply to Hong Kong preferential tariff rates in respect of over 100 product items in which Hong Kong has a special trading interest. In July 1986, Australia introduced a revised system of tariff preferences for developing countries. Under the new system, preferential developing country tariff rates set at five percentage points below the normal tariff rates will apply to all dutiable products imported from any developing countries, except those which attract excise duties only.

     The existing arrangements for textiles, clothing and footwear products will continue to apply, however, until the end of 1988.

     The US GSP was extended for 8 years in January 1985 and Hong Kong continues to be a beneficiary. Under the extended scheme, the US President is required to conduct a general review to determine the extent of preferential treatment granted to beneficiary countries. Factors to be taken into consideration under the review are individual beneficiary's level of development, its competitiveness in respect of GSP articles and its trade practices.

     Any modification made as a result of the review will take effect on July 1, 1987. The Hong Kong Government and private sectors have participated actively in the review. During 1986, two rounds of talks on the review were held with the United States.

     Harmonised Commodity Description and Coding System (Harmonised System or HS). The HS is expected to be introduced in most significant trading entities, including Hong Kong, from 1988. Hong Kong is consulting with its major trading partners to resolve any

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      adverse results of their introduction of the HS, which is intended to be neutral in its effect on tariff levels.

      New Round of Trade negotiations: The Contracting Parties to the GATT held a session at ministerial level in Uruguay from September 15 to 19, 1986 and launched a new round of multilateral trade negotiations to further liberalise world trade and to strengthen the disciplines of the GATT. Hong Kong took part in the ministerial meeting as a GATT contracting party and will continue to participate fully in the new trade round.

Documentation of Imports and Exports

As a free port, Hong Kong keeps its import and export licensing requirements to a minimum. Products over a wide range do not need licences to enter or leave Hong Kong. Where licences are required, they are intended to achieve two main objectives. Firstly, they help Hong Kong to fulfil its international obligations to restrain exports of textiles products and, related to this, to monitor the flow of these products into Hong Kong. Thus there is a requirement for all imports and exports of such products to be covered by licences issued by the Director of Trade. Secondly, they help Hong Kong to control, on health or safety grounds, exports and imports of a few types of non-textile products such as strategic commodities, pharmaceuticals, agricultural pesticides and rice.

      There is in Hong Kong a certification of origin system to establish the origin of the goods which Hong Kong exports and to meet the requirements of the importing authorities. The Trade Department administers and safeguards the integrity of this system, and issues certificates of origin where required. Other government-approved certificate issuing organ- isations are the Hong Kong General Chamber of Commerce, the Indian Chamber of Commerce, the Federation of Hong Kong Industries, the Chinese Manufacturers' Associa- tion of Hong Kong, and the Chinese General Chamber of Commerce.

Trade Department

The Trade Department is responsible for Hong Kong's commercial relations with foreign governments. It implements trade policy and agreements, and procedures for import and export licensing and origin certification. On matters of policy affecting trade, the Director of Trade takes advice from the Trade Advisory Board and the Textiles Advisory Board, both of which are appointed by the Governor and chaired by the Secretary for Trade and Industry. The department consists of five divisions. Three of them deal with bilateral commercial relations with Hong Kong's trading partners. Their work includes the conduct of trade negotiations and the implementation of textile agreements, as well as collecting and disseminating information on developments, especially those relating to trade policy in Hong Kong's major markets, which may affect Hong Kong. The distribution of work among these three divisions is by geographical area. The fourth division deals with the multilateral aspects of Hong Kong's external commercial relations, such as its participation in the GATT and in the negotiation of the MFA. The fifth division is responsible for common services, origin certification, the import and export licensing of commodities other than textiles, and a rice control scheme.

The department's work is assisted by Hong Kong Government Offices in London, Brussels, Geneva, New York, Washington and San Francisco. Details are at Appendix 2. These overseas offices are administered by the Trade and Industry Branch of the Govern- ment Secretariat. They represent Hong Kong's commercial relations interests on a day-to-day basis and provide information on international developments which may affect Hong Kong.

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Customs and Excise Department

The department is made up of two component parts - the Customs and Excise Service and the Trade Controls Group.

      The Customs and Excise Service is a disciplined and uniformed force, and its work is described in Chapter 14, Public Order.

The Trade Controls Group is manned by officers of the Industry Officer Grade, and is responsible for inspection of factories and consignments in connection with certificates of origin, import and export licences, verification of trade declarations and manifests, and control of reserved commodities. It also investigates fraud relating to imports and exports, enforces the Trade Descriptions Ordinance and design copyright aspects of the Copyright Ordinance, and handles trade complaints.

During the year, the group completed 66 372 inspections of factories and consignments, 1 477 costing checks in connection with applications under the GSP (Form 'A'), and 89 503 enquiries and verifications relating to trade declarations and manifests. It conducted 6 235 assessments on trade declarations, which resulted in the collection of $4.1 million in ad valorem charges and administrative penalties.

The group also completed 2 347 investigations, resulting in the imposition of fines totalling $21.2 million and prison sentences up to 43 months. Under the Trade Descriptions Ordinance and the Copyright Ordinance, goods with a market value of $44.3 million were seized, of which $3.1 million worth were forfeited to the Crown.

Hong Kong Trade Development Council

The Hong Kong Trade Development Council is a statutory body responsible for promoting and developing Hong Kong's overseas trade and publicising the opportunities and advan- tages of Hong Kong as a trading partner.

The chairman is appointed by the Governor and the 19 other members include repre- sentatives of major trade associations, leading businessmen and industrialists, and two senior government officials. The council is financed by the net proceeds of an ad valorem levy on all exports and on imports other than foodstuffs, and by miscellaneous income from sources such as advertising fees and sales of publications.

      The council was established in 1966 and has built up a network of 22 offices throughout the world, in addition to the head office in Hong Kong and local branch offices in Tsuen Wan and Kwun Tong. All offices process trade enquiries, provide up-to-date trade and economic in- formation and offer advice to businessmen interested in developing trade with Hong Kong. The overseas representatives and consultants can put traders in touch with any of the 25 000 Hong Kong manufacturers and exporters registered in the Trade Enquiries Service computer.

The computerised Trade Enquiries Service of the council processed more than 150 000 overseas and local trade enquiries. The Research Department continued to publish special market surveys and detailed product reports, specifying opportunities in overseas markets for Hong Kong exports.

Council staff carried out an extensive trade promotion programme in 1986, organising more than 80 major international projects. In the United States, these included the Winter Consumer Electronics Fair in Las Vegas and the Summer Consumer Electronics Fair in Chicago, the American Toy Fair in New York, the National Hardware Show in Chicago and the New York Premium Show.

In Europe, the council participated in the International Toy Fair in Nuremburg, the Frankfurt International Spring and Autumn Fairs, the Birmingham International Spring Fair and Domotechnica in Cologne, as well as the Swiss Industries Fair in Basle.

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In China, the council mounted an overseas exhibition featuring more than 3 000 Hong Kong-made products in Peking to coincide with the opening of the council's first office in China.

A variety of Hong Kong business groups under the auspices of the council visited the United States, Europe, China, the Middle East and Japan to enhance old, or establish new, trade contacts. The council also received more than 200 inward missions from more than 40 countries, most notably from the United Kingdom, the United States, Japan, China, the Federal Republic of Germany, Canada and Sweden.

In Hong Kong, the council staged the Casual Apparel Show and organised its 12th Hong Kong Toy and Gift Fair, and was involved with the 5th Hong Kong Watch and Clock Fair, the Hong Kong Fur Fair and the Hong Kong Gifts and Houseware Fair.

In the very successful department store promotions, the HKTDC joined forces with T. Eaton Company Limited in Canada for a country-wide promotion in February involving 93 stores. In July, the council held a store-wide promotion in San Francisco at I. Magnin and Company, one of the city's more popular stores. And in Japan, it staged promotions in seven of the A.I.C. chain of department stores in October and November.

For the Queen's visit in October, the council staged 'Showcase Hong Kong', a display of more than 3 500 Hong Kong products. The exhibition was opened to the public after the royal ceremonies.

The council puts out two product magazines, a fashion magazine and a newspaper on general circulation. They are Hong Kong Enterprise, a monthly general products magazine; the annual Hong Kong Toys, published each October to coincide with the Hong Kong Toy and Gift Fair; Hong Kong Apparel, a biannual fashion magazine, and the Hong Kong Trader, a monthly newspaper (sent airmail) giving news and views of the territory. The council also publishes three specialised trade magazines Hong Kong Jewellery and Watches (an annual); Hong Kong Electronics and Hong Kong Household (both biannuals) - which are distributed at trade fairs throughout the world. A guidebook, Hong Kong For The Business Visitor, is published annually in seven languages (English, Chinese, French, German, Italian, Spanish and Japanese).

       The council's Overseas Associations Section administers the HK-US Economic Co- operation Committee and the HK-Japan Business Co-operation Committee. In February, the Chief Secretary, Sir David Akers-Jones, led a Hong Kong delegation to the HK-US/ US-HK Economic Co-operation Committees 3rd plenary session in Washington, DC. The committees came out strongly against protection in any form.

In May, the Governor accompanied a delegation to Tokyo for the 9th plenary session of the HK-Japan/Japan-HK Business Co-operation Committees which discussed Japanese tariffs on fur garments, for 'prior confirmation' on silk fabric imports and technological transfer.

       This section also monitors the activities of seven overseas associations Spain, Canada, Austria, the Netherlands, the United Kingdom and Italy.

in Sweden,

Construction work is proceeding on the Hong Kong Convention and Exhibition Centre, the cornerstone of which was laid by the Queen during her visit in October. Supporting facilities for the centre include two five-star hotels - with 1 500 rooms combined - and two towers containing office space, a trade mart and service apartments. The government provided the 2.96-hectare site on the Wan Chai waterfront through a private treaty grant, free of premium. The portion of the development to be retained by the council will ultimately comprise around 73 000 square meters, and will include two 9 100 square metre exhibition halls, a 2000 square metre conference/convention hall, two auditoria with

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seating for 700 and 360, plus a variety of small function rooms. The centre is scheduled to open in October 1988.

Hong Kong Export Credit Insurance Corporation

The Hong Kong Export Credit Insurance Corporation (ECIC) is a statutory corporation established in 1966 to issue insurance contracts which protect exporters and manufacturing exporters against risks of monetary loss arising from non-payment by their overseas buyers for goods and services supplied on credit. The ECIC is autonomous in its day-to-day operations, with major formulation and changes in policy being subject to the approval of the Financial Secretary. Its capital of $20 million is provided by the government which also guarantees the corporation's underwriting liabilities up to $4,200 million. The corporation, which is required to operate commercially, is assisted in the conduct of its business by a 12-member advisory board.

As a member of the International Union of Credit and Investment Insurers (the Berne Union), the corporation has regular access to confidential and updated economic and marketing information on all major trading countries.

      The primary function of the corporation is to improve the competitiveness of Hong Kong's exports, by protecting policy-holders against losses arising from those risks not normally covered by commercial insurers, namely, commercial risks of an overseas buyer and the political risks of his country. The maximum percentage of indemnity is 90 per cent. The protection provided by the corporation's policies helps policy-holders to obtain from their bankers trade finance and discount facilities for export operations.

The corporation also provides policy-holders with supporting services in resolving payment difficulties, and in the supply of political and economic intelligence on overseas markets, as well as giving indications as to the credit-worthiness of individual overseas buyers.

      Transactions which include documents against payment, document against acceptance and open account invoices concluded on short-term credits (maximum 180 days) are normally insured under a Comprehensive Shipments Policy which gives protection from the date of shipment. Cover can also be made effective from the date of the contract of sale instead of the date of shipment so as to provide the exporter with protection during the manufacturing stage. For exports of capital goods and services sold on medium or long-term credits with payments spreading over two to five years or longer, the corporation provides other types of insurance policies to cater to the individual needs of the exporters.

      In recent years, Hong Kong's exporters and manufacturers who export on the basis of irrevocable letters of credit (ILC) are increasingly facing risks at the pre-shipment, or manufacturing, stage. They often find themselves having to begin manufacturing before the ILC has arrived and therefore have to face the risk of contract repudiation during the manufacturing stage. To protect them against this risk as well as the risk of the buyer becoming insolvent and other political risks, the corporation introduced a new Compre- hensive Contracts Policy in early 1986.

      Although the corporation itself does not provide finance, exporters find a 'letter of authority' a useful form of collateral security in negotiating export finance facilities. For exports on medium and long-term credits, the corporation can, upon application, provide a full unconditional guarantee directly to the exporter's banker.

       Many of the corporation's business operations have been computerised. This enables the corporation to deal with policyholders' enquiries speedily in respect of around 55 000 overseas buyers and to process some 10 000 credit limit applications a year.

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      In 1986, close to $6,380 million in goods and services were insured by the corporation, which earned a premium income of more than $40.5 million. Some 155 claims were paid, involving a total of $15.2 million.

Hong Kong Productivity Council

The Hong Kong Productivity Council (HKPC), a statutory organisation established in 1967, is responsible for promoting increased industrial productivity in Hong Kong. The council has a chairman and 20 members, all appointed by the Governor, representing management, labour, academic and professional interests as well as government depart- ments closely associated with productivity. It is financed by an annual government subvention and by fees earned from its services.

      The council has over 280 staff members covering a wide range of disciplines. An important strength of the HKPC is its ability to mix and blend skills for a large variety of industrial and management consultancy as well as technological support services. It conducts a diverse range of training programmes in industrial technology, management techniques and computer-related topics. It organises industrial exhibitions and overseas study missions, and operates a technical information service. It also undertakes develop- ment work in priority areas with multiple application potential so that upon successful completion newly-developed productivity improvement systems can benefit as many users as possible. The legislative amendment in 1985 provided for the enlargement of the council's powers and functions to enable it to meet the changing industrial development needs of Hong Kong with greater flexibility and effectiveness.

      The council's facilities include five training centres in Central District, Mong Kok, Tsim Sha Tsui, To Kwa Wan and Tai Kok Tsui - electronic data processing facilities, microprocessor application laboratory, industrial automation unit, industrial chemistry laboratory, metal finishing laboratory, heat treatment unit, die-casting unit, environmental control laboratory, technical reference library, on-line information retrieval service and the newly established CAD/CAM centre and workshop.

During the year, the council's implementation plan on a 'unified approach' to industry support services was approved by the government. It included the expansion of relevant technical branches to provide an integrated industrial automation support service, and a limited expansion of its metals development facilities with special emphasis on the improvement of precision tooling capability. In view of the increasing size and diversity of the HKPC, a committee was appointed to advise on its long-term accommodation arrangement.

On an assignment for the Industry Department, the council assisted SRI International in a techno-economic study of the plastics conversion industry. It also undertook specific industry studies for trade bodies in collaboration with external consultancies.

There was a sustained demand for the council's management and industrial consultancy services from both local and overseas companies in establishing new plants, and in expanding and streamlining their operations. The council completed 260 consultancy projects, including feasibility studies, production management, new plant projects, person- nel recruitment, marketing and technical assistance services. In metals technology, 2 900 heat treatment and metal finishing assignments were completed on behalf of client com- panies to improve the quality of their production tooling and to increase the produc- tivity of their operations.

The Microprocessor Application Laboratory was engaged in the provision of consul- tancy and training services and the development of productivity enhancement systems.

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Work was being carried out on a computer-aided-design system for making garment markers. Earlier systems developed by the council, including the pattern grading system, automatic plating line controller and computerised employee data entry and surveillance system, have proved to be cost-effective tools in upgrading quality and productivity. In electronic data processing, a comprehensive management information system, a joint venture project, developed for the garment industry made good progress. The council also developed a low-cost computer-aided-design system for the knitting industry. In environ- mental management, 109 projects were carried out, covering air pollution control, waste-water treatment, noise control, solid waste management and resources and wastes recovery and recycling.

      The council maintains close contact with industry through its Industry Liaison Scheme. Seminars, forums and presentations were conducted for various district bodies and in- dustrial associations. In training, the council organised 480 courses for over 8 800 people, covering management and supervisory techniques, advanced programming and electronic data processing appreciation courses, and a diverse range of technology programmes for various industries. It also organised exhibitions on clothing industry, Chinese computers and software technologies. Seventeen overseas study missions and visits were organised to observe the latest technology in various areas, including CAD/CAM, quality control, electroplating, electroforming, human resource development, metal working and electronic engineering.

       As a member of the Asian Productivity Organisation (APO), the council handles all APO matters on behalf of the government. During the year, under the sponsorship of the APO, the council held two seminars, attended by delegates from most Asian countries, on surface technology and food processing.

Other Trade and Industrial Organisations

The Hong Kong General Chamber of Commerce founded in 1861 is the oldest and largest trade and industrial association in the territory. It comprises more than 2 700 companies representing all branches of commerce and industry. The chamber is actively involved in promoting Hong Kong's trade and attracting new industries. It is a member of the International Chamber of Commerce and has been approved by the Economic and Social Commission for Asia and the Pacific to arbitrate in commercial disputes. The chamber provides a wide range of services to its members and to, more than 8 000 non-member companies. These include the issue of certificates or origin commercial carnets, endorse- ment of invoices and the processing of trade and industrial enquiries. The government regularly consults the chamber on important issues affecting trade, industry and aspects of social development.

An independent body incorporated in 1981, the Hong Kong Trade Facilitation Council was set up to promote, stimulate and assist the facilitation of international trade procedures and the documentation and information flows associated with them. Its members comprise representatives of the government, and of trade and industrial organisations. In recent years, the emphasis in trade facilitation work has shifted from paper to the transmission of essential trade data by sophisticated electronic means. In line with this trend, the council is developing a project called 'Hotline', which is a proposal for a comprehensive elec- tronic system for the transfer of data between interested parties. To keep itself abreast of developments elsewhere, the council liaises closely with other international bodies and sends representatives to attend United Nations-sponsored and other international meetings from time to time.

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      The Federation of Hong Kong Industries was established by statute in 1960 to promote and protect the interests of Hong Kong industry and to provide a strong central organisation to which all manufacturing industries in Hong Kong could belong. It advises the government on all matters affecting Hong Kong industry and effectively reflects industry's views to government. It has a membership which is broadly representative of all industries. The Federation provides a wide range of services to both members and non-members, covering certificates of origin, trade enquiries and joint venture requests, translation services, specialised research tailored to particular needs. Through its Design and Packaging Centre which is the executive arm of the Design Council of Hong Kong, the Federation offers design and packaging depository and consultancy services. It organises the annual Governor's Award for Hong Kong Design competition. It operates the Q-Mark Scheme, under the supervision of the Hong Kong Q-Mark Council, and through which licences are issued in respect of products found to comply with internationally approved standards and manufactured under an adequate quality control system. The Federation also services the Hong Kong Toys Council, which is open to all companies and manufac- turers interested in the toy business in Hong Kong. It publishes a monthly magazine, the Hong Kong Industrial News, and a Members' Directory. It sponsors exhibitions and fairs, and organises seminars and conferences on various industrial issues.

       The Chinese Manufacturers' Association of Hong Kong was established in 1934. It has a membership of over 3 600 industrial and trade establishments. A member of the Interna- tional Chamber of Commerce, the CMA has played an important role in the industrial development of Hong Kong and is widely consulted by the government in connection with formulation and implementation of public policies. It is authorised by the government to issue certificates of origin. It operates a trade enquiry section and sponsors trade fairs in support of trade promotion, promotes product development, and holds the annual Hong Kong New Products Competition. It also provides services to introduce new technology, encourage investment and promote trade. The CMA Testing and Certification Labora- tories provide a wide variety of services including product testing, certification, production and pre-shipment inspection and technical consultancy. The association promotes in- dustrial safety and manpower development in the industrial sector and runs two prevoca- tional schools which provide technical education for more than 2 000 students.

Founded in 1900, the Chinese General Chamber of Commerce, Hong Kong, is an association of Chinese firms and businessmen resident in Hong Kong. It has a membership of more than 5 000. In addition to the traditional activities of a chamber of commerce, it maintains close contact with trade organisations in China and actively seeks to promote two-way trade between China and Hong Kong. This is highlighted by the fact that since 1957 the chamber has been authorised by the Chinese Export Commodities Fair authorities to issue invitations on their behalf to Chinese firms situated in Hong Kong. It is also one of the five commercial and industrial organisations authorised by the government to issue Hong Kong certificates of origin. In 1985, it became a functional constituency of the Legislative Council together with the Hong Kong General Chamber of Commerce, the Federation of Hong Kong Industries and the Chinese Manufacturers' Association.

The Hong Kong Management Association is an incorporated body established in 1960 for the purpose of improving the effectiveness and efficiency of management in Hong Kong. Institutional and individual membership totals over 7 000. The association operates under its auspices a number of specialists clubs which provide opportunities for groups with similar interests to share and further develop their expertise. It regularly offers management consultancy and knowledge/skills oriented courses. More than 1000 programmes are

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offered annually, catering to over 30 000 executives. A highlight of the association's activities is its annual conference which provides a platform for eminent speakers to share their knowledge, experience and new thinking on the practice of management. Other management services provided by the association include the publication of the Hong Kong Manager, a bilingual management journal, library and information services, seminars and forums, inter-firm competitions and translation services. A Business Enter- prise Management Centre operates with the association to generate better management practices in small-to-medium-sized businesses, and a series of Chinese-language books on management has been compiled and published.

Consumer Council

The Consumer Council, established in 1974, is responsible for protecting and promoting the interests of consumers of goods and services. It comprises a chairman and up to 15 members who are appointed by the Governor. The council has a staff of 94 and is financed primarily by an annual subvention from the government.

It provides a comprehensive consumer protection service covering consumer representa- tion and legislation, advice and complaints, research and testing, information and educa- tion. It maintains close co-operation with the government and is represented on many committees to tender specialist advice on a wide range of consumer concerns.

The work of the council in 1986 was marked with successes in a number of long-standing issues affecting consumers. With the support of the relevant professional bodies and government departments, the council succeeded in reaching a resolution on a standard method of floor measurement which will enable purchasers to gauge accurately the area and hence unit price - of housing units put up for sale by developers before completion. The agreement standardised a confusing array of floor area descriptions that had led to many consumer complaints. Another issue concerned the prices of oil products. As prices of crude oil began to slide on the world market, the council which has been monitoring oil prices since 1975, was quick to submit a detailed report on the situation to a working group of the Legislative Council.

The council's crack-down on malpractices by retailers received a significant boost when an amendment to the Defamation Ordinance was passed into law. This enabled the news media to publicise the council's reports of unscrupulous or dishonest traders, including the names of those involved, without fear of libel action against them. The year also saw the enactment of an amendment to the Small Claims Tribunal Ordinance which considerably enhanced the protection of consumers, especially tourists, and the Travel Agents Ordinance. In its regular activities, the council dealt with 9 324 complaints and 160 092 enquiries for advice. A new Consumer Advice Centre was also opened, bringing the total number throughout Hong Kong to 15. To fulfil its function of collecting and disseminating independent and impartial advice and information to consumers, the council continued its extensive programme of research and comparative product testing. The year the council also embarked on a testing programme that comprised expensive household durables, such as air-conditioners, washing machines and refrigerators.

      In the field of consumer education, a Product Safety Campaign was launched in March with a variety of activities which included the establishment of a telephone hotline for complaints on hazardous products and an exhibition that attracted some 500 000 members of the public. Awareness was aroused among consumers, manufacturers and retailers alike. The launching of the new 'Choice', the council's monthly magazine, also proved to be a resounding success with circulation averaging 40 000 for the year. To ensure that the

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consumer message reached a wide audience, the council liaised with the mass media and other interested bodies, notably schools, in extra-curricular activities such as competitions and a scheme for 'Young Consumer Education Ambassadors'.

      The Consumer Council is a Council Member of the International Organisation of Consumers Union (IOCU), and maintains strong ties with its counterparts abroad, including those in China.

Trade in Endangered Species

The possession, importation and exportation of endangered species of animals and plants including parts and derivatives, into and out of Hong Kong is strictly regulated by the Animals and Plants (Protection of Endangered Species) Ordinance which gives effect to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). While the licensing policy allows legitimate trade in scheduled specimens, import licences may not be granted in certain cases, to help the survival of a species. For example, there has been a total ban on the import into Hong Kong of rhino products of all species of Rhinocerotidae since 1979. Hong Kong maintains its place as an important centre for legitimate trade in African ivory.

The ordinance is administered by the Agriculture and Fisheries Department and is enforced by officers of the department and the Customs and Excise Department. The Trade Department is authorised to issue certificates for ivoryware carved in Hong Kong. Illegal trade is investigated and prosecutions follow if there is evidence of a breach of the ordinance. During 1986, there were 420 seizures and 200 prosecutions under the ordinance.

Metrication

In the field of metrication, the government's objective is to facilitate progressive adoption of the International System of Units (SI) in those areas for which it is responsible, and the positive encouragement of the use of metric (SI) units by the private sector. The Metrication Ordinance, enacted in 1976, provides for the eventual replacement of non- metric units by SI units in all legislation in Hong Kong. Most government departments are now using metric units exclusively.

A Metrication Committee, consisting of representatives of industry, commerce, manage- ment and consumer affairs, and government officials appointed by the Governor, is the focal point of liaison on all matters concerning metrication. It advises and encourages the commercial and industrial sectors in the framing of their metrication programmes. Partly through the efforts of the committee, public awareness of metrication has increased and considerable progress has been made in the adoption of metric units in the private sector.

      With effect from January 1, 1986, public weather services went fully metric and the new units used were kilometres for horizontal distance, kilometres per hour for wind speed and hectopascals for atmospheric pressure. Other significant developments during the year included the production of posters and conversion cards to promote metrication in the fashion trade and the printing industry respectively.

Trade Marks and Patents

The Trade Marks Registry, which is a sub-division of the Commercial Division of the Registrar General's Department, is a registry of original registration. Trade marks are registered under the Trade Marks Ordinance, the provisions of which are similar to trade marks legislation in the United Kingdom. The procedure in applying for registration is laid down in the Trade Marks Rules, and the prescribed forms may be obtained free from the

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Trade Marks Registry, Registrar General's Department. Every mark, even if already registered in the United Kingdom or any other country, must satisfy all the requirements of the Trade Marks Ordinance before it may be accepted for registration. During 1986, 7 686 applications were received and 4 184, including many made in previous years, were accepted and allowed to be advertised. A total of 3 120 marks were registered in 1986, compared with 2 780 in 1985. The principal countries of origin were: Hong Kong, 803; United States, 666; Japan, 345; West Germany, 230; France, 228; United Kingdom, 214; Switzerland, 106; Italy, 102; Netherlands, 97; Taiwan, 47. The total number of marks on the register at December 31, 1986 was 46 453.

Unlike the Trade Marks Registry, the Patents Registry, which is another sub-division of the Commercial Division of the Registrar General's Department, is not a registry of original registration. The Registration of Patents Ordinance provides that any grantee of a United Kingdom patent or European Patent (UK) may, within five years from the date of its grant, apply to have the patent registered in Hong Kong.

A total of 1 010 patents were registered in this way during the year, compared with 1 030 in 1985. Registration of a United Kingdom patent or European Patent (UK) in Hong Kong confers on the grantee the same privileges and rights as if the patent had been granted in the United Kingdom with an extension to Hong Kong. The privileges and rights run from the commencement of the term of the patent in the United Kingdom, and continue as long as the patent remains in force there.

Companies Registry

The Companies Registry of the Registrar General's Department keeps records of all companies incorporated in Hong Kong and of all overseas companies that have established a place of business in Hong Kong.

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Local companies are incorporated under the Companies Ordinance which was originally based, to a large extent, on the Companies Act 1929 formerly in force in Britain but now replaced by various statutes culminating in the Companies Act 1985. However, following recommendations made by the Companies Law Revision Commit- tee (June 1971 and April 1973), several parts of the Companies Ordinance - notably those dealing with prospectuses, accounts and audit were amended and now incor- porate most of the relevant provisions of the Companies Acts of 1948 and 1967. Most of the remainder of the recommendations in the committee's second report are given effect in the lengthy Companies (Amendment) Ordinance 1984 which was enacted in January and came into force on August 31, 1984. The ordinance is subject to continual revision and improvement on the advice of the Standing Committee on Company Law Reform which was set up in 1984. The primary task of the committee is to ensure that Hong Kong's company law meets the most up-to-date needs of government and business.

     On incorporation, a company pays a registration fee of $600 plus $6 for every $1,000 of nominal capital. In 1986, 16 743 new companies were incorporated - 1 722 fewer than in 1985. The nominal capital of new companies registered totalled $3,356 million. Of the new companies, 97 had a nominal share capital of $5 million or more. During the year, 5 425 companies increased their nominal capital by amounts totalling $17,079 million on which fees were paid at the same rate of $6 per $1,000. At the end of 1986, there were 161 986 local companies on the register, compared with 147 636 in 1985.

     Companies incorporated overseas are required to register certain documents with the Companies Registry within one month of establishing a place of business in Hong Kong.

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      A registration fee of $500 and some small filing fees are payable in such cases. During the year, 288 of these companies were registered and 142 ceased to operate. At the end of the year, 2 238 companies were registered from 64 countries, including 551 from the United States, 328 from the United Kingdom and 267 from Japan.

      The Companies Registry also deals with the incorporation of trustees under the Registered Trustees Incorporation Ordinance, and with the registration of limited part- nerships.

Insurance Division

The Insurance Companies Ordinance (Chapter 41), which came into operation on June 30, 1983, restricts the transaction of all classes of insurance business in or from Hong Kong to a company authorised to do so by the Insurance Authority, to Lloyd's of London, and to an association of underwriters approved by the Governor in Council.

      The Registrar General, who has been appointed the Insurance Authority for the purposes of the ordinance, must be satisfied that certain conditions are met before authorising a company.

These include the suitability of the directors and controllers of the company; a minimum paid-up capital requirement of $5 million ($10 million in cases of companies undertaking both long-term and general business or statutory business, the latter meaning insurance cover required by statute); and a solvency margin requirement of $2 million ($4 million or $6 million in different cases depending on whether both long-term and general business are carried on, and whether statutory business is included).

      There are 288 insurance companies, including 128 local companies, authorised to transact insurance business in Hong Kong.

      In September, the 13th General Conference of the East Asian Insurance Congress was held in Hong Kong. The congress is an association founded in 1962 to develop interna- tional co-operation in the field of insurance among members in the East Asian countries; 1 020 insurance professionals from 29 countries participated in this conference.

Bankruptcies and Liquidations

     During the year, there were 469 petitions in bankruptcy and 397 petitions for the compulsory winding-up of companies. The court made 385 receiving orders, six administra- tion orders and 304 winding-up orders, which were a slight decrease of 0.57 per cent in the number of cases in 1985. As in past years, the Official Receiver was appointed trustee or liquidator in most cases. Assets realised by the Official Receiver during 1986 amounted to $255 million. In addition to these compulsory liquidations, 1 625 companies went into voluntary liquidation - 1 512 by members' voluntary winding-up and 113 by creditors' voluntary winding-up.

Money Lenders

Under the Money Lenders Ordinance, which came into force in December 1980, anyone wishing to carry on business as a money lender must apply to a Licensing Court, consisting of a magistrate and two lay assessors, for a licence. In the first instance, the application is submitted to the Registrar General as Registrar of Money Lenders and a copy is sent to the Commissioner of Police, who may object to the application.

      The application is advertised, and any member of the public who has an interest in the matter also has the right to object. During the year, 399 applications were received and 402 licences were granted. At year-end, there were 417 licensed money lenders.

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      The ordinance provides severe penalties for a number of statutory offences, such as carrying on an unlicensed money lending business. It also provides that any loan made by an unlicensed money lender shall not be recoverable by court action. Any person, whether a licensed money lender or not, who lends or offers to lend money at an interest rate exceeding 60 per cent per annum commits an offence and agreement for the repayment of any such loan or any security given in respect of such loan shall be unenforceable.

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Employment

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HONG KONG has a resourceful and energetic workforce of some 2.64 million - of which 64 per cent are men and 36 per cent are women. This estimate is based on the results of the July-September 1986 General Household Survey. They are mainly engaged in: manu- facturing, 35.8 per cent; wholesale and retail trade, restaurants and hotels, 22.7 per cent; community, social and personal services, 17.1 per cent; transport, storage and communica- tions, 8.4 per cent; construction, 7.5 per cent; and financing, insurance, real estate and business services, 6.1 per cent.

According to an establishment survey of Employment, Vacancies and Payroll in the manufacturing sector, conducted in September 1986, 869 753 people were engaged in 48 623 establishments. The survey covered working proprietors and partners, employees receiving pay, and unpaid family workers affiliated to business organisations, but excluded out-workers. Some 379 600 people - the largest portion of the manufacturing workforce - were engaged in the textile and wearing apparel industries. The electrical industry and the plastics industry were the next two largest employers. Details of the distribution of manufacturing establishments, and of the number of people engaged in them, are given at Appendices 13 and 14.

The bulk of the manufacturing workforce is concentrated in the urban areas of Hong Kong Island, Kowloon and the satellite towns in the New Territories. Industrial develop- ment in the New Territories is increasing and 35 per cent of the manufacturing workforce now works there.

Labour Legislation

In 1986, eight items of labour legislation were enacted to provide for better standards of safety, health and welfare for the workforce. This brings the total number of items of labour legislation enacted in the last 10 years to 136 under the overall policy of achieving a level of legislation on safety, health and welfare broadly equivalent to Hong Kong's neighbouring countries at a similar stage of economic development. The most significant items of labour legislation which came into force during the year were the long service payment provisions under the Employment Ordinance, which took effect on January 1, and two new sets of regulations under the Factories and Industrial Undertakings Ordinance: the Factories and Industrial Undertakings (Asbestos) Special Regulations, the Factories and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations. These and other items of legislation are described in greater detail below.

As a dependent territory of the United Kingdom, Hong Kong is not a member of the International Labour Organisation (ILO) and is not called upon to ratify any International Labour Conventions, which set international labour standards. However, the United Kingdom Government makes declarations on behalf of Hong Kong with regard to the

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     application of conventions it ratifies. This is done after full consultation with the Hong Kong Government. As at December 1986, Hong Kong has applied 29 conventions in full and 19 with modification, making a total of 48. This compares favourably with most member nations in the region.

During the year, there were 3 589 prosecutions for breaches of ordinances and regula- tions administered by the Labour Department. Fines totalling $6,568,500 were imposed. Since April 1, 1986, prosecutions under the Air Pollution Control Ordinance and its regulations have been conducted by the Environmental Protection Department.

Wages and Conditions of Work

     There is no statutory minimum wage rate in Hong Kong. The wage levels prevailing are essentially the result of an interplay of the economic forces of supply and demand.

Wage rates are usually calculated on a time basis such as hourly, daily or monthly, or on an incentive basis depending on the volume of work performed. The pay period is normally 15 days for daily-rated and piece-rated workers and a month for monthly-rated workers. Most semi-skilled and unskilled workers in the manufacturing industries are piece-rated, although daily rates of pay are also common. Monthly-rated industrial workers are usually employed in skilled trades or in technical, supervisory, clerical and secretarial capacities. On the other hand, monthly rates of pay are most common for workers in the non- manufacturing industries. Men and women receive more or less the same rate for piece-work. Women on average are paid less when working on a time-basis, but there may not be strict job comparability.

Wage rates of manufacturing workers continued to increase in money terms during the year. After allowing for rises in consumer prices, there was an increase in wage rates of 4.1 per cent in real terms during the 12 months ending in September 1986. The rate of increase in wage rates was faster compared with the previous year, while unemployment and underemployment remained stable at a low level due to the continued expansion of the service sectors of the economy.

In September 1986, 75 per cent of manual workers engaged in manufacturing industries received daily wage rates (including fringe benefits) of $87 or more (males $102 and females $83); and 25 per cent received $126 or more (males $149 and females $115). The overall average daily wage rate was $108 (males $128 and females $99).

Besides granting rest days, statutory holidays, paid annual leave and other entitlements under the Employment Ordinance, a number of employers in the manufacturing industries provide workers with subsidised meals or food allowances, attendance bonuses and free medical treatment. Free or subsidised transport is also provided by some establishments. Many workers are entitled to a Lunar New Year bonus of one month's pay or more under their employment contracts. An increasing number of employers are introducing provident fund schemes to provide additional welfare benefits for their employees.

The Employment of Children Regulations, made under the Employment Ordinance, prohibit the employment of children under the age of 15 in any industrial undertakings. Children who have attained the age of 13 and who have completed Form 3 education may be employed in non-industrial establishments, subject to stringent conditions which aim at ensuring a minimum of nine years' education and at protecting their health, safety and welfare.

Under the Women and Young Persons (Industry) Regulations, young persons aged 15 to 17 and women are permitted to work eight hours a day and six days a week in industry. Women and young persons aged 16 and 17 must be given a break of at least 30 minutes

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after five hours of continuous work. In the case of young persons aged 15, the break must not be less than one hour. Overtime employment for women is restricted to two hours a day and 200 hours a year while persons under the age of 18 are not permitted to work overtime. Women are not usually allowed to work between 8 p.m. and 6 a.m., while persons under the age of 18 are prohibited from working between 7 p.m. and 7 a.m. Permission has been given by the Commissioner for Labour to some large factories mostly those engaged in cotton-spinning to employ women at night, subject to certain stringent conditions. Women and young persons must not be employed on more than six days in any week. The regulations also prohibit women and young persons from working underground or in dangerous trades.

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The Labour Department is also responsible for enforcing the provisions of the Em- ployees' Compensation Ordinance. This Ordinance requires all employers to take out an insurance policy for their employees to cover compensation in respect of injury or death resulting from accidents arising out of and in the course of employment. Employers must also display notices at the working place giving details of the insurance policy.

In 1986, the Labour Inspectorate of the Labour Department made 251 167 day and night inspections to both industrial and non-industrial establishments. Three special campaigns were conducted against the employment of children and illegal immigrants, covering 19 274 establishments. During the year, 84 cases of child employment involving 84 children were brought before the courts.

Controls on Illegal Employment

     Under the Immigration Ordinance, employers are prohibited from employing persons who have no valid proof of identity and those Vietnamese refugees who are not permitted to obtain employment. The ordinance also requires all employees to produce proof of identity for inspection and employers to maintain up-to-date records of their employees. These legislative requirements, which aim at stopping the flow of illegal immigrants into Hong Kong, are enforced by the Labour Department.

Long-Service Payment

The Employment Ordinance was amended to provide, with effect from January 1, 1986 for a long service payment to be made by an employer under certain circumstances. An employee who has worked continuously for the same employer for a specified number of years ranging from five to 10 years, depending on the employee's age, and who has been dismissed otherwise than by way of summary dismissal or redundancy, is entitled to a long service payment calculated at the rate of two-thirds of a month's wages for each year of service.

The amount of the payment can also vary depending on the age of the employee. An employee aged 40 or above is entitled to the full payment as calculated above, while younger employees are entitled to only 50 per cent or 75 per cent, depending on age, of what they would otherwise have received. In the first year after its introduction, 438 cases of disputes arising from the long service payment legislation were reported to the Labour Relations Service of the Labour Department.

Trade Unions

Trade unions in Hong Kong must be registered under the Trade Unions Ordinance, which is administered by the Registrar of Trade Unions. Once registered, they are corporate bodies and enjoy immunity from certain civil suits.

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      During the year, 18 new unions were registered. At the end of the year, there were 448 unions, comprising 403 employees' unions with about 371 100 members, three employers' associations with some 3 070 members, and 15 mixed organisations of employees and employers with about 22 880 members.

      The majority of the blue collar employees' unions are affiliated to one or the other of the two local societies registered under the Societies Ordinance - the Hong Kong Federation of Trade Unions and the Hong Kong and Kowloon Trades Union Council.

The Hong Kong Federation of Trade Unions has 71 affiliated unions with about 167 940 members. Its affiliated unions are concentrated in shipyards, textile mills, public transport, public utilities and the printing and carpentry trades.

The Hong Kong and Kowloon Trades Union Council has 68 affiliated unions with a membership of about 34 930. These unions are mainly in the catering and building trades.

     The remaining 264 employees' unions have a membership of about 168 230, mostly drawn from the Civil Service and the teaching profession.

Labour Administration and Services

The Labour Department has an establishment of 1 623. Branch offices throughout the urban areas and the New Territories deal with labour matters raised by local employers and employees. The Commissioner for Labour is the principal adviser to the government on labour affairs. He is also the Commissioner of Mines.

The department initiates labour legislation and ensures that Hong Kong's obligations under international labour conventions are observed. It is made up of 15 divisions: administration, development, information and public relations, employees' compensation, employment services, factory inspectorate, labour relations, mines, occupational health, pressure equipment, prosecutions, selective placement, staff training and development, women and young persons, and the youth employment advisory service and overseas employment service.

Labour Relations

The Labour Relations Ordinance provides machinery for special conciliation, voluntary arbitration and boards of enquiry for settling trade disputes that cannot be resolved through ordinary conciliation. A committee on labour relations was set up by the Labour Advisory Board in 1986 to promote good labour-management relations.

In 1986, the Labour Relations Service of the Labour Department conciliated in 205 trade disputes which led to nine work stoppages, with a loss of 4 907 working days, compared with 1 160 working days lost in three work stoppages in 1985. The service also dealt with 19 211 claims for wages in lieu of notice, severance pay, long service payment, wages in arrears, annual leave pay, holiday pay, end of year bonus and others.

The Promotion Unit of the Labour Relations Service is responsible for the promotion of harmonious labour-management relations. During the year, officers of the unit made 240 advisory visits to employers, trade unions and employers' associations. Other promotional activities included eight certificate courses, comprising 68 half-day sessions on industrial relations, and two conferences on labour relations in the catering and electronics industries. A total of 1 191 management personnel, union officials and workers' representatives participated in these activities. The unit also produced posters and calendars to publicise its activities. In addition, a newsletter was published on a quarterly basis and one mini- exhibition was organised, attracting 9 000 visitors. The unit, in conjunction with two district boards, also organised a seminar and a festival on labour relations for residents.

EMPLOYMENT

Protection of Wages on Insolvency of Employers

87

Employees who are owed wages by their employers may apply to the Protection of Wages on Insolvency Fund for ex-gratia payment. The fund was established by the Protection of Wages on Insolvency Ordinance which came into effect on April 19, 1985 and is financed by an annual levy of $100 on each business registration certificate. Previously, most employees of insolvent companies had to wait until the conclusion of the winding-up or bankruptcy proceedings before receiving wages owed to them. Even then, they might receive only a small proportion of their entitlements, depending on the value of the realised assets of insolvent employer. With the establishment of the fund, an employee can now receive promptly from this fund payment covering wages not exceeding $8,000 due to him for services rendered during a period of four months preceding the date of application. This sum is equivalent to the amount to which the employee has a priority claim in a winding-up or bankruptcy. Upon payment, the employee's rights are transferred to the fund, which may recover all or part of the money it has paid to the employee from any assets of the employer realised at the conclusion of the winding-up or bankruptcy.

      In most cases, the presentation of a winding-up or bankruptcy petition is a pre-condition for payment. However, the Commissioner for Labour may exercise discretion in certain cases so that payment can be made without the presentation of a petition.

      During the year, 7 584 applications were received and 7131 were approved, with payments totalling $18.3 million.

      To give more protection to the employees of insolvent employers, consideration was being given to an extension of the scope of the fund to cover wages in lieu of notice. Further amendments to the Protection of Wages on Insolvency Ordinance will be necessary to give effect to the extension.

The Labour Tribunal

The Labour Tribunal, which is part of the Judiciary, provides a quick, inexpensive and informal method of adjudicating certain types of dispute between employees and employ- ers, with a minimum of formality. The tribunal deals with claims of right, wherever possible in the language of the parties.

In 1986, the tribunal heard 4 687 cases involving employees as claimants, and a further 227 cases in which the claims were initiated by employers. More than $21 million was awarded by the presiding officers. Of the cases dealt with by the tribunal, 95.8 per cent were referred by the Labour Relations Service after unsuccessful conciliation attempts.

Finding Employment

The Local Employment Service of the Labour Department provides a free placement service to assist employers to recruit suitable staff and job-seekers to find suitable employment. It operates from 15 offices which are linked by a facsimile system for the rapid exchange of information on vacancies notified by employers. The Central Recruitment Unit, working closely with the Local Employment Service, is a central agency for all government departments in the recruitment of non-pensionable staff such as artisans, drivers and workmen. It also co-ordinates employment services provided to large employ- ers in the private sector with territory-wide recruitment needs. During the year, 36 857 people were successfully placed in employment, including 3 491 who found jobs in the Civil Service.

      The Higher Education Employment Service (formerly known as the Special Register) provides free employment assistance to job-seekers who possess either university, post-

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EMPLOYMENT

secondary or professional qualifications. During the year, 388 people found employment through this service.

The Selective Placement Division provides a free employment counselling and placement service to physically handicapped, mentally retarded and ex-mentally ill persons seeking open employment. The service operates from three offices in Hong Kong, Kowloon and the New Territories.

The placement of socially maladjusted job-seekers is still the responsibility of the Hong Kong Council of Social Service and other voluntary agencies. During the year, the Selective Placement Division launched a series of activities to publicise its work and to promote the employability of the disabled. In 1986, some 1 000 disabled persons were placed in employment.

Careers Guidance

The Youth Employment Advisory Service of the Labour Department provides careers guidance to young people through various programmes and activities. In 1986, officers of the service delivered 469 careers talks in 231 schools and six voluntary agencies, covering an audience of 78 787. Careers conventions and careers projects were organised jointly with the Hong Kong Association of Careers Masters and Guidance Masters and the Vocational Training Council. The 15th annual careers exhibition organised by the service attracted 96 000 visitors. In addition, a Work Orientation Programme which comprised 28 visits to various establishments in the private and public sectors was organised and some 700 students took part.

     To promote careers education, the service organises training programmes for careers teachers in co-operation with the Education Department. It also produces various careers publications which are distributed free of charge to schools, youth centres and other interested persons.

At present, the service operates three careers information centres, each equipped with a reference library and audio-visual recordings of information on employment and training opportunities. In 1986, some 39 195 students and young people visited the centres and made use of the facilities there.

Overseas Employment

The Contracts for Overseas Employment Ordinance was retitled the Contracts for Employment Outside Hong Kong Ordinance in July 1985. It controls contracts entered into in Hong Kong between employers, or their authorised representatives, and manual workers who are required to work outside Hong Kong. Such contracts must be attested by the Commissioner for Labour before the workers leave Hong Kong. An employer or his agent who fails to comply with the provision is liable on conviction to a fine of $50,000. During the year 256 contracts were attested, compared with 440 in 1985.

Foreign Domestic Helpers

The employment conditions of foreign domestic helpers, the majority of whom come from the Philippines, are controlled by the administrative requirement that their employment contracts must be attested by the Labour Department.

During the year, 28 586 such contracts were attested. The department is also responsible for conciliation of disputes arising from the employment of these domestic helpers. In 1986, 382 claims, 673 consultations and 43 755 enquiries were handled.

EMPLOYMENT

Employment Agencies

89

Under the Employment Ordinance, an employment agency is required to obtain a licence before starting operation. During the year, the Labour Department issued 238 licences to employment agencies dealing with local employment and 58 to those handling employment outside Hong Kong.

Industrial Safety

The Factory Inspectorate of the Labour Department is responsible for enforcing the Factories and Industrial Undertakings Ordinance and its subsidiary regulations. These regulations provide for the safety and health of workers in factories, on building and engineering construction sites and in other industrial undertakings. Advice and assistance is given to management on guarding dangerous machinery parts, adopting safe working practices and the layout of new factories to achieve a better working environment. The inspectorate also investigates industrial accidents and dangerous occurrences.

The Factories and Industrial Undertakings (Asbestos) Special Regulations 1986, which came into operation in August, prohibit the use in any industrial undertaking of certain types of asbestos and any process involving the spraying of asbestos. They also control the use of other types of asbestos in industrial undertakings.

      The Factories and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations were enacted later in the year. The regulations provide for the compulsory employment of safety officers and safety supervisors in construction sites above a certain size, the establishment of a safety officers advisory committee and the registration of safety officers. The provisions on the establishment of the safety officers advisory committee and the registration of safety officers came into operation in December; the rest will come into effect in December 1987.

      The Factories and Industrial Undertakings (Carcinogenic Substances) Regulations were also enacted during the year. The regulations seek to prohibit or control the use of certain known carcinogenic substances in industrial undertakings. They came into effect in November.

The Factory Inspectorate, in collaboration with the Information Services Department, continued its publicity programme for the promotion of industrial safety through extensive use of the media and other means. A series of eight episodes of documentary or drama was presented between July and September as part of the popular television programme 'Enjoy Yourself Tonighť.

Under the Labour Advisory Board's Committee on Industrial Safety and Accident Prevention, sub-committees for the construction, textiles, plastics, shipbuilding and ship- repairing, metalware and electronics industries were set up between 1980-5. These sub-committees, following ILO recommendations, comprise representatives of employers, workers and the government; their aim is to promote work safety in various industries.

The Committee on Industrial Safety and Accident Prevention organised an industrial safety forum for management staff and workers in December to foster their awareness of safety at work. Various other promotional activities were also undertaken by the industry- based safety sub-committees. These activities included the preparation of codes and pamphlets on safe practices for the relevant industries, the organising of safety quiz competitions and the arrangement of promotional visits to factories. A safety award scheme was organised by the Construction Industry Sub-committee for the fourth time.

      Throughout the year, the Factory Inspectorate's Industrial Safety Training Centre provided safety training courses for supervisors and workers from various industries. In

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EMPLOYMENT

conjunction with the Hong Kong Polytechnic, the centre continued to organise two evening courses and a part-time day-release course leading to a Certificate of Proficiency in Industrial Safety. To meet the increasing needs of industry, two advanced courses were started during the year leading to the award of a Certificate of Proficiency in Advanced Industrial Safety. For the third year since 1984, the department assisted the Construction Industry Training Authority to run construction safety officer courses.

The Pressure Equipment Division enforces the Boilers and Pressure Receivers Ordinance and the Gasholders Examination Ordinance. The Boilers and Pressure Receivers Ordin- ance stipulates that boilers, steam receivers, steam containers, air receivers and cement tanks mounted on trucks or trailers must be approved and registered with the division and must be examined periodically by qualified engineers in the private sector acting as appointed examiners.

       The division conducts examinations for boiler attendants for the issue of certificates of competency. Comprehensive training courses for electrically heated boiler attendants are organised in collaboration with the Haking Wong Technical Institute. A short training course is also organised by the division for persons who wish to obtain a provisional certificate of competency. Pamphlets on statutory, technical and safety aspects of pressure equipment are disseminated to owners and attendants of such equipment.

The division also approves the design of gasholders and carries out inspections during fabrication and subsequent annual inspections as laid down in the Gasholders Examination Ordinance. It gives technical assistance to the Fire Services Department concerning the safety of certain types of Category 2 dangerous goods containers.

The division monitors the operation of pressure equipment through spot checks to ensure compliance with statutory requirements and carries out investigations into accidents involving pressure equipment.

Occupational Health and Hygiene

The Occupational Health Division of the Labour Department provides an advisory service to the government and the public on matters concerning the health of workers and the hygiene of the workplace and complements the Factory Inspectorate Division in supervising health standards and practices in industry. It works to maintain and im- prove the physical and mental well-being of workers and to protect them against any health hazard arising from their employment. During the year, the division took part in a number of seminars and exhibitions for the promotion of occupational health and also published a series of booklets and codes of practice on the prevention of occupational hazards.

A prime responsibility of the division is to investigate notified occupational diseases and potential health hazards reported by the Factory Inspectorate and to determine preventive action. Surveys are conducted in various industries and an epidemiological study on health and hygiene conditions in quarries and construction sites was completed during the year. Similar epidemiological studies on health hazards in glass-making factories and iron foundries are underway. A large scale monitoring programme of factories with possible lead hazards has also been started.

The division carries out medical examinations of personnel exposed to ionising radiation and government employees engaged in compressed air, diving, pest control and flourida- tion work. It also deals with cases of silicosis under the Pneumoconiosis (Compensation) Ordinance. The division's nurses handle medical clearance for employees' compensation cases and its occupational health officers are appointed as members of Special Assessment

EMPLOYMENT

91

     Boards and Prostheses and Surgical Appliance Boards under the Employees' Compensa- tion Ordinance.

The Occupational Health Division's laboratory carries out analytical tests on biological samples from workers and other environmental samples taken during site visits.

Employees' Compensation

The Employees' Compensation Division of the Labour Department administers the Employees' Compensation Ordinance and the Pneumoconiosis (Compensation) Ordin- ance. The division ensures that injured employees and dependants of deceased employees covered by the Employees' Compensation Ordinance obtain from their employers, without undue delay, compensation in respect of injuries or deaths caused by accidents arising out of and in the course of employment, or by occupational diseases. It also ensures that persons covered by the Pneumoconiosis (Compensation) Ordinance obtain compensation as soon as possible from the Pneumoconiosis Compensation Fund, which is financed by a levy imposed on the construction and quarry industries.

      Under the two-tier Employees' Compensation Assessment Board system, employees with work-related injuries which are likely to result in permanent incapacity are assessed by the assessment boards at eight major hospitals in Hong Kong. In 1986, Ordinary Assessment Boards convened 482 sessions and completed assessment of 15 616 cases referred to them by the Commissioner for Labour and 1032 review cases. Special Assessment Boards convened seven sessions and completed assessment of seven cases referred to them by the Ordinary Assessment Boards and one review case.

      Compensation levels under the Employees' Compensation Ordinance and the Pneumo- coniosis (Compensation) Ordinance were increased by about 23 per cent with effect from January 1, 1986, to take into account changes in wage levels since their last revision in 1983. The Pneumoconiosis (Compensation) Ordinance was also amended to provide greater flexibility in the payment of compensation to the dependants of a pneumoconiotic who dies from a cause other than pneumoconiosis.

      Owing to a gradual decline in the last few years in the number and size of claims for compensation from the Pneumoconiosis Compensation Fund, it has been possible to reduce the Fund's income by way of levy substantially. The value of construction works and quarry products subject to levy was raised from $0.25 million to $1 million with effect from June 1, 1985 and the rate of levy was reduced from 0.2 per cent to 0.15 per cent with effect from January 6, 1986.

7

1813

Primary Production

HONG KONG has a very small agricultural base with only about nine per cent of the total land area being suitable for crop farming. Only about two per cent of the labour force is engaged in primary production - agriculture and fisheries- yet Hong Kong people, according to the Food and Agriculture Organisation of the United Nations, are among the world's highest consumers of protein.

Each day, the people consume about 1 000 tonnes of rice, 1 300 tonnes of vegetables, 10 000 pigs, 510 head of cattle, 280 tonnes of poultry, 420 tonnes of fish and 1 100 tonnes of fruit. Much of this is imported, but Hong Kong farmers help to satisfy some of the demand. In terms of quantity, local farmers produce about 35 per cent of fresh vegetables, 45 per cent of live poultry, 18 per cent of live pigs, and 12 per cent of freshwater fish, while the fishing fleet of some 4 700 vessels supplies about 86 per cent of all fresh marine fish eaten. The locally produced food is generally of a higher quality than the same types of imported foodstuffs and thus fetches higher prices in the markets.

Foodstuffs account for about 14 per cent of Hong Kong's imports from China. Local production, which complements rather than competes with imports, is aimed at maintain- ing some degree of self-sufficiency with respect to highly perishable foodstuffs. Local produce consists mainly of high-value foods and full advantage is taken of the consumers' preference for fresh food, as opposed to frozen or chilled food.

Agriculture and Fisheries Department

The Agriculture and Fisheries Department encourages the productive use of agricultural land in the rural areas. It assists in the development of agriculture, especially in the form of irrigation projects. New concepts, techniques and material input to the farming and fishing industries are evaluated and actively promoted. Controls are exercised to prevent the introduction and spread of plant and livestock pests and diseases.

     Investigatory programmes of the department cover crops, pest control, animal husban- dry and fisheries. Experiments are conducted on government farms to improve the quality and yield of vegetables, flowers and fruit. The department advises livestock farmers on modern methods of animal production, supplies good quality seeds and breeding stocks of pigs and poultry, and provides an artificial insemination service for pigs.

Fisheries research is conducted on marine resources, aquaculture and the environmental impact of development activities on fisheries. In marine resources, emphasis is placed on optimising production from the fisheries resources exploited by the local fishing fleet and investigating the development potential of under-exploited resources.

Aquaculture studies are concerned with the development of more efficient culture systems for fish and molluscs and of improved methods of producing marine fish fry. Hydrographic investigations are designed to supply environmental information for an

PRIMARY PRODUCTION

93

assortment of biological programmes. Research is also aimed at assessing the impact of pollution, including red tides, on fisheries, particularly mariculture, in order to minimise production loss.

Low-interest loans are administered by the department to help farmers and fishermen to finance their operational or long-term investment requirements. The department also organises and finances vocational and technical training for those directly and indirectly involved in primary production. In addition, it is responsible for the registration and supervision of co-operative societies and credit unions. The department manages large areas of open countryside and is responsible for soil and water conservation, woodland management and landscape repair - as well as fire-fighting - and the development of recreational services in country parks.

-

Consumer demand and local primary production are monitored to enable appropriate development planning. Statistics on production factors and food supplies, including imports, are collected and analysed to help formulate local production and marketing policies. The business efficiency of different sectors within the primary industries is studied to establish and update productivity standards and to identify areas for improvement.

Farming and Fishing Development

Owing to the shortage of farm labour in Hong Kong and its rising cost, the main development in the agricultural industry in recent years has been the introduction of labour-saving devices. Farmers use pre-emergence herbicides for weed control in market garden crops and there is widespread use of small farm machines and sprinkler irrigation. At the end of the year, there were 2 650 rotary cultivators and 2 375 sprinkler units in use on vegetable farms.

Integrated pest management, a safe method of pest control on vegetables without the use of toxic pesticides, is the subject of an active development programme undertaken by the Agriculture and Fisheries Department. The use of a safe microbial organism to control the Diamond-back moth, a major pest on leafy green vegetables, has been adopted by local farmers. Seminars and demonstrations are also organised to publicise and promote integrated pest control and safe use of pesticides.

Technical assistance, agricultural loans and related services have been made available to farmers to promote better farming results.

      The cultivation of edible mushrooms has gained considerable popularity in recent years and at the end of 1986 there were 60 mushroom farms. The locally produced mushroom has about a 70 per cent share of the local market.

Teams of agricultural extension officers are posted by the department throughout the New Territories to deal with farming problems, and to liaise with co-operative societies and rural associations.

Credit facilities and technical advice are available to farmers and the agricultural development officers also assist them in land development and rehabilitation.

In the rural development programme during the year, more than 680 farmers took part in group discussions led by professional and technical officers from the department and officers made 85 576 visits to farmers and co-operative societies. Visits were also arranged for farmers to see government experimental farms and farming projects.

Fisheries development work involves modernising fishing craft and introducing more efficient fishing gear and navigational aids. An advisory service on hull design and deck arrangement is provided for fishermen, while experiments and demonstrations are con- ducted to test the suitability of new fishing gear. Training classes in navigation and business

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management for coxswains, engineers and radiotelephone operators working on fishing boats are organised in the main fishing centres.

Education is provided for the children of fishermen at 12 schools run by the Fish Marketing Organisation. At the end of 1986, more than 2 500 children were attending these schools. A further five were attending other schools on scholarships awarded by the organisation.

      Close contact with the fishing community is maintained through liaison with producer associations and fishermen's co-operative societies. Ten Fish Marketing Organisation liaison offices operate in the main fishing centres to provide a link with fishermen.

Loans

Loans are available to the agricultural industry through three main funds: the Kadoorie Agricultural Aid Loan Fund, the J. E. Joseph Trust Fund and the Vegetable Marketing Organisation Loan Fund. All are administered by the Agriculture and Fisheries Department. By December 31, 1986, loans issued since the inception of these three funds had reached a total of $233.4 million. Of this, $221.6 million had been repaid.

      The Fisheries Development Loan Fund, with capital of $7 million, is administered by the Director of Agriculture and Fisheries specifically for developing the fishing fleet.

      Finance from the World Refugee Year Loan Fund for Co-operative Societies, donated by the United Nations High Commissioner for Refugees in 1962, is also available to members of fishermen's co-operative societies.

      The Fish Marketing Organisation Loan Fund, which has operated as a revolving loan fund since January 1, 1983, by the transfer of funds from the organisation's surplus and deficit account, is another important source of loan finance for fishermen. At the end of 1986, the fund capital was $16 million.

      The department administers another revolving loan fund, financed by the Co-operative for American Relief Everywhere (CARE), specifically for shrimp fishermen.

       By December 31, 1986, loans issued since the inception of these four funds totalled $160 million, of which $142 million had been repaid.

Co-operative societies operate under a Co-operative Societies Ordinance, which provides for the appointment of a registrar - the Director of Agriculture and Fisheries. His powers and duties relate to the registration of co-operative societies and their by-laws, the auditing of accounts, inspection and enquiry, general supervision of operations, and such matters as mediation in disputes and dissolution of co-operative societies when necessary.

       At the end of the year, some 12 666 farmers and 1956 fishermen were members of co-operative societies.

      There were 70 societies and two federations among the farming community, and 68 societies and four federations supported by fisherfolk.

Land Usage

     Hong Kong's land area totals 1 070 square kilometres. Of this 8.8 per cent is used for farming, 74.6 per cent is marginal land with different degrees of sub-grade character, and the remaining 16.6 per cent comprises built-up areas.

       The need to establish new towns and expand residential areas in the New Territories has resulted in an encroachment on agricultural land. The effect of the losses in the total area of agricultural land, however, has been offset to some extent by more intensive farming on remaining areas. The Buildings and Lands Department is responsible for land administra- tion throughout Hong Kong.

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Class

(i) Urban built-up lands

Approximate area (square kilometres)

104

Percentage of whole

9.7

(ii) Rural developed lands

74

6.9

(iii) Woodlands

220

20.6

(iv) Grass and scrub lands

533

49.8

(v) Badlands

44

4.1

(vi) Swamp and mangrove lands

0.1

(vii) Arable

73

6.8

(viii) Fish ponds

21

2.0

Remarks

Main urban area of Hong Kong Island, Kowloon and six new towns in the New Territories (Tsuen Wan, Tuen Mun, Yuen Long, Fanling, Tai Po and Sha Tin) includ- ing district open space (parks and gardens) but excluding all other non-built-up land. Rural market towns and villages and other developed sites in the New Territories such as reservoirs, roads and railways. Natural and established woodlands. Natural grass and scrub lands, including those

within country parks.

Stripped of cover. Denuded granite country.

Capable of regeneration.

Coastal brackish swamp and mangrove. Cultivable lands, including orchards and market gardens, under cultivation and fallow.

Fresh and brackish water fish farming exclud- ing coastal marine fish farms but including fallow farms.

Agricultural Industry

The government's policy is to enhance the productivity of the local agricultural industry, through increased technical and economic efficiency, improved stability of production and maintenance of orderly and efficient marketing. It also seeks to protect the consumer from unnecessarily high food prices by ensuring that local produce of acceptable standards is marketed efficiently and to maintain a reliable source of fresh primary products to the community.

      Common crops are vegetables, flowers, fruit and other field crops. The value of crop production has increased from $93 million in 1963 to $438 million in 1986. Vegetable production accounts for more than 79 per cent of the total value, having increased from $64 million in 1963 to $344 million in 1986.

      The main vegetable crops are white cabbage, flowering cabbage, lettuce, Chinese kale, radish, watercress, leaf mustard, spring onion and chives. They grow throughout the year, with peak production in the cooler months. Water spinach, string beans, Chinese spinach, green cucumber and many species of Chinese gourd are produced in summer. A wide range of exotic temperate vegetables including tomato, sweet pepper, cabbage, celery, head lettuce, cauliflower and carrot is grown in winter. Straw mushroom is also produced, using industrial cotton waste as the growing medium.

      Among the common types of flowers, gladioli and chrysanthemums grow throughout the year; dahlias, roses, asters, snapdragons and carnations are produced in winter; ginger lilies and lotus flowers in summer. A wide range of ornamental plants - including philodendrons, dieffenbachia, bamboo palms and poinsettia - is produced in commercial nurseries. Peach blossom and ornamental citrus are grown specially for the Lunar New Year. The area of land under vegetables and flowers increased from 910 hectares in 1954 to 4 790 hectares in 1976 but declined gradually to 2 660 hectares in 1986, mainly as a result of new town development.

      The amount of land used to cultivate rice dropped from 9 450 hectares in 1954 to less than 10 hectares in 1986. Rice production has given way to intensive vegetable production, which gives a far higher return.

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      Much former paddy land around the more remote villages has fallen into disuse and now lies fallow.

Various types of fruit are grown in Hong Kong. The principal crops are longan, lychees, wampei, tangerines, local lemons, bananas and guavas. Land under orchards in 1954 totalled 390 hectares, but by 1986, it was 540 hectares. Other field crops such as sweet potatoes, taro, yams and sugar cane are cultivated on a small scale in the remote and drier areas where water and transport facilities are inadequate for growing vegetables. Some 50 hectares were under rain-fed crops in 1986 compared with 1 410 hectares in 1954.

Because there is insufficient land for extensive grazing, pigs and poultry are the principal animals reared for food. Pigs in Hong Kong are mostly crosses of local animals with exotic stock. The value of locally produced pigs killed in 1986 amounted to $326 million.

The production value of poultry, including chickens, ducks, pigeons and quails, amounted to $638 million in 1986. Local chicken production was about 17 million birds, representing 50 per cent of total consumption.

Friesian cattle are kept by dairies, all of which are in the New Territories.

Sporadic outbreaks of a mild type of foot-and-mouth disease (Type O) and swine fever still occur, but are kept under control by vaccination. Newcastle Disease in poultry is controlled by the use of Ranikhet and intranasal-drop vaccines. Investigations to establish the incidence of intercurrent disease in both pigs and poultry are carried out at the government's veterinary laboratory.

      Stringent rabies control measures remained in force throughout the year. These include extensive immunisation of dogs and cats against rabies, intensive catching and elimination of stray dogs, and restriction of canine movement into and out of the gazetted rabies- infected area. The gazetted infected area covered the Frontier Closed Area. In addition, So Kwun Po and its vicinity in Sheung Shui was designated in November as a rabies infected area after the confirmation of an indigenous canine rabies case, the first since August 1984. By the end of 1986, 15 100 dogs had been humanely destroyed and another 42 000 licensed and inoculated against rabies.

      As a standard practice, all imported dogs and cats, other than those from Britain, Ireland, Australia and New Zealand, are subject to six months' quarantine. Any dog that has bitten a person is required to be detained for observation in government kennels for seven days. All cattle and pigs imported for food are quarantined on arrival in Hong Kong. Importation for breeding purposes is also subject to strict control.

Fishing Industry

Marine fish constitute one of Hong Kong's most important primary products. More than 150 fish species of commercial importance frequent the waters of the adjacent continental shelf. Most important of these in terms of landed weight are big-eyes, golden thread, lizardfishes, squids and hair-tails. Total estimated production from the two major sectors - marine capture and culture fisheries - amounted to 211 300 tonnes with a wholesale value of $2,040 million in 1986. These figures represented increases of 7.8 per cent in weight and 12.8 per cent in value compared with 1985. Of the total production, 96 per cent in weight came from marine capture and four per cent from culture fisheries. In terms of wholesale value, 89 per cent came from marine capture and 11 per cent from cultured fisheries.

An estimated 24 000 fishermen work the fleet of some 4 700 vessels, of which over 83 per cent are mechanised. There are four major types of fishing in terms of gear: trawling, lining, gill-netting and purse-seining. Trawling is the most important, accounting for 73 per cent or 148 000 tonnes of marine fish landed in 1986. The total landed catch of live and fresh marine

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97

fish available for local consumption in 1986 amounted to 109 000 tonnes, with a wholesale value of $963 million. This represented 86 per cent of the local consumer demand.

      Pond fish farming is one of the most important culture activities. Fish ponds under active cultivation covering 1 350 hectares are located in the New Territories, mostly in the Yuen Long district. Traditional pond fish farming is similar to that practised in China for hundreds of years. Several different carp species are cultured in the same pond, each deriving its food from a different source and so making the utmost use of the nutrients introduced. Owing to the increasing urbanisation of the New Territories, the land area devoted to fish ponds has gradually declined. During the year, the ponds yielded 5 710 tonnes, or 12 per cent of the local consumption of freshwater fish.

      Marine fish culture has developed considerably in the past decade. Young fish captured from their natural environment as well as imported fish fingerlings are reared in cages suspended from rafts in sheltered bays throughout Hong Kong, particularly in the eastern New Territories. Under the Marine Fish Culture Ordinance, 28 fish culture zones have been designated and all marine fish culture is now required to be conducted at sites within these zones under licences issued by the Director of Agriculture and Fisheries. By year-end, 1 661 licences had been issued. Live marine fish supplied by this activity in 1986 amounted to 2 070 tonnes, valued at $135 million.

Marketing

Much of the wholesale marketing of primary products - particularly fresh foods is the responsibility of the Agriculture and Fisheries Department and the Vegetable and Fish Marketing Organisations. In 1986, 38 per cent of the total quantity of locally produced vegetables, and 60 per cent of the total landings of marine fish were sold through the organisations.

      The Vegetable Marketing Organisation operates under the Agricultural Products (Mar- keting) Ordinance, which also provides for the establishment of a Marketing Advisory Board to advise the Director of Marketing (the Director of Agriculture and Fisheries). The organisation is responsible for transporting locally produced vegetables from the New Territories to the wholesale market in Kowloon, providing marketing facilities, and supervising sales and financial transactions in the market. Revenue is obtained from a 10 per cent commission on sales.

      The organisation is non-profit-making. It seeks to maximise returns to farmers by minimising marketing costs. It also provides ancillary services such as the acquisition and sale of agricultural supplies to farmers and the awarding of secondary and tertiary education scholarships to the children of farmers. During the year, 65 400 tonnes of local vegetables valued at $137 million were sold through the organisation.

      The Fish Marketing Organisation operates under the Marine Fish (Marketing) Ordin- ance, which also provides for the establishment of a Fish Marketing Advisory Board. The ordinance provides for the control of the landing, wholesale marketing, and the import and export of marine fish. The organisation operates seven wholesale fish markets. Revenue comes from a six per cent commission on the proceeds of sales. Surplus earnings are channelled back into the industry in the form of various services such as low-interest loans to fishermen, improvements to the markets, financial support for the 12 schools for fishermen's children, and scholarships for secondary and tertiary education.

In 1986, the wholesale fish markets handled 68 800 tonnes of marine fish, crustacea and molluscs which were sold for $493 million. This included 1 900 tonnes of imported marine fish sold through these markets.

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Facilities in the existing wholesale markets are becoming inadequate for handling the ever increasing quantities of imported fresh vegetables, fruit, poultry, eggs, freshwater fish and crustacea. Marketing activities have spilled on to adjacent public streets, causing obstruction and traffic congestion. To improve the situation, plans are going ahead to establish new wholesale markets in Kowloon and on Hong Kong Island to centralise the wholesale marketing of fresh foodstuffs. In the interim, the government has introduced a number of temporary wholesale markets at Cheung Sha Wan in Kowloon for freshwater fish, poultry and imported vegetables, and at Western District on Hong Kong Island for fruit.

Mining

At the end of 1986, one mining lease and two mining licences for the extraction of feldspar and kaolin were in operation. Details of the leases and licences are published twice a year in the Government Gazette.

The Mines Division of the Labour Department enforces legislation and safety regula- tions relating to mining and explosives. It processes mining and prospecting applications, inspects mining and prospecting areas, stone quarries, blasting sites and explosives stores, and issues shotfirers' blasting certificates. The division also controls the possession, conveyance, storage, manufacture and use of explosives in Hong Kong, including the delivery of explosives from government depots to blasting sites. In addition, it manages government explosives depots which provide bulk storage facilities for imported explosives. The Mass Transit Railway Island Line tunnelling works from Chater to Sheung Wan were completed during the early part of the year and explosives were no longer required, resulting in a sharp reduction in the overall consumption of explosives. The total consumption of explosives during the year was 4 594 tonnes.

      Storage space was provided for about 2.3 tonnes of fireworks for a display in February to mark the Lunar New Year. Space was also provided for about 2.7 tonnes of fireworks for a display to mark the visit of the Queen and the Duke of Edinburgh to Hong Kong in October. Additionally, transit storage facilities were provided for explosives imported from the United States and France for use by off-shore oil well drilling companies in the South China Sea.

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Education

     WITHIN the Government Secretariat, policy responsibility for education matters rests with the Secretary for Education and Manpower. A number of bodies are, however, involved in an executive or advisory capacity in the administration and development of the educa- tional system.

Education Commission

     In the light of recommendations made in the report of a visiting panel of educational experts published in November 1982, an Education Commission was established in April 1984. Its overall objective is to provide the Governor with consolidated advice on the development of the educational system as a whole, in the light of the needs of the community.

The terms of reference of the Education Commission are: to define overall educational objectives, formulate education policy, and recommend priorities for implementation, having regard to resources available; to co-ordinate and monitor the planning and development of education at all levels; and to initiate educational research.

The purpose of the commission is to co-ordinate but not to seek to direct the work of the Board of Education, the University and Polytechnic Grants Committee and the Vocational Training Council.

The commission is composed of 14 members. Eleven of these, including the chairman, are non-government members appointed with a view to ensuring that a broad range of personal and professional experience is brought to bear upon the issues before the commission. Included among these, ex-officio, are the chairmen of the Board of Education, the University and Polytechnic Grants Committee and the Vocational Training Council. The three remaining members are government officials - the Secretary for Education and Manpower (who is vice-chairman), the Deputy Financial Secretary and the Director of Education.

      The commission's first report was published in October 1984. Its second report was submitted to the Executive Council in September, 1986. The report contained far-reaching recommendations with regard to the structure of the sixth-form, kindergarten education, teacher preparation, open education and the financing of educational provision. It was subsequently published for public consultation and had attracted a substantial number of comments by the end of the year.

Board of Education

The Board of Education, formed in 1920, is a statutory advisory body established under the Education Ordinance to advise the Governor on educational matters. Of the 18 members appointed by the Governor, 16, including the chairman, are non-government members.

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The two official members are the Director of Education (who is vice-chairman), and the Deputy Secretary for Education and Manpower. Apart from regular meetings, the board also visits schools, educational institutions and centres from time to time. The board is serviced by the Education Department.

The Education Ordinance gives the board a general warrant rather than specific terms of reference. However, the board plays a key role in the formulation of educational policy. The composition of its membership is such that a variety of interests are reflected and its individual members, who are specialists in their own right, provide a wealth of experience and expert knowledge. The board's advice is sought on all major issues involving either the formulation of new policy or the modification of existing policy.

University and Polytechnic Grants Committee

The University and Polytechnic Grants Committee (UPGC) is appointed by the Governor to advise the government on the development of higher education in Hong Kong, and on the necessary funding, and to administer grants in respect of the institutions of tertiary education. There are at present five institutions under the aegis of the UPGC: the University of Hong Kong, the Chinese University of Hong Kong, the Hong Kong Polytechnic, the City Polytechnic of Hong Kong, and the Hong Kong Baptist College.

      Recurrent funding for the institutions is normally by block grants, provided on a triennial basis. Capital grants are considered annually at the same time as the government's estimates are being prepared.

      In addition to monitoring directly the academic development and funding of the institutions, the UPGC is responsible for providing advice on a wide variety of issues involving higher education. During the year the UPGC was consulted on such subjects as open education; the provision of graduate teachers; the reform of sixth form education; the establishment of a local body for validating degree courses at the non-university institu- tions; the development of strategic research at the tertiary institutions; student targets up to the year 2000, and the need for, and the profile of, the Third University.

There is no government representation on the UPGC. Membership comprises two categories: overseas members, who are distinguished senior academics from the United Kingdom, Australia and North America, and local members, who have previously been drawn from the professions, business and commerce but who, since 1986, include senior local academics.

      The UPGC Secretariat, which is staffed by public servants, comprises two separate parts. The first services the UPGC. The second, the Student Finance Section, is responsible to the government for the administration of two means-tested schemes through which financial assistance is provided to Hong Kong students attending higher education institutions in Hong Kong and in the United Kingdom.

Vocational Training Council

The Vocational Training Council was set up in 1982 under the Vocational Training Council Ordinance. The council is composed of 22 members appointed by the Governor, four of whom are official members the Secretary for Economic Services, the Director of Education, the Commissioner for Labour and the Director of Technical Education and Industrial Training. The council's role is to advise the Governor on measures required to ensure a comprehensive system of technical education and industrial training suited to the developing needs of Hong Kong; to set up, develop and operate training schemes for training operatives, craftsmen, technicians and technologists necessary to maintain and

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improve Hong Kong's industry, commerce and services; and also to establish, operate and maintain technical institutes and industrial training centres.

      Under the council are 19 training boards and seven general committees. The training boards cover major economic sectors: accountancy; automobile repair and servicing; banking; building and civil engineering; clothing; electrical; electronics; hotel, catering and tourism; insurance; jewellery; journalism; machine shop and metal working; merchant navy; plastics; printing; shipbuilding and ship repair; textile; transport and physical distribution; and wholesale/retail and import/export trades. The seven general committees, which are concerned with areas of training relevant to more than one sector of the economy, deal with apprenticeship and trade testing; electronic data processing training; management and supervisory training; precision tooling training; technical education; training of technologists; and translation.

      The training boards assess the future manpower needs of their respective industries or sectors and recommend measures to meet such needs, prepare job specifications, design training programmes and trade test guidelines, and carry out other duties, such as operating and maintaining training centres. During 1986, the training boards carried out manpower surveys in the following 12 sectors: accountancy; automobile repair and servicing; banking; electronics; footwear; furniture; machine shop; management and supervisory training; merchant navy; printing; shipbuilding and ship repair, and whole- sale/retail and import/export. In the same period, the training boards prepared or revised job specifications, training programmes and trade test guidelines for principal jobs in their industries. A glossary of common technical terms used in commerce and services was published.

      The council, and its training boards and committees are serviced partially by its own staff and partially by staff of the Technical Education and Industrial Training Department.

Education Department

The Director of Education, supported by the Education Department, is responsible under the terms of the Education Ordinance and the Education Regulations for general oversight of kindergarten, primary and secondary education in Hong Kong. He directly controls all government schools, the Colleges of Education, the Hong Kong Technical Teachers' College and the Institute of Language in Education. All other schools and kindergartens, with minor exceptions, are required to register under the ordinance, thus enabling the department to ensure that acceptable standards are maintained. Those schools in receipt of financial assistance from the government under the codes of aid are in addition subject to the provisions of these codes which deal principally with such matters as staffing standards and entitlements, salary scale and conditions of service. Institutions registered under the Post Secondary Colleges Ordinance are also supervised by the Director of Education.

      In addition to these duties of supervision and control, the Education Department is concerned with provision, through its Advisory Inspectorate, of advice to schools on teaching methods, with curriculum development and with the provision of educational television and other services. The planning and development of education, the school building programme, the allocation of school places and the conduct of educational research are also important responsibilities of the department.

      The department maintains a network of 15 local offices, each headed by a Senior Education Officer, grouped into three regions covering Hong Kong, Kowloon and the New Territories. The function of senior education officers is to supervise the administration of schools within their districts and to provide advice and assistance to schools, teachers,

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parents and students as well as a channel of communication between them and the department. Senior education officers also attend district board meetings, when invited to do so, to assist in discussion of educational matters.

Expenditure

The annual estimates of expenditure for the financial year beginning in April 1986 provided for $986 million in capital expenditure for educational projects and $7,755 million in recurrent expenditure, representing 18 per cent of the total budget.

Kindergartens

     In September, there were 825 kindergartens in Hong Kong providing pre-primary educa- tion for 231 610 children in the three-to-five age group. These are mostly private institutions, though an increasing number of kindergartens in the recently completed public housing estates are operated by non-profit-making organisations. In addition to the allocation of premises to non-profit-making kindergarten operators in public housing estates, other government assistance for this level of education include the reimbursement of rates and rents to the non-profit-making kindergartens and fee assistance to needy parents.

Officers of the Education Department are responsible for supervision of kindergartens and also offer professional advice to school managers, teachers, parents and the public. In-service training for teachers is provided through seminars, workshops, exhibitions and training courses, including a two-year part-time course conducted by Grantham College of Education and a 12-week part-time course operated twice yearly by the Advisory Inspectorate of the Education Department, with an annual intake of 240 and 360 teachers respectively. During the year, the Kindergarten Section of the Advisory Inspectorate also organised a series of workshops on the promotion of civic education.

      Three serving kindergarten teachers were released from teaching duties, through the courtesy of their employers, to serve as members of the Education Department's Kinder- garten Curriculum Development Team to assist with the production of teaching resource materials.

Primary Education

     Primary education has been free in all government schools and in nearly all aided schools since September 1971. In the few aided primary schools where fees are charged, fees may be remitted in cases of genuine hardship. To assist needy parents further, an annual textbook grant of up to $215 per pupil is also available to a maximum of 25 per cent of pupils enrolled in government and aided primary schools. A minority of parents continue to send their children to the 84 private primary schools although places are available in the public sector.

In September, the primary school enrolment totalled 531 993 compared with 534 903 in the previous year. Enrolment in primary-level evening schools for adults totalled 2 743. During the year, 16 primary schools were completed, providing 30 720 primary school places. Of these schools, 13 were located in the new towns to cater for the needs of their growing populations.

Of the 79 929 children who took part in the fourth cycle of the Primary One Admission (POA) System, 45 294 or 56.7 per cent were allocated discretionary places in schools of their parents' choice. The remainder were allocated places in other schools in their own districts, account again being taken of parental preference.

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      Primary 6 leavers are allocated junior secondary school places in the public sector through the Secondary School Places Allocation (SSPA) System. The system is based on internal school assessments, scaled by a centrally administered Academic Aptitude Test, allocation taking account of parental choice. In July, 89 282 Primary 6 pupils participating in the SSPA were allocated Form 1 places in government schools, aided schools, private non-profit-making schools in receipt of per caput grants, and private independent schools in the 'bought place' scheme.

      A review of the SSPA system was completed and, in the light of this review, a number of improvements to the method of allocation, the feeder and nominated school schemes, the net systems, the advisory machinery and the method of filling discretionary places were planned for introduction in 1988.

The Student Guidance Scheme provides a school social work service to 796 primary school sessions, covering a student population of 410 032.

Secondary Education

Provision of secondary education continued to expand during the year to meet approved policy targets. One secondary school providing 1 160 school places was completed in the year. Progress on the other secondary school projects in the School Building Programme was maintained.

     There are four main types of secondary school in Hong Kong: Anglo-Chinese grammar schools, Chinese middle schools, technical schools and prevocational schools. The Anglo- Chinese grammar schools had enrolments totalling 372 422 compared with 370 615 in 1985. These offer a five-year secondary course in a broad range of academic and cultural subjects leading to the Hong Kong Certificate of Education Examination (HKCEE), the medium of instruction being mainly English. Students with satisfactory results in the HKCEE may enter a two-year sixth-form course leading to the Hong Kong Advanced Level Examina- tion for admission to the University of Hong Kong and other tertiary level courses. Many also sit for the United Kingdom General Certificate of Education Examination at both ordinary and advanced levels. Some Anglo-Chinese schools also offer a one-year sixth-form course preparing their students for the Hong Kong Higher Level Examination with a view to admission to the Chinese University of Hong Kong.

In 1986, there were 58 Chinese middle schools accommodating 35 585 pupils, compared with 59 and 35 295 respectively in 1985. Pupils attending these schools also take courses leading to the HKCEE. Instruction is mainly in Chinese with English taught as a second language. Most Chinese middle schools also offer a one-year Middle 6 course leading to the Hong Kong Higher Level Examination.

Secondary technical courses are provided for 22 244 students in 22 schools. Ten of these schools are run by the government and 11 are government-aided. Secondary technical schools prepare their students for the HKCEE with emphasis on technical and commercial subjects. Suitably qualified candidates can continue their studies in Form 6 or in technical institutes, the Hong Kong Polytechnic, the City Polytechnic of Hong Kong or the Hong Kong Technical Teachers' College.

Prevocational schools are government-aided secondary schools which provide students with a general education and an introduction to a wide range of technical skills upon which future vocational training may be based. The curriculum in Forms 1 to 3 is made up of technical subjects and general subjects in roughly equal proportions. The technical content is reduced to about 30 per cent in Forms 4 and 5. After completion of Form 3, students may enter approved craft apprenticeship schemes with associated part-time day-release courses

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at technical institutes. Credit units are given by the institutes for technical subjects which have been studied in depth at school. In addition, direct entry into the second year of an approved craft apprenticeship may be given.

At present, there are 15 prevocational schools providing 12 048 places. A further 13 schools of this type are included in the Secondary School Building Programme.

The Junior Secondary Education Assessment (JSEA) System, which selects and allocates Form 3 leavers to Form 4 places in the public sector, completed its sixth cycle in July. Of the 73 136 students presented for assessment, 55 463 or 75.8 per cent were allocated aided places in Form 4 or one-year full-time craft courses. Of those who were allocated Form 4 places, over 85 per cent obtained places in their own schools. The working party set up to review the operation of the JSEA System and to devise a new method of placement for Form 3 leavers after 1991, presented its report to the Director of Education in February. As recommended by the Board of Education, the views of the public were sought before a final decision was reached on the recommendations embodied in the working party's report.

With a view to promoting practical/technical education for junior secondary pupils, in accordance with the government's objectives as stated in the 1978 White Paper on the Development of Senior Secondary and Tertiary Education, the first Practical Education Centre was opened in September. This centre is operated and maintained by the govern- ment. Courses offered include Design and Technology (Woodwork, Metalwork and Plastics), Home Economics (Cookery, Needlework) and Art and Design (Painting, Pottery and 3-Dimensional work). Pupils from neighbouring schools which lack either the facilities or trained staff to run the courses are encouraged to participate in the scheme and attend courses at the centre free of charge. Initially such courses will be provided for pupils at Form 1 to 3 levels and in the first year of operation, only Form 1 pupils are being admitted. These courses may be extended to Form 4 and Form 5 levels at a later date. The total maximum weekly enrolment of the centre is 9 600.

As a further step to strengthen sex education in secondary schools, a set of 'Guidelines on Sex Education in Secondary Schools' was published and distributed to all secondary schools in May. The guidelines seek to establish some guiding principles on ways to implement sex education and suggest ways to achieve this through a cross-curricular approach in secondary schools.

      The Careers Education Section of the Education Department promotes the development of careers education and student guidance in secondary schools. During the year, it continued to work closely with the Labour Department and the Careers Division of the Hong Kong Association of Careers Masters and Guidance Masters to provide a compre- hensive service for young people. The section also co-operates with the Guidance Division of the association and school social workers in providing guidance services to secondary school students.

Special Education

     The provision of special education continued to develop in line with the objectives of the White Paper on Rehabilitation published in 1977 and subsequent annual reviews of the Rehabilitation Programme Plan. A total of 13 846 special places for handicapped children were provided in 1986.

      A total of 8 476 places for the more severely handicapped were available in 71 special schools. These schools provide special education for the blind, the deaf, the physically handicapped, the mentally handicapped, the maladjusted and socially deprived and slow-learning children. A total of 741 residential places were provided in the boarding

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sections of 14 special schools. In addition, there were 352 special education classes in ordinary schools providing 5 370 places for the partially sighted, the partially hearing and children with learning difficulties. A two-year pilot project providing medical support for mildly disabled children in non-profit-making kindergartens was launched during the year. Intensive remedial services were also provided by the Special Education Section of the Education Department for children in ordinary classes with learning difficulties and adjustment problems. These services included remedial support outside school hours in resource teaching centres and adjustment units, a peripatetic teaching service in ordinary schools during school hours, and advisory services to schools.

      Screening and assessment services are provided to identify special educational needs among school-age children so that remedial action could be taken as early as possible. Primary 1 pupils are screened under the Combined Screening Programme with screening tests for hearing and eye-sight. This programme also provides checklists and guides for teachers to detect children with speech problems and learning difficulties. Pupils requiring further assessment are given audiological, speech or psychological assessment, while those in need of remedial services such as speech and auditory training, speech therapy and counselling are given such services at the Special Education Services Centres.

      A centralised braille production unit was established in late 1986. This centre, operated by the Hong Kong Society for the Blind with government subvention, will produce braille reading material and carry out research into the improvement of braille production in both English and Chinese. With the implementation of this centralised braille production service, the Braille Printing Unit of the Education Department has ceased operation.

      Two-year part-time in-service courses of training for teachers of children with special educational needs are operated by the Sir Robert Black College of Education. Short courses, seminars, workshops as well as refresher courses are also arranged by the Special Education Section to enhance the professional knowledge of staff in the special education field.

Post-Secondary Education

There are two approved post-secondary colleges - the Hong Kong Shue Yan College and Lingnan College - registered under the Post Secondary Colleges Ordinance. The Hong Kong Shue Yan College, registered in 1976, has three faculties arts, social science and business with 13 departments offering day and evening courses with a total enrolment of 3 905 students. It operates a four-year diploma programme without government financial assistance. Lingnan College, registered in October 1978, has three faculties - arts, business and social science -- and an enrolment of 1 348 students. It offers two-year Form 6 courses and a two-year post-Form 6 higher diploma course, for which it receives government financial assistance. It also offers a fifth year course leading to an honours diploma for students who successfully complete the higher diploma course.

Students of the two-year post-Form 6 courses at Lingnan College are eligible for grants and loans, the maximum levels for which were revised to $3,500 and $4,200 per annum respectively in the 1986-7 academic year. Loans up to a maximum of $7,700 per annum were available to students in the fifth-year course at Lingnan College and to students in the four-year course at Shue Yan College.

Higher Education

     There are five institutions of higher education funded through the University and Polytechnic Grants Committee.

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In its 75 years of existence, the University of Hong Kong has grown from modest beginnings to its present student population of 8 000. It has faculties of arts, architecture, dentistry, education, engineering, law, medicine, science and social sciences. The univer- sity's central estate is on the northwestern slopes of Hong Kong Island. The Faculty of Medicine is adjacent to Queen Mary Hospital, the university's teaching hospital, and the Faculty of Dentistry is located in the Prince Philip Dental Hospital in Western District.

With the exception of the Faculty of Education, which at present teaches postgraduate students only, all of the faculties teach both undergraduate and postgraduate courses. Most undergraduate courses are of three years duration, except courses for the degrees of Bachelor of Architecture, Bachelor of Dental Surgery, and Bachelor of Medicine and Bachelor of Surgery, which are of five years duration, and those for the degree of Bachelor of Science in Quantity Surveying, which are of four years duration. All courses lead to honours degrees, and are mainly taught in English.

At postgraduate level the university offers facilities for both Master's and Doctor's degrees. Master's degrees by coursework are available in a number of subjects and the Master of Philosophy degree is awarded on the basis of research at Master's level. Doctorates are awarded on the basis of research. In 1986 there were well over 1000 students studying for higher degrees.

Close links are maintained with other universities through the Association of Common- wealth Universities and the Association of Southeast Asian Institutes of Higher Learning. The structure of the degrees and the governance of the university are based mainly on the British system, and eminent academics, generally from Britain and the United States, visit the university as external examiners in each subject area at least once every three years and moderate each year's finals papers.

Competition for places at the university is intense and in August 1986 there were 10 times the number of applications from qualified candidates as there were places available. Academic staff are recruited by international advertisement.

      The university is in the middle of a substantial building programme. The Hsu Long Sing Amenities Centre was recently opened, bringing to three the number of such centres. Accommodation is provided for 25 per cent of undergraduate students. A number of postgraduate students and academic visitors can be accommodated at Robert Black College.

      To help students who are unable to obtain a place in a hall of residence, and who do not have suitable facilities at home for studying, the university has increased its emphasis on the provision of general amenities over the past few years. The centres provide study and rest rooms, games and music rooms, and restaurant facilities.

     Adjoining the new centre, and a part of the same complex, is the Simon K. Y. Lee Hall of residence, which provides accommodation for 300 students. The complex also houses new premises for the students' union and a part of the Faculty of Engineering.

      The Kadoorie Agricultural Research Centre in the New Territories was opened in June 1986. The centre provides facilities and accommodation for both undergraduate and postgraduate studies and research, including among others, agriculture, botany, meteoro- logy and zoology. It is also available to other higher education and research institutions.

Construction work began last year on the 20-storey K. K. Leung academic building. When completed in 1988, the building will house the Departments of Law and Professional Legal Education, and the Departments of Economics, Management Studies, Social Work and Sociology.

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      The present development programme has also led to the re-equipping of the university's laboratories. This has resulted in a significant updating in the Departments of Science and Engineering and the consequent use of the latest teaching equipment.

Work to extend the Main Library is also in progress. The university has one of the best-equipped libraries in Southeast Asia. With over 800 reading places, the Main Library contains more than 650 000 volumes, including the invaluable collection of Chinese works in the Fung Ping Shan Library. Other specialist libraries form an important part of the Faculties of Dentistry, Education, Law, Medicine and Music. The university also has its own publisher and bindery.

The Department of Extramural Studies offers a wide variety of vocational and profes- sional courses, and courses of general and cultural interest which are attended by nearly 25 000 students each year.

Research projects continue through the university's various departments, the Language Centre, the Centre of Asian Studies - which serves as a focal point for multi-disciplinary research on China, Hong Kong, East Asia and Southeast Asia -- and the Centre for Urban Studies and Urban Planning.

The Chinese University of Hong Kong

The Chinese University of Hong Kong was inaugurated in 1963 as a federal university and a self-governing corporation which draws its income mainly from government grants. The campus occupies more than 110 hectares of land near Sha Tin.

The university comprises three colleges - New Asia College (founded in 1949), Chung Chi College (founded in 1951) and United College (founded in 1956). A fourth college, the Shaw College, named after its donor, Sir Run Run Shaw, is expected to become operational in 1988 at the northern part of the campus.

Since its inception, the university has adopted a curriculum structure based on a combination of the credit unit system and degree examination system. Students admitted to the undergraduate programme after six years of secondary education are granted a Bachelor's degree upon completion of a number of course credits and the passing of a degree examination assessed by external examiners from home and abroad.

The university started a comprehensive curriculum review in 1983 which resulted in the adoption of a new curriculum structure for its undergraduate studies, based solely on the credit unit system. The new curriculum is applicable to students admitted in 1986-7 and thereafter. Under this new structure, general education is strengthened, language standards are emphasised, minor programme becomes optional and degree examination is replaced by course examinations with the external examiner system retained.

In 1986-7, the university offered full-time undergraduate students 32 major subjects and 34 minor subjects through its 47 departments grouped under five faculties, namely, arts, business administration, science, social science and medicine. The first four faculties offer four-year programmes, leading to the Bachelor's degrees.

The Faculty of Medicine, which produced its first graduates during the year, runs a five-year programme with two years of pre-clinical studies followed by three years of clinical work. Clinical teaching is conducted mainly in the university's teaching hospital - the Prince of Wales Hospital in Sha Tin. The university emphasises bilingualism; most courses are taught in Chinese, but English is also widely used.

     At the postgraduate level, there are 53 academic and professional programmes leading to the degrees of Doctor of Medicine, Doctor of Philosophy, Master of Philosophy, Master of Business Administration, Master of Social Work, Master of Divinity, Master of Science,

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     Master of Arts, and Master of Arts in Education as well as Diplomas in Education and Social Work.

Part-time degree programmes leading to Bachelor's degrees (Bachelor of Business Administration; Bachelor of Arts in Chinese and English, Music; and Bachelor of Social Science in Social Work) and Master's degrees in Translation, Business Administration and Social Work as well as professional diplomas in both Education and Social Work are offered to working adults.

New postgraduate programmes launched in 1986-7 comprised the Specialisation MBA Programme in Organisation and Policy Studies, and Masters degrees programmes in Clinical Biochemistry, and in Biotechnology and Psychology. Expansion in the fields of education, medicine, electronics and computer science is expected in the coming years. Plans are also made to establish engineering studies in the near future.

The university is strongly committed to research and other academic activities. In addition to research work conducted in the teaching departments, six research centres are operating under the Research Institutes of Chinese Studies, Science and Technology, and Social Studies.

     Competition for university places is intense. Over 30 000 candidates sat the various public examinations held in 1986, and 1 325 were admitted to first year studies. Enrolment as of September 1986 totalled 7 203, comprising 5 389 full-time and 518 part-time under- graduate students and 400 full-time and 896 part-time postgraduate students. Almost all students are local, and about half of them are given hostel places.

      In 1986-7, the Department of Extramural Studies offered more than 1 300 courses with a total enrolment of more than 42 000. Besides general courses and those leading to the award of diplomas and certificates, the department also offered correspondence courses, courses on radio and by newspapers, and self-learning courses packaged in the form of audio tapes, programmed texts and resource materials.

Construction projects completed during the year included the reprovisioning of all-weather surfacing to a set of athletes' tracks and an extension added to the hostel for medical students at the teaching hospital. An integral building for the School of Education together with a multipurpose hall for Chung Chi College is at an advanced stage of construction.

The library system consists of the University Library, the Medical Library, and three branch libraries in the colleges. The total collection in 1986 was 893 800 volumes.

The university participates in the affairs of regional and international associations of universities, and has from time to time launched co-operative projects with foreign governments and individual institutions.

       It is a member of the Association of Commonwealth Universities, International Association of Universities, the Inter-University Council for Higher Education Overseas and the Association of Southeast Asian Institutions of Higher Learning.

Hong Kong Polytechnic

The Hong Kong Polytechnic was established in 1972, taking over the campus of the former Hong Kong Technical College which formed the basis of the polytechnic's initial development.

      Since then, student and staff numbers have increased greatly. At the beginning of the 1986-7 academic year, there were 7 860 full-time, 1 350 sandwich, 590 mixed-mode, 3 280 part-time day release and 12 580 part-time evening students. There were also 180 students on a new self-study programme. At June 30, the staff strength stood of 2 448, comprising 908 teaching, 244 senior administrative and 1 296 technical, clerical and ancillary staff.

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      The polytechnic has 22 academic units organised into divisions and institutes. The Division of Applied Science comprises the Departments of Applied Science, Mathematical Studies, Nautical Studies, the School of Social Work and the Centre of Environmental Studies. The Division of Commerce and Design comprises the Departments of Account- ancy, Business and Management Studies, Computing Studies, Institutional Management and Catering Studies, Languages, and the Swire School of Design. The Division of Construction and Land Use comprises the Departments of Building and Surveying, · Building Services Engineering, Civil and Structural Engineering, and the Centre of Land and Engineering Surveying. The Division of Engineering comprises the Departments of Electrical Engineering, Electronic Engineering, Mechanical and Marine Engineering, Production and Industrial Engineering, and the Industrial Centre. The two institutes are the Institute of Medical and Health Care and the Institute of Textiles and Clothing.

      The polytechnic offers a wide range of courses to meet the demands of commerce, industry and the community. Study programmes are offered in different modes of attendance, namely full-time, sandwich, parti-time day release, part-time evening and mixed. Successful completion of these courses will lead to the awards of degree, associate- ship, professional diploma, higher diploma, diploma, post-registration certificate/diploma, endorsement certificate, higher certificate, certificate and certificate of proficiency.

      Degree programmes offered during the year were: BA(Hons) in Business Studies; BA(Hons) in Computing Studies; BA in Design; BA(Hons) in Textile and Clothing Marketing; BEng(Hons) in Civil Engineering; BEng(Hons) in Electrical Engineering; BEng(Hons) in Electronic Engineering; BEng(Hons) in Manufacturing Engineering; BEng (Hons) in Mechanical Engineering; BEng in Building Services Engineering; BSc(Hons) in Combined Studies in Mathematics and Science, and Bachelor of Social Work.

       Since 1981, the polytechnic has conducted a phased schedule of discontinuing the bulk of its diploma and certificate level work as corresponding courses are offered by the technical institutes. This phased schedule reflects the polytechnic's move towards a greater propor- tion of higher level academic work.

      The polytechnic also offers short full-time and extension courses to meet the needs of the community. A total of 633 students enrolled in the short full-time courses and 9 624 students enrolled in the extension courses in 1985-6.

       Research activities continued to grow significantly, with the research grant in 1985-6 nearly tripling the previous year's. The major areas of research included environmental studies, immunoassay techniques, offshore engineering, CAD/CAM, electric power sys- tems, industrial automation, textile technology, VLSI fabrication techniques together with applied biology and chemistry.

       The polytechnic also continued to give high priority to staff development. The funding of staff development programmes in 1985-6 increased by 42 per cent over the previous year's. It also continued to establish new contacts and maintained close liaison with academic, research and professional institutions in China and overseas.

       The polytechnic's library has seating capacity for 1 600 readers, as well as special facilities for disabled persons. Its book collection has grown to 360 000 volumes.

The campus covers nearly nine hectares and is located in Hung Hom, Kowloon. Construction of the proposed Phase IIIA development began during the year to provide a new administration block, additional teaching and staff accommodation, a small theatre, and an improved main entrance.

       The sports pavilion and outdoor sports facilities which are under construction will be ready for use during the academic year.

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City Polytechnic of Hong Kong

EDUCATION

The City Polytechnic of Hong Kong, which opened its doors to students in October 1984, conferred awards on its first graduates in November 1986. The graduates were: 20 holders of the Higher Diploma in Business Studies, 74 Diplomates in Social Work, and 21 part-time students who were awarded the Higher Certificate in Translation and Interpretation. By the end of the year, most of the graduates were already in employment.

Another important development during the year was the introduction of degree programmes - the Bachelor of Arts (Honours) in Business Studies and in Public and Social Administration. Both courses were evaluated by external advisers from the community, as well as representatives from the United Kingdom Council for National Academic Awards. Two other new courses, in Information Technology, were also introduced, making a total of 20 courses offered by the eight academic departments of: Accountancy, Building and Construction, Business and Management, Computer Studies, Electronic Engineering, Languages, Mathematics and Science, and Social Administration. These courses, offered in full-time, part-time, sandwich and mixed modes, represent different levels of study, namely Higher Certificate, Diploma, Higher Diploma, Professional Diploma, Postgraduate Di- ploma, and Degree.

The intake of about 2 000 new full-time and part-time students in October 1986 brought the total student population to about 4 500.

      The polytechnic's courses are designed to provide a wide range of general and specific areas of knowledge, made possible by the application of a modular system. This enables parts of the courses to be taken in common by students of different departments, so that they can appreciate the wider application of their own studies. It also enables full-time and part-time students following the same programmes to study courses of similar content and ultimately to receive the same awards. Practical case studies or placements are also emphasised so that students are better prepared to take up employment immediately after graduation.

The City Polytechnic adopts a centralised approach in the provision of academic support services, substantially reducing duplication of manpower and equipment. Its library has a collection of 50 000 volumes, 1 800 titles of serials and periodicals, and 1750 items of non-print materials. A new catalogue production system using compact laser discs was recently installed. A polytechnic-wide computer network has been established by the Computer Centre and various computer-aided packages, intelligent work stations and computer literacy programmes are being developed. The Educational Technology Centre provides audio-visual facilities to all classrooms and such other special teaching rooms as language and video laboratories. A video distribution system enables video programmes to be shown from a central source in any classroom. The Centralised Laboratories and Workshops deal with the laboratory requirements of those academic departments needing such support, and the laboratories are designed around activities common to departments. During the year, contacts with international institutions of higher education increased, particularly with those in China. A formal agreement on academic exchange was signed with Zhongshan University in March 1986.

      The polytechnic's research base was consolidated by a grant of $1 million from the UPGC for 1986-7. This enabled more projects to be supported. In addition, some research projects were supported by major international companies.

The polytechnic is currently operating from its interim campus in Argyle Centre Tower II in Mong Kok. The contract for site formation work for the permanent campus on a 12.2-hectare site at Tat Chee Avenue in Kowloon Tong was awarded in April 1986. Work

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on the project began in June, and the first phase of the development is expected to be ready for occupation by October 1988.

Hong Kong Baptist College

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The Hong Kong Baptist College commemorated two major events during the year - the 30th anniversary of its founding and its recognition in September as a degree-granting institution. The college is fully autonomous and is governed by its own Ordinance. Its statutory governing bodies, the Board of Governors and the Council, are composed of members independently appointed by the government and members nominated by the Baptist Convention of Hong Kong, which founded the college.

      The college's goal is to educate students to become well-balanced in academic achieve- ment, professional competence and character development. Courses are offered by depart- ments grouped into four faculties. These faculties are: Arts (departments of Chinese language and literature, English language and literature, music and fine arts, religion and philosophy); Business (departments of accounting, business management, economics, secretarial management); Science (departments of biology, chemistry, mathematics, phys- ics); and Social Sciences (departments of communication, geography, history, social work, sociology). In addition, the language centre, the centre for computing studies and services, and athletics unit provide teaching services to students from all courses.

All students are full-time and are admitted on the results of the Hong Kong Advanced Level (HKAL) Examination. All courses offered are of three years' duration and lead to the award of a Bachelor's degree or honours diploma. In the academic year 1986-7, there were two Bachelor's degree courses BSc(Hons) in Combined Sciences, and BSW in Social Work, together with 11 honours diploma courses in other disciplines. To ensure maintenance of academic standards, external examiners are appointed to all courses. Each course is broadly based and comprises two essential components: liberal education and vocational preparation. As a provider of such courses, the college fulfills a distinctive role within the local spectrum of higher education.

The degree courses are academically validated by the Council for National Academic Awards (CNAA) in the United Kingdom. In 1986, the UPGC agreed that proposals for two degree courses, Management Studies and Communication, both planned to begin in September 1987, could be submitted to the CNAA for validation. Other degree course proposals discussed with the UPGC during the year included the BA(Hons) in Music and BA with Education Studies.

At the end of the academic year 1985-6, 651 students graduated with the honours diploma award. In 1986-7, applications for admission continued to exceed the number of places, and the average applicant-to-place ratio was 9:1. As of October 1986, full-time student enrolment totalled 2 267, broken down as follows: arts 411, business 644, science 442, and social sciences 770. Additionally, 66 students were enrolled in a special two-year course preparing them to sit the HKAL in Examination in music. There were 188 members of teaching staff, the majority holding higher degrees from overseas institutions. Senior academic and administrative staff are recruited through international advertisement.

       The redevelopment of the college campus in North Kowloon which began in 1985 continued on schedule. The redevelopment programme, which involves the construction of five new buildings and the refurbishing of existing buildings, will increase the space available by 80 per cent and is phased in line with the growth of the student population to 3 000 by 1989-90.

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      The college's main library has a unique integrated computer system covering all the major library services. This system became fully operational in October. The total number of books increased to 159 446 during the year. There is also a branch library which houses a collection of rare research materials on contemporary China.

      The Centre for Education Development provides support to staff in the areas of educational technology, educational software production, and audio-visual services.

      Staff research and consultancy, and academic exchanges with institutions in China, multiplied during the year. Close links were maintained with the community, in particular through the various course advisory committees, and with local and overseas institutions. The Division of Continuing Education interacts with the community in another way by providing a broad range of courses to people in employment. Financially self-supporting, the division offered 1 100 courses during the year for a total enrolment of 34 500. The part-time courses, some leading to professional qualifications, are mostly held in the evening using the campus and off-campus centres.

Technical Education

With the completion of Tuen Mun and Sha Tin Technical Institutes in August 1986, the number of technical institutes in Hong Kong rose to seven. These provide courses at the craft and technician levels with full-time, block-release, part-time day-release and part-time evening attendance. A large number of short courses are also offered and these are mainly designed to update the knowledge and skills of persons in employment.

The main disciplines covered by the institutes include: clothing, commercial studies, computing studies, construction, design, electrical engineering, general studies, hotel- keeping and tourism studies, industrial technology, marine engineering and fabrication, mechanical engineering, motor vehicle engineering, printing and textiles. Most technician level courses have been validated by the United Kingdom Business and Technician Education Council and students attending these courses are able to register for the council's awards.

The demand for places on most courses remained high. Enrolments for the 1986-7 academic year totalled 8 200 full-time, 13 000 part-time day and 27 800 part-time evening students. In September, the number of full-time teaching staff in the technical institutes was 640, with some 560 supporting staff.

      Each technical institute has on average 55 computer work-stations comprising terminals linked to medium-scale computers and microcomputers. This enables the study of com- puter appreciation and application to be included in most courses.

The annual employment survey of full-time course graduates again showed that they had little difficulty in finding employment in their respective disciplines after completion of their studies.

      To meet the increasing demand for courses, a new technical institute is under construc- tion at Chai Wan and is scheduled for completion in mid-1987. Plans were in hand to provide additional accommodation at the Kwai Chung and Kwun Tong Technical Institutes and to redevelop the annex of the Morrison Hill Technical Institute.

Industrial Training

The Vocational Training Council's nine-storey Kowloon Bay Training Centre Complex houses six training centres for the electronics, hotel, machine shop and metal working, plastics, precision tooling, and printing industries. The 10-storey Kwai Chung Training Centre Complex also has six training centres for the automobile, electrical, electronics, gas,

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machine shop and metal working (including welding), and textile industries. Electronic data processing and insurance training centres were established during the year and a banking training centre was planned.

These training centres have the capacity to provide basic off-the-job training for some 9 000 trainees a year, ranging from operative to technologist level.

      The Seamen's Training Temporary Centre at Little Sai Wan provides 30-day training programmes to Hong Kong seamen to enable them to obtain the certificates required under the International Maritime Organisation's Convention on Standards of Training, Certifica- tion and Watchkeeping for Seafarers 1978. The centre can train 1920 seamen a year. A permanent seamen's training centre at Tai Lam Chung was under construction.

      The Engineering Graduate Training Scheme was launched by the council in February 1983 to provide 18-months' practical training to enable engineering graduates to become qualified professional engineers. In 1986, 90 firms and 265 trainee engineers participated in the scheme.

      The Management Development Centre of Hong Kong began operation in October 1984 with the main purpose of improving management in Hong Kong and ensuring that it is capable of meeting changing needs, both in the short and the long term. The centre has four principal functions: research, development, co-ordination and promotion.

      Apart from industrial apprenticeship schemes, commercial traineeship schemes were also introduced in the accountancy and insurance sectors. The Training Course Subsidy Scheme proved popular; this was operated by the boards for the accountancy, banking, journalism, transport and physical distribution, and wholesale/retail and import/export sectors.

Training Authorities

     The Clothing Industry Training Authority and the Construction Industry Training Authority are statutory bodies set up in 1975 to establish and operate training centres for these particular industries. The former is financed by a training levy based on the export value of clothing items while the latter is financed by a levy based on the value of construction works exceeding $1 million. There are now two construction industry training centres operating and a third one being built, and two clothing industry training centres.

Apprenticeship Scheme

The Apprenticeship Ordinance provides a legal framework for the training of craftsmen and technicians. It requires an employer to enter into a contract of apprenticeship when engaging a person aged between 14 and 18 in one of the 42 designated trades specified in the ordinance, unless that person has already completed an apprenticeship in the trade. The contract must be registered with the Director of Technical Education and Industrial Training. Contracts for apprentices engaged in non-designated trades, or for apprentices aged over 18 engaged in designated trades, may also be registered with the Director on a voluntary basis.

      The Apprenticeship Section of the Technical Education and Industrial Training Depart- ment is responsible for administering the ordinance. Its duties include advising and assisting employers in the training and employment of apprentices, ensuring that the training is properly carried out, helping to resolve disputes arising out of registered contracts, and co-operating with educational institutes to ensure that apprentices receive the necessary complementary technical education. Courses of instruction for apprentices, normally on a part-time day-release basis, are provided at the Hong Kong Polytechnic and the technical institutes.

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Apprenticeship contracts registered in 1986 totalled 4 500, of which 900 were for non-designated trades. These contracts cover 3 800 craft apprentices and 700 technician apprentices. By the end of the year, 9 400 apprentices were being trained.

Vocational Training for the Disabled

The provision of vocational training for the disabled continued to expand during the year as more places were offered with the completion of the new Pinehill Village Advanced Training Centre reprovisioning project at Tai Po. This brought the total number of training places in both government and subvented centres to about 720. At the same time the number of residential places in subvented centres was increased to 214. Development of training programmes placed emphasis on the inculcation of social skills, particularly in mentally handicapped trainees. In addition, over 120 disabled students followed a wide variety of courses at both craft and technician levels in the technical institutes. Supportive services were provided to them during their course of study.

During the year 300 persons completed vocational assessment at the Vocational Assessment Centre and, in response to requests from disabled students, trainees and employees, over 40 special aids and machine adaptations were produced by the Technical Aids and Resource Centre.

An employment survey of disabled leavers from the skills centres and the technical institutes conducted at the beginning of the year showed that 73 per cent of the survey group found employment in the government, industrial or commercial sectors.

Teacher Preparation

General teacher training is provided at the three Colleges of Education - Grantham, Northcote and Sir Robert Black - and at the Hong Kong Technical Teachers' College. All four colleges are administered by the Education Department.

The three general Colleges of Education offer a two-year full-time course of initial teacher training to students possessing the required Hong Kong Advanced Level Examina- tion qualifications and a three-year full-time course to students with the required Hong Kong Certificate of Education Examination qualifications. The Colleges of Education also conduct in-service training courses, including a one-year full-time Advanced Course of Teacher Education for teachers of practical and cultural subjects, retraining courses of seven-to-eight weeks duration for teachers in primary and secondary schools, and two-to- three year part-time courses for serving teachers in kindergartens, primary and secondary schools and for teachers of students with special educational needs. In September, there were 1336 students in the three-year full-time course, 981 students in the two-year full-time course, 91 students in the Advanced Course of Teacher Education, and a total of 2 071 students in the in-service training and retraining courses.

Technical teacher training is offered by the Hong Kong Technical Teachers' College for future teachers of technical subjects in secondary and prevocational schools. A one-year full-time course is available to mature students who are well qualified in a technical field and wish to take up technical teaching as a career. Grants are offered to attract suitable recruits. A three-year full-time course is open to secondary school leavers who have prior studies in either technical or commercial subjects. The college also offers in-service courses for teachers and a variety of short courses for instructors working with the handicapped and supervisors and instructors employed in industry. In September, there were 165 students in the full-time courses and 137 students in the part-time and short courses.

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       Financial assistance in the form of interest-free loans and maintenance grants is provided by the government for students enrolled in the full-time courses at the four colleges.

Basic training courses in educational management for heads of schools in the public sector are provided by the Training Unit of the Education Department. During the year, a total of 120 primary school heads in six groups attended a ten-day management course while 18 secondary school heads attended a nine-day course and 98 secondary school heads in five groups attended a four-day staff development workshop. A six-day management course for 20 kindergarten heads was conducted for the first time. Various seminars/short courses for professional officers and, induction and basic training courses for new recruits of the department were also offered.

Adult Education

The Adult Education Section of the Education Department provides formal and non- formal education to adults through a wide range of courses and activities.

For the academic year beginning in September, over 20 000 persons enrolled in formal education courses ranging from basic literacy to secondary and post-secondary studies in 84 centres. At the primary level, the Adult Education Course (General Background) in Chinese, English, Mathematics and Social Studies provided retrieval education to those who had earlier missed the opportunity of a formal primary education. Some of these classes were operated jointly with the Correctional Services Department, Social Welfare Department and Urban Services Department. English courses were also offered. At the secondary level, the Secondary School Course and Government Secondary School Course for Adults offered a full secondary school course and prepared students of both English and Chinese Sections for the Hong Kong Certificate of Education Examination. English courses were run at secondary and GCE levels which prepared adult students to sit for the English Language Paper (Syllabus B) of the Hong Kong Certificate of Education Examination and the GCE 'O' Level Examination. At the post-secondary level, teachers' courses were offered which provided refresher courses for serving teachers in a variety of academic and cultural subjects. For the public, the Evening School of Higher Chinese Studies offered short courses in Chinese language, classical literature and culture.

       The non-formal education courses continued to be very popular. The Adult Education Courses (Practical Background) which teach such skills as sewing, knitting, cookery and woodwork were offered in 28 centres. Some 5 000 students attended these courses during the year. The number of Adult Education and Recreation Centres, which organised a great variety of educational, cultural, social and recreational activities to stimulate individual and social awareness, cultivate creative ability and develop individual talents, was increased to 18. Various activities were organised with other government departments and organisa- tions, such as the Independent Commission Against Corruption, the Consumer Council and the St. John Ambulance Brigade. During the year, over 17 000 persons participated in the courses. Microcomputer courses were introduced for members of the Adult Education and Recreation Centres. Over 400 members attended these courses in the year.

A number of voluntary agencies continued to run subvented courses which complemented and supplemented the department's adult education services in various areas. In 1986-7, a total of 159 projects operated by 50 organisations were granted government subsidies.

Language in Education

The language research projects referred to in the Education Commission's Report No. 1 were completed during the year and these substantiated the assumption that, other things

URBAN COUNCIL PUBLIC LIBRARIESĮ

Referenz LYDIAIS

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being equal, teaching and learning would be generally more effective if the medium of instruction were Chinese. In this connection, the policy recommended by the commission of 'positive discrimination' in favour of secondary schools using Chinese as the medium of instruction will be implemented from September 1988. In accordance with this policy, additional teachers of English and additional resources will be provided to strengthen the teaching of English to avert any consequential drop in the standard of English as a result of reduced exposure. To assist secondary schools in deciding on the language mode of instruction, various language-medium models were circulated to schools for consideration and for planning purposes.

A Chinese Textbooks Committee was established in June with the task of assessing the demand for such textbooks, in the light of the policy of encouraging schools to adopt Chinese as the medium of instruction, and to ensure the availability in time for the 1989-90 school year of an adequate supply of textbooks, of good quality and appropriate standard, in Chinese. The committee is composed of government officials and members of the community, and is serviced by the Education Department.

The Institute of Language in Education, founded as a training and research institute with the objective of improving language learning and teaching in Hong Kong, offers full-time refresher courses and occasional seminars and workshops for teachers of English and Chinese in primary and secondary schools. It conducts research into language learning and teaching, provides consultancy services to teachers and language teaching specialists and designs and develops language learning and teaching materials for use in schools. The institute is recognised by the Royal Society of Arts Examinations Board as a centre for courses leading to the Diploma for Overseas Teachers of English.

      During the year, the institute organised refresher courses for 1113 primary and secondary school teachers of English and Chinese, a seminar for primary level teachers in Hong Kong Diocesan Schools, two seminars for heads of primary schools and a three-day international conference on in-service language teacher education. Three teachers' guides were written and distributed to schools and a book on future directions in language teacher education was published. The second volume of the institute's professional journal (the ILEJ) was issued in September and made available to teachers and language specialists in Hong Kong and overseas. Institute research activities are being developed in four directions: (a) studies on the theory and practice of language learning and teaching in Hong Kong, (b) studies on particular problems in the teaching of Chinese and English at the primary and secondary levels in Hong Kong, (c) evaluation studies, including situational, needs and task analyses and (d) linguistic and socio-cultural studies of con- temporary forms of Chinese and English. Specific projects completed or underway have focused on the standardisation of commonly-used Chinese characters, needs analyses of teachers of English in prevocational schools and of institute participants, and an extensive reading scheme. A project related to computer-assisted language learning is in the planning stage. Two exhibitions of language learning and teaching materials were organised during the year.

Education Research

Research into a wide range of educational topics is undertaken by the Educational Research Establishment of the Education Department. The annual monitoring of academic standards at Primary 1 and Primary 4-6 took place in May. Manuals for the standardised Primary 4-6 Chinese and English test were compiled and made available to schools during the year. Screening tests (Chinese and English) for Form 1, and two additional versions of

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the aptitude test for the selection of students for prevocational schools were produced. Standardised Chinese and English tests at Form 2-3 levels and mathematics tests at Form 1-3 levels were being developed.

      Other research projects undertaken during the year, in addition to those relating to the medium of instruction, included evaluation of the activity approach in primary schools, the construction of aptitude tests for career guidance, and evaluation of the Remedial Teaching Scheme.

Advisory Inspectorate

The main function of the Education Department's Advisory Inspectorate is to promote the quality of teaching. This involves frequent visits to schools by subject inspectors to advise on curriculum matters, teaching methods and utilisation of resources, and the provision of in-service training courses, seminars and workshops for teachers. The inspectorate is also responsible for curriculum development, production of educational television programmes, and evaluation of textbooks and instructional materials.

      The Curriculum Development Committee and its many subjects committees continued to advise on curriculum innovation and revision at pre-primary, primary and secondary levels. In 1986, new syllabuses for Fashion and Clothing, and Accommodation and Catering Services at secondary level, and Government and Public Affairs at senior secondary level as well as revised syllabuses for Physical Education at primary level, Mathematics at secondary level, Science at junior secondary level and Geography at senior secondary level were issued. Resource centres were established to support the implementa- tion of the guidelines on Moral Education, Civic Education and Sex Education. The Activity Approach, a more child-centred and less formal approach to learning in primary schools, continued to expand. At senior secondary level, the Computer Studies Scheme entered its fourth phase of development in September. The Textbooks Committee, as in previous years, provided guidance to schools in the selection of textbooks through the publication of recommended textbooks lists and also maintained close contact with publishers of educational materials.

Teaching and Resource Centres

The Advisory Inspectorate operates six teaching centres concerned with the teaching of Chinese, English, Mathematics, Science, Social Subjects and Cultural Crafts and three resource centres in connection with Civic Education, Religious/Ethical/Moral Education and Sex Education. A Field Studies Centre is open to sixth form students and teachers.

      During the year, the Chinese Language Teaching Centre conducted 60 refresher courses, workshops and seminars for 1 700 teachers of Chinese in secondary and primary schools. Two competitions, one on recorded play and the other on writing at secondary level, were organised and 250 pupils participated in the competitions. Three small exhibitions on special topics were organised and attracted some 1 500 teachers. Both primary and secondary schools benefited from the centre's free dubbing service and over 2 100 teaching tapes were made during the year. To prepare teachers for the implementation of Putonghua as a subject in primary schools commencing in September, 10 courses/seminars on teaching of Putonghua were conducted for 900 teachers. An exhibition of resource materials on Puntonghua teaching was also organised in July.

      The English Language Teaching Centre organised a total of 70 seminars, workshops and talks for over 2 000 participants. As well as providing schools with a free tape-dubbing

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service, the centre had a tape library containing 950 English language tapes for teachers' reference as listening materials. The centre's library, which was open to teachers, has a stock of over 8 780 books and a variety of journals on English language teaching and linguistics.

      The Mathematics Teaching Centre serves as an in-service training venue and resource centre for mathematics teachers. A total of 26 seminars, courses and workshops were conducted for mathematics teachers in primary and secondary schools. More than 1 320 teachers visited the centre for in-service training, viewed the display of teaching aids and obtained information on resource materials.

The Science Teaching Centre was used extensively for conducting refresher courses, seminars, workshops and teachers' meetings as well as for the display of equipment and resource materials for science teaching. More than 3 500 primary and secondary school science teachers and laboratory technicians visited the centre. The science laboratory provided facilities for trying out science experiments in relation to curriculum development projects, making prototype apparatus and performing practical work during science workshops.

      The Social Subjects Teaching Centre continued to be a training venue and resource centre for teachers of various social subjects such as Economics, Economic and Public Affairs, Geography, Health Education, History, Chinese History and Social Studies at both primary and secondary levels. Thirteen courses/seminars with more than 1 200 participants from primary and secondary schools were conducted at the centre. Over 700 visitors made use of the resources available.

The Cultural Crafts Centre, in addition to co-ordinating activities for the promotion of practical/technical subjects, provided opportunities for teachers in Art and Design, Art and Craft and Home Economics to update their professional knowledge. Resource materials including handouts, slides and video tapes were also produced for teachers' use. In 1986, about 2 000 teachers attended various retraining programmes and about 25 000 visitors were attracted to the exhibitions organised by the centre.

A Civic Education Resource Centre and a Religious/Ethical/Moral Education Resource Centre are also accommodated in the Advisory Inspectorate Teaching Centres at Pak Fuk Road. These provide reference materials, information and advisory service on matters relating to Civic Education and Religious/Ethical/Moral Education in schools and have proved to be popular among teachers.

      A Sex Education Resource Centre housed in the Advisory Inspectorate Teaching Centres at Pak Fuk Road was opened in November. This centre provides support for primary and secondary school teachers implementing Sex Education in their schools. A variety of resource materials such as books, magazines, charts, models, audio-visual teaching materials and school projects are on display. During its first month of opening there were over 500 visitors.

The Field Studies Centre in Sai Kung was well patronised by sixth form students and secondary school teachers for ecological and geographical studies. Thirty-one residential ecology and geography courses for a total of 1 500 sixth formers from 99 secondary schools were organised.

Various in-service training courses and seminars were held for 450 biology and geography teachers to acquaint them with methods and techniques used in field studies. The centre was also used as a venue by various educational institutions for running activities related to field work and environmental education for students and student teachers.

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The Visual Education Section makes available through its Audio Visual Resources Library a wide range of audio-visual aids on free loan to schools. The stock includes 16mm films, video-cassette tapes, filmstrips, slides and transparencies, filmloops, learning packages and cassette tapes. The section's Media Production Services Unit in Canton Road is open seven days a week to assist teachers in the production of teaching aids. The facilities of the unit include photographic, reprographic, graphic, model making, tape duplicating, booklet binding, picture preservation and screen printing equipment and a microcomputer system. During the year, 7 000 teachers utilised the facilities of the unit and over 150 courses and workshops on the production of audio-visual materials were organised, with a total attendance of more than 3 500 teachers.

Physical Education

The Physical Education Section is responsible for the improvement of teaching standards in physical education in schools and the promotion of school sports, outdoor education camps and dance. In 1986, some 52 courses and seminars in physical education were conducted for over 2 707 teachers.

      In January, the 22nd Schools Dance Festival attracted 3 623 participants from 252 secondary, primary and special schools. In April and May, prize-winners' performances were held at the City Hall, the Tsuen Wan Town Hall and Lut Sau Hall, Yuen Long. In July and August, the Hong Kong Schools Dance Team took part in the Festival International de Musica de Cantonigros in Spain and the Aberdeen International Youth Festival, Scotland. It also performed at the opening of the new Hong Kong Exhibition at the Commonwealth Institute in London.

      Throughout the year, 371 courses and 10 competitions in various sports were organised for students. In addition, 122 courses in connection with the Duke of Edinburgh Award Scheme were conducted for 158 member schools.

      The section continued to administer the Royal Hong Kong Jockey Club Fund for the Summer Youth Programme for Schools, through which 175 813 students from 532 primary and secondary schools benefited.

      Through the Hong Kong Schools Sports Council, the Physical Education Section also played an active role in the promotion of school sports. Training schemes in badminton, basketball and football were conducted to develop the potential of young athletes in schools. Jing Ying competitions in various sports were held at both primary and secondary levels; inter port competitions in nine different sports were organised between Hong Kong, Macau and Guangdong. Two school football teams also took part in international school tournaments held in Brunei and South Korea in summer.

Music Education

In 1986, a total of 13 in-service training courses and seminars were organised for over 1 300 music teachers in primary and secondary schools. The emphasis of this year's in-service training programme was to improve the teaching capabilities of teachers in rural primary schools.

      The Centralised Scheme of Music Training, which provides opportunities for further study in music at senior secondary level in courses leading up to the Certificate of Education, Higher Level and Advanced Level Music Examinations, reached its final stage of expansion.

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      Over 55 000 pupils participated in the 38th Annual Hong Kong Schools Music Festival organised by the Hong Kong Schools Music and Speech Association. The festival ended with a series of eight prize-winners' concerts.

Technical and Commercial Education

     During the year the teaching of technical subjects, as part of the general curriculum in secondary schools continued to expand at the Forms 4-5 level. Two new technical subjects, Fashion and Clothing and Accommodation and Catering Services developed at Form 4 to 5 level for prevocational schools, were introduced at Form 4 level in September.

As in previous years, a range of in-service courses for technical teachers was organised including a seminar to introduce the new Technical Drawing teaching syllabus.

      As part of the year's programme, help was again given in the promotion of the Hong Kong Young Designer of the Year Award Competition sponsored by the Federation of Hong Kong Industries and the Design Council.

      The Commercial Subjects Section organised the fourth Commercial Projects Competi- tion with the Chinese Gold and Silver Exchange Society. The aims of the competition were to arouse the interest of secondary school pupils in various commercial activities in Hong Kong and to encourage a more lively approach in the teaching of commercial subjects. 'Commerce and Civic Education' was chosen as the theme of the 1986 projects and about 1 400 pupils took part in the competition. The section also assisted in promoting Civic Education by organising seminars as well as producing reference materials for teachers of commercial subjects.

Computer Education

The Computer Studies Scheme, introduced in 1982, was further extended to include another 55 secondary schools, bringing the total number of schools in the public-sector implementing the subject to 265. The ultimate aim of the scheme is to include all public-sector schools.

Community Youth Club

The Community Youth Club, established in 1977, continued to participate in building up a strong community spirit and in promoting civic-mindedness among students. Its 170 000 members contributed substantially towards various public campaigns. With the addition of one more new district during the year, there are now 19 district committees co-ordinating the club's activities.

      Thousands of members gained awards under the Merit Award Scheme which required them to set examples of good citizenship by offering services to the community. Ten outstanding members from the scheme were selected for an educational tour to Expo '86 in Canada in July.

Educational Television

Programmes produced by the Educational Television Service (ETV) are considered the most useful audio-visual supplement to classroom teaching and regular viewing of the educational television programmes has become a normal part of school life in Hong Kong. In 1985-6, the total audience of ETV programmes was estimated to be 354 000 primary and 254 000 secondary school pupils.

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      Programmes are produced jointly by the Education Department and Radio Television Hong Kong, and are transmitted to schools by the two commercial television stations. They are based on syllabuses used in primary and secondary schools. ETV programmes for secondary schools cover Chinese Language, English Language, Mathematics, Social Studies and Science, at Form 1 to 3 levels, while those for primary schools are produced for Primary 3 to 6 in the same five subjects and in Health Education. Notes are provided for teachers in conjunction with ETV programmes which include suggested preparation and follow-up activities.

      To facilitate reception and utilisation of ETV programmes in schools, TV equipment, including colour television receivers and video-cassette recorders, are provided and installed in all government and aided schools and private secondary schools with 'bought places'. In the financial year to the end of March 1986, some $3.7 million was spent on the provision of equipment for these schools.

School Library Services

School library services expanded with the training of more librarians in secondary schools. In primary schools, the Class Library Scheme was fully implemented in Primary 1 to 6 classes in all government and aided primary schools. Each class was provided with an initial grant of $500 for bookcases and $10 per pupil per year for library books. A one-off grant of $300 was also allocated to primary classes with 20 or less pupils for acquiring an essential library stock.

Hong Kong Examinations Authority

The Hong Kong Examinations Authority, an independent statutory body, has adminis- tered the Hong Kong Certificate of Education Examination since 1978, the Hong Kong Higher Level Examination since 1979, and the Hong Kong Advanced Level Examination since 1980. In 1986, a total of 156 519 candidates entered for the Hong Kong Certificate of Education Examination, 9 219 for the Hong Kong Higher Level Examination and 21 200 for the Hong Kong Advanced Level Examination. For the Higher Level Examination, the drop in candidature was very significant, from 12 585 in 1985 to 9 219 in 1986. This was attributable mainly to the introduction of the Provisional Acceptance Scheme by the Chinese University of Hong Kong.

      The authority also assumes responsibility for conducting a large number of overseas examinations on behalf of various examining bodies in the United Kingdom and elsewhere. These examinations include the General Certificate of Education, the Test of English as a Foreign Language, the London Chamber of Commerce and Industry Examinations, and many others which enable students to acquire academic and professional qualifications.

Hong Kong Students in Britain

The Students Division of the Hong Kong Government Office in London is responsible for the welfare of Hong Kong students and nurses in training in the United Kingdom. The division liaises with the Education Department regarding the admission of students from Hong Kong to institutions in the United Kingdom and problems encountered by students currently studying there. It also works closely with the Secretariat of the University and Polytechnic Grants Committee, assisting in administering the United Kingdom-Hong Kong Joint Funding Scheme.

      More generally, the division monitors developments in education in the United Kingdom and, in order to promote the interests of Hong Kong students, establishes and maintains

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close relations with universities, polytechnics and colleges, British Government depart- ments, local education authorities, the British Council, welfare organisations and, in the case of trainee nurses, medical authorities.

In addition to advising and assisting individual students, it maintained close contact with the Hong Kong student community through college-based student societies. The Hong Kong Student Centre in London closed in July because of diminishing use of its facilities.

Hong Kong Students Overseas

The Overseas Students and Scholarships Section of the Education Department gives advice to students wishing to further their education overseas and supplies information on educational establishments in Britain and other countries. Altogether, 4 518 students went to Britain during the year, while 2 953 went to Canada, 1 872 to the United States and 564 to Australia.

Student Finance

     Full-time students attending the local tertiary institutions are eligible for grants to cover their faculty expenses, tuition fees and student union fees, together with interest-free loans to meet their living expenses. During the year 8 725 students received grants totalling $37.5 million and 9 860 students received loans totalling $78.1 million. This scheme is adminis- tered by the University and Polytechnic Grants Committee.

      Also administered by the UPGC is a joint-funding arrangement between the United Kingdom Government and the Hong Kong Government, under the terms of which grants are made to full-time students attending first degree or Higher National Diploma courses in the United Kingdom, to meet the difference between home and overseas student fees. During the year, grants totalling £3.8 million were paid to 116 institutions on behalf of 1 360 students.

British Council

The aim of the British Council in Hong Kong is to reinforce and help develop education and cultural links with Britain. Perhaps the best known of the council's activities in Hong Kong is the English Language Teaching operation, which has 85 qualified teachers. During the year 25 000 students enrolled on 12-week courses of three hours per week, and around 500 primary and secondary school teachers received in-service training sponsored by the Education Department. Special courses were also designed for private sector organisations, including a 12-month full-time course for 25 middle managers.

      The Educational Counselling Service provides advice to students on educational oppor- tunities in the United Kingdom and has become increasingly popular. In addition, two major missions of academics from Britain visited Hong Kong during the year, providing advice to students and discussing possible areas of collaboration with their Hong Kong counterparts.

      British specialists visiting Hong Kong were mainly in the areas of Education and English Language Teaching. The British Council also sponsored a specialist in Education for the Deaf, and Dr J. R. Moss from the Independent Broadcasting Authority to give lectures and seminars on Educational Technology to the major audio-visual units in Hong Kong educational institutions. Scholarships were given in many subject areas, ranging from Stage Management and Lighting, to Robotics and Automated Systems.

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      The main arts event to receive sponsorship was the 'Art of Henry Moore Exhibition' shown in three main venues: the City Hall Complex, the Arts Centre and the Tsim Sha Tsui promenade. This was one of the largest exhibitions of Henry Moore's work ever shown and attracted enormous interest.

       The council offices, classroom, library and hall have been remodelled and refurbished. The library has a membership of 14 000 and provides access to a wide range of books, periodicals, supplementary graded readers, and audio and video cassettes for self access learning. Book exhibitions have included one on 'Computers and their Applications' and

'Children's Rare Books'.

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Health

To cope with the continuing increase in demand for medical services, the Medical and Health Department embarked on a comprehensive medical development programme which includes the construction of at least four major hospitals and 22 additional clinics and polyclinics in the coming decade.

      Construction of the Tuen Mun Hospital, which will have 1 600 beds, is near completion and a topping out ceremony for the hospital was performed by the Chief Secretary, Sir David Akers-Jones, in August.

      When completed in 1988, the hospital will reinforce medical services in the northwest of the New Territories. It is a further example of the government's policy of expanding medical facilities in the New Territories to keep up with the growth of the population in these areas, especially evident in the new towns.

      Site formation work has started on the long-awaited 1 600-bed Eastern District Hospital on Hong Kong Island. The hospital, which will be completed by 1991-2, will provide a comprehensive range of specialist treatment facilities, including a round-the-clock accident and emergency service and a psychiatric nurse training school.

      Construction work on the Queen Mary Hospital extension Stage II is expected to be completed in 1989. The hospital will then provide two multi-storey blocks with an addition of 844 beds, and some new psychiatric and paediatric facilities.

      The government has also approved funds for extensive redevelopment of the 280-bed Ruttonjee Sanatorium in Wan Chai to convert it from an institution for chest and tuberculosis patients into a general hospital, with 462 beds.

      The most significant event of the year in the medical and health field was the publication in late March 1986 of a consultant's report on the delivery of medical services in public hospitals.

The report was the result of a 10-month review of 'the delivery of medical services in Hong Kong' carried out for the government in February 1985 by an Australian con- sultancy firm.

      The government, while welcoming the report, has decided that it is necessary first to seek the views of the public, and in particular those involved in the health care system, before making a decision on the recommendations.

      Copies of the English and Chinese texts of the full report, together with a summary, were distributed to interested professional bodies, staff associations and the general public. The public were invited to convey their comments on the report to the Secretary for Health and Welfare before the end of August.

      Another significant development in the medical field, which has far-reaching im- plications, was the setting up of a Working Party on Postgraduate Medical Education and Training.

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      The working party was set up on the advice of the Medical Development Advisory Committee, with the objective of examining the various aspects of postgraduate medical training in Hong Kong, and making recommendations.

      The working party, chaired by Dr K. E. Halnan, a British physician with wide-ranging knowledge of postgraduate medical education, began work in October.

It will:

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-

monitor the need for postgraduate training in medical specialties and continuing education for the medical profession in Hong Kong;

   advise on the organisation of programmes on postgraduate medical training and continuing education with reference to the responsibilities of the universities, medical professionals, hospital authorities and the government;

determine the standards within each postgraduate programme, examine the need for local examinations and certification of standards and advise on the need for a body to accredit programmes of postgraduate medical training and continuing education. The working party comprises 14 other members from local universities, medical pro- fessional bodies, government and subvented hospitals, medical and health administra- tion and the University and Polytechnic Grants Committee. It is expected to report its findings and recommendations within two years to the government.

      For the 1986-7 financial year, the Medical and Health Department's estimated ex- penditure is $2,646 million. In addition, subventions totalling about $1,270 million are being made to many non-government medical institutions or organisations. The capital expend- iture on hospitals and other buildings, including equipment and furniture, totals around $249 million.

Health of the Community

The general level of health of the population remains good, largely due to anti-epidemic and disease surveillance measure, developments in preventive and personal health services, and a high standard of living. This progress is further reflected in the highly satisfactory health indices and the general decline in the incidence of major communicable diseases.

      The leading causes of death today are various forms of cancer, heart disease and cerebrovascular diseases. The low infant mortality rate is attributed to the provision of comprehensive family health care and neo-natal care facilities as well as improvements in environmental and socio-economic conditions.

       Three confirmed but isolated cases of cholera were reported in the months of May, June and July. Two of these were imported cases. Towards the end of July and in early August, there was a local outbreak and Hong Kong was declared a cholera infected area in accordance with the International Health Regulation of the World Health Or- ganisation.

      Up to August 20, a total of 22 cases of cholera was reported. Epidemiological in- vestigation revealed that there was a clustering of cases in the East Kowloon region, where 14 patients residing or working in Kwun Tong indicated that they had consumed food prepared by hawkers in the Kwun Tong area, prior to the onset of symptoms. A common source was suspected to be responsible for this outbreak.

The other cases occurred in Sha Tin, Tsim Sha Tsui, Tsz Wan Shan, Mong Kok, Sham Shui Po, Kwai Chung and Yuen Long. These were considered to be isolated cases.

      Public health and preventive measures were immediately stepped up, and an ad hoc Interdepartmental Co-ordinating Committee on the Control of Cholera was established to advise and co-ordinate the various preventive, control and publicity measures.

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      The concerted efforts of the different departments involved in the imposition and enforcement of the various stringent food hygiene measures helped greatly to arouse public awareness of the cholera problem and no further local cases were reported from August 6. As a result, Hong Kong was declared to be cholera free on August 19.

In the latter part of the year four further imported cases and one local case of cholera were confirmed.

      Two cases of rabies in humans were reported during the year. Both were persons who had been bitten by dogs while in China and who developed symptoms after their return to Hong Kong. In these two cases, a 68-year-old woman died in March, and a 37-year-old man died in August. The single indigenous case of animal rabies was reported in November.

     During the year, 143 cases of malaria were notified, most of them imported cases, with the probable sources of infection in China, Pakistan, Vietnam and India. Eight indigenous cases were identified in the same period. These cases occurred in Sai Kung, Yuen Long, North New Territories districts, and Ping Chau (Mirs Bay).

      All notified malaria cases were thoroughly investigated and followed up by regional health staff. This active surveillance programme was undertaken to minimise the possibility of a build-up of parasite density in the local community and to ensure that all practicable prevention and treatment programmes were being instituted effectively. With the establish- ment of the Central Reference Laboratory for malaria, all positive slides as well as 10 per cent of negative slides were routinely cross-checked for the presence of the parasite.

Malaria control in the territory is concentrated on early case detection and notification, vector control and health education.

Health talks, film shows, posters, pamphlets, press releases, radio and television inter- views are used to remind the general public to eliminate mosquito breeding sites and to urge picnickers and international travellers to protect themselves against mosquito bites.

      Tuberculosis remains an important disease in Hong Kong. In spite of continued diligence and a dynamic programme in the fight against the disease, the total number of notifications was 7 432 in 1986, representing a notification rate of 134.33 per 100 000. The local BCG immunisation scheme effectively covered some 99 per cent of the new born. Booster doses were also given to primary school children and to new immigrant children after initial mantoux test. Death from tuberculosis continued to fall from 409 in 1985 to 407 in 1986 and the death rate from 7.5 to 7.36 per 100 000.

Measles and rubella vaccination programmes were carried out in family health clinics and schools. Measles vaccinations were given to one-year-old babies and rubella vaccina- tions to girls in Primary 6 classes. The coverage was in the region of 80 per cent and 97 per cent respectively.

To increase the protection of the at-risk group, namely women at child-bearing age, the rubella vaccinations were made available to the nurses, teachers and social workers who are in constant contact with children. These vaccinations are also given to eligible women attending the various Family Health Services clinics.

      Both virus hepatitis A and hepatitis B remain prevalent in the community with 1 424 notified cases and 18 deaths reported during the year. Because of the public health implications of hepatitis, which usually leads to long-term liver complications such as cirrhosis and liver cancers, a hepatitis B vaccination programme was introduced as a prevention against the disease.

      Based on the recommendation of the World Health Organisation, the present strategy is to provide immunisation against hepatitis B to certain high-risk groups in the community. The first group comprises babies born to mothers who are carriers of the disease. The

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second group comprises health care workers who are in frequent contact with blood and blood products or tissue fluids.

The Medical and Health Department continued to administer a combined neo-natal screening programme for glucose-6-phosphatase dehydrogenose deficiency and congenital hypothyroidism to facilitate early diagnosis and treatment of infants who may otherwise develop disabilities or mental retardation. The programme managed to cover all babies born in government and subvented hospitals. Based on the result of the screening pro- gramme so far, the prevalence of G-6-PD deficiency in local male babies is 4.5 per cent whereas the frequency of congenital hypothyroidism disorder is one in 3 200 live births. Prompt follow-up and remedial measures were instituted and the development of per- manent disabilities in these children was therefore avoided. In 1986, the programme was extended to cover babies born in private hospitals as well.

      In November 1984, an Advisory Committee on AIDS (Acquired Immune Deficiency Syndrome) consisting of medical experts from the Medical and Health Department and the two universities was established to monitor the global development of this disease. The committee, in the light of available scientific data and knowledge and in line with the recommendations from centres for disease control in the United States and the World Health Organisation, set up guidelines to medical, nursing and laboratory personnel on the diagnosis and handling of AIDS cases. Laboratory facilities and clinical expertise for the screening, diagnosis, counselling and management of the disease were also set up.

To prevent the possible transmission of the disease through blood transfusion, the Hong Kong Red Cross Blood Transfusion Service introduced a blood screening programme in August 1985. All blood and blood products in the blood transfusion service were screened for the presence of any antibody to the AIDS virus before use.

      Health educational activities on the subject were stepped up to educate the public on the facts of the disease and to allay any misconception and undue anxiety. The department's Central Health Education Unit produced special leaflets on the subject, and a 24-hour telephone service was set up for those wanting to know more about the subject. Emphasis was placed on reaching the special at-risk group in the community. A special AIDS counselling and consultative clinic service was also established in November 1985.

An active surveillance programme was set up in 1985 to monitor the likely occurrence of the disease in many of the high-risk groups. So far only three confirmed cases of AIDS have been detected. Follow-up investigations had revealed previous history of contacts with the risk factors and carriers while they were abroad. All three cases had died in the later part of 1985.

Hospitals and Development Programmes

There are three types of hospitals in Hong Kong - government, government-assisted and private with a total of 24 550 beds, representing 4.4 beds per thousand of the population. During the year, pressure on the service was experienced on all fronts. This was reflected by the increase in attendance at out-patient clinics, and by the number of hospital admissions.

As stated earlier, the Medical and Health Department's overall plan for the decade involves the construction of at least four more government hospitals: a 1 600-bed hospital in Tuen Mun, a 1 600-bed hospital in Chai Wan, a 1 500-bed hospital in East Kowloon and a 1 430-bed hospital in Tai Po. Plans also include the provision of extension blocks to the first three regional hospitals: the Queen Mary, Queen Elizabeth and Princess Margaret Hospitals.

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      Other projects in the pipeline include further extensions to the Caritas Medical Centre, United Christian Hospital, Yan Chai Hospital and Pok Oi Hospital and the redevelopment of the Ruttonjee Sanatorium into a 462-bed general hospital. Emphasis was also placed on the provision of infirmary beds for the elderly infirm and the severely disabled and a total of 2 400 beds are planned for the coming decade.

      In 1986, the total attendance at government and government-assisted accident and emergency departments was 1 134 000, averaging 3 107 attendances per day. More than 644 000 patients were treated at 14 government and 20 government-assisted hospitals.

Clinics

     General out-patient services form a vital part of the health care system. The government now operates 65 public general out-patient clinics as well as polyclinics and specialist clinics. Evening, Sunday and public holiday sessions continued at clinics in the more densely populated areas as part of the overall measures to meet the expanding demand for out-patient services. The medical development programme includes 22 clinic and polyclinic projects throughout the territory.

      Mobile dispensaries and floating clinics take medical services to the outlying islands and the more remote areas of the New Territories. Other inaccessible areas are visited regularly by the 'flying doctor' service, with the assistance of the Royal Hong Kong Auxiliary Air Force.

       At the end of 1986, 321 clinics were registered under the Medical Clinics Ordinance. Of these, 95 clinics were under the control of a registered medical practitioner and 226 were registered under the provisions for exempting certain clinics. Registered medical practi- tioners - members of the Estate Doctor Association - set up clinics in housing estates to provide a low-cost service for residents.

      The total attendance figure at government out-patient clinics was 16 million in 1986, 4.8 per cent more than in the previous year.

Family Health

The Family Health Services of the Medical and Health Department operate 44 Maternal and Child Health Centres, providing a comprehensive health programme for women of child-bearing age and children aged up to five years. Family planning is an important component of the Family Health Services. Ante-natal and post-natal health consultation sessions are conducted for mothers. Immunisation programmes are carried out against tuberculosis, diphtheria, whooping cough, tetanus, poliomyelitis, measles and rubella. During the year, about 93 per cent of newborn babies were checked at the family health

centres.

      The comprehensive observation scheme to detect and assess early developmental abnormalities, and where necessary to provide follow-up treatment, is now available at 44 family health centres. Children attending these centres may, if their condition warrants it, be referred to child assessment centres or various specialist units for further examination. The system enables rehabilitation processes to start as early as possible.

       Two child assessment centres are in operation and six other regional multi-disciplinary child-assessment centres will be established in the coming decade.

      Health education is extended to expectant mothers at major government hospitals, with particular emphasis on the promotion of breastfeeding. A telephone service is available to answer enquiries from the public. The government-subvented Family Planning Associa- tion of Hong Kong runs 30 birth control clinics.

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      It provides services in such areas as premarital counselling, contraception, sterilisation, vasectomy, and sub-fertility. The association also placed emphasis on health education promotional work involving family planning and sex education.

School Health

The School Medical Service Scheme is operated by an independent School Medical Service Board. Participation is voluntary and for a token fee of $10 a year children from Primary 1 to Form 3 can receive free medical attention from a general medical practitioner of the school's choice. The government contributes $65 a year for each pupil enrolled and also bears the administrative cost. The general response to the scheme is good: more than 349 000 school children from 879 schools have participated - representing about 44 per cent of the eligible school population - and more than 360 general medical practitioners have enlisted.

The School Health Service, a government responsibility, deals with the environmental health and sanitation of school premises and the control of communicable diseases. School health officers, health visitors and health inspectors make frequent inspections of schools to advise on matters concerning the health of children and organise health education activities and immunisation campaigns.

Mental Health

The department's Mental Health Service, in conjunction with other local academic and voluntary bodies, provides a comprehensive psychiatric service for the mentally ill in Hong Kong. The service is organised on a non-regional basis taking into account the overall need of the territory as a whole. The service consists of a network of psychiatric hospitals (3 107 beds), psychiatric units in general hospitals (592 beds) psychiatric clinics and psychiatric day-centres meeting the needs for in-patients, out-patients and day patients, supported by various aftercare services. In line with the universal trend of developing smaller psychiatric units within general hospitals, an additional 2 286 such beds are planned for future medical projects.

      Special emphasis is placed on the follow-up and after-care of discharged mental patients during their reintegration into the community. The Community Psychiatric Nursing Service (CPNS) provided continuity in after-care treatment programmes to patients discharged from psychiatric hospitals as well as patients referred in from the psychiatric centres. Apart from the main centres in the major psychiatric hospitals, three new district CPNS centres have been established in Hong Kong and Kowloon to serve patients residing in the areas. One new centre will be established in the Hong Kong region in 1987. Other complementary rehabilitative supporting services include after-care social services, place- ment services, half-way houses, long-stay care homes and social clubs organised by various voluntary agencies.

      Severely mentally handicapped persons requiring intensive nursing and medical treat- ment are cared for at the 200-bed Siu Lam Hospital and 300 beds in Caritas Medical Centre. A further 700 beds in this category have been planned for the next decade to meet the continuing need.

Dental Services

The School Dental Care Service provides regular dental examination and treatment services to primary school children. Essentially preventive in nature, the service has proved to be an appropriate and cost effective means of promoting dental health among school

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children. The response from parents and schools authorities has been most encouraging; some 298 700 children, 67.3 per cent of Primary 1, 2, 3, 4 and 5 pupils participated during 1986-7, compared with 64.4 per cent in 1985-6. Five school dental clinics have been established and four more are planned for the next four years. Dental health education programmes, involving lectures and exhibitions, are held to promote dental health awareness in children and adults.

The Government Dental Service provides dental care for all monthly-paid govern- ment servants and their dependants, as well as simple dental treatment for inmates of penal institutions and specialist treatment for patients in government hospitals. Emergency treatment is also provided for the public at a number of district dental clinics.

Port Health

The Port Health Service enforces control at Hong Kong International Airport and in the territory's waters to prevent the introduction of quarantinable diseases and to carry out other measures required under the International Health Regulations.

The service provides facilities for vaccination and the issuing of international vaccination certificates. It also inspects and supervises the eradication of rats from ships on inter- national voyages. It provides medical assistance to ships in the harbour, transmits medical advice to ships at sea, operates a 24-hour health clearance service for all incoming vessels, and grants radio pratique to ships.

The health staff also maintain close surveillance of the food catering service provided for international airlines to ensure that food and water supplied to flight kitchens is clean and safe. Epidemiological information is exchanged regularly with the World Health Organisa- tion in Geneva and its Western Pacific regional office in Manila, and with neighbouring countries.

Special Services

The Pathology Service provides clinical and public health laboratory services for govern- ment hospitals and clinics, and a consultant service for the government-assisted sector. It also administers hospital mortuaries and blood banks.

      The Institute of Immunology produces vaccine and other biological products for use in the local health services. The Virus Unit provides a central laboratory service for the diagnosis and surveillance of viral infections and valuable services for the screening, assess- ment and guidance of vaccination programmes against viral infections.

A Central Neo-natal Screening Laboratory was established in 1984 in the Kwong Wah Hospital on a temporary basis. The main function of this unit is to co-ordinate the laboratory activities of the territory-wide neo-natal screening programme on congenital hypothyroidism and glucose-6-phosphatase dehydrogenose deficiency.

In 1985, facilities for the screening and diagnosis of AIDS were incorporated into the Virus Laboratory in Queen Mary Hospital and the Immunological Laboratory in Yan Oi Pathology Institute.

The Forensic Pathology Service, through its forensic laboratory, works closely with the Royal Hong Kong Police Force on the medical aspects of criminology and other medical-legal work. It also administers public mortuaries.

      The Institute of Radiology and Oncology was reorganised into two major divisions: the Diagnostic Radiology Division with the Nuclear Medicine Unit and the Radiotherapy and Oncology Division with its Medical Physics Unit.

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The Diagnostic Radiology Division provides a diagnostic organ-imaging service for government institutes and one government subvented hospital, the Nam Long Hospital. A consultant service is available to all government subvented hospitals and private medical practitioners on payment of a fee. The main tasks of the Nuclear Medicine Unit are to co-ordinate and improve the various nuclear medicine procedures and to train medical personnel in the field.

      The Radiotherapy and Oncology Division provides comprehensive radiotherapy pro- grammes and a chemotherapy service. The division also operates a cancer registry covering the whole territory. The Medical Physics Unit is responsible for the maintenance and operation of the radiation physics and mould laboratories, radiological workshop and the photographic section of the division.

      The Pharmaceutical Service is made up of two main divisions. The first is the hospital and clinic pharmacy service which has a staff of 750, which includes 54 pharmacists. The second division is the pharmacy law enforcement service, with an establishment of 17 pharmacists supported by a number of clerical staff. During the year, continued action against the illegal sale and distribution of poisons and antibiotics was carried out, resulting in 103 prosecutions.

Community Nursing Service

The Community Nursing Service extends care to patients discharged from hospitals after acute illness and provides domiciliary medical care and support for the sick, the disabled and the elderly in their own homes.

      The service is provided by trained community nurses. Jointly operated by eight agencies, including the Medical and Health Department, it is largely hospital-based, with domiciliary services provided through a network of 40 sub-centres. During the year, 10 200 new patients were treated by community nurses and more than 213 000 home visits were made.

Health Education

      The Central Health Education Unit of the Medical and Health Department is responsible for organising, co-ordinating and promoting health education activities. In response to the WHO World Health Day theme for 1986, 'Healthy Living, Every One a Winner', the Central Health Education Unit adopted the subject for a large scale health education campaign in 1986. A carnival was celebrated at Victoria Park in November to remind the public of their own responsibility in health.

       During the year, the Central Health Education Unit was also involved in other health education campaigns. Of special note was the anti-smoking publicity campaign. Besides providing resources and expert advice, the unit also participated in the rally at Kowloon Park in September. And starting in the same month, anti-smoking workshop sessions for secondary students were organised at the Yung Fung Shee Health Education Centre.

      In September, an organ donation campaign was launched, appealing to the public to donate their kidneys and eyes after death.

      Other health education campaigns included the Home Safety Campaign and the Mental Health Education Campaign. Health education on malaria, food borne diseases and other medical topics were also provided.

       Increased community concern for health was shown by the popularity of the resource supply service where audio-visual materials were lent free of charge to schools and voluntary agencies. In addition, there was an increasing number of persons visiting the three audio-visual centres to obtain information on health matters.

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      Other on-going programmes of the unit continued to be popular. These included the telephone health education hotline service, the slide and video shows at the health education centres and out-patient clinics, the lending of audio-visual materials to schools and voluntary organisations, and the health column appearing weekly in the newspapers.

Medical Charges

In August, the charge for a consultation at a general out-patient clinic was increased from $9 to $10. The charge for a consultation at a specialist clinic was also raised, from $12 to $13. These charges cover medicine as well as X-ray examinations and laboratory tests. Charges for physiotherapy, occupational therapy and child assessment were raised to $13 per visit. Charges for injections and dressings remained at $3 while those for visiting family planning clinics and methadone clinics remained at $1. Even at the increased rate, the charges still represent a substantial subsidy from public funds. They may be reduced or waived in cases of hardship certified by a medical social worker.

      From August, patients in third class beds in government hospitals were charged $20 per day, an increase of $2. This fee is all-inclusive, covering diet, X-ray examinations, laboratory tests, drugs, surgery and any other forms of special treatment required. The fee for home visits by community nurses remained at $18. These fees may also be waived if warranted. Despite the increase, hospital charges remain barely adequate to cover only the cost of patients' meals. A limited number of private beds is provided at major government hospitals with higher maintenance and treatment charges.

Free medical services continued to be offered at maternal and child health centres, tuberculosis and chest clinics, social hygiene clinics, accident and emergency departments, floating clinics and through the 'flying doctor' scheme.

Training of Health Personnel

The basic training of doctors is provided by the University of Hong Kong and the Chinese University of Hong Kong. Graduates of the two medical schools are awarded degrees recognised by the General Medical Council of Great Britain. The student intake at the University of Hong Kong remains at 150 a year. During the year, the Chinese University of Hong Kong produced its first group of 51 doctors who will be ready for full registration in 1987.

Both the government and the two universities maintain a comprehensive post-graduate training programme for doctors, providing opportunities for doctors to receive training overseas, sit for higher professional examinations, attain higher qualifications, and attend professional conferences, seminars and workshops. In 1986, about 150 doctors went overseas for further training under government sponsorship, or with the help of scholarships.

Under the licentiate scheme, 65 externally trained doctors successfully passed the local licenciate examination in 1986.

The Prince Philip Dental Hospital produced a group of 72 dentists in 1986. The training of dental therapists is provided at the Tang Shiu Kin Dental Therapists Training School.

The basic training for general registered nurses is conducted at government, government- assisted and private hospitals. There are now eight such training schools with an average annual training capacity of about 1070 places. Three more nurse training schools are planned over the next decade. The annual training capacity for general enrolled nurses is to be increased from 560 to 570.

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The training of registered psychiatric nurses is conducted at the Kwai Chung Hospital and Castle Peak Hospital, and of psychiatric enrolled nurses at Castle Peak Hospital. The average in-take capacity for psychiatric registered nurses and enrolled nurses is 160 and 60 respectively. Three more training schools for psychiatric nurses have been planned for the coming decade to meet the steady demand on the Mental Health Service.

The need for continued training and education for nurses is being recognised. The post-basic school of the Nurse Training Unit provides post-registration courses in midwifery, health nursing and community health nursing on a regular basis. In-service training for prosthetists, and mould laboratory technicians is provided by the respective units in Medical and Health Department.

       The Institute of Medical and Health Care at the Hong Kong Polytechnic provides training for para-medical and para-dental staff, including radiographers, physiotherapists, occupational therapists, medical laboratory technicians, dental technicians and dental surgery assistants. There are opportunities for overseas training in specialised areas for nursing, para-medical and para-dental staff. The Shatin Technical Institute of the Technical Education and Industrial Training Department, provides training for dispensers, which is complemented by in-service departmental training.

Government Laboratory

The Government Laboratory conducts analytical, advisory and investigative work in chemistry and the allied sciences and provides scientific support for the implementation of government policy on health. During the year the laboratory offered comprehensive and impartial scientific advice to government departments and public institutions.

      Chemical analyses of air, water and waste management samples, undertaken principally for the Environmental Protection Department, increased substantially. Analytical support was also provided to the Royal Observatory for the Background Air Pollution Monitoring Network and a radiochemistry unit set up to determine the background radiation levels prior to the operation of the nuclear power plant in Daya Bay in China.

       The laboratory also carried out measurements of industrial emissions and factory atmospheres on behalf of the Labour Department. A 24-hour support service was provided to assist the emergency services in cases of chemical spills, fires involving dangerous goods and accidents caused by gases in confined spaces.

      Close liaison with the Medical and Health Department was maintained to ensure that pharmaceutical products sold and used locally complied with registration and labelling requirements. Herbal medicines were checked for inclusion of synthetic drugs and their toxic metal content.

       Food items were tested for compliance with the regulations of the Public Health and Municipal Services Ordinance. Particular emphasis was given to the detection of hormone residues in meats to ensure that they were not contaminated by the illegal use of hormones in animal husbandry.

       Other aspects of the laboratory's work included the classification of dangerous goods, quality checks on government purchases and certain export commodities, analyses of pesticide formulations and residues and identification of a variety of spurious consumer goods. Dutiable items were examined for revenue purposes and two further biannual tables were published showing cigarette brands ranked according to tar and nicotine yields to support the government's anti-smoking efforts.

       The laboratory also provided a urinary testing service to support the government's methadone maintenance programme in the treatment of drug abusers.

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HEALTH

Drug abuse is a long-standing problem in Hong Kong with serious social, economic, legal, medical and psychological implications. The government's expressed policy is to stop the illicit trafficking of narcotic drugs into and through Hong Kong, to develop a compre- hensive treatment and rehabilitation programme for drug addicts and to dissuade the people of Hong Kong, particularly young people, from experimenting with drugs, so as to eradicate drug abuse in the community.

      The exact number of addicts in Hong Kong is not known. However, findings from the government's computerised Central Registry of Drug Abuse and other linked indicators show that at the end of 1986 the size of the known and active addict population was about 38 000.

      Data collected by the registry, based on 320 000 reports on 56 000 individuals, indicate that 92 per cent are male and eight per cent female. As for age distribution, 74 per cent were over 30 as at the end of 1986, 22 per cent were in the 21 to 30 bracket and four per cent were under 21. The principal drug of abuse in Hong Kong is heroin, which was used by 97 per cent of the addicts reported to the registry in 1986. The remaining three per cent took other drugs, including Mandrax, opium and cannabis. The most widely used method of taking heroin was by injection, followed by fume inhalation, commonly known as 'chasing the dragon'.

      Typical addicts are adult males over 21 in the lower income group, generally employed as casual labourers or as unskilled or semi-skilled workers and living in overcrowded conditions. They have generally not more than six years of formal education and are single or, if married, usually separated from their families.

       The government's overall strategy to combat drug abuse consists of four main elements: law enforcement, treatment and rehabilitation, preventive education and publicity, and international co-operation. Law enforcement is the responsibility of the Narcotics Bureau and individual district formations of the Royal Hong Kong Police Force, and the Customs and Excise Department. Treatment and rehabilitation are undertaken by the Medical and Health Department, the Correctional Services Depart- ment and a number of voluntary agencies, the largest being the Society for the Aid and Rehabilitation of Drug Abusers (SARDA) which is subvented by the government. Preventive education and publicity rests mainly with the Narcotics Division of the Government Secretariat, the Information Services Department and various government district offices concerned with community building efforts. International co-operation is the responsibility of all.

The work undertaken in each of these four areas is inter-related. Effective law enforce- ment action pushes up the price of illicit drugs and reduces their supply, thus inducing addicts to seek treatment voluntarily. Addicts who wish to rid themselves of their drug habits are offered a wide range of treatment programmes, the effectiveness of which reduces the demand for illicit drugs. At the same time, preventive education and publicity measures are used to dissuade others, especially the young, from experimenting with drugs. Co-operation at the international level enhances the effectiveness of efforts in these three areas through the exchange of information and experience.

       All these efforts are co-ordinated by the Action Committee Against Narcotics (ACAN), a non-statutory body comprising a chairman, eight government officials and eight members from the community. The committee, formed in 1965 and reconstituted in 1974, is the government's sole advisory body on all anti-narcotics policies and actions, whether internal or external, and whether related to government departments or voluntary agencies. It is serviced by the Narcotics Division, which is headed by the Commissioner for Narcotics.

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In law enforcement, effective action by the police and customs resulted in 12 600 prosecutions being made in respect of drug offences in 1986. The year unfortunately saw another bumper harvest being reaped in the 'Golden Triangle', resulting in a continuing influx of illicit drugs into Hong Kong despite unrelenting law enforcement action. Drug prices thus remained low and were relatively stable throughout the year.

The methadone treatment programme which provides both maintenance and detoxifica- tion services on an out-patient basis caters for the majority of addicts who volunteer for treatment. Methadone maintenance is a long-term treatment approach intended to prevent an addict's return to illicit heroin or other forms of narcotic abuse, while detoxification is a short-term form of treatment aimed at eliminating the physical dependence on narcotics. At present, there are 24 methadone clinics operated by the Narcotics and Drug Adminis- tration Division of the Medical and Health Department.

The largest voluntary in-patient treatment programme is run by SARDA. The society operates two treatment centres, one for men and the other for women. The male centre, on the island of Shek Kwu Chau, has capacity for 500 patients, while the Women's Treatment Centre, in Wan Chai and in Sha Tin can handle 39 patients. Linked to these centres are three units for the intake of patients, five regional social service centres, six halfway houses, an employment placement office and a clinic which provides pre-admission medical ex- amination and methadone treatment, urine analysis and post-discharge medical care.

A compulsory treatment programme is operated by the Correctional Services Depart- ment under the Drug Addiction Treatment Centres Ordinance. The ordinance provides for the sentencing of a drug dependent person, who has been found guilty of an offence punishable by imprisonment, to detention in a drug treatment centre. The department now runs two addiction treatment centres on the island of Hei Ling Chau, one for male adults and the other for young males under 21. The former has capacity for 938 and the latter 136. For the treatment of female addicts, a section of the Tai Lam Centre for Women is set aside for a maximum of 76 inmates. These treatment programmes range from two to 12 months, and all persons discharged are given one year of statutory after-care.

In 1986, the two voluntary treatment programmes and the Correctional Services Department's compulsory treatment programme admitted 15 300 addicts. On average, there were 15 500 addicts and ex-addicts receiving some form of treatment, rehabilitation and after-care every day.

Preventive education and publicity play an important part in Hong Kong's fight against drug abuse. Work in these areas is focused on heightening public awareness of the dangers of drug abuse, promoting community involvement in tackling the problem, dissuading young people from experimenting with drugs or becoming involved in drug crime, and encouraging addicts to come forward for treatment. The objectives of the publicity campaign in 1986 were to publicise the treatment and rehabilitation facilities available and to encourage addicts to seek treatment.

Four district campaigns with community involvement were held. Among the events organised to drive home the anti-narcotics message were carnivals, concerts, variety shows, telematch games, soccer tournaments, dancing, film shows and exhibitions.

The major territory-wide event of the year was the Anti-Narcotics Variety Show held at the Hong Kong Coliseum on June 8. Some 7 000 youths from youth centres, schools, outreach social service agencies, and boys and girls' hostels attended the show. The two- hour programme highlighted the dangers of drug abuse and the significance of youth par- ticipation in the fight against drugs. The show was broadcast live on television, spreading the anti-narcotics message to an audience of three million throughout the territory.

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Formed in 1984, the School Talks Team in the Narcotics Division continued to give drug addiction talks to students aged between 12 and 15 at secondary schools throughout the territory. During the year a total of 44 625 students in 85 schools attended the talks.

A revised secondary school drug education teaching kit which provides topical teaching materials for Form 1 to Form 5 on the drug problem and prevention of drug abuse in Hong Kong was issued to all secondary schools in October. The revised kit replaced the previous one which had been in use since 1978.

      For the sixth year, the Youth Against Drugs Scheme provided encouragement and financial support to young people who wished to participate directly in the planning and implementation of anti-narcotics projects. The scheme helped 17 groups of young people to implement 19 anti-narcotics promotional activities. The 60-strong member ACAN Youth Volunteer Group, established in 1981 with a view to training and encouraging young volunteers to play an active part in anti-narcotics work, participated in the territory- wide and district campaigns and organised various community involvement activities.

The Narcotics Division also organised seminars for outreach social workers and school administrators for the purpose of giving them a better understanding of the drug problem and enlisting their active support in the fight against drugs. Moreover, talks, film shows and visits were organised for Mutual Aid Committees and parent groups.

      To support these activities and to publicise the anti-narcotics message, television and radio announcements of public interest, films, posters, leaflets as well as an anti-narcotics theme song were produced. The appeal through TV for information on neighbourhood drug peddling activities was particularly successful.

      During the year, the ACAN Drug Abuse Telephone Enquiry Service received 1 619 enquiries from both addicts and non-addicts. Most enquiries were related to drug addiction treatment facilities.

In 1986, there were some indications of an increase in the abuse of certain non-opiate psychotropic substances. While the abuse of these drugs is at present not as serious a social problem as heroin addiction, the situation is being carefully monitored by ACAN and steps are to be taken to increase public awareness of the dangers of such drugs, the controls which exist over them and the penalties for their misuse.

The government's determination to tackle the drug problem from all acceptable angles is evident in a consultation document on the Hong Kong triad problem which includes proposals to deprive convicted drug traffickers of their ill-gotten gains.

Externally, Hong Kong continued to play an active and important part in international anti-narcotics operations by maintaining close links with the United Nations, inter- governmental agencies such as the Colombo Plan Bureau, Interpol and the Customs Co-operation Council - and with the governments of countries in Southeast Asia, Europe and North America. Hong Kong took part in 20 regional and international meetings and seminars concerned with anti-drug law enforcement, treatment and rehabilitation, and preventive education. Hong Kong also made its 12th annual contribution of $100,000 to the United Nations Fund for Drug Abuse Control in support of its world-wide anti- narcotics efforts, which include the opium poppy crop-substitution programme in the 'Golden Triangle' on the borders of Burma, Laos and Thailand, the source of most of Hong Kong's opiate drugs.

The techniques and methods employed by Hong Kong in its anti-narcotics work have made it an important venue for training anti-narcotics personnel from overseas. During the year, 182 anti-narcotics officers from various countries came to Hong Kong on study

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visits and training courses, either through bilateral arrangements with their governments or under the sponsorship of a United Nations body, such as the World Health Organi- sation or the Colombo Plan Bureau. Experienced officers from the Narcotics Division, the Royal Hong Kong Police Force and the Customs and Excise Department travelled over- seas to act as lecturers or consultants on training courses related to anti-narcotics work.

Environmental Hygiene

The work of the Urban Services Department and the Regional Services Department includes street cleansing, collection and removal of refuse and nightsoil, cleansing of gullies, management of public toilets and bathhouses, pest control and the disposal of the dead.

In the urban areas, a regular workforce of about 5 400 is employed in cleansing duties. This cleansing force is equipped with a fleet of 397 specialised vehicles which include refuse collection vehicles, street-washers, mechanical sweepers, nightsoil collectors, gully emptiers and mobile toilets. All streets are swept at least once daily, either mechanically or manually, while busier thoroughfares are swept from four to eight times a day. Streets are also hosed down regularly. A daily refuse collection service is provided to all built-up areas in the territory and about 2 800 tonnes of refuse and junk are collected every day. A free nightsoil collection service is also provided in those areas which do not have a water-borne sewage disposal system.

      The Keep Hong Kong Clean Campaign Committee implemented a six-phase clean-up programme covering housing estates, block-to-block cleansing, squatter areas, villages, beaches, countryside and highways. A general beautification programme was also incor- porated into the clean-up programme. In addition to education, publicity and community involvement, law enforcement was still the major tactic against littering. During the year, 48 924 people were fined $8,885,547 for littering offences.

      In the Regional Council area, although regular cleansing duties are mainly carried out by a workforce of 3 500 and a specialised fleet of over 200 vehicles, street sweeping in Shek Wu Hui and Luen Wo Hui in the North District is being carried out by contract labour. The cleansing of the Tolo Highway and Tuen Mun Highway was taken over by the Highways Department's contractor in 1986.

The waste collection service collects an average of 1 300 tonnes of refuse and junk every day. Law enforcement remained the major tactic in combating indiscriminate littering and in 1986, 8 000 people were convicted of litter offences in the Regional Council area.

Controls

In maintaining and improving standards of hygiene through the enforcement of the Public Health and Municipal Services Ordinance and its subsidiary legislation, health inspectors of the Urban Services Department and the Regional Services Department regularly inspect licensed and permitted premises, common parts of residential and commercial buildings, construction and vacant sites and squatter areas throughout the territory. They also carry out inspections to deal with complaints on sanitation and vermin infestation. The staff of the Urban Services Department and the Regional Services Department also work closely with the staff of the Medical and Health Department in the investigation and control of food poisoning outbreaks and infectious diseases.

      Pest control staff continued to employ integrated programmes to control rodents, mosquitoes, flies and other public health pests. Preventive action included environmental improvement and health education. These measures were supplemented by the eradication

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     of breeding places, use of pesticides and law enforcement. Attention is also paid to the control of malaria vectors, especially in Sai Kung and the border areas.

      General health educational strategies in environmental hygiene were employed with particular emphasis being placed on educating the younger generation. The Health Education Unit of the Municipal Services Branch manned by health inspectors organised talks, instruction courses, contests and competitions for students and youth groups to stimulate their awareness of and concern for public health matters. During the year, a number of educational campaigns on environmental and food hygiene were launched. Lectures, seminars and courses on public health were conducted for the food trade, members of voluntary welfare agencies, elderly people and Vietnamese refugees. Efforts were also made to educate special groups, including immigrants from China and Filipina maids, chiefly through mobile broadcasting. In addition, the Health Education Unit provided a consultancy service on health education methodology and techniques for the public and disseminated public health information on a wide front with the aid of the mass media.

Food

The health inspectorate, backed by medical advice and supported by laboratory staff, continued to monitor food for sale, both imported and locally produced, to ensure it was hygienic and safe for consumption. The ever-increasing number of food establishments and the quantities and varieties of food items on sale have increased the importance of law enforcement, including systematic inspection, sampling of food products for laboratory examination, and surveys. At the same time, liaison with the World Health Organisation and other international bodies keeps Hong Kong abreast of international developments in food science and toxicological evaluation for the protection and benefit of local food traders and consumers.

Markets

In the urban areas of Hong Kong Island and Kowloon, the Urban Council runs 58 public markets with more than 7900 stalls selling different commodities ranging from fresh foodstuffs such as meat, fish, poultry, vegetables and fruits, to general merchandise such as clothing, household goods and other daily necessities. Besides providing a wide range of commodities, the design of new market complexes includes also the standard provision of a cooked food centre.

It is the Urban Council's policy to reprovision outdated markets and replace them with multi-purpose complexes to cater for other needs of the community such as games halls, libraries, and auditoria for the performing arts, as well as markets. This results in a more efficient and productive use of available land. There are now six such market complexes in the urban areas.

The Regional Services Department is responsible for the management of public markets in the Regional Council area. There are 27 public markets and 13 cooked food markets with a total of 4 468 market stalls and 362 cooked food stalls under its management. One new market, namely the Hung Shui Kiu Temporary Market was commissioned in 1986, providing 224 additional market stalls.

Hawkers

The management and control of hawkers in the urban areas of Hong Kong Island and Kowloon is the responsibility of the Urban Council, with the police assisting in the control

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of unlicensed hawkers. In 1986, there were about 22 000 licensed hawkers in the urban areas, a decline of 1 500 compared with 1985. This reduction was mainly due to the continuous efforts of the Urban Council to remove on-street hawkers into newly completed markets and off-street hawker bazaars. The number of unlicensed hawkers tends to fluctuate from year to year, and the estimated figure in 1986 was 16 000. The General Duties Teams of the Urban Services Department are responsible for carrying out the Urban Council's policies for management and control of both licensed and unlicensed hawkers in the urban areas.

      A Working Party to Review Hawker and Related Policies, set up by the Urban Council, produced a consultative document in December 1985. After lengthy consultations with district boards, government departments, hawker associations and other interested or- ganisations, the working party prepared a final report for presentation to the Urban Council to consider implementation of its recommendations.

      The management and control of hawkers in the Regional Council area are the responsibility of the Regional Services Department. In 1986, there were 3 815 licensed hawkers in the Regional Council area, a drop of 861 compared with 1985. The number of unlicensed hawkers was estimated to be 1 200.

      Through the deployment of General Duties Teams, which have an establishment of 962, the Regional Services Department maintains control over the hawker situation. While illegal hawking activities are increasing with the urbanisation of the Regional Council area, the number of licensed hawkers is gradually declining as more and more of them are resited into new markets to become market stall lessees.

Abattoirs

The two government abattoirs - in Kennedy Town on Hong Kong Island and in Cheung Sha Wan in Kowloon - continued to supply the bulk of the population with fresh meat. During the year, 2 469 000 pigs, 129 000 head of cattle and 12 000 goats were slaughtered in these abattoirs.

Slaughtering services in the Regional Council area are provided by three licensed private slaughterhouses in Kwai Chung, Yuen Long and Tai Po districts. They handled a total of 1 183 684 pigs, 54 975 head of cattle and 3 668 goats during the year. The slaughterhouse at Kwai Chung, which can slaughter up to 3 000 pigs a day, also helps to meet the demand from Kowloon. In the long term, a site at Sheung Shui has been reserved for the construction of a private slaughterhouse with a minimum throughput capacity of 2 000 pigs and 200 cattle and a small slaughterhouse is being planned for Cheung Chau to cater for the needs of the island.

All animals slaughtered in these abattoirs were inspected by qualified health inspectors of the Urban Services Department and the Regional Services Department.

Cemeteries and Crematoria

It is the government's policy to encourage cremation rather than burial for the disposal of the dead. During the year, over 60 per cent of the dead were cremated. Human remains buried in public cemeteries are subject to exhumation after six years. The exhumed remains are then either cremated or removed to an urn cemetery.

The Urban Council operates two funeral depots, one on Hong Kong Island and one in Kowloon, which provide free services for the disposal of the dead. In the urban areas there are five public cemeteries, two public crematoria and 18 private cemeteries. There are two war cemeteries under the management of the Commonwealth War Graves Commission.

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In the Regional Council area, there are three public crematoria at Kwai Chung, Fu Shan and Wo Hop Shek under the management of the Regional Services Department. The first two are used for the cremation of the dead while the third is used solely for cremation of exhumed remains. Niches are provided at the columbaria in these areas. The department also manages five public cemeteries, including the Wo Hop Shek Cemetery, the biggest public cemetery in use in Hong Kong, and oversees eight private cemeteries in the Regional Council area. To meet the demand of local inhabitants of outlying islands, a public cemetery is being planned at Mui Wo to replace the Tai O Cemetery which is expected to be full by 1987.

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Social Welfare

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THE general rising expectations of people coupled with increasing community awareness and concern over social welfare provisions continued to generate pressures and demands for improvements in both quality and quantity. During the year, the Social Welfare Department and the subvented welfare sector continued to step up their efforts to provide services to meet these demands.

      The provision of social welfare services is based on the policy objectives as laid down in three White Papers - Integrating the Disabled into the Community: A United Front (1977); Social Welfare into the 1980s (1979); and Primary Education and Pre-Primary Services (1981). Responsibility for carrying out government policies on social security and social welfare rests with the Director of Social Welfare. The government is advised by the Social Welfare Advisory Committee on social welfare policy, and the Rehabilitation Development Co-ordinating Committee on the policy and development of rehabilitation services. Members of both committees are appointed by the Governor and the committees are chaired by unofficial members. In the day-to-day planning and development of services, the Social Welfare Department works closely with subvented welfare agencies which play a major role in the provision of welfare services. The majority of these agencies are affiliated to the Hong Kong Council of Social Service.

Much attention was focused on the provision of half-way houses in the community for discharged mental patients. The combined efforts of the Social Welfare Department, the Commissioner for Rahabilitation, the City and New Territories Administration and the District Boards to enlist the participation of the public in educational programmes resulted in greater understanding by the community, and led to the establishment of half-way houses for the ex-mentally ill and the acceptance of residents in them. The exercise provided valuable experience in the planning and development of such services.

To meet the needs of the growing number of elderly people, a range of welfare services including social centres for the elderly, day care centres, homes for the aged, hostels, care and attention homes, and home help service have been developed. The demand for residential homes for the frail and aged was particularly felt, and action had been taken to increase the provision of these facilities. The Housing Authority's decision to provide sheltered housing for the elderly who are capable of self-care enabled the welfare agencies to concentrate their effort on those who need more personal care.

      In services for offenders, a pilot scheme on the Community Service Order will be introduced in the beginning of 1987. The scheme, which requires offenders to render community service as an alternative to imprisonment, has received the support of voluntary welfare agencies and government departments.

      To provide the basis for future development of services for children and young persons, three reviews were being carried out during the year. These reviews concerned the operation

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and development of outreaching social work service, school social work service and residential child care services.

And to speed up the provision of welfare services in new public housing estates, arrangements were made to hand over the fitting-out work of initially 25 welfare premises to the Housing Department. Subsequently, a three-year rolling programme was drawn up to deal with projects in four service areas - day nurseries, children and youth centres, social centres and hostels for the elderly.

      The payment of social security benefits having already been computerised, plans were being finalised to computerise the referral system for pre-school disabled children, the social welfare personnel information system, the central register of street sleepers, existing and planned welfare projects and the central waiting list for admission to institutions for the elderly.

During the year, 18 new day nurseries, four homes and hostels for the elderly, eight social and day care centres for the elderly and five children and youth centres were established. The provision of these additional services and the increase in the social security caseload were reflected in increased recurrent expenditure.

The total estimated expenditure on social security and social welfare services, which include Social Welfare Department recurrent expenditure and subventions to voluntary welfare agencies, in the 1986-7 financial year is $2,486.8 million, an increase of more than eight per cent over the previous year's sum.

      The Community Chest which organises and co-ordinates fund-raising activities for its member agencies, raised $38.1 million in 1985-6, compared with $30.4 million in 1984-5.

Social Security

     Social security schemes are non-contributory and are aimed at meeting the basic main- tenance needs as well as the particular needs of the vulnerable groups in the community who require help because of special circumstances. Such schemes include the Public Assist- ance Scheme, the Special Needs Allowance Scheme, the Criminal and Law Enforcement Injuries Compensation Scheme, the Traffic Accident Victims Assistance Scheme and Emergency Relief.

      The Public Assistance Scheme, which is means-tested, is designed to bring the income of needy individuals and families up to a prescribed level. Eligibility for assistance is governed by four main criteria: length of residence in Hong Kong, the level of income and savings, age, and employment. To benefit, a person must have resided in Hong Kong for at least one year and must prove that he has insufficient income and other resources to meet his basic needs. In cases of genuine hardship, the Director of Social Welfare is empowered to waive the residence requirement. An able-bodied unemployed person aged 15 to 59 is eligible only if he is actively seeking employment and has registered with the Local Employment Service of the Labour Department.

      The rates of assistance are reviewed regularly in line with the cost of living. The current monthly basic allowance is $510 for a single person, $370 for each of the first three eligible members of a family, $315 for each of the next three eligible members and $245 for each additional eligible member. In addition to the basic allowance, an old age supplement, a disability supplement and a long term supplement may be given. An old age supplement of $255 per month is payable to those aged 60 and above who are not receiving a special needs allowance or a disability supplement. A disability supplement of $255 per month is given to those who are partially disabled with at least 50 per cent loss of earning capacity and are not in receipt of an old age supplement or a special needs allowance. An annual long-term

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supplement of $1,290 for a family or $645 for a single person is given to those who have received public assistance continuously for 12 months to enable them to meet the cost of replacement of household wares and durable goods. Separate allowances are also payable to cover the cost of accommodation and other special requirements.

      To encourage self-help, an individual's earnings up to $255 per month are disregarded in the calculation of entitlement for assistance.

At the end of 1986, the number of active public assistance cases was 63 160, compared with 62 828 in 1985. Expenditure on public assistance in the 1985-6 financial year amounted to $625.5 million, an increase of 7.2 per cent over the previous year.

      The non-means-tested Special Needs Allowance Scheme provides a flat-rate allowance for the severely disabled and for elderly persons aged 70 and over who have continuously resided in Hong Kong for five years after the age of 65. Any person, regardless of age, who has resided continuously in Hong Kong for at least one year prior to claiming the allowance, and who is severely disabled, is eligible for a disability allowance. The current rate of disability allowance is $510, and for old age is $255. The number of people receiving these two allowances at the end of the year was 291 090, compared with 272 595 at the end of 1985. Expenditure on Special Needs Allowance in the 1985-6 financial year was $909.6 million, 10.5 per cent over the previous year.

The Criminal and Law Enforcement Injuries Compensation Scheme provides cash assistance for people injured and for dependants of those killed in crimes of violence, or through the action of law enforcement officers in the execution of their duties. This non-means-tested scheme is administered by the Criminal Injuries Compensation Board and the Law Enforcement Injuries Compensation Board. Total payments in 1986 amounted to $5.3 million, compared with $4.7 million in the previous year.

The Traffic Accident Victims Assistance Scheme provides immediate financial assistance to traffic accident victims or their dependants in case of death, regardless of the means of the family or any element of fault in the cause of the accident. However, the accident must have been reported to the police and the application must be made within six months of the accident. This scheme covers only traffic accidents as defined under the Traffic Accident Victims (Assistance Fund) Ordinance. Payments are made for personal injury or death. Damage to property is not covered. In case of injury not causing death, evidence of not less than three days' sick leave must be shown. The scheme does not affect the applicant's right to claim damages or compensation from other sources. Beneficiaries who subsequently receive damages or other compensation in respect of the same accident are required to refund the payments they received from the scheme or the amount of damages or compensation, whichever is less. During the year, 5 560 applications were received, and 5 080 were approved for assistance payments amounting to $35.8 million.

      Emergency relief is provided to victims of natural or other disasters in the form of immediate material aid such as hot meals, eating utensils and other essential articles. Grants from the Emergency Relief Fund are also paid to disaster victims or their dependants. During the year, emergency relief was rendered to 8 100 registered victims on 200 occasions.

      To prevent abuse of the various schemes, a special team conducts in-depth investigation in cases of suspected fraud or difficulties encountered in repayment. During the year, the team completed investigation of 295 cases, some of which were subsequently referred to the Attorney General for legal advice and possible prosecution.

The Social Security Appeal Board is an independent body which considers appeals from individuals against decisions by the Social Welfare Department concerning public

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assistance, special needs allowances and traffic accident victims assistance payments. It heard a total of 92 appeals during the year. Of these, five were related to public assist- ance, 82 to special needs allowance, and five to traffic accident victims assistance.

Services for Offenders

The Social Welfare Department has several statutory duties in the field of services for offenders. These duties have the objective of giving effect to the directions of the courts on the treatment of offenders through social work methods. The overall aim is to reintegrate offenders into the community through probation supervision, remand home service, residential training for young offenders and after-care services.

      Probation applies to offenders of all age groups. It allows offenders to remain in the community under the supervision of probation officers and subject to prescribed rules set by the courts. Volunteers from many walks of life participate in the programme under a special scheme which enhances community involvement in the rehabilitation of offenders.

       Under the Community Service Orders.Ordinance, the courts may order offenders aged over 14 years who are convicted of an offence punishable by imprisonment, to perform unpaid work of benefit to the community in place of, or in addition to, another sentence. Offenders subject to a Community Service Order will be supervised by probation officers of the Social Welfare Department. To ensure that the scheme is developed in a way most appropriate to the situation in Hong Kong, the Social Welfare Department has studied the operation of a similar scheme in the United Kingdom and will implement a pilot project in early 1987.

      Educational, pre-vocational, social and recreational training is provided in remand homes and residential institutions to assist juvenile offenders to return to the community as law-abiding citizens.

      The Social Welfare Department operates seven institutions specialising in this work, each with a slightly different training programme to cater for the needs of both sexes and all age groups. Following a review of educational programmes in these institutions, the department is planning to introduce major improvements to the curricula, teaching standards and facilities for academic teaching and vocational training. The Begonia Road Boys' Home and Ma Tau Wai Girls' Home are combined remand and probation institutions for juvenile offenders and youth in need of statutory care and protection. The Pui Chi Boys' Home has helped to alleviate overcrowding in the probation section of the Begonia Road Boys' Home. Similarly, the Pui Yin Juvenile Home, operating since February 1986, has contributed to improving the conditions at the remand sections of the Begonia Road Boys' Home and Ma Tau Wai Girls' Home. The Castle Peak Boys' Home is for boys aged 14 to 16 on admission who need a longer period of training after conviction, while the O Pui Shan Boys' Home is a similar institution for offenders aged from seven to 14 on admission.

The Kwun Tong Hostel is a probation hostel for men aged between 16 and 21. There are long-term plans to improve residential facilities by constructing a new girls' home in Tuen Mun and reprovisioning the Castle Peak Boys' Home and Begonia Road Boys' Home.

      The Social Welfare Department also operates an after-care unit which helps offenders to rejoin society by preparing them before they leave reformatory schools and supporting them after they are discharged. Besides the work carried out by the Social Welfare Department, several welfare agencies also provide services to help young offenders and young people with behavioral problems to reintegrate into the community.

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The Social Welfare Department and a number of welfare agencies are involved in the provision of family services which have the objective of maintaining and strengthening the family unit through helping individuals and families to solve problems and prevent them from arising.

The department operates a network of 22 family service centres and there are 23 such centres in the subvented welfare sector. Services provided under this programme include counselling on personal and family problems; care and protection of young people aged under 21; residential and foster care for children up to the age of 21, day care for children under six; referrals for schooling, housing, employment, financial assistance, legal advice, medical attention, home help and, where appropriate, placement in institutions for elderly or disabled persons.

      A number of statutory responsibilities arising from the Protection of Women and Juveniles Ordinance, the Offences Against the Persons Ordinance, the Marriage Ordinance, the Guardianship of Minors Ordinance and the Matrimonial Causes Ordinance lie with the Social Welfare Department. The department provides supervision and residential accom- modation for young people aged under 18 whose parents or guardians fail to exercise proper care of them, and for those under 21 who have no parents or guardians or who are adopted other than by a court order.

Child care service continued to be a focus of particular attention in 1986. The Sha Kok Children's Home had operated effectively for around one year as an extension to the frequently overcrowded Chuk Yuen Children's Reception Centre run by the department for the temporary care of children aged up to eight. The Child Protective Services Unit provides services for children who have been, or are suspected to have been, abused, whether physically, psychologically or sexually. The Social Welfare Department's Adop- tion Unit co-ordinates adoptions both within Hong Kong and overseas, the latter with the assistance of the local branch of the International Social Service. During the year, there were 440 new applications, 525 local adoptions, and 91 overseas adoptions. Through the Central Foster Care Unit, the Social Welfare Department works closely with three subvented foster care agencies to promote foster care services in Hong Kong. Subvented foster care places totalled 160 in 1986.

      A special working group was set up under the auspices of the Health and Welfare Branch to examine policies on the provision of residential services for children in need of care and protection.

      Child care centres are established for children aged under six. Such centres must comply with the standards laid down in the Child Care Centres Ordinance and are subject to registration and inspection. At the end of the year, there were 26 381 places in day child care centres and 795 places in residential child care centres. Families with a low income and a social need for children to attend a child care centre may apply to the Social Welfare Department for assistance in meeting fees charged. A total of 10 923 children were receiving fee assistance at year-end.

      A hotline service is operated by the Social Welfare Department to deal with enquiries from the public on matters relating to the services of the department and to provide immediate telephone counselling or advice where necessary. A total of 14 339 calls were received during 1986.

Social work services are also provided by medical social workers stationed in 100 medical social service units in government hospitals and clinics. During the year, they handled a total of 94 500 cases.

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      A broad range of family life education programmes is co-ordinated by the Social Welfare Department. The programmes aim at improving the quality of family life through the promotion of interpersonal relationships and social consciousness, which may help prevent family crises and consequent social problems. The 1986 theme of the annual publicity campaign was 'Honour Your Parents'. It aimed at urging the younger generation to recognise and appreciate their parents' efforts in bringing them up. In addition to the major publicity campaign, family life education programmes are organised by social workers at the district level, with 56 family life education workers from 14 subvented welfare agencies providing the service.

Care of the Elderly

     'Care in the community and by the community' remains the guiding principle for the planning of services for the elderly. Subvented welfare agencies are the main provider of a wide range of community support services for the elderly which aim at encouraging families to look after their elderly members and enabling old people to live independently and in dignity. These services include home help, canteen service, community education, day care and social and recreational activities. At the end of 1986, there were three outdoor recreational buses, 40 home help teams, 84 social centres, 10 multi-service centres and four day care centres for the elderly. Priority allocation of public housing is available for elderly people and families with elderly relations.

       Residential facilities are also provided for those who, for health or other reasons, can no longer live alone or with their families. At the end of the year, there were 6 933 places in homes/hostels (including 1 581 non-subvented places) and 1470 places in care and attention homes. Future provision of residential places will be significantly boosted by the decision of the Housing Authority to equip and operate sheltered housing schemes for the able-bodied and to make premises available for old people's homes and care and attention homes in new public housing estates. The government also provides sheltered housing for 595 elderly people in good health and capable of living independently through the purchase of 103 flats in two separate private housing developments.

Social Work Among Young People

A wide range of services has been designed for young people under the age of 25. The overall objective is to assist and encourage young people to become mature and responsible members of society by fostering the development of their personality, character, sense of civic responsibility, social aptitudes and ability to use their leisure time beneficially.

To achieve these goals, the Social Welfare Department organised a wide variety of programmes, with special emphasis on the development of the potential of the youth. Community centres not only provide residents with a venue for community functions, but also house various welfare services, such as day-care for pre-school children, and services for the elderly and the handicapped. Following the transfer of the management of community centre facilities to the City and New Territories Administration, the department was able to devote more of its resources to promoting and strengthening group work activities. Children's and youth centres operated mainly by voluntary agencies under the guidance of social work staff serve as focal points for a wide variety of indoor and outdoor activities for the development of character, leadership potential and skills at socialising. In 1986, two children's centres, and five combined children's and youth centres were opened. At the end of the year, there were 149 children's centres and 162 youth centres in operation - with 100 being combined children's and youth centres.

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       The Opportunities for Youth Scheme, administered by the Social Welfare Department, aims at encouraging young people to investigate and identify needs in the community and to propose and implement projects to meet these needs. During the year, a total of $233,561 was granted to youth groups to carry out about 87 community projects. In addition, the government provides financial assistance to various uniformed youth groups which manage a number of youth camps and hostels.

       Through the establishment of direct contact with young people in places which they are known to frequent, outreaching social work provides an alternative approach in counsel- ling and guidance to young people who do not normally attend youth centres or participate in organised activities. The future development of this service is now being examined.

School social work service is available to all primary and secondary schools. Student guidance officers of the Education Department are based in primary schools to give guidance to pupils and to help them in solving their personal problems. Social workers in the Social Welfare Department and subvented welfare agencies visit secondary schools on certain days of the week to assist pupils in making maximum use of their educational opportunities and to provide counselling on individual problems. A review of the delivery of school social work service was completed during the year which recommended a number of improvements to the service.

Rehabilitation

      Rehabilitation services in Hong Kong are aimed at integrating the disabled into the community. Services provided by government departments in this area therefore have the objective of enabling handicapped people to develop their physical, mental and social capabilities to the fullest extent. Rehabilitation services provided by the departments and welfare agencies are carefully co-ordinated by the Commissioner for Rehabilitation by means of an annual review of the Rehabilitation Programme Plan. The Social Welfare Department is responsible for the planning and development of a wide range of services for the disabled in order to meet their general welfare and social rehabilitation needs either through direct service provision or subvention to welfare agencies. The Education Department is responsible for all aspects of the education and training of disabled children of school age and for boarding care and transport services in special schools. The Technical Education and Industrial Training Department co-ordinates vocational training for disabled young people and adults. Job placement for the deaf, the blind, the physically disabled, the ex-mentally ill and the mentally handicapped is the responsibility of the Selective Placement Service of the Labour Department.

       The Social Welfare Department provides the handicapped with direct services including counselling, compassionate rehousing, financial assistance, technical and rehabilitation aids and day and residential care. It directly operates facilities including an integrated programme in a child care centre, a composite club for the handicapped, residential homes and hostels, work activity centres and sheltered workshops. The services provided by the 31 subvented agencies include (in addition to those provided by the department) pre-school care, education and training programmes, special child care centres, home help service, halfway houses for ex-mental patients, special transport schemes, sports, social and recreational programmes, sign language interpretation services and mobility and orienta- tion programmes for the blind.

By the end of the year, the Social Welfare Department and welfare agencies provided a total of 1 010 work activity places and 2 905 sheltered workshop places. These facilities provide employment for disabled adults unable to compete in the open job market.

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During the year, staffing standards in sheltered workshops in the subvented sector were brought up to a level comparable with those for departmental sheltered workshops.

Disabled persons who cannot be adequately cared for at home, or those who have no close relatives to look after them, are entitled to residential care. By the end of the year, there were 1 041 places in homes for mentally handicapped adults, 355 places in homes for the physically handicapped, and 399 places in homes for the blind.

      For pre-school disabled children, subvented agencies provided 538 places for mildly mentally handicapped children in integrated programmes in child care centres, 480 places for the moderate and severely mentally handicapped children in 11 special child care centres, 380 places for pre-school disabled children in seven early education and training centres. The agencies also provided 18 social clubs, two sports associations and a fleet of 21 Rehabuses for the use of handicapped persons generally, while the Hong Kong and Yaumati Ferry Company introduced a new travel concession scheme.

      Further efforts were made to improve after-care and rehabilitation services for dischar- ged mental patients. By the end of the year, 455 places were provided in halfway houses. The Committee on Public Education in Rehabilitation continued its efforts to foster a more positive public attitude towards former mental patients.

      During the year, the Social Welfare Department carried out a review of existing services provided for the disabled in the light of the recommendations of the review of the policy on social, recreational and sports services for the disabled, with the aim of implementing these recommendations where feasible. Both the department and the welfare agencies intend to increase their efforts to integrate the disabled into the community.

Training

The training of professional social workers is the responsibility of the two universities, the two polytechnics and the post-secondary colleges. The Social Welfare Department and welfare agencies assist in the provision of field work placements for social work students from these institutions. The Social Welfare Department, through its Training Section at the Lady Trench Training Centre, provides in-service training programmes including basic social work training, staff development programmes, induction training and orienta- tion courses for both departmental staff and social workers employed in the voluntary welfare sector.

      During the year, the number of courses, programmes, seminars and workshops organ- ised by the Training Section totalled 179, compared with 137 in 1985. The Training Section also operates a child care centre which, besides providing day care for 100 children aged between two and five, serves as a training facility for trainees in child care work.

To equip staff with updated and specialised skills in the various areas of welfare service, the Social Welfare Department sponsors experienced personnel to attend advanced training courses or international conferences. During the year, 27 officers attended 18 such courses and conferences. The Social Work Training Fund and other scholarships also provide funds to promote advanced social work training.

Research and Evaluation

The Research and Statistics Section provides support service to the department by preparing various estimates and conducting studies. In 1986, 11 studies were conducted, to obtain statistical information for planning and reviewing the social security schemes, and family and other services. The section also runs a standardised Law and Order Statistical System for offenders under the care of the department.

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The Evaluation Section of the department is responsible for monitoring and assessing services provided by the subvented welfare agencies. For this purpose, departmental staff make regular visits to these agencies and they, in turn are required to submit service statistics to the department regularly. Where appropriate, findings are submitted to the Subventions and Lotteries Fund Advisory Committee which advises on allocation of subventions. During the year, the department conducted eight in-depth evaluations of the service programmes of individual subvented agencies.

Community Building

'Community building' serves to foster among the people of Hong Kong a sense of belonging, mutual care and civic responsibility as the society undergoes rapid socio- economic changes. Community building efforts involve the provision of purpose-built facilities for group and community activities, formation of citizens' organisations and encouragement of community participation in the administration of public affairs, in solving community problems, in promoting social stability and in improving the quality of life.

A number of government departments and voluntary organisations contribute towards the community building programme which is monitored and co-ordinated by the Com- munity Building Policy Committee. The City and New Territories Administration and the Social Welfare Department are the two departments principally responsible for this programme. The former implements the specific objectives of community building through a network of district offices, and is primarily concerned with promoting mutual care and community spirit through local organisations such as area committees, mutual aid committees, rural committees, kaifong welfare associations, women's organisations and local arts and sports associations.

The Social Welfare Department is responsible for various aspects of group and community work aimed at promoting the development of individuals and groups and at fostering a sense of community responsibility. Community centres, run by either the City and New Territories Administration or voluntary agencies, are provided throughout the territory to serve as bases for community building work.

Central Committee on Youth

Having regard to the rapid expansion of youth activities in recent years and following the celebration of the 1985 International Youth Year, a Central Committee on Youth was set up by the government in May 1986. The objective of the committee is, among other things, to identify the needs and aspirations of young people in Hong Kong, to liaise with and assist organisations concerned to promote youth development and to enhance youth participation in community affairs, and to examine the need for a comprehensive youth policy.

Committee on the Promotion of Civic Education

The importance of promoting civic education in Hong Kong, particularly in the light of the development of the system of government was noted in the White Paper, 'The Further Development of Representative Government in Hong Kong' published in 1984. Sub- sequently, an inter-departmental committee was set up within the government to examine what measures should be taken to promote civic education outside of the educational system, while the Education Department has been responsible for civic education within schools.

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      To provide a focus for the promotion of civic education outside of schools, the government decided to set up a new committee involving both unofficials and represent- atives from various government departments. The Committee on the Promotion of Civic Education, established in May 1986, is aimed at offering advice to the government and community organisations on the objectives and scope of civic education and promoting civic education by stimulating initiatives from the community at large.

      As part of its efforts to encourage active participation from the community, the committee provided financial assistance to community organisations for implementing broad-based civic education projects.

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Housing

HOUSING Continues to be a priority commitment for the government, which devoted about one-third of its total annual capital expenditure in 1986 for the development of public housing.

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      There are at present 2.6 million people - or about 47 per cent of the population - living in rental and home ownership public housing.

      The Housing Authority maintained a high level of production during the year, adding 37 100 new flats to the public housing stock. This is the seventh successive year in which the authority's annual production target of 35 000 flats has been exceeded.

The greater emphasis being placed on design has provided a better living environment for the tenants, with the newer estates offering homes in pleasant landscaped surroundings where schools, shopping centres, welfare and recreational facilities, and a good transport infrastructure are also provided.

      Benefiting also are the thousands of other families who have been or will be moving into the modern homes, with a wide range of facilities, built under the authority's redevelop- ment programmes.

      The Home Ownership Scheme (HOS) and the Private Sector Participation Scheme (PSPS) offer lower-middle income families the chance to buy their own flats at lower prices than those of comparable units in the open market. During the year, 9 600 units were completed for sale under the two schemes, bringing the total number of these flats to 79 400 units.

      The Hong Kong Housing Society supplements, on a smaller scale, the Housing Authority's contribution to public housing, and also carries out urban redevelopment schemes. The society has started work on its second rural public housing scheme, and inaugurated a flats-for-sale scheme which is similar to the HOS.

In the private sector, 37 140 units were completed in 1986, an increase of 7 140 over production in 1985, making a welcome addition to the private housing stock.

Housing Authority

The Hong Kong Housing Authority, established under the Housing Ordinance, is a statutory body responsible for co-ordinating all aspects of public housing. It advises the Governor on all public housing policy matters and through its executive arm, the Housing Department, plans and builds public housing estates for various categories of people as determined by the authority with the approval of the Governor. It also manages public housing estates, Cottage Areas, Temporary Housing Areas and Transit Centres throughout the territory, clears land for development, prevents and controls squatting, and plans and co-ordinates improvements to squatter areas. On behalf of the government, it plans, builds and manages flats provided under the Home Ownership Scheme. It acts as the govern-

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ment's agent in the development of land and construction of flats for the HOS, and also nominates purchasers for flats built under the PSPS.

The authority meets quarterly under the chairmanship of the Secretary for Housing, to review the work of six standing committees responsible for dealing with finance, building, estate management, home ownership, operations and appeals. In addition, there are three special committees responsible for reviewing domestic rent policy and housing subsidies to tenants of public housing, and for ensuring the smooth implementation of the Extended Redevelopment Programme. The authority comprises 18 members representing a wide spectrum of the community, and six members from government departments directly involved in housing matters. All members are appointed by the Governor. There are also 19 co-opted members, who sit on one or more of the committees. Many of the members of the authority also serve the community as Legislative Councillors, Urban Councillors, Regional Councillors, or as members of the Heung Yee Kuk, district boards and mutual aid committees. Together, they have a broad range of experience and representation and are able to apply a critical and conscientious perspective in determining public housing policies.

      The Housing Authority is responsible for its own finance and management. Capital funding for the public housing programme is provided by the government on the basis of a four-year expenditure forecast rolled forward annually. The government subsidises the programme by providing free land for rental and home ownership projects, and loans from the Development Loan Fund to finance the construction of rental estates. The Home Ownership Scheme is financed by the government which recoups its expenditure from the sale of the flats.

       The authority obtains loans from the Development Loan Fund for the construction of the domestic portion of public rental housing estates. The loans are repayable over 40 years at an annual interest rate of five per cent on a reducing balance. However, to alleviate the cash flow burden on the authority, the government does not require the interest to be paid in cash. The interest charges must, nonetheless, be fully accounted for, along with the value of the free land provided, in the authority's balance sheet as part of the government's contribution to public housing. On March 31, the government's contribution stood at $27,210.8 million, which included, among other subsidies, $23,475.3 million for free land and $1,843.2 million for interest foregone. Furthermore, the 40-year repayment period for loans means that, having regard to the declining value of money over time, the government recovers only a fraction of the real value of the loans.

      In the 1985-6 financial year, recurrent expenditure on the Housing Authority's domestic rental properties - covering mostly management and maintenance costs - totalled $2,061.2 million, while income from domestic rents was $1,940.8 million, resulting in a deficit of $120.4 million. This deficit arose because the low rents in old estates were insufficient to meet management expenses and the high cost of maintenance and improvements. The authority was able to offset this deficit from income derived from its commercial properties which in the same period generated $1,097 million against an expenditure of $540.3 million. Surplus funds are used to help finance the public housing construction programme.

      The authority spent $2,438 million on its capital programmes, of which $1,466.5 million was financed by the government (mostly loans on concessionary terms) with the balance being financed from the authority's funds. In addition, the authority, acting as the government's agent, spent $653.8 million on the construction of flats for sale under the Home Ownership Scheme.

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For the seventh successive year, the authority has achieved its annual production target of 35 000 flats. The construction programme is now firmly geared to producing 228 400 flats over the next five years comprising 171 800 public rental flats, 32 000 Home Ownership flats, and 24 600 flats to be built under the Private Sector Participation Scheme.

During the year, 30 building contracts with a total value of $3,460 million were let. New housing sites have been identified which, together with sites already allocated for the housing programme, ensure that the current level of housing production will be maintained well beyond 1990.

      Since the introduction of 'mechanised' construction methods in 1985, the quality of construction workmanship has improved significantly and 'mechanisation' has gained increasing popularity among local contractors. In order to sustain this momentum, a 'Large Panel Formwork Programme' has been introduced. This allows contractors to continue using the equipment acquired under the 'mechanised construction programme'. To improve standards further, tighter quality control measures were implemented during the year. These included the setting up of a Material Testing Laboratory within the Housing Department to carry out testing of materials used on construction sites.

The Computer Aided Draughting and Design (CADD) System installed in the Housing Authority Headquarters a year ago has improved the efficiency in the design of housing projects, and action is in hand to expand the system.

Home Ownership Scheme

The Home Ownership Scheme (HOS) is administered by the Housing Authority with funds from the government to provide reasonably priced flats for sale to public housing tenants and to lower-middle income families in the private sector. Since the Phase 1 sales exercise started in 1978, a total of 77 175 flats built under the HOS and the related Private Sector Participation Scheme (PSPS) have been sold to eligible families. About 42 per cent of these families were public housing tenants who, although not subject to restrictions on incomes and property ownership, were required to surrender their flats for reallocation to families in greater need of public housing. Another two per cent of these families were prospective public housing tenants who were residents of temporary housing and cottage areas, wait- ing list applicants, households displaced by clearance of squatter areas for development and natural disaster victims.

These families, together with public housing tenants, were accorded 'Green Form' priority status to buy HOS flats. Successful applicants from this category have to give up their eligibility for public rental housing. For applicants from the private sector, the maximum family income limit was raised from $7,500 to $8,500 per month to keep these flats within the reach of the target population.

      Improved mortgage arrangements for prospective purchasers of HOS flats were also revised during the year. The financial institutions are now prepared to extend the maximum mortgage repayment period from 15 to 20 years and the maximum amount of loan from 90 to 95 per cent of flat price for 'Green Form' applicants.

Two sales were held during the year for a total of 9 588 flats. The first sale (Phase 8B) was held in May, when 3 718 HOS flats and 2 180 PSPS flats were offered. HOS flat prices ranged from $154,600 for a 43-square-metre (gross area) flat at Lung Poon Court, Diamond Hill, to $353,300 for a 58-square-metre flat at Po Lai Court, Sham Shui Po. Prices for the PSPS flats were in the range of $250,100 for a 48-square-metre flat to $443,700 for one of 67 square metres, all in Kornhill in Quarry Bay.

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The second sale (Phase 8C) was held in September, involving 1 680 HOS flats at Hong Wah Court in Lam Tin and 2 010 PSPS flats at Chevalier Garden in Ma On Shan. Prices for HOS flats ranged from $154,400 for a 44-square-metre flat to $286,800 for a 53-square- metre flat. Prices for the PSPS flats were in the range of $142,300 to $274,200, with a size range of 45 square metres to 63 square metres.

Urban Housing

On Hong Kong Island, major site formation work is taking place at Siu Sai Wan and Kellet Bay. A further site has been identified in Shau Kei Wan and clearance will be carried out in stages between 1992-6. When completed, these sites will provide 13 000 rental flats and 2000 Home Ownership flats. Other sites under active consideration for inclusion in the Public Housing Programme are at the Lei Yue Mun Barracks and Aldrich Bay.

      Work on Phase I of Lei Tung Estate at Ap Lei Chau, comprising 4 292 rental flats, was completed while construction of Phase II, comprising 3 248 rental flats, and the 1 960 Yue On Court Home Ownership flats is nearing completion. At Chai Wan, piling work was completed and building work started at the Chai Wan D site.

      In East Kowloon, site formation work for Lam Tin South, is underway. The site is one of the largest in the urban area, and when completed between 1991 and 1992 will provide 5 880 rental and 1 400 Home Ownership flats.

Another large estate in Kowloon is Chuk Yuen. The first three phases of work on the estate were completed during the year and the two remaining phases will be completed in 1987 and 1988. On total completion, the estate will provide 12 700 rental flats. Nearby in Central Kowloon, two major Home Ownership projects, Tin Ma Court in Ma Chai Hang and Phases I and II of Lung Poon Court in Diamond Hill, with a total of 6 140 flats, were completed during the year.

Housing in New Towns and Rural Townships

In Yuen Long, 3 346 rental flats were completed under Phase I of Long Ping Estate and a further 3 164 flats will soon be completed under Phase II.

      In the Tsuen Wan/Tsing Yi Area, 1 620 rental flats were completed under Tsing Yi Area 1, Phase I and 1 996 rental flats were completed under Phase V of Cheung Hong Estate. The piling contract of Phase III of Cheung Fat Estate was awarded during the year, and construction work for Phase II of Cheung On Estate has started.

In Sha Tin, Phase I of Hin Keng Estate with 3 230 rental flats was completed, and the remaining phases, comprising 2 640 rental flats and 1 680 Home Ownership flats, will be completed between 1987 and 1988. After completion of Hin Keng Estate, most of the new development in Sha Tin will take place in Ma On Shan. The first housing estate in this new area is Heng On. Phase I, with 2 670 rental flats, was completed during the year. Construction of the remaining phases are well underway. Together with Yiu On Estate, these two estates will provide 10 700 rental flats and 2 100 Home Ownership flats between 1987 and 1988.

In Tai Po, 2 404 rental flats were completed under Phases II and III of Fu Shin Estate. On a site which straddles the Kowloon-Canton Railway line, construction work on Tai Wo Estate had started. This estate will be completed between 1988 and 1989 and will provide 9 380 rental flats, as well as a major shopping centre for the area.

In Junk Bay, construction work at Po Lam Estate is well advanced, and Phases I and II consisting of a total of 2 488 flats will be completed in early 1987.

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      On the outlying islands, the Housing Authority began construction work for 420 flats in Mui Wo on Lantau and finalised layout plans for the development of rental estates on Lantau and Cheung Chau. The Housing Society completed one rural public housing estate at Tui Min Hoi, Sai Kung and began construction of another on the border at Sha Tau Kok.

Redevelopment

From 1954 to 1964, 12 Mark I/II estates, comprising 240 blocks, were constructed to house victims of natural disasters and squatters cleared from development sites. As these estates provided accommodation with only basic facilities, a redevelopment programme was launched in 1972 to improve the living environment of some 84 000 families in these estates. In 1983, the Housing Authority decided to accelerate the redevelopment programme, with the aim of having all the families living in the remaining Mark I/II blocks rehoused by 1990-1. Under this programme, 6 000 families would be rehoused annually. Families wishing to improve their living conditions in advance of the scheduled redevelopment are offered the opportunity to move to new flats in new towns in the New Territories.

      During the year, a further 28 Mark I/II blocks in Lei Cheng Uk, Lower Wong Tai Sin, Tung Tau, Wang Tau Hom and Kwun Tong (Tsui Ping Road) estates were demolished to make way for construction of new blocks. The remaining 93 blocks will be demolished and redeveloped by 1990-1.

The authority continued its extended redevelopment programme involving 26 other estate blocks in which the condition of the concrete was found to be unsatisfactory. About 15 000 families affected by this programme will have to be rehoused in new flats in other public housing estates by the end of the decade.

A new section had been set up to plan, co-ordinate and monitor the redevelopment programme. Supplementary sites have been identified to enable new flats to be completed in time for rehousing families affected by the programme. During the year, contracts for four of these supplementary sites were let, and a total of 4 160 flats will be completed on these sites by the end of 1988. At Kwai Fong Estate, the Phase I redevelopment is in hand, and the 905 new flats in this phase will be completed in mid 1987. A total of 4 850 rental flats were completed in Phase 2B of Tung Tau Estate, Phase III of Kwun Tong (Tsui Ping Road) Estate, Phase III of Wan Tsui Estate, Phase VII of Lower Wong Tai Sin Estate, Phase III of Lei Cheng Uk Estate and Phase IVB of Tung Tau Estate, while construction work began on Phase II of Lei Cheng Uk Estate and Phase III of Tai Wo Hau Estate in the normal redevelopment programme.

Allocation

The Housing Authority possesses one of the world's largest public housing stocks, comprising 550 000 rental flats in 119 housing estates. These flats are of different sizes, amenities and rent levels, to meet the wide-ranging requirements of families in need of public housing.

During the year, 25 161 new flats and 9006 vacated units were let to the various categories of eligible applicants. The biggest share went to waiting list applicants (36 per cent), followed by families affected by development clearances (15 per cent), and tenants involved in the redevelopment of Mark I and II blocks and extended redevelopment (27 per cent). Junior public servants, victims of fires and natural disasters, occupants of huts and other structures in dangerous locations, and compassionate cases recommended by the Social Welfare Department took up the rest of the flats.

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Information from the waiting list and on the allocation of accommodation has been computerised. Information regarding nearly three million applicants and tenants is stored in the Housing Applications and Tenancies Management Information System. Computeri- sation enables housing allocations and duplication checks to be carried out effectively and produces useful statistical information for management.

The 12 261 flats allocated to waiting list applicants during the year were located mostly in Tai Po, Fanling, Sha Tin, and Yuen Long. Waiting time varied from six years for estates in Sha Tin to three years for those in Yuen Long.

Applications from families of two persons or more were considered in the order of registration and in accordance with the choice of districts indicated by the applicants. Accommodation was offered to those who, on investigation, were found eligible in respect of their family income and other reasons. The income limits were fixed having regard to the average household expenditure, plus the rent for self-contained accommodation in the private sector. Currently, the income limits range from $4,200 for a family of two to $7,400 for a family of 10 or more. The number of live applications at the end of the year stood at 165 997.

Since the establishment of the Single Persons Waiting List in 1985, the number of live ap- plications at the end of the year stood at 16 000. The current income limit for them is $2,900. The Housing Authority provides a priority scheme for elderly couples or single elderly persons applying in groups of two or more to be allocated public housing within two years. So far, 3 969 flats have been allocated to this category. In 1982, the authority approved an incentive scheme under which families with elderly members were allocated housing one year ahead of their normal waiting time, and each year about 1 000 families benefit from this scheme. In 1986, the Housing Authority introduced a Sheltered Housing Scheme for the able-bodied elderly, for which a warden service was provided to deal with emergencies. The first 138 units will be available for allocation in March 1987 in Heng On Estate, Ma On Shan, Sha Tin. Allocation will be made to applicants attaining 60 years of age who are eligible under compulsory rehousing categories, and qualified elderly applicants from the Single Persons Waiting List and the Elderly Persons Priority Scheme of the Waiting List.

Rent Policy for Public Housing

     Rents for domestic premises in public housing estates have been maintained at low levels despite increasing operating and maintenance costs. This has been possible because of heavy government subsidies.

Rents are reviewed on a biennial basis and adjusted to take account of increases in rates, maintenance and other costs; estate values in terms of location, facilities and services provided, as well as tenants' ability to pay. On average, public housing tenants are paying seven per cent of their income as rent. This is an extremely low figure compared with the 19 per cent in the private sector. Owing to the very low rents at old estates where maintenance and improvement costs are high, there was a substantial deficit in the Housing Authority's estate working account for domestic properties in 1985-6.

Rents for the newest estates are set at a more realistic level of $21.2 per square metre for urban estates with downward adjustments for those in the new towns to reflect difference in estate values. These rent levels represent about one-third of current market rents and are estimated to take up 13 to 15 per cent of the total family income of the prospective tenants. A committee was set up in 1985 to review the authority's domestic rent policy. Its recommendations were generally in line with the authority's existing policies which have been adopted since 1977, and no major changes were suggested. The only new proposal was

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that the median rent-income ratio for new public housing estates at the current standard should not exceed 15 per cent.

      Some 637 welfare premises in estates are let at concessionary rents. These include children's and youth centres, nurseries, social and community services centres, libraries, study rooms, welfare clinics, sheltered workshops, hostels and centres for the mentally or physically handicapped. Hostels for the elderly are let to voluntary agencies at normal domestic rents. During the year, 65 welfare lettings were made. In order to maintain a balanced community for public housing tenants, a total of 489 premises have been let for educational purposes, such as kindergartens, and primary and secondary schools. In most cases, kaifong and residents' associations and Mutual Aid Committees in housing blocks are provided with office accommodation. Medical clinics and premises for various government departments are generally let at commercial rents.

Letting of Commercial Properties

The Housing Authority also has 22 757 sets of commercial premises, including shops, market stalls, banks, restaurants, in its various estates, and the total rental income generated in 1985-6 was $1,097 million. In March 1986, a new Commercial Properties Division of the Housing Department was set up to deal with all matters relating to the authority's commercial properties, design research, valuation, marketing and letting, pro- motion activities and tenancy control.

Ordinary shops and market stalls were let by rental tendering, thus enabling small operators with limited capital to obtain a tenancy which is usually of a three-year term. Some large shops and chains of shops are, however, let by negotiations through which some well-known firms are attracted into starting businesses in the authority's shopping centres. It is the authority's policy not to subsidise commercial operators and to keep rents of commercial premises at or close to the market levels. The level of market rents has been fairly stable during the year for the majority of commercial premises. However, in cases where rent increases for the authority's commercial premises were substantial because of higher market values, the increases were applied over two or three years. There were also cases where rents were reduced at the time of tenancy renewal to reflect the prevailing market trends.

      Shop premises affected by the extended redevelopment programme have received special consideration. Rents for the premises are reviewed at six-month intervals. Ex-gratia payment equivalent to 15 months rent are given to tenants who have to vacate their shops. The tenants are also given a fairly wide range of alternative commercial premises which they can acquire through tenders restricted to their group as a reprovisioning arrangement. A three-month rent-free period will be granted for new tenancies so acquired.

The authority is also managing 18 130 flatted factory units in 35 blocks.

Management

      Senior staff of the authority continued to foster close contacts with district boards and mutual aid committees, as well as local interest groups by participating in their meetings and community activities. Close contacts with tenants were also maintained through door-to-door visits by estate staff.

      To ensure that public housing is offered to the most deserving families, some policy changes have been made, including the adoption of new criteria for the relief of over- crowding and voluntary transfer, and the discontinuation of automatic inheritance of a public housing tenancy.

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The Housing Ordinance empowers the authority to introduce road restrictions in estates and impose charges for the impounding and removal of vehicles parked illegally within estates. Offending car owners or drivers may also be prosecuted under the provisions of the Housing (Traffic) By-laws. These arrangements make it possible to keep the access roads in estates free from obstruction caused by illegal parking and hawking, thereby improving the estate environment.

The 'door-to-door' rent collection system, which provides regular personal contact between estate staff and tenants or their family members, is recognised by the authority as a very useful method in fostering good landlord and tenant relationship. This method of rent collection is adopted in all the new public housing estates where such direct contact will help tenants to settle down rapidly in a new environment.

Estate management staff continued to take vigorous action against illegal hawking activities inside public housing estates. A special 100-member operations team was success- ful in bringing hawker black spots under better control, including those in the Wong Tai Sin, Kwai Chung, Kwai Fong, Cheung Hong, Cheung Ching and Kwai Shing East estates.

Temporary Housing

At the end of the year, 119 236 people were living in 51 Temporary Housing Areas (THAs) with a total capacity of 133 456 person spaces. Some eight new THAs were constructed, producing 14 000 person spaces for those not yet eligible for public housing. These new THAS consist of full-built structures, providing electrical fittings, individual water supply and kitchen/shower rooms. In addition, development of 21 new temporary housing areas is underway. On the other hand, 16 360 person spaces were lost, mainly through development clearances of THA sites.

Further improved facilities were provided in THAS. Since early 1985, individual living units for single persons have been gradually introduced to replace hostel-type accommoda- tion for these people. Hose reels were added to the existing fire fighting installations and safety matting to play equipment. Individual metered water supply was made available to 25 older THAs, and this facility was an added convenience to tenants and cut down water consumption and cost.

     During the year, 18 606 THA residents moved into permanent public housing, 5 400 through clearance and 13 208 through trawling (an exercise conducted on the basis of voluntary application), waiting list and applications for HOS flats. Meanwhile, 19 970 people moved into THAS from clearances and natural disasters. Small units in existing THAS and some spaces in new THAs were reserved for allocation to over-crowded families. A total of 540 families benefited from this scheme in the year.

Transit Centre

There are nine transit centres in the territory to provide immediate shelter for people made homeless by natural disasters. After a short stay they will be allocated permanent or temporary public housing depending on their eligibility. The total capacity of these centres is over 5 100, with the largest centre at Tuen Mun capable of accommodating 3 500.

Cottage Areas

During the year, the Chai Wan and Shui Ngau Ling Cottage Areas were cleared to make way for new development. As a result, the number of cottage areas has been reduced to eight, and their population to 11 758. A project to introduce individual metered water supply to all cottage areas was completed in the year.

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The Squatter Control Division of the Housing Department operates a system of daily patrols to deter new squatting. Full control over squatting has been maintained. Racketeer- ing in the form of the construction of squatter huts for sale has been effectively suppressed. In 1986, 13 700 illegal structures or extensions were demolished. The results of a squatter occupancy survey completed in September 1985 have been computerised for planning and control purposes. This survey has now become an additional eligibility criterion for rehousing squatters. This additional condition will prevent queue jumping by unscrupulous squatters for public housing.

      The number of squatters moving to permanent public housing through the general waiting list increased during the year, with 2 400 families successfully obtaining rental flats. More squatters are encouraged to register on the list.

Improvement to Squatter Areas

Since the Squatter Area Improvement Division was formed in 1982, a total of 38 im- provement projects have been carried out in squatter settlements in the urban area, in- cluding Tsuen Wan, and 17 more are being put into effect. During 1986, efforts continued to be placed on squatter areas which have over 500 residents and which will not be cleared for three years. In addition to the safety and environmental improvements gen- erally effected in squatter areas, a stepped-up programme was started to install 600 street lights in 40 smaller squatter areas. A total of 285 street lights installed in other squatter areas by District Boards have been taken over by the division for management and maintenance.

      A pilot scheme for improvements in squatter areas in the New Territories has begun. The result will be examined to determine the practicability and cost effectiveness, of extending the squatter improvement scheme to the New Territories.

Clearance

During the year, 470 hectares of land were cleared for development. This resulted in 19 400 people being given permanent housing and 17 200 being given temporary housing. Some 1 530 industrial, commercial and agricultural undertakings affected by clearances were awarded ex-gratia allowances. A total of 4 600 people who became homeless as a result of fires and landslips were provided with either permanent or temporary accommodation.

Management of Private Residential Buildings in Multiple Ownership Privately owned buildings constitute more than half of the territory's housing stock and accommodate about half of the population. Most of these buildings are high-rise blocks which are held by a number of owners who may or may not be residents of the building.

      The nature of ownership of these buildings, combined with other factors, has resulted in a situation over the years where the management of some private properties has deteriorated.

      Although the management of privately owned buildings is the responsibility of property owners, the consequences of consistent neglect are of serious concern to the government.

      The government is, therefore, taking steps to provide assistance to private management bodies in order to stimulate a more effective, self-help process among property owners and tenants. The nature of this assistance is both legislative and administrative.

Work is in hand to amend the Multi-Storey Buildings (Owners Incorporation) Ordinance to make it easier to form owners' corporations. Such corporations act in the interests of

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individual owners regarding their rights, power, duties and liabilities in relation to those parts of a building held in common ownership. Although the existence of an owners' corporation does not guarantee good management of a building, it has been found from experience that management standards in buildings which have owners' corporations have generally been better than in cases where no comparable management body exists.

There will also be other amendments dealing with management standards and pro- cedures. These clauses define more clearly the powers and responsibilities of the corpora- tions' management committee.

      In addition to the proposed amendments, all Deeds of Mutual Convenant arising from new, non-industrial leases granted since February 1986 were required to contain a number of clauses aimed at improving the management of common areas in a building.

      Administrative arrangements to improve private building management consist mainly of the establishment, in four districts to date, of building management teams. These teams of professional housing managers and assistants, together with the liaison staff of district offices, offer advice to owners' corporations, mutual aid committees and other building management bodies, at a district level.

      The teams play an important role in encouraging the formation of owners' corporations and in providing advice to the members of management committees. They also work towards improving public awareness in building management matters by means of seminars and discussion groups.

Rent Control in the Private Sector

Statutory controls on rents and security of tenure in Hong Kong date back to 1921. The present legislation governing these matters is the Landlord and Tenant (Consolidation) Ordinance.

      The legislation is under constant review to improve its working and to achieve the ob- jective, recommended in 1981 by a Committee of Review and endorsed by the govern- ment, that as soon as circumstances permit, rent control should be phased out.

      At present, statutory controls apply only to domestic premises in the private sector unless otherwise excepted. Tenants are afforded rent increase control and security of tenure. Unless a tenant voluntarily vacates the premises, a landlord must apply on certain specified grounds and obtain an order from the Lands Tribunal before he can recover possession.

Heavy penalties are prescribed for harassment of a protected tenant with intent to induce him to leave. However, provisions exist to facilitate negotiations by which the parties may reach an agreement whereby the tenant surrenders his protected tenancy in exchange for a consideration. The Rating and Valuation Department publishes explanatory pamphlets to help people understand their position in relation to the legislation, and provides an advisory and mediatory service to deal with the many practical problems arising from rent controls. It also operates a scheme under which rent officers attend district offices on set days each week to deal with referred cases and answer enquiries on landlord and tenant matters.

Pre-War Premises

     Legislation controlling rents of pre-war premises and providing security of tenure was instituted by proclamation immediately after World War II and in 1947 was embodied in the Landlord and Tenant Ordinance since re-enacted as Part I of the Landlord and Tenant (Consolidation) Ordinance.

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Part I previously applied to both domestic and business premises but as from July 1, 1984, it applies only to domestic premises. It restricts rents by reference to pre-war levels

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(standard rent). New or substantially reconstructed buildings are excluded from Part I controls.

      Increases in rents have been permitted annually in recent years, the latest being in July 1986 when the legislation was amended to provide for permitted rents to be 30 times (previously 27 times) the standard rent (i.e. the rent payable in respect of the unfurnished premises on or most recently before December 25, 1941). However, in no case is the permitted rent to exceed the prevailing market rent. The Commissioner of Rating and Valuation is empowered to certify the standard rent and the prevailing market rent.

      There is provision in the legislation for the exclusion from control of premises for the purpose of redevelopment, and generally possession is subject to the payment of compensa- tion to the protected tenants. Jurisdiction under Part I is exercised by the Lands Tribunal while technical functions are performed by the Commissioner of Rating and Valuation.

Post-War Premises

     Comprehensive rent control legislation affecting post-war domestic premises has been in force in one form or another since 1963 - apart from the period between 1966 and 1970 - and is now embodied as Part II of the Landlord and Tenant (Consolidation) Ordinance.

      Part II, which provides security of tenure and controls rent increases, now covers the majority of tenancies and sub-tenancies in post-war domestic premises completed or substantially rebuilt after August 16, 1945. It does not, however, apply to tenancies in buildings first certified for occupation after June 18, 1981, nor to new lettings created on or after June 10, 1983, nor to tenancies of premises having a rateable value of or above $30,000 as at June 10, 1983.

Under Part II, landlords and tenants are free to agree on an increase in rent, but such agreements must be endorsed by the Commissioner of Rating and Valuation. Increases, except by agreement, are permitted only once every two years. Where an increase is not agreed, the landlord may apply to the commissioner for his certificate of what increase may be made to the current rent. From December 19, 1986 the permitted increase is arrived at by taking the lesser of (i) the difference between the prevailing market rent and the current rent, or (ii) 30 per cent of the current rent. However, if the increase so determined, when added to the current rent, results in a rent being less than 60 per cent of the prevailing market rent, the permitted increase will be an amount necessary to bring the current rent up to 60 per cent of the prevailing market rent. Both landlord and tenant are at liberty to apply to the commissioner for a review of his certificate and further to appeal to the Lands Tribunal against the commissioner's review.

For domestic tenancies outside these controls, Part IV of the Landlord and Tenant (Consolidation) Ordinance provides a measure of security of tenure for a sitting tenant who wishes to renew his tenancy and who is prepared to pay the prevailing market rent on renewal. However, Part IV does not impose control on rents. Under these provisions, a new tenancy must be granted unless the landlord can satisfy the Lands Tribunal that he requires the premises for his own occupation or that he intends to rebuild the premises, or on one of the other grounds specified in the legislation. The parties are free to agree on the rent and terms for the new tenancy, but failing agreement, they can apply to the Lands Tribunal for a determination.

The scheme under Part IV is intended as a permanent framework regulating the relationships of landlords and tenants for nearly all domestic tenancies not otherwise subject to the Part I or II controls. Moreover, there are provisions enabling tenancies to be transferred, under certain statutory conditions, from the ambit of Part II to Part IV.

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Land, Public Works and Utilities

THE primary objectives of the government's lands and works policies are to ensure an adequate supply of land to meet the needs of both the public and private sectors, to optimise the use of land within the framework of land use zoning and development plans, and to ensure co-ordinated physical development in infrastructure and buildings.

To provide a better response to district requirements, and to balance the workload and rationalise the functions and responsibilities of the departments concerned, a major reorganisation of the Lands and Works Group of Departments was carried out during the year.

The main features of the reorganisation were:

- The amalgamation of the Buildings Ordinance Office of the Building Development Department with the Lands Department to become the new Buildings and Lands Department. Matters relating to land and building development are now placed under one single department.

The transformation of the Architectural Office of the Building Development Depart- ment into an independent Architectural Services Department to cope with the increasing demand for architectural services.

The amalgamation of the Urban Area Development Organisation of the Lands and Works Branch of the Government Secretariat with the New Territories Development Department to form a new Territory Development Department. This permits a more effective control of the Public Works Programme and district planning throughout the territory as well as more efficient deployment of staff resources.

The transformation of the Highways Office of the Engineering Development Depart- ment into an independent Highways Department which is responsible to the Secretary for Transport for the implementation of transport policy and the highways develop- ment programme. For works policy, construction standards, contract procedures and Public Works Programme co-ordination, the Highways Department is responsible to the Secretary for Lands and Works.

- The restructuring of the Engineering Development Department to form a new Civil Engineering Services Department with responsibilities for civil engineering works, geotechnical control and railway development.

The overall policy responsibility for land, public works and private development continues to rest with the Secretary for Lands and Works, who heads a branch which also monitors the performance of the five reorganised departments mentioned above, the Water Supplies Department and the Electrical and Mechanical Services Department. The Secretary for Lands and Works is the Chairman of the Town Planning Board and also of the Development Progress Committee, which is responsible, among other things,

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for considering and approving detailed planning briefs and layouts for development areas in accordance with planning standards laid down by the Land Development Policy Committee.

      The Land Development Policy Committee, chaired by the Chief Secretary, is responsible for overseeing all aspects of the physical development of the territory and for approving, in principle, all major proposals affecting the development or planned use of land. The Land and Building Advisory Committee, with the chairman and eight members drawn from the private sector, advises the government on a wide range of issues, including the adequacy of land development programme and of the policies and procedures relating to land, buildings and the construction industry.

       The Sino-British Land Commission met regularly in 1986 to discuss issues arising from the implementation of the agreement on land leases set out in Annex III to the Sino-British Joint Declaration on the future of Hong Kong. Important issues considered included updating the average cost of land production and drawing up and monitoring the land disposal programme.

      Land grants and leases are now made in accordance with the terms set out in the Joint Declaration. The total amount of new land to be granted is limited to 50 hectares a year (excluding land to be granted to the Hong Kong Housing Authority for public rental housing), although the Land Commission may increase this limit. Premium income obtained from land transactions is, after reduction of the average cost of land production, shared equally between the Hong Kong Government and the future Hong Kong Special Administrative Region Government.

      In 1986-7 funds for public works amounted to $5,425 million - about 14 per cent of the government's total expenditure for 1986-7. The largest portion, $2,814 million, was for the development of new towns. Some $453 million was earmarked for expenditure on civil engineering projects, $724 million on highways projects, $515 million on water works, and $918 million on buildings. In addition, $1,200 million was provided for the acquisition of leased land for the projects involved.

      With regard to strategic planning in a broad territorial context, further follow-up work on the initial results of the 1984 Territorial Development Strategy studies continued in 1986. This included planning and engineering feasibility studies of the 'common com- ponent' potential development areas around Victoria Harbour and updating the long-term urban growth strategy of Hong Kong. The Port Development Strategy Study was also completed during the year. The findings and recommendations of the above studies are being applied in the detailed feasibility studies of various harbour reclamations with a view to drawing up an outline programme for implementing the necessary works.

Land Administration

The Lands Administration Office of the Buildings and Lands Department co-ordinates all aspects of land administration throughout the territory. In addition to its headquarters, the department has 12 district lands offices: two on Hong Kong Island, two in Kowloon and eight in the New Territories. District lands officers are responsible for most aspects of land administration and land disposal, while the headquarters formulate territory-wide policy and give guidance on more complex matters.

Land Supply

All land in Hong Kong is held by the government, which sells or grants leasehold interests. In the early days, leases were for terms of 75, 99 or 999 years, subsequently standardised in

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the urban areas of Hong Kong Island and Kowloon to a term of 75 years, renewable at a reassessed annual rent under the provision of the Crown Leases Ordinance. Leases for land in the New Territories and New Kowloon were normally sold for the residue of a term of 99 years less three days from July 1, 1898.

In accordance with Annex III to the Sino-British Joint Declaration, normal land grants throughout the territory are now made for terms expiring not later than June 30, 2047. They are made at a premium and nominal rental until June 30, 1997, after which date an annual rent equivalent to three per cent of the property's rateable value will apply which will be adjusted in step with changes in the rateable value thereafter. Leases expiring in or before 1997, with the exception of short-term tenancies and leases for special purposes, may also be extended to 2 047 under the provisions of Annex III to the Joint Declaration without payment of an additional premium. An annual rent equivalent to three per cent of rateable value will be charged in the same way as for the grant of new leases.

The first priority with regard to land supply is to make available sufficient land for the government's development programmes, including the public housing programme. Land for the Hong Kong Housing Authority's public rental estates is provided free by the government, as is land for the residential element of the Housing Authority's Home Ownership Scheme. Land for the rental estates constructed by the Hong Kong Housing Society, a non-profit-making body with aims similar to those of the Housing Authority, is provided on concessionary terms. Land is also granted by private treaty, at nil or nominal premium, to non-profit-making charitable institutions which operate schools, hospitals, and social welfare and other community services in accordance with the government's policy objectives.

      Most land available for private sector commercial, industrial or residential development is sold by public auction or tender. The formulation of overall targets for the production of land is carried out under the auspices of the Land and Building Advisory Committee. Regular auctions are held by the government and a six-month provisional land sales forecast is published. In the New Territories, however, where much of the land required for development has to be resumed, a high proportion of land is disposed of by tender. Since 1984, it has been possible for the holders of Land Exchange Entitlements to bid in tenders of New Territories sites by offering surrender of these entitlements in lieu of cash.

      Leases for certain special purposes, which have particular site requirements or other factors which would make public auction inappropriate, are also offered for sale by public tender. Such special purposes include capital-intensive industry, introducing higher tech- nology which cannot be adequately housed in more conventional multi-storey flatted factory buildings. Such sales are initiated only in response to formal applications and, in certain circumstances, may be concluded by private treaty.

Land Acquisition

When private property needed for carrying out public works projects cannot be acquired by negotiation, the use of compulsory powers becomes necessary. Property may then be acquired under either the Crown Lands Resumption Ordinance, the Land Acquisition (Possessory Title) Ordinance, the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance, or through the Roads (Works, Use and Compensation) Ordinance in the case of land required for road projects. These ordinances provide for the payment of compensation based on the value of the affected properties as at the date of reversion. If agreement cannot be reached on the amount payable, either party can refer the claim for compensation to the Lands Tribunal for determination.

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      For development in the New Territories, a system of ex-gratia payments applies with enhanced rates paid for land situated within the new town development areas and progressively reduced rates paid for land situated outside these areas. In the case of building land, an ex-gratia payment is offered in addition to the statutory compensation.

The need for land for development has continued to grow, and during 1986, some 1.2 million square metres of private land was acquired in the New Territories to carry out various public works projects. These projects included the phased development of Junk Bay New Town, the block resumption of land for Tin Shui Wai development, the redevelop- ment of the Old Town Centre at Tsing Yi Island, Kwai Chung Container Terminal No. 6 development, and the rural public housing development at Sha Tau Kok. The total land acquisition and clearance costs for these projects was about $1,200 million.

In the urban areas of Hong Kong Island and Kowloon, about $10 million was paid in compensation for land and buildings acquired during the year, either under compulsory powers or by agreement. The projects involved included the Eastern Harbour Crossing, the Princess Margaret Flyover, and the Hong Kong Island Eastern Corridor Stage III.

Land Office

The Land Registration Ordinance provides for the registration in the Land Office, a Division of the Registrar General's Department, of all instruments affecting land. Registra- tion is effected by means of a memorial containing the essential particulars of the instrument which are then placed on a register card relating to the particular piece of land. Register cards are kept also in respect of individual premises such as residential flats, shops and commercial and industrial premises. The register cards, as a result, provide a complete picture of the title to each property from the grant of the government lease and are available for search by the public in photostat form on payment of a small fee. The memorials and a complete copy of each registered instrument are kept and are available for search in microfilm form by the public, again on payment of a fee.

The Land Registration Ordinance also provides that all instruments registered under it shall have priority according to their respective dates of registration. This provision applies unless they are registered within one month of execution, in which case priority relates back to the date of the instrument. In the case of charging orders made by the court and pending court actions, priority runs from the day following the date of actual registration. The ordinance further provides that unregistered instruments, other than bona fide leases at a rack rent for a term not exceeding three years, shall be null and void as against any subsequent bona fide purchaser or mortgagee for valuable consideration. Registration is therefore essential to the protection of title, but does not guarantee it.

The records of transactions affecting land on Hong Kong Island and in Kowloon, New Kowloon and some of the urban areas of the New Territories are kept at the Land Office, Victoria, while those relating to transactions affecting land in the remainder of the New Territories are kept in the appropriate District Land Offices, of which there are eight, in the New Territories. During the year, 292 796 instruments were registered at the Land Office, compared with 262 934 in 1985. Detailed statistics are at Appendix 29. At the end of the year, the card index of property owners contained the names of 536 017 owners, an increase of 37 174 over the previous year.

Work on the computerisation of the information on the Land Office register cards, with a view to introducing a computerised land registration system, continued on schedule during the year, and conversion into computerised data began in November. This exercise is expected to be completed by late 1988.

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The Land Office also provides a conveyancing and legal advisory service to the government for all government land transactions and associated matters. It is responsible for the issue, renewal, variation and termination of government leases as well as for the drafting, completion and registration of conditions of sale, grant and exchange of government land, the granting of mining leases, the registration of owners' corporations, the apportionment of government rents and premia, and the recovery of outstanding rents. It also provides conveyancing services for the Housing Authority in connection with the sale of flats built under the Home Ownership Scheme and for the Financial Secretary Incorporated in connection with the extension of non-renewable government leases, mortgages to secure interest-free loans to private schools, the purchase of properties for government staff quarters and group housing schemes for the elderly.

Land Sales

Important land transactions in 1986 included the sale by public auction of a site on Hong Kong Island of 16 150 square metres for commmercial and/or residential development. This site is located in Supreme Court Road and was part of the former Victoria Barracks. A further site of 15 320 square metres on Hong Kong Island, situated in Tin Hau Temple Road was sold by public auction in November for medium density residential development. The sale by private treaty to Kowloon-Canton Railway Corporation of a site of 1.935 hectares for its Light Rail Transit System Terminus in Tuen Mun was completed in April. Comprehensive development above the terminus will provide commercial space at first floor level, recreational uses at podium level and private residential use above.

     A sale by private treaty to the Housing Authority comprising a site of 1.65 hectares for the Home Ownership Scheme development at Ma On Shan was completed in November. The development will provide 1 050 flats with a maximum gross floor area of 61 394 square metres.

In Kowloon, a site of 55 760 square metres at Chuk Yuen West was sold by public tender in December under the Private Sector Participation Scheme. This development will provide about 3 160 flats for sale to purchasers within limited income groups nominated by the Housing Authority. This followed the sale in October of a Private Sector Participation Scheme site in the Junk Bay new town development area which will similarly provide about 1 850 flats.

      In the New Territories, a site of 22 810 square metres close to the Fanling Railway Station was sold by tender for residential development in July; the tenders were restricted to holders of land exchange entitlements (Letter A/B). This was the first significant land sale in the expanding Fanling development area and will provide about 100 000 square metres of residential gross floor area together with some 27 500 square metres of associated commercial floor space.

Town Planning

The main aim of town planning in Hong Kong is to provide a good living and working environment for its present and future population. This applies both to the new develop- ment areas, such as Tuen Mun and Sha Tin and to the older congested urban districts, such as Yau Ma Tei and Western District where the need for improvement is most apparent. Town plans can be broadly classified into two groups: statutory and departmental. Their purpose is to control land use and building volume on individual sites to meet the demands of the territory's growing population and to ensure, as far as possible, adequate provision of the required community facilities and public utility services.

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      Statutory plans for existing and potential urban areas are prepared under the provisions of the Town Planning Ordinance, under the direction of the Town Planning Board. These statutory outline zoning plans show areas set aside or zoned for residential, commercial, industrial, government, institutional and other purposes. They act as important links between the government and the public, providing a guide to public and private investment by indicating the future broad land use pattern, including major public works for developing areas. Once a statutory plan is gazetted for public inspection, it has statutory effect. Under the Buildings Ordinance, the Building Authority may refuse to give approval to any plan of building works which would contravene any draft or approved plan prepared under the Town Planning Ordinance. To avoid piecemeal development or redevelopment and to encourage comprehensive urban design, suitable areas are designated as comprehen- sive development areas or comprehensive redevelopment areas on statutory plans. Under these designations, development or redevelopment may only proceed in a comprehensive manner according to master layout plans approved by the Town Planning Board.

      During the year, the Board published 26 statutory plans, including four new plans for Kennedy Town and Mount Davis, Mid-Level West, Pok Fu Lam, and Ngau Tau Kok and Kowloon Bay, and 22 amended plans. It considered 54 objections to the published plans and, as a result, some of the plans were amended for further public examination. By the end of the year, 35 out of 42 planning areas in the main urban areas were covered by statutory plans. In the New Territories, there were seven statutory plans covering Tsuen Wan, Kwai Chung, Tsing Yi, Sha Tin, Tai Po, Tuen Mun and South Lantau coast.

The Town Planning Ordinance makes provision for a Schedule of Notes to be attached to each statutory plan. This schedule shows the land uses permitted in a particular zone together with other uses for which the Town Planning Board's permission must be sought. This provision for applications for planning permission allows greater flexibility in land use planning and improved control of development to meet changing needs. During the year, the board considered 150 applications, compared with 182 in the previous year. Should the board refuse to grant permission, the applicant may apply for a review of the decision. In 1986, there were six applications for review, compared with four in 1985.

      Outline development and layout plans are used administratively within the government to guide development. While outline development plans and layout plans are both prepared within the framework of the sub-regional planning statements and statutory outline zoning plan, layout plans are usually of local significance and apply to newly-formed land or to areas requiring comprehensive redevelopment. They are action plans enabling land to be prepared and released for public and private development. Compared with statutory plans, they are normally drawn to a larger scale, showing road proposals and the disposition of sites in greater detail. Examples of such plans prepared during the year include those for Tsuen Wan West, Sai Kung Town, San Tin, Cha Kwo Ling and several other planning areas in Sha Tin, Tuen Mun and Fanling. Many existing plans were revised to take account of changes in population forecasts, government policies, and planning standards.

       Guidelines for the reservation of land for various uses, standards of provision for community facilities, and locational and use requirements crucial to the preparation of town plans and planning briefs are contained in the Hong Kong Planning Standards and Guidelines changes to which must be approved by the Land Development Policy Committee. The document is constantly kept under review to take account of changes in government polices, demographic characteristics and other social and economic trends. Sections revised during the year were related to educational facilities, industry, utility services and environment.

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       Surveys in land and floor uses covering the whole territory were conducted or updated to provide the basic input in the preparation of both statutory and departmental plans. Special planning studies such as the forecast of land supply, forecast of population distribution in the private housing sector, future demand and supply of hotels, and floor space requirements of banks in industrial buildings were also carried out during the year to provide information for the formulation of land development and planning policies.

      During the year, work continued on the formulation of planning statements for the sub-regions. These set out the government's intentions for the future use and development of land in the five sub-regions. In 1986, the Development Progress Committee approved the statements for the North Eastern New Territories, the South Eastern New Territories and the South Western New Territories. Statements for the North Western New Territories and for the Metropolitan area will be programmed during the course of the coming year. These statements provide a necessary link between the Territorial Development Strategy and district planning and are already proving useful in directing attention towards development issues within these sub-regions.

A Central Information and Technical Administration Unit of the Town Planning Office was established in 1980 to provide a common channel through which planning information is released to the public. During the year, a total of 1 820 enquiries from members of the public were handled by or through the arrangement of this unit, representing a 13 per cent increase compared with 1613 enquiries in 1985. Persons seeking planning advice and planning information included overseas visitors and officials, professionals, property owners, developers, journalists and students.

Development of the New Towns and Rural Townships

The launching of a major housing programme in 1982 provided the impetus for the new town development programmes. The objective of this housing programme was to provide 1.8 million individual units of accommodation over a 10-year period, the majority of which were to be located in new towns in the New Territories. This target was substantially achieved and the new town programmes have since been extended into the 1990s. The first generation of new towns, Tsuen Wan, Sha Tin and Tuen Mun is already housing 1.4 million people and is expected to reach substantial completion by the end of this decade. Development in the second generation new towns in the northern New Territories, namely Tai Po, Fanling and Yuen Long, is proceeding at a fast pace and the major works will be completed by the early 1990s. These new towns have a current population of some 340 000. Works on the Junk Bay New town on the Sai Kung peninsula are proceeding apace and along with the works at Tin Shui Wai in the northwestern New Territories, the advance works for which are already in hand, should reach final development by the late 1990s. On completion of the present development programmes, the population of the New Territories will have risen to nearly 3.5 million people compared with the present 1.8 million and less than half a million in 1970.

      To ensure proper co-ordination of the major task of planning and implementing development works in the whole territory, the Territory Development Department is constituted on a multi-disciplinary basis and includes professional officers with expertise in civil engineering, town planning, architecture and landscaping. The department works closely with the Housing Department in implementing the public housing programme and the City and New Territories Administration, the Urban Services Department and Regional Services Department in fostering the growth of new balanced communities.

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      A major contribution continues to be made by the private sector in a wide range of privately financed housing developments and facilities.

Tsuen Wan

     Since its birth in the post-war years as an industrial satellite of urban Kowloon, Tsuen Wan has grown to a thriving township housing almost 700 000 people. When all major developments are completed in the early 1990s the new town will have a population of about 800 000 with job opportunities for 280 000 workers in the industrial sector.

The town contains the Kwai Chung container terminal which is being further expanded by reclamation.

      Development on Tsing Yi Island is now progressing rapidly and it is here that the major increase in population in the next few years is to be accommodated mainly in large public housing estates. On the southern and western parts of the island site formation is in progress for specialist and land-intensive industries.

      Transport continues to be a matter of prime importance in the new town. There is already severe congestion on the single bridge connecting the island to the mainland but the completion of the Tsing Yi North Bridge by late 1987 will improve access and promote rapid development on the island. Work has already started on the Route 5 road tunnel to Sha Tin and several large road improvement schemes are to start in the town to provide connections from this highway to other major roads and to the container terminal. These include the New Container Port Road and the flyover across Castle Peak Road.

      To meet the needs of the expanding population, there is an extensive programme to provide additional park and recreational facilities. Work on Kwai Chung park on the completed Gin Drinker's Bay controlled tip has started.

      It is hoped that innovative recreational facilities can be incorporated which will make this park a regional attraction. Plans have been drawn up to relocate the Yeung Uk Sportsground, which is near the town centre, to an area in the Shing Mun valley to form the nucleus of a major sports and recreation complex.

      It is proposed that land from the relocation of the Yeung Uk Sportsground and from the Tsuen Wan Bay reclamation will be used for a modern commercial/residential development which will revitalise the town centre and provide the catalyst for redevelopment of the older, congested buildings. Redevelopment of some of the older public housing estates has already begun to provide better living conditions and environment for the residents.

      A study is in progress to formulate improvement and expansion plans for existing villages in the green belt area of the foothills, to the north of Tsuen Wan. Proposals will be made to reduce pollution in the streams and to examine the recreational potential of the area.

Sha Tin

The population in Sha Tin has increased by about 100 000 to 400 000 in the past year and is expected to reach 750 000 by the mid-1990s. Housing development, both in the public and private sector, continued apace but the progress on industrial development was not in keeping with the rapid expansion of the town population, although industrial land was available.

In Ma On Shan, which is an extension of Sha Tin, engineering work for the reclamation, land formation and the provision of infrastructure was at its peak. The development potential for Ma On Shan has been reviewed to take into account a proposed additional road link from Sha Tin to Kowloon through Tate's Cairn. Based on the recommendations

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of this review, Ma On Shan will be developed to accommodate a population of about 200 000 and land production is being adjusted accordingly.

Development in Sha Tin was concentrated on a wide range of community facilities projects during the year. Major projects completed included the riverside promenades, a cultural complex, a hotel, and a magistracy. Adequate commercial facilities are provided in all housing estates together with a major commercial complex in the Sha Tin Town Centre.

Other important facilities in the new town include the Prince of Wales Hospital, providing over 1 400 beds and the Chinese University of Hong Kong. To complement these, a technical institute has been completed and other hospitals and a college of educa- tion are in an active stage of planning.

Tuen Mun

The population in Tuen Mun has already risen to about 280 000 and the development of land which is in the pipeline will raise the population to over 500 000 by the mid-1990s.

High density development has been and will continue to be concentrated on land reclaimed from Castle Peak Bay and along the adjoining valley floor between the Castle Peak ridge and the Tai Lam hills. In this 'urban core', eight public housing estates have been completed and are occupied by some 176 000 people. A further 45 000 people live in Home Ownership and Private Sector Participation schemes.

The town centre has grown rapidly and when complete will provide a variety of commercial and recreational activities. The new government offices are occupied and the auditorium is substantially complete. The adjoining private sector commercial and resi- dential development is also progressing quickly. The facilities of the town centre are complemented by the first phase of the town park. Elsewhere a swimming pool complex and two indoor recreation centres have been completed.

Due to polarised migration, there has been an abnormally high level of demand for school facilities. The school building programme has been advanced and 10 schools are under construction. In addition, a new technical institute has been opened.

Within the core of the new town, the existing industrial areas are largely developed, providing floorspace for around 1 700 companies and jobs for over 33 000 workers.

Work has started on the Tuen Mun-Yuen Long Light Rail Transit System which will provide rapid tram links within the town and to Yuen Long. At the southern end of the system, the transport interchange will also provide facilities for buses, taxis, and public light buses, and is linked to the new ferry pier which provides hoverferry services to Central.

In the low density residential areas along the coast to the southeast of town, work has also started on a marina which will provide berths for 300 craft as well as hotel and commercial facilities.

Tai Po

     Tai Po New Town is located at the northwestern extremity of Tolo Harbour about 20 kilometres north of Kowloon. With the completion of the Tolo Highway and the electrified Kowloon-Canton Railway, travelling time from Tai Po to Kowloon is less than 30 minutes by either rail or road.

      Historically Tai Po served as a market town for its rural hinterland, but a rapid build-up in population in recent years has overshadowed this traditional role. In 1986, Tai Po had a population of about 135 000 and under present plans this will grow to about 300 000 in the mid-1990s.

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      About 190 000 people will be accommodated in six public housing estates, four of which will include an element of home ownership. The private residential areas are expected to house about 110 000 people.

Fanling

Fanling New Town, which covers about 790 hectares, includes Fanling, Luen Wo Hui, Shek Wu Hui and Sheung Shui. It lies about eight kilometres north of Tai Po. It will be linked to Yuen Long, Sha Tin and Tai Po by the New Territories Circular Route now under construction. With the opening of Fanling Bypass, Tolo Highway and the Tai Po Bypass, the New Town enjoys a high speed road link to Kowloon, uninterrupted by traffic lights. This road, or alternatively the electrified Kowloon-Canton Railway, enables people to travel to the centre of Kowloon in less than 40 minutes.

      The present population of the new town is about 105 000 but is projected to reach 220 000 within the next decade. At that time about 120 000 people will be accommodated in public housing.

Plans are in hand for the existing retail and commercial 'core' of Shek Wu Hui and Luen Wo Hui to be redeveloped and the On Lok Tsuen industrial area to be improved. Provision has been made for the retention and expansion of the existing villages.

Yuen Long and the North Western New Territories

The growth and development of Yuen Long Town continues at a rapid pace. The present population is about 86 500 and is expected to reach 161 000 by 1995. Work on a major new public housing estate, which will accommodate more than 30 000 persons at Long Ping to the northwest of the town, has reached a stage in which people are already being accepted.

Yuen Long will be linked to the neighbouring Tuen Mun New Town by the Yuen Long-Tuen Mun Light Rail Transit System which is now under construction and which will be operational in 1988. A large transport terminal to serve the town is also scheduled for completion in time with the Light Rail Transit System.

Design work is nearing completion on a landscaped town park which will include a wide range of features and attractions. Meanwhile, work will soon begin on a town square to provide an important open space feature in the eastern part of the town.

      Initial construction works have begun on a comprehensively planned new town at Tin Shui Wai which will also be linked with the Light Rail Transit System. The main land formation works will begin in 1987. This new town has a projected population of 150 000 but with land reserves for expansion to 350 000 in further stages. The first public housing intake is expected in 1992.

Following a comprehensive planning study of the remaining areas in Northwestern New Territories there are proposals to upgrade existing infrastructural systems which will greatly improve the services to, and the environment of, certain existing settlements. Design and implementation of many of the component parts are underway.

The overall intention is that concentrated urbanisation will take place in Yuen Long, Tin Shui Wai and at Hung Shui Kiu in the Tuen Mun/Yuen Long corridor, while established settlements at Kam Tin and Lau Fau Shan will be improved.

Junk Bay and Sai Kung

The first public housing estate in Junk Bay New Town is scheduled for completion in early 1987.

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Following the government's decision to proceed with development of both tubes of the Junk Bay Tunnel, the approved Outline Development Plan for Junk Bay New Town Phase I, which allowed for a population of 223 000, has been revised to make provision for an expanded development area with a total population of 325 000.

Development is being planned around three main districts with populations of 125 000, 90 000 and 110 000 each. The new town will be served by a centrally located and easily accessible major commercial complex which will also include open space, community facilities and a transport interchange. The principal external access linking Junk Bay with East Kowloon will be the twin-tubed Junk Bay Road Tunnel, work on which began in late 1986. The tunnel is supplemented by the improved Po Lam Road, also linking with East Kowloon, which serves as the initial external road link prior to the opening of the road tunnel in 1990.

      The possible future extension of the Mass Transit Railway from Kwun Tong is being studied, and the revised Outline Development Plan makes provision for such an extension to enter Junk Bay New Town from the South.

Outside the new town, plans for Sai Kung District have given priority to the recreational potential and to the containment of new urban development in selected areas. The approved Outline Development Plan for Sai Kung Town and its immediate hinterland has a design population capacity of around 40 000.

Islands District

In recent years, the outlying islands have taken on an increasingly important role in catering for the recreational needs of the people of Hong Kong.

As part of the Islands Development Programme, projects continued during the year to provide for existing and future growth in population, to upgrade living standards and to improve general facilities for the increasing number of visitors to the islands. Although development remains generally low-rise and rural in character, the programme of works is large and diverse, concentrating mainly on the population centres of Mui Wo and Tai O on Lantau, and on Cheung Chau and Peng Chau.

Work on the construction of a new rural public housing estate at Mui Wo for about 1 700 people started in early 1986 to add to the existing rural public housing estates at Tai O and on Cheung Chau. Planning started for the development of more rural public housing estates and other facilities, including ferry piers, schools, market buildings, recreational facilities, sewage treatment plants and abattoirs.

Urban Renewal

To facilitate the process of urban renewal in areas where satisfactory redevelopment is inhibited by factors such as multiple ownership of properties, small size of the site or obsolescent layout, the government has decided that a Land Development Corporation (LDC) should be established. Its main task will be to negotiate the surrender of existing properties and to oversee comprehensive redevelopment of the area. A provisional Board of the LDC was appointed in August. The Town Planning Office of the Buildings and Lands Department has been carrying out studies to identify areas which would be suitable for redevelopment in this way.

      Acquisition of land zoned for open space and government, institution and community uses in the areas covered by the town plans for Western, Wan Chai and Yau Ma Tei continued to be given impetus in 1986 with efforts being concentrated in assembly project

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sites that have been partially acquired. By the end of the year, it was estimated that some $75 million had been spent on the acquisition of properties in these areas.

     Of particular note was the approval given by the Executive Council to resume 24 private lots for implementation of the Chai Wan Folk Museum project, which will be developed and managed by the Urban Council for the benefit of the residents in the eastern district of Hong Kong Island.

Special importance continues to be attached to urban renewal schemes, particularly those implemented by the Hong Kong Housing Society. To assist the Housing Society with its scheme, 100 properties at Sai Ying Pun and Yau Ma Tei were planned to be resumed and cleared by the end of the year.

To enable the government to improve the private roads and to provide for a more efficient traffic management to these roads, a programme was worked out to acquire nine private streets in Kowloon City and North Point.

Potential Development Areas

Five potential development areas, all of which require reclamation from Victoria Harbour, have been identified to meet forecast development needs and provide for further growth in the 1990s. Work continued through the year on the planning and engineering feasibility studies of these five areas at Aldrich Bay, Hung Hom Bay, West Kowloon, Central and Wan Chai and Green Island, which will provide some 640 hectares of land for development and housing for up to 420 000 people.

Reclamation of 37 hectares of land at Hung Hom Bay to provide for expansion of the Kowloon-Canton Railway Freight Yard and for a number of other government uses commenced in mid-1986 and the planning and engineering study report, prepared by consultants commissioned by the Kowloon-Canton Railway Corporation, was submitted shortly afterwards.

      The Central and Wan Chai Reclamation Study will be carried out by consultants for the government and should commence in early 1987.

The study for Aldrich Bay Reclamation, which will have an area of 17 hectares, was completed and work on reprovisioning the typhoon shelter, as a first phase, is scheduled to start in mid 1987.

The effects on the harbour of the proposed reclamations will be assessed by means of hydraulics and water quality studies.

Public Building

During 1985-6, the Architectural Services Department completed 107 building contracts under the Public Works Programme. The total capital expenditure, including that on minor works, was $1,717 million. An additional $395 million was spent by the department's Maintenance Branch in carrying out maintenance and alteration works on 6 300 govern- ment, Urban and Regional Councils and British Forces buildings, including leased accommodation and staff quarters. The overall expenditure, at $2,112 million, shows an increase of some 12 per cent over the 1984-5 expenditure of $1,876 million.

Tendering on all types of projects continued to be very active and highly competitive. During the 12-month period to March 1986 tender prices increased by slightly over 10 per cent, with most of the increase occurring in early 1986. In the same 12-month period labour and basic material costs rose by three per cent and six per cent respectively, with prices continuing to increase slightly during the year, reflecting the general upturn in the construction industry.

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      Major projects completed during 1986 included the Shatin Cultural Complex, incor- porating a 1 450-seat auditorium with extensive stage facilities, orchestra pit and acoustic treatment which make it suitable for large scale orchestral, opera, dance and theatre performances. The complex also includes a three-storey library block of 3 500 square metres providing adult and junior lending areas, study rooms, reference/viewing/listening libraries and exhibition space, which serves as the central library for the region. A marriage registry, restaurants and shops form part of the development which is connected by outdoor terraces to the Shatin Town Park.

      The District Court and Magistracy Building in Harbour Road, Wan Chai, was completed towards the end of the year. This distinctive 28-storey building reprovisions the Causeway Bay Magistracy, and the Kowloon and Victoria District Courts and provides 39 courtrooms on the lower floors catering for several distinct types of legal proceedings including District and Magistrates Courts, Juvenile and Family Courts, Small Claims Court, and Land and Labour Tribunals. The upper 14 floors of the building provide 27 000 square metres of office space which is shared by six government departments.

      Expansion of medical facilities in Hong Kong continued in 1986 with significant progress being maintained on the 1 600-bed Tuen Mun Hospital, due for completion in 1988. Work on the adjacent Nurses' Training School and Quarters, due for completion by late 1988, was well underway. Work on the Laundry Block will begin early in 1987, to be completed at the same time. This is believed to be the largest hospital project currently under construction in the world, but will soon be overtaken by the new Eastern Hospital at Chai Wan. Formation work on the $1,300 million project on a site overlooking Chai Wan Bay was completed at the turn of the year and was quickly followed by work on foundations and substructure. The hospital will serve the whole Eastern District of Hong Kong and will provide 1 750 beds in the Main Block. The development will include a polyclinic, pathology and special blocks, a School of Psychiatric Nursing and staff quarters. Superstructure work will begin early in 1988 and the full project is scheduled for completion in late 1991.

      In addition to these two very large projects, work is continuing on the second phase of the extension of Queen Mary Hospital to provide new facilities for paediatric and psychiatric patients as well as various other medical units. Phase three, involving extensions and alterations to staff quarters and extensive functional alterations to the main buildings, began in October and is due for completion in 1992. The existing wards will then be upgraded to provide a total of 2 000 beds by 1994. Design work was at an advanced stage for the Shatin Convalescent/Infirmary Hospital, the first of its type in Hong Kong, which is due to begin early in 1987, and will provide 700 beds to supplement the existing Prince of Wales Hospital.

      With regard to recreation and cultural facilities, apart from the Shatin Cultural Complex, a similar development in Tuen Mun progressed well during the year and will be completed in early 1987.

      Construction of the Hong Kong Cultural Centre, due for completion in late 1987, also continued, reaching the level of the suspended cable roof by the middle of the year. Foundation work for the new Museum of Art will begin on an adjacent site in early 1987. The notable recreation project completed in 1986 was the new Hong Kong Squash Centre in Victoria Barracks, which provides 18 courts, including one of inter- national standard.

      Expansion work on the Passenger Terminal at Kai Tak Airport progressed throughout the year, despite problems associated with airport security and the need to keep the airport fully operational at all times. To facilitate alterations to existing buildings, certain parts of

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the new terminal will come into use before the whole project is completed in 1988. The passenger capacity of the airport will increase to 18 million per year from the present 10 million.

      Construction of the 47-storey Queensway Government Offices will be completed early next year. The building, providing over 54 000 square metres of office space, is being occupied in phases while construction and fitting-out work goes on.

      Several projects for the disciplined services were also completed in 1986, including a new Marine Police Base in Aberdeen, which forms part of a general expansion and upgrading of marine police facilities. Design work was being carried out for new marine bases at Sai Kung and Ma Liu Shui. Divisional police stations were completed at Castle Peak, and at Tin Sum in Sha Tin, while the new Kowloon Regional Command Centre provided improved communications for the Kowloon area. Work began on the reprovisioning of the Police Tactical Unit in Fanling, a major project to improve training facilities, while construction continued on the final phase of the expansion of the Police Training School in Wong Chuk Hang, and new District Police Stations in Tai Po and Tsing Yi. The Fire Services Department occupied the new Headquarters and Divisional Fire Station in Tsim Sha Tsui East, as well as a new fire station in Shun Lee Tsuen and an ambulance depot in Tai Po. Construction of 274 quarters for the Correctional Services at Hei Ling Chau and Stanley Prison was underway, and a new border crossing facility was completed at Man Kam To to cope with the ever-increasing volume of traffic between Hong Kong and China.

      Apart from carrying out its own building contracts, the Architectural Services Depart- ment continued its considerable involvement in joint-venture projects between the govern- ment and private developers, and with community facilities which are the subject of subvention by the government. Among the joint-venture projects completed or under construction in 1986 are residential flats in Ho Man Tin and Nga Tsin Wai Road, Kowloon, and Tai Tam and Shouson Hill, Hong Kong, from which the government will receive a total of over 390 flats. Other major projects include developments at Tai Po Market and Southorn Playground, Wan Chai, and the new China Passenger Ferry Services Terminal, currently under construction in Kowloon. Subvented work for schools and education, vocational training, social welfare, medical and recreation facilities currently involves the department in over 400 projects.

Private Building

During 1986, 597 proposals for private building development were submitted to the Buildings Ordinance Office for approval, compared with 626 in 1985. Occupation permits issued for completed buildings totalled 404, providing usable floor area of 2 515 834 square metres, an approximate decrease of 13 per cent compared with the previous year. The total amount expended on private building works, excluding the cost of land, was $13,906 million, an increase of 21 per cent. At the end of the year, the private building sector was served by 818 architects, engineers, or surveyors registered as authorised persons, 355 engineers registered as structural engineers, and 2455 contractors registered under the Buildings Ordinance.

Interest in luxury flat development continued as shown by the construction of the very large residential project overlooking Tai Lam Country Park, and the proposed new residential blocks on the site of the old Repulse Bay Hotel. Other significant examples of development for which approval has been given are the new Hong Kong and China Ferry Terminal at Canton Road, the proposed City Polytechnic at Tat Chee Avenue, and the

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Hong Kong Convention and Exhibition Centre at Harbour Road with two hotels, service apartments and offices in the four tower blocks above.

Work on the new Bank of China Building in Central, which on completion will be the tallest in the territory, is still in progress, as is the installation of a new 275 KVA Transmission System involving major tunnelling works, from Wah Fu to Bowen Road, by the Hongkong Electric Company, to meet the ever-increasing demand for electricity.

With the amalgamation of the Buildings Ordinance Office and the Lands Department on April 11 into the Buildings and Lands Department, every effort is being made for private sector building proposals to be considered concurrently under the Buildings Ordinance and lease conditions and in relation to town plan zoning. Comments on these aspects, as well as comments from other interested government departments, are now all communicated in one reply to authorised persons and to developers, within the time limit laid down under the Buildings Ordinance, thereby reducing the time taken to convey essential information on proposed building projects.

Legislative amendments pursued in 1986 included a major revision of the Building (Construction) Regulations, and minor updating of the Building (Planning) Regulations, with legislative amendments to facilitate the control of unauthorised building works also being reviewed.

The year saw a growing public awareness of the problem of illegal structures as it affects the environment and the condition of private buildings. The Buildings Ordinance Office received 5 484 complaints. It also carried out 14 976 inspections and issued 3 797 orders to require removal of illegal structures or rectification of illegal alterations or additions to buildings. A high-powered inter-departmental committee was also formed to review enforcement policy and co-ordinate enforcement programmes by various government departments.

With regard to the maintenance of dilapidated private buildings, the Building Authority closed 32 dangerous buildings, served 23 orders requiring the demolition or repair of dangerous buildings, and served 738 orders requiring repairs to defective concrete. Specialised concrete and steel testing instruments were introduced to determine the extent of the problem, which is rapidly becoming a major cause for concern. The authority also served eight orders requiring remedial works to dangerous slopes.

It experienced its busiest year in slope stabilisation works carried out by the government on behalf of private owners. Many jobs in excess of $1 million have been satisfactorily completed, and more are on hand. Recent innovations in this area have been the introduction of shrubs, in addition to hydro-seeding, to give enhanced surface protection and to replace the trees lost during original slope failure.

With the predominance of high-rise buildings and the ever-increasing height of modern structures, the Buildings Ordinance Office is constantly considering new ways to carry out repairs to buildings at high level. In addition to administering the Buildings Ordinance and Regulations, the office also offered expert advice to various government licensing authorities on the suitability of licensed premises. In this respect, 2 554 applications for food business, 724 for places of public entertainment, 210 for schools, 92 for child care centre and 24 for oil storage installations were examined. The office also handled 470 applications for permitted work permits concerning the control of building construc- tion noise.

Following the government's endorsement of a recommendation to upgrade the priority status of work on the alleviation of pollution of Hong Kong's watercourse by industrial effluents and waste, a specialised team, called the Drainage Unit, was formed in November.

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Its main functions are to exercise control over illegal, defective, inadequate and insanitary drains and sewers in private buildings.

Survey and Mapping

The Survey and Mapping Office of the Buildings and Lands Department is mainly engaged in establishing and maintaining survey control throughout the territory as a basis for land title boundary surveys, and the production and revision of topographical mapping. Some of the other services provided include large scale basic mapping, pro- duction of special use maps, aerial photography and photogrammetry and reprographic services.

Horizontal and vertical control networks, known as geodetic control systems, have been established and maintained to a high order of accuracy. These networks provide the necessary origin for the production of cadastral (or property boundary) surveys and the all-important control for engineering surveys and topographical mapping.

      Cadastral surveys in the urban areas are an ongoing requirement. Most of the work is in the definition of leasehold property boundaries, and the demarcation of land required for government purposes. In the New Territories the emphasis has shifted from the new towns to the village areas where an increasing number of boundary surveys for village house lots are being carried out. Other tasks include the re-establishment of old lot boundaries for redevelopment purposes, and the maintenance of the cadastral records that define land allocation and occupation for every region of Hong Kong.

     Comprehensive map coverage of the territory is provided, ranging from the 3 000-sheet large scale basic mapping series at 1:1 000, through 1:5 000, 1:20 000 and 1:50 000 series down to the single small scale sheets at 1:100 000 and 1:200 000. A new 1:10 000 street map series of the developed areas was completed, mainly for use in guide books and to replace the obsolete 1:7 500 sheets. Guide books, guide maps and countryside leisure series remain in high public demand, necessitating continuous action on revision and periodic redesign and replacement.

A wide range of cartographic services is also provided to other government departments. These services include preparing end-paper maps for the Hong Kong Annual Report, providing geological services for geotechnical control, and preparing base maps for other forecasting services, electoral boundary maps, country park maps, and harbour and glide path maps. Copies of monochrome services and sophisticated photo-reproduction services are also provided by the Reprographic Unit.

The Air Survey Unit operating from the Royal Hong Kong Auxiliary Air Force aircraft continued to provide aerial photographs for engineering design work, volumetric calcula- tions of quarries and reservoirs, environmental studies and large scale mapping. Processing and production of the required data continues to be carried out by the Survey and Mapping Office Photogrammetric Unit. Vertical and oblique photography has been taken using an air survey camera in a RHKAAF helicopter, and has been particularly useful for obtaining photography of dangerous slopes.

The three sets of Survey/Mapping Computers and Plotters, installed in the Hong Kong, Kowloon and Tai Po District Survey Offices, are now fully utilised, undertaking surveying calculations and producing computer activated maps and plans. Terminals from more remote District Survey Offices have been installed to link up with these three main units. The introduction of these modern 'hi-tech' installations has greatly improved efficiency.

The proposal to install a computerised Land Information System is under study.

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     Some 600 metres of seawall was constructed at Ap Lei Chau, enabling four hectares of seabed to be reclaimed, and providing land for roads, boatyards and other industrial and government uses. At Aberdeen, a berthing pier was built for the Marine Police.

Other port works under construction include an extension to a public pier at Cheung Chau and a 180-metre breakwater for naval vessels at Stonecutters Island.

Geotechnical Control

The Geotechnical Control Office (GCO) of the Civil Engineering Services Department continued to exercise control over the geotechnical aspects of public and private building and civil engineering works in the interest of public safety. All new design proposals for works which involved site formation, slopes, earth retaining structures and deep exca- vations were checked for compliance with the necessary standards of safety. A total of 4 400 design proposals were checked. The Geotechnical Control Office also attended or inspected landslip incidents, and gave advice on emergency precautions, evacuation and remedial works.

      Under the geotechnical advisory services for government projects, the GCO undertook 46 geotechnical designs for 46 projects and gave advice on 122 other projects to depart- ments in the Lands and Works group.

      The long-term Landslip Preventive Measures Programme continued at an expenditure of about $55 million per year. In 1986, stabilisation works were completed on 42 slopes and retaining walls at a cost of $44 million, and works commenced on a further 61 slopes and walls. Stabilisation works were also carried out on 13 slopes affecting squatters.

      The Geotechnical Area Studies Programme Report for Hong Kong and Kowloon was released to the public in the latter part of the year. This is the first of 12 reports covering the territory which summarise geotechnical constraints to land development for use in planning and engineering feasibility studies.

      The first of the new Hong Kong Geological Survey 1:20 000 scale maps and explanatory memoirs, covering Sha Tin, Kowloon and Hong Kong Island, were made available to the public by the GCO. The maps and memoirs contain geological information both on land and offshore, in considerably greater detail than has been attempted previously.

A comprehensive archive of geological data including maps, a rock collection, thin sections and photomicrographs, and field photographs has been built up and forms the basis of an enquiry service offered to members of the public.

Quarrying and Materials Testing

The Geotechnical Control Office of the Civil Engineering Services Department manages two government quarries, and supervises six private quarries and two private rock-crushing plants operated under government contract. With the supplement of rock crushing plants associated with development works, the total production in the territory amounted to approximately 11 million tonnes. The total consumption of aggregates, crushed rock fines and sand was approximately 16 million tonnes. The balance of five million tonnes was imported mainly from China.

The GCO also operates several laboratories situated throughout the territory to provide a testing and advisory service to government departments on a wide range of construction materials with the emphasis mainly on soil, rock, reinforcing steel and concrete, but including timber, aggregates, and bituminous products. More than 220 000 tests were carried out during the year.

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Full supply was maintained throughout the year. At the beginning of 1986, there were 396 million cubic metres of water in storage, compared with 428 million cubic metres at the start of 1985. The combined storage of Hong Kong's largest reservoirs, High Island and Plover Cove, was 339 million cubic metres. Rainfall for the year was 2338 millimetres compared with the average of 2 225 millimetres. Water piped from China during the year totalled 360 million cubic metres. The Lok On Pai Desalting Plant was not operated and continued to remain as a 'stand-by resource'. The salinity of water at High Island remained at about 12 milligrams per litre while at Plover Cove the salinity varied from 50 milligrams per litre at the beginning of the year to 46 milligrams per litre at the end of the year.

A peak consumption of 2.22 million cubic metres per day was experienced, compared with the 1985 peak of 1.95 million cubic metres per day. The average daily consumption throughout the year was 1.93 million cubic metres, an increase of 10.3 per cent over the 1985 average of 1.75 million cubic metres. The consumption of potable water totalled 703 million cubic metres compared with 637 million cubic metres. In addition, 107 million cubic metres of salt water for flushing was supplied, compared with 101 million cubic metres.

Planning studies completed in 1986 included the improvement of fresh water supplies to developments at Shau Kei Wan, Telegraph Bay, Kellet Bay and Siu Sai Wan on Hong Kong Island and at Tai Po and Tuen Mun in the New Territories and the improvement of flushing water supplies to areas in southern and eastern Kowloon.

      Major studies in hand included improvement of the fresh water supply to Mid-Level Areas in Central, the provision of a fresh water supply to Sham Tseng and Tsing Lung Tau, extension of water supply to remote villages in the New Territories, and improvement of the Central Salt Water Supply System on Hong Kong Island. Design work for the Waterworks Centralised Workshop at Lung Cheung Road was near completion.

      During the year, construction of the reception and distribution systems for future increases in the supply from China continued. The aqueduct supplying the western New Territories from Muk Wu via Au Tau to Tai Lam Chung was completed and put into operation in early 1986. Construction work continued at the Pak Kong Treatment Works and for the transfer facilities for supplying water to the Junk Bay New Town development and for augmenting supplies to Kowloon East and Hong Kong Island East while design work began on laying the associated eastern cross harbour main.

      To improve the water supply systems on Hong Kong Island, construction of waterworks installations continued at Shau Kei Wan, Wan Chai and Pok Fu Lam with those for Shek O, Sai Wan Ho, North Point, Stanley and Repulse Bay under design. Construction work for uprating the Red Hill Treatment Works also commenced.

      Both design and construction of waterworks installations progressed satisfactorily at all the new towns. Design work for Au Tau Treatment Works commenced, to cater for the new developments in Tuen Mun and Yuen Long. Diversion and protection of the distribution systems in these areas for the construction of the Tuen Mun-Yuen Long Light Rail Transit System were completed.

       Construction work began on laying three submarine mains from the mainland to Tsing Yi and Ma Wan and from Lantau Island to Cheung Chau to provide and improve water supplies to these areas. Design of Cheung Sha Filters was in progress. For the outlying islands, distribution systems were extended in Cheung Chau, Cheung Sha and Pui O.

      Distribution systems in general were extended and enlarged to meet urban and rural demands in the territory. Salt water for flushing was supplied to most areas on Hong Kong Island and the Kowloon peninsula as well as to Tsuen Wan, Kwai Chung, Tsing Yi and

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Tuen Mun in the New Territories. Design work was also being carried out for extending flushing supply to Wan Chai and Aberdeen and improving the systems in Kwun Tong and Ho Man Tin.

Several mechanical and electrical installations for treatment works, pumping stations and service reservoirs were commissioned during the year. These included additional pumpsets at Muk Wu, additional treatment plant and pumping equipment at Tuen Mun as well as new pumping plant at Tsing Yi Island, Tsuen Wan West, Au Tau, Shum Wan Shan and Hong Kong Island Eastern Area. The first stage of the work to provide water supplies to high level villages in the New Territories was substantially completed with five pumphouses commissioned. The second stage, which includes a further 18 pumphouses, was in progress.

New consumer enquiry centres were opened in Kwun Tong and Stanley, joining the existing centres in Causeway Bay, Mong Kok, Tsuen Wan, Sha Tin, Tai Po and Sai Kung. The network continued to prove successful and plans are in hand to extend it throughout the territory.

Planning was in hand to implement the regionalisation of the operational functions of the Water Supplies Department. The first region was set up, initially covering the activities of both Hong Kong Island and the outlying islands.

Electricity

Hong Kong Island and the neighbouring islands of Ap Lei Chau and Lamma are supplied with electricity from the Hongkong Electric Company Limited (HEC), and Kowloon and the New Territories, including Lantau and a number of outlying islands, receive electricity from the China Light and Power Company Limited (CLP).

      The two supply companies are investor-owned and do not operate under franchise. The government monitors the financial arrangements of the companies through schemes of control. The schemes require the long-term financing plans of the companies and any proposed tariff changes to be submitted to the Governor in Council for approval.

Arrangements for monitoring the operations of the power companies were reviewed by an American firm of consultants in 1984, with resultant recommendations for strengthening the monitoring process. The consultancy report was published in March 1985, and a special working party responsible to the Secretary for Economic Services has been set up to develop the recommendations put forward by the consultants. The working party will submit its findings to the Executive Council in the first quarter of 1987.

Generation of electricity in Kowloon and the New Territories is carried out by CLP and three affiliated electricity generating companies - Peninsula Electric Power Company Limited (PEPCO), Kowloon Electricity Supply Company Limited (KESCO) and Castle Peak Power Limited (CAPSO). The combined capacity of the four companies at the end of 1986 was 4 361 MW. ESSO owns 60 per cent and CLP owns 40 per cent of the three affiliated companies.

      Operation of the power companies owned by the affiliated electricity generating companies is in the hands of CLP, which also has its own 20 MW gas turbine at Hok Un 'B'. PEPCO owns the three generating plants: at Tsing Yi 'A' (720 MW), Tsing Yi 'B'(800 MW) and Hok Un 'C' (240 MW). KESCO owns 504 MW of gas turbine capacity, together with the Castle Peak 'A' Station consisting of four 350 MW coal-fired or oil-fired dual fuel units. Adjacent to the Castle Peak 'A' Station is the Castle Peak 'B' Station, owned by CAPCO. This station, scheduled for completion in 1990, will provide four 677 MW dual fuel (coal or oil-fired) units. The first unit was commissioned in early 1986, and the second

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one is due for commissioning in early 1987. The Castle Peak 'A' and 'B' power stations together will have a combined capacity of over 4 000 MW and will become the largest power station complex in Southeast Asia.

      CLP's transmission system operates at 400 kV, 132 kV and 66 kV, and distribution is effected mainly at 33 kV, 11 kV and 346 volts. The supply is 50 hertz alternating current, normally at 200 volts single phase or 346 volts three phase. Supply for bulk consumers is available at 33 kV and 11 kV.

Work continued during the year on the development of an extra high voltage transmis- sion system at 400 kV to transmit power from the Castle Peak Stations to the various load centres. This 400 kV network comprises two transmission rings. One ring, a primary ring encircling the New Territories, was completed in late 1985. It consists of 90 kilometres of double circuit overhead lines and four extra high voltage sub-stations at Lei Muk Shue, Tsz Wan Shan, Tai Po and Yuen Long. The other ring, scheduled for completion in 1988, will provide 22 kilometres of cable circuits linking the major sub-stations at Tsz Wan Shan, Tai Wan and Lai Chi Kok.

Electricity for Hong Kong Island, Ap Lei Chau and Lamma, is supplied by HEC's Ap Lei Chau Power Station and Lamma Power Station. The Ap Lei Chau Power Station, with an installed capacity of 935 MW, is made up of two 60 MW and six 125 MW oil-fired generating units together with two gas turbines with a combined capacity of 65 MW.

      The demand for electricity has grown by 244 per cent over the last decade. To ensure that HEC can meet rising demand in the future, a site on Lamma Island was granted to the company for development of a new dual coal-fired or oil-fired power station. The first 750 MW phase of the station was completed in February 1984. The next phase, when completed, will add another two 350 MW units to the station.

In HEC's system, transmission of electricity is carried out at 275 kV, 132 kV and 66 kV and distribution is effected mainly at 11 kV and 346 volts. With the exception of a small propor- tion of 132 kV overhead transmission lines, all transmission and distribution are carried out underground or by submarine cables. The supply is 50 hertz, 200 volts single phase and 346 volts three phase. Supplies at high voltage are also made available to the larger consumers.

      The transmission systems of CLP and HEC are interconnected by a cross-harbour link, thereby achieving cost savings to consumers through economic energy transfers between the two systems and a reduction in spinning reserve requirements. The interconnector, which was commissioned in 1981, now has a capacity of 480 MVA. Upon full completion, the total capacity will rise to 720 MVA.

CLP's system is also interconnected with that of Guangdong General Power Company of China and over three million units of electricity are exported to Guangdong Province each day. This interconnection results in better utilisation of the company's generating plant during off-peak demand periods. In July 1985, CLP signed a contract with the China Merchants Steam Navigation Company to supply power to the industrial zone of Shekou from August 1986. This arrangement, which affords to Shekou a reliable electricity supply without subsidy from Hong Kong consumers, is another example of the close co-operation on energy matters which has developed on both sides of the border.

      On January 18, 1985, the Hong Kong Nuclear Investment Company (a wholly-owned subsidiary of CLP) and the Guangdong Nuclear Investment Company signed the Joint Venture Contract for the formation of the Guangdong Nuclear Power Joint Venture Company, to construct and operate a nuclear power station at Daya Bay in Guangdong Province. About 70 per cent of the power from the station will be supplied to Hong Kong to help meet the territory's rising demand for electricity well into the 1990s.

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The Daya Bay Nuclear Power Station, when complete, will comprise two 900 MW pressurised water reactors.

Main electricity statistics and sales figures are at Appendix 30.

Gas

     Gas for domestic, commercial and industrial use in Hong Kong is supplied either as manufactured Towngas and substitute natural gas (SNG) by the Hong Kong and China Gas Company Limited (HKCG) or in the form of liquefied petroleum gas (LPG) by most of the major oil companies in Hong Kong. Manufactured Towngas and SNG accounted for approximately 52 per cent of the total gas sold and LPG for 48 per cent in 1986.

About 70 per cent of the total LPG local sales is distributed through a dealer network in portable cylinders and about 30 per cent in the form of a piped gas supply from bulk LPG storage and vaporiser installations located on or adjacent to the developments being served. Towngas is produced in Ma Tau Kok, Kowloon and, recently, also in the Tai Po Industrial Estate. The two gas works have capacities of 3.68 and 1.42 million cubic metres per day respectively. With more gas plant due to be commissioned early in 1987, the manufacturing capacity of Towngas will be raised to 6.52 million cubic metres per day.

Towngas is currently supplied through high pressure transmission pipelines and inter- mediate, medium and low pressure distribution systems to the urban areas of Hong Kong Island, including Aberdeen, Repulse Bay, Stanley and Ap Lei Chau, as well as the urban areas of Kowloon and many towns in the New Territories including Sha Tin, Tai Po, Junk Bay and the industrial towns of Kwun Tong, Yau Tong, Tsuen Wan and neighbouring Tsing Yi Island.

SNG, on the other hand, is produced by HKCG at temporary gas works located in the new towns of Yuen Long and Tuen Mun, and is supplied through separate distribution systems within each township. When natural gas becomes available, the temporary gas works will be decommissioned and the gas will be supplied to the new towns through a high pressure pipeline.

      In 1986, sales of LPG increased by eight per cent over the previous year, while Towngas and SNG sales increased by 12 per cent, mainly as a result of increased sales to housing estates.

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Transport

TOGETHER with the growth of economic and building activity, Hong Kong's transport authorities have always to ensure that there are sufficient means for the smooth movement of people and goods throughout the territory.

This is in line with the government's policy of continuing to develop the road and rail networks and public transport services, and of managing and co-ordinating the operation of the transport system to a high degree of efficiency and productivity.

Transport planning is, therefore, a never-ending process, involving studies and projec- tions which must deal with existing requirements and also look into the future.

A major consideration has been the need to cope with the vast movements of people from the metropolitan areas to the new towns in the New Territories. This task has been heightened in recent years by China's open door economic policy, which has brought about a greater flow of people and goods across the border.

     To replace a now somewhat outdated 1976 Comprehensive Transport Study, which provides projections up to 1991, a new study has begun which will develop a transport investment programme and propose policies up to the year 2001.

In port development and shipping services, Hong Kong, which has one of the most perfect natural harbours in the world, has continued to meet efficiently the demands of an increasing number of ship arrivals and to cope with a growth in both the volume of cargo handled and number of passengers.

In addition, the Marine Department, which administers the port, completed, in co- operation with other government departments, a Port Development Strategy Study in May, 1986. The study provides a strategy and development programme, also up to 2001.

In civil aviation, Hong Kong entered a new and important era with the signing, on September 17, of the Hong Kong/Netherlands Air Service Agreement. It is the first of a series of air service agreements governing the operation of scheduled air services which Hong Kong plans to conclude in the coming years to replace existing arrangements relating to Hong Kong made between the United Kingdom and second-country governments.

Administration

The responsibility for overall policy formulation and the direction and co-ordination of all transport matters rests with the Transport Branch of the Government Secretariat, headed by the Secretary for Transport. In discharging this responsibility, the Secretary for Transport is joined on major issues by the Transport Advisory Committee (TAC), which advises the Governor in Council on transport policies. The TAC has 11 appointed members, including the chairman, and six official members. The Transport Policy Co- ordinating Committee, which advises on the co-ordination of policies, is made up wholly of official members and is chaired by the Secretary for Transport.

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The Commissioner for Transport heads the Transport Department, which administers the Road Traffic Ordinance and other legislation regulating public transport operations other than railways. His responsibilities cover road traffic management, including govern- ment road tunnels, carparks and metered parking spaces, and the regulation of internal road and waterborne public transport. On these matters, he is advised by the Standing Conference on Road Use and the Standing Committee on Waterborne Transport. He is also responsible for the licensing of drivers and the registration, licensing and inspection of vehicles.

In June, as part of a reorganisation of engineering functions within the government, the Highways Office became a separate department under the Director of Highways, with responsibility for designing and building all highways and roads, and for their repair and maintenance. The new department has been placed under the policy direction of the Transport Branch. The Royal Hong Kong Police Force enforces traffic legislation and prosecutes offenders.

A Transport Tribunal, chaired by an appointed member and set up under the Road Traffic Ordinance, provides members of the public with an avenue of appeal against decisions made by the Commissioner for Transport in respect of the registration and licensing of vehicles and the issue of hire-car permits and passenger service licences.

Planning

The basis for the long term planning of the overall development of the territory is the Territorial Development Strategy produced by the Strategic Planning Unit of the Lands and Works Branch. Transport considerations form part of the input to the strategy, and transport planning takes place within the general framework prescribed by it.

      During the year, the Transport Department conducted three short-term and medium- term transport planning studies. These were: a study of cross harbour public transport requirements up to 1991, a re-run of the full Comprehensive Transport Models to update the travel demand forecasts for 1991 and 1996, and the East Kowloon Traffic Study, which examined future transport infrastructure requirements for East Kowloon, in the light of the future opening of the Eastern Harbour Crossing and Tate's Cairn Tunnel.

      Rail operators also conducted studies of the possible expansion of their services. The Kowloon Canton Railway Corporation (KCRC) commissioned consultants to conduct an economic assessment of the viability of extending the Light Rail Transit System, and a feasibility study of railway terminal expansion and associated infrastructure on the Hung Hom Bay Reclamation. The Mass Transit Railway Corporation (MTRC) carried out studies into possible MTR extensions from Tsuen Wan to the north-west New Territories, from Kwun Tong to Junk Bay and from Sheung Wan to the proposed Green Island Reclamation.

Progress was made with the detailed design of new major highways to enable construc- tion to start in 1987. These included the remaining section of the New Territories Circular Road System from Fairview Park to Mai Po, the remaining section of the Island Eastern Corridor from Shau Kei Wan to Chai Wan, and the western access to developments in Ma Chai Hang, Chuk Yuen.

Cross Border Traffic

Traffic between Hong Kong and China via the two road crossing points at Man Kam To and Sha Tau Kok continued to rise sharply during 1986. The number of vehicles travelling in both directions rose from 5 032 per day in December 1985 to 7 220 per day in December

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1986 at Man Kam To and from 340 per day in December 1985 to 778 per day in December 1986 at Sha Tau Kok. Most (97 per cent) were goods vehicles, reflecting the rapid growth in trading and industrial links with China. There was also a limited number of private cars, primarily used by businessmen with interests in Shenzhen, and at the end of the year, 22 companies operated tourist coach services across the border.

The Kowloon Canton Railway also plays an important role in the growing traffic between Hong Kong and China. Some 3.28 million tonnes of freight (1985: 2.52 million) and 2.21 million head of livestock (1985: 2.06 million) were brought into Hong Kong by rail. Exports to China by rail amounted to 848 000 tonnes, a significant increase over the 588 000 tonnes carried in 1985. A new goods yard was opened at Mong Kok, increasing the railway freight handling capacity by about 20 per cent. Cross border passenger traffic on the KCR also increased, from 19.1 million in 1985 to 21.1 million in 1986, and a fourth daily through train to Canton was introduced in April.

Ferry services between Hong Kong and China also carried more passengers, with a total of eight operators carrying 2.4 million passengers (2.1 million in 1985) from the two China ferry terminals at Central on Hong Kong Island and Tai Kok Tsui in Kowloon. A new China ferry terminal is being built at Canton Road in Kowloon and will be completed in 1988.

Road Network

Hong Kong's roads are among the most densely used in the world. At the end of the year, the territory had 266 933 vehicles and 1 345 kilometres of roads - 380 in Hong Kong Island, 359 in Kowloon, and 606 in New Territories. There were, on average, seven million public transport trips by road each day.

Strategic Road Network

The principal feature of the system is Route 1, which runs from Aberdeen on the south shore of Hong Kong Island to Sheung Shui in the northern New Territories, and includes three tunnels - Aberdeen, Cross Harbour and Lion Rock. Other strategic routes within the urban areas are along the north shore of Hong Kong Island, including the Island Eastern Corridor (Route 8), two routes which follow the west and east coasts of the Kowloon peninsula, Routes 2 and 3, and Route 4 which runs along the base of the foothills separating Kowloon from the New Territories.

      The strategic road system in the New Territories connects each of the new towns. The major link in the western New Territories is Route 2. This consists of the Tsuen Wan Bypass and its connections into Kowloon, the Tuen Mun Highway from Tsuen Wan to Tuen Mun and the existing dual carriageway from Tuen Mun to Yuen Long. In the eastern New Territories, the major link is the newly-completed continuation of Route 1 from Sha Tin to Sheung Shui.

     Further improvements to this strategic network are being constructed or planned. On Hong Kong Island, a major project to upgrade Connaught Road (Route 7) to provide a dual-lane free flow facility from Harcourt Road to Hill Road began in August. This project includes the construction of two flyovers, an underpass, three footbridges, widening of Connaught Road West and ancillary works. It will cost about $520 million and be completed by late 1989. Design for the final stage of the Island Eastern Corridor from Shau Kei Wan to Chai Wan was well advanced. Construction, at a cost of about $200 million, will start in 1987 for completion in late 1989.

      In Kowloon, the construction of Stage Three of the West Kowloon Corridor, from Sham Shui Po to Lai Chi Kok, (Route 2), continued and is due for completion at the end of 1987.

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The first two stages, from Gascoigne Road, near the Cross Harbour Tunnel, to Sham Shui Po were finished some time ago. The final stage, an elevated carriageway above Ferry Street, will be built when the traffic situation warrants it. Elsewhere in Kowloon, Route 1 is being improved by the reconstruction of the Princess Margaret Road Flyover. The present flyover, which was built in 1966, before the build up of population in the New Territories, has only three lanes for two way traffic. The new flyover, which will cost about $60 million and be complete in mid-1989, will provide two lanes in each direction, separated by a central divider.

      In the New Territories, the remaining stages of the New Territories Circular Road, between Au Tau and Fanling, are under construction and should be completed by 1991. The future principal road link with China is being constructed at Lok Ma Chau, and is due for completion in 1988. In July, work started on a major flyover to replace the present at-grade junction at Lam Kam Road.

       Elsewhere in the New Territories, construction of the main section of the new trunk road from Sha Tin to Tsuen Wan (Route 5) began in April. This will be the first direct road link between Tsuen Wan and the eastern side of the New Territories, and will replace the present circuitous and heavily used routes via the Lion Rock Tunnel and Tai Po Road. The main section will be a 3.5 kilometres long dual two-lane carriageway, of which 2.5 kilometres will be in tunnels under Smugglers Ridge and Needle Hill. The toll plaza and administration building will be at the Tsuen Wan entrance to the tunnel. The cost of the whole route will be about $1 billion. When it is completed in late 1989, travelling time between Sha Tin and Tsuen Wan will be reduced from the present 25 minutes to about 10 minutes.

      Work started during the year on two other tunnels which will form part of the strategic road network, the Eastern Harbour Crossing and a tunnel from Junk Bay new town, and planning began on a further link between Sha Tin and the urban area, by way of a road tunnel under Tate's Cairn.

Other Road Projects

A major project is being undertaken to provide grade-separated vehicular and pedestrian access to the Wan Chai Reclamation Area, where intensive commercial and other development is going on. The work will cost about $120 million and will be completed by the end of 1987. Other major projects are the improvement of Tai Po Road, and of Lam Kam, Man Kam To and Sha Tau Kok roads, all in the New Territories.

Tunnels

Due to the hilly terrain and the harbour, road tunnels are an important part of Hong Kong's road network. Of the four existing tunnels, the Lion Rock, Aberdeen and Airport tunnels are managed by the Transport Department, and the Cross Harbour Tunnel is owned and operated by the Cross Harbour Tunnel Company Limited.

        Lion Rock Tunnel links Kowloon to Sha Tin and the north-eastern New Territories. It opened in 1967 with a single tube, and in 1978 a second tube was added. The average daily traffic is 79 000 vehicles. Aberdeen Tunnel, opened in 1982, links the north and south sides of Hong Kong Island. The average daily traffic is 37 000 vehicles. The toll for both tunnels is $3 for all vehicles.

      The toll-free Airport Tunnel provides direct road access from the central area of Kowloon to Hong Kong International Airport, and also crosses beneath the airport runway to Kwun Tong. Since the tunnel opened in June 1982, the volume of traffic using it has been increasing steadily and now averages about 55 000 vehicles per day.

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The Cross-Harbour Tunnel - opened in 1972 - runs beneath the harbour between Hong Kong Island and the Kowloon peninsula. The tunnel's traffic increased over the years to such an extent that, with an average of 110 000 vehicles using it per day in 1983, it became the world's busiest four-lane facility. The eight-class toll structure, with charges varying from $2 for motorcycles to $20 for the largest goods vehicles, has remained unaltered. To reduce congestion, the government, in June 1984, introduced a passage tax of from $2 to $5 on all vehicles using the tunnel, except public and private buses and vehicles used by disabled drivers and members of the consular corps. After an initial drop of 15 per cent in the number of vehicles using the tunnel, the figure had risen again to 110 500 per day by the end of 1986.

During the year, work began on the construction of three new road tunnels. One tunnel - the Eastern Harbour Crossing, is a commercial venture being undertaken by the New Hong Kong Tunnel Consortium, an international group of companies formed for the purpose. It will link Quarry Bay on Hong Kong Island and Cha Kwo Ling in Kowloon by means of an immersed twin-tube crossing incorporating both road and rail (MTR) links. The other road tunnels are being built by the government and are the Route 5 Tunnel, linking Sha Tin and Tsuen Wan, and the Junk Bay Tunnel from Kwun Tong to Junk Bay New Town. All three are scheduled for completion by 1989-90. A feasibility study on Tate's Cairn Tunnel, linking Diamond Hill in Kowloon to Sha Tin, was completed in late 1986 and its findings are being examined. Provided that there are no serious unforeseen problems, it is hoped that this tunnel, which will provide much needed relief for the heavily congested Lion Rock Tunnel, can be completed by early 1992.

More Economic Use of Roads

To improve the traffic situation, comprehensive, computerised traffic control measures were introduced in Central District and Wan Chai, in conjunction with the upgrading of Connaught Road and the work on improving the access to Wan Chai Reclamation. Preliminary traffic planning work began on the Hong Kong and Kowloon approaches to the Eastern Harbour Crossing, to cope with the expected increase in traffic flows.

In Kowloon, traffic improvement schemes included the widening of Gascoigne Road at its busy junction with Wylie Road and Science Museum Road in Tsim Sha Tsui. A traffic management scheme, involving the removal of car parking spaces and hawkers in Nelson Street, was implemented in Mong Kok, and a major traffic diversion scheme was introduced to cope with the phased reconstruction of the Princess Margaret Road Flyover. In addition to major schemes, changes in the traffic situation throughout the territory were kept under constant surveillance so that traffic light signal timings could be adjusted to deal with changing traffic flows. About 640 sets of traffic light signals are in operation in the territory, including 320 sets which are under computer control. Planning work was in hand to expand the existing computerised Kowloon Area Traffic Control System into Wong Tai Sin and Kwun Tong to improve conditions there. A contract was awarded to expand the West Kowloon closed-circuit television system, which has proved to be invaluable in traffic control, from the present 10 camera sites to 24. The Hong Kong Island Final Area Traffic Control System is being put into effect, and when completed, will control all traffic light signals on the northern shore of the Island, from Kennedy Town to Shau Kei Wan.

Road Pricing

In December 1985, it was decided that the Electronic Road Pricing System, which involves levying a charge for the use of busy roads at peak periods, should not be introduced for the

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time being. However, consideration will be given to introducing the system if there is sustained growth in private vehicle ownership or a serious increase in traffic congestion.

Parking

During the year, a total of 11 multi-storey carparks, providing 7 125 parking spaces, were operated on the government's behalf by a private company, while five open-air carparks comprising 635 car and lorry parking spaces and 34 motorcycle spaces were operated by the Transport Department. Other off-street public parking is provided by the Civil Aviation Department at Hong Kong International Airport and by the Kowloon-Canton Railway Corporation at railway stations. Surveys conducted in late 1985 showed that there were about 42 400 spaces in multi-storey, housing estate and open-air carparks owned and operated by the private sector throughout the territory. On-street parking is usually metered and is only provided at locations where traffic conditions permit. In mid-1986, there were 14 900 metered spaces throughout the territory operating during the period 8 a.m. to midnight, from Monday to Saturday. In such areas as Causeway Bay, Happy Valley and Tsim Sha Tsui, where parking demand is high, meter operation has been extended to include Sundays and public holidays.

Licensing

The number of new private cars registered rose from 11 200 in 1985 to 13 900 in 1986. However, as a number of old vehicles were scrapped following the introduction of the private car inspection scheme for six-year old private cars in January 1986, there was a slight decrease in the total number licensed - 144 723 in December 1985 to 139 321 in December 1986.

There was a steady increase in the number of goods vehicles, from 77 492 in December 1985 to 86 633 in December 1986.

      At the end of 1986, the total number of licensed vehicles in all classes was 266 933, an increase of 1.5 per cent over the previous year's total. The number of new learner drivers remained at about 4000 per month. Under the Driving-Offence Points System imple- mented in August 1984, 697 driving licence holders were disqualified after accruing 15 or more points for committing offences scheduled under the Road Traffic (Driving-Offence Points) Ordinance.

Vehicle Examination

The Transport Department continued to operate four vehicle examination centres at Kowloon Bay, To Kwa Wan, Sheung Kwai Chung and So Kon Po, carrying out annual re-licensing inspections of all public service vehicles, older goods vehicles and vehicles licensed to carry dangerous goods. Transport Department vehicle examiners were also based at three regional police vehicle detention pounds to inspect vehicles which were involved in accidents or suspected to be defective. Airport vehicles were inspected at the airport, while franchised buses were examined at the company depots.

From January 1, a scheme was introduced to allow private cars over six years old to be examined by authorised private garages for the issue of certificates of roadworthiness. A total of 27 737 cars were checked during the year under this scheme.

      With the continued monitoring of bus maintenance standards, there was an improve- ment in the condition of franchised buses, resulting in a low number of prosecutions for defects found during unscheduled inspections. At the same time, spot checks of non- franchised buses were increased, and were effective in improving the maintenance standards of the smaller bus companies.

1

Ocean Park

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roller coaster thrill

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equestrians at the Pokfulam Riding School

kite enthusiasts

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school sports meet

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Road Safety

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      There was a welcome reduction in road accidents and casualties, but the trend began to slow down during the year, and efforts to maintain the improvements in road safety were continued.

       Traffic accidents involving injury decreased by two per cent in 1986. There were 14 610 accidents, of which 4 100 were serious and 280 fatal, compared with 14 920 in the previous year (4 360 serious, 290 fatal). In-depth investigations were carried out at 124 traffic accident blackspots to identify accident causes. Remedial accident prevention measures were recommended at 69 of these locations. Remedial measures, when implemented, have been shown to reduce accidents by 28 per cent on average.

      Road safety campaigns continued to play an important role in the reduction of traffic accidents. The major themes of the 1986 campaigns were parents' and teachers' role in educating children on road safety. Emphasis was also put on promoting elderly pedestrian safety, cycling safety, and defensive driving on high capacity roads. Apart from using posters, announcements of public interest and leaflets as publicity media, four issues of a 'Road Safety Quarterly' were produced with a wide distribution, through which the road safety message was further disseminated. Also, a new Road Users Code, aimed at promoting safety for all road users, was completed and will be published early in 1987.

      By the end of 1986, the Road Safety Association of Hong Kong operated 228 School Road Safety Patrols with the object of ensuring the safety of school children on their way to and from school. The Road Safety Council, an advisory body, continued to co-ordinate all road safety matters in the territory.

      A second off-street driver training centre is due to open in Sha Tin in 1987, and will provide mandatory off-street training for learner motorcyclists.

       Legislation was enacted to modify the driving offence points system so that the number of points awarded for speeding increased with the severity of the offence, and to regulate the use of motorised carts.

Improvement and Expansion of Public Transport

The improvement of personal mobility through the expansion and improvement of public transport services continued to be one of the principal elements in the government's internal transport policy.

      In May 1986, the extension of the Island Line of the Mass Transit Railway westward from Admiralty to Sheung Wan was brought into operation, resulting in a major increase in the efficiency of transport services along the northern coast of Hong Kong Island. A further extension of the Mass Transit Railway will be carried out to link the Kwun Tong line to Tai Koo Shing as part of the Eastern Harbour Crossing project.

      Construction of the Light Rail Transit system by KCRC to cater for the demand for travel within Tuen Mun and Yuen Long in the north-western part of the New Territories began. The possibility of further extensions of the system in the New Territories is being examined by the corporation.

      Improvements in bus services were concentrated in the New Territories and in the south of Hong Kong Island. The standard and level of bus services continued to improve through more effective planning and monitoring, with operators maintaining reasonable profit margins at comparatively low fares.

      Competition from both road and rail transport has continued to erode the patronage of cross-harbour ferry services, and the planned opening of the Eastern Harbour Crossing in 1990 is predicted to result in further patronage declines. As a result, a phased rationalisa-

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tion of the ferry services of the Hongkong and Yaumati Ferry Company will be implemented over the next five years to maintain an economically viable franchised ferry network.

Kowloon-Canton Railway

The number of passengers using the electrified Kowloon-Canton Railway (KCR) between the towns of Sha Tin, Tai Po and Fanling and the urban area, as well as those travelling to and from China via Lo Wu increased significantly during the year. An average of 311 000 passengers was carried each day by the railway, 63 per cent above the 190 500 it carried three years ago.

A new station at Tai Wai with a transport interchange was opened in April to serve the southern part of Sha Tin New Town, replacing the temporary station.

There were 450 trains running each day between 5.52 a.m. and 0.12 a.m., with four through trains operating each way between Kowloon and Canton. With both Kowloon Motor Bus Company and minibus operators providing feeder services to KCR stations, there were 22 feeder routes in operation.

In July 1986, legislation was enacted enabling the KCRC to build and operate a Light Rail Transit (LRT) system in the northwestern New Territories, between Tuen Mun and Yuen Long. Ground formation and other preliminary work on the first phase, comprising 23 kilometres of track, 41 stops and seven routes in addition to several feeder bus services, began in 1985 and continued during the year. This phase of the LRT is expected to go into service in 1988.

Mass Transit Railway

The Mass Transit Railway (MTR) system now comprises three lines, operating as an integrated whole with 37 stations on the overall length of 38.6 kilometres, and with interchange facilities at Prince Edward, Mong Kok, Admiralty and Central stations.

      Trains run at two-minute intervals during the morning peak hours and 2.5-minute intervals during the evening peak hours on both the Tsuen Wan and Kwun Tong lines. On the Island Line, trains run at 3.5-minute intervals during both morning and evening peaks.

The MTR carried an average of 1.6 million passengers each weekday, making it one of the most heavily utilised underground railway carriers per route kilometre in the world.

A record number of 2.09 million passengers was carried on Christmas Eve, 1986. The arrival of trains at destinations within two minutes of the scheduled time was maintained at 99.8 per cent during the year.

An overall fare increase of five per cent was introduced in May. However, adult fares were maintained within a range of $2 to $5. Purchasers of the higher value common stored-value tickets continued to enjoy discounts which included a last-ride bonus.

A number of promotional activities were devised to attract additional passengers and to increase awareness of the benefits of stored-value tickets. In addition, public an- nouncement and extensive poster campaigns were organised to promote a spirit of courtesy among passengers travelling on the MTR, in particular to allow passengers to alight first.

By the end of the year, the MTR network was served by 39 feeder bus routes. To encourage motorists to use the system, multi-storey carparks are provided adjacent to MTR stations in Kwai Fong, Tsuen Wan, Sheung Wan and Central.

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There are three franchised bus companies in Hong Kong, carrying four million passengers per day on a total of 356 routes.

      The largest, the Kowloon Motor Bus Company (1933) Limited (KMB), has 213 bus routes in Kowloon and the New Territories, and jointly operates 22 cross-harbour routes with the China Motor Bus Company Limited. During 1986, 220 double-deckers and eight coaches were added to the fleet, which at year-end totalled 2 740 buses, comprising 2 599 double deckers, 100 single-deckers and 41 coaches.

      Most of the expansion of bus services operated by KMB took place in the new towns in the New Territories, including four new 'express' services to Kowloon and to railway stations. Air-conditioned coaches were introduced on all KMB airport services.

With the exception of the after-tunnel section fare on the cross-harbour routes, KMB bus fares have remained unchanged since the last revision in February 1985. Fares on urban routes range from 70 cents to $2.10, whereas those on rural routes range from 80 cents to $4. Higher fares are charged on the express, coach and recreation services.

      During the year, 1 100 million passengers were carried by KMB and 210 million kilometres were travelled - increases of two per cent and nine per cent respectively over the previous year.

The China Motor Bus Company Limited (CMB) operates 96 bus routes on Hong Kong Island and Ap Lei Chau and 19 joint cross-harbour routes. In 1986, its fleets of 1019 double-deckers carried 320 million passengers and travelled 55 million kilometres, which represents a patronage decline of eight per cent compared with 1985, largely as a result of competition from the MTR Island Line.

CMB bus fares were revised in April. Fares on urban routes range from $1 to $1.70, and from $1 to $3.50 on suburban routes. Bus fares for cross-harbour services remained un- changed, except for the section fare after crossing the harbour, which was revised to $1.20. Following 12 months of regular monitoring of CMB's maintenance standards in the light of recommendations contained in the Report of the Working Group of the Transport Advisory Committee on CMB Maintenance, the committee concluded that CMB had made encouraging progress in upgrading vehicle maintenance and other aspects of its performance.

On Lautau Island, the New Lantao Bus Company (1973) Limited (NLB) operates eight routes with a fleet of 56 buses, 11 of which are double-deckers. In 1986, NLB buses carried an average of 6 500 passengers each weekday. Recreational demand increased this figure to an average of 15 700 on Sundays and public holidays. NLB bus fares, revised in May, range from 80 cents to $5.70 on weekdays and from $1.20 to $9 on Sundays and public holidays.

The franchise for KMB was extended to August 31, 1995; for CMB to August 31, 1989 and for NLB to March 31, 1991.

      Franchised bus services are supplemented by a fleet of 2 208 non-franchised public buses which are operated for hire on a contract basis, as well as 117 private buses operated by private housing developments and factories for their own needs.

Minibuses

The size of the public light bus (PLB) fleet has been fixed at 4 350 since May 1976. PLBs are 14-seater minibuses authorised under the Road Traffic Ordinance to carry passengers at separate fares. Some PLBs are used on scheduled services (green minibus services) and others on non-scheduled services (red PLB services).

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In 1986, red PLBs carried about one million passengers daily. There is no control of fares and routes for red PLBs, which are popular with passengers prepared to pay higher fares for a quick, direct and comfortable service with the added advantage of being able to board or alight anywhere along unrestricted sections of the route. However, this type of red PLB contributes to congestion as it tends to concentrate in the main bus and tram corridors, delaying high capacity carriers and other traffic by its frequent stopping.

Expansion of the green minibus scheme continued in 1986, with PLBs being converted to fixed routes and fares under the control of the Transport Department, to serve areas of particular need. An additional 15 green minibus routes were introduced in the year. At the end of the year, 152 green minibus routes utilising 1 125 PLBs were in operation throughout the territory, with about 514 000 passengers being carried daily. Concessionary fares for handicapped passengers, elderly persons and students are offered on some green minibus routes.

A fleet of 2 165 private light buses is also maintained by schools, private residential developments and commercial enterprises for their own needs. Approval for public light buses to bear commercial advertisements on the interior or exterior parts of the vehicles was given on April 1.

Residential Coach Services

To serve the transport needs of outlying residential areas, and particularly private housing developments, a residential coach service scheme was introduced in 1982 to complement the franchised bus services. Residential services are authorised under a passenger service licence with certain conditions so that the service can only be operated according to the route, timetable and stopping places approved by the Commissioner for Transport. Licences, which are usually valid for one year, may be renewed, depending on the need for the service. There are 21 residential coach routes in operation - 20 in the New Territories, and one on Hong Kong Island, with 85 single-deck buses. Some 5 500 passengers were carried in 1986, representing a 15 per cent increase over the previous year.

Trams

The tram service in Hong Kong dates back to 1904 when Hongkong Tramways Limited began services on five over-lapping routes. Operating along the densely populated north shore of Hong Kong Island, the tram service comprises six overlapping routes over 30 kilometres of track. The trams continued to be well patronised even after the opening of the MTR Island line. During 1986 the fleet of 161 double-deck tramcars carried a daily average of 334 000 passengers. Fares were last revised in 1983 and remained at 60 cents for adults, 20 cents for children under 12 years and 30 cents for student travel card holders.

To improve the operational efficiency of the company's services, approval was given to relocate the depot facilities from Sharp Street East to Sai Ying Pun and Sai Wan Ho. The trams are now being refurbished and modernised so as to make travel more comfortable.

The Peak Tramway Company Limited has been operating a cable-hauled funicular railway service up Victoria Peak between the lower levels of Hong Kong Island and Victoria Gap, 397 metres above sea level, since 1888. The service stops at four stations on the 1.4 kilometre line and in places negotiates a gradient of one-in-two. It is popular with tourists, and at the same time provides a direct route to Central District for Peak residents. In 1986, the service carried 7 200 passengers a day, an increase of 13 per cent compared with 1985.

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An aerial ropeway operates at Ocean Park in the Southern District of Hong Kong Island. Designed to carry visitors between the park's lowland and headland sites, the system has 246 cars in service with a total carrying capacity of 1 476 persons. During the year the system carried an average of 3 000 passengers a day.

Ferries

Ferries continue to provide an important means of public transport in Hong Kong. Services are mainly provided by the two franchised companies - the Hong Kong and Yaumati Ferry Company Limited (HYF) and the Star Ferry Company Limited (SF). The Star Ferry operates a fleet of 10 vessels plying across the harbour between Edinburgh Place on Hong Kong Island and Tsim Sha Tsui and Hung Hom in Kowloon. During the year, the company carried 40 million passengers on its two routes. HYF operates 16 cross-harbour services (three of which carry vehicles), nine outlying district services and two excursion services. The company has a fleet of 85 vessels, comprising double and triple-deck ferries and high speed hovercraft, some of which are air-conditioned. Fares on HYF's ferry services were increased on January 1. Cross-harbour passenger fares range from $1.7 to $5 for ordinary class. Outlying district fares range from $1 to $9 on weekdays and $1 to $11 on Sundays and public holidays. During the year, HYF carried 77 million passengers and four million vehicles, a decline of eight per cent and five per cent respectively compared with 1985.

As a result of the opening of the MTR Island Line, HYF's cross-harbour passenger ferry services experienced a drop in patronage of 13 per cent compared with 1985. This trend is expected to continue beyond the projected opening in 1990 of the Eastern Harbour Crossing. The withdrawal of the Chai Wan to Kwun Tong passenger service at the end of March marked the beginning of a phased reduction in cross-harbour services in response to continuing decline in patronage.

      In addition to the services operated by the two franchised ferry companies, 10 minor ferry services are provided to outlying islands by six licensed operators. To cater for local demand, mainly in the outlying rural areas, supplementary services known as 'kaitos' are available. During the year, 126 'kaitos' were in operation. Both types of services are controlled by licences issued by the Transport Department under the Ferry Services Ordinance. In Victoria Harbour, fleets of motor boats known as 'walla-wallas' are available for hire at public piers.

       Three new piers were opened during the year - one at Tsing Yi, one at Sai Wan Ho for the licensed ferry service to Rennie's Mill and one near Butterfly Estate in Tuen Mun.

Taxis

Hong Kong is served by three types of taxis: Hong Kong and Kowloon taxis which may operate anywhere within Hong Kong Island, Kowloon and the New Territories (but primarily serve the urban areas); New Territories taxis which operate only in permitted areas in the New Territories, and Lantau taxis which operate only on Lantau Island.

       For urban area taxis, fares were $5 for the first two kilometres and 70 cents for each subsequent 267 metres. For the New Territories and Lantau, the fare was revised to $4 for the first two kilometres and 80 cents for each subsequent 400 metres, from March 1. A double toll charge is applicable for taxis crossing the harbour.

      A comprehensive review of taxi policy is being carried out by a sub-committee of the Transport Advisory Committee. It is scheduled to be completed in late 1987.

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     Port Development and Shipping Services The port of Hong Kong has continued to meet efficiently the demands of an increasing number of ship arrivals as well as a growth in both the volume of cargo handled and passenger numbers.

      Victoria Harbour, lying between Hong Kong Island and Kowloon, is the centre of shipping activity. It has an area of 5 000 hectares and varies in width from 1.2 to 9.6 kilometres.

      The optimum utilisation of all port facilities is reflected in the turn-round time for ships using the port, with vessels working cargo at harbour mooring buoys remaining on average for just two-and-a-half days and container ships at Kwai Chung terminals remaining for about 13 hours. These are probably the fastest turn-round times for any port in the Far East.

      The administration of the port is the responsibility of the Director of Marine. He is advised by various committees through which the closest liaison with shipping and commercial interests is maintained to ensure that facilities and services are developed to meet the changing needs of Hong Kong and of ships using the port.

      In 1986, some 14 050 ocean-going vessels and 81 150 river-trade vessels called at Hong Kong and loaded and discharged more than 62 million tonnes of cargo. This included 34 million tonnes of general goods from ocean-going vessels, of which 44 per cent was containerised cargo.

      Although containerisation is a major cargo transport method, a considerable amount of dry cargo handled in Hong Kong is transported at some stage by lighters and motor cargo boats. About 2000 of these were operating at the end of 1986, and 26 per cent were mechanised. Break-bulk cargo is normally handled, using ships' gear, but floating heavy-lift cranes are available when required.

      The port of Hong Kong handled 2.7 million TEUs (20-foot equivalent units) in 1986. The container terminals at Kwai Chung provide six berths with more than 2 300 metres of quay backed by about 90 hectares of cargo handling area. This area includes container yards and container freight stations, all of which are operated by private companies or consortia. Up to six 'third generation' container ships can berth simultaneously at the container terminals. One of the terminal operators at Kwai Chung provides a 12-storey multi-purpose godown which has a usable floor area of 52 400 square metres, with the first two floors serving as a container freight station. A six-storey cargo distribution and handling centre, one of the largest of its kind in the world, is also being constructed and will more than double the operator's present container capacity. Various other multi-storey godowns in the vicinity of Kwai Chung provide additional storage facilities.

      Other wharves and terminals provided and operated by private enterprise are capable of accommodating vessels up to 305 metres in length with draughts up to 14.6 metres. Cargo handling facilities in the public sector include cargo working areas at Wan Chai, Yau Ma Tei, Kwun Tong, Tsuen Wan, Western District, Rambler Channel, Chai Wan, Sham Shui Po, Kowloon Bay and Tuen Mun. These areas are administered by the Marine Depart- ment. Government policy calls for the provision of public cargo working areas throughout the territory to maintain swift and efficient internal cargo movement.

The Marine Department, in co-operation with other government departments, com- pleted a Port Development Strategy Study in May. The object of the study is to recommend a strategy and development programme for the provision of additional major port facilities in Hong Kong up to the year 2001, taking into account anticipated future demands derived from trade forecasts, the capacities of various existing and planned port facilities and

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medium and long-term strategic development opportunities. The key finding of the study is that additional container terminal and related facilities will be required to meet the anticipated increased demands in the 1990s and beyond. To this end, the study recommends further reclamation to the west of Stonecutters Island as the best development option. The feasibility of this recommendation is now being studied in depth.

In the short term, even though Hong Kong already ranks as the leading container port in Asia and among the top three in the world, further expansion of the Kwai Chung Container Port is taking place. The reclamation of some 26 hectares of seabed at Kwai Chung Creek, which commenced in July 1984, continued throughout 1986. The new land formed will be used to provide back-up space for the container terminals.

As a second phase of the expansion programme, work commenced on the reclamation of a further 29 hectares of land at Kwai Chung for the provision of an additional three berths and associated terminal facilities. Construction of this new terminal is expected to be completed by the end of 1989.

During the year, 9.4 million passengers were carried between Hong Kong and Macau by jetfoils, hydrofoils, jetcats, hoverferries, high-speed ferries and conventional ferries operat- ing from either the Hong Kong-Macau Ferry Terminal on Hong Kong Island or the Sham Shui Po-Macau Ferry Terminal in Kowloon.

About 2.34 million passengers, representing an increase of 13 per cent over 1985, travelling between Hong Kong and 18 destinations in China, passed through the temporary terminals at Tai Kok Tsui and Central. Hoverferries, jetcats, catamarans and conventional ferries operate on these routes.

In January 1986, a temporary terminal in the Central District of Hong Kong Island was opened to relieve congestion at the Tai Kok Tsui Terminal in Kowloon to cope with increasing passenger traffic to China.

The construction of a new ferry terminal in Tsim Sha Tsui on the site of the existing Kowloon Public Pier Number 54 is progressing on schedule. This new terminal is expected to open in early 1988. It will serve destinations in China and replace the temporary terminals at Tai Kok Tsui and Central.

Within the port of Hong Kong, 71 mooring buoys are provided and maintained by the Marine Department. Of these, 44 are classified as 'A Class' moorings, suitable for vessels up to 183 metres in length, and 27 are classified as 'B Class' moorings suitable for vessels up to 137 metres in length. These moorings include 55 special typhoon moorings to which vessels may remain secured during the passage of tropical storms, so improving working efficiency and reducing operational costs.

For ships calling at Hong Kong, immigration facilities are available on a 24-hour basis at the Western Quarantine Anchorage and from 6 a.m. to 6 p.m. at the Eastern Quarantine Anchorage. Quarantine facilities are available continously at the Western Quarantine Anchorage, but at the Eastern Quarantine Anchorage, only between 6 a.m. and 6 p.m., on request through the Port Communications Centre. Vessels may, on application, obtain advanced clearance, advanced immigration processing and advanced free pratique by radio.

Hong Kong occupies a prominent position as a centre for shipowning and management activities. As a British port of registry, the tonnage of shipping registered in Hong Kong is of significance internationally. Despite a general recession in world shipping, the Hong Kong registered fleet experienced a sizeable growth, from 7.1 million to eight million gross tons during the year, bringing the position of the Hong Kong register to within the 12 largest registers in the world. The regulatory administration of ships registered in Hong

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    Kong is the responsibility of the Shipping Division of the Marine Department, in respect of maritime control, safety standards and international certification to facilitate their world- wide operation. Hong Kong shipowners also control a significant percentage of the world's deadweight tonnage other than those registered in Hong Kong. Most local shipowners and connected businesses are represented by the Hong Kong Shipowners Association.

     Ships registered in Hong Kong adopt, in all key aspects, the same standards of construction, safety, manning and merchant shipping legislation as those registered in the United Kingdom. This status cannot continue beyond 1997. The Sino-British Joint Declaration provides that the future Hong Kong Special Administration Region may continue to maintain a shipping register under its own legislation. It is therefore necessary to modify existing laws applicable to Hong Kong concerning registration to put them into a form in which they can continue to exist under British administration until 1997 and under the Government of the Hong Kong Special Administration Region thereafter.

A consultative document was published in May 1985, outlining preliminary proposals on the modified register and seeking views on them from those concerned with shipping. Taking into account the views received, a plan for the modified register was drawn up and discussed in the Sino-British Joint Liaison Group which, at its fourth meeting in July, agreed on the principles for the establishment of the modified register. A paper setting out these agreed principles was published in October, and detailed proposals on the modified register are now being developed by the government in consultation with other interested parties.

     As regards the present register, the Shipping Division of the Marine Department undertakes the survey and certification of Hong Kong registered vessels under various international conventions, and also provides a plan approval and survey service. Statutory surveys of vessels intended for Hong Kong register are undertaken world-wide by surveyors of the division. Locally, surveyors are made available to British or foreign ships for the issue of certificates under the International Convention for the Safety of Life at Sea (SOLAS) 1974, and other international maritime conventions.

A number of such international certificates were issued to foreign flag ships at the request of foreign governments. Additionally, one of the world's largest fleets of high technology dynamically supported craft, comprising jetfoils, hydrofoils, side wall hovercraft and jetcats, operates from Hong Kong under the survey and certification of the shipping division. With some exceptions, vessels plying within the waters of Hong Kong need to be licensed under the Shipping and Port Control Ordinance. These, too, are inspected and issued with certificates.

     Hong Kong-registered ships maintain a high standard of safety in compliance with the SOLAS convention and its amendments for improved safety measures. This conven- tion is generally regarded as the most important of all international treaties relating to maritime safety.

     A convention of particular significance which is in force internationally and observed by Hong Kong registered vessels, is the International Convention for the Prevention of Pollution from Ships (MARPOL) 1973 as modified by its 1978 Protocol. Hong Kong registered vessels comply with the requirements of the convention and are issued with International Oil Pollution Prevention (IOPP) certificates. As a result, Hong Kong ships are now able to produce authoritative evidence of compliance with MARPOL, thereby making a positive contribution to the environmental protection of the sea. Moreover, as visiting ships are required to comply with MARPOL standards, the risk of pollution to Hong Kong waters has been reduced.

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      During the year, Hong Kong also adopted an important amendment to the SOLAS Convention 1974, which came into effect internationally. The new requirements provide for improved standards of life-saving appliances and related training measures, and are observed by Hong Kong-registered ships, thereby contributing to a greater level of safety for shipping generally.

      Phase 1 of compulsory pilotage in Hong Kong is now in operation and it is expected that Phase 2 will be introduced in 1987. The final phase will be implemented in 1989, after which all ships of 1 000 gross registered tons and over will be required to engage the services of a Hong Kong-licensed pilot when navigating within the pilotage area. The Director of Marine is the Pilotage Authority in Hong Kong.

All licensed pilots are members of the Hong Kong Pilots Association which provides pilotage services on a commercial basis, the fees for which are governed by statute.

      All navigation buoys in Hong Kong waters are in conformity with the International Association of Lighthouse Authorities Maritime Buoyage System and all fairway buoys are lit and fitted with radar reflectors. Other aids to navigation in the harbour and its approaches are constantly being improved to ensure greater safety and the programme conversion to solar power of a number of light beacons is continuing and proving successful.

The Port Communications Centre is linked by teleprinter, telephone and VHF radio to Green Island Signal Station and by telephone and VHF radio to Waglan Island Signal Station. The Marine Department operates a continuous VHF radio-telephone port operations service, based on international maritime frequencies, which gives comprehen- sive marine communications throughout the harbour and its approaches. The teleprinter and telex facilities are also linked directly to users on a world-wide basis.

A continuously monitored emergency communications network links the Marine Depart- ment's Search and Rescue Co-ordination Centre with aircraft of the Royal Hong Kong Auxiliary Air Force and military helicopters, Marine Police and Fire Services Department launches and other similar facilities. In the event of a vessel experiencing difficulties in the South China Sea within 1 300 kilometres of Hong Kong, the Marine Department will activate the Maritime Rescue Co-ordination Centre in liaison with other Rescue Co- ordination Centres in the region.

      Marine Department patrol launches maintain a watch on shipping, fairways, typhoon shelters and cargo working areas. The launches are in continuous radio contact with the Port Communications Centre, enabling the centre to initiate and co-ordinate any action required. A fleet of fire-fighting vessels operated by the Fire Services Department is kept in a state of readiness with units stationed on both sides of the harbour.

      Following approval by the Finance Committee of the Legislative Council in July 1986, implementation of a Vessel Traffic Management System to reduce navigational risks for the waters of Hong Kong and its approaches commenced, and is expected to be completed in early 1989.

The system will consist of five remote radar sites located at Black Point, North East Lantau, Shek Kwu Chau, Bluff Head and Waglan Island, with the Vessel Traffic Centre located at the new Macau Ferry Terminal. It is intended that the system will be put into operation by phases as major elements are installed.

      Good bunkering facilities are provided in the port, and vessels may be supplied with fuel oil either from wharves at oil terminals or from a large fleet of bunkering barges. Fresh water is obtainable at commercial wharves or from private water boats which service vessels at anchor or on government mooring buoys.

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There are extensive facilities for repairing, maintaining and dry-docking or slipping all types of vessels, including oil rigs, up to about 230 metres in length and 27 metres beam. Five floating dry-docks are located off Tsing Yi Island, the largest being capable of lifting vessels up to 40 000 tonnes deadweight. Hong Kong has a large number of minor shipyards equipped to undertake repairs to small vessels. These yards also build specialised craft, including sophisticated patrol craft and pleasure vessels.

Hong Kong is a prominent centre for the recruiting of seafarers. The Seamen's Recruiting Office and the Mercantile Marine Office register and supervise the employment of approximately 9 500 active seafarers on board some 750 ships of many flags. Consider- able attention has been given to providing more comprehensive training for Hong Kong seafarers and, in this respect, the temporary seamen's training centre at Little Sai Wan provides additional in-service training to comply with the requirements of the International Convention on Training and Certification of Seafarers. Construction of permanent premises for the Seamen's Training Centre has started, and this centre should open in mid-1987.

      The Examination Section conducts a wide range of examinations for candidates wishing to obtain certificates of competency for use on various sizes and types of vessels sailing world-wide or plying within local waters. In addition, the section inspects, supervises, and monitors all aspects of training at approved establishments for the acquisition of various maritime qualifications recognised by the Hong Kong Government.

The Mariners' Clubs in Kowloon and Kwai Chung provide recreation and welfare facilities of a high standard to visiting seamen of all nationalities.

Civil Aviation

The Civil Aviation Department is responsible for all aspects of civil aviation in Hong Kong apart from the licensing of scheduled air services which falls to the Air Transport Licensing Authority, an independent statutory body. The department consists of five divisions dealing with air traffic control, aviation safety, technical matters and planning, inter- national relations governing air services and management of the Hong Kong International Airport. It is provided with accounting services to control revenue and expenditure, and with office management services for staff establishment, discipline and welfare.

Hong Kong's single-runway airport is the product of a continuous programme of modification and development to meet the rapid growth in air traffic and the introduction of new aircraft. A full range of facilities is available including aircraft engineering, in-flight catering and one of the largest air freight complexes in Asia.

Signature of the Hong Kong/Netherlands Air Services Agreement on September 17 marked the beginning of a new and important era in Hong Kong's civil aviation history. This is the first in a series of air service agreements governing the operation of scheduled services which Hong Kong aims to conclude with other governments in the coming years. These agreements have been specifically designed with the relevant provisions in mind of the Joint Declaration on the future of Hong Kong.

At Hong Kong International Airport an increase in passenger traffic of 7.8 per cent was recorded in 1986, compared with 3.1 per cent in 1985. A total of 10.6 million passengers passed through the airport in 1986, compared with 9.8 million the previous year, and this was the first time ever that the annual passenger throughput exceeded the 10 000 000 mark. General cargo including manufactured goods imported, exported and re-exported by air totalled 536 000 tonnes compared with 430 000 tonnes in 1985. The value of airborne goods totalled $122,927 million. Viewed against Hong Kong's total trade in imports, exports and

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re-exports, imports by air made up about 21 per cent, exports by air about 28 per cent and re-exports by air about 19 per cent in value terms respectively. The United States was the major market for exports and re-exports by air, accounting for 50 per cent and 24 per cent respectively, of the trade.

      An increase of 8.5 per cent in aircraft movements was recorded, bringing the annual total to 64 770. More than 80 per cent of the aircraft calling at Hong Kong were wide-bodied.

      The number of airlines using Hong Kong International Airport and the overall frequency of their operations remained substantially unchanged. During the year, some 30 scheduled airlines operated about 1 100 scheduled flights weekly between Hong Kong and some 70 other cities. The scheduled air services network covered Europe, the Middle East, South Africa, North America, Australasia and Asia. In addition, an average of 75 non-scheduled flights each week were operated between Hong Kong and Europe, the United States, Australia and Asia.

      The year saw the introduction of Cathay Pacific Airways' scheduled services to Peking, Rome, Paris, Amsterdam and San Francisco and the re-introduction of scheduled services to Auckland and Nagoya. A total of 22.5 per cent of Cathay Pacific Airways' shares were offered for sale, 15 per cent being allocated to the public and the airline's employees. The airline has been listed on the Hong Kong Stock Exchange since May. Cathay Pacific Airways placed an order with Boeing for two B747-400 aircraft with options for a further seven B747-400's and two B747-300's, and converted an option for a B747 freighter into a firm order. Cathay Pacific Airways was also the launch customer for the Rolls Royce RB211-524-D4D engines for the B747-400.

      Hong Kong Dragon Airlines continued to operate B737 non-scheduled services between Hong Kong and a number of cities in China, other Asian countries and Micronesia.

      In May, the Air Transport Licensing Authority granted Hong Kong Dragon Airlines a licence to operate scheduled services to four cities in Thailand. In July, the ATLA granted Cathay Pacific Airways licences to operate scheduled services to Manchester and Amsterdam.

      Work continued on the extension of the Airport Passenger Terminal Building and is expected to be completed in 1988. The capacity of the terminal building will then be almost doubled to 18 million passengers per annum.

      In May, work started on a 22-month-long project to provide paved shoulders along the full length of the runway to overcome severe soil erosion problems on the grass areas adjacent to the runway. During the entire contract period of the project, the runway will be closed to aircraft operations from 0001 to 0845 hours daily.

       In June, a Doppler VOR/DME long-range radio navigation aid on Tung Lung Island was commissioned for operational use. This replaced obsolete VOR/DME equipment at Mount Kellett which had been in use for more than 20 years.

       The Civil Aviation (Aircraft Noise) Ordinance, which empowers the government to prohibit aircraft not meeting international noise standards from landing and taking off in Hong Kong, was enacted in June, but by the end of the year had not been brought into operation. A noise study into the effects of helicopter operations at the Fenwick Pier Street helipad on the nearby Hong Kong Academy for Performing Arts showed that subject to certain restrictions on helicopter types and flight paths, there was no significant adverse effect. A tenancy agreement for the use of the facility for a further five years was therefore approved by the Executive Council.

      Air-conditioned coaches with large luggage storage capacity were introduced on bus services between the airport and Hong Kong Island and Tsim Sha Tsui.

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Public Order

THE Royal Hong Kong Police Force has responsibility for preventing and detecting crime and continues to expand and adapt its resources to meet the increasing challenges of modern police work. For example, long-term schemes are being introduced to enhance the police force's radio communications network and computer facilities.

In 1986, a strategy was approved to increase gradually the proportion of local officers in the senior ranks of the police force. To preserve the high efficiency and morale of the police force, promotion on merit will continue to take priority.

      In tackling the illicit trade in drugs, the police maintain close liaison with the Customs and Excise Department. The Customs and Excise Department also works closely with over- seas law enforcement agencies to combat smuggling and to enforce the Copyright Ordin- ance. Work continued on amending the Dutiable Commodities Ordinance, which provides for the control of the import, manufacture and distribution of dutiable commodities.

      The Independent Commission Against Corruption enforces the Prevention of Bribery Ordinance and continues to educate the community on the evils of corruption. On occasion, the commission liaises closely with the police force to pool resources and expertise.

      The Correctional Services Department administers the penal system, runs all different types of rehabilitation and correctional programmes, and manages closed centres for Vietnamese refugees. During 1986, the department continued to expand and improve its facilities and services. Great emphasis is placed on vocational and educational training of inmates.

      Fire fighting is not an easy task in the crowded areas of Hong Kong. The Fire Services Department, nevertheless, provides an efficient and modern service to the community, with fire stations strategically located all over the territory. The work of the Ambulance Command of the department continued to increase during the year, receiving about 1 000 calls a day.

Fight Crime Committee

The Fight Crime Committee, under the chairmanship of the Chief Secretary, continued to reflect the high priority given by the government to the fight against crime and the maintenance of law and order. The committee provided advice and recommendations on a wide range of matters, including triad and gang activities, control of imitation firearms, approaches to juvenile crime and young offenders, nuisance caused by vice establishments, and regulation of Hong Kong's security industry.

The menace posed by triads, gangs and organised crime was the focus of much attention during the year. In April, the committee published a discussion document, 'Options for Changes in the Law and in the Administration of the Law to Counter the Triad Problem',

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which contained a wide range of legislative and other options aimed at making the fight against organised crime more effective. The document attracted much public and media interest and a variety of views were expressed during the three-month consultation period, culminating in an adjournment debate in the Legislative Council in July. Although some options gained more favour than others, there was clear public support for vigorous action to counter the triad threat. In October, the Chief Secretary made a statement in the Legislative Council, detailing the options that the government intended to pursue further. Work has begun on developing various options in draft legislation.

Discussions continue to be held with government departments on areas for which they have responsibility and in which triads and gangs might be operating, with the aim of preventing criminal activity by tightening controls and changing procedures.

The Fight Crime Committee paid special attention to the problem of juvenile crime. It followed up on recommendations to help prevent young people from slipping into delinquency, and to reduce recidivism among those who already had delinquency records. A decision was made to establish a Young Offender Assessment Panel which could better co-ordinate advice given to the courts on the backgrounds of young offenders and the correctional programmes most likely to reform them. The committee also embarked on a detailed examination of triad influence in schools and measures to combat this.

The committee monitored the implementation of the standardised law and order statistics system which became fully operational in July, providing compatible statistics from all branches of the criminal justice system. The proposal to establish a more sophisticated integrated statistics system was endorsed and planning for this began.

Discussions were started with the Security Association on how the security industry could best be regulated to ensure that the services it provided met adequate standards. In connection with this, amendments to the Watchmen Ordinance to improve the quality of watchmen and measures to control the standard of burglar alarms were examined. Liaison with goldsmith and jewellery trade associations was maintained in order to encourage sufficient security measures on the part of these trades, and the proposed scheme of using closure orders to tackle the problem of vice establishments causing nuisance in residential buildings was further refined.

The District Fight Crime Committees continued to play a vital role in the fight against crime by organising their own publicity campaigns on various issues and supporting territory-wide efforts, such as the Neighbourhood Watch Scheme and annual fight crime campaign, activities which bolster public awareness of anti-crime measures and involve- ment in these measures. The district committees also reflect the concerns of the community on law and order issues, and close links are maintained with the main committee, as epitomised by the annual conference of all members of the district and central committees.

Police Force

The visit of the Queen and Prince Philip in October was the high point of a year that was characterised throughout by a great deal of activity and advancement for the Royal Hong Kong Police Force. The Royal visit required a large police commitment, deployed mainly to marshal the large crowds that gathered to see the Queen.

      Earlier in the year, the force was honoured by the visit of Princess Alexandra, who is the Honorary Commandant-General of the Royal Hong Kong Police Force. Accompanied to Hong Kong by her husband, the Honourable Angus Ogilvy, the Princess unveiled plaques to open the Police Officers' Club in Causeway Bay and the Police Sports and Recreation Club in Boundary Street, and commissioned three new Marine Police launches.

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In May, the Commissioner of Police made his first official visit to Peking under an arrangement to exchange information and promote closer co-operation. This has resulted in improved international criminal police organisation (Interpol) contacts.

The extent of triad society influence in the community was a dominant subject of concern in 1986, reaching a peak with the release of the Fight Crime Committee's discussion document on options for changes in the law and in the administration of the law to counter the triad problem. Following an investigation, which started in mid-1985, police mounted a large scale anti-triad operation overnight on July 15 and took in 34 men for enquiries into various offences. In the wake of the operation, police set up a special anti-triad hotline, which produced encouraging results.

Other crime trends which came under particular scrutiny were the increase in shoplifting cases, most notably in the new towns; the law and order situation in unlicensed billiard saloons; and the negligent carrying of very large sums of money by victims of robberies who were often unaccompanied workers acting as couriers for their employers.

To counter the shoplifting problem, the police mounted a campaign in August to emphasise the serious nature of the crime and to draw attention to the re-classification of shoplifting as 'shop theft'.

Women police officers were being supplied with new winter uniforms as the year ended, and it is planned that they will have new, two-piece uniforms for summer use. Styled for greater comfort, ease of care and more modern appearance, the new designs replace uniforms which had not been changed for 21 years.

      The Police Bands, accompanied by teams of police ribbon and lion dancers, visited Paris, Rome, San Francisco and Expo '86 in Vancouver.

Crime

In 1986, 81 411 crimes were reported, compared with 86 944 in 1985. There were 5 372 robberies, compared with 6 745, and 11 942 burglaries compared with 13 922 in 1985. The overall detection rate was 47.9 per cent, against 46.1 per cent in the previous year.

A total of 37 863 people were arrested and prosecuted, compared with 38 749 in 1985. Adults prosecuted totalled 35 265 and juveniles (under 16 years) numbered 2 598, com- pared with 35 585 and 3 164, respectively, in the previous year.

Organised and Serious Crime

A series of anti-triad operations was carried out by the Organised and Serious Crimes Group. Of particular significance was the neutralisation of an overseas-based triad society which had been attempting to gain a foothold in the territory. The operations also dealt a heavy blow to several other locally-based triad societies.

The number of robberies involving genuine or imitation firearms remained at broadly the same level as that of the previous year. A total of 139 robberies involving the use of real or imitation firearms was recorded, 38 of which were committed against goldsmith and jewellery shops, accounting for loss of property valued at $38 million.

Altogether, 18 firearms were seized during police operations, resulting in 53 persons being charged with various offences.

Commercial Crime

     There was continued progress through the courts of a number of major fraud investigations undertaken by the Commercial Crime Bureau. Hong Kong's investigative and judicial processes were tested to the full by the problems encountered in bringing these complex investigations to trial.

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      During the year, the full benefit of the bureau's computerised exhibit handling system was realised. This resulted in a significant reduction in time spent preparing cases for court and, in particular, has eased the workload involved in preparing extradition papers within time limits imposed by the treaties.

      The first joint Commercial Crime Bureau/ICAC task force was set up during 1986. This greatly facilitated a major investigation, utilising powers contained in both the Police Force and Prevention of Bribery Ordinances.

      Hong Kong continues to be a centre for the production of high-quality counterfeit currency and other security printed documents, supplying both the home market and, increasingly, international groups of criminals. During the year, a number of workshops producing counterfeit currency, cheques and Indonesian Duty Stamps were located and neutralised.

      The bureau's expanded capacity to liaise with overseas law enforcement agencies continued to produce a useful flow of information and prevented a number of frauds. Close contact with overseas police forces was maintained through Interpol and the bureau received a large number of requests for assistance through this body.

Public Order

There were no major incidents affecting Hong Kong's internal security during the year. Officers of the Police Tactical Unit continued to play an important role in maintaining order at major public functions. They were fully committed during the Royal visit in October, and had the honour of mounting guard at Government House in April during the stay of Princess Alexandra. During the year, 1992 officers from the rank of constable to superintendent received training in internal security tactics and methods of crowd control at the Police Tactical Unit base in the New Territories.

Bomb Reports

During the year, 70 incidents related to bombs and explosives were reported. These were categorised as 25 homemade explosive devices, 64 unexploded World War II military ordnance (mainly shells and aircraft bombs), nine cases involving the seizure of explosives and 23 reports which were made with good intent but were found to involve innocuous objects. In addition, 134 hoax reports were received and dealt with by either bomb disposal or general duty officers.

Illegal Immigration

     Illegal immigration has continued to be one of the most serious problems facing the security forces. An average of 738 police officers were deployed daily to counter all forms of illegal immigration, including the detection and apprehension of persons who have evaded security surveillance. A total of 3 726 such evaders were apprehended during the year. This compares with a total of 16 832 illegal immigrants arrested while attempting to enter Hong Kong.

      Patrols by Marine Police launches also helped to deter illegal entry by sea. The Illegal Immigration Bureau has taken effective action against syndicates bringing illegal im- migrants into Hong Kong, and a total of 339 persons were prosecuted during the year for involvement in such criminal activities.

      Among the evaders who surfaced, 19 were found to be in possession of forged identification documents. This compares with 53 in 1985.

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      The new-style identity card has continued to prove difficult to forge, while computerised checking procedures make it possible to identify evaders who use lost or stolen cards belonging to bona fide Hong Kong residents.

The smuggling of children into the territory was a worrying trend in the latter part of the year despite counter-measures taken by security forces. During the year, the police located 212 child illegal immigrants.

Narcotics

A sixth successive heavy crop of the opium poppy in the 'Golden Triangle' border area of Burma, Laos and Thailand resulted in widespread drug trafficking throughout Southeast Asia and a flow of opiates into Hong Kong. Continued enforcement action by police and customs units resulted in fluctuations in prices and purity levels.

A disturbing trend was the increased seizures of Methaqualone which had been smuggled into the territory.

Some 643 kilograms of opiate drugs, including heroin base, No. 3 heroin and opium were seized, compared with 467 kilograms in 1985. There were 12 554 prosecutions for narcotics offences, compared with 12 432 in the previous year.

Crime Prevention

The Crime Prevention Bureau continued to expand its activities. Its officers co-operated with various public bodies and organisations in the production of a wide range of crime prevention leaflets and announcements of public interest, and participated in seminars and community exhibitions.

Criminal Information

The Police Operational Nominal Index Computer System, which is maintained and operated by the Criminal Records Bureau, continued to be effective. Approximately 9 000 enquiries a day were handled in 1986.

The Identification Bureau specialises in fingerprint technology and forensic photo- graphy. Staff of the Scenes of Crime Section attended 23 140 crime scenes to examine fingerprints, resulting in 535 persons being identified as having connection with 645 cases. The main fingerprint collection contains 573 438 sets of fingerprints. During the year, 72 336 arrest fingerprints were processed and, of these, 39 294 people were identified as having previous convictions. The section also carried out searches on 60 565 sets of fingerprints for vetting purposes.

The Certificate of No Criminal Conviction Section received 38 200 applications for certificates.

The Photographic Section, which is staffed by professional photographers as well as trained police officers, produced 594 030 black and white photographs and 165 718 colour slides and photographs.

Traffic

Traffic accidents causing personal injury continued to decline throughout 1986. A number of factors contributed to this, including the effect of the opening of new high-capacity roads, which relieved the pressure on existing urban routes; the opening of the Hong Kong Island line of the Mass Transit Railway, which further reduced the pressure, and the continued overall decline in the number of licensed vehicles, private cars in particular. The latter reduction may, in part, have been due to the stringent standards of roadworthiness now set for private motor vehicles over six years old.

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      Road safety campaigns continued throughout the year with particular attention being paid to the elderly.

      The Road Safety Town at Sau Mau Ping was refurbished during the year and plans are in hand to open two more 'towns' in 1987.

      On December 31, provisional figures for accidents causing personal injury showed a decrease of 1.2 per cent overall, with 288 fatalities and 19 420 persons being injured.

Community and Media Relations

The Police Public Relations Branch (PPRB) continued to encourage closer links between the force and the public and to keep the public informed about the force through close co-operation with the media.

Another major territory-wide anti-crime campaign, taking as its theme 'Home Security', was launched to combat the problem of burglaries in residential premises. The campaign featured an intensive 'Fight Crime Month' in September, culminating in 'Home Security Day' on September 28, during which thousands of young people from a wide variety of youth organisations, including the Junior Police Call, were mobilised to distribute pamphlets containing advice on home security to all residential premises in the territory.

As part of the campaign, the Neighbourhood Watch Scheme was further expanded and two phases were completed during the year. At the end of phase two, a total of 31 152 households had joined the scheme. Public enthusiasm for the scheme remains at a high level. These concentrated efforts to arouse public awareness of simple crime prevention methods and the necessity for home security are showing some encouraging results. For the first time in over 10 years, the figures for burglaries during 1986 showed a decline of 14.3 per cent when compared with 1985, a very welcome trend.

Apart from helping with the Fight Crime Campaign, the police youth movement, the Junior Police Call, has continued to grow and develop. About 3 000 youngsters applied each month to join the JPC, and the total number who have joined the movement since its inception in 1974 is now over 430 000. As well as providing healthy recreational pursuits for its young members, the movement is involved in raising funds for charity, and members take part in a wide variety of community programmes. JPC played a major part in the 'Save a Ring-Pull' campaign launched by the Hong Kong Kidney Patients Trust Fund to raise funds for the treatment of persons suffering from kidney disease.

As part of the on-going efforts to encourage young people to help in the fight against crime, the sixth in a series of 'Young People Help the Police' competitions was held in the spring. From the many thousands of entries, 30 youths were selected to take part in the final, where their talents as 'detectives' were put to the test as they tried to pick out the 'culprit' while watching a specially-made television programme. The entire final was shown on the JPC television programme. The five winners went on a trip to West Germany and the United Kingdom, while the five runners-up went to Thailand.

      Another means of encouraging the public in the fight against crime is the Good Citizens' Award Scheme in which those who actively help in arresting criminals are given cash awards. During the year, 75 Good Citizens received awards totalling $122,000. The Good Citizen of the Year Award, which was introduced in 1985 for outstanding efforts by members of the public, continued to attract nominations, and seven such awards were made during the year, totalling $48,000. The readiness of the public, as a whole, to co-operate with the police was illustrated by the fact that 4 792 criminals were actually arrested by members of the public. This represented 12.6 per cent of the total arrests. The public also continued to make full use of the police 'hotline' telephone to pass on crime

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information. The number of criminals arrested as a direct result of hotline information reached the 5 000 mark by September 1986.

     Television programmes jointly produced by PPRB and Radio Television Hong Kong continued to prove popular, and 'Crimewatch', the programme which features re-enact- ments of actual crimes and asks for assistance from the public, has proved to be a great success, both in terms of viewing figures and audience response. 'Police 15', a 15-minute programme, which is aired on the Chinese channels every week and which offers simple crime prevention advice as well as asking for witnesses to crime to come forward, reached its 10th anniversary in October 1986, which was the subject of a special programme.

     Officers in the PPRB newsroom, which is open 24 hours a day, handled a monthly average of 155 912 media queries. The newsroom also issued a monthly average of 1 598 traffic bulletins and 1 298 press releases on all aspects of police work. Press conferences, background briefings, and interviews were also arranged by the PPRB.

Training

Facilities at the Police Training School were further expanded and improved to meet increasing demand. Recruit inspectors continued to undergo a 36-week course and recruit constables began their career with a 22-week course. The courses covered criminal law, social studies, police and court procedures, drill and musketry, first aid and, for overseas inspectors, an eight-week course in colloquial Cantonese. Recruit traffic wardens under- went a six-week course covering traffic legislation and procedures.

     The school provides training for junior police officers, to refresh and update their professional knowledge, for traffic personnel, and for newly-promoted sergeants and station sergeants, to prepare them for the responsibilities of higher rank. With the implementation of the revised syllabus on mock court training, the standard of junior officers' evidence in court will be raised.

     The Regional Continuation Training Scheme continued to operate from centres in each of the four police regions. It provides supplementary training for some 2 000 constables each year, during their first two years of service. In addition, a scheme of continuation training for inspectors with less than one year's operational service has proved to be most effective, as has a series of courses on community relations specially designed for newly- appointed Neighbourhood Police Co-ordinators.

     The Detective Training Wing of the Police Training School held 12-week Standard Criminal Investigation Courses throughout the year with an average of 25 inspectors, 20 sergeants and station sergeants and 100 constables attending each of the four courses. The courses are designed to cater for Uniform Branch officers and for officers already serving in crime formations who have not received formal criminal investigation training. A small number of officers from the Immigration Department and the Customs and Excise Department also attended the courses, full-time, at inspectorate and NCO rank level. All officers attending the Standard Criminal Investigation Courses were also trained in disaster victim identification techniques and, while on the course, formed the Disaster Victim Identification Unit (DVIU) which would act in the event of a major civil disaster.

     Continuation Training for junior and inspectorate CID officers, first introduced in May 1984, continued during the year under review. The courses are of two weeks' duration, and are designed for officers already serving in crime formations in their fourth year in grade. The academic year provides for 16 courses for detective police constables, two courses for detective sergeants, one course for detective station sergeants and three courses for detective inspectors.

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      On Command Training, a greater emphasis was placed on management concepts and the use of human resources.

Command courses are held for inspectorate officers, newly-promoted chief inspectors and superintendents and are designed to develop their supervisory and management skills. Directorate Seminars for officers of chief superintendent rank are held in one-day or two-day sessions throughout the year. These seminars are designed to bring officers up to date on recent professional, political, socio-economic, managerial and technological developments.

To cope with expansion and to provide additional expertise in certain branches of the force, the local universities, polytechnics and management associations are commissioned to arrange special job-related courses for the force, such as radar, navigation, fire-fighting and first aid for the Marine Police and accounting/financial investigation for the Com- mercial Crime Bureau.

      The scholarship scheme for inspectorate officers continued to attract those seeking a university education. Since 1970, when the scheme was introduced, 32 officers have obtained degrees and eight are in the first or second year of their full-time studies.

      During the year, 12 inspectorate officers started a part-time course at the City Poly- technic of Hong Kong which will lead to the award of a Higher Diploma in Public and Social Administration.

With regard to overseas training, 38 officers of various ranks attended professional and technical training courses in the United Kingdom, Canada, United States, Malaysia and New Zealand.

Police Cadet School

Since its formation in 1973, the establishment of the Police Cadet School has progressively been increased from its original 150 to its present 750. During its 13 years of operation, 3 114 cadets have graduated from the school. Of these, 2 863 joined the police, 40 entered the Fire Services, 75 opted for the Customs and Excise Service and 47 joined the Correctional Services Department.

      The two sites on which the school stands - Fan Gardens, Fanling, and Dodwell's Ridge, Sheung Shui - are temporary. It is intended that a purpose-built school will be built within the next few years at Fan Gardens.

Complaints Against Police

The Complaints Against Police Office (CAPO) was set up in 1974 to investigate complaints from the public concerning the conduct and behaviour of members of the police force, including civilian staff and auxiliary police officers. Over the years, the number of complaints has increased steadily and, in 1977, the OMELCO Police Group was set up to monitor all complaints. The chairman and members were drawn from the Executive and Legislative Councils and appointed by the Governor. The Attorney-General was a co-opted member.

      In 1978, 2 264 complaints were tabled before the group. By 1984 the total had risen to 4 389, indicating both an increased awareness of the system and confidence in the investigative procedures of the police. This confidence has continued and is reflected in the fact that now almost 90 per cent of complaints are made in person, or by telephone, to the three regional CAPO offices or to police stations.

       However, by 1984 the rise in complaints had put increased pressure on the members of the group and a Working Party was established to examine methods of reducing this

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workload, while at the same time maintaining a detailed and independent monitor. As a result, in early 1986 the new Police Complaints Committee (PCC) was formally established, supported by its own independent secretariat. The PCC consists of a chairman and two vice-chairmen drawn from the Executive and Legislative Councils and eight Justices of the Peace, all appointed by the Governor.

In 1986, 4 547 complaints were registered - representing an increase 5.1 per cent over the 4 325 complaints received in 1985. During the year, 65 police officers were disciplined and seven were convicted of criminal offences. The rate of substantiated complaints was 7.3 per cent, against five per cent classified as false. Investigations are still to be completed into 1 506 complaints reported during the year.

In addition to investigating complaints, CAPO has a preventive role and is responsible for educating the force on complaint trends and associated problems. To achieve this, a video tape on common complaint situations was produced in conjunction with PPRB, and an intensive programme of lectures extending throughout the year covered a large proportion of all operational junior police officers. It is hoped, in this way, to reduce conflict situations with members of the public and to enhance public relations.

Police Complaints Committee

A new Police Complaints Committee, comprising OMELCO members and Justices of the Peace, was appointed by the Governor to take over the work formerly undertaken by the OMELCO Police Group. The committee is an independent body whose main function is to monitor the handling by the police of all complaints made by the public. A secretariat staffed by full-time public servants assists the committee with its work.

Planning and Development

Construction of Phase 1 of a new Police Headquarters began during the year and is expected to be completed in early 1989. Detailed planning for Phases 2 and 3 is in hand.

      During the year, two new divisional police stations at Tin Sum in Sha Tin and in Castle Peak were completed, along with the interim accommodation for the Police Tactical Unit at Fanling. A new Marine Police base for South Division was also completed at Aberdeen, as were two new police recreational and sporting clubs at Boundary Street and Causeway Bay. New police facilities were also provided at the Man Kam To border control point.

Work under the long-term renovation programme for old police stations continued. Construction commenced on seven new police building projects: the Police Training School, Stage V, Phase III re-development; Tai Po District and Divisional Police Station; Tsing Yi District and Divisional Police Station; the New Territories Regional Head- quarters; Siu Lek Yuen Divisional Police Station; Lo Wu Police Station and at the Lok Ma Chau border control point. As the year ended, site formation work was well advanced on the Hung Hom Divisional Police Station and the new Police Tactical Unit.

A 20-storey block of 144 junior police officers quarters in Old Bailey Street, Central, was completed in March and a similar block at Yuen Long was completed in September. In addition, 198 quarters purchased at Jubilee Gardens, Sha Tin, became available for occupancy in September.

Communications

Datanet, the new message-switching system, proved to be a success during its first full year of operation and the new Airport District Command Control Centre was officially opened in June. The Airport District now has an enhanced beat radio system for coverage of the Hong Kong International Airport.

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      Approval was obtained for a five-year project to replace and integrate most of the existing communications facilities. This will cover the expansion of these facilities to include areas previously excluded from the beat radio system. A new radio relay system will ensure that the police force has continuous communication availability and greater flexibility for use during major operations and natural disasters.

Transport

The fleet now consists of 1 311 four-wheeled vehicles and 720 motorcycles. The introduc- tion of dedicated vehicles for district Special Duties squads has proved successful, improving the efficiency of the units in their anti-vice activities.

Computer Development

There has been a steady expansion in the use of computers within the police force. The Commercial Crime Bureau and Kowloon Region now have a number of micro-computers to aid investigation into major crimes. For a six-month trial period, the Criminal Intelligence Bureau was provided with computer facilities designed to enhance significantly the collection, collation and analysis of intelligence on territory-wide triad and organised crime activities. Eight microcomputers have been obtained for the Regional Intelligence Units and selected District Intelligence Sections to improve their storage, retrieval and analysis of information on criminals and crime patterns. The benefits of all these computer facilities are being evaluated. Preparations continued for the introduction of a Personnel and Training Computer System to improve the maintenance of personal records and to aid management in career planning and resources deployment.

Licensing and Societies Registration

Work continued on proposed amendments to the Firearms and Ammunition Ordinance, to provide for stricter controls of imitation firearms, and on amendments to the Watchmen Ordinance.

Applications for licences, for which the Commissioner of Police is the authority, continued to increase steadily. At the end of the year, 70 348 watchmen were registered. There were 242 registered societies; 31 societies exempted from registration, and 129 licensed massage establishments.

      In addition, an inter-departmental review was conducted on the fees charged for licences, certificates and permits issued by the Commissioner of Police, with the aim of recovering the full costs of processing. The recommendations of this review are likely to come into effect in 1987.

Police Dogs

Police Dogs are trained at the Police Dog Unit at Yuen Long in the New Territories and are used for such work as patrolling, tracking and detecting dangerous drugs. Comprehensive training programmes were regularly attended by the handlers and their dogs to ensure that high standards of operational performance were maintained.

The Police Dog Unit also frequently gave public demonstrations.

The unit has 92 police dogs, most of them German Shepherds.

Personnel

At year's end, the police force had an establishment of 25 957 disciplined posts, 560 more than the figure in 1985. In addition, it had 5 716 civilian personnel, representing 18.04 per cent of the overall establishment.

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During the year, 9 303 people applied to join the police force as constables. The number of constables appointed was 994 and, of these, 14 per cent were women. A total of 152 police inspectors were appointed, of whom 81 were direct entry local appointees, 28 were direct entry overseas appointees and 43 were junior police officers appointed through the 'potential officer' selection scheme.

      Promotion prospects in the force remained excellent at all levels. A total of 27 gazetted officers were promoted to the rank of senior superintendent and above, 32 chief inspectors to superintendent, 45 senior inspectors to chief inspector, 85 sergeants to station sergeant and 270 constables to sergeant. In addition, 16 exceptionally experienced station sergeants were promoted to the rank of inspector.

Welfare

The Police Welfare Branch provides a wide range of welfare, psychological, sporting, recreational and catering services for both disciplined and civilian members of the force and their families.

During the year, 5 389 interviews were conducted in the regional welfare offices and 4999 visits were made by Welfare Branch staff to officers and their families at home or in hospital. Some 4213 children of both regular and auxiliary police officers were granted bursaries from the Police Children's Education Trust and the Police Education and Welfare Trust.

Two new sports and recreation clubhouses were opened by Princess Alexandra in April. The Police Sports and Recreation Club in Boundary Street provides a wide range of facilities for all ranks, while the Police Officers' Club in Causeway Bay provides facilities for officers of inspectorate rank and above and their civilian counterparts.

      Thirty-one holiday homes and recreation centres, situated at scenic spots, were also available to members of the force.

Royal Hong Kong Auxiliary Police Force

The Royal Hong Kong Auxiliary Police Force comprises volunteers from all walks of life. Its current strength is 4 837, about 10 per cent of whom are women officers. The force assists the regular police force in day-to-day constabulary duties and provides additional manpower if needed.

The average daily turnout of auxiliaries for constabulary duties was about 700.

      The Commissioner of Police officially opened the new headquarters of the Royal Hong Kong Auxiliary Police, at Kowloon Bay, on January 25.

Customs and Excise Department

The Customs and Excise Department is organised into three major branches - the Headquarters Branch responsible for departmental administration, revenue and training; the Operations Branch comprising the three Customs and Excise Service regions together with the three Trade Inspection regions, and the Investigation Branch comprising the Customs Investigation Bureau, the Trade Investigation Bureau and the Trading Standards Investigation Bureau.

The major component part of the department is the Customs and Excise Service, a disciplined force of 2 611 officers and men which enforces Hong Kong's laws on dutiable commodities, dangerous drugs, import and export controls and copyright protection. Other responsibilities include the prevention and detection of illegally imported goods which are prohibited or restricted for public health or safety reasons or to meet inter- national obligations.

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       The work of the Trade Controls Group, another arm of the department manned by Industry Officer Grade officers, is described in the chapter on Industry and Trade.

Revenue Protection

There are seven groups of dutiable commodities in Hong Kong - hydrocarbon oil, intoxicating liquor, non-intoxicating liquor, methyl alcohol, tobacco, non-alcoholic bever- ages and cosmetics. The Customs and Excise Service is responsible for collecting and protecting revenue from dutiable commodities. The Dutiable Commodities Ordinance imposes controls on the import, export, manufacture, sale and storage of these commodi- ties throughout Hong Kong. In 1985-6, some $3,092 million was collected on dutiable commodities, compared with some $2,343.60 million in 1984-5.

Anti-Narcotics Operations

The service has a responsibility for the prevention and supression of illicit trafficking in narcotics and other dangerous drugs. It intercepts illegal imports and exports and takes action against drug manufacturing, trafficking and abuse in Hong Kong. The service co-operates closely with the Royal Hong Kong Police Force, overseas customs authorities and other law enforcement agencies.

       During the year, 406 kilograms of opiate drugs and cannabis were seized, including 156 kilograms of heroin, 162 kilograms of heroin base, 56 kilograms of opium, and 32 kilograms of cannabis. In addition 77 355 tablets of assorted synthetic dangerous drugs, mainly methaqualone, were seized. A total of 1 439 people were charged with drug offences.

Intellectual and Industrial Property Rights Protection

The service is responsible for protecting the copyright of literary, dramatic and musical works. While the problem of pirated sound recordings has been contained, illicit copying of motion pictures and television programmes and unauthorised photocopying of books remains a preoccupation. In 1986, the Copyright Division made 72 copyright investiga- tions, which resulted in 98 people being charged and the seizure of 161 pirated books, 19 photocopying machines, 918 pirated video tapes and 75 video recorders. In addition, as an offshoot of the division's activities in this field, 188 pornographic video tapes and 80 pornographic magazines were seized and 10 persons charged with offences under the Objectionable Publications Ordinance.

      The department is also responsible for protecting industrial property rights. It investi- gates false and misleading descriptions of commercial goods under the Trade Descriptions Ordinance, and infringements of industrial design copyright under the Copyright Ordin- ance. During the year, the Trading Standards Investigation Bureau and the Copyright Division made 1 724 investigations, resulting in 850 people being charged with offences under the Trade Descriptions Ordinance and the Copyright Ordinance.

Independent Commission Against Corruption

The Independent Commission Against Corruption (ICAC) entered its 13th year of operation. Its efforts to combat corruption in Hong Kong have been vigorously sustained, notwithstanding its notable success in eradicating syndicated corruption in the public service. One of the highlights of the year's successful operations was the smashing of a horse-race fixing ring dubbed the 'Shanghai Syndicate'. The commission's growing international reputation as a leader in the fight against corruption led to it being chosen as the host for the Third International Anti-Corruption Conference to be held in Hong Kong in November 1987.

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      The year also saw the ICAC conduct its sixth mass survey on attitudes towards the commission and public knowledge about its work. Field work on the survey lasted six weeks, involving over 1000 sample respondents. Computation and compilation of data collected from the survey was completed by the end of the year.

      The ICAC is independent of the Civil Service and the commissioner is directly responsible to the Governor. An advisory Committee on Corruption, consisting of leading citizens and senior government officials, provides guidance for the commission on policy matters concerning staffing, financial estimates, administration and other aspects of its work. Each of the three functional departments of the commission, namely the Operations, Corruption Prevention and Community Relations departments, is also guided by an advisory body with members drawn from various sectors of the community and public service. All complaints against the commission and its staff are handled by an ICAC Complaints Committee, which comprises five Members of the Executive and Legislative Councils and a law officer. A total of 20 such complaints received during the year were thoroughly investigated.

Operations

The Operations Department investigates all reports related to allegations or suspected offences under the Prevention of Bribery Ordinance, the ICAC Ordinance and the Corrupt and Illegal Practices Ordinance.

The department received 2 547 corruption complaints. Of these, 852 were made by members of the public in person, 1044 by telephone and 477 by letter, and 201 were received from government departments. Some 65 per cent of these complaints were made by persons prepared to identify themselves.

      The Corrupt and Illegal Practices Ordinance was amended in 1985 to include within its provisions elections to both the Legislative and Regional Councils, in addition to the Urban Council and district boards. Following these amendments, 29 complaints were received by the ICAC in connection with the Regional and Urban Council Elections held on March 6, 1986. Complaints related to the Regional Council Election totalled 14 while 15 related to the Urban Council Election. As more elections are held in Hong Kong, this may well become a new area of concern to the commission.

      Another area of concern has been the appearance of large scale fraud facilitated by corruption. Special task forces were established to investigate allegations of this type of crime, which often entail complex and time-consuming probes. New skills, including a basic knowledge of accounting, banking and the use of computers, have had to be developed.

As a result of investigations carried out by the department, 251 persons were prosecuted for corruption or related offences and 169 prosecutions were completed with 122 convic- tions. The conviction rate of completed cases stood at 74 per cent. At the end of the year, 82 cases were pending trial and 420 investigations were in progress.

      On the advice of the Operations Review Committee, reports concerning 320 serving or former government officers were referred to the heads of departments and the Civil Service Branch for consideration of disciplinary or administrative action.

Corruption Prevention

The Corruption Prevention Department reviews and recommends changes to procedures which could be conducive to corruption in government departments and public bodies. Advice is also available to private organisations or individuals on request.

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      During the year, there was a rise in the numbers of complaints and prosecutions concerning corruption in the private sector. An analysis of these complaints indicated that management was becoming less tolerant of the misdeeds of employees. The department's Advisory Services Group, which helps the private sector implement corruption prevention measures, was in contact with 102 organisations. The free services provided ranged from verbal advice to detailed studies of systems and work habits, which were conducted confidentially.

      During the year, 110 assignment studies were completed, bringing the total since 1975 to 1 123. These studies were detailed examinations of specific areas of a government department's activities, covering policy, law, instructions, work methods and management. Reviewing the effectiveness of previous studies and monitoring corruption prevention measures continued to be an important aspect of the department's work.

The Corruption Prevention Department maintained a close working relationship with a large number of government departments, offering advice on draft legislation, new procedures and instructions. The department also played an active part in departmental and inter-departmental working groups, being represented on 56 working groups or committees. The Corruption Prevention Groups established at directorate level in govern- ment departments continued to provide a co-ordinated approach to corruption prevention studies. At the end of the year there were 33 such groups.

Training programmes for supervisors in the government, public bodies, and the private sector continued to be organised. The programmes covered the concepts of supervisory accountability, management's role in corruption prevention, and delegation of responsi- bility and authority. Training for senior and junior supervisors in the government helped to build corruption prevention measures into government policies and procedures as they evolved.

      The department also took part in management seminars organised by the Shenzhen University for managers and executives in China.

Community Relations

The Community Relations Department is responsible for educating the public against the evils of corruption, harnessing public support in the fight against corruption, and, in the long term, promoting higher moral standards and a greater sense of civic responsibility in the community. To achieve these objectives, the Liaison Division maintains close contact with the community through 11 ICAC local offices, while the Media and Education Division reaches the public via the mass media and education institutions.

Liaison staff maintained dialogues with a broad spectrum of the community. The department conducted 17 613 liaison functions and 218 special programmes, reaching 375 500 people. This was the third year in which the department launched a special programme to involve volunteers in community relations work, with its targets widened to include housewives in 1986.

      A territory-wide programme on the theme "Towards A Fuller Life' was organised jointly with a service club, to introduce young people to different aspects of a fuller life and to steer them away from purely materialistic pursuits. Altogether, 28 500 people took part in the programme.

In the department's Media and Education Division, the Public Education Office con- tinued to produce teaching materials to promote moral education in schools. Teachers were also introduced to a social morality programme for Forms 5 to 7 entitled 'The Way Ahead'. The first set of structured teaching materials for primary schools was also

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introduced. The set included an illustrated booklet entitled 'A Thought A Day', consisting of 20 stories on the dilemmas and doubts encountered by Hong Kong children in their daily life, and a filmlet entitled 'Super kid'. The commission was assisted by teachers in the production and promotion of these teaching materials.

The department made use of the mass media, particularly television, to spread the anti-corruption message. Two programmes, Vanguard II and Money Isn't Everything, were shown on the Chinese channel of the two local television stations. The former was a six-hour drama series depicting ICAC investigations and the latter, which was running in its third year, was an educational series for the young and comprised 13 nine-minute episodes.

      By year's end, the commission initiated a joint venture with both television stations to co-produce two mini-programme series. One was aimed at informing the public of anti-corruption laws; the other was a youth programme based on the theme Towards A Fuller Life. These broadcasts will last until May and October 1987 respectively. Mean- while, work has begun on the in-house production of another drama series on the commission's investigations.

The commission's annual multi-media advertising campaign, launched in January 1986, attracted over 900 enquiries from commercial firms and individuals for advice and assistance in a seven-week period. This campaign captured two gold awards: the best film and the best print advertising in the Institution/Corporate and Public Service Section of the third Creative Awards Competition organised by the Association of Accredited Advertis- ing Agents in Hong Kong.

Towards the end of the year, a new series of advertisements was being designed to sustain the impact of the campaign.

Government Laboratory

The Government Laboratory provides an essential and sophisticated scientific support service to law enforcement agencies such as the Royal Hong Kong Police Force, the Customs and Excise Department, the Immigration Department and the Independent Commission Against Corruption.

The scope of work undertaken by the Forensic Science Division of the laboratory is wide and covers investigation into such diverse crimes as arson, burglary, counterfeiting, deception, forgery of documents, fraud, hit-and-run traffic accidents, homicide, illegal manufacture and possession of drugs of abuse, paternity testing resulting from incest, sexual assaults, robbery and wounding. Scene of crime examinations continued to play an important part in the service provided with some 550 scenes attended by laboratory staff during the year. The workload of all sections of the division has increased and the urgent nature of much of the work calls for the use of rapid analytical techniques. The application of recently acquired instrumentation for the semi-automated examination of narcotics as well as organs and body fluids in cases of unknown cause of death has been expanded.

      The future introduction of a new ID card has resulted in laboratory expertise being sought regarding suitable inks, paper and production methods. Officers of the Questioned Document Section have also been involved in the examination of materials from cases of complex commercial fraud and in these investigations the new Fourier Transform Infrared Spectrophotometer has been an invaluable tool.

The recently-formed Traffic Accident Reconstruction Unit is now well utilised by police personnel and has proved to be a useful addition to the range of services provided by the division.

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      The continuing prominence of non-opiate restricted substances together with the increasing complexity in the work of the Drugs of Abuse Section has resulted in the expansion and reorganisation of this section.

      Forensic biochemistry concerning the grouping of blood, other body fluids and hair continued to progress and the gunshot residue project has met with considerable success and is now well established in routine casework.

      Two new instruments were installed, an Argon Laser and a Mass Spectrometer, and these have allowed the division to expand appreciably its capacity in supporting the fight against crime.

Correctional Services

The Correctional Services Department administers a wide range of treatment and training programmes for different types of offenders. The department provides services for young offenders, drug addicts, first offenders and recidivists. It operates 20 correctional institu- tions, three half-way houses, a Staff Training Institute and an Escort Unit, with an establishment of 6 170 staff. There is capacity for 8 848 inmates, and the average daily population in 1986 was 8 107 compared with 7 969 in 1985. In addition, the department is also responsible for managing closed centres for Vietnamese refugees. The staff in these centres, with the exception of the senior management, have been specially recruited and trained to look after refugees. They have no previous experience in connection with prisons or prisoners.

Adult Male Offenders

Prisoners are assigned to an institution dependent upon their security rating, which takes into account the risk they pose to the community and whether or not they are first offenders. Care is taken to separate recidivists from first offenders.

      Eleven prisons accommodate adult male prisoners, four being maximum security institutions. Stanley Prison and Shek Pik Prison house prisoners serving long sentences, including those sentenced to life imprisonment. Siu Lam Psychiatric Centre accommodates the criminally insane and those requiring psychiatric treatment. Adult males awaiting trial or remanded in custody during court hearing are detained at Lai Chi Kok Reception Centre. Male civil debtors who are admitted into custody from time to time are held in a separate section at Lai Chi Kok Reception Centre.

       Ma Po Ping Prison, Tung Tau Correctional Institution and Victoria Prison serve as medium security institutions for male offenders. In addition to its role as a prison, Victoria Prison also houses illegal immigrants awaiting repatriation to China, persons arrested for immigration offences, and a small number of Vietnamese refugees.

Four institutions, namely Tai Lam Correctional Institution, Pik Uk Prison, Tong Fuk Centre and Ma Hang Prison, are designated as minimum security prisons and are used to hold prisoners who work outside the institution, usually on community projects. A special section within Ma Hang Prison has been set aside for geriatric prisoners. Those who are medically fit are engaged in light industrial tasks or gardening, while the incapacitated may be hospitalised.

Young Male Offenders

The department implements four distinctly different correctional programmes under the Prisons, Training Centres, Drug Addiction Treatment Centres and Detention Centres Ordinances for the corrective training of young male offenders. In 1986, there was an average daily population of 1 062 young offenders in custody compared with 1 125 in 1985.

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Reference Library

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      Pik Uk Correctional Institution is a maximum security institution for young offenders with facilities for a reception centre, a training centre and a prison. Young adults under 25 years of age are also detained there for pre-sentence reports on their suitability for admission to a detention centre.

      Lai Sun Correctional Institution on Hei Ling Chau Island provides accommodation for young prisoners aged between 14 and 20.

Cape Collinson Correctional Institution and Lai King Training Centre are equipped with a full range of facilities for young offenders sentenced to a training centre.

      A very effective detention centre programme is administered at Sha Tsui Detention Centre. It is a medium security institution on Lantau Island, divided into two sections, one for the detention of young persons aged between 14 and 20; and the other for young adults aged between 21 and 24. Strict discipline, hard work, strenuous physical effort and a vigorous routine are emphasised in the programme.

Phoenix House provides halfway house accommodation for young persons released under supervision from detention or training centres. Residents usually stay in the house for up to three months before they are permitted to live at home or in other accommodation while continuing under after-care supervision. While residing in Phoenix House, they are required to go to work or attend school but must return in the evening for counselling and therapy.

Female Offenders

Tai Lam Centre for Women in the New Territories provides accommodation for women sentenced to imprisonment. It also has a remand section and a separate section where women addicts are given treatment under the Drug Addiction Treatment Centres Ordin- ance. The majority of women are employed in a large industrial laundry which renders services to a number of government departments and public hospitals.

      Female offenders under 21 years of age are housed at Tai Tam Gap Correctional Institution where there are separate sections for Training Centre inmates, young prisoners and persons on remand.

Bauhinia House serves as a halfway house for female inmates released under supervision from the training centre.

Drug Addiction Treatment

     Under the Drug Addiction Treatment Centres Ordinance (Chapter 244 of the Laws of Hong Kong), the courts are empowered to sentence a drug addict found guilty of an offence punishable by imprisonment to detention in a drug addiction treatment centre. The period of detention varies from a minimum of two months to a maximum of 12 months depending on the inmate's progress. This is followed by 12 months statutory after-care supervision.

There are two drug addiction treatment centres for male addicts of different age groups. Accommodation is provided in Hei Ling Chau Addiction Treatment Centre for adult addicts and in Nei Kwu Chau Addiction Treatment Centre for those under the age of 21. For female addicts, the treatment centre is located in a section of the Tai Lam Centre for Women. As at December 31, 1986 the numbers of inmates undergoing treatment were: in Hei Ling Chau Addiction Treatment Centre 892, Nei Kwu Chau Addiction Treatment Centre 130, and Tai Lam Centre for Women 100.

The drug addiction treatment programme aims firstly to detoxify and to restore the physical health of the drug addicts, and secondly through the application of therapeutic

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and rehabilitation treatments to wean the addicts from their physical, psychological and emotional dependence on drugs.

Social re-adjustment arrangements such as post-release employment and accommoda- tion, as well as intensive follow-up supervision by an after-care officer are important parts of the programme. In this regard, temporary residence in New Life House, a halfway house, is arranged for those who are in need of such support immediately following release. Contravention of supervision requirements may result in a supervisee being recalled for further treatment.

After-care Supervision

After-care plays an important role in helping inmates to reintegrate into the community and to lead an industrious and law-abiding life. This service begins soon after an inmate is admitted into an institution and continues throughout the period of detention. Sound relationships are established during the detention period between the inmate, his family and the case officer in readiness for release.

Through individual and group counselling, inmates are guided in the handling of problems and difficulties they are likely to encounter after release. Following discharge, the after-care officer maintains close contact with the ex-offender, offering appropriate assist- ance and guidance in coping with the demands made upon him and ensuring that he leads a law-abiding life.

Statutory after-care supervision is provided for all persons released from training, detention and drug addiction treatment centres as well as the young prisoners. Breach of supervision requirements may result in their being recalled for a further period of detention. The success of the programmes is defined as the percentage of those who have completed the supervision period without subsequent reconviction and, where applicable, remain drug free. Percentages at the end of 1986 were: detention centre, 94; training centres, 66 for males and 93 for females; young prisoners, 86 for males and 89 for females.

Correctional Services Industries

The Correctional Services Industries aim to provide gainful employment for prisoners and other inmates and to supply as economically as possible goods and services for the government. Emphasis is placed on training prisoners to develop healthy work ethics. Most are employed in manufacturing trades such as garment making, production of precast concrete products and providing services for the public sector. A small proportion of the prison population is engaged in domestic activities related to the running of institutions.

      The Correctional Services Industries employed 3 848 prisoners and inmates on manufac- turing activities and 3 208 prisoners and inmates on services and domestic requirements at the end of the year.

The workshops at Tai Lam Correctional Institution continued to expand, with a wider range of concrete products including kerbstones and pavement slabs being produced. At Stanley Prison, additional equipment was installed in the shoe making workshop for the manufacture of a more extensive range of shoes and boots. During the year, improvements have been made to various workshops and the industries as a whole have continued to improve productivity and the quality of products. A major quality assurance programme has been implemented. Through careful management and increased productivity, the commercial value of goods and services provided by Correctional Services Industries for the year was $131.5 million, an increase of 3.8 per cent over the previous year.

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Qualified psychologists and specially-trained officers provide a wide range of counselling services for prisoner and inmates with emotional difficulties, behavioural or personality problems. In addition, the service also provides in-depth reports for the courts and for the department's use in deciding an offender's suitability for participation in its programmes. Research projects are also undertaken by the psychological unit as part of the effort to improve treatment programmes and reduce recidivism.

Education

     Offenders under the age of 21 may be required to attend compulsory educational classes conducted by qualified teachers. They follow a curriculum recommended by the Cur- riculum Development Committee on the advice of the Education Department. Adult offenders may, on a voluntary basis, attend evening classes run by part-time lecturers from the Adult Education Section of the Education Department. Correspondence courses, self-study courses and special courses leading to external examinations are also undertaken by young and adult offenders. External examinations include the Telecommunications Examination of the City and Guilds of London Institute, the London Chamber of Commerce and Industry Examinations and the Hong Kong Certificate of Education Examination.

Visiting Justices

Justices of the Peace appointed by the Governor visit each institution either bi-weekly or monthly, depending upon the type of institution. Their statutory duties include investigat- ing complaints, checking meals and reporting on the standards of living and working conditions. They are also required to advise the commissioner on the employment of prisoners and work opportunities after release. In 1986, 517 visits were made to institu- tions, including those accommodating Vietnamese refugees, without prior notice.

Medical Services

All institutions are equipped with hospitals or sick bays providing treatment and health care, including radiodiagnostic and pathological examinations as well as prophylatic inoculations for persons in custody. While essential medical care is administered within the institutions, those inmates requiring specialist treatment are either referred to a visiting consultant or transferred to a government hospital as appropriate. Essential dental treatment is also provided.

      Siu Lam Psychiatric Centre and a psychiatric observation unit at Lai Chi Kok Reception Centre provide treatment for the criminally insane and psychiatric consultations and assessment for inmates referred from other institutions and the courts.

      Ante-natal and post-natal care is provided at institutions for women and in the closed centres for refugees. Arrangements are invariably made for babies to be born in govern- ment hospitals rather than within an institution.

Staff Training

The department's Staff Training Institute is responsible for the training of both new staff and serving officers. A 26-week orientation training programme is provided for all recruit assistant officers and officers. This is followed by another four weeks of training prior to completion of their probationary period. The syllabus, which is designed for the correc- tional services, includes a study of the Laws of Hong Kong, footdrill, self-defence,

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weaponry, riot-drill, first-aid and social sciences, including criminology, psychology and social work.

Development training and job oriented courses are provided throughout the year to all serving officers to update professional knowledge, prepare officers for promotion and equip selected officers for duties in specialised fields such as counselling, after-care, nursing, psychological services and physical education.

Society for the Rehabilitation of Offenders, Hong Kong

Formerly known as the Hong Kong Discharged Prisoners' Aid Society, the Society for the Rehabilitation of Offenders, Hong Kong is a voluntary organisation which provides services for ex-offenders who are given non-custodial sentences and discharged prisoners. The services rendered by the society include casework counselling, hostel accommodation, employment guidance, recreational activities as well as the caring for discharged prisoners who have a history of mental illness.

Refugees

At the end of 1986, there were 4 226 Vietnamese refugees detained in closed centres managed by the department compared with 4 438 in the previous year. Chi Ma Wan Closed Centre and Hei Ling Chau Closed Centre accommodate South Vietnamese and North Vietnamese respectively. This separation was made necessary following conflict and unrest between the two groups. Tuen Mun Closed Centre houses a mixture of southerners and northerners, including unaccompanied females and minors and family groups who have been carefully selected for their ability to live in harmony with each other. In April, Cape Collinson Correctional Institution ceased to function as a closed centre, when its refugees were transferred to Tuen Mun Closed Centre.

     A number of improvement projects have been undertaken to provide additional facilities for education, training and recreation within the closed centres.

      The Save the Children Fund, World Relief, the Salvation Army and the International Social Service organise social services, including educational classes, vocational training and recreational activities for the refugees. The United Nations High Commissioner for Refugees has continued to meet the considerable cost of food, medical supplies, utilities and relief items.

Fire Services

During the year, the Fire Services Department answered and handled 18 808 fire calls, 10 895 special service calls and 365 574 ambulance calls. Fires caused 45 deaths, and injured 604 people, including 63 firemen. A total of 736 persons were rescued and hundreds of others were led to safety by Fire Services personnel.

Legislation

The Fire Services (Amendment) (No. 3) Bill was introduced and passed in 1986, aimed at outlawing the malpractices of causing obstruction to means of escapes and indiscriminate locking of fire exits in multi-storey buildings.

      Any breach of this legislation is a direct offence and carries a maximum fine of $25,000 and a $5,000 per day maximum fine for continuance. A second or subsequent offence can result in a maximum fine of $50,000 and imprisonment for one year.

The legislation also stipulates that a person who, having complied with a fire hazard abatement notice, but allows the hazard to recur within 12 months of being served with the notice, will be guilty of an offence.

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The amendments tighten the legislation relating to the recurrence of fire hazard and provide a deterrent against the common, but dangerous, practices of causing obstructions to means of escapes and indiscriminate locking of fire exits.

Buildings and Quarters

Under the government policy to provide an emergency response to all areas within minimum set times according to the category of risk, two new fire stations were commissioned in 1986. These were at Shun Lee Estate and Tsim Sha Tsui East in Kowloon. An ambulance depot was also completed in Castle Peak Bay. There are now 48 fire stations, 19 ambulance depots and five fireboat stations in the territory. A new 12-storey Fire Services Headquarters building was completed in August 1986 in Tsim Sha Tsui East.

At the end of the year, more than 2 100 staff quarters were occupied or were available for occupation. Planning was in hand for 50 Officers' Married Quarters and 1 376 additional married quarters for firemen and ambulancemen at selected sites.

Fire Prevention

The department is responsible for enforcing fire safety regulations. It also advises and assists all sections of the community with regard to fire protection measures generally and in the abatement of fire hazards. The Fire Protection Bureau plays an important role in educating the public on fire prevention. Publicity campaigns launched during the year increased the community's awareness of fire safety, resulting in requests for more fire prevention lectures, exhibitions and demonstrations from kaifong associations, rural committees, schools and community groups. The number of complaints - 7 446 - received from members of the public was seen as an indication of the level of public concern over potential fire hazards and a growing awareness of the services provided by the department. Fire Services personnel made 83 473 inspections of all types of premises and, where fire hazards were found, abatement notices were issued. In 1986, there were 1 500 prosecutions for non-compliance with abatement notices resulting in fines amounting to $1.2 million. All new building plans are vetted by the department, which specifies the requirements for built-in fire protection and advises on related matters. Some 8 555 new building plans were processed during the year. The department is also responsible for carrying out research into matters associated with fire safety.

Ambulance Services

The Fire Services Department operates the government ambulance service with a strength of 1 802 in all ranks of uniformed staff, and 136 civilian employees. The service operates 216 ambulances from 19 ambulance depots or stations throughout the territory and from many fire stations. During the year, 365 574 calls, involving 468 554 people, were handled - representing an average of 1 001 calls every 24 hours. This was an increase of 9.5 per cent in the number of calls compared with the total for 1985.

Facilities on ambulances are constantly reviewed and all ambulances are equipped with analgesic apparatus, piped oxygen, inflatable splints, special stretchers and incubator- carrying capability.

Appliances and Workshops

The department has some 700 modern operational appliances and vehicles fitted with up-to-date fire-fighting and rescue equipment to ensure that fast and efficient fire-fighting and rescue operations can be carried out. In 1986, 28 new or replacement appliances and

Aberdeen typhoon shelter

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MESCO

decked out for Tin Hau festival

sunset silhouettes

harbour ferry traffic

KONC

SILVER STAR

THINKLING OTAP. Í

POFIC RAINBOW

PACIFIC RAINBOW

AMENTISTEN SUNNO

immigration patrol

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vehicles of various kinds were put into service. Of these, six were mini-appliances purchased from Japan and specially geared to steep roads and narrow paths, which are typical of outlying islands in Hong Kong. The appliances have been in use on Cheung Chau, Peng Chau and Lantau islands. The department is constantly evaluating new products from different parts of the world with a view to introducing them into service if they meet local requirements.

To maintain its fleet of fire appliances and rescue equipment, the department operates three workshops - on Hong Kong Island, in Kowloon and in the New Territories.

Staff Training

All recruits except those in the specialist communications ranks of senior fireman (control) and senior firewoman (control) are trained at the Fire Services Training School at Pat Heung in the New Territories. The courses vary in content and last from eight to 26 weeks. The training of senior firemen (control) and senior firewomen (control) is conducted at the Fire Services Communication Centre in Kowloon by instructors from the Training School. During the year, 372 recruits successfully completed initial training.

       The school also conducted fire protection courses for senior station officers and station officers, refresher courses for ambulance personnel, basic courses on fire fighting, fighting fires on ships and on the use of breathing apparatus for government departments and private organisations in Hong Kong. Some 880 people attended these courses during the year. The Driving Training School conducted courses for 2 370 officers and other ranks.

Establishment and Recruitment

The uniformed establishment of the Fire Services Department at the end of 1986 totalled 6 322. The number of civilian staff employed by the department increased to 627. Recruitment exercises were held, resulting in the appointment of 28 officers and 250 firemen and 93 ambulancemen. Standards are high and on average only about five per cent of all applicants are accepted for appointment.

15

Immigration and Tourism

事入 旅務境 遊和

IMMIGRATION Control in Hong Kong has a comparatively recent history. The first restrictions on travel were imposed in 1923 when persons, other than those of Chinese race, entering Hong Kong were required to hold travel documents or visas. The work of checking travel documents and issuing British passports and visas was carried out by the police. In 1940, to contain the rapid growth in population, the government decided to impose stricter controls on immigration and recommended the formation of an Immigration Department to take over these functions from the police. The new department did not, however, survive the war. Following the liberation of Hong Kong in 1945, the police resumed responsibility for immigration duties.

During the initial post-war years, there was a substantial increase in population which gave rise to the need in 1950 to control the entry of Chinese from China. Entry permits were required except for natives of Guangdong. A quota system was also introduced to restrict the number of daily entrants. In 1959, the increased volume of immigration work arising from the sustained influx of Chinese immigrants and the socio-economic development of Hong Kong led the government to revive the issue of establishing an autonomous department for the provision of immigration services.

The Hong Kong Immigration Department was established, with its headquarters in leased premises in a bank building in Central, on August 4, 1961. The department celebrated its 25th Anniversary with a series of events culminating in a parade reviewed by the Governor on November 29, 1986.

Since the establishment of the department, political and economic changes in Hong Kong and elsewhere, and increasing pressure from legal and illegal immigration have brought about significant expansion in the scale and scope of the services it provides. In November 1976, the Immigration Department and the Registration of Persons Department were amalgamated and in May 1979 the department took over responsibilities for the registration of births, deaths and marriages. In recent years, therefore, the department has had to cope with a wider scope of work, as well as dramatic increases in the volume of passengers and applicants making use of its facilities.

In spite of these changes, the central aim of the Immigration Department's work has continued to be to contain increases in population from immigration to acceptable levels. During 1986, about 27 100 legal immigrants from China settled in Hong Kong. In past years, illegal immigration has been the greatest threat to limiting growth to a reasonable level. In September 1980, the rate of illegal immigration had reached 450 each day. Measures taken since then have greatly improved the situation. These include the abolition of the 'reached base' policy (which allowed illegal immigrants from China who had successfully entered Hong Kong to stay), the enactment of legislation requiring all residents over the age of 15 to carry legal documents of identity at all times and employers to inspect

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     identity documents of new employees, and the gradual introduction of a more secure identity card, backed up by an efficient computer-based record system. In addition, continued efforts have been made by the security forces at the border and in Hong Kong waters, to detect and intercept illegal immigration. During 1986, an average of 46 illegal immigrants a day were arrested while entering. A further 10 illegal immigrants who had evaded detection on entry were arrested each day during the year.

      The illegal immigration of children, often under conditions of great danger and hardship, continued. The numbers reporting to the Immigration Department for permission to stay averaged five a week during the first nine months of 1986, but rose to six per day in the remaining three months. Every effort will be made to stamp out this despicable and dangerous practice.

      The work of the Immigration Department falls into two main streams - controlling people moving into and out of Hong Kong, and providing travel documents and registration facilities for local residents. The work embraces such diverse fields as the issue of travel documents, visas and identity cards, the processing of applications for naturalisa- tion, and the registration of births, deaths and marriages. Much effort also goes into the detection and prosecution of those who breach the immigration laws and the repatriation of those who are in Hong Kong illegally. Immigration policies are framed to limit permanent population growth, and every effort is made to streamline immigration procedures for Hong Kong residents, tourists and businessmen.

Immigration Control

The number of passengers moving into and out of Hong Kong continued to increase. Passenger traffic in 1986 totalled some 43.6 million, an increase of 6.9 per cent compared with 40.3 million in 1985. Movements to and from China, up 2.1 million from 23.6 million in 1985, showed the biggest growth, but the figures for other categories of travellers also showed increases. As a result, all immigration control points had a very busy year. The bulk of the China traffic was carried by rail via Lo Wu which remained under heavy pressure. Conditions at Lo Wu were uncomfortable for both passengers and staff because of severe overcrowding in the present temporary terminal building. This persisted in spite of an extension of operating hours. The construction of the new permanent terminal is on schedule and it is expected to open in January 1987, before the Lunar New Year holidays. Work on improved facilities at the Man Kam To crossing point was completed and the Permanent Terminal was brought into use in February. A fourth through train to Canton was introduced on April 1. Work on a new road crossing point at Lok Ma Chau is in progress but this will not be completed until the end of 1988 or early 1989.

      A temporary China Ferry Terminal was opened in January, making use of the old Macau Ferry Terminal building. This temporary terminal has greatly relieved the crowded conditions at the immigration control point at Tai Kok Tsui. Work has now started on the permanent passenger terminal, which is expected to be completed in 1988.

       Arrangements for residents of China to visit Hong Kong were further extended. In 1986, there were 65 600 individual visitors and 65 500 visitors who travelled in groups.

       A new scheme was introduced in August to allow some former residents of China now living in Macau to visit their relatives in Hong Kong. At the same time arrangements were also made to allow a small number of wives and children of Hong Kong residents who originated from China and are now in Macau to apply for entry to Hong Kong. In the last five months of the year, some 3 021 visitors and 750 immigrants were admitted under these schemes.

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Planning and preparation for the computerisation of immigration control work con- tinued during 1986. The system will be introduced in stages, starting in May 1987 at the Hong Kong-Macau Ferry Terminal.

Personal Documentation

During the year, 0.9 million travel documents were issued to Hong Kong residents. Re-entry permits for travel to China and Macau accounted for some 72 per cent of all issues.

      The four-year programme to introduce a new and more secure identity card has now been completed and the whole record system has been computerised. This has proved to be very effective in countering illegal immigration.

Planning and preparation work is now in hand for the issue of new types of identity cards to Hong Kong residents from July 1, 1987. Under this scheme, a Hong Kong permanent identity card which states that its holder has the right of abode in Hong Kong will be issued to persons who have that right. A different form of identity card, which does not state that its holder has the right of abode in Hong Kong, will be issued to Hong Kong residents who do not have that right. The introduction of permanent identity cards stating the holders' right of abode in Hong Kong is necessary for the purpose of issuing new British National (Overseas) passports and Hong Kong Certificates of Identity from July 1, 1987, both of which will contain an endorsement referring to the holders' permanent identity cards and right of abode.

Vietnamese Refugees

     Vietnamese refugees continued to arrive in Hong Kong during 1986. As in the previous year, there was some improvement in the situation in that further reduction in the refugee population had been achieved. At the beginning of the year, there were 9 443 refugees in Hong Kong whereas by the end of the year, the refugee population had gone down to 8 039. Of this number, 4 527 were in the closed centres and 3 512 in the open centres. During the year, 2 087 refugees arrived, compared with 1 112 in 1985, while 327 babies were born. It is the first time since the introduction of the closed centre policy in July 1982 that the number of arrivals in a year has increased over the preceding year. Separately, there were 228 refugees who chose to leave Hong Kong voluntarily after arrival. On the resettlement side, 3 816 refugees were resettled from Hong Kong's camps, including 60 local settlement cases. Compared with the resettlement of 3 953 refugees in 1985, the 1986 figure represents an increase of three per cent over the previous year's.

Newly arrived refugees continue to be detained in closed centres in accordance with the closed centre policy which was introduced in July 1982. In the closed centres the refugees are not allowed to seek outside employment. However, a full range of social, educational and recreational services and skills and adult language training programmes is provided in the centres by the voluntary agencies subvented by the United Nations High Commissioner for Refugees (UNHCR) and the Hong Kong Government. Families split between open and closed centres are allowed to be reunited in closed centres.

During the year, the United States, Canada and Australia continued to provide an ongoing resettlement programme for Vietnamese refugees in Hong Kong. In a special effort to help reduce the refugee population, the United Kingdom accepted 425 refugees from Hong Kong for resettlement under relaxed family reunion criteria during the year. Responding to the British initiative, other countries such as Finland, the Netherlands, Norway, Sweden and New Zealand also resettled 369 refugees from Hong Kong, whereas

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     Belgium, Denmark, Japan and Luxembourg have agreed to resettle a limited number from Hong Kong. As part of an international effort to reduce the size of the refugee problem in Hong Kong, the government also agreed to accept 20 Vietnamese refugees of Chinese origin from the open centres for local settlement each month up to a maximum of 250. This local settlement scheme started in April 1985 and so far 60 refugees have taken advantage of the scheme by accepting Hong Kong's offer.

       In response to a request made by the UNHCR, the government decided in February to establish a RASRO (Rescue at Sea Resettlement Offers) Transit Centre in Hong Kong to help solve the problem faced by RASRO participating countries in resettling refugees rescued at sea within the normal guarantee period of 90 days. The plan was to permit the transfer of the overdue cases from other camps in the region to the closed centres in Hong Kong so that more time would be allowed for the resettlement processing of these cases. The centre came into operation in May 1986 and refugees admitted to the centre are allowed to stay for a maximum of 180 days. The number of RASRO cases using the centre at any one time is limited to 100 and the cost of maintenance of these refugees is fully recoverable from the UNHCR.

The result of all the efforts made during the year was a net reduction of 1 404 refugees in Hong Kong. This situation enabled the government to close down Cape Collinson Closed Centre in April and to begin work on the amalgamation of the two open centres, the Jubilee Transit Centre and the Kai Tak Transit Centre, at the Kai Tak site. The conversion of the Kai Tak site started in July and is scheduled for completion in January 1987 when the refugees in Jubilee Transit Centre will be transferred to Kai Tak.

       Accommodating refugees in Hong Kong cost the government $118 million in 1986, of which $106 million was spent on closed centres and $12 million on open centres. The UNHCR contributed $35 million towards the care and maintenance of refugees in these centres. It started to fund the educational and language training programmes for refugees from the beginning of 1986.

       For those 3 512 who had arrived in Hong Kong before July 1982 and still live in the open centres, few restrictions are imposed upon their movements either inside or outside the centres. They are allowed to take up temporary employment to support themselves and their families. More than 85 of the refugees have been living in the open centres for over seven years.

Tourism

Hong Kong earned an estimated $17,300 million from tourism during the year, an increase of 20 per cent over the 1985 amount.

Hong Kong Tourist Association

The Hong Kong Tourist Association (HKTA) is a statutory body set up in 1957. Comprising members from the private sector whose businesses are based on tourism, the HKTA co-ordinates the activities of the industry and advises the government and the industry itself on measures aimed at ensuring growth.

In December 1986, it had 1 526 members, an increase of six per cent over the 1985 figure. The Chairman and Members of the Board of Management of the HKTA are appointed by the Governor.

       The association derives over 90 per cent of its income from a subvention from the government, and the remainder of its revenue from membership dues, the sale of publications and souvenirs, and from tours.

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The HKTA has its headquarters in Connaught Centre in Central, on Hong Kong Island. It operates an Information and Gift Centre at the headquarters, and similar centres at the Star Ferry Concourse in Kowloon and at the Empire Centre in Tsim Sha Tsui East. These centres and the information counter at Hong Kong International Airport gave assistance to more than 1.2 million visitors in 1986. In addition, there are both English and Japanese- language 'hotline' telephone services, which, together dealt with 30 000 calls during the year. All enquiries, whether made in person or by telephone, are monitored to provide further insight into visitor interests and spending patterns.

      The marketing overseas of Hong Kong as a tourist destination is carried out primarily through the HKTA's 11 overseas offices and representatives, working closely with the travel trade. Offices are located in San Francisco, New York, Chicago, Sydney, Singapore, Tokyo, Osaka, London and Frankfurt, and there are representatives in Paris and Rome. There is also an agreement with the Hong Kong-based Cathay Pacific Airways to act as the HKTA's information agent in 44 cities in 19 countries.

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During the year, the HKTA refined and enhanced three main marketing themes which were continued from the previous year. These themes promoted Hong Kong as a 'destination for all seasons', as an ideal venue for international conferences and exhibitions, and as the primary destination for those travelling to and within Asia. To help promote the first theme, which conveyed the message that Hong Kong had much to offer visitors throughout the year, and not only in the usual peak season of October-November, the HKTA organised the first 'Hong Kong Food Festival - the Flavour of '86' which ran from August 17 to September 17. The festival was heavily promoted overseas to carry the message of Hong Kong's food attractions and its position as the culinary centre of the Orient. The highlight of the festival, which combined the talents of over 170 restaurants and entertainment establishments in Hong Kong, was the holding of the Hong Kong Food Festival Culinary Awards. In the Culinary Awards, a panel of 10 overseas experts joined a local panel to judge 269 original entries in the two sections of Chinese and Western cuisine. An additional feature of the festival was the introduction of the "Yum Sing Night on the Town Tour', designed to introduce visitors to Hong Kong's nightclubs, discotheques, pubs and bars.

Some 100 members of the overseas press who specialise in writing about food were hosted during the festival, and 2 700 visitors came to Hong Kong on food-related special interest tours.

The second marketing message, concerning the conference and exhibition business, received a boost with the official laying of the foundation stone of the new Hong Kong Convention and Exhibition Centre by the Queen on October 21, the first day of her visit to Hong Kong.

      The centre, located on the Wan Chai waterfront and due to open in late 1988, will add to Hong Kong's international appeal as a site for large meetings and exhibitions. It will be able to compete for conferences of over 2 500 delegates and exhibitions requiring more than 18 000 square metres of presentation space. There has been steady growth in the number of international conferences and exhibitions held in Hong Kong, rising from 15 in 1976 to 450 in 1986.

The third marketing theme took account of the fact that few travellers visit just one destination in Asia, particularly from longhaul markets. With this in mind, the HKTA devised a new marketing strategy by which agreement was reached in principle with another Asian national tourist office and an airline to promote Hong Kong in a two-destination package for the United States market.

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Marketing strategies are designed to promote higher-yield markets, with emphasis on increasing the amount spent in Hong Kong and encouraging visitors to return. The 3.73 million visitors to Hong Kong in 1986 came primarily from the United States and Canada (22.3 per cent), Southeast Asia (19.7 per cent), Japan (19.5 per cent), Western Europe (15.4 per cent) and Australia and New Zealand (8.1 per cent). Some 50 per cent were repeat visitors.

The HKTA places emphasis on co-operative advertising in conjunction with airlines, wholesaling agents and hotels. Special seasonal campaigns for summer and winter were held with Hong Kong hotels in various overseas markets. Promotional visits are arranged for travel agents and members of the media from overseas to come to Hong Kong to experience the tourism product. In 1986, 4 670 agents and 1 050 members of the media were hosted in Hong Kong and briefed on the new and future developments. Visits made in conjunction with the HKTA are designed to coincide with special events. For example, during the International Dragon Boat Races in Hong Kong in 1986, 92 members of the media were hosted by the HKTA. A total of 21 overseas and 91 local teams competed in the races, and $680,000 was raised for the Community Chest by the holding of special 'row-for-charity' races.

During the year, the HKTA also continued to organise three tours aimed at widening the visitor appeal of Hong Kong. These were the 'Come Horseracing' tour, which enables visitors to attend the two race courses in Hong Kong, "The Land Between Tour', which gives an insight into the rural aspects of the New Territories, and takes visitors to areas not included in other tour itineraries, and the 'Sports and Recreation Tour', which enables tourists to use the facilities at a private golf and country club. Nearly half of all visitors to Hong Kong take at least one organised tour in Hong Kong.

The association again conducted the 'Student Ambassador Programme', under which 100 Hong Kong students going overseas to study take part in a month-long programme to acquaint themselves with all aspects of Hong Kong so they may speak more knowledgeably about their home while overseas.

       The HKTA also continued its 'Effective Selling Skills' Certificate programme, which is designed to provide those in the retail trade wishing to optimise, through courteous service to the tourist, their retail opportunities. In another programme, the Shop N Win' promotion held with six sole agents and 64 member outlets, some 120 prizes were given away to winning overseas visitors.

During the year, several new hotels opened, adding over 2000 rooms to the 18 180 already available. The association continued to conduct the 'Hotel Reservation Monitor System', which assists the travel trade overseas in making advanced bookings.

16

The Armed Services

and Auxiliary Services

|輔軍

隊助

THE Armed Services operate in Hong Kong under the overall command of the Commander British Forces, who advises the Governor on matters affecting the security of Hong Kong and who is also responsible to the Chief of Defence Staff in London. The Armed Services are stationed in the territory primarily to assist the government in maintaining security and stability and to sustain confidence in the United Kingdom's stated commitment to Hong Kong.

     The Royal Navy, the British Army and the Royal Air Force are all represented. During the year, the permanent garrison comprised five Royal Navy patrol craft, a naval tug, a Royal Marines raiding squadron, one United Kingdom and four Gurkha infantry battalions, a Gurkha engineer regiment, a Gurkha signals regiment, a Gurkha transport regiment, an Army Air Corps helicopter squadron with nine Scout helicopters and a Royal Air Force squadron with 10 Wessex helicopters.

     The size and composition of the garrison, and Hong Kong's contribution towards its cost, are determined by a Defence Costs Agreement between the Hong Kong and United Kingdom governments. The current agreement took effect on April 1, 1981, and runs for seven years. Reinforcements may be made available if necessary.

     Although the flow of illegal immigrants has been reduced in recent years, it continues to be necessary for all three services to concentrate a significant part of their effort on the task of preventing illegal immigration by land and sea.

Hong Kong also has a number of voluntary organisations making up a strong force of auxiliary services to assist the government and the Armed Services.

     Throughout the year, there was continued emphasis on training for internal security operations, and combined exercises - involving the Royal Air Force, the Army, the Royal Navy, the Royal Hong Kong Police Force and the Royal Hong Kong Regiment (The Volunteers) - helped to improve proficiency in such operations.

Royal Navy

The Royal Navy, based at HMS Tamar in Central District, continued to patrol the waters of Hong Kong. Its force of five patrol craft, and Fast Pursuit Craft of the Third Raiding Squadron, Royal Marines, acted in close support of the Royal Hong Kong Police Force in deterring and apprehending illegal immigrants from China, intercepting Vietnamese refugees and conducting operations against smugglers and others who illegally infringe territorial waters.

     The Captain-in-Charge Hong Kong has responsibility for the operational control of the Hong Kong Sea Defence Area which extends to 91 kilometres. He has responsibility for all Royal Navy forces deployed on search and rescue operations in the South China Sea and works closely with the Director of Marine and the Director of Civil Aviation. The naval

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base of HMS Tamar maintains a recompression chamber for use in diving emergencies, and a small clearance diving team assists the police in the recovery of drugs and smuggled goods and is trained in the techniques of searching for and neutralising underwater explosives. The Captain-in-Charge also administers the naval staff in Singapore, where the Royal Navy maintains berths and an oil fuel depot.

During 1986 the Royal Navy task group Global 86 visited Hong Kong. This was one visit among many made by the group worldwide during a nine month deployment. The group comprised HM Ships Beaver, Manchester and Amazon. They were supported by Royal Fleet Auxiliary vessels Fort Grange, Olmeda and Bayleaf. Others visiting included warships from Australia, New Zealand, Singapore, the Netherlands, Sweden, France and the United States. During the year ships from the Hong Kong Squadron were deployed throughout the Far East region. The deployments are made to show a continued British interest in this vast free trade area. The countries visited were Thailand, Malaysia, Singapore, Brunei, Philippines, Indonesia, Australia, South Korea and Japan. Many of these deployments included joint sea exercises and ocean training with the naval forces of countries visited.

The Hong Kong Squadron consists of five 'Peacock' Class Patrol Craft: HM Ships Peacock, Plover, Starling, Swallow and Swift. The five ships, built by Hall Russell Limited, Aberdeen, Scotland have been specially designed for patrol duties in Hong Kong waters, including search and rescue and have the ability to stay at sea during typhoons. All the vessels are of a steel and aluminium construction and are 63 metres long, 10 metres wide and have a gross tonnage of 763 tonnes.

High definition radar, direction finding equipment, an echo sounder and a very accurate gyro compass form part of the equipment that give accurate navigation through confined Hong Kong waters. Boarding tasks are usually achieved by using two rigid inflatable Avon Seariders which are widely used throughout the service. A comprehensive communications system enables the ships to talk to boarding parties and shore authorities and to send messages to any part of the world.

Under the direction of the Captain-in-Charge, a team is training to co-ordinate a scheme of control for the protection of commercial shipping using the port of Hong Kong in times of tension or war. Personnel include officers of the Royal Naval Reserve, United States Naval Reserve and the Canadian Armed Forces Reserve who are resident in Hong Kong and can be ready at short notice. The team enjoys a close liaison with the Marine Department and shipping companies.

The strength of the Royal Navy, including reinforcements, is about 670, supported by about 70 locally employed civilians. The patrol craft are jointly manned by Chinese ratings and United Kingdom naval personnel serving in Hong Kong. Altogether, about 370 locally entered personnel are employed ashore and afloat in the seaman, engineering, supply and medical branches. Manning laundries on ships of the Royal Navy is another task traditionally undertaken by Hong Kong men.

The Royal Navy plays an active part in the community and during the year personnel provided sea training for the Sea Cadet Corps and the Hong Kong Sea School, and gave assistance to the Home of Loving Faithfulness.

The Army

The Army provides the bulk of the forces in Hong Kong, under the direct command of the Commander Land Forces. Command of operational units is exercised on behalf of the Commander Land Forces by the Commander Gurkha Field Force, while logistic units, grouped as support troops, come under the Commander Support Troops.

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      In 1986 the 1st Battalion the 22nd (Cheshire) Regiment was replaced by the 1st Battalion Coldstream Guards and the 1st Battalion 7th Duke of Edinburgh's Own Gurkha Rifles was replaced by the 1st Battalion the 2nd King Edward VII's Own Gurkha Rifles. Resident throughout the year were the 6th Queen Elizabeth's Own Gurkha Rifles, the 2nd Battalion 7th Duke of Edinburgh's Own Gurkha Rifles, and the 10th Princess Mary's Own Gurkha Rifles.

      Support is provided by a number of units permanently based in Hong Kong. These include the Queen's Gurkha Engineers, the Queen's Gurkha Signals, the Gurkha Transport Regiment, 660 Squadron Army Air Corps, the Composite Ordnance Depot, the British Military Hospital, and 50 Hong Kong Workshops, Royal Electrical and Mechanical Engineers.

Hong Kong people play an important role through their support of the Royal Hong Kong Regiment (The Volunteers) - a locally enlisted regiment of part-time soldiers - and the Hong Kong Military Service Corps, which is also locally enlisted but forms part of the British Army. The latter corps is staffed by full-time regular soldiers and numbers 1 272 Chinese officers and men who serve throughout Hong Kong as guards, military policemen, interpreters, dog-handlers, drivers, cooks, clerks, seamen and storemen. The Hong Kong Military Service Corps provides a valuable contribution to the garrison and has played an important role in operations against illegal immigrants.

The primary role of the Army is to support the Royal Hong Kong Police Force in maintaining internal security, and to be responsible for preserving the integrity of the border. In recent years, the Army's major task has been to help with the control of illegal immigration, with individual battalions spending an average of three months a year on border duties. A high level of border security is maintained and anti-illegal immigration operations continue to play a major part in the daily life of the Army.

Owing to limited space and the unsuitability of much of Hong Kong's terrain for training, a series of overseas exercises was mounted to maintain high standards of military skills. During the year, exercises took place in Malaysia, Brunei, New Zealand, Fiji, Papua New Guinea, Australia and Singapore. In addition, a detachment from Hong Kong took part in a Five Power Defence Agreement exercise in New Zealand. Units of Gurkha Field Force also played host to visiting detachments from the 5/7 Battalion Royal Australian Regiment, the Royal Brunei Armed Forces, and New Zealand Forces based in Singapore. The high standard of shooting of Hong Kong-based units was demonstrated at the 1986 Regular Skill at Arms Meeting held at Bisley, England. The 6th Queen Elizabeth's Own Gurkha Rifles took third place in the Major Units competition and the team from the Depot Hong Kong Military Service Corps came fourth out of 24 Minor Units. Corporal Fung Kin-man serving with the Army Dog Unit, Royal Army Veterinary Corps became the first Hong Kong Chinese soldier to be selected for the British Army Team after he came seventh among the 200 pistoleers competing in the Service Pistol Championship.

Royal Air Force

The main element of the Royal Air Force in Hong Kong is based at Sek Kong in the New Territories. The No. 28 (Army Co-operation) Squadron operates 10 Wessex helicopters from Sek Kong airfield, and is supported by engineering and administrative squadrons. Included in the supporting element is an air traffic control unit, which also provides an advisory control service outside Hong Kong International Airport airspace. Movement of military personnel and cargo by air from Hong Kong International Airport is controlled by the RAF Airport Unit based at Kai Tak. The RAF Provost and Security Services Unit is

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located at Blackdown Barracks, San Po Kong. Additionally, RAF personnel serve on the staff of Headquarters British Forces, in the Joint Air Tasking Cell, and in the Joint Services Movements Centre.

The Wessex helicopters are employed in direct support of the Army and can each carry up to 14 troops or 1 400 kilograms of freight anywhere within Hong Kong. The helicopter is the only practicable way of moving troops, rations and equipment quickly to outlying areas, and its speed and flexibility have been significant factors in the success of the security forces' operations.

Although illegal immigration has been substantially reduced across the land border, some illegal immigrants still attempt to enter Hong Kong in speedboats. These clandestine operations, which are normally carried out at night, are countered by combined operations involving surface vessels and Wessex helicopters. The Wessex uses its 65 million candle- power Nightsun to illuminate the area, assisting in the capture of speedboats and occupants by surface vessels. The flying is demanding and involves considerable time on stand-by at night waiting for call out.

During the year, one helicopter was available for search and rescue duties throughout the normal working day and, on a rotational basis with the Royal Hong Kong Auxiliary Air Force, one helicopter was on permanent stand-by for territory-wide aeromedical evacua- tion. During the dry season, the RAF provided assistance in fighting fires in areas inaccessible to normal fire appliances: the Wessex can carry a suspended bucket containing 1 000 kilograms of water for release over the fire.

In addition to its operational task, No. 28 (AC) Squadron provides training and support for the Royal Hong Kong Police Force and has assisted with a number of community projects, including the removal of abandoned vehicles from remote areas, transporting young people to camps in the New Territories on government sponsored holidays, and the provision of air experience flights for a large proportion of the Air Scouts and Air Cadet Corps of Hong Kong.

Royal Hong Kong Regiment (The Volunteers)

The Royal Hong Kong Regiment (The Volunteers) is a light reconnaissance regiment of part-time volunteers. Its role, though primarily one of internal security, includes reconnais- sance, anti-illegal immigration operations and assistance to other government departments in the event of natural disasters. It is administered and financed by the Hong Kong Government, but if called out it is commanded by the Commander British Forces and forms part of the Gurkha Field Force.

      The regiment has an establishment of 946 volunteers and 54 permanent staff, including nine regular soldiers, one of whom is the Commanding Officer, on loan from the British Army. The volunteers come from all walks of life and are of various nationalities, but over 95 per cent are Chinese.

      The regiment is composed of four reconnaissance squadrons, a home guard squadron and a headquarters squadron. In addition, a women's troop was established in 1983 and expanded to 52 members in 1984 to provide support in internal security and anti-illegal immigration operations as searchers and interpreters. A guard troop of 12 members was established in 1983 to look after the general security of the Regimental Headquarters. There is also a junior leaders' corps of 300 boys, aged from 14 to 17, trained in youth activities and leadership. As part of the youth activities geared to the Duke of Edinburgh Award Scheme, a junior leaders' band was formed in 1984 to give performances at youth functions. The response to recruiting campaigns has been enthusiastic. A highly selective

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intake of 140 recruits joined the volunteers in 1986 following a successful campaign which attracted over 1 800 applications.

The Regimental Headquarters is located in the busy residential area of Happy Valley on Hong Kong Island where the volunteers have been based since 1950. The regiment does not have a training camp of its own and has to share the training facilities of the British Army in Hong Kong.

      The training commitment is two evenings and one weekend each month as well as centrally organised regimental training, such as regimental camps and exercises. Regimen- tal camps, the highlights of the year's training, take place over seven days each in April and November. For the November camp, the regiment is deployed on the border to relieve a regular battalion of its anti-illegal immigration duties. During the year, selected volunteers were sent for overseas training in the United Kingdom and Malaysia. All officer cadets are trained at the Royal Military Academy Sandhurst.

Royal Hong Kong Auxiliary Air Force

The Royal Hong Kong Auxiliary Air Force, based at Hong Kong International Airport, provides a variety of flying services for the government. It operates a fleet of seven aircraft: a twin-engined Cessna Titan, a Britten-Norman Islander, two Scottish Aviation Bulldog trainers and three Aerospatiale Dauphin twin-engined helicopters. With a self-sufficient engineering squadron and an establishment of 83 permanent staff and 131 volunteers, the RHKAAF can operate round-the-clock for seven days a week during an emergency. A total of 3 400 hours was flown during the year.

      In 1986, the RHKAAF responded to 120 requests for emergency medical evacuation and rescues. Some of these requests came from the local fleet of about 5 000 fishing boats, many of which now have high frequency radios enabling them to call for assistance when necessary. Sixty search and rescue operations were carried out, involving both helicopters and fixed-wing aircraft. During the dry season, the Dauphins assisted in over 100 fire-fighting operations and dropped over 600 tonnes of water on bush and forest fires in areas inaccessible to conventional fire-fighting appliances.

      The Royal Hong Kong Police Force and the Correctional Services Department made frequent use of helicopters for training and operational purposes. Helicopter flights were routinely provided to transport engineering staff to hilltops to carry out maintenance and repair work at communications repeater stations. During the year, about 5 700 government officers were flown to various areas in the course of their duties. Flying services were also provided to give official visitors from overseas an overview of the territory.

      The Titan and Islander maintained regular offshore patrols in connection with anti- illegal immigration operations and were also heavily employed in support of the Buildings and Lands Department's continuing need for aerial survey, photography and map-making. The Bulldogs provided pilot training for the squadron's own volunteers and student air traffic controllers.

Civil Aid Services

The role of the Civil Aid Services is to provide a uniformed and disciplined volunteer force of men and women trained in counter-disaster duties, in support of the regular emergency services and government departments. Members of the Civil Aid Services are trained to handle a wide variety of emergency duties in connection with tropical cyclones, landslips and flooding, search and rescue, building collapses, forest fire fighting, refugee feeding and camp management, oil pollution, crowd control, life saving, and mountain rescue. The

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CAS is also very heavily committed to assisting in performing civic duties during more peaceful times. It has a membership of about 3 700 adults, and 2 800 youths who make up the Cadet Corps.

During the year, adult volunteers helped to organise charity fund-raising walks and other events.

      Volunteers are enrolled into either the Operations Wing or the Administration Wing. Units within the Operations Wing are situated throughout the territory, so that members are able to respond rapidly to any incident in their area.

The tactical force unit, comprising the emergency, mountain rescue and liaison units, is made up of volunteers who receive special training in rescue work so as to be able to respond quickly to calls.

All of the support units are grouped under the Administration Wing.

      The CAS has two main training centres, situated on Hong Kong Island and in Kowloon, and a 20-hectare training camp at Tsing Lung Tau. The centres have simulated smoke- rooms, facilities for rescue from confined spaces, towers for practising rescue from heights and classrooms for indoor instruction.

The training camp is also extensively used by many other government and non- government organisations. It has facilities for all forms of training, including a swimming pool, a rope initiative course, a soccer field, camping areas, an oriental garden and a very scenic jogging track.

A new training centre is being developed at Tai Tan, Sai Kung, to provide both accommodation and classrooms for persons wishing to take part in all forms of water- borne activities.

Training is progressive, and cadets entering at the age of 12 to 14 progress through a series of useful and beneficial studies. The cadets leave the corps on reaching the age of 18. Cadets are encouraged to join in the Duke of Edinburgh Award Scheme. In 1986, three cadets qualified for Gold Awards, 15 for Silver and 103 for Bronze.

Auxiliary Medical Services

The Auxiliary Medical Services, formed in 1950, is a volunteer organisation with members trained and equipped to provide an essential service to the public, especially in times of emergency. In 1986, the establishment was 5 835 with 1 500 of the members being professionally qualified in medical, nursing, para-medical or hospital administration

services.

In addition to emergency work, the members perform a variety of duties, such as first aid coverage at public functions, manning of medical posts at refugee camps, staffing methadone treatment centres and providing lifeguard services on public beaches and swimming pools.

The service has a fleet of eight ambulances. On weekends and public holidays, ambulance services are provided in country parks and suburban areas in addition to motor-cycle ambulance patrols and first aid posts.

17

Communications and The Media

潘巾舖 事霸孔 業嘿

THE process of consultation, which is central to government decision-making in Hong Kong, depends upon the ready availability of information on the government's policies and activities and the free expression of public views and opinions through all available channels. The news media plays a valuable role in this respect.

      A number of major issues arose in 1986 which generated lively - and sometimes intense - public debate in Hong Kong. These were given extensive coverage, together with a great deal of editorial and other comment, in the local media.

Foremost among these were the concerns expressed, in the wake of the Chernobyl nuclear accident, with regard to China's proposal to build a nuclear power plant at Daya Bay, about 50 kilometres from the centre of Hong Kong. Also given prominence were far-reaching proposals concerning the management and organisation of Hong Kong's medical services, the further development of various aspects of the education system, the future of broadcasting and the strengthening of efforts to combat the criminal activities of triad societies.

The regular meetings of the two diplomatic bodies set up in accordance with the Sino-British Joint Declaration, namely the Joint Liaison Group and the Land Commission, were widely reported upon, as were the discussions in the Basic Law Drafting and Consultative Committees which are assisting the Chinese Government in drafting the Basic Law for the post-1997 Hong Kong Special Administrative Region.

Externally, too, communications and public information play a vital role in fostering Hong Kong's continuing growth as a world trading, manufacturing and financial centre. Sophisticated telecommunications equipment based on the latest technology link Hong Kong with most parts of the world, ensuring an efficient and continuous interflow of up-to-the-minute information. As well as serving Hong Kong's own commercial interests, these facilities have attracted news media representatives from many parts of the world. News agencies, newspapers with international readerships and overseas television compan- ies and corporations, about 90 in all, have found it convenient to establish their bureaux and offices here. Regional publications produced in Hong Kong have prospered, reflecting the territory's enhanced position as a centre of industrial and trading expertise.

Within Hong Kong itself, the extensive news media is made up of many daily newspapers, a range of periodic magazines, two private television companies, one govern- ment radio-television station, one commercial radio station and one radio service for the British Forces. There is a free, critical and outspoken press which, together with the electronic news media, provides an efficient and speedy supply of information to a literate, industrious and healthily inquisitive society. It also plays a vital part in the territory's precautionary measures against sudden climatic threats: when typhoons approach or rainstorms spell danger the news media reacts to alert, inform and advise the population.

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      Against this background, it is not surprising that remarkable advances and innovations have taken place in the information field in recent years. The government has matched this progress by expanding its information services and by producing and participating in an increasing number of public affairs programmes on television and radio.

Information Policy

     The Secretary for Administrative Services and Information has overall policy responsibility for the government's relations with the media. The main aim is to keep the media informed of the government's policies and thinking, as well as forthcoming events and proposed legislation, thus providing a valuable means of communication with the general public. On this front, the Administrative Services and Information Branch is responsible for co-ordinating the work of the Government Information Services, Radio Television Hong Kong and the Television and Entertainment Licensing Authority.

      Apart from formulating policy on a wide range of information and broadcasting matters, the Secretary for Administrative Services and Information advises the government on the presentation of its policies and on public relations matters generally.

Liaison Division

The Liaison Division of the Administrative Services and Information Branch is responsible for overseas public relations matters. In this, it serves as a point of contact between the government's overseas offices and non-government bodies, such as the Trade Development Council, the Hong Kong Tourist Association, chambers of commerce and consulates and commissions. An Overseas Public Relations Group comprising government and non- government representatives co-ordinates overseas public relations activities.

      Receiving overseas visitors is another major function of the division. A Visits Office was set up in September 1983 to handle parliamentary visits from the United Kingdom. The role of this office has since been expanded to include the arranging of programmes of visits and briefings for VIP visitors from all over the world. In this task the office maintains close contact with the overseas offices, commissioners and consuls-general.

     To promote Hong Kong's overseas public relations, the Visits Office has, since May 1985, been co-ordinating programmes on overseas speaking engagements for prominent people. Suitable platforms are arranged for influential Hong Kong personalities and other internationally-known people to speak for Hong Kong before audiences in North America, the United Kingdom and other European countries.

      Hong Kong took part in Expo '86 in Vancouver for the purpose of projecting Hong Kong's image as the communication and transportation nerve-centre on the Pacific rim. The opportunity was also taken to project the message of Hong Kong's continuous stability and prosperity. The Hong Kong Pavilion, designed by a Hong Kong architect, had a strategic position at the Expo site. The whole project, costing $15 million, was financed jointly by the government and by a number of quasi-public organisations and private corporations. It took the form of an extremely popular multi-media show in a pavilion surrounded by bamboo scaffolding, representing Hong Kong's continued process of growth and redevelopment.

During the six months of display, the Hong Kong Pavilion attracted more than 1.3 million people, an average daily attendance of 8 500.

      Another major event on the overseas public relations front for the year was the official visit by the Governor to San Francisco, Seattle, Chicago and Vancouver in July.

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During the 13-day tour, the Governor met senior government officials and business leaders in these cities. Speaking to an influential forum in each of the four cities, the Governor delivered a positive message on Hong Kong's future, highlighted the trading and business potential for North America in Hong Kong, and underlined the threat posed to world trade by protectionism in the United States. While in San Francisco, he opened the Hong Kong Government's new Economic Affairs Office on Sutter Street. When in Vancouver, he attended the 'Hong Kong Day' celebration organised by the Hong Kong Pavilion at Expo '86.

The Press

Hong Kong's flourishing free press consists of 67 newspapers and 515 periodicals, which have a high readership. The registered newspapers include 45 Chinese-language dailies and five English-language dailies. A number of news agency bulletins - Chinese, English and Japanese are also registered as newspapers.

Of the Chinese-language dailies, 36 cover mainly general news, both local and overseas, while others cover solely entertainment, especially television and cinema news, and one concentrates on finance. The larger papers include Chinese communities overseas in their distribution networks, and some have editions printed outside Hong Kong, in particular in the United States, Canada, Britain and Australia.

Hong Kong is the Southeast Asian base for many newspapers, magazines, news agencies and the electronic media. Among the international news agencies with offices in Hong Kong are Associated Press, Reuters, United Press International and Agence France Presse. Newsweek and Time magazines have editions printed in Hong Kong, which is also the base for the regional magazines Asiaweek and the Far Eastern Economic Review, as well as the Asian Wall Street Journal and the International Herald Tribune.

Several organisations represent and cater for people working in the news media in Hong Kong. The Newspaper Society of Hong Kong represents Chinese and English newspaper proprietors. It is empowered to act in matters affecting the interests of its members. The Hong Kong Journalists Association seeks to raise professional standards by recommending better training, pay and conditions in journalism, and advises its members in the event of disputes with employers. The Foreign Correspondents' Club offers its members social facilities and a range of professional activities, including news conferences, briefings and films. The Hong Kong Press Club provides an opportunity for journalists to meet socially. In the steps taken to expand and improve training in journalism, the Journalism Training Board of the Vocational Training Council plays an important role. During the year, the board published its third biennial manpower survey report on the mass media. The report revealed that the total manpower in the industry, excluding clerical, accounting, manual and printing staff, increased from 4033 in 1983 to 4 763 in 1985. The increase was particularly significant since the number of establishments in the four sectors of the industry, namely newspapers, magazines, radio-TV stations and news agencies actually declined from 357 to 312. This suggests that the mass media industry, which suffered from the recession in 1983, has strengthened. The increase was the highest in the supervisory and editorial level. One particular job, that of news editor, doubled in manpower in the newspaper sector, indicating that newspapers were keen to improve their news coverage.

With an allocation of $200,000 from the council, the board began a basic training scheme for working journalists, as a joint effort with five tertiary institutions - Hong Kong University, Chinese University of Hong Kong, Hong Kong Polytechnic, City Polytechnic of Hong Kong and Hong Kong Baptist College. In 1986, 14 courses were conducted by the

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institutions, covering such topics as law, English oral communication skills, Putonghua, translation, reporting, editing, economics and feature writing, with the aim of upgrading journalistic standards.

      The annual journalism symposium, an intensive three-week course conducted by the board itself, was held again in May-June.

Sound Broadcasting

There are 10 radio channels in Hong Kong. Five are operated by Radio Television Hong Kong (RTHK), three by the Hong Kong Commercial Broadcasting Company, more popularly known as Commercial Radio (CR), and two by the British Forces Broadcasting Service (BFBS).

      Policy guidelines for RTHK require the publicly-financed station to provide balanced and objective broadcasting services to inform, educate and entertain the people of Hong Kong. The aim is to serve the best interests of the community by providing impartial and balanced news and public affairs programmes reflecting accurately the views of both the government and the public. The Director of Broadcasting is its editor-in-chief.

      RTHK now broadcasts 700 hours a week and operates a 24-hour service in Chinese and English. The most recent independent survey showed that the total number of radio listeners was 75 per cent of the population aged nine and above. The station has developed an individual identity for each of its five channels.

Radio 1 of the Chinese Service provides news bulletins and summaries on a half-hourly basis between 6 a.m. and 11 p.m. and hourly throughout the night. It also broadcasts financial reports every hour during the day, in addition to traffic reports during rush hours. During the year, major political and social events in the territory were covered extensively. In addition, the channel's phone-in programmes served to reflect the public's sentiments on various current issues. With the interim FM plan in operation, it now relays Legislative Council meetings on its FM service every Wednesday, while continuing the normal programmes on the AM service.

Radio 2 has acquired popularity as a channel mainly for young people. Although popular music is the salient feature, more magazine programmes have been introduced. During the year, the channel continued to strengthen its early morning and late evening magazine programmes to attract an even broader audience. The channel adopts a lively approach to civic education and community service. It helped promote major publicity campaigns concerning the International Year of Peace, as well as anti-narcotics and fight crime efforts, and also organised a number of large-scale fund-raising activities. In its continuing effort to promote local music talent, the channel also organised its ninth 'Top Ten Chinese Gold Songs' presentation.

Radio 3, the station's news and information channel for the English-speaking popula- tion, continued to cover both local and overseas events. 'Open Line', the channel's phone-in programme between 8.15 a.m. and 10 a.m., continued to be a valued link between the people of Hong Kong and the government. During the year, the channel increased its emphasis on discussions and interviews in the programmes. In addition to the use of stories, comedies and quiz programmes from overseas and those produced locally, the coverage of events with specially arranged outside broadcasts continued. The channel also relayed the weekly meetings of the Legislative Council.

Radio 4, the channel for fine music and the arts, covered major music and arts events throughout the year. The bilingual presentation of these programmes was welcomed by listeners. In January, the channel organised the 1986 Young Player of Chinese Instruments

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Competition, an event sponsored by a major bank. Through co-operation with other cultural organisations, the Urban Council, the Regional Council and government depart- ments, it was possible for the channel to maintain its broadcasts of concerts and recitals at various venues throughout the territory. Concerts were also held in the RTHK studios, featuring local and overseas artists and ensembles.

Radio 5 relays the BBC World Service from 5 p.m. to 2.30 a.m. daily. Outside these hours, it provides an additional FM service of Chinese programmes, such as Cantonese opera, provincial music, as well as programmes in Putonghua and the Chiu Chow dialect. Programmes for the elderly and programmes on Chinese classics and the arts were further strengthened in the year.

      Work on the planning and engineering of the extension of the VHF Radio Services in Hong Kong has continued. Completion of the project, which will provide territory-wide coverage for seven services, is expected in 1988.

Commercial Radio operates two Cantonese services and one English-language service in the AM wave band with simulcasts on FM to areas in the New Territories and the north side of Hong Kong Island. FM coverage is expected for the whole area by the end of 1987. Fund-raising for charity continued to be an important part of the station's public service commitment. It actively supported local fund-raising activities through its participation in the annual fund-raising outside broadcasts for a children's hospital, organisation of the 9th Annual Super Stars Charity Basketball Match, and promotion of the Helping Hand for lonely old people and SANTA, which gives new toys to orphans at Christmas, both activities having originated from the English service's morning talk shows. Considerable effort was also devoted to promoting fund-raising for overseas relief agencies. CR II, known as the 'Youth Station', took part in Worldvision's 30 Hours Famine and 'The Sport Aid Race Against Time'.

The British Forces Broadcasting Service (BFBS) is part of the radio division of the Services Sound and Vision Corporation, a world-wide organisation providing entertain- ment, information and training films, video, television and radio services for the British Forces, under contract to the Ministry of Defence.

BFBS provides two radio services designed for the particular needs of the Gurkha and British Forces serving in Hong Kong, Brunei and Nepal.

Nepali programmes, broadcast for more than 76 hours each week, cater for the interests of the Brigade of Gurkhas, providing music and features reflecting daily life in Nepal, Nepalese and world news, news reviews, quiz shows and audience participation phone-in programmes.

The English-language service broadcasts for more than 130 hours a week. The breakfast and lunchtime shows originate from the BFBS Studio in HMS Tamar, with the rest of broadcasting coming from the main studio complex in Sek Kong in the New Territories.

About 40 hours each week is provided by the BFBS Production Centre in London, which keeps listeners in touch with home and provides specialist programmes involving many of Britain's premier broadcasting personalities.

The highlights of the year were the live commentaries on Her Majesty the Queen's visit to Nepal and Hong Kong, and the arrival of the special BFBS Satellite News Service.

Broadcasting Review Board Report

     Following the publication in September 1985 of the Broadcasting Review Board Report containing recommendations on, among other things, regulation of the broadcasting industry, technical requirements, programme quality and advertising and censorship

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standards, a lengthy period of public consultation aimed at obtaining the community's views on the report was carried out and completed in February. A wide cross-section of the community expressed their opinions and the report was also debated in the Legislative Council.

       Since there were more than 100 recommendations in the report, they were grouped for administrative convenience under different packages, each package covering a specific policy area. In July, the Governor in Council announced that, in principle, the introduction of cable television in Hong Kong would be accepted. This was followed by a further announcement in November on the government's decisions on the other major recom- mendations of the Broadcasting Review Board. These included:

     (i) The existing pattern of two television licensees, each operating one Chinese and one English language service, should continue.

     (ii) To enable more effective control to be exercised over the activities of the broadcasting licensees and to allow for greater public participation in the regulation of the broadcasting industry, a Broadcasting Authority will be created with responsibility over television, radio and cable television. Its functions will include administering the provisions of the future Broadcasting Ordinance and securing proper standards of broadcasting with regard to programme content and technical efficiency of broadcasts. The authority will consist of 12 members appointed by the Governor, including three official members. The Television Entertainment Licensing Authority will act as the executive arm of the authority. A complaints committee will be established within the ambit of the authority to resolve disputes in the broadcasting industry.

     (iii) The existing television licences, which are due to expire in December 1988, will be renewed for a 12-year period subject to a mid-term review in 1994. Additional regulatory measures will be imposed on the new licensees which include a requirement for the maintenance of a complaints procedure, payment of royalties based on turnover, submission of audited accounts to the Broadcasting Authority and imposition of heavier financial penalties for contravention of the regulations of the future Broadcasting Ordinance. Public hearings will also be conducted in future before television licences are granted, renewed or reviewed.

     (iv) RTHK will remain within the public service as an executive arm of a Board of Governors to be appointed by the Governor. The board will consist of nine members, including one official member, and will be established by legislation. Its functions will be to decide, within the ambit of the future RTHK Ordinance, the broad policies and objectives of RTHK, so that it should continue to be and be seen to be a balanced and objective public broadcaster. RTHK will continue to receive public funding but will be free to accept sponsorship and donation. It will be given an increased presence on television both in terms of the total number of hours made available for RTHK programmes and its access to prime time hours.

(v) A total ban on tobacco advertisements on television and radio will be introduced in December 1990. In the interim, further restrictions will be placed on tobacco advertising and sponsorship on television and radio, including the extension of the hours of ban on TV from 4.30-6.30 p.m. to 4.30-10.30 p.m. in December 1988.

     (vi) To improve the viewing enjoyment of the audience, restrictions on the frequency and length of advertising breaks will be introduced in the terms and conditions of the future television licences.

(vii) The definition of Announcement of Public Interest will be tightened so that the television stations will only be required to broadcast free of charge announcements in

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the public interest which are directly related to issues of public concern or govern- ment policy.

(viii) There will be no relaxation of the present standards of censorship which fairly reflect those of the community as a whole. Licensees will also be allowed to broadcast religious programmes subject to prior approval by the future Broadcasting Authority. There are a number of other recommendations in the Broadcasting Review Board report concerning radio policy, technical requirements and programme content which have still to be considered. These will be examined in due course by the Governor in Council or the future Broadcasting Authority.

Television

Television viewing continued to be Hong Kong's prime leisure activity, with some 95 per cent of households owning one television set or more. Two franchised commercial wireless broadcasting stations, Television Broadcasts Limited (TVB) and Asia Television Limited (ATV), transmit an average of 490 hours of programming each week, and together provide two English and two Chinese-language services for the community. The UHF 625-line PAL colour system is standard and virtually all transmission is in colour. Both TVB and ATV maintain large well-equipped studios and office complexes using the latest production and transmission technologies.

      The television stations are licensed to operate under the provisions of the Television Ordinance, which is administered by the Television Authority. The Commissioner for Television and Entertainment Licensing is responsible for the regulation of the stations' licences and the issue and enforcement of the programme, advertising and technical standards required of the licensees. He is advised in these responsibilities by the Television Advisory Board. One of the main roles of the Television Authority is to monitor regularly the performance of the television stations to ensure that the terms and conditions of their licence requirements are being met.

An important breakthrough has been made in the development of local television technology. Since 1985, the two television stations have been engaged in a joint experiment with the digital multiplex sound system, with the aim of providing stereophonic and dual-sound programmes. The experiment is being carried out in conjunction with the British Broadcasting Corporation. The introduction of such a service would give viewers a much wider choice of programme material in that, apart from stereo-reception, viewers would be able to receive the same programmes in either English or Cantonese.

Competition between the stations continues to be keen. This competition has brought benefits to the public in the form of more varied and sophisticated entertainment, information and educational programmes. However, station-produced serialised drama remains the major attraction on Chinese services.

      There was an increase in sports output, including the regular sports magazines and the broadcast of major local soccer matches, the FA Cup '86, and the satellite broadcast of the World Cup '86 in Mexico.

Other international sporting events, like the Commonwealth Games and the Asian Games, were also covered. The rising popularity of snooker led to a series of programmes on the game, including tournaments. During the year, both stations mounted a series of entertain- ment specials, mainly on beauty contests. Pop music and travelogues were also popular.

There has also been an increase in informative and educational programmes. Both stations increased production of current affairs programmes, including some special series on the Urban Council and Regional Council elections and the district boards.

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Television Home Viewing Groups appointed by the Television and Entertainment Licensing Authority have been in operation since 1982 in each of Hong Kong's 19 districts. These groups, set up with the assistance of district offices and having a total membership of 570, provide the authority with a continuing flow of public opinion on programming and advertising across a broad spectrum of the population. Three Regional Advisory Panels, one each for Hong Kong Island, Kowloon and the New Territories, consisting of representative members drawn from each group, were established in 1983 and served to keep the authority and members of the Television Advisory Board in close contact with the Home Viewing Groups.

Radio Television Hong Kong, which uses the transmission services of the two commer- cial stations, produced 12 hours of public affairs programmes each week. Below the Lion Rock, Children's Drama and Hong Kong Profile are highly acclaimed dramas, while The Common Sense, Pentaprism and Access remain among the top programmes.

Policy guidelines for RTHK require its programmes to provide a communicating channel between the government and the public which promotes civic responsibility and identity, serves minority interests and educates and informs. Material produced falls basically into six areas of interests: current affairs, drama, information and community services, variety and games shows, children and youth, and educational programmes.

RTHK productions are generally popular and have won acclaim both locally and internationally. During the year, RTHK's drama productions included a Writers' Series which ventured into the local literature scene, and The Below the Lion Rock series. To promote civic education, a new programme Today in LegCo was launched to highlight the work of the Legislative Council. Emphasis has continued to be put on educational programmes. Dial A Tutor is a programme to help students with their studies and Pre-school deals with the healthy development of pre-school children, while Music Time and Story Time are two new children's programmes with a new format that places emphasis on the arts. In addition, The New Epoch, a documentary type of youth programme which investigates the various facets of Hong Kong adolescents, was started. Adult education is another area being developed with civic education, language and the performing arts as the main theme this year.

The highlight of the year was the station's production of a Youth Spectacular in October to celebrate the Queen's visit to Hong Kong. This special event, held in the Hong Kong Coliseum and comprising music, songs and dances performed by over 6000 youths, demonstrated the talents of Hong Kong's young people. It was televised and was very well-received by the audience.

       RTHK's Educational Television Division and the Education Department have contin- ued their joint efforts in producing educational programmes for schools. The government's Educational Television Service, which utilises the transmission facilities of the commercial stations for eight hours a day, is watched by around 600 000 children in primary and secondary schools. The programmes are devised and written by specialist Education Department staff who provide schools with programme literature and follow-up work. The programmes are produced by RTHK and are made in colour using film animation, drama and documentary techniques.

Proposals for Cable Television

Earlier in the year, the government accepted in principle a recommendation of the Broadcasting Review Board that cable television should be introduced in Hong Kong. To assess the commercial community's interest in the development of cable television in Hong

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     Kong, the government invited interested parties to submit preliminary proposals between July 25 and September 30. Eight submissions were received in response to this invitation. The submissions were examined by the government with a view to drawing up terms and conditions and preparing tender documents for the award of the necessary licence. To assist in the formulation of cable television policies, a study visit was made by staff of the Administrative Services and Information Branch, Economic Services Branch and Post Office in late October and early November to the United Kingdom, France, the United States and Canada. Discussions were held with relevant government officials and selected cable operators in those countries. A tender exercise is expected to be held in 1987.

Government Information Services

The Government Information Services (GIS) provides the link between the administration and the information media and, through them, the people of Hong Kong.

      The work of the GIS is carried out by several divisions. The News Division distributes a great variety of government information through its teleprinter and facsimile networks, which are directly linked with leading newspapers, radio and television stations, and news agencies. The facsimile system, which is especially important for communicating in the Chinese language, is designed to transmit to the media both photographs and typed or printed messages. Telex and international facsimile services enable government offices overseas to receive messages without delay and to communicate directly to the department and, through it, to the rest of the government. The News Division operates a 24-hour media enquiry service, handling an average of 20.000 questions every month.

The division is also responsible for organising and conducting press conferences, including the year-round meet-the-media sessions by heads of government departments. In addition, a media service team is charged with the responsibility of planning and providing press facilities for public functions performed by top government officials and visits by VIPs from overseas. The importance of this service was highlighted by the visit of the Queen and Prince Philip in October, during which extensive arrangements were made for some 200 local and overseas journalists to cover the major event.

In an emergency such as a typhoon, the newsroom becomes a co-ordination centre. It disseminates information to the media, particularly the radio and television stations, to keep the public informed of developments. Apart from this mobilisation of both manpower and equipment in the newsroom, other staff man various key positions within the government's organisation for managing emergencies, contributing to the minute-by- minute flow of information.

      The Public Relations Division has three sub-divisions: media research, departmental units and overseas. The media research sub-division keeps the government fully informed of public opinion as expressed in the information media. It produces the Gist, a daily news sheet in English which summarises news and editorial comment in the major Chinese language papers, as well as opinions voiced on radio and television. Other publications include Opinion, a weekly review of Chinese editorial comment, What the Magazines Say and special reports on media coverage of subjects of particular interest to the government. The sub-division is also responsible for producing the Hong Kong News Digest, a fortnightly newspaper in Chinese which helps Hong Kong Chinese overseas to maintain contact with Hong Kong, and The Week in Hong Kong, a newsletter mainly on trade and economic matters distributed to overseas subscribers.

The departmental units sub-division co-ordinates the operation of the 26 information and public relations units in government departments. These units issue press releases,

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arrange press conferences and site visits and answer many media enquiries concerning the activities and aims of their respective departments. Through these efforts they play a major role in maintaining the flow of information and helping to improve relations with the public.

The overseas public relations sub-division (OPRS) assists in the government's publicity efforts overseas and produces and distributes promotional material including feature articles and newsclips for radio and television. Assistance is provided for visiting journalists requiring information and interviews with government officers, and close liaison is maintained with news agencies and overseas journalists based in Hong Kong. In 1986, the unit assisted 308 overseas journalists and 63 other visitors, and distributed 23 features, and produced 17 video items for television.

The Publicity Division embraces the creative, publishing and promotional resources of the department. Its ambit includes photography and film-making, an extensive photo- graphic library, the staging of exhibitions, the design of books, leaflets and posters and the design and placement of all government advertising. GIS produces a wide variety of publications ranging from leaflets and fact sheets to the Hong Kong Annual Report and other full-colour books. Sales of government publications rose by 5.2 per cent to more than $22.3 million in 1986, compared with $21.2 million in 1985. The main emphasis of publishing activity continued to lie with information materials for free distribution. During the year some 900 items totalling 8 380 000 copies were given out to the public. These included leaflets advising on procedures for obtaining a wide range of government services, together with fact sheets covering 55 topics, which are updated annually with the latest statistics.

The Publicity Division also plans and carries out all government publicity campaigns. The Anti-narcotics, Crime Prevention, Anti-Smoking, Industrial Safety, Road Safety and Fire Prevention programmes continued to be accorded status as major campaigns, along with Rehabilitation of the Disabled, Keep Hong Kong Clean and the issue of New Identity Cards. Two new campaigns were launched in 1986, designed to promote awareness of dangers in the home - especially to the very young - and to promote a greater sense of civic awareness and responsibility. Thirty-six other topics were treated in publicity programmes, including Road Traffic Legislation, Country Parks, and the Summer Youth Activities Programme. In support of these, numerous promotional events were organised through mobile exhibitions, live shows, television and radio programmes as well as competitions. The division also contributed to the organisation of, and publicity for, Hong Kong's participation in Expo '86 and the Royal visit in October.

       The News and Public Relations Division of the Hong Kong Government Office in London works closely with GIS to provide a press service on Hong Kong matters for the British media and for Hong Kong journalists based in the United Kingdom, and enquiry and information services for the public about events and developments in Hong Kong.

       The News Section monitors British Parliamentary proceedings and media coverage of Hong Kong affairs, and keeps the Hong Kong Government informed on a daily basis by telex and facsimile transmission. It also publishes a fortnightly newsletter, 'Dateline Hong Kong', which is distributed among organisations and individuals with a close interest in Hong Kong.

       The Public Relations Section was heavily involved in the organisation of two major projects during the year. The first, the 'Two Cities' Project, was held in October to coincide with the formal opening by the Governor of the new unified Stock Exchange of Hong

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Kong. The project, designed to publicise Hong Kong's growing importance as an international financial centre, included as its highlights a live, hour-long television link between two functions held simultaneously in Hong Kong and London, as well as twin exhibitions mounted by the Financial Times, in collaboration with the London Office, in the Public Gallery of the London Stock Exchange and the Rotunda in Exchange Square, Hong Kong, on Hong Kong's financial and business services.

The second major project was the complete rebuilding of the Hong Kong Exhibition at the Commonwealth Institute in London to reflect the important developments that have taken place in Hong Kong since the signing of the Joint Declaration on the future of Hong Kong, and Hong Kong's emergence as a 'high-tech' manufacturing and business orientated economy of world importance. The new exhibition was opened by Mr Timothy Renton, MP, Minister of State at the Foreign and Commonwealth Office.

      In common with the London Office, the Hong Kong Government Offices in New York and Brussels were kept busy catering to media interest in Hong Kong.

News media and public enquiries are serviced by two offices in North America, in New York and San Francisco.

The New York office went into operation in 1983 and is now firmly established as a resource for news media throughout the United States and Canada, particularly in the major news centres of New York and Washington. The San Francisco office opened in mid-1986, and will concentrate mainly on the area of the United States west of the Rockies. The New York office continued to publicise Hong Kong and its positive attributes, part- icularly its guaranteed future, arising from the Joint Declaration, and its status as a free and open trader which erects no barrier against imports or services from overseas. This work was especially important during the various debates in Congress on pro- tectionist legislation which would have harmed Hong Kong exports to the United States.

      The Brussels office is responsible, among other things, for the government's publicity efforts in the 12 Member States of the European Community, except the United Kingdom. The office's information section works closely with GIS to provide material on Hong Kong matters in response to enquiries from the European media and to provide briefings for journalists visiting Hong Kong.

       It also distributes feature articles and news releases to selected media contacts, and offers a more general enquiry and information service for members of the public, particularly business travellers, tourists and students.

Film Industry

By the end of 1986, the number of cinemas totalled 105 compared with 104 in 1985. The new theatres are generally better equipped, though smaller.

      The annual cinema attendance remained constant at about 60 million. Cinema going remains a popular activity, second only to watching television.

The number of locally produced films was 100 (including three co-productions), com- pared with 105 in 1985. While imported films continued to be popular, good quality local films remained the favourites with the majority of cinema patrons. The biggest box-office successes for the year included A Better Tomorrow which grossed $35 million; Noble Express ($28 million), Aces Go Places ($27 million) and Lucky Stars Go Places ($25 million). The trend towards making locally produced films in Cantonese rather than in Mandarin continued during 1986. Comedies, action films and horror films were the most popular.

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All films intended for public exhibition in Hong Kong must be submitted to the Panel of Film Censors, which is part of the Television and Entertainment Licensing Authority. Censorship standards are drawn from ascertained community views and a panel compris- ing 90 members of the public assists the films censors in reflecting community views as to whether a film is suitable for public exhibition. During the year, 703 films were submitted for censorship (including films intended for cine-clubs and cultural organisations). Of the total number submitted, 479 were approved without excisions, 217 were approved after excisions and seven were banned. These figures do not include films intended for television use.

Printing and Publishing

The international status of Hong Kong's printing industry has continued to grow steadily in recent years, based upon a reputation for quality and economy. As a leading centre for printing and publishing, the territory's growth has led to the establishment of over 3 370 printing factories, employing around 32 130 people, and more than 200 publishing houses, including many from overseas which have set up offices or regional headquarters here. Continued growth of the industry during the year can be attributed to the confidence of employers in the future of Hong Kong, and to the relative depreciation of the Hong Kong dollar against most other currencies which has enabled Hong Kong printers to obtain more orders from overseas.

      The industry constitutes seven per cent of all manufacturing establishments and four per cent of employment in the manufacturing sector. Most of the printing factories (77 per cent) are engaged in general jobbing work, and most of the remainder deal with related work, such as typesetting and bookbinding. There are also 38 newspaper printers.

Use of the latest technology, especially computerised equipment, has enabled the industry to become highly specialised. The local electronics industry contributes to the plant and equipment of the more sophisticated printing companies and also the publishers, who are becoming increasingly involved in the use of data and word-processing systems for editorial production and stock control.

The sales and marketing of data and word-processing systems are now handled by more than 100 companies offering over 200 systems. The output data can be converted or interfaced with typesetting equipment at realistic cost to provide publishers with the additional benefits of fast and cost-efficient printing. An increasing number of Chinese language word-processors are being installed to meet demand.

      Domestic exports of printed matter increased in value terms by 21.4 per cent over the previous year. Material printed locally with a total value of $1,760 million was exported, with China, the United States, the United Kingdom, Australia and Taiwan being the main customers. Books and pamphlets, newspapers, journals and periodicals accounted for over 63 per cent of exports of printed products. The biggest customers for this reading material were the United Kingdom, the United States and Australia.

Overall, the printing and publishing industries contributed 1.6 per cent of the net output of the manufacturing sector.

Postal Services

Hong Kong's efficient postal service includes two mail deliveries each weekday in the urban and industrial areas, and one delivery elsewhere in the territory.

Despite the large volume of letters handled, the Post Office continued to achieve its target of delivering most local mail within 24 hours of posting. In the case of airmail postings made at the four main offices - General Post Office, Tsim Sha Tsui and Kowloon Central

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Post Offices and the International Mail Centre the aim is to have the letter mail despatched on the same day if outgoing flights are available. Other airmail postings are generally despatched to their overseas destinations within 24 hours.

      During 1986, a total of 618 million letters and parcels - a daily average of 1.7 million - was handled, an increase of 9.4 per cent compared with the 1985 figure. About 4 018 tonnes of letter mail and 4 372 tonnes of parcels were despatched abroad by air during the year, an overall increase of 8.5 per cent over the previous year.

      The Speedpost service continued to grow rapidly, and is now available to 536 cities in 47 countries, including all major trading partners of Hong Kong, such as Australia, Belgium, Canada, China, France, West Germany, Italy, Japan, Singapore, South Korea, Sweden, Taiwan, the United Kingdom and the United States. During the year, 1 409 412 items were handled, an increase of 27.6 per cent over 1985.

      The Intelpost service is now available to 39 major destinations including Argentina, Australia, China, Denmark, West Germany, the Irish Republic, Israel, Japan, South Korea, Portugal, Singapore, the United Kingdom and the United States. It offers high speed facsimile transmission of high quality black and white reproductions of documents, handwritten material, drawings and personal messages up to A4 size (210mm x 297mm). These items can be accepted at the special counters in any of the 26 accepting offices, and will be available for delivery within hours at the overseas destinations. Facilities are also available to accept for overseas delivery Intelpost items transmitted over the local telephone network direct from facsimile machines operated by commercial organisations in Hong Kong.

A new official aerogramme printed on white paper was introduced in September to replace the traditional plain blue one. The new aerogramme bears a $1.30 stamp depicting a stylised map of Hong Kong.

      Lei Cheng Uk, Lok Fu, Ngau Tau Kok and Aberdeen Post Offices were relocated in bigger premises during the year to cope with the rising postal demand in their districts. There are now 103 post offices in the territory.

      The Post Office issued five sets of special stamps in 1986. The first of these, issued in February, consisted of four stamps commemorating the return of Halley's Comet. A miniature sheet comprising a set of these four stamps was also released. To honour the 60th birthday of Her Majesty the Queen, a set of five stamps was issued on April 21. This set of stamps formed part of the Crown Agents omnibus series issued in conjunction with 22 other postal administrations.

In July, a set of four stamps depicting the themes of transport, finance, trade and communications was issued to mark the participation of Hong Kong at the 1986 World Exposition in Vancouver, Canada. Another set of four stamps featuring four types of old and new fishing vessels found in Hong Kong waters was released in September. The last set of special stamps was issued in December. It consisted of four stamps depicting four 19th century portrait paintings kept as part of the art collections in the Hong Kong Museum of Art and by the Hong Kong and Shanghai Banking Corporation. In addition to these special stamp issues, commemorative covers franked with a special datestamp were released on October 21, to mark the second visit to Hong Kong by the Queen. For use on these covers, the special stamps issued on the occasion of the Queen's 60th birthday were again placed on sale on the first day of the Royal visit.

      First day covers were also issued on December 30 to mark the introduction in Hong Kong of postage labels issued from a Frama label issuing machine which was installed at the General Post Office.

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As a leading financial, commercial and industrial centre in Asia, Hong Kong depends on efficient and reliable telecommunications both within the territory and internationally.

      Telecommunication services are provided by two franchised local companies, the Hong Kong Telephone Company Limited and the Cable and Wireless (Hong Kong) Limited.

The Postmaster General is the Telecommunications Authority and he administers the Telecommunication Ordinance and the Telephone Ordinance which govern the establish- ment and operation of all telecommunication services. He also acts as adviser to the government on matters concerning the provision and operation of public telecommunica- tion services and the technical aspects of radio and television broadcasting.

      The Post Office makes use of computer techniques in managing the radio frequency spectrum to ensure that it is utilised efficiently. It draws up frequency allocation plans for the territory and assigns frequencies for specific applications. It grants licences, under the Telecommunication Ordinance, for all forms of radio communication within Hong Kong. It maintains surveillance of the radio frequency bands to detect illegal transmissions and interference emanating from sources within and around the territory. It conducts exam- inations leading to the issue of the Certificate of Competence in Radiotelephony or Radio- telegraphy to radio operating personnel in compliance with the International Radio Regulations. It also conducts inspections of ships' radio stations to ensure compliance with the International Convention for the Safety of Life at Sea.

      In addition, the Post Office provides advisory and planning services for the communica- tion requirements of government departments, and co-ordinates and regulates the use of all radio communication sites. Major systems planned in 1986 included the replacement of the existing police telephone network with a new network that consists of digital stored-program-controlled exchanges and high capacity digital links, a new teleprinter network for the Government Information Services and a digital PABX to replace the existing telephone exchange serving the Government Secretariat.

      The basic public telecommunication services in Hong Kong - telephone, telex and telegram - are operated by the two franchised companies on an exclusive basis. Customer premises terminal equipment is provided on a competitive basis but 'permission to connect' is required in respect of each type of equipment. Other telecommunication services may be operated competitively, provided the service has been licensed under the Telecommunica- tion Ordinance.

      The internal telephone service is provided by the Hong Kong Telephone Company Limited. With over 2.3 million telephones served by more than 1.7 million lines, the territory has a density of around 42 telephones for every 100 people.

      The company also operates a public data network using a special transmission switching technique, known as packet switching, to provide the public with more advanced data communication facilities.

The network helped the introduction of 'cashless shopping', as it enabled the electronic transfer of funds to go into operation at selected retail outlets.

      Hong Kong's international telephone service is provided jointly by the Hong Kong Telephone Company Limited and the Cable and Wireless (HK) Limited. A world-wide operator-connected service is available and International Direct Dialling can be made to more than 140 overseas destinations.

      International telecommunication services, which include public telegram, telex, tele- phone, television programme transmission/reception, leased circuits, ship-shore and air- ground communications, are provided by the Cable and Wireless (HK) Limited under an

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exclusive licence granted under the Telecommunication Ordinance. The company also operates the local telex and telegram service. International facilities are provided through land and submarine cables, radio systems and satellite links from the Stanley earth station which operates via satellites over the Indian Ocean and the Pacific Ocean.

To further improve Hong Kong's telecomunication facilities for communication with other territories, new submarine cables and radio links are planned and put into service from time to time. A new submarine cable between Hong Kong and Taiwan was brought into service in October 1985 to replace the old tropospheric scatter radio system.

      Other than the basic services provided by the two franchised companies, a number of telecommunication services are operated by private companies under appropriate non- exclusive licences granted by the Telecommunications Authority. Services such as radio paging, mobile radiotelephone, data facsimile transmission, videotex, electronic mail, community repeater and one-way data message are offered competitively by a number of organisations. Radio paging services are especially popular, and over 250 000 pagers are now in service.

18

Religion and Custom

FOXX:

HONG KONG people enjoy complete religious freedom, with different ethnic communities practising the world's major faiths. Buddhist monasteries and Taoist temples co-exist with Christian churches, mosques, and Hindu and Sikh temples. All major religious bodies have established schools which offer a general education besides religious instruction.

Buddhism and Taoism, the leading Chinese religions, maintain a strong hold on the population, especially among the older folk. Ancestral worship is also widely practised as advocated by Confucianism which, though not truly a religion, teaches a moral code based on human relations.

Buddhism and Taoism

     Hong Kong has more than 360 Chinese temples. Some temples are centuries old and contain priceless antiques, some are of more recent construction, while others are housed inside multi-storey buildings and cater for the spiritual needs of smaller circles of city dwellers.

All temples are required to be registered under the Chinese Temples Ordinance. The Chinese Temples Committee manages some 40 public temples and the income, from donations by worshippers, is used for the preservation and restoration of not only public temples but also privately owned temples of historical value. Most of the large temples and monasteries are open to the public.

Each temple is dedicated to one or two deities enshrined in the main hall, with side halls housing subsidiary deities. Since Buddhism and Taoism, basically two different faiths, are often regarded as related in that they both involve sacred rites of traditional origins, Buddhist and Taoist deities may be honoured together within one temple. Leading deities include Buddha, Kwun Yum (the Buddhist Goddess of Mercy), and Lui Cho (a Taoist god).

There are also a diversity of deified mortals traditionally worshipped as a result of their performance of actual or mythical feats. Foremost among these is Tin Hau, the Queen of Heaven and Protectress of Seafarers, worshipped by the fishing population as well as others in the community, reflecting Hong Kong's high dependence on fishing and sea trade.

There are at least 24 Tin Hau Temples in Hong Kong, the most famous being the one in Joss House Bay, which is visited by tens of thousands of worshippers each year at Tin Hau Festival on the 23rd day of the third lunar month.

Other deified mortals include Kwan Tai, the God of War and Righteousness; Pak Tai, Lord of the North and Patron of Cheung Chau Island; Hung Shing, God of the South Seas and a weather prophet, and Wong Tai Sin, a Taoist deity, in whose honour a temple originally built 60 years ago in north-eastern Kowloon in traditional Chinese architectural style has been enjoying great popularity. Dedicated to the Gods of Literary Attainment and

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     Martial Valour, the Man Mo Temple in Hollywood Road on Hong Kong Island, run by the Tung Wah Group of Hospitals, a charitable organisation, is also very popular and well-known.

There are five major festivals in the Chinese calendar, all of which are statutory public holidays. First and foremost is the Lunar New Year, when gifts and visits are exchanged between friends and relatives, and children receive 'lucky' money. The Ching Ming Festival in the springtime provides an opportunity to visit ancestral graves. The Dragon Boat Festival is celebrated on the fifth day of the fifth moon in early summer with dragon boat races and by eating cooked rice wrapped in lotus leaves. The Mid-Autumn Festival falls on the 15th day of the eighth moon. Gifts of mooncakes, fruit and wine are exchanged, and adults and children go into the parks and countryside at night carrying colourful lanterns. The Chung Yeung Festival is on the ninth day of the ninth moon, and is celebrated by large crowds climbing hills in remembrance of an ancient Chinese family's escape from plague and death by fleeing to the top of a high mountain. Family graves are also visited on this day.

Christian Community

The Christian community - Roman Catholic and Protestant - is estimated to number almost half a million people, comprising more than 50 denominations and independent groups.

The Protestant and Roman Catholic churches enjoy a good fellowship. The Roman Catholic Diocese and the Hong Kong Christian Council have a Joint Committee on Development which plans joint action in areas of mutual concern, with official representa- tion on each other's committees. Church leaders issue joint pastoral letters and various bodies of both groups co-operate in a number of mission and service projects. All local religious broadcasting in both Chinese and English over Radio Television Hong Kong is planned and produced in association with two ecumenical committees. They serve the station in an advisory capacity. An important event for the total religious community took place in April. It was a courtesy visit by a delegation from Peking, led by Mr Ren Wuzhi, Director of the Religious Affairs Bureau of the State Council of China. The group visited all the major religions in the territory.

Roman Catholic Community

The Roman Catholic Church has been present in Hong Kong since the territory's early days. The church was established as a Mission Prefecture in 1841 and as an Apostolic Vicariate in 1874. It became a diocese in 1946.

In 1969, Francis Chen-peng Hsu was installed as the first Chinese Bishop of the Hong Kong diocese, and he was succeeded in 1973 by Peter Wang-kei Lei. The present Bishop, John Baptist Cheng-chung Wu, was consecrated in 1975.

About 267 250 people, or five per cent of the population, are Catholics. They are served by 350 priests, 71 brothers, and 738 sisters. There are 56 parishes and 54 centres for Mass. The majority of the services and other religious activities are conducted in Chinese, with a few churches providing services in English.

The diocese has established its own administrative structure while maintaining tradi- tional links with the Pope and with other Catholic communities around the world. The assistant secretary-general of the Federation of Asian Bishops' Conference has his office in Hong Kong.

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Along with its apostolic work, one of the prime concerns of the diocese has been for the well-being of all the people of Hong Kong. In education, there are 300 Catholic schools and kindergartens which have about 321 200 pupils. There is the Catholic Board of Education to assist in this area. The medical and social services include six hospitals, 10 clinics, 16 social centres, 13 hostels, 12 homes for the aged, two homes for the handicapped and many self-help clubs and associations. Caritas is the official social welfare arm of the church in Hong Kong.

These services are open to all people - indeed, 95 per cent of those who have benefited from the wide range of services provided by the diocese are not Catholics.

      To reach people through the media, the diocese publishes two weekly newspapers, Kung Kao Po and The Sunday Examiner. In addition, the Diocesan Audio-Visual Centre produces tapes and films for use in schools and parishes and, overall, the Hong Kong Catholic Social Communications Office acts as an information and public relations channel for the diocese.

By special appointment of the Pope, Bishop Wu attended the Extraordinary Synod of Bishops held in Rome during the year. The synod was called to commemorate the 20th Anniversary of the Second Vatican Council, to assess the implementation of the council teachings and to make plans highlighting the council spirit.

      Early in the year, at the invitation of the Director of the Religious Affairs Bureau of Guangdong, Bishop Wu made an official visit to Guangdong.

In September the Bishop attended the General Assembly of the Federation of Asian Bishops' Conference in Tokyo.

Protestant Community

The Protestant community in Hong Kong numbers over 200 000 people. Major traditions represented are Adventist, Alliance, Anglican, Baptist, Church of Christ in China, Lutheran, Methodist, Pentecostal and the Salvation Army as well as many independent and indigenous congregations.

      Protestant churches operate 200 kindergartens, 175 primary schools, 120 secondary schools, three post-secondary colleges, three schools for the deaf, several training centres for the mentally handicapped, and 15 theological schools and Bible institutes.

      Health care is also an important field. There are five major hospitals operated by the Protestant churches. These are augmented by many clinics, community health programmes and other health services including home visits by nurses. Plans for the expansion of the United Christian Hospital have been approved by the government and architectural details are now under study. The 640-bed capacity is to be enlarged to 1 400 beds. In January a ground-breaking ceremony marked the beginning of work on two new staff quarters for the enlarged hospital.

      There are two ecumenical bodies which facilitate the co-operative work among the Protestant churches. The oldest of these is the Chinese Christian Churches Union, dating from 1915. About 200 congregations make up the membership of the Churches Union. The union's work is carried out through departments of evangelism, Christian education, charities, information and cemeteries. The Churches Union publishes the newspaper Christian Weekly, which serves all the Protestant congregations. A city-wide evangelistic crusade and a church music camp were highlights of the year. The year also saw completion of a $6-million church centre for leadership training and conferences, built adjacent to the Kowloon Christian Cemetery.

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      The second co-operative body is the Hong Kong Christian Council, formed in 1954. The council bases its membership on the major denominations and the ecumenical services bodies. The Christian Council is committed to building closer relationships among all churches in Hong Kong as well as with churches overseas. Its programme is carried out through the Division of Mission and the Division of Service, which operate as the Hong Kong Christian Service. Related service agencies include the United Christian Medical Service, the Alice Ho Miu Ling Nethersole Hospital, the Christian Industrial Committee, Christian Family Service Centre and the Tao Fung Shan Ecumenical Centre.

The council sponsors the 'Alternative Tours' on Wednesdays, designed to give visitors to Hong Kong an opportunity to see specific ways in which Christians serve the people. "The Mission of the Church in Hong Kong - A Mid-Decade Consultation' was held by the council in January although originally planned for the previous month. Out of this grew an ongoing effort to promote civic education and political participation in Hong Kong for the betterment of the community.

Muslim Community

There are about 50 000 Muslims in Hong Kong. More than half of them are Chinese with the rest being either locally born non-Chinese or believers from Pakistan, India, Malaysia, Indonesia and Middle Eastern and African countries. Three principal mosques are used daily for prayers. The oldest is the Jamia Mosque in Shelley Street on Hong Kong Island which was built before the turn of the century and rebuilt in 1915. It can accommodate a congregation of 400.

      Also on Hong Kong Island is the Masjid Ammar and Osman Ramju Sadick Islamic Centre. Opened in 1981, this eight-storey centre in Wan Chai houses a mosque on two floors, a community hall, a library, a medical clinic, classrooms and offices. The mosque, which is managed by the Islamic Union of Hong Kong, can accommodate 700 people but up to 1 500 if necessary, by using other available space in the centre.

Situated on what is sometimes called the 'Golden Mile' in Nathan Road is the Kowloon Mosque and Islamic Centre which was opened in May 1984. This imposing building, with white marble finishing is a new landmark in Tsim Sha Tsui. The mosque can accommodate a congregation of about 2 000 and has in addition to the three prayer halls, a community hall, a medical clinic and a library.

There are two Muslim cemeteries, both on Hong Kong Island -- one at Happy Valley and the other at Cape Collinson, Chai Wan. The cemetery at Cape Collinson also has a mosque. The co-ordinating body for all Islamic religious affairs is the Incorporated Trustees of the Islamic Community Fund of Hong Kong. A board of trustees comprising representatives of four Muslim organisations, namely the Islamic Union of Hong Kong, the Pakistan Association, the Indian Muslim Association and the Dawoodi Bohra Association is responsible for the management and maintenance of mosques and cemeteries. The trustees are also responsible for organising the celebration of Muslim festivals and other religious events. Charitable work among the Muslim community, including financial aid for the needy, medical facilities and assisted education, is conducted through various local Muslim organisations.

Hindu Community

The religious and social activities of the 12 000 members of Hong Kong's Hindu community are centred on the Hindu Temple in Happy Valley. The Hindu Association of Hong Kong is responsible for the upkeep of the temple, which is also used for

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     meditation periods, yoga classes and teaching Hindi to the Indian community. Naming, engagement and marriage ceremonies are performed at the temple according to Hindu customs. Religious music, lectures and recitals are conducted every Sunday morning and Monday evening.

The Hindu Temple is frequently visited by swamis and learned men from overseas who give spiritual lectures to the community. A number of festivals are observed, the more important being the Holi Festival, the Birth of Lord Krishna, Shivaratri, Dussahara and Diwali.

Various linguistic groups among the Hindus organise additional festivals for other deities such as Hanuman, Devi and Ganesh, and conduct prayer meetings on auspicious occasions.

Sikh Community

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The Sikhs distinguished by their stylised turbans and unshorn hair - first came to Hong Kong from the Punjab in North India as part of the British Armed Forces in the 19th century. Because of their generally strong physique, they also comprised a large segment of the Royal Hong Kong Police Force before World War II.

Today, members of the community are engaged in a variety of occupations. The centre of their religious and cultural activities is the Sikh Temple in Wan Chai. A special feature of the temple, which was established in 1901, is the provision of free meals and short-term accommodation for overseas visitors of any faith. Religious services, which include hymm singing, readings from the Guru Granth (the Sikh Holy Book) and sermons by the priest, are held every Sunday morning. The temple also houses a library which contains a good selection of books on the Sikh religion and culture, and runs a 'starters' school for Indian children aged between four and six to prepare them for English primary schools in Hong Kong.

The main holy days and festivals observed are the birthdays of Guru Nanak (founder of the faith), Guru Gobind Singh (the 10th and last Guru) and Baisakhi (birthday of all Sikhs). To meet the demands of a growing congregation, the temple prayer hall has been enlarged.

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Jewish Community

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Hong Kong's Jewish community comprising families from various parts of the world - worships on Friday evenings, Saturday mornings and Jewish holidays at the Synagogue 'Ohel Leah' in Robinson Road, Hong Kong Island. The synagogue was built in 1901 on land given by Sir Jacob Sassoon and his family. The site includes a rabbi's residence and a school as well as a recreation club for the 1 000 people in the congregation. There is also a Jewish cemetery, which is located in Happy Valley.

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Recreation and The Arts

WHILE recognising the benefits of their industry, Hong Kong people are also aware of the need for leisure time activities.

With their shorter working hours and improved standard of living, they are able to take part in and enjoy an increasingly diverse range of recreational, sports and cultural activities. While large numbers take part in or watch the many sporting events that are regularly held, others may spend their time going to the countryside or the beaches at weekends or holidays.

A great deal of interest is also shown in cultural events, as Hong Kong develops into a leading centre in Southeast Asia, with several large new cultural venues having recently been opened or about to open. Thousands of events are now held throughout the year. These events range from traditional Cantonese opera and puppet shows to ballet perform- ances, theatre, and orchestral music.

Funds and facilities for these pursuits, as well as further training and coaching opportunities for young sportsmen and students of the arts, have been made available largely by the government, the Urban Council, the Regional Council, governing sports bodies, voluntary associations and many private organisations.

In the cultural area, the Hong Kong Academy for the Performing Arts was officially opened by Her Royal Highness the Duchess of Kent in February. The Academy, whose objects are to foster and provide for training, education and research in the performing arts and related technical fields offers unique facilities and opportunities for the multi-disciplinary and bi-cultural training in Chinese and Western music, drama, dance and related technical arts. The building was financed by a $300-million donation from the Royal Hong Kong Jockey Club and its annual running costs are being met by the government.

Countryside

Countryside recreation is an accepted part of the way of life for many people in Hong Kong. Country parks and woodlands on the urban fringes are used extensively by city dwellers for morning walking, shadow boxing and jogging, and by students for nature study, while more remote parks are used for hiking, picnicking, barbecuing, cycling, kite flying, orienteering and camping by those seeking a relaxing change of pace.

There are 21 country parks throughout Hong Kong, covering about 40 per cent of the land area. Within these country parks recreational amenities include picnic and barbecue places, waymarked walks, shelters, toilets, and information and educational services. Road access is being improved to enable park staff to deal more effectively with fires and litter - the most serious problems created by visitors.

About 9.4 million visits were made to the parks during the year. Although the parks are used more in the drier and cooler months, with October to April accounting for 65 per cent

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of the total visitors, increasing numbers of people now go to the countryside during the summer. Evening visits to roadside picnic sites are also becoming popular.

The Director of Agriculture and Fisheries is the Country Parks Authority and, advised by the Country Parks Board, is responsible for these facilities and for the provision of management and protection services for all lands designated as country parks and special areas.

Urban Council

The Urban Council continues to play a vital role in community life by providing a wide range of recreational and cultural facilities in the urban area of Hong Kong. The Urban Services Department, as the executive arm of the council, manages a total open space of 497 hectares. Major recreational facilities include parks, playgrounds, swimming pools, beaches and indoor games halls.

Urban Council projects completed in 1986 include Hiu Kwong Street Playground and Indoor Games Hall, Carpenter Road Park (Stage II Phase I), Hong Kong Squash Centre in Victoria Barracks, Wong Nai Chung Reservoir Park and Harbour Road Garden.

To maximise land use, new or redeveloped Urban Council markets are built as multi-storey complexes with one or more floors constructed exclusively for recreational or cultural use. The facilities so provided include indoor games halls, libraries, auditoria, multi-purpose rooms for rehearsals, training, lectures and community functions, visual arts studios and exhibition areas.

Two complexes were completed in 1986, one in Wong Tai Sin and one in Wan Chai. During the year, seven complexes were under construction in the Eastern and Western Districts on Hong Kong Island and in the Kowloon City, Kwun Tong, Sham Shui Po, Mong Kok and Yau Ma Tei Districts in Kowloon. Twelve similar projects in various districts are under planning. In addition, five new indoor games halls were under construction together with 16 under various stages of planning to supplement the existing indoor facilities at Aberdeen, Kai Tak East, Cheung Sha Wan, Morse Park, Boundary Street, Lai Chi Kok, To Kwa Wan, Ngau Tau Kok, Chun Wah Road and Hiu Kwong Street.

With a budget of $7 million in 1986, the Urban Council, through its Sports Promotion Office, provided the main financial support to events jointly promoted with sports associations and other organisations. The 7 800 sports and recreational events promoted in this way included territory-wide leagues and championships, spectator events and special projects such as school sports, the annual Festival of Sport and sports activities for the physically handicapped. Some 195 180 people took part in these activities which attracted large numbers of spectators.

Through its network of 10 Recreation, Amenities and Sports District Offices, the Urban Council promotes community-based recreation and sports programmes and elementary learn-to-play courses for the general public, housewives and shift workers, in addition to courses specially designed for the handicapped and disabled. During the year, about 220 000 people took part in 4 000 programmes and activities, including 27 000 people in the Learn-To-Swim Scheme, and 53 000 people in fitness and dance programmes.

The Regional Council

The Regional Council, formed on April 1, provides recreational and sports facilities in the non-urban areas, while the Regional Services Department (RSD), as the council's executive arm, is responsible for the planning and management of the facilities. Major recreational

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and sports facilities include town parks, playgrounds, swimming pools and beaches, indoor recreational centres, sports grounds, camps and water sports centres.

Building projects completed in 1986 include the Tuen Mun Swimming Pool Complex Phase I, the Tuen Mun Swimming Pool Squash Courts, an artificial turf soccer pitch at Tai Po, a beach building at Hap Mun Bay, Sai Kung and the landscaped promenade along the Shing Mun River of Sha Tin. Many more recreation and sports facilities are being built in the area, including in particular major town parks in all main population centres and an ambitious building programme in respect of indoor recreation facilities. Construction of three indoor recreation centres was completed in Tai Po, Yuen Long and Sha Tin. Nine similar projects in various districts were being built, and 25 additional indoor centres were in various stages of planning.

The council also manages 311 hectares of open space and amenity plots providing recreational and sports facilities.

Through its Sports Promotion Scheme, the council subsidises various sports associations in providing sports programmes on a regional or multi-district scale. With a provision of $1 million, the council sponsored over 50 such sports events in 1986.

      The RSD's nine district offices organised 3 833 recreation and sports programmes for 248 308 people, including 19 137 who took part in various fitness and dance programmes held in four neighbourhood sports centres. In addition, 1 179 similar projects were jointly organised with other government departments and outside bodies. Some of the projects were specifically designed for the elderly, the handicapped and the disabled. During the same period, some 56 community events including sports festivals, carnivals and fun fairs were jointly organised by the council and various district boards to give residents a greater sense of district identity. Some 48 700 people attended these activities.

In outdoor pursuits, 87 186 day-campers and 97 449 overnight-campers took part in activities organised by the council at the Lady MacLehose Holiday Village, the Sai Kung Outdoor Recreation Centre, the Tai Mei Tuk Water Sports Centre and the Chong Hing Water Sports Centre.

Beaches and Swimming Pools

Swimming is by far Hong Kong's most popular summer recreation. During the year, 8.5 million people visited the bathing beaches and 1.3 million used the public swimming pools managed by the Urban Council and the Regional Council.

There are 41 gazetted bathing beaches: 12 on Hong Kong Island managed by the Urban Council and 29 in the New Territories managed by the Regional Council. The beaches are manned by lifeguards and provided with changing rooms, toilets, first-aid posts, lookout towers and other ancilliary facilities.

Currently there are 20 public swimming pool complexes managed by the two councils - 13 in the Urban Council area and seven in the Regional Council area. The competition pools in these complexes are built to international standards. There are six public swimming pool projects under planning in the urban area and 12 in the New Territories.

      The two councils regularly organise learn-to-swim classes to promote water safety. During the year, 241 swimming classes and training programmes were held, attracting 6 814 participants.

City Hall

With an area of 11 000 square metres, the City Hall has been, since its opening in 1962, a popular venue for the performing and visual arts.

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      This well-established civic centre is the major venue for the Hong Kong International Film Festival and the Festival of Asian Arts, both staged by the Urban Council, and the Hong Kong Arts Festival. Cultural and entertainment presentations by the Urban Council's performing companies and various cultural organisations are also staged in the City Hall round the year.

      Facilities provided by the City Hall complex are housed in the High Block and the Low Block, connected by a memorial garden. The Low Block has a 1 488-seat Concert Hall, a 467-seat Theatre, an Exhibition Hall and both Chinese and Western restaurants.

      In 1986, some 518 300 people enjoyed 1035 performances at the Concert Hall, the Theatre and the Recital Hall and a total of 122 exhibitions were presented at the Exhibition Hall and the Exhibition Gallery.

Town Halls

The completion of Sha Tin Town Hall in October marked another milestone in the promotion of cultural activities in the Regional Council area. Five civic centres are now being managed by the council. The other four are Tsuen Wan Town Hall, Lut Sau Hall in Yuen Long, North District Town Hall in Sheung Shui and Tai Po Civic Centre. Another civic centre, Tuen Mun Town Hall which is similar in design to the Sha Tin Town Hall, is being built and will be ready next year.

The Sha Tin Town Hall is located on a convenient site between the Sha Tin Railway Station and the Shing Mun River. Its main feature is a 1 424-seat multi-purpose audito- rium, including an enlarged 323-square metre stage, two side stages, and an orchestra pit. The Tsuen Wan Town Hall is the first cultural complex in the Regional Council area. The Lut Sau Hall, North District Town Hall and Tai Po Civic Centre each has an auditorium for about 800 people and a rehearsal room or dance studio.

Hong Kong Cultural Centre

     Funded by the government and the Urban Council, the Hong Kong Cultural Centre is being constructed in phases on a choice waterfront site at the tip of the Kowloon peninsula. In the first phase, the Hong Kong Space Museum was completed in 1980. Work on the second phase - which includes a 2 250-seat Concert Hall, a 1 860-seat Grand Theatre, a Studio Theatre for 500, an Arts Library, administrative offices and two restaurants - began in November 1984 and will be completed in late 1989.

Aberdeen Civic Centre

The Aberdeen Civic Centre, on the fifth floor of the Urban Council Aberdeen Complex, is basically intended to be a district cultural facility. It has a 160-seat Cultural Activities Hall, an Exhibition Hall which also serves as a rehearsal room, a Conference Room, two music practice rooms and ancillary facilities suitable for a wide variety of small-scale cultural performances and community activities such as recital, dance, drama, chamber music, mime shows, rehearsals, exhibitions, lectures, meetings and receptions.

During the year, 238 activities were held there.

Community Arts Centre

To promote arts and culture at community level, the Urban Council provides a reasonable geographical spread of community arts centres in the urban area. A community arts centre normally comprises a 450-seat auditorium for performances, rehearsal and practice facilities, an exhibition hall and a visual arts studio.

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Two such centres are under construction in the Urban Council Ngau Chi Wan Complex and the Urban Council Western Complex, and should be ready in early 1987 and mid-1988 respectively. Another centre in the Urban Council Sai Wan Ho Complex is being planned.

Ko Shan Theatre

The Ko Shan Theatre, opened in 1983, is a purpose-built, semi-open-air theatre available for hiring by the public. It is situated within the Ko Shan Road Park in Hung Hom and provides 3 000 seats - 1 000 under cover and 2 000 in the open air.

The Theatre is a venue for Urban Council presentations and community activities. About 105 000 people attended 150 performances in the theatre in 1986.

Indoor Stadia (Hong Kong Coliseum and Queen Elizabeth Stadium)

The Hong Kong Coliseum and the Queen Elizabeth Stadium, in their fourth and sixth year of operation respectively, are the two major multi-purpose, fully air-conditioned indoor stadia and entertainment complexes in Hong Kong. Both are under the management of the Urban Council.

      Over the past three years many local and overseas celebrities as well as world ranking athletes have used the 12 500-seat coliseum for a wide variety of concerts, entertainment events and sports spectaculars. The coliseum has also accommodated several major trade exhibitions and an international conference. A unique feature of the coliseum is its arena, which can be converted into an ice rink for ice shows or recreational ice skating. Altogether, 796 000 people attended 105 shows and events staged at the coliseum in 1986.

      The 3 600-seat arena of the Queen Elizabeth Stadium offers an alternative, smaller venue to the coliseum in presenting sports, entertainment or cultural events catering to a medium-sized audience. Its distribution lobby can be used for hosting exhibitions, trade demonstrations as well as recreational activities such as chess and bridge.

      Other facilities of the stadium include badminton, squash, volleyball and basketball courts, table tennis facilities as well as multi-purpose gymnasia for fitness courses and various sports, dance, or music training activities. More than 429 400 people attended events and activities at the stadium during the year.

      The stadium is also the home of the Amateur Sports Federation and Olympic Committee of Hong Kong, and houses 23 sports associations in its office block.

Hong Kong Arts Centre

The Hong Kong Arts Centre is the home of an independent non-profit making organisation which presents multi-cultural arts events, including music, drama, dance, film and the visual arts. In general, its programming emphasis is on encouraging local artists, groups and events. The Arts Centre is not financially supported by government funding, but instead relies on the support of the public and the business community for its survival.

In 1986, the three auditoria at the Arts Centre, namely Shouson Theatre, Recital Hall and Studio Theatre, were used for 1043 performances and the Pao Sui Loong Galleries held 77 exhibitions. The two rehearsal rooms, art and crafts studios, music practice rooms and other areas were used for 406 classes.

The main events of the year included a 'Trilogy' drama project, a 'Music Series', an 'International Festival', a 'Children's Festival', 'The Art of Henry Moore', 'Minority and Folk Crafts of Guizhou' and 'An Exhibition of French Modern Art'. All these events received sponsorship from the business community.

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Classes and workshops on dance, theatre, crafts and ceramics, Western and Chinese painting, fashion design and children's art were conducted. The number of participants exceeded 5 000.

Cultural Presentations

During 1986, the Urban Council presented 302 performances by local and overseas groups and artists, apart from those given by its professional performing companies and staged at the Festival of Asian Arts and the International Theatrical Carnival.

The performances, which drew 260 945 people, included instrumental, vocal and orchestral concerts, drama, ballet, folk and modern dances, Chinese and Western operas, mime, films and others. Some performances were presented in conjunction with other cultural organisations, such as the Hong Kong Philharmonic Society, the British Council, the Goethe Institute and the Alliance Francaise.

Highlights of the year included performances by the Chicago Symphony Orchestra, the St Louis Symphony Orchestra, the violin recital by Salvatore Accardo, the piano recital by Pascal Roge, the Vienna Boys Choir, the Alvin Ailey Modern Dance Theatre, the Manhattan Ballet, London Shakespeare Group, Cantonese opera performances by the Chor Fung Ming Opera Troupe, and the opera production Maria Stuarda.

Work will continue in presenting the performing arts to the public and providing more performing opportunities for local artists and groups.

The Regional Council also presented a variety of cultural programmes, making a wide range of the arts more accessible to the public. The council played an important role in the district arts festivals by contributing quality programmes and providing professional expertise. It took part in the Tsuen Kwai Arts Festival 1986 and the Tai Po, Sha Tin and Kwai Ching festivals.

A total of 260 cultural presentations was organised by the Regional Council, attracting an attendance of 107 000. These presentations included performances by world renowned overseas artists and groups such as the flamenco guitarist Paco Pena, pianist Yin Chengzong, pipa virtuoso Liu Dehai, the Bach Collegium Munchen from West Germany, the puppet group Theatre Sans Fil from Canada, the American Ballet Comedy, the legendary Kodo from Japan, the Vienna Boys Choir, and the Zhejiang Xiao Bai Hua Shanghai Opera Troupe.

As an encouragement, the Regional Council offered half price on tickets for students and elderly people.

Computerised Ticketing

The Urban Council operates a computerised ticketing system which has sold over 2.8 million tickets since its start in 1984. The system provides a comprehensive range of postal, telephone and counter booking services for the Urban Council's cultural, entertain- ment and sports events and for events organised by 101 hirers of Urban Council facilities, and in commercial venues. Eight sales outlets are available in Urban Council venues as well as in commercial premises. Two more sales outlets have also been set up in the Regional Council's venues.

Hong Kong Repertory Theatre

Founded by the Urban Council in 1977, the 24-member Hong Kong Repertory Theatre continued to gain strong support from local audiences. Under the new Artistic Director, Dr Joanna Chan, the company offered a seasonal repertoire of translated Western dramas,

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contemporary works from China and overseas, and original pieces by local playwrights. Seven major productions and four small-scale or workshop-style productions were staged,

all in Cantonese.

      The company also gave regular, free performances at schools and district community centres. Its 146 performances attracted 65 100 persons. It also organised the annual Drama Festival in July and August.

Hong Kong Chinese Orchestra

The Hong Kong Chinese Orchestra is a professional Chinese music orchestra formed by the Urban Council in 1977. It has been introducing new musical works by commissioning local and overseas composers to undertake compositions and arrangements. The orchestra's 74 performances under the baton of its new Music Director, Mr Kuan Nai-chung, its Assistant Music Director and local and overseas guest conductors drew audiences totalling 97 300 during the year. Apart from the regular concerts at the City Hall, the orchestra gave free concerts at various other civic centres, as well as at schools and district community halls.

During the year, the orchestra also staged its first popular concert series at the Hong Kong Coliseum in the Festival of Asian Arts and had its first record made for release in 1987.

Hong Kong Dance Company

The Hong Kong Dance Company is the only professional dance company in Hong Kong to present traditional and folk Chinese dances and new dance dramas choreographed on Chinese and Hong Kong themes. Founded by the Urban Council in 1981, it continued to gain popularity with its attractive and innovative dance programmes staged regularly in both the council's venues and community halls. In 1986, the company gave 64 perform- ances, some of which were free performances at schools and district arts festivals. The total attendance was 43 650. A highlight was the premiere of a new dance drama Yue Fei choreographed by Ms Shu Qiao, the company's new Artistic Director, and Mr Ying Eding, which was adapted from the story of the famous hero of the Song Dynasty.

Hong Kong Arts Festival

The Hong Kong Arts Festival marked the fourteenth year with more than 120 performances in the four-week programme, which once again attracted 95 per cent capacity audiences.

One of the highlights of the 1986 Hong Kong Arts Festival was the appearance of Glyndebourne Festival Opera which was making its first visit to Asia. It was presented by the Academy for Performing Arts for the official opening of its superb new Lyric Theatre. Another major event was the largest and most important sculpture exhibition ever mounted anywhere in Asia, The Art of Henry Moore containing more than 250 pieces of his work. The extensive concert programme included the Minnesota Orchestra conducted by Sir Neville Marriner, the Vienna Chamber Orchestra, the Hong Kong Philharmonic and the Hong Kong Chinese Orchestra, New London Consort, the Medici String Quartet, Albert Bolliger, the Brass Band, Cyprien Katsaris, Helene Delavault, and pipa master Liu Dehai. The variety of dance performances included Balletap USA, the Scottish Ballet, the Desrosiers Dance Theatre and City Contemporary Dance Company, while drama presen- tations were given by the Compass Theatre, Theatre Sans Fil, the Chinese Youth Arts Theatre (Beijing) and Hong Kong's own Repertory Theatre and Chung Ying Theatre Company.

The festival is presented in association with the Council for the Performing Arts, the Urban Council and the Royal Hong Kong Jockey Club.

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The Festival Fringe is an open arts festival that takes place at the same time as the annual Hong Kong Arts Festival. It comprises four weeks of shows and exhibitions contributed by local and overseas artists in indoor and outdoor venues throughout Hong Kong. All the artists present their shows with their own financial resources.

      The Fringe provides a year-round venue at the Fringe Club for performers and artists to create new works and polish their skills. In the past year, 116 different shows, 20 exhibi- tions, and 26 different training courses were held at the Fringe Club. The premises are made available rent-free by the government.

Festival of Asian Arts

The Festival of Asian Arts, one of the most important international cultural events in the region and organised by the Urban Council, celebrated its 11th year. The 17-day festival was held from October 17 to November 2, featuring 10 overseas and six local groups. Performers from China, India, Indonesia, Japan, South Korea, Malaysia, Nepal, Pakistan, Sri Lanka and Thailand presented various facets of Asian culture ranging from contempor- ary jazz music and popular spiritual singing to ritual dances and experimental theatre.

       Performances were presented at the City Hall Concert Hall and Theatre, the Ko Shan Theatre, the Space Museum Lecture Hall and the Hong Kong Coliseum. In addition, there were free performances in parks and playgrounds.

      The festival also included several lectures and demonstrations by visiting and local artists to promote appreciation and understanding of various Asian performing art forms. Four museum exhibitions were held to coincide with the festival.

The festival events attracted 407 160 people.

Hong Kong International Film Festival

Held for the tenth year in 1986, the Hong Kong International Film Festival has grown from a modest regional festival to become one of the most eclectic film festivals in the world, gaining international recognition as a showcase for Asian cinema.

       The tenth festival, held from March 27 to April 11, featured new productions from 29 countries, and several retrospective programmes. There were mini tributes to Max Ophuls and Jean-Luc Godard, whose distinctive styles of cinematography had greatly influenced the development of European cinema. A special programme on 'The Best of Heinosuke Gosho' was presented, showing 12 best works of the Japanese filmmaker, acclaimed in Japan as one of the greatest masters but little known abroad. To celebrate the anniversary and in recognition of the local film industry, 15 local works were highlighted in the retrospective: 'Ten Years of Hong Kong Cinema (1976-85)'.

In addition, Cantonese melodramas made in the 1950s and 1960s were chosen as the topic for the Hong Kong Cinema Retrospective Section, and a small programme was dedicated to Li Chenfeng, a renowned film director on the Cantonese melodrama genre who died in May 1985.

International Theatrical Carnival

The International Theatrical Carnival was organised by the Urban Council to provide entertainment programmes for the enjoyment of children and young people during the summer holidays.

      Six groups from China, Britain, Canada, Austria, Holland and the United States took part in the carnival. Together with five local performing groups they gave 37 performances

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     at the City Hall and the Space Museum, six free performances at major shopping arcades, and a fun fair at the Chater Road Pedestrian Precinct.

The carnival offered programmes covering almost the whole spectrum of theatrical arts. Some 14 600 persons attended the performances, and 18 170 saw the exhibition.

Hong Kong Museum of History

The year witnessed a major development in the educational and extension services of the Hong Kong Museum of History.

      A regular Museum Weekend Programme was introduced for the first time in July to provide education orientated entertainment in the form of free lectures, demonstrations, film shows, video and slide programmes on subjects related to local history, archaeology, ethnography and natural history. Special museum workshops on historical inscriptions of Hong Kong and physical archaeology were organised from March to June and November to December to cater for the school population. Four additional travelling exhibitions were produced for free display in schools during the year, bringing to five the total number of such exhibitions. All of them were fully booked. Organised group visits to the museum by schools and local communities continued to be a popular feature and a total of 320 organised group visits comprising 27 400 participants were entertained.

      A standing exhibition introducing the history of Hong Kong from the Neolithic period to 1841 has been staged on the ground floor gallery of the museum since July 1986.

      The first floor gallery of the museum was reserved for the display of temporary thematic exhibitions, including the most popular display entitled 'Local Traditional Chinese Wedding', which was organised as a contribution to the 11th Festival of Asian Arts in October. Other significant and interesting exhibitions included the 'Ethnic Costume of the Miao People in China', the first display on costumes ever staged in the museum, the 'Historical Inscriptions of Hong Kong' and the 'Currency of Macao'.

      Progress continued to be made in the collection of ethnographic and historic materials and on special projects recording different facets of the local heritage. During the year, a new project to survey local traditional village ware and implements was completed.

      Pending the provision of a permanent building, the museum has plans for interim expansion and up-grading of its premises at Kowloon Park, to provide an additional 1 200 square metres of display area. In addition, plans to convert Law Uk, a 200-year old Hakka House at Chai Wan, into a folk museum were finalised and construction work is expected to be completed in late 1988. The folk museum will become the second branch of the Museum of History, the first being the Han Tomb preserved in situ at Lei Cheng Uk. The Han Tomb continued to attract visitors, particularly school parties, and recorded a total attendance of 45 000.

Hong Kong Space Museum

     Some 1 217 200 visitors enjoyed the various sky shows, exhibitions and extension activities presented by the Hong Kong Space Museum during the year. Major attractions in the museum's Space Theatre included two Omnimax film shows ("Grand Canyon - The Hidden Secrets' and 'Flyers'), two sky shows ("The Universe of Dr Einstein' and 'The Star of Christmas') and one educational programme ('Introducing the Solar System') for primary 5-6 pupils. Temporary exhibitions on related themes were also held in conjunction with the shows. These shows attracted 536 379 persons.

      Besides, three new exhibits and one publication were produced by the Space Museum during the year. To foster interest in astronomy, particularly among young people, the

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museum organised nine astronomy classes, 24 film shows and 12 lectures on astronomy. A highlight of the year was the start of the Astronomical Observation Award Scheme, aimed at promoting public interest in astronomical observation.

Hong Kong Museum of Science and Technology

Following the allocation of a prime site in Tsim Sha Tsui East by the government to the Urban Council for a Museum of Science and Technology, important steps were taken in the year to pursue the project. Construction work will be carried out in phases. The first phase, with a gross area of 13 500 square metres, is expected to be completed by 1990.

      A museum consultant was appointed for the preparation of a master zoning study, facility outline programme and site utilisation plan, as well as for the coordination of the exhibition design and fabrication of exhibits. The facility outline programme and master zoning plan were completed in April. A tentative exhibition plan is being consolidated.

To meet the increasing demand for science related activities and to stimulate interest in the museum, a variety of educational and extension activities in the form of lectures, film shows and seminars was organised. These programmes attracted more than 5 000 persons. A joint project with the Hong Kong Polytechnic to produce simple prototype exhibits was also initiated.

Hong Kong Museum of Art

The Hong Kong Museum of Art presented 13 exhibitions which attracted 243 350 visitors, including 6 300 students in 136 school parties.

      The exhibitions featured Chinese and contemporary local art, as well as art from overseas. The most important exhibition of the year was 'The Art of Henry Moore', presented jointly with five local and overseas institutions. A total of 257 exhibits, including monumental sculptures, were displayed at seven venues at the same time. The exhibition, officially opened by Her Royal Highness the Duchess of Kent, was unprecedented in scale. Two other overseas travelling exhibitions were also held with the generous support of foreign institutions and collectors. These included sculptures by contemporary German sculptors and Chinese paintings under the Qianlong Emperor from the Phoenix Art Museum.

The exhibition of Urban Council Fine Art Award Winners showed the most representa- tive works of a group of local artists in the media of painting, print, sculpture, ceramics and Chinese calligraphy. Four exhibitions featuring items of Chinese antiquities and historical pictures from the museum collections were also organised. To inspire creative art activity for local school children, a childrens' painting competition and exhibition was organised jointly with the Education Department.

      The branch museum, the Flagstaff House Museum of Tea Ware, continued to stage exhibitions on tea drinking and Yixing tea wares. A special exhibition on Chinese bamboo carving was presented to display items donated by the late Dr Ip Yee, while a significant competition and exhibition on pottery tea wares was organised to promote public interest in the art of pottery.

The museum also organised education and extension activities including lectures, film shows, slide programmes, mini-travelling exhibitions, and talks for teachers and students. Throughout the year, the museum acquired suitable items to strengthen its collections. The museum also received a donation of 238 items of Shiwan pottery figures from Mr Woo Kam-chiu. The donation has provided the museum with a specialised collection for exhibition and research purposes.

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      Planning work gathered momentum for the new Hong Kong Museum of Art which forms part of the Hong Kong Cultural Centre at Tsim Sha Tsui. The new museum will have 12 500 square metres of space for the galleries, educational facilities and supporting services. Piling started in November and the project is scheduled for completion in 1991.

Sheung Yiu Folk Museum

The Sheung Yiu Folk Museum at the nature trail of Pak Tam Chung, Sai Kung, was in its third year of operation. The museum shows a 19th-century Hakka walled village of domestic units, a gate tower, kitchens, pig pens with display of period furnishings and farming implements. It attracted 86 307 visitors throughout the year.

Hong Kong Railway Museum

Housed at the old Tai Po Market Railway Station and opened in December 1985, the museum deals specially with the history, development and services of the Kowloon-Canton Railway. It displays the old Tai Po Market Railway Station built in 1913 which is now a declared monument. The station's booking office, waiting hall and signal cabin have been restored for public viewing. Other exhibits include a full-sized mock-up of an electrified train carriage, five old historic rail coaches, two inspection trolleys and other railway artefacts. During the year, the museum attracted 410 604 visitors.

Sam Tung Uk Museum

     Construction of the Sam Tung Uk Museum began in February, and the museum is expected to be ready and opened to the public in mid-1987. Located in Tsuen Wan, the museum is being converted from an 18th-century Hakka walled village of a Chan clan. The 2 000 square metre museum will include the restored ancestral hall, 12 village houses, a reception hall, an orientation hall, an exhibition hall, a lecture room, and museum offices all converted from village houses. Its adjoining 8 000 square metre open space, incorporating a pond, a gateway, a sales kiosk with landscaped sitting out areas, will reflect the rural character of the museum.

Zoological and Botanical Gardens

The Hong Kong Zoological and Botanical Gardens, managed by the Urban Council, are the oldest and possibly the most popular public gardens in Hong Kong. Situated on a 5.35 hectare site at the foot of Victoria Peak overlooking Government House, the gardens contain a wide variety of botanical and zoological features. The gardens were constructed between 1861 and 1871 and were divided by Albany Road. The Old Garden, located to the east of the road, houses an extensive bird collection while the New Garden, opened in 1871, is home for the mammals. The horticultural contribution, which is mainly located in the Old Garden, is enhanced by extensive planting inside the zoological enclosures.

      The mammal collection includes Jaguars, Clouded Leopards, Red-cheeked Black Gib- bons, Emperor Tamarins, Green Acouchis, Common Marmosets, Prevost's Tree Squirrels, Indian Porcupines, Goodfellow's Tree Kangaroos, Celebes Black Apes, Common Squirrel Monkeys, Agoutis, Short-beaked Echidnas, Ring-tailed Lemurs, Siamangs, Orang-utans and Golden-headed Lion Tamarins. Among them, 13 species of mammals, including the Orang-utans and Lion Tamarins, have bred in the gardens.

       The bird collection, which is among the best in Asia, concentrates on rare or endangered species. Altogether, more than 850 specimens representing about 265 species are housed. With the sale or transfer of zoological stock between countries growing increasingly

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difficult, greater emphasis has been placed on the breeding of stock within the gardens. An excellent record in this respect has been achieved in recent years, including success with the white-naped crane, the Count Raggi's bird of paradise, the Victoria crowned pigeon and the white-winged wood-duck.

       The horticultural collection includes trees, palms and shrubs representing more than 400 species. Colourful displays of seasonal flowers can be found at the Fountain Terrace garden which was reconstructed in 1985. This formal garden has a large fountain as the central feature and the landscaped surrounds include more than 230 species of shrubs.

Public Libraries

Library services to the community are provided under the aegis of the Urban Council in the urban area and the Regional Council in the New Territories.

      With the opening of two small libraries in Lok Fu Estate and Hong Ning Road, and the reprovisioning of the Happy Valley Public Library and Wan Chai Public Library in the new Urban Council Lockhart Road Complex, the Urban Council now operates 24 static libraries and two mobile libraries. Facilities provided by these libraries include adult and children's lending services, extension activities programmes, reference and audio-visual services, newspaper and periodical service, and students' study room facilities as well as block loan services to cultural organisations and penal institutions.

During the year the Royal Hong Kong Jockey Club donated two reading machines capable of converting printed English into spoken words to the Kowloon Central Library and the City Hall Public Library, thus making it possible for the blind to use the libraries' English books. The two libraries also received 10 sets of microcomputers each from a local company to promote computer literacy.

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      The Regional Council operates two mobile libraries and 20 public libraries, including the Tsing Yi, Shek Wai Kok and Butterfly Estate public libraries opened earlier in the year.

      Last November saw the completion of the council's first central library - the Sha Tin Central Library - which is also its largest and most comprehensive library, with an initial stock of 222 000 books and audio-visual services to libraries in the surrounding areas.

       Each of the nine districts in the area is provided with at least one static library. All libraries provide a free lending service of adult and junior books, and audio-cassettes.

       To assist the Education Department, study rooms are provided in district libraries at Tsuen Wan, South Kwai Chung, North Kwai Chung, Yuen Long and Sai Kung. The mobile libraries regularly visit various mainland districts to serve people.

      New materials acquired during the year for the public libraries included 466 000 books, 710 gramophone records, and 18 028 items of audio-visual material. Some two million people took part in the extension activities which were organised to promote the use of the libraries. More than 11.2 million items of library material were issued for home reading and 21 million books were read in the libraries.

Council for Recreation and Sport

As the government's principal advisory body on recreation and sport, the Council for Recreation and Sport advised on the disbursement of $10.4 million of government funds in 1986 to sports associations. The money was spent chiefly towards supporting competitions and tournaments at international level both locally and overseas, training, development programmes and staff salaries and administrative costs. Of this amount, $1.5 million was granted to the Amateur Sports Federation and Olympic Committee of Hong Kong to take part in the Commonwealth and Asian Games.

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The council also advised on the disbursement of certain independent funds, including the Sir David Trench Fund for Recreation, earmarked for youth recreation projects primarily for capital works items and the purchase of specialised equipment. In 1986, $5.7 million was allocated for this purpose. From a newly-established Sports Aid for the Disabled Fund, grants were made available to disabled athletes on the advice of the council.

Subvented Voluntary Agency Recreational Camps

Advisory and supervisory responsibility relating to the 39 Voluntary Agency Camps has been transferred from the Social Welfare Department to the Municipal Services Branch, with a view to identifying those camps that could be further developed and those requiring reorganisation to bring them up to standard as recreational facilities.

      The aim is to make as many of the camps as possible economically viable and effective in attracting children and young people to make maximum use of the available facilities.

Outward Bound School

The Hong Kong Outward Bound School is a private registered charity and part of a world-wide network of 34 such schools. It provides year round land and sea-based stress challenge personal development training programmes, which last from seven to 18 days.

      The training is held on the school's training ship, the brigantine Ji Fung, and from the residential base on the Sai Kung Peninsula.

      The purpose of each course is to improve the trainee's self confidence, self awareness, leadership and communication skills. Trainees include employees of corporations and businesses who use Outward Bound as part of their staff development programmes, students, and young people, both able-bodied and handicapped.

      During its year-round operation the school organised a total of 106 courses for 2900 people, including 39 courses for adults, 16 children's adventure and social education programmes, seven special outdoor skills courses, and 18 courses for the disabled.

      Financing is provided through tuition income, charitable donations, and a government subvention which enables the participation of handicapped people and young people who are unable to afford the full course fee.

Adventure Ship

The Adventure Ship project began in 1977 with the acquisition of a large Chinese junk named the Huan. After conversion from its original design as a passenger vessel, it became a sail training ship which can carry 60 young people. Adventure Ship Ltd was formed as a registered charity in 1978 with the aim of providing 'skill and character development with sea adventures' for underprivileged young people in Hong Kong. The various modifica- tions made to the 90-foot Huan also enable handicapped groups to use the vessel.

      Groups of young people join Huan for trips of one to five days, staying within Hong Kong waters, and whenever sponsorship is available longer trips to overseas ports are undertaken. More than 5 700 young people took part in trips during 1986.

Ocean Park

     Ocean Park, an 87-hectare oceanarium and fun park on the south side of Hong Kong Island overlooking the South China Sea, attracted 1.5 million visitors in 1986.

      The park comprises headland and lowland areas, linked by a cable car system, and the headland has a second entrance by means of the world's longest covered outdoor escalator.

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Among the many attractions on the headland are six 'thrill rides', including one of the longest and fastest roller coasters in the world. There is also the Ocean Theatre, which has a killer whale, dolphins, sea lions and high divers. Other features of the headland include the Wave Cove, with sea lions, penguins and pelicans, and the Atoll Reef, the world's largest aquarium.

      The major attractions on the lowland include Water World, the first water play park of its kind in Asia which provides visitors with a variety of water activities, a children's zoo, a dolphin feeding pool, a Golden Pagoda housing over 100 species of goldfish, a garden theatre, and Cine 2000, a new and exciting concept in cinema entertainment.

       In addition, plans are now in hand to build a $35-million Craft Village, a car park and an inflight-aviary at Tai Shue Wan. The inflight-aviary is due for completion in 1987, and will include a bird theatre, exhibition hall, parrot garden, flamingos and water birds on an existing ornamental lake.

Plans are also in hand to relieve the Royal Hong Kong Jockey Club, which has been funding the capital works and annual operating expenses of the park, of the control and management of the park. These responsibilities will be assumed by an independent statutory corporation, to which the Jockey Club has pledged a donation of $200 million for the running of the park.

Jubilee Sports Centre

     The Jubilee Sports Centre, a 16-hectare modern sports complex at Sha Tin, has become increasingly popular as a venue for international groups. Some have used it as a training venue en route to major tournaments, while others have stayed at the centre specifically to work together with Hong Kong squads and the centre's coaches. The centre played host to many international workshops and courses and accommodated a number of teams during the year. Major events and courses are organised in conjunction with the sports' governing bodies. The combination of world standard facilities and the centre's team of expert coaches has helped achieve many outstanding results.

      During the year, approval was given to the Royal Hong Kong Jockey Club's proposal that the centre be given full autonomy by endowing it to a level which not only meets the club's present obligation to cover recurrent operating costs but also to meet future depreciation of plant and equipment and an element of capital replacement for 20 years.

Summer Youth Programme

The Summer Youth Programme is a large-scale community project involving youth and voluntary agencies, schools, district organisations, the Royal Hong Kong Jockey Club and government departments.

       The 1986 Summer Youth Programme adopted the theme of 'Care for Your Community, Get to Know It Better'. More than 10 000 activities were organised between June and September and over one million young people took part in the programme which cost about $15 million. The Royal Hong Kong Jockey Club donated $6 million and the balance was from government and Urban Council funds, private donations and fees from participants. Six outstanding youth leaders were also awarded Outward Bound Scholar- ships and were sent to attend an 18-day course on board the Outward Bound vessel Ji Fung. The Royal Hong Kong Jockey Club also donated $2.2 million for setting up permanent recreational facilities for young people in various districts.

From July, the Summer Youth Programme was co-ordinated by the Summer Youth Programme Committee, under the auspices of the Central Committee on Youth. One of the

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responsibilities of the Central Committee on Youth, formed in May, is to advise the government on territory-wide youth activities including the Summer Youth Programme and their funding.

The Summer Youth Programme Committee undertakes co-ordination work and appro- priates funds among the District Co-ordinating Committees which organise district activities, the Hong Kong Council of Social Service and relevant government departments which run different cultural and recreational programmes as well as social service projects.

Youth Hostels

The Hong Kong Youth Hostels Association is a charitable organisation providing outdoor leisure opportunities for young people. The number of annual members was around 30 000, being mainly in the 18-to-26 age group.

The association runs a number of hostels. The redeveloped Pak Sha O Hostel, situated in one of the more attractive areas of the Sai Kung Country Park, continued to be one of the most popular hostels. The Governor visited the Pak Sha O Hostel in April, in- specting the new buildings and talking to some of the people staying there. Plans to develop a third hostel, at Sai Wan Tsui, progressed during the year, with agreement in principle being given by the government on a site. Plans for the building were being drawn up by the architects.

Running costs are covered by membership fees and overnight charges for use of hostels. Capital expenditure is met by the association's own fund-raising activities and by grants from charitable institutions. Hostel sites are provided by the government.

Culture Division

The Culture Division of the Municipal Services Branch is responsible for the formulation and coordination of government's policies on culture. With the advice of the Council for the Performing Arts, it administers the disbursement of government subsidies to various performing arts bodies.

The division also supervises the work of the Books Registration Office and the Antiquities and Monuments Office, and provides secretariat service to the Council for the Performin