Hong Kong Yearbook - Annual Report for the Year 1995

HONG KONG 1996

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GOVERNMENT INFORMATION SERVICES

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HONG KONG1996

REVIEW OF 1995

AND A PICTORIAL REVIEW OF

THE PAST LIFTY YEARS

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WONG KONG

Cover Illustration

Bright lights,

big city: Hong Kong Island

appears bedecked with jewels in the autumn nightfall,

looking west across

C LIBRAR

Central District over Causeway Bay and Wan Chai.

P

End-paper Maps

Front

The Territory of Hong Kong

Back

Hong Kong in its Regional Setting

Frontispiece

Barely half a century separates the post-war sleepy backwater from the gleaming

powerhouse that

is modern Hong Kong. The other photographs in this retrospective illustrate

the changes wrought by time

and human endeavour.

FOREWORD

Hong Kong 1996 is the 50th edition in a series of annual reports prepared by the Hong Kong Government since relatively normal operations resumed after World War II. Before the yearbook, annual reports appeared more in the form of financial accounts or ledgers. They were filled out by hand, mostly in copperplate script which

enhanced even the most prosaic entries. The pust half-century has been far from prosaic. The first annual report, produced by what is now the Information Services Department, reported on Hong Kong's experiences during 1946 and was printed in March 1947.

It noted that Civil Government was restored on May 1, 1946, when Sir Mark Young resumed the Governorship, the Legislative and Executive Councils were reconstituted

and normal administrative organisation restored after the interruption caused by the war. Among Sir Mark's first acts was to open discussions on the best method for giving the people of Hong Kong a greater share of responsibility in the management of their own affairs. The result was a proposal to form a Municipal Council, two-thirds

elected by voters and one-third appointed by "Chinese and non-Chinese representative bodies". This was approved in general the following year and

Ats constitution and electoral procedures have changed gradually since then.

In May 1947, Sir Mark retired after a term of office interrupted by World War II. He paid farewel visit to the authorities in Guangzhou and several agreements were concluded to further the cordial relations existing between Great Britain and China.

Also in 1947, when almost 80 per cent of the territory's current population were yet to be born, Hong Kong was admitted as an Associate Member of the United Nations Economic Commission for Asia and the Far East. It was the first time

Hong Kong had been represented as an individual territory in a UN organisation.

RIES

Kat Tak Aerodrome- "never very satisfactory" was deemed totally inadequate for modern requirements and liable to cramp Hong Kong's development as an air centre.

No resolution to the problem was found by the end of 1947- and air traffic growth

was such that no remedy would last more than a year or two until Chek Lap Kok was chosen,

One of Hong Kong's worst disasters came the following year, when 173 people died in a godown fire at West Point (now well inland behind successive Western District reclamations)

on September 22, 1948. Hong Kong also experienced the world's first case of attempted air piracy that year. Some of the 23 passengers in a Catalina flying boat en route from Macau belonged to a gang which tried rob the rest of those on board. The plane crashed and

the four crewind 22 of the passengers died

The first reliable post-war figures became available, and Hong Kong was estimated to have a population of 1.8 million which the yearbook pointed out was "greater than

the population of New Zealand". In 1949, Hong Kong was pressed to provide housing and water for refugees fleeing from the civil war which was about to reach its climax on

the mainland. Those two issues became key factors in shaping modern Hong Kong, as Tide Cove turned into Sha Tin, Tuen Mun was created from

Castle Peak Bay, and High Island became the seaward wall of a fresh-water reservoir. Some things never change. The 1948 yearbook complained about the traffic congestion created by Hong Kong's 9 266 vehicles - and ran two photographs to prove it. One shows cars parked "on the waterfront" along both sides and in the centre of Connaught Road outside the

-

Hong Kong Club. The other shows a street that no longer exists.

So it went, year by year, as a succession of editors collated the facts of Hong Kong's growth through riots, typhoons, boom, bust and boom again. Browsing through them reads more often like

a novel than a government report but then, that is Hong Kong. And, as the series of yearbooks shows,

it has been 50 years of change for the better.

#

HONG KONG 1996

Editor

Bob Howlett

Information Services Department

Photography

Augustine Chu, David Ho, Anthony Chu and other staff photographers. Additional photographs by arrangement with the Apple Daily, the Hong Kong Trade Development Council,

the Hong Kong Tourist Association, the Public Records Office and Enviropace Limited. Thanks also to the Hongkong Standard and South China Morning Post.

Design

Magdy Yiu Ma Hak Mei Information Services Department

Special Contributor The Baroness Dunn (Chapter 1)

Statistical sources Census and Statistics Department

The editor acknowledges

and thanks all contributors and sources.

Copyright reserved

Code No F30019600EO

(ISBN 962-02-0220-1)

Price HK$80.00

Printed and Published by H Myers, Government Printer at the Government Printing Department, Hong Kong Printed on paper made from woodpulp derived from renewable forests.

CONTENTS

Chapter

Page

CALENDAR OF EVENTS IN 1995

1

THE WAY We Are

1-4

2

CONSTITUTION AND ADMINISTRATION

5-28

3

The Legal System

29-38

4

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

39-45

5

THE ECONOMY

46-69

6

FINANCIAL AND MONETARY AFFAIRS

70-91

7

TRADE AND INDUSTRY

92-113

8

EMPLOYMENT

114-125

9

PRIMARY PRODUCTION

126-130

10

EDUCATION

131-155

11

HEALTH

156-171

12

Social WelFARE

172-183

13

HOUSING

184-194

14

LAND, PUBLIC WORKS AND UTILITIES

195-225

15

TRANSPORT

226-248

16

THE AIRPORT CORE PROGRAMME

249-257

17

PORT DEVELOPMENT

258-261

18

PUBLIC ORDER

262-300

19

TRAVEL AND TOURISM

301-306

20

THE ARMED SERVICES

307-311

21

COMMUNICATIONS AND THE Media

312-332

22

RELIGION AND CUSTOM

333-337

23

RECREATION, SPORTS AND THE ARTS

338-366

24

THE ENVIRONMENT

367-394

25

POPULATION AND IMMIGRATION

395-401

26

HISTORY

402-410

APPENDICES

411-486

INDEX

487-494

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$7.8=US$1.

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

Hong Kong Government Publications

are obtainable from

The Government Publications Centre

Queensway Government Offices, Low Block, Ground Floor, 66 Queensway, Hong Kong

Leading bookshops throughout Hong Kong

Government

Information Services Department Publishing Sub-division

(bulk sales and editorial enquiries)

28th Floor, Siu On Centre, 188 Lockhart Road, Wan Chai, Hong Kong

CALENDAR OF EVENTS IN 1995

January

8-10

13-17

25-31

27

30

February

10

The UK Minister of State for Foreign and Commonwealth Affairs, the Right Honourable Alastair Goodlad, visits Hong Kong, attends a session of the Executive Council and meets Legislative Council members.

The Chief Secretary, Mrs Anson Chan, visits Singapore, where she names a $350 million floating dock built for Hong Kong United Dockyards Ltd.

The Chief Secretary, Mrs Anson Chan, attends the World Economic Forum in Davos, Switzerland.

The government issues an assessment of public opinion on the consultation paper, An Old Age Pension Scheme for Hong Kong, which was published in July 1994. The 6 665 submissions received offer divided views.

The Finance Committee approves an additional advance of $5,202 million (in money of the day) for the Provisional Airport Authority to move ahead on building the airport at Chek Lap Kok.

The Finance Committee approves $188 million for Stage I works of the Shenzhen River Regulation Project.

The Boundary and Election Commission publishes its report on a thorough review of the electoral arrangements for the 1994 District Board elections.

Hong Kong and the Philippines sign an agreement on the Surrender of Fugitive Offenders. It will remain in force after 1997 and is the fifth agreement Hong Kong has signed in this area of co-operation against international crime. The first was signed with the Netherlands; the second with Canada the third with Australia and the fourth with Malaysia.

Trade unionist Mr Lee Cheuk-yan is elected unopposed for the Legislative Council seat in Kowloon Central left vacant by the resignation of Mr Lau Chin-shek.

CALENDAR OF EVENTS IN 1995

March

1

ᏓᏁ

5

12-19

28

April

13

15-16

22-29

23

May

5

11

19

The Financial Secretary, Sir Hamish Macleod, presents his fourth and last Budget to the Legislative Council. He envisages a small deficit of $2.6 billion in 1995-96 and forecasts that GDP will rise by 5.5 per cent, total exports by 13 per cent and exports of services by nine per cent. Salaries tax is reduced to a maximum 15 per cent.

A total of 561 943 or 25.8 per cent of voters cast their votes in the Municipal Council elections; both figures higher than at the 1991 elections.

The Legislative Council passes a government motion for the establish- ment of a mandatory, privately managed occupational retirement protection system with provision for the preservation and portability of benefits.

The Secretary for the Treasury, Mr Donald Tsang, visits Beijing and Tianjin in a series of visits between Hong Kong and China aimed at increasing mutual understanding by Chinese and Hong Kong Govern- ment officials of each other's systems and ways of life.

A Preparatory Committee on Chinese Medicine is appointed to steer the compilation of a list of traditional Chinese medicine practitioners in Hong Kong and to help produce legislation to cover it.

Financial Secretary Sir Hamish Macleod visits the Shenzhen Stock Exchange and various developments, including port facilities and the airport, at the invitation of the Shenzhen Municipal Government.

The Secretary for the Treasury, Mr Kwong Ki-chi, leads a delegation to the Asia-Pacific Economic Co-operation (APEC) Finance Ministers' Meeting in Indonesia.

The Chief Secretary, Mrs Anson Chan, visits Belgium, the Netherlands and Germany and meets, among other dignitaries, European Com- mission President Jacques Santer.

For the third successive year, Hong Kong is declared the world's busiest container port.

Hong Kong and Germany sign an air services agreement.

Hong Kong and the Shenzhen Municipal Government sign an agree- ment on the Stage I works of the Shenzhen River Regulation Project. These involve straightening the Shenzhen River to reduce the risk of flooding.

The Sino-British Land Commission agrees at its 30th meeting that the Land Disposal Programme for the 1995/96 financial year should

CALENDAR OF EVENTS IN 1995

amount to 132.93 hectares, for commercial, residential and industrial development, public housing, public utilities and other uses.

June

6

7

9

14

26

26

28

30

The Governor, the Right Honourable Christopher Patten, announces measures to tackle unemployment, including cracking down on illegal employment and reviewing the General Labour Importation Scheme.

A white paper, Equal Opportunities and Full Participation: A Better Tomorrow for All, sets out policy directions for the development of rehabilitation services over the next decade and beyond.

British and Chinese representatives to the Joint Liaison Group sign an agreement to set up the Court of Final Appeal on July 1, 1997.

The Legal Aid (Amendment) Bill 1995, which proposes expanding the standard legal aid scheme and the Supplementary Legal Aid Scheme, is passed.

The Director-General of Industry, Miss Denise Yue, leads trade and industry officials on a five-day visit to Hangzhou and Ningbo. The Sex Discrimination Bill is passed in the Legislative Council, repre- senting a significant step in achieving gender equality and removing sexual harassment.

A Sino-British agreement is reached on the Financial Support Agree- ments for the new airport and the airport railway, allowing the Mass Transit Railway Corporation and the Airport Authority to borrow from banks to get on with the projects. Two franchise agreements for air cargo services are also validated.

July

1

4

6

13

The Chief Secretary, Mrs Anson Chan, makes her first visit to Beijing at the invitation of the Director of the Hong Kong and Macau Affairs Office, Mr Lu Ping. She meets Vice-Premier Mr Qian Qichen.

The daily quota for one-way permits for Chinese nationals to settle in Hong Kong goes up from 105 to 150 in an effort to help reuniting families.

The local telecommunications market is opened to competition from four telephone companies.

The Joint Liaison Group's 33rd meeting starts in London.

Hong Kong and New Zealand sign an Investment Promotion and Protection Agreement.

A 42-point action plan to beat drugs is released. It covers school-based education courses, an enquiry line for parents and students and more training places for social workers.

CALENDAR OF EVENTS IN 1995

25

26

27

August

1

12

18

21

25

28

September

1

3

5

6

12

The Governor in Council endorses a package of proposals to deal with traffic congestion, including studying the feasibility of electronic road pricing.

A Chinese delegation led by the Chief Economist of the Ministry of Railways, Mr Sheng Guangzhu, arrives in the territory for a 10-day visit.

The Court of Final Appeal Bill is passed by the Legislative Council.

The Legislative Council passes the Mandatory Provident Fund Schemes Bill, which gives workers retirement protection.

The Infrastructure Co-ordinating Committee meets in Beijing to discuss infrastructure projects with cross-border implications.

Torrential rain causes one landslide at Aberdeen, killing a man and a woman, and another at Chai Wan that kills a 12-year-old boy. Parts of Hong Kong Island receive 650 millimetres of rain in three days.

Hong Kong opens an economic and trade office in Singapore.

The Secretary for Financial Services (Designate), Mr Rafael Hui, and six other officials visit Beijing and Qingdao until August 28. This is part of a series of familiarisation visits to China started in 1988.

Chief Secretary Mrs Anson Chan visits Hefei in Anhui to attend the premiere of a television series on her late grandfather, General Fang Zhen-wu. She is invited by the Office of the Chinese People's Political Consultative Conference, Anhui Province.

The Governor inspects a parade at the Cenotaph to commemorate the 50th anniversary of the liberation of HK from Japanese forces.

The Minister of State with special responsibility for Hong Kong, Mr Jeremy Hanley, arrives for a five-day familiarisation visit.

The Royal Hong Kong Regiment (The Volunteers) is disbanded after 141 years of distinguished part-time service to Hong Kong.

Chief Secretary Mrs Anson Chan flies to Massachusetts to receive an honorary doctorate in Humane Letters awarded by the Tufts University.

Hong Kong comes third among the world's most competitive places for business in a survey by the World Economic Forum.

Hong Kong hosts the fourth special session of senior officials planning for the Seventh APEC Ministerial Meeting.

CALENDAR OF EVENTS IN 1995

13

14

17

19

20

21

25

27

October

1

3

10

A working group chaired by the Secretary for the Civil Service, Mr Michael Sze, publishes a report recommending measures to encourage the greater use of Chinese within the government.

The Secretary for Trade and Industry, Mr Chau Tak-hay, attends an APEC ministerial meeting on small and medium enterprises in Adelaide, Australia.

Voters choose Hong Kong's first fully elected Legislative Council. More than 920 000 people go to the polls in the geographical constituencies; another 460 000 ballots are cast in the functional constituencies and 282 voters turn out in the election committee poll. The election sets records for turnout and the number of candidates.

A scheme is announced to encourage vehicles to switch from light diesel fuel to petrol in a bid to fight air pollution.

A survey by the Bank of International Settlements ranks Hong Kong as the fifth-largest centre for foreign exchange trading after the United Kingdom, the United States, Japan and Singapore.

The Law Draftsman, Mr Tony Yen, leads a group of crown counsel on a visit to Beijing and Shanghai at the invitation of the Chinese Ministry of Justice.

The Secretary for Transport, Mr Haider Barma, attends the first meeting of a working group under the Infrastructure Co-ordinating Committee in Shenzhen to discuss a new rail passenger crossing at Lok Ma Chau.

Hong Kong begins its biggest promotion in Japan. It features business seminars, cultural shows, film and food festivals, a fashion show and exhibitions. The Chief Secretary, Mrs Anson Chan, leads a business delegation to Tokyo, Osaka and Fukuoka for the event.

Hong Kong attends the 11th general meeting of the Pacific Economic Co-operation Council in Beijing. The council aims at developing closer co-operation among economies in the region in trade and economic policy issues.

The Governor in Council approves the lifting of the Cantonese- language restrictions on Star TV's Star Plus and Chinese channels.

Hong Kong opens a new economic and trade office in Sydney.

Foreign ministers of Britain and China reach a four-point agreement on closer links between China and HK in handling transitional issues such as co-operation with the Special Administrative Region Preparatory Committee, contacts between civil servants and Chinese officials, the development of container terminals and handover ceremonies. Financial Secretary Donald Tsang attends the annual meeting of the World Bank/International Monetary Fund in Washington.

CALENDAR OF EVENTS IN 1995

11

19

31

November

9

10

16

17

19

20

23

24

The Governor presents his fourth policy address to the Legislative Council. It states the government's aims and objectives, and reports on the success most departments had in meeting their targets over the year.

The Solicitor-General, Mr Daniel Fung, leads a Hong Kong Govern- ment team to Geneva for a hearing before the UN Human Rights Committee on a periodic report on the territory.

The Governor visits London to brief the Prime Minister, Mr John Major, on the latest developments in the territory.

The Sino-British Joint Liaison Group visits Beijing for its 34th meeting.

The Attorney General, Mr Jeremy Mathews, makes his first official visit to Beijing and Shanghai.

The Governor chairs his second summit on employment, which produces a three-way approach to the issue clamping down on illegal labour, increasing resources for retraining, and improving the govern- ment's job-matching procedure.

The United States and Hong Kong confirm a draft air services agree- ment text, which, when cleared by the Joint Liaison Group, will ensure the continuation of air links between both places beyond 1997.

The Secretary for Trade and Industry, Mr Chau Tak-hay, represents Hong Kong at the seventh ministerial meeting of the Asia-Pacific Economic Co-operation forum in Osaka. Ministers agree on an Action Agenda for submission to economic leaders.

A team led by Principal Crown Counsel Mr Stephen Wong attends a hearing of the UN Committee Against Torture in Geneva on govern- ment measures to prevent any acts of torture.

The Action Agenda for achieving a free trade goal in the Asia-Pacific region is endorsed by the APEC Economic Leaders Meeting in Osaka. Financial Secretary Donald Tsang represents Hong Kong.

The head of the Economic Affairs Department of the Hong Kong and Macao Affairs Office of the Chinese State Council, Mr Zhang Liangdong, leads a Chinese delegation on a 10-day visit to the territory.

The Secretary for Trade and Industry, Miss Denise Yue, takes part in an informal ministerial meeting of the World Trade Organisation in Vancouver.

The Chief Secretary, Mrs Anson Chan, begins a 12-day visit to Milan, Rome, Paris and Singapore. She meets government officials and busi- ness leaders.

At its 31st meeting, the Sino-British Land Commission agrees to adjust the land disposal programme to facilitate the building of the River Trade Terminal at Tuen Mun.

CALENDAR OF EVENTS IN 1995

27

28

29

30

December

4

5

9

10

11

12

13

14

Hong Kong is named the world's freest economy on the Index of Economic Freedom compiled by the Heritage Foundation.

Hong Kong and Italy sign a bilateral agreement on the promotion and protection of investments.

The Sino-British Joint Liaison Group holds the fifth round of expert talks in Beijing on the preparation of the transitional budget.

Britain and China reach a four-point agreement on the membership of the Airport Authority, the Airport Authority Ordinance and two franchise agreements on catering and fuel supply for the new airport at Chek Lap Kok.

Hong Kong and Chinese officials meet at the Happy Valley clubhouse of the Royal Hong Kong Jockey Club for their first informal get- together.

The Chief Secretary, Mrs Anson Chan, signs an investment promotion and protection agreement with France in Paris.

A civil case in the High Court is conducted in Chinese for the first time. The Hong Kong Government Information Centre is launched on the Internet, offering a single access to government and quasi-government information.

The Director of Fire Services, Mr Peter Cheung, leads a group of six fire officers on a visit to Beijing, Qingdao and Shanghai.

The Government pays an official visit to the Philippines at the invitation of President Fidel Ramos.

The government and Guangdong provincial authorities hold talks in Hong Kong on matters relating to boundaries of administration.

A further 17 departments and four branches come under the Code on Access to Information, bringing to 57 the total number of government agencies covered by the code. Members of the public can seek infor- mation or copies of records held by government department under the code.

The Education Commission releases its sixth report setting out 38 recommendations to enhance proficiency in the Chinese and English languages in education.

In the last such exercise of the year, 112 Vietnamese migrants are sent back to Hanoi under the Orderly Repatriation Programme, bringing the total for the year in this category to 864. A total of 1 668 Vietnamese migrants returned home under the Voluntary Repatriation Scheme during the year, and 212 Ex-China Vietnamese illegal immigrants were sent back to Guangxi Province.

The Sino-British Joint Liaison Group holds the first round of expert talks to discuss handover ceremonies.

CALENDAR OF EVENTS IN 1995

15

16

20

21

28

29

Hong Kong reaches an agreement with Australia on air services arrangements.

The Secretary for Education and Manpower, Mr Joseph Wong, leads a group to Beijing and Hangzhou in the 14th China familiarisation visit by senior officials since the programme began in 1988.

The Director-General of Industry, Mrs Regina Ip, signs a memorandum of understanding with the Chinese Academy of Sciences on technology collaboration on applied research and development.

The Infrastructure Co-ordinating Committee on major cross-border infrastructure projects holds its fourth plenary meeting in Hong Kong. Experts of the Sino-British Joint Liaison Group hold a fourth round of talks on the Strategic Sewage Disposal scheme in Hong Kong. The third informal get-together between senior local civil servants and their Chinese counterparts takes place in Hong Kong. Secretary for Financial Services Rafael Hui says both parties shared a strong consensus to maintain Hong Kong's status as a free-market economy and an international financial centre.

China names the 150 members of its Preparatory Committee for Hong Kong's return to mainland sovereignty.

Secretary for Housing Dominic Wong announces an easing of restric- tions on the conditions governing sale of flats before completion. This is welcomed as providing flexibility for housing buyers and developers, without reviving property speculation.

1

In November, for the second year running, Hong Kong was named the world's freest economy

by the Washington-based think-tank, the Heritage Foundation. The Governor is shown receiving a copy of the report from the foundation's president, Dr Edwin J Feulner, Jr.

296 Index of

CONOMIC

DER PRİDDENÝ BANCA SZELOW.

Jonsson & THOMAS H.,

KONG PB

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Ms Lee Hea Jin, of South Korea,

found her trip to Hong Kong even more delightful when she was declared the territory's 10 millionth visitor for the year on December 19. She is shown being welcomed by the chairman of the Hong Kong Tourist Association. Mr Martin Barrow, who presented her with prizes including a free, three-day stay.

Hồng Kong

HELL

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TOP: A dragon prepares to dance during the Hong Kong Dragon Boat races in New York. ABOVE: A member of the Academy for Performing Arts swirls a ribbon in a move taken from a traditional Chinese dance to the skirl of the Royal Hong Kong Police Pipe Band outside the Houses of Parliament during a Hong Kong promotion in London.

Hong Kong takes its message abroad: Chief Secretary Anson Chan takes a closer look at some of the territory's offerings during a trip boosting trade and business in Japan. It was the biggest promotion Hong Kong has held there and included business seminars, cultural shows, film and food festivals, a fashion show and exhibitions in Tokyo, Osaka and Fukuoka.

Baroness Dunn receives a farewell bouquet and applause from political correspondents at a press reception

to mark her retirement as Senior Member of the Executive Council. The baroness was previously Senior Member of the Legislative Council. Her husband, former Attorney General Michael Thomas, is at left.

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ON

The Governor

leaps into a Life

Education Activity Programme with

a group of primary school children

at Pok Fu Lam.

1 THE WAY WE ARE

A personal reflection by The Baroness Dunn, who between 1976 and 1995, was variously a Member of the Legislative and Executive Councils, becoming Senior Member of each body. She was also Chairman of the Hong Kong Trade Development Council for nine years. In the private sector, Baroness Dunn achieved prominence as a business executive.

In late 1995 Baroness Dunn announced plans to relocate in the United Kingdom

with her husband, the former Attorney General Mr Michael Thomas, where she will continue to work on Hong Kong's behalf as a Life Peer in the House of Lords.

INTROSPECTION is not a Hong Kong characteristic. It is certainly not one of mine. But as I prepare for a new phase of my life based in England, and as my beloved Hong Kong moves steadily towards the final page of a remarkable chapter and the first page of a new one, I find myself reflecting more and more about our society.

What is it about Hong Kong that enabled it to become the world's eighth-largest trading economy? The world's largest container port? The world's largest producer of timepieces? The world's freest economy out of 140 economies studied by the American research institute, the Heritage Foundation? What magic enabled its people to achieve in the short space of 50 years a GDP per capita of more than US$24,000 higher than some European Union nations to be able to expect an average life span of 75 for men and 81 for women, and for some of them to rank among the world's league table of the richest and most successful?

When I travel the world, one of the questions most frequently ask of me is how I, a Chinese woman, managed to reach the top of the corporate and political ladders of a traditional and conservative society. Outside Hong Kong, even in advanced and enlightened Western countries, my professional and political career is considered exceptional. In Hong Kong, it is commonplace. Look at Anson Chan, Rosanna Wong and so many other Hong Kong women who have reached the top of their professions on merit.

I think there is a straightforward reason for our success and a more complex one. The straightforward reason is that, in Hong Kong, government provides the framework for a free-enterprise system to operate efficiently, while the entre- preneurial flair and hard work of a highly motivated immigrant population enable them to take full advantage of its opportunities.

We have a low and simple system of taxation. We have a trusted legal system and courts of integrity and independence. These features have provided confidence for entrepreneurs to invest their capital and labour. And the community has prospered as a whole.

The more complex reason for our success is something more difficult to define. It is the set of values, beliefs and principles upon which we have become accustomed to base our dealings with one another and our attitudes to those who govern us.

For instance, when we talk of freedom we do not mean absolute liberty to follow our own wishes or instincts without any restraint. When we talk of a free society I think most of us mean a society in which each individual is free to pursue his own interests within the bounds of what society as a whole has come to accept as reasonable. Nowadays we accept also that a society cannot really be a free society

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unless every member of it has a fair chance to exercise that freedom, for economic or social repression limit that freedom just as much as political repression. A man who has a vote but cannot choose his occupation, a woman who cannot choose how many children she will have, a child that is deprived of education -- none of them is really free.

   I think we instinctively assume that we have that sort of freedom, within a generally accepted framework of established law, under a government structure which ensures that no one person or organisation is permitted to override everyone else.

   Many people around the world accept rather uncritically that freedom is impossible without democratically elected government. But democracy without the safeguard of justice under the law does not guarantee freedom. A judicial system independent of the executive arm of government and which can and does act as a restraint on the exercise of power by the executive is essential. So also are limitations on the power to make new laws. For if the power even of an elected legislature is not subject to some restraint it can easily become, under the guise of democracy, as tyrannous as any medieval tsar.

The greatest virtue of our government structure is that no one is supreme. The Governor is required to consult the Executive Council on all matters of importance. Only the Governor in Council can initiate legislation with financial implications but he cannot force the Legislative Council to pass it. Proposals involving expenditure of public funds are subject to the provision of those funds by the Legislative Council. Once a law is made no one Governor, Executive Council, Legislative Council, nor any official - can disregard it. And anyone aggrieved by any action he believes to be contrary to the law can take his case to the courts, which are independent of both the executive and legislative arms of the government.

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   This might sound like a recipe for perpetual stalemate but everyone who lives in Hong Kong knows that it is not. However, I am not so sure that it is realised that it is this system of checks and balances that guarantees their freedom to live and work within a framework of law and justice.

   We have a system of consultation for ascertaining public opinion on the matters for which the government has accepted or thinks it should accept responsibility. Most of us accept that even elected governments cannot afford to drive ahead implementing every proposal in their manifestos without any further consultation. Only thus can the administration ensure that the proposals that it puts forward have a fair chance of being endorsed by the Executive and Legislative Councils and accepted by the public.

   Inevitably this process of consultation and the search for consensus take time. To those who are tempted to believe in their own infallibility it may all seem rather inefficient. But it is in fact the only efficient way. Any government that does not have the consent of the governed is inherently unstable. However sure anyone may be that he is right, he is very unlikely to be right all the time, and the less he listens to other people the more out of touch he will become and the more mistakes he will make.

It is, of course, not always possible to achieve consensus in every case. But if the essential consent of the governed is to be retained, it is necessary that all people should feel that they have had a fair chance to put their point of view forward and that it has been considered, not just brushed aside. When a shipload of Vietnamese

THE WAY WE ARE

boat people arrived on the Huey Fong in December 1978, mine was one of few voices in the Legislative Council and outside which argued for not allowing them to land and not allowing Hong Kong to become a port of first asylum, for all the reasons which sadly came true in subsequent years. My calls were rejected after consideration and debate. I regret that we did not take a firmer line on this vexed issue from the outset but I felt that my point of view was given a proper hearing.

Our society has always enjoyed freedom of expression, which includes the free- dom to advocate changes of policy and practice. But we have never favoured sudden radical changes. Stability of policy and practice ensure that people know where they stand today and that things will not be too different tomorrow. However, stability does not mean rigidity. Radical changes have taken place in our society and its attitudes since World War II but they have come about gradually and without major disruption. It has been possible for everyone to adjust to them. When I became a member of the Legislative Council in 1976, Hong Kong had no nine years' compulsory education, hardly any labour protection laws, virtually no environmental- protection measures and the Legislative Council itself was a wholly appointed body with all its internal deliberations held in camera. How far we have come in 20 years. A corollary of all this is that the possibility of arbitrary action within our system is limited and that when such action is taken it is normally subject to appeal. One can appeal to the Courts, to the Governor or to the Governor in Council, as the case may be, and everyone has the right to petition a higher authority against the action of a lower.

When the government raised the mooring charges for pleasure craft some years ago, a group of pleasure craft owners felt that the proposed new fees exceeded the cost of administering this activity. They appealed and the fees were eventually lowered. I remember thinking at the time how effective our system was. Even though the issue concerned a very small minority of our community, it received serious consideration by the Executive Council and the legitimate complaint of a small group was heard and put right.

      Whether such appeals are few or many is beside the point. The real point is that the safeguard is there. The possibility of appeal is a brake on ill-considered action by any authority. There is a parallel in our commercial life in that anyone who is aggrieved by what he believes to be a breach of contract can appeal to the courts. This is a very important factor in facilitating the conduct of business and, indeed, in attracting business to Hong Kong.

      The facts that our laws are published; that any action of government must have a legal basis; that all cases, criminal or civil, are normally heard in open court; and that there is an established body of statute and case law so that people know broadly what they can and cannot do - all these contribute to a system that we sum up in the phrase 'the rule of law'.

      The 'rule of law' is a term which means a great deal more to us than is contained in those words alone. We all know of countries where the courts are not independent arbiters between government and governed. When my husband was the Attorney General of Hong Kong, he once said in a debate in the Legislative Council that:

'The freedom established by law gives energy, enterprise and confidence to Hong Kong's people..... Everyone knows that in the last resort their rights will be

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enforced by the Courts of Justice. That gives them confidence in their dealings with one another and with Government."

I think that statement very well encapsulates the important role played by the rule of law in our success story.

Our success has demonstrated that there is plenty of confidence in our society but that confidence is little use if we cannot have confidence in the rules of the game and that they will not be changed overnight. That confidence is the product of the factors that I have been talking about. Of course it is not much help to be sure that the rules will not be changed if they are bad rules. They must be rules that the majority of the population accepts as fair and reasonable, rules that give everyone a fair chance and an incentive to provide for themselves and their families, knowing that if they succeed, they will be allowed to decide for themselves how to dispose of the rewards of that success. People can do this in Hong Kong because we have a system of taxation that, while it takes something from each of us to provide for necessary public services and for the support of the less fortunate, leaves the major portion of all salaries and profits in the hands of those who have earned them. That division of earnings is not just an accident of history. It is based on the belief that profits left in the hands of those who made them are more likely to generate more profits, and so more prosperity, than any government is likely to be able to do by 'picking winners'. The best judges of profitable enterprise are successful entrepreneurs - from the hawker to the billionaire - not civil servants, or politicians.

  If you are going to engage in any enterprise, from running a market stall to running a multi-million-dollar business, you need to know where you stand, to know what the rules are. If authority has changed the rules arbitrarily in the past you cannot have that confidence even if you are assured that there is no intention to change the rules again. That is why, however desirable any particular change may seem, we have always avoided sudden radical change. It destroys confidence, over a much wider area than is affected by the particular change in question.

I believe it is, in the main, the coexistence of all these factors and their interaction that have produced the Hong Kong we know today and of which, with all its inevitable imperfections, we can be justly proud. And all these factors will continue. Not just because the Joint Declaration and the Basic Law have guaranteed their continuation in the letter and in the spirit but because they are the written and unwritten values by which we live. I and my generation of Hong Kongers were brought up on these fundamental beliefs. We know of no other way to conduct our affairs in a civilised society.

  It is Hong Kong people's instinctive belief in these deeply rooted values combined with their intelligence, hard work, resourcefulness, imagination and resilience, that have transformed Hong Kong from that 'barren rock with hardly a house upon it' to the thriving, prosperous, go-ahead society it is today. Hong Kong people have achieved the miracle that is Hong Kong against all odds and despite periods of political turmoil and the ever-present uncertainties of our unique geo-political position. That is why there is not a single doubt in my mind that they will scale new heights, break new records and set even higher standards as they go forward into the 21st century and beyond. I, like so many millions of other Chinese people all over the world who have the privilege of calling Hong Kong our home, shall be with them every step of the way, cheering them on and basking in their reflected glory.

2 CONSTITUTION

AND ADMINISTRATION

Elections in 1995

      Elections for the Urban Council and the Regional Council (collectively known as the municipal councils) were held on March 5, 1995, and 560 000 electors turned out to vote. This surpassed the voter turnout in all previous rounds of elections for the municipal councils. The overall turnout rate was 25.8 per cent, compared with the 23.1 per cent achieved in the last elections in 1991.

      The Legislative Council elections held on September 17, 1995, were a milestone in Hong Kong's history. For the first time, the Legislative Council was wholly elected: 20 members by geographical constituencies, 30 by functional constituencies, and 10 by an Election Committee. They attracted 138 candidates altogether, which was the most ever. A record number of 920 000 people voted in the geographical elections. In terms of absolute number, over 170 000 more people voted than in 1991, representing a growth of 23 per cent. In percentage terms, the turnout rate was 35.8 per cent, compared with 39.1 per cent in 1991. The turnout rate has to be seen against a substantially greater number of registered electors: 2.57 million in 1995 compared with 1.92 million in 1991. Indeed, the 35.8 per cent turnout achieved on September 17 was the highest amongst the three sets of elections in 1994/95 (33.1 per cent for the September 1994 district board elections and 25.8 per cent for the March 1995 municipal councils elections).

      The functional constituency elections also had a record turnout of 460 000, representing a 40.4 per cent turnout rate. The nine new broad-based functional constituencies, which represented the entire working population, accounted for more than 417 000 votes. The other 21 functional constituencies, with expanded franchise, attracted a voter turnout of 43 000, which was 20 100 or 87.7 per cent more than in 1991. All but one of the 283 electors (who were themselves elected district board members) voted in the Election Committee election.

With the conclusion of the 1995 Legislative Council elections, the electoral system established through an open and fair process has been firmly put in place. A strong foundation for our representative institutions has been laid.

General

Hong Kong is administered by the Hong Kong Government, which is headed by the Governor. The Governor is the representative of the Queen in Hong Kong. He has the ultimate direction of the administration of Hong Kong. An Executive Council offers advice to the Governor on important matters of policy.

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CONSTITUTION AND ADMINISTRATION

  At the central level of the three-tier system of representative government, the Legislative Council legislates, controls public expenditure and monitors the perform- ance of the Administration. At the regional level, the two municipal councils provide public health, cultural and recreational services in their respective regions. At the district level, 18 district boards offer advice on the implementation of policies in their districts and provide an effective forum for public consultation.

Under the terms of the Sino-British Joint Declaration on the Question of Hong Kong, which was ratified on May 27, 1985, Hong Kong will become a Special Administrative Region of the People's Republic of China with effect from July 1,

1997.

Constitution

The Letters Patent establish the basic framework of the administration of Hong Kong. They, together with the Royal Instructions, form the written constitution of Hong Kong.

  The Letters Patent create the office of Governor and Commander-in-Chief of Hong Kong, and require him to observe 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 Council, the Governor's powers in respect of legislation, the 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 Council, the nature of proceedings in the Executive Council, the Governor's respon- sibility to consult the Executive Council on important policy matters, and his right to act against its advice (a right exercised only once, in 1946). They also deal with the membership of, and election to, the Legislative Council, the nature of pro- ceedings there, and the nature of legislation which may not be passed.

Various well-established practices determine the way in which these constitu- tional arrangements are applied. Hong Kong is governed by consent and through consultation with the community. Although from the constitutional instruments described above, Her Majesty's Government would appear to have substantial control over the way in which Hong Kong is run, in practice the territory largely controls its own affairs and determines its own policies. Similarly, the Governor, by convention, rarely exercises the full extent of his powers.

Role of the Governor

The Governor is appointed by the Queen and derives his authority from the Letters Patent. He has ultimate direction of the administration of Hong Kong and is also the titular Commander-in-Chief of the British Forces stationed in Hong Kong. He makes policy decisions on the advice of the Executive Council, and makes laws by and with the consent of the Legislative Council. As head of the government, he presides at meetings of the Executive Council. The present Governor, the Right Honourable Christopher Patten, assumed office on July 9, 1992, and is the 28th incumbent.

CONSTITUTION AND ADMINISTRATION

The System of Government

Executive Council

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The Executive Council consists of three ex officio members - the Chief Secretary, the Financial Secretary and the Attorney General - and 10 other members appointed by the Governor with the approval of the Secretary of State, including one official. The council normally meets once a week, and its proceedings are confidential, although many of its decisions are made public.

The Governor is required by the Royal Instructions to consult the council on all important matters of policy. The Governor in Council - the Governor acting after consulting the Executive Council is Hong Kong's central and highest executive authority on policy matters. In practice, decisions are arrived at by consensus rather than by division. Members tender their advice in an individual capacity, and the council is collectively responsible for the decisions made by the Governor in Council. Individual non-official members do not hold personal responsibility for given subjects or portfolios. That is a matter for the government.

Besides policy matters, the Governor in Council determines appeals, petitions and objections under those ordinances which confer a statutory right of appeal. The Executive Council also considers all principal legislation before it is introduced into the Legislative Council, and is responsible for making subsidiary legislation. Its 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 has 60 members. Thirty members come from functional constituencies, each representing an economic, social, professional or other sector of the community; 20 are returned by direct elections in geographical constituencies which cover the whole territory; and 10 are elected by the Election Committee Constituency comprising members of the district boards. Legislative Councillors elect one of their fellow members as President.

The Legislative Council's procedures are governed by its Standing Orders, which derive their authority from the Hong Kong Royal Instructions, and by the Legislative Council (Powers and Privileges) Ordinance. The main functions of the Legislative Council are to enact laws, control public expenditure and monitor the performance of the government by putting forward questions on matters of public interest. The government is responsible for initiating legislative and public funding proposals to the Legislative Council for consideration.

Legislation is enacted in the form of bills. Most business, including the passage of bills, is transacted by way of motions, which are decided by the majority of the members present. A bill passed by the Legislative Council becomes law when it receives the Governor's assent. 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. During the 1994-95 Legislative Council session, 120 bills were passed 16 more than in 1993-94.

Apart from the enactment of legislation, the council holds two major debates in each legislative session: a wide-ranging debate on government policies which follows the Governor's address at the opening of the new session in October each year; and

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the budget debate on financial and economic affairs concerning the annual Appro- priation Bill, which takes place in March.

Members of the council may question the government on policy issues for which the latter 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, and may put forward supplementary questions for the purpose of elucidating an answer already given. Altogether, 159 oral and 760 supplementary questions on a wide range of topics were raised during the 42 sittings in 1994-95. In addition, 508 written questions were tabled for reply by the administration.

The council normally meets in public on Wednesdays for the transaction of normal council business. About once a month, the Governor answers questions from members at a special sitting.

All Legislative Council sittings and most meetings of its bills committees, subcommittees and panels are open to the public. The increased transparency of the Legislative Council has helped promote better awareness and understanding of the constitutional role and functions of the council.

The council operates three standing committees the Finance Committee, the Public Accounts Committee, and the Committee on Members' Interests. A House Committee is constituted to consider bills, subsidiary legislation and other council business.

Finance Committee

The Finance Committee of the Legislative Council formerly consisted of 56 non- government members of the council and the Chief Secretary and the Financial Secretary as ex officio members. In the Legislative Council term which began in October 1995, the committee has 59 members, i.e. all members of the council except the President. Members elect the chairman and deputy chairman from among themselves.

  The Finance Committee scrutinises public expenditure, both at special meetings held in March to examine the draft estimates of expenditure for the year ahead, and at regular meetings, held between October and July, at which members con- sider proposals which entail changes to the approved estimates, or note financial implications of new policies. These meetings are held in public.

   The Finance Committee has two subcommittees, Establishment and Public Works, which also meet in public. The Establishment Subcommittee examines the adminis- tration's proposals for the creation, redeployment and deletion of permanent and supernumerary posts remunerated from the directorate pay scales, the creation of directorate-level consultancy positions for periods lasting more than 12 months, and changes to the structure of civil service ranks and grades (including pay scales, new grades and new ranks). It makes recommendations on such proposals to the Finance Committee for approval and reports to the Finance Committee on the size and cost of the civil service and the changes in departmental establishments.

The Public Works Subcommittee examines the administration's proposals for the upgrading of projects to, or downgrading from, Category A of the Public Works Programme, or changes to the scope and/or approved estimates of projects already in that category. It makes recommendations on such proposals to the Finance Committee for approval.

The Governor meets the news media in a question and answer session on October 11 after presenting his fourth policy address to the Legislative Council.

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A voter registration drive and series of educational exhibitions (left) preceded Hong Kong's milestone elections for the Legislative Council on September 17. It was the first time the Legislative Council was wholly elected: 20 members by geographical constituencies, 30 by functional constituencies, and 10 by an Election Committee. Records were established in the number of candidates (138), the number voting in the geographical sector (920 000), and the turnout for the functional constituency (460 000). Their votes were counted (below) in the biggest hall that could be found - a brand-new building at Kowloon Bay.

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ABOVE: The Chief Justice, Sir Ti Liang Yang, opens the legal year in a traditional ceremony at the Supreme Court. RIGHT: Legal history was made on December 4 when a civil case in the High Court was conducted totally in Chinese for the first time. In a highly representative legal wrangle, Mrs Sun Er-jo was engaged in a dispute with family members over property. She won.

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CONSTITUTION AND ADMINISTRATION

Public Accounts Committee

     The Public Accounts Committee's prime concern is to see that public funds are spent on the purposes for which they are granted, that full value is obtained for the sums expended, and that the government has not been faulty or negligent in its conduct of financial affairs.

      The committee has a chairman and six members appointed by the council President. It examines the reports of the Director of Audit on the government's annual state- ments of accounts, and looks into matters relating to the performance of the Director of Audit's duties and value-for-money audits carried out by the Director.

      In examining the issues raised in the Director of Audit's reports, the Public Accounts Committee may invite the controlling officers for certain heads of expenditure to its public hearings to give evidence. The committee's report, based on these hearings, is tabled in the Legislative Council within three months of the tabling of the Director of the Audit's report to which it relates.

      The government's response to the committee's report is contained in a government minute, which describes the measures taken to give effect to the committee's recommendations or explains why these recommendations cannot be accepted. The government minute is also tabled in the Legislative Council, within three months of the tabling of the Public Accounts Committee's report.

Committee on Members' Interests

The Committee on Members' Interests has a chairman and six members. It examines the arrangements for the compilation, maintenance and accessibility of the Register of Members' Interests. It also considers matters pertaining to the declaration of interests by council members and matters of ethics in relation to the conduct of members in their capacity as such, and makes recommendations on matters relating to members' interests.

House Committee

The House Committee includes all council members except the President. Its chairman and deputy chairman are elected from among its members. The House Committee co-ordinates the business of the council and most of its committees.

      When the council is in session, the House Committee meets every week. Regularly on the agenda of these meetings are reports on bills and subsidiary legislation introduced into the council; questions that members intend to put to the government; motions and bills to be debated; and any other matters of public concern or relating to the business of the council.

      The House Committee may appoint bills committees to study bills and sub- committees to consider specific subsidiary legislation and issues of public concern.

Bills Committee

After a bill has been introduced into the Legislative Council, it is referred to the House Committee which may allocate the bill to a bills committee for detailed scrutiny. Any member of the Legislative Council, other than the President, may join a bills committee. The chairman is elected by the committee from among its members.

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Government officials and members of the public may be invited to attend such meetings. A bills committee may consider the principles and merits of a bill allocated to it for scrutiny, as well as the bill's detailed provisions. It may consider any amendments relevant to the bill. A bills committee may also appoint subcommittees to help in the performance of its functions. A bills committee is normally dissolved after it has reported on the bill concerned to the House Committee.

Panels

Panels are committees of the Legislative Council set up to monitor and examine government policies and issues of public concern. The 18 existing panels cover the following policy areas: administration of justice and legal services; constitutional affairs; economic services; education; environmental affairs; financial affairs; health services; home affairs; housing; information policy; planning, lands and works; manpower; public service; recreation and culture; security; trade and industry; transport; and welfare services.

Council members, other than the President, may join any of the panels. Each panel is headed by a chairman and a deputy chairman elected from among its members. It may examine any issue that touches on the policy area with which it is concerned. In the course of discussion, the panel may invite senior government officials and representatives from different sectors of the community to provide information on the matters being examined. The panel may summarise its findings and make recommendations on important issues in the form of a report to the House Committee which may, if necessary, be tabled at a council sitting. Last year, the Panel on Administration of Justice and Legal Services conducted a study on the briefing out costs in the Bumiputra Malaysia Finance Limited case and made a series of recommendations in the context of public money costs control.

A panel may also form subcommittees to study specific issues. Last year, a subcommittee was formed by the Panel on Planning, Lands and Works to monitor the progress of the proposed legislation for regulating the relationship between the Wong Wai Tsak Tong and its sub-lessees on Cheung Chau Island.

Select Committees

The Legislative Council may appoint select committees to consider matters or scrutinise bills in depth. The purpose is to let small groups of members examine complex problems and to report their findings and recommendations to the council. Meetings of a select committee are normally held in private unless the committee decides otherwise. All select committees are dissolved at the end of the session. In October 1994, the council resolved to appoint a select committee to look into the landslip at Kwun Lung Lau Estate earlier in the year and related issues. The select committee, having completed its work, reported to the council in July 1995.

Redress System

Legislative Councillors operate a redress system under which members of the public can make representations on, or seek solutions to, problems arising from government policies, decisions and procedures. Under the system, members take turns to be on 'ward duty' during their duty week to meet individual complainants and to give on- the-spot guidance to staff in processing cases.

CONSTITUTION AND ADMINISTRATION

Cases are examined in the light of government policies and procedures. If members consider a complaint to be justified, they will ask the government department con- cerned to reconsider the matter or to re-examine the procedures that have given rise to the complaint. Cases involving matters of policy, or of particular importance, are put to the appropriate Legislative Council panels for further consideration. Where a change in policy or in law is considered necessary, members will make recommendations to the appropriate policy branch in the Government Secretariat. Members may also ask questions during council sittings on the problem itself, or the policy giving rise to it.

During the 1994-95 session, more than 1 350 new cases were handled. About 18.5 per cent of the cases handled were group representations, while the rest were com- plaints and requests for assistance from individuals. Members initiated 59 case conferences with representatives of the Administration. More than 1 000 telephone enquiries were handled.

Legislative Council Commission and Secretariat

Administrative support and services are provided to the council through a secretariat under the direction of the Legislative Council Commission. The commission is chaired by the President of the Legislative Council with 10 Legislative Council members as members. The commission is a statutory body that enjoys managerial and financial autonomy in directing the activities of the secretariat. The secretariat provides a wide range of support services to members, including secretariat services to sittings of the council and meetings of committees, legal services, centralised research support, library services, translation services, and public information support. Through a representative office in London, members are kept informed of political developments in Britain. The office also helps British opinion-formers to better understand major Hong Kong issues.

Urban Council

The Urban Council is a statutory body with responsibilities for the provision of municipal services to some 3.1 million people in the urban areas. These services include street cleaning, refuse collection, control of environmental hygiene, and ensuring the hygienic handling and preparation of food in restaurants, shops, abattoirs and other establishments.

The Urban Council is also the authority for the control of hawkers and street traders, although some of this work devolves to the police as the council does not have the manpower or finances to shoulder the whole burden.

Within the urban areas, the council provides and manages all public recreation and sporting facilities such as swimming pools, parks, playgrounds, indoor and outdoor stadia, tennis courts, football grounds, squash courts and basketball courts; and promotes a large number of sports at district level. Included among its facilities is the redeveloped Hong Kong Stadium, which, with a seating capacity of 40 000, provides a multi-purpose venue for sports activities and mass entertainment events.

      The council manages museums, public libraries and several major cultural venues and multi-purpose facilities, including the City Hall, the Queen Elizabeth Stadium, the Hong Kong Coliseum, the Hong Kong Science Museum and the Hong Kong

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Museum of Art; and promotes cultural performances and runs a comprehensive programme of public entertainment throughout the urban areas.

The council has 32 members elected from geographical constituencies, and one representative member from each of the nine urban district boards. It meets in public once a month to pass by-laws and deal with its finances, formal motions and questions on its activities.

Its routine business is conducted by the Standing Committee of the Whole Council, supported by 14 select committees and 38 working groups or subcommittees. All the committees, subcommittees and working groups 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 an establishment of 16 300. The director is charged with carrying out the council's policies and implementing its decisions.

The council is financially autonomous and spent about $5,300 million on council- controlled activities and projects during 1994-95. A share of the rates forms the main part of its income, with the balance coming from various licence fees and other charges.

The council has ward offices spread throughout the urban areas, where council members deal with the public on a wide variety of matters. Members of the public may also make their complaints and views known to the council through the 'Members Duty Roster System'. Under this system, council members are placed on a duty roster to meet the public, by appointment, twice a week.

Regional Council

The Regional Council is the statutory municipal authority responsible for environ- mental hygiene, public health, sanitation, liquor licensing and the provision of recreational, sports and cultural facilities and services for some 2.8 million people in the New Territories.

The council consists of 39 members: 27 elected from geographical constituencies, nine elected by the district boards in each of the nine New Territories districts as their representatives, and three ex officio members who are the chairman and the two vice- chairmen of the Heung Yee Kuk (a statutory advisory body which represents the indigenous population of the New Territories). The chairman and vice-chairman of the council are elected by members from among themselves.

Council policies are implemented by its executive arm, the Regional Services Department, which is headed by the Director of Regional Services and has a staff of about 10 600. The council is financially autonomous, its main source of revenue being rates collected in the council area. In 1994-95, this provided about 85 per cent of its total revenue. The rest comes from fees and charges, and rental income (mostly from market stalls). In 1994-95, total revenue amounted to $3,439 million and total expenditure stood at $3,212 million.

  The council discharges its responsibilities through four functional select committees and a Liquor Licensing Board. The four select committees, which meet monthly, are responsible for finance and administration, capital works, environmental hygiene,

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      and recreation and culture. The Liquor Licensing Board meets quarterly to consider contested applications.

The council has established nine geographically-based committees to assist in gauging local needs and aspirations in the provision of municipal services and facilities. Each district committee has 15 to 16 members: eight to nine being Regional Council members, four from the respective district board and three co-opted from the community.

The full council meets every month. All proceedings of the council and its committees are open to the public except when confidential issues such as commercial arrangements touching on financial deals are discussed.

The council is represented on several organisations whose work is closely related to its responsibilities. These include the Hong Kong Sports Development Board, the Hong Kong Arts Development Council, the Hong Kong Arts Centre, the Antiquities Advisory Board, the Chung Ying Theatre Company, the Hong Kong Children's Choir, the Hong Kong Ballet, the Hong Kong Sinfonietta and the Hygiene Services Advisory Committee.

District Administration

District boards are statutory bodies which provide a forum for public consultation and participation in the administration of the districts. With effect from October 1, 1994, there are 18 district boards (nine in the urban areas and nine in the New Territories), with 346 elected members and 27 ex officio members who are rural committee chairmen.

A new round of district board elections was held on September 18, 1994, when 757 candidates were nominated for the 346 seats. With only 50 seats returned unopposed, the election was hotly contested. For the contested seats, 2 093 603 voters (among the registered electorate of 2 450 372) could vote for the members to represent their respective contested constituencies. A record 693 223 voters (33.1 per cent) turned out to vote, compared with the 424 023 (32.5 per cent) turnout rate for the last election in 1991.

The main function of the district boards, established in 1982, is to advise the government on many matters affecting the interests or well-being of the people living and working in the districts. Through their advice, important contributions are made to the management of district affairs. District boards are also consulted on a wide range of territory-wide issues.

In 1995-96, $100 million has been made available to the district boards for the implementation of minor environmental improvement and community involvement projects in the districts. An additional $13.5 million has been provided by the two municipal councils for district boards to undertake minor environmental improve- ment projects.

As an important service for residents, each district board operates a 'meet-the- public' scheme, under which residents may meet board members face-to-face to express their views on any district problems. The scheme has been well received by the general public and has provided a direct channel for collecting public views on local issues and reflecting them to the government.

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  Each district has a district management committee, chaired by the district officer, comprising representatives of departments providing essential services in the district. It serves as a forum for inter-departmental consultation on district matters and co- ordinates the provision of public services and facilities to ensure that district needs are met promptly.

  The district management committee works closely with the district board and, as far as possible, follows the advice given by the board. To improve communication between the district management committee and the district board, district board chairmen attend district management committee meetings as observers.

  Area committees and mutual aid committees were set up in districts in the early 1970s throughout the territory, in support of the Keep Hong Kong Clean Campaign and Fight Violent Crime Campaign. A review of the area committees brought changes in November 1994 relating to their number, composition, terms of reference and geographical coverage. These were introduced to streamline their operations. Area committees encourage public participation in district affairs, help organise community activities and government campaigns, and advise on issues of a localised

nature.

  Mutual aid committees are building-based resident organisations, established to improve the security, cleanliness and general management of multi-storey buildings. More than 70 area committees and 4 000 mutual aid committees provide an extensive and effective network of communication between the government and the people at the grassroots level.

  Attached to the district offices are 19 public enquiry service centres, which provide a wide range of free services to members of the public, including answering general enquiries on government services; distributing government forms and information materials; administering oaths and declarations for private use; and referring cases under the meet-the-public scheme, the free Legal Advice Scheme and Rent Officer Scheme. Under the latter scheme, rent officers from the Rating and Valuation Department are available at 15 public enquiry service centres on specified days of the week to advise on tenancy matters and the statutory rights and obligations of landlords and tenants. The public enquiry service centres and central telephone enquiry centre handled 1.64 million enquiries and 1.07 million clients in 1995.

Links Between the Representative Institutions

The Urban Council and the Regional Council, which cover much the same fields in their respective areas, hold liaison meetings and institute joint ventures. The Urban Council and the Regional Council are closely linked to the district boards. Each district board in the urban area has a representative member on the Urban Council. A similar arrangement exists between the Regional Council and the district boards in the New Territories. In addition, members of the New Territories district boards also sit on the district committees under the Regional Council. Through these channels, the district boards are consulted on a wide range of matters affecting their

areas.

  New Territories district boards maintain a close relationship with the Heung Yee Kuk, reserving seats for Rural Committee chairmen, who are also ex officio members of the Kuk's executive committee. The Regional Council also has a formal link with the Heung Yee Kuk, through the ex officio membership of the Kuk's chairman and

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two vice-chairmen on the Council. Since the 1991-92 Legislative Council session, the two municipal councils and the Heung Yee Kuk have been functional constituencies, each returning one member to the Legislative Council.

The Electoral System

Voter Registration

Elections to the Legislative Council geographical constituencies, municipal councils and district boards are through a broad franchise. Practically everyone who is 18 years of age or over, and who is a Hong Kong permanent resident or has ordinarily resided in Hong Kong for the preceding seven years, is eligible to apply for registration as an elector in the constituency in which he lives. An applicant should be ordinarily resident in Hong Kong at the time of application. A registration exercise is conducted each year, although applications for registration can be made at any time of the year.

       Registration of electors for the September Legislative Council elections began in early 1995. Some 236 000 new electors were registered for the geographical constituencies, bringing the total number of registered geographical electors to 2 570 000, representing a 65 per cent registration rate. The number of registered electors in the functional constituencies rose from about 71 000 in 1994 to 1 147 100 in 1995.

Electoral System for the Legislative Council

The Legislative Council elected in September 1995 has 60 seats: 20 returned by geographical constituency elections, 30 by functional constituency elections, and 10 by an Election Committee. Hong Kong is divided into 20, single-seat geographical constituencies - four on Hong Kong Island, seven in Kowloon, and nine in the New Territories. The franchise for the Legislative Council geographical elections includes all electors on the General Electoral Roll. Electors may vote only in the constituency in which they are registered. They may, however, stand for election in any con- stituency, provided that they have been ordinarily resident in Hong Kong for the preceding three years, have attained the age of 21, and are nominated by 50 electors in that constituency. The elections are by simple majority.

       Each functional constituency represents an economic, occupational or professional group. These are: (1) primary production, power and construction; (2) textiles and garments; (3) manufacturing; (4) import and export; (5) wholesale and retail; (6) hotels and catering; (7) transport and communication; (8) financing, insurance, real estate and business services; (9) community, social and personal services; (10) commercial (first); (11); commercial (second); (12) industrial (first); (13) industrial (second); (14) finance; (15) labour; (16) social welfare; (17) tourism; (18) real estate and construction; (19) financial services; (20) medical; (21) education; (22) legal; (23) engineering; (24) health services; (25) accountancy; (26) architectural, surveying and planning; (27) Urban Council; (28) Regional Council; and (29) rural. Of these, the labour functional constituency returns two Legislative Council members while the other 28 return one member each. The electorate is made up of relevant persons from designated organisations and trade unions, and working persons. A person who wants to be a functional elector has to be a geographical elector as well.

HONG KONG PUBLIC LIBRARIES

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For functional constituency elections, a candidate must, besides satisfying the usual age and residential requirements, be a registered functional elector of or have a substantial connection with the relevant functional constituency. Each nomination requires 50 subscribers for the nine functional constituencies representing the working population (i.e. functional constituencies (1) to (9) in the preceding paragraph, which were introduced in the 1995 elections) and 10 for the other functional constituencies, except for the Urban Council and Regional Council functional constituencies which require only five subscribers due to their small electorates. Elections for the Urban Council, Regional Council and Rural functional constituencies are by preferential elimination, while elections for the other functional constituencies are by simple majority.

The Election Committee, comprising all elected district board members, elects 10 Legislative Council Members. The qualifications for candidature in the Election Committee constituency election are the same as those for the geographical con- stituency elections, except that each nomination requires five subscribers. Elections for the Election Committee are by the Single Transferable Vote System.

Electoral System for the Municipal Councils and the District Boards

All appointed seats in the Urban Council, Regional Council and district boards have been abolished and elections to these bodies are on a geographical basis. There are 18 district boards (elected in September 1994) with 346 members elected from single-seat constituencies. In the New Territories, the 27 Rural Committee chairmen are ex officio members of the respective district boards.

  For the Urban Council, 32 members are elected from geographical, single-seat constituencies, and one each from the nine urban district boards. The Regional Council has 27 members elected from single-seat, geographical constituencies, and nine from the nine New Territories district boards. There are also three ex officio members: the chairman and the two vice-chairmen of the Heung Yee Kuk.

  Elections to the district boards and the municipal councils are by simple majority. Electors may vote only in the constituency in which they are registered. The qualifications for candidature in the district board and municipal council elections are the same as those for the Legislative Council geographical constituency elections, except that each nomination requires 10 subscribers.

Boundary and Election Commission

The independent and apolitical Boundary and Election Commission, operating under the Boundary and Election Commission Ordinance since July 1993, reviews and makes recommendations to the Governor on the geographical constituency boundaries of the Legislative Council, the municipal councils, and the district boards. The three-member commission is also responsible for overseeing the conduct and supervision of elections, keeping under review the procedure for these elections and the arrangements for registration of electors to ensure that the elections are conducted openly, honestly and fairly.

  Several major tasks were accomplished during the commission's busy third year of operation. In March 1995, it organised and supervised the municipal councils elections. A report on the elections was submitted to the Governor in May 1995 in accordance with statutory requirements. Improvements to the electoral arrangements

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were also recommended for implementation in the September 1995 Legislative Council elections.

In preparation for the Legislative Council elections, the commission conducted a voter registration exercise from January to June. A special exercise was also conducted during the first quarter of 1995 to update the General Electoral Roll. A total of about 1.4 million entries in the roll were checked against information supplied by the relevant government departments and the electors themselves and updated where necessary.

In mid-March 1995, the commission appointed a Nominations Advisory Com- mittee to advise prospective candidates and returning officers on the qualifica- tions for candidature for the Legislative Council elections. It dealt with 20 cases. In early July, after public consultation, the commission promulgated the regulations and guidelines on the electoral procedures for the Legislative Council elections.

The commission organised and supervised the Legislative Council elections on September 17. For the convenience of electors, the three types of elections (i.e. geographical, functional, and Election Committee) were held concurrently. Voting procedures were also kept simple and special arrangements were instituted to help physically disabled electors. These included the setting up of specified polling stations in all districts with special access facilities for the physically disabled, the provision of templates in all polling stations to enable visually impaired electors to mark their ballot papers, and the provision of Braille and audio tapes containing information on candidates.

To ensure that the elections were conducted fairly, openly and honestly, the commission established a Complaints Committee to deal with election-related complaints and set up a dedicated team in the Registration and Electoral Office to carry out full checks on election expenses declared by candidates. The com- mission submitted its report on the Legislative Council elections to the Governor in December.

The Registration and Electoral Office

The Registration and Electoral Office, a government department headed by the Chief Electoral Officer, is the executive arm of the Boundary and Election Commission. It works under the direction of the commission and carries out its decisions. The work of the Registration and Electoral Office includes the review and demarcation of geographical constituencies for the district boards, the municipal councils and the Legislative Council; the registration of electors; and the conduct and supervision of elections.

Advisory Boards and Committees

The government's network of advisory boards and committees is a distinctive feature of the system of government, which seeks to obtain, through consultation with interested groups and individuals in the community, the best possible advice on which to base decisions. Advisory bodies of one kind or another are found in nearly all government branches and departments.

In general, advisory bodies can be divided into two major categories - statu- tory bodies (such as the Antiquities Advisory Board and the Pilotage Advisory Committee) and non-statutory bodies (such as the Construction Advisory Board

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and the Economic Advisory Committee). Both types of bodies give advice to the government through a branch secretary or a head of department. Their areas of activities are wide-ranging. Some deal with the interests of a particular industry, such as the Fish Marketing Advisory Board. Others advise on a particular area of government policy or public interest, such as the Transport Advisory Committee and the Social Welfare Advisory Committee. Some of these bodies also carry out executive functions, such as the Hong Kong Examinations Authority and the Hospital Authority. There are also local committees concerned with the affairs of particular areas and neighbourhoods throughout the territory. They include the area committees and District Fight Crime Committees.

Government officials and members of the public are represented on these advisory boards and committees. About 3 100 members of the public have been appointed to serve on a total of about 300 advisory boards and committees, and some serve on more than one. These members are appointed for their specialist knowledge or expertise, or for their record or interest in contributing to community service. Increasing importance has been attached to their contribution to the formulation and execution of government policies. In order to fully utilise their potential, the composition and effectiveness of these bodies are regularly monitored. Where appropriate, the government broadens the cross-section of representation and encourages an inflow of new ideas through a reasonable turnover of membership.

The Administration

Role of the Chief Secretary

The Chief Secretary is principally responsible to the Governor for the formulation of government policies and their implementation. As the head of the Public Service, the Chief Secretary is one of the Governor's principal advisers, along with the Financial Secretary and the Attorney General.

  The Chief Secretary exercises direction primarily as head of the Government Secretariat, the central organisation comprising the secretaries of the policy branches and resource branches and their staff. She deputises for the Governor during his absence, and is the Senior Official Member of the Executive Council.

Role of the Financial Secretary

The Financial Secretary, who reports directly to the Governor, is responsible for the fiscal and economic policies of the government. He is an ex officio member of the Executive Council and regularly attends meetings of the Legislative Council as senior government representative.

  As the government official with primary responsibility for Hong Kong's fiscal, monetary and economic policies, the Financial Secretary oversees the operations of the Finance, Financial Services, Trade and Industry, Economic Services, and Works Branches of the Government Secretariat, and the Hong Kong Monetary Authority. He also chairs the Exchange Fund Advisory Committee.

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. He delivers the annual budget speech, 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.

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Role of the Central Policy Unit

The Central Policy Unit provides a confidential source of advice to meet the special requirements of the Governor, the Chief Secretary and the Financial Secretary and reports directly to them. It seeks to combine the organisational strengths and expertise of the Civil Service with the best features of private sector practice.

The unit consults widely with business and professional circles, political organisa- tions and pressure groups and the academic community. It undertakes in-depth examinations of complex policy issues, analyses options and recommends practical solutions.

Much of its work is related to the annual Policy Address and Budget exercises. Other issues, which often cut across or fall between the boundaries of several policy branches or government departments, are assigned on a case-by-case basis. In 1995, the unit produced some 350 reports and papers on a wide range of economic, social, administrative, political and other issues.

Role of the Efficiency Unit

      The Efficiency Unit was established in May 1992 and reports to the Chief Secretary. Its objective is to pursue the government's commitment to improve services to the community and to enhance openness and accountability by formulating, securing support for, and overseeing, the implementation of public sector reform.

The Structure of the Administration

The Hong Kong Government is organised into branches and departments. The branches, each headed by a policy secretary, collectively form the Government Secretariat. There are 13 policy branches, and two resource branches concerned with finance and the Public Service.

      There are 71 departments and agencies whose heads are, with some exceptions, responsible to the branch secretaries for the direction of their departments and the efficient implementation of approved policy. The exceptions are the Audit Department, the independence of which is safeguarded by the Director reporting directly to the Legislative Council; the Independent Commission Against Corrup- tion and the Office of the Commissioner for Administrative Complaints, whose independence is safeguarded by having the Commissioners report 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.

Office of the Commissioner for Administrative Complaints

The Commissioner for Administrative Complaints (COMAC) is an independent authority, established in 1989 under the Commissioner for Administrative Com- plaints Ordinance. The purpose of the office is to provide citizens with a means through which an independent person outside the Public Service can investigate and report on grievances arising from administrative decisions, acts, recommendations or omissions. COMAC has jurisdiction over practically all government departments, except the Royal Hong Kong Police and the Independent Commission Against Corruption, which have their own bodies to deal with complaints from the public.

Legislative amendments were enacted in June 1994 to widen COMAC's powers and jurisdiction. The major changes included allowing members of the public to

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make complaints directly to the Commissioner. The Commissioner's jurisdiction. was extended to cover major statutory bodies including the Hong Kong Arts Development Council, Hong Kong Housing Authority, Hospital Authority, Kowloon-Canton Railway Corporation, Mass Transit Railway Corporation, Securities and Futures Commission, Regional Council and Urban Council. The Commissioner can initiate investigations of his own volition and may publish investigation reports of public interest.

Direct investigations were conducted by the Commissioner on unauthorised building works in private buildings and in exempted houses in the New Territories, overcrowding relief in public housing, accommodation for foreign domestic helpers, emergency vehicular access in public and private building developments, and bursting of water mains.

In 1995, 4 881 enquiries and 2 607 complaints were received by the office, compared with 594 complaints in 1994.

The areas which attracted substantial numbers of complaints were related to negligence or omissions; disparity in treatment or unfairness; delay; errors or wrong decisions; lack of response to complaints; failure to follow procedures and rudeness. The 10 organisations receiving most complaints were the Housing Department, Lands Department, Government Secretariat, Immigration Department, Buildings Department, Hospital Authority, Legal Aid Department, Transport Department, Urban Services Department and Inland Revenue Department. Most of these organisations have frequent contact with members of the public and are more vulnerable to complaints than the others.

In March 1995, the government introduced the Code on Access to Information on a pilot scheme basis. The code will be extended throughout the government by the end of 1996. Any person who believes that a department has failed to apply any provision of the code properly may make a complaint to COMAC for review.

In October 1995, COMAC launched the Ombudsman Week in Hong Kong. It also hosted the 15th Australasian and Pacific Ombudsman Conference and an International Ombudsman Symposium in Hong Kong. About 40 delegates from ombudsman institutions in 18 countries participated in these events, the first of their kind held in Hong Kong.

Office of the Director of Audit

The necessity for an audit presence was recognised in the very early days of Hong Kong and the Audit Department is one of the oldest departments in the territory. The first Auditor-General was appointed in 1844.

  The audit of the accounts of the Hong Kong Government is carried out under the terms of the Audit Ordinance, enacted in 1971. This provides for the appointment, security of tenure, duties and powers of the Director of Audit; for the submission of annual statements by the Director of Accounting Services; for the examination and audit of those statements by the Director of Audit; and for the submission of the latter's report on these to the President of the Legislative Council. The Director has wide powers regarding access to books, documents and records, and the explanations which may be required. The Director is not subject to the direction or control of any other person or authority, and has considerable discretion in the conduct of inquiries.

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The Director functions independently of the administration and is free to report publicly.

Aside from auditing the government's accounts, the Director of Audit also audits the accounts of the Urban Council, the Regional Council, the Vocational Training Council, the Hong Kong Housing Authority, the ex-government hospitals under the Hospital Authority, five trading funds and more than 50 statutory and non-statutory funds and other public bodies. The Director also reviews the financial aspects of the operations of the multifarious government-subvented organisations in Hong Kong. Government auditing practised in Hong Kong falls into two main categories, termed 'regularity' audit and 'value-for-money' audit. Regularity audits, which are intended to provide an overall assurance of the general accuracy and propriety of the financial and accounting transactions of the government and other audited bodies, are carried out by means of selective test checks and reviews designed to indicate possible areas of weakness.

Value-for-money audits are carried out according to guidelines tabled in the Legislative Council by the chairman of the Public Accounts Committee in 1986. The audit is intended to provide independent information, advice and assurance about the economy, efficiency and effectiveness with which any branch, department, agency, other public body, public office or audited organisation has discharged its functions. This involves going beyond the normal accounting records. In line with contemporary developments in both government and commercial auditing elsewhere, it is also becoming increasingly relevant to ascertain whether efficient and economical practices are being followed in pursuing prescribed goals and whether these goals are being achieved.

After it has been submitted to the President of the Legislative Council and laid before the council, the Director of Audit's report is considered by the Public Accounts Committee. In 1995, the Director submitted three reports. The first report was tabled on April 26, covering the results of value-for-money audits completed, and the second and third reports on November 8, covering the audit certification of the government's accounts for the preceding financial year and the results of value-for- money audits completed.

The Director's reports on the accounts of other public bodies are submitted to the relevant authority in accordance with the legislation governing the operation of these bodies.

Foreign Relations

The Role of the British Government

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. 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 essentially one of co- operation. One important task regularly undertaken by the Foreign and Common- wealth Office is to ensure that Hong Kong's interests and views (which are not always identical to those of the United Kingdom) are properly considered within the

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British Government machinery, particularly when new policies are being formulated by other Whitehall departments.

   Hong Kong's foreign relations are constitutionally the direct responsibility of the British Government. The British Government is internationally responsible for ensuring that the Hong Kong Government fulfils its obligations under the many international conventions 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, and full autonomy regarding international economic and trade matters.

The Role of the Political Adviser

The Political Adviser is a senior member of the British Diplomatic Service, seconded to the Hong Kong Government principally to advise on relations with China and matters pertaining specifically to Britain's responsibilities in Hong Kong, the requirement for which will cease in 1997. The office is part of the Hong Kong Government.

The Political Adviser's office, in conjunction with the Constitutional Affairs Branch, is closely involved in the work of implementing the Sino-British Joint Declaration on the Question of Hong Kong. The Political Adviser is, ex officio, a member of the UK side of the Joint Liaison Group.

   The Political Adviser's office is also a communication channel between the Hong Kong Government and foreign and Commonwealth missions in the territory. These missions deal directly, however, with the relevant departments of the Hong Kong Government in most day-to-day matters.

The Public Service

The Public Service employs about six per cent of Hong Kong's workforce. It provides staff for all government departments and other units of the administration. As at July 1, 1995, the total strength of the Public Service was 180 313. Nearly 99 per cent are local officers. The service is structured into some 426 grades or job categories in the administrative, professional, technical and manual fields, with about 1 232 ranks or job levels.

Overall responsibility for the management of the Public Service lies with the Civil Service Branch of the Government Secretariat. The branch deals with matters such as appointments, pay and conditions of service, staff management, manpower planning, training and discipline. It is also the focal point for consultation with the principal staff associations. There are five departmental divisions, each responsible for the full range of personnel management matters of a group of departments; and four functional divisions, dealing with service-wide issues such as staff relations and pensions. In addition, its General Grades Office is responsible for the overall man- agement of some 30 000 officers in certain categories of general grades.

The principle of open and fair competition is the cornerstone of the government's appointment policy which aims to recruit the best people into the Civil Service. The appointment process is open, transparent and non-discriminatory. Recruitment and promotion to the middle and senior ranks of the Civil Service are subject to the advice of the Public Service Commission, an independent statutory body comprising a full-time chairman and prominent citizens serving as members.

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      The government is advised on matters relating to pay and conditions of service by four independent bodies. The Standing Committee on Directorate Salaries and Conditions of Service advises on matters affecting directorate officers. The Standing Committee on Judicial Salaries and Conditions of Service advises on matters affecting judicial officers. The Standing Committee on Disciplined Services Salaries and Conditions of Service advises on the salaries and conditions of service of the disciplined services. The Standing Commission on Civil Service Salaries and Con- ditions of Service advises on matters affecting all other civil servants.

The government values regular communication and consultation with staff. There are four consultative councils at the central level: Senior Civil Service Council, Model Scale I Staff Consultative Council, Disciplined Services Consultative Council and Police Force Council. More than 80 consultative committees operate at the departmental level. Individual staff or staff associations also have ready access to departmental or grade management and the Civil Service Branch. There is an established system to deal with staff complaints and grievances, as well as an award scheme to encourage improvement suggestions from staff. A Civil Service Newsletter is published quarterly to provide an added link with civil servants and retirees.

Staff commitment and contributions are recognised in various forms including appreciation letters, commendations, and honours or awards. Long Service Travel Awards, Long and Meritorious Service Awards and retirement souvenirs are given to long-serving civil servants. To promote the community spirit of the civil service, a Civil Service Walk for Charity was organised on October 15, 1995, following the successful precedent in 1993.

      There are four main types of terms of appointment in the Civil Service: local permanent and pensionable (P&P) terms, local agreement terms, overseas P&P terms and overseas agreement terms. Local candidates are normally appointed on local P&P terms. However, for grades which have difficulty in recruiting or retaining local candidates on P&P terms, local agreement terms may be offered, subject to the advice of the Public Service Commission. A local agreement officer has the option to transfer to local P&P terms. Under the government's long-established localisation policy, an overseas candidate is appointed to the Civil Service only if no fully qualified and suitable local person is available and the qualification for appointment cannot be modified to enable a local candidate to be appointed. Offer of first appointments on overseas P&P terms ceased on March 28, 1985, and all first appointments on overseas terms have since been made on agreement terms only. Appointees on local terms receive local conditions of service and those on overseas terms receive overseas conditions. At senior directorate level, local and overseas conditions of service are virtually the same. At more junior levels, there are some differences in housing benefits, and leave and passage entitlements.

P&P officers can serve up to the normal retirement age. Circumstances under which this does not apply include: compulsory retirement or dismissal on disciplinary grounds, invalidation on medical grounds, removal from office for unacceptable performance and removal under the provisions of an abolition of office scheme or a compensation scheme. For agreement officers, local and overseas alike, each renewal of agreement depends on service need, satisfactory conduct and performance and physical fitness. For overseas agreement officers, in line with the localisation policy, the offer of another overseas agreement is also subject to no suitable local replacement being found available.

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Traditionally, whether an officer should be offered overseas or local terms was determined before joining the Civil Service. No change of status is acceptable afterwards. However, in the light of the provisions in the Bill of Rights that all permanent residents should have access to the public service on general terms of equality, in 1993 it was decided that a two-stage approach should be adopted.

As an interim measure, the government announced in July 1993 that overseas agreement officers who were permanent residents could apply to transfer to agree- ment terms modelled on local conditions of service. After extensive discussions with staff associations and the Legislative Council, the July 1993 arrangements were modified in July 1994 in respect of applicants for transfer whose agreements were to expire before September 1, 1995.

In December 1994, a more comprehensive set of arrangements was announced to deal with agreement renewal in respect of officers whose agreements were to expire on or after September 1, 1995. Under the new arrangements an agreement officer, whether overseas or local, at a promotion rank who seeks a further agreement on local or locally based conditions, must compete with officers one rank below.

For the longer term, a wide-ranging consultation exercise was started in October 1993 to develop long-term arrangements for Civil Service terms of appointment and conditions of service that would converge with the provisions in the Basic Law, comply with existing Hong Kong laws, and take account of present-day circumstances. The consultation exercise on long-term arrangements for Civil Service terms of appointment and conditions of service was completed in September 1994. In the light of comments received, the government has proposed introducing a uniform set of terms of appointment and conditions of service for all staff and a definition of a 'local' for the purpose of Civil Service appointments. The rationale is that the differences between local and overseas terms and conditions have become less necessary for the purpose of recruiting and retaining staff of a suitable calibre. There is also a need to have a definition of a 'local' to converge with the Basic Law while complying with existing laws. As the proposals will have implications for the Civil Service after 1997, the issue is being raised in the Sino-British Joint Liaison Group. During the year, the localisation policy has continued to be pursued and the number of local officers holding posts at senior management/professional level increased steadily. At July 1, 1995, local officers constitute about 82 per cent of the total 2 846 officers at senior management/professional level. At directorate level, local officers now constitute about 68 per cent of the directorate.

In January 1995, an overseas officers' association, the Association of Expatriate Civil Servants, and four overseas officers obtained leave to apply for judicial review of certain aspects of the arrangements for: transfer from overseas agreement terms to locally based conditions, the proposals on long-term Civil Service terms of appointment and conditions of service, and the localisation schemes in relation to the filling of future Principal Official posts. The substantive hearing took place in September 1995.

Public Sector Reform

Public sector reform is a programme of financial and management reforms, aimed at bringing about long-term improvements to the efficiency and management of the public sector, and better service and accountability to the community. The Efficiency

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Unit was established to serve as a focal point to direct and co-ordinate the efforts of public sector reform.

The government is committed to providing the best service possible to the public. Since the launching of the performance pledge programme in late 1992, all govern- ment departments directly serving the public have already published performance pledges, informing their customers what services are available and the standards they can expect. All departments with substantial public contact have established either an advisory group, user committee or a customer liaison group. Individual departments have also embarked on customer research for mapping out strategic, long-term customer service plans. Apart from this, 1995 also marked the extension of the performance pledge programme to cover internal services departments. The programme is now a permanent feature of the public sector. The government will continue to build on the message of serving the community within the Public Service. The government has embarked on a practical programme of public sector reform which sees the Civil Service Branch and Finance Branch concentrating more on their strategic roles; and policy branches and departments being given more responsibility over the way in which they manage their activities.

      The government has also introduced a system of programme management, which divides a department's work into its major activities, for monitoring and review purposes. This has placed more emphasis on performance measurement, quality of service, value for money and, not least, accountability. It has led to a more business- like approach to the delivery of services. This has seen an increase in the use of new technology, including office automation, desktop publishing and automated telephone-answering systems.

As part of the public sector reform, the government has completed a comprehen- sive review of its personnel policies and practices. Departments now have greater authority in matters such as non-directorate appointments and promotions, leave and passage, and professional training. The review's purpose is to develop a more dynamic management environment so that staff will be motivated, developed and managed in a way which maximises their contribution to the civil service. The review recommended several improvements in recruitment, training, discipline and performance management. These recommendations will be implemented over the next few years.

Civil Service Training

The government attaches great importance to the training of public servants in order to increase efficiency and effectiveness, and to help them meet new challenges. Induction and refresher training is provided by many departments to equip staff with the knowledge and skills to carry out their duties effectively. Where the need arises, staff are also sponsored on overseas training courses or attachments, so that they can keep abreast of the latest developments in their specialised fields.

To meet common departmental needs, the Civil Service Training Centre conducts a wide range of management, language, China studies and computer courses, and co-ordinates the management training undertaken by public servants at local and overseas institutes. It also provides advice and assistance to departments relating to their own staff training programmes. The Senior Staff Course Centre runs pro- grammes to train and develop senior public servants.

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The Civil Service Training Centre and the Senior Staff Course Centre will be merged to form the Civil Service Training and Development Institute in April 1996 to facilitate co-ordination of training activities and to enhance the use of training resources. It will strive to become a centre of excellence for training.

Transition to 1997

It is important to maintain continuity in the Civil Service through the transition to Chinese sovereignty, particularly at the management level. For this purpose the government has a well-organised staff planning system. The Secretary for the Civil Service holds regular meetings with Heads of Department and their Policy Secretaries to review succession planning and to identify and groom officers with potential for management, in order to ensure a steady supply of talent to fill senior positions.

To tap a larger pool of candidates for appointment to the Civil Service, the government strengthened the mechanism for assessment of non-local qualifications early in the year. The purpose was to improve assessment of non-local qualifications on a case-by-case basis so that candidates whose qualifications are of a standard comparable to those of a local candidate may apply for Civil Service posts. Where necessary, advice is sought from the Hong Kong Council for Academic Accredi- tation, particularly in cases where information on particular institutions is not readily available, such as those in China, Taiwan and other non-English-speaking countries.

  The Basic Law states that only Chinese citizens among permanent residents of the Hong Kong Special Administrative Region with no right of abode in any foreign country may fill Principal Official posts. There are 23 such posts, the most senior in the government. They include the Chief Secretary, Financial Secretary, Attorney General and policy secretaries.

The government is committed to filling all 23 posts well before 1997 by officers who are potentially qualified under the Basic Law. To achieve this, the government is developing a pool of talented local officers capable of filling posts at future Principal Official level and those immediately below. It has also been necessary to retire, or to supersede for promotion, a number of senior overseas officers under the Limited Compensation Scheme. At the end of the year only three of the 23 posts were still held by overseas officers.

To provide an additional assurance to civil servants on the security of pensions, a Civil Service Pension Reserve Fund was established in 1995. The fund reinforces the strong guarantees in the existing pensions legislation, the Joint Declaration and the Basic Law. An initial amount of $7 billion has been injected into the fund, which will be topped up as and when necessary in order to maintain the balance at a minimum of one year's pension expenditure.

The China Training Programme, which aims to provide public servants with the necessary knowledge, understanding and skills to enable them to work effectively in the future Hong Kong Special Administrative Region Government, is being strengthened. The programme is divided into two parts, China Studies and Chinese language training.

The emphasis on China Studies is to cultivate knowledge about the social, economic and administrative systems in China through courses held in China or in Hong Kong, and through visits to institutes in China. The courses also serve to

CONSTITUTION AND ADMINISTRATION

      promote understanding between Hong Kong civil servants and their counterparts on the mainland. Key components of the studies include:

Tsinghua Course: Each course consists of four weeks of classroom lectures at the Tsinghua University in Beijing, followed by 10-day visits to cities such as Dalian, Wuhan, Chengdu and Qingdao. The objective is to increase course members' understanding of the political, social, economic and legal systems of China, and to improve their Putonghua and written Chinese. Five courses, each with 26 students, are organised annually.

Familiarisation Visits: Four visits are organised per year, each of which gives 12 officers the opportunity to get a better understanding of China's government system and way of life.

     China Seminars: Speakers knowledgeable about China-related issues are invited from within and outside the government to deliver seminars to public servants. Self-learning Packages: Packages comprising videos and booklets on China-related subjects are developed for use by civil servants.

     Commissioned Courses: Local tertiary institutes are commissioned to run short courses for civil servants.

Chinese language training, which includes Putonghua and official Chinese writing, is being offered to a larger number of officers. Additional Cantonese courses are provided for expatriate officers to enable them to work effectively in the Chinese community.

      The government will continue to identify and develop officers to provide a pool of talent to fill senior positions. They will be offered training and development opportunities, including overseas management training or attachment to branches in the Government Secretariat to expose them to strategic and policy work.

Government Records Service

The Government Records Service is responsible for the management of government records. It undertakes two different but related programmes: the Records Manage- ment Office is responsible for a records management programme to handle current as well as inactive records; and the Public Records Office for an archives administration programme to look after the preservation and use of permanent records.

      The appropriate management of records affects the efficiency of business in government. The Records Management Office has to oversee and develop a com- prehensive system to manage records effectively and efficiently, from their creation to their destruction, when all useful purposes have been served. Since November 1994, a Records Management Strategy has been formulated and implemented by phases to help the civil service improve the quality of records services, control the growth of records, reduce the records stock, and enhance cost-effectiveness in records management.

The Public Records Office is one of the largest local sources of information for historical and other studies relating to Hong Kong. The public archives also help to foster the identity of the Hong Kong community through the safe-keeping of permanent records on the territory's history and development.

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To achieve better co-ordination of work and operational efficiency, the Public Records Office and the bulk of its archival holding was moved to Tuen Mun in July 1995, to be housed under the same roof as the Records Management Office. Plans are in hand to construct a permanent archives building in Kwun Tong, Kowloon. The new building will be built and fitted out to the latest international standard required for the permanent preservation of various types of records, and is expected to be completed by mid-1997.

Language

The official languages of Hong Kong are English and Chinese. The Official Languages Ordinance, enacted in 1974, provides that both languages possess equal status and enjoy equality of use for the purposes of communication between the government or any public officer and members of the public. Correspondence from the public in Chinese is replied to by government departments in Chinese.

Major reports and publications of public interest issued by the government are available in both languages. Simultaneous interpretation is provided at meetings of the Legislative Council, Urban Council, Regional Council and other government boards and committees where English and Chinese are used.

  A Bilingual Laws Advisory Committee was set up in October 1988 to advise the Governor in Council on, among other things, the authentication of Chinese texts of existing laws which are being translated. Since July 1992, the Chinese texts of 190 ordinances have been declared to be authentic. All new principal legislation enacted since April 1989 is in English and Chinese.

With the greater openness and accountability of the government and to prepare for the transition of Hong Kong to become a Special Administrative Region of China, the government is promoting a wider and more proficient use of Chinese in the civil service. The government's ultimate objective is to develop a civil service which is biliterate (in Chinese and English) and trilingual (in Cantonese, Putonghua and English).

  A working group chaired by the Secretary for the Civil Service was asked to develop a strategy for achieving this objective. It reported in September and its recommendations are being implemented. One of these is to upgrade the office of the Commissioner for Chinese Language to become the Commissioner for Official Languages with enhanced responsibilities for the two official languages. A second is to spend more than $130 million to provide hardware, software and training so all civil servants who need it can have access to Chinese word-processing.

3 THE LEGAL SYSTEM

THE legal system in Hong Kong is firmly based on the rule of law and the inde- pendence of the judiciary. The Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China provide that the present judicial system will be maintained after 1997, except for those changes consequent upon the establishment of the Court of Final Appeal (CFA) in Hong Kong to replace the Judicial Committee of Her Majesty's Privy Council as Hong Kong's highest appellate court.

On June 9, 1995, after intensive discussions in the Sino-British Joint Liaison Group, the two sides reached agreement on the establishment of the CFA in Hong Kong on July 1, 1997. This agreement ensures that Hong Kong will have a proper court of final appeal that will, subject only to the Basic Law, have the same functions and jurisdiction as the Judicial Committee of the Privy Council does now in relation to Hong Kong and that there will be no judicial vacuum in 1997.

On July 26, 1995, the CFA Bill was passed by the Legislative Council. Since September 1995, the two sides have discussed the practical arrangements for setting up the CFA to ensure that the court will be fully operational on July 1, 1997.

The body of local jurisprudence on the Hong Kong Bill of Rights Ordinance continued to grow during the year. The Judiciary has been given additional resources to handle the increasing number of cases involving the Bill of Rights.

The past year saw major developments in the area of human rights protection. Among these were new laws to protect personal data and laws against discrimination on the grounds of sex and disability.

Law in Hong Kong

The Governor, acting with the advice and consent of the Legislative Council, has the power to enact laws for the peace, order and good government of Hong Kong. Most legislation applicable in the territory is enacted in the form of ordinances or as subsidiary legislation made under an ordinance. These ordinances, together with the common law and rules of equity, are the main sources of law in Hong Kong.

The Attorney General's Chambers are responsible for drafting new legislation in Chinese and English, and for translating existing legislation into Chinese. Both the Chinese and English texts are authentic texts of the laws. The first bilingual ordin- ance was enacted on April 13, 1989. Since then, all new principal legislation, and legislation amending bilingual legislation, has been enacted bilingually. In October 1988, the government set up the Bilingual Laws Advisory Committee, to advise on the quality and authentication of Chinese texts of existing ordinances. The committee

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examines Chinese texts prepared by the Law Drafting Division of the Attorney General's Chambers, and then recommends that the Governor in Council declare these approved texts as authentic texts of the laws. The first Chinese text of existing legislation was declared authentic in July 1992. Since then, the Chinese texts of about 190 ordinances have been declared authentic. The authentication of Chinese texts of ordinances is progressing well. At each Executive Council sitting, the Chinese texts of at least two ordinances are declared authentic.

In the Law Drafting Division, a bilingual legal glossary is being kept in a database. This glossary has grown to about 15 500 entries and is still growing at a rate of about 250 entries per week. An English-Chinese glossary of legal terms, in booklet form, containing legal and relevant terms appearing in legislation which has an authentic Chinese text is published from time to time. The first issue in the series, containing about 4 000 entries, was published on April 6, 1995. The next issue will be published in summer 1996.

Until 1989, the laws of Hong Kong were published in a 32-volume compilation known as the Laws of Hong Kong. Since 1990, the Laws of Hong Kong have been published in a loose-leaf edition. This will be updated continuously. All new laws are also published in the Hong Kong Government Gazette.

  The Application of English Law Ordinance provides that the common law of England and the rules of equity shall be in force in the territory so far as they are applicable to the circumstances of Hong Kong or its inhabitants, subject to such modifications as circumstances may require. The ordinance applies a number of English Acts, such as the Habeas Corpus Act 1816, to Hong Kong.

United Kingdom legislation may be applied to Hong Kong either directly or by order of Her Majesty-in-Council. In practice, the exercise of these powers is largely confined to matters which have a bearing on Hong Kong's international position. For example, the Multilateral Investment Guarantee Agency (Overseas Territory) Order 1988 is an Order-in-Council implementing in Hong Kong a treaty to which the UK is a party.

To ensure that by 1997, Hong Kong will possess a comprehensive body of law which owes its authority to the legislature of Hong Kong, it is necessary to replace such UK legislation which applies to Hong Kong by local legislation on the same topics. The Hong Kong legislature has been empowered under the Hong Kong Act 1985 to repeal or amend any enactment so far as it is part of the law of Hong Kong, and to make laws having extra-territorial operation, if the enactment relates to one of a number of topics (including civil aviation, merchant shipping, fugitive offenders and intellectual property) or if it is required in order to give effect to an international agreement which applies to the territory. Legislation has already been enacted to localise laws in a number of fields including admiralty jurisdiction, marine pollution, merchant shipping and civil aviation, and work in other areas is in progress.

A Localisation and Adaptation of Laws Unit has been established in the Attorney General's Chambers. The unit's role is to give legal advice on the localisation of United Kingdom legislation which presently applies to Hong Kong. It also advises on the adaptation of the laws of Hong Kong to ensure compatibility with the Basic Law of the Hong Kong Special Administrative Region, which was promulgated in April 1990. In that respect, a review by policy branches of all ordinances within 30 their spheres of responsibility has been completed and, where necessary, drafting

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instructions will be prepared with a view to appropriate amendments being made on, or before, July 1, 1997.

Human Rights

The International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) have been extended to Hong Kong since 1976. The Sino-British Joint Declaration on the Question of Hong Kong guarantees that the provisions of the two covenants, as applied to Hong Kong, shall remain in force after 1997.

The Bill of Rights Ordinance was enacted in June 1991. It gives effect in local law to the provisions of the ICCPR as applied to Hong Kong. To complement the protection afforded by the Bill of Rights, the Letters Patent for Hong Kong have been amended, to the effect that no law can be made in the territory which restricts the rights and freedoms enjoyed in Hong Kong in a manner which is inconsistent with the ICCPR as applied to the territory. The amendment came into operation at the same time as the Bill of Rights Ordinance.

The United Nations Convention on the Rights of the Child was extended to Hong Kong in 1994. It places Hong Kong under additional international obligations to respect children's rights and protect their interests.

In response to widespread support, action is also being taken with a view to extending to Hong Kong the United Nations Convention on the Elimination of All Forms of Discrimination Against Women.

The Sex Discrimination Ordinance was enacted in July this year. The Ordinance renders unlawful discrimination on the grounds of sex, marital status, and pregnancy in specified areas of activity. Sexual harassment is also made unlawful under the Ordinance. The Disability Discrimination Ordinance was enacted in August this year to prohibit discrimination on the ground of disability. To oversee the imple- mentation of both the Sex Discrimination Ordinance and Disability Discrimination Ordinance, an Equal Opportunities Commission will be established to work towards the elimination of discrimination and harassment, and to promote equality of opportunities. It will also provide assistance for persons who have experienced discrimination and harassment. A preparatory team is now in place to set up the commission.

The privacy of the individual faces a special threat from technological advances that facilitate the holding, processing and transfer of vast quantities of personal data. Based on recommendations by the Law Reform Commission, the Personal Data (Privacy) Ordinance, which aims to provide comprehensive statutory protection for the privacy of the individual with respect to personal data, was enacted in August 1995. It will be brought into force when the office of the Privacy Commissioner for Personal Data is established. This is expected to take place in early 1996.

The Judiciary

      A key element in the past success and continuing attraction of Hong Kong is that its judicial system operates on the principle, fundamental to the common law system, of the independence of the judiciary from the executive and legislative branches of government. The courts make their own judgements, whether disputes before them involve private citizens, corporate bodies or the government itself. The independence

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of the judiciary will be maintained after 1997, as provided for by the Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law.

The Chief Justice of Hong Kong is head of the judiciary. He is assisted in the overall administration of the judiciary by a Judiciary Administrator and her supporting team.

   The Hong Kong courts are organised, and staffed, on levels according to a number of factors, including the seriousness, complexity and number of cases handled, with the aim of ensuring fair and timely judgements and with a view to attracting and promoting the most appropriate judicial talent from as wide a pool as possible.

The most senior court in the territory is the Supreme Court, which covers both the Court of Appeal and the High Court. Sitting in the Supreme Court, in addition to the Chief Justice himself, are nine Justices of Appeal and 25 High Court Judges. The court's Registrar and Deputy Registrars serve as Masters of the Supreme Court in civil trials in the High Court. The Court of Appeal hears civil and criminal appeals from the High Court and from the District Court. Further recourse for appeal lies with the Judicial Committee of the Privy Council in London.

The jurisdiction of the High Court is unlimited in both civil and criminal matters. Civil matters are usually tried by High Court Judges sitting without juries, although there is a rarely-used provision for jury trials in certain cases, including defama- tion. For criminal trials, they sit with a jury of seven, or sometimes nine on special direction of the judge.

  The District Court is the next level of court below the High Court. As well as the new post of Chief District Court Judge, there are 33 Judges, who sit without a jury. The District Court's civil jurisdiction is currently limited to disputes involving a monetary value of up to $120,000. In its criminal jurisdiction, the District Court may try most serious cases with a few exceptions such as murder, manslaughter and rape. The maximum term of imprisonment it can impose is seven years. It also exercises appellate jurisdiction in stamp duty appeals. Jurisdictionally part of the District Court, the Family Court deals with divorce, adoption and family-related matters.

The Magistrates' Courts have the highest volume of cases of all the courts, trying some 90 per cent of the cases heard annually in Hong Kong. Including one Chief and 10 Principal Magistrates, there are 63 professional magistrates sitting in 10 magistracies: two on Hong Kong Island, four in Kowloon and four in the New Territories. They have a purely criminal jurisdiction covering a wide range of offences. Professional magistrates are empowered to impose sentences of up to three years' imprisonment and fines of up to $5 million for certain offences under the Gambling Ordinance. They also try cases in the Juvenile Court, which has jurisdiction in charges against children and young persons aged up to 16 years, except in cases involving homicide. In addition to the professional magistrates, there are 11 Special Magistrates, who are not legally qualified. They handle routine cases such as littering and minor traffic offences. Their powers of sentencing are limited to fines of up to $50,000.

In addition to these principal courts of civil and criminal jurisdiction, there are five tribunals presided over by 21 judicial officers. The Small Claims Tribunal hears minor civil claims, up to a limit of $15,000 at present. The Labour Tribunal hears civil claims arising from contracts of employment. The Lands Tribunal, which forms

THE LEGAL SYSTEM

part of the District Court, has a specialised role with jurisdiction in matters of rating and valuation, and in assessing compensation when land is resumed by the government or reduced in value by development. The Obscene Articles Tribunal is also specialised, with jurisdiction to determine whether or not an article is obscene, and to classify it into statutory categories of acceptability or otherwise. The Coroner's Court handles inquiries into unusual circumstances causing death.

The main official language of the courts in Hong Kong is English. This is exclusively so in the Court of Appeal, the High Court, the District Court and certain tribunals, while in the other courts and tribunals either English or Chinese may be used. Whichever language is used by the court for a case, however, a party or witness may still use Chinese or English, or any other language permitted by the court. Legislation enabling the phased introduction of the use of Chinese in the higher courts was passed in July 1995. A steering committee, appointed by the Chief Justice and chaired by a High Court Judge, has drawn up a programme to allow the use of Chinese, along with English, in all judicial proceedings in Hong Kong before July 1, 1997. This programme is ambitious and wide-ranging. The pace of its phased implementation will be decided by the Chief Justice having regard to the availability of facilities and expertise and the experience gained from a series of trial schemes which will run until July 1997.

Following on the Sino-British agreement on the Court of Final Appeal, action is now in hand for the establishment of the Court of Final Appeal in the French Mission Building.

Arbitration and Alternative Dispute Resolution

Arbitration has been a popular method of dispute resolution in Hong Kong for some time. It is governed by the Arbitration Ordinance, which has two distinct regimes a domestic regime based on English law and an international regime which includes the UNCITRAL Model Law, the model law adopted by the United Nations Com- mission on International Trade Law. Awards made in Hong Kong can be enforced in more than 80 other jurisdictions which are signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

      The Hong Kong International Arbitration Centre (HKIAC) was established in 1985 to act as an independent and impartial focus for the development of all forms of dispute resolution in Hong Kong and Southeast Asia. The HKIAC provides information on dispute resolution and arbitrations both in Hong Kong and over- seas. It operates panels of international and local arbitrators, and maintains lists of mediators.

      The HKIAC recently moved to new premises in Central District, with 10 purpose- built hearing and conference rooms and full support facilities. The number of cases involving the HKIAC has increased substantially in recent years. It is expected that there will be a further increase in such cases in the future, not only because of the increased popularity of arbitration and mediation as a means of dispute resolution but also because of the growth of Hong Kong as a regional dispute resolution centre.

The Attorney General

The Attorney General is the Governor's legal adviser and an ex officio member of the Executive Council. He is chairman of the Law Reform Commission of Hong Kong,

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and a member of the Judicial Service Commission, the Operations Review and Complaints Committees of the Independent Commission Against Corruption, and the Independent Police Complaints Council.

  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 also responsible for the drafting of all legislation.

  The Attorney General is responsible for all prosecutions in Hong Kong. It is his responsibility to decide whether a prosecution should be instituted in any particular case, and, if so, to institute and conduct the prosecution.

  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, decision-making and the allocation of responsibility for legislative initiatives which have a substantial legal policy content. Often, the group will call upon the Attorney General to take respon- sibility, as sponsor and spokesman, for legislative proposals to be submitted to the Executive and Legislative Councils.

  The Attorney General's Chambers have six divisions, five of which are headed by a Law Officer to whom the Attorney General delegates certain of his powers and responsibilities. The remaining division deals with administrative matters.

  The Civil Division, headed by the Crown Solicitor, provides legal advice to the government on civil law and conducts civil litigation, arbitration and mediation on behalf of the government. The International Law Division, headed by the Law Officer (International Law), deals with all external legal matters arising out of the Sino-British Joint Declaration and other international agreements, and advises upon questions of international law. The Law Drafting Division, headed by the Law Draftsman, is responsible for drafting and translating all legislation, including subsidiary legislation, in Chinese and English, and assists in steering legislation through the Executive and Legislative Councils.

The Solicitor General heads the Legal Policy Division, which includes the Law Reform Commission Secretariat. The division services the professional needs of the Attorney General, and provides legal input on a wide variety of topics being considered by the government. The division also advises on issues affecting the administration of justice, human rights, constitutional law and China law.

  The Prosecutions Division is headed by the Crown Prosecutor, who is commonly known as the Director of Public Prosecutions. Counsel from this division conduct prosecutions in the majority of High Court and District Court trials, and often appear before magistrates when an important point of law is involved. The division also provides legal advice to the police and other government departments respon- sible for prosecuting offences.

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 academic and practising lawyers, and prominent members of the community.

THE LEGAL SYSTEM

Since its establishment in 1980, it has published 27 reports covering subjects as diverse as commercial arbitration, homosexuality, bail, sale of goods and supply of services, and illegitimacy. The recommendations in 17 of its reports have been implemented, either in whole or in part. It is currently considering references on hearsay evidence in civil actions, privacy, guardianship and custody, insolvency, the description of flats on sale, and the interpretation of statutes.

Director of Intellectual Property

The post of Director of Intellectual Property was established in 1990 as a statutory office by the Director of Intellectual Property (Establishment) Ordinance. The Intellectual Property Department includes the Trade Marks and Patents Registries, which administer trade marks and patents registration systems under the Trade Marks Ordinance and the Registration of Patents Ordinance. The department is also responsible for other forms of intellectual property protection such as copyright and layout-design (topography) of integrated circuits, and for further development of Hong Kong's intellectual property regime.

The Legal Profession

There are about 3 570 solicitors and 490 local law firms in Hong Kong. In addition, there are around 56 registered foreign law firms, 363 registered foreign lawyers and 10 registered associations between foreign law firms and local law firms in Hong Kong which advise on foreign law.

The Law Society is the governing body for solicitors and foreign lawyers and foreign law firms in Hong Kong. It has wide responsibilities for maintaining professional and ethical standards, and for considering complaints against these legal professionals.

      Hong Kong has about 600 practising barristers, whose governing body is the Bar Council. Their conduct and etiquette are governed by the Code of Conduct for the Bar of Hong Kong.

Legal Aid, Advice and Assistance

Hong Kong has developed, over the years, a comprehensive system of legal aid to ensure that any person who has reasonable grounds for pursuing or defending a legal action is not prevented from doing so by lack of means. The provision of legal aid services is funded by the government through the Legal Aid Department and the Duty Lawyer Service.

Legal Aid

The Legal Aid Department provides legal representation in civil and criminal cases which are heard in the Magistrates' Courts, where the prosecution is seeking committal of a defendant to the High Court, in the District Court, the High Court, the Court of Appeal in Hong Kong and also the Judicial Committee of the Privy Council in London. Such aid is available to any person in Hong Kong, resident or non-resident, who is able to satisfy the Director of Legal Aid as to financial eligibility (the means test) and the justification for legal action (the merits test). Legal assistance is provided either with or without payment of a contribution. Upon grant of legal aid,

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the cases are assigned either to a lawyer in private practice or in the department's Litigation Division.

Following a comprehensive review of the law, policy and practice governing the provision of legal aid services, a number of amendments were made to the Legal Aid Ordinance in June 1995 to expand the scope and to improve the operation of the legal aid scheme. The upper limit of the financial eligibility for legal aid was raised from $120,000 to $144,000 to take account of inflation since 1992. The scope of the legal aid service was also extended to give the Director of Legal Aid discretion to waive the upper financial eligibility limit in any meritorious civil case in which a breach of the Hong Kong Bill of Rights Ordinance or an inconsistency of the International Covenant on Civil and Political Rights (ICCPR) as applied to Hong Kong is an issue, including those election petitions which involve Bill of Rights or ICCPR issues. Legal aid was also extended to those persons making applications to the Mental Health Review Tribunal against detention in a mental hospital or psychiatric centre and applications to the Motor Insurers' Bureau for payment of compensation in hit-and-

run cases.

Legal Aid in Civil Cases

In civil cases, apart from financial eligibility, an applicant must satisfy the Director of Legal Aid that he has reasonable grounds for pursuing or defending a legal action. Legal aid is available for a wide range of civil proceedings, including matrimonial cases, traffic accident claims, landlord and tenant disputes, claims in respect of industrial accidents, employees' compensation, immigration matters, breach of con- tract and professional negligence.

Admiralty, bankruptcy and companies winding-up proceedings are also undertaken by the Legal Aid Department. The majority of these cases deal with employees' wages and severance pay.

An applicant who is refused legal aid may appeal against such refusal to the Registrar of the Supreme Court; or in Privy Council cases, to a committee of review. The department's total expenditure for 1995 was $133 million in civil cases. During the year, 21 100 applications were received, and 7 700 were granted legal aid. Altogether, $470 million was recovered for the aided persons.

Supplementary Legal Aid Scheme

The Director of Legal Aid also operates the Supplementary Legal Aid Scheme, which provides legal assistance to persons whose resources exceed the financial limits under the standard legal aid scheme but are not sufficient to meet the high costs of conducting litigation on a private basis. The scheme is self-financing, funded by contributions from damages or compensation recovered. The scheme is available for civil claims in the High Court, the Court of Appeal and certain claims in the District Court for employees' compensation and for damages for death or personal injuries. Total expenditure on the scheme in 1995 was $5 million, 100 applications were received, and 75 were granted legal aid.

In June 1995, the Legal Aid Ordinance was also amended to increase the eligibility limits and expand the scope of the scheme. The upper financial limit was increased from $280,000 to $400,000 to take account of inflation since the inception of the scheme in 1984. The scope of the scheme was also expanded to cover claims involving professional negligence on the part of medical doctors, dentists and lawyers. A capital

THE LEGAL SYSTEM

injection of $27 million was made into the Supplementary Legal Aid Fund for this purpose.

Legal Aid in Criminal Cases

      In criminal cases, legal aid is available for representation in proceedings in the High Court and District Court, in the Magistrates' Courts (where the prosecution is seeking the committal of a defendant to the High Court), in appeals from the Magistrates' Courts, and in appeals to the Court of Appeal and to the Privy Council.

For appeals against conviction for murder, subject to financial eligibility, the grant of legal aid is mandatory to ensure that all relevant matters are placed before the court by the appellant's legal representative. For all other criminal appeals, legal aid will be given, subject to financial eligibility, if the Director of Legal Aid is satisfied that there are arguable grounds of appeal.

      The director has discretion to grant legal aid to an applicant charged with a criminal offence even if he fails the means test, if satisfied that it is in the interests of justice to do so. Most people charged with criminal offences have therefore become eligible for the grant of legal aid.

Total expenditure on legal costs on criminal cases for 1995 was $119 million. During the year, 4 700 applications were received, and 3 050 applicants granted legal aid.

Legal Aid Policy Review

A review of the whole range of legal aid services in Hong Kong was completed in July 1994 by an interdepartmental working group. Most of the working group's recommendations to expand the scope and improve the operation of legal aid services have been implemented with the enactment of the Legal Aid (Amendment) Ordinance in June 1995.

In response to growing concerns over the status of the Legal Aid Department as a government department, the working group also recommended the setting up of an independent statutory Legal Aid Services Council to reinforce the independence of legal aid services and to advise the government on legal aid policy and funding requirements. A Bill was introduced into the Legislative Council in February 1995, then reintroduced in October 1995. The government intends to establish the council after the legislation is enacted, probably in early 1996.

The Official Solicitor

Following the enforcement of the Official Solicitor Ordinance in August 1991, the Director of Legal Aid was appointed the first Official Solicitor and a separate office was established to represent persons under legal disability in court proceedings in Hong Kong. Up until July 1995, the Official Solicitor had received 295 requests for representation, mostly in matters involving receivership, unclaimed estates, adoption, guardianship, and application for care and protection order under Cap. 213. The Official Solicitor assigned less than five per cent of the cases to private lawyers and litigated the balance herself.

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THE LEGAL SYSTEM

Duty Lawyer Service

The Duty Lawyer Service operates the Legal Advice Scheme, which provides legal advice; the Duty Lawyer Scheme, which provides legal representation; and the Tel Law Scheme, which provides legal information over the telephone. It is jointly managed and administered by the Law Society and the Bar Association of Hong Kong. It is funded by the government and the subvention in 1995-1996 was approximately $70.9 million.

The Legal Advice Scheme was set up in 1978 to provide to members of the public free advice, without means testing, at five advice centres located in the District Offices. Members of the public can make appointments to see the volunteer lawyers through one of the 120 referral agencies, which include all District Offices, Caritas Services Centres and the Social Welfare Department. There are about 550 lawyers in the scheme. They advised 4 035 people during the year.

  The Duty Lawyer Scheme was introduced in 1979. It initially provided free legal representation to defendants charged with one of six 'scheduled' offences in three magistracies. This was subsequently extended to nine 'scheduled' offences in 1981 and covered all magistracies in 1983. Upon the enactment of the Bill of Rights Ordinance in 1991, the scheme was expanded to offer representation to virtually all defendants charged in the magistracies who have passed both the means and merits tests.

  Applicants are subject to a simple means test. The threshold was raised to $108,000 per annum from November 1, 1995. The Administrator of the Duty Lawyer Service has discretion to grant legal representation to defendants whose gross annual income exceeds the specified financial eligibility limit. An applicant is also subject to a merits test, based on the 'interest of justice' principle in accordance with the Bill of Rights Ordinance. The prime consideration is whether the defendant is in jeopardy of losing his liberty or whether a substantial question of law is involved.

The scheme also assigns barristers and solicitors, on a roster basis, to advise defendants facing extradition, to monitor the one-way viewer in police identification parades and to represent hawkers upon their appeals to the Governor in Council. The duty lawyer roster listed about 850 remunerated barristers and solicitors in 1995. A total of 42 206 defendants facing charges received advice and representation at trial under the Duty Lawyer Scheme.

The Tel Law Scheme was introduced in 1984 to provide members of the public with a free telephone enquiry service with basic taped legal information, in English and Chinese, on the legal aspects of everyday problems. These tapes cover aspects of matrimonial, landlord and tenant, criminal, financial, employment, environmental and administrative law. They are constantly updated, and new tapes are added when another subject is identified as being of interest to the public. During the year, Tel Law handled more than 145 870 calls.

4 IMPLEMENTATION OF THE

SINO-BRITISH JOINT DECLARATION

THE Sino-British Joint Declaration on the question of Hong Kong was signed in Beijing on December 19, 1984, by the Prime Ministers of Britain and China. On May 27, 1985, instruments of ratification were exchanged and the agreement entered into force. It was registered at the United Nations by the British and Chinese Governments on June 12, 1985.

The Documents

      The Joint Declaration is a legally binding international agreement. Indeed it is the highest form of commitment between sovereign states. It consists of several documents:

(a) the Joint Declaration itself;

(b) Annex I, in which the Chinese Government establishes its basic policies

towards Hong Kong;

(c) Annex II, which sets out the terms of reference and the working arrangements for the Sino-British Joint Liaison Group (JLG) which will operate until January 1, 2000;

(d) Annex III, which provides for the protection of land rights and for future land leases. It also establishes the Land Commission, which will operate until June 30, 1997; and

(e) an exchange of memoranda associated with the Joint Declaration on the status

of British Dependent Territories Citizens.

The Joint Declaration

In the Joint Declaration, the Government of the People's Republic of China declares that it has decided to resume the exercise of sovereignty over Hong Kong with effect from July 1, 1997, and the Government of the United Kingdom declares that it will restore Hong Kong to the People's Republic of China with effect from July 1, 1997. The Government of the People's Republic of China declares that the basic policies of the PRC towards Hong Kong are that:

(a) Hong Kong shall be a Special Administrative Region (SAR) of the People's

Republic of China;

(b) the Hong Kong SAR (HKSAR) will be directly under the authority of the Central People's Government and will enjoy a high degree of autonomy except in foreign and defence affairs;

39

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

40

(c) the HKSAR will be vested with executive, legislative and independent judicial

power including that of final adjudication;

(d) the Government of the HKSAR will be composed of local inhabitants;

(e) the current social and economic system in Hong Kong will remain unchanged,

and so will the life-style. Rights and freedoms will be protected by law;

(ƒ) the HKSAR will retain the status of a free port and a separate customs

territory;

(g) the HKSAR will retain the status of an international financial centre;

(h) the HKSAR will have independent finances;

(i) the HKSAR may establish mutually beneficial economic relations with the

United Kingdom and other countries;

(j) using the name "Hong Kong, China", the HKSAR may on its own develop

economic and cultural relations;

(k) the maintenance of public order in the Hong Kong Special Administrative

Region will be the responsibility of the Hong Kong SAR; and

(1) these policies will remain unchanged for 50 years.

The Joint Declaration also provides that, until June 30, 1997, the Government of the United Kingdom will be responsible for the administration of Hong Kong with the object of maintaining and preserving its economic prosperity and social stability; and the Government of the People's Republic of China will give its co-operation in this connection. It also provides that the Governments of the United Kingdom and the People's Republic of China agree to implement the declaration and its annexes.

The Sino-British Joint Liaison Group

The Joint Declaration foresaw that, in the years between its signing and the establishment of the Special Administrative Region, much would need to be done to prepare Hong Kong for its new status. To this end it provided for the establishment of the JLG and a Sino-British Land Commission.

Annex II of the Joint Declaration sets out the functions of the JLG as:

 (a) to conduct consultations on the implementation of the Joint Declaration; (b) to discuss matters relating to the smooth transfer of government in 1997; and (c) to exchange information and conduct consultations on such subjects as may be

agreed by the two sides.

The JLG is an organ of liaison not power. It must meet in Hong Kong, London and Beijing, at least once a year at each venue. The JLG has held 34 plenary meetings since 1985: 13 in Hong Kong, 11 in London and 10 in Beijing. It has also established expert groups which have met many times.

Agreements Reached So Far

The Joint Declaration set out that, in the first half of the period between the establishment of the JLG and July 1, 1997, the JLG should consider:

(a) action to be taken by the two governments to enable the HKSAR to maintain its economic relations as a separate customs territory, and in particular to

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

ensure the maintenance of Hong Kong's participation in the General Agree- ment on Tariffs and Trade (GATT), the Multifibre Arrangement and other international arrangements; and

(b) action to be taken by the two governments to ensure the continued application

of international rights and obligations affecting Hong Kong.

       Almost all of this work has been completed. In 1986, the JLG agreed that Hong Kong should be deemed to be a separate contracting party to the GATT and also that Hong Kong should become a separate Member of the Customs Co-operation Council. The JLG has also agreed that Hong Kong should continue to participate in 27 other international organisations after July 1, 1997. They are the: Asian Development Bank (agreement reached in 1985), Universal Postal Union (1986), World Meteorological Organisation (1986), International Maritime Organisation (1986), International Telecommunication Union (1986), Asia-Pacific Postal Union (1986), subsidiary bodies of the Food and Agriculture Organisation of the UN in the Asia-Pacific Region (1987), United Nations Economic and Social Commis- sion for Asian and the Pacific, and its subordinate bodies including the Asia and Pacific Development Centre, Intergovernmental Typhoon Committee and Statistical Institute for Asia and the Pacific (1987), International Labour Organisation (1987), United Nations Conference on Trade and Development (1987), World Health Organisation (1988), Interpol (1988), Asia-Pacific Telecommunity (1988), Interna- tional Atomic Energy Agency (1988), United Nations Commission on Narcotic Drugs (1988), International Hydrographic Organisation (1988), Network of Aquacul- ture Centres in Asia and the Pacific (1988), International Monetary Fund (1989), International Bank for Reconstruction and Development (1989), International Finance Corporation (1989), International Development Association (1989), Interna- tional Telecommunications Satellite Organisation (1990), International Maritime Satellite Organisation (1990), World Intellectual Property Organisation (1994).

Significant progress has also been made concerning international rights and obligations. The JLG established an International Rights and Obligations Sub- Group in 1986. Agreement has been reached on the continued application of 173 international conventions to Hong Kong after July 1, 1997. A full list is set out in Appendix 5A.

The JLG has also agreed to programmes letting Hong Kong enter into bilateral agreements with various countries. These will continue in force after July 1, 1997:

(a) Investment Promotion and Protection Agreements with: The Netherlands (agreed to in the JLG, March 1992, signed December 1992), Sweden (June 1993, May 1994), Denmark (September 1993, February 1994), Switzerland (September 1993, September 1994), Australia (June 1993, September 1993), New Zealand (April 1995, July 1995), Canada (agreed to in June 1992), Germany (December 1993), Italy (June 1994, November 1995), France (September 1994, November 1995) and Belgium (July 1995).

(b) Surrender of Fugitive Offenders Agreements with: The Netherlands (agreement in the JLG, June 1992, signed November 1992), Canada (May 1993, September 1993), Australia (September 1993, November 1993), Malaysia (June 1994, January 1995), The Philippines (September 1994, January 1995), and India (December 1994).

41

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

42

(c) Air Services Agreements with: The Netherlands (agreed to in the JLG July 1986, signed September 1986), Switzerland (November 1987, January 1988), Canada (March 1988, June 1988), Brunei (November 1988, January 1989), France (December 1988, August 1990), New Zealand (December 1990, February 1991), Malaysia (December 1990, March 1991), Brazil (June 1991, September 1991), Sri Lanka (September 1992, February 1993), Australia (June 1993, September 1993), Germany, (December 1994, May 1995) and India (September 1993).

Early in the JLG's existence agreement was reached that some travel and identity documents issued to Hong Kong residents before July 1, 1997, would continue to be valid thereafter, including:

(a) Certificate of Identity and Permanent Identity Card (1985);

(b) Document of Identity (1987);

(c) Hong Kong Seaman's Certificate of Nationality and Identity (1988);

(d) Seaman's Identity Books (1992); and

(e) Re-entry Permits (1992).

The Joint Declaration provides that in the second half of the period between the establishment of the JLG and July 1, 1997, matters for consideration shall include:

(a) procedures to be adopted for the smooth transition in 1997; and

(b) action to assist the Hong Kong Special Administrative Region to maintain and develop economic and cultural relations and conclude agreements on these matters with states, regions and relevant international organisations.

Much has already been done to achieve a smooth transition. As early as 1986, the two sides agreed to the introduction of a new pension scheme for the civil service. In 1987, agreement was reached on the expansion of the Police Force. In 1990, an agreement was reached on the measures that needed to be taken as a result of the establishment of the Special Administrative Region in respect of the Hong Kong Government's archives. In 1994, there was a comprehensive agreement on the future use of the defence estate in Hong Kong, and agreement was reached on the site for the future Chinese Ministry of Foreign Affairs Office in Hong Kong. Also in 1994, agreement was reached on transitional arrangements for postal stamps, and the future arrangements for international call sign services for Hong Kong.

One of the JLG's most important achievements has been to ensure the continuity of the judiciary in Hong Kong. The Joint Declaration and the Basic Law both provide that the judicial system previously practised in Hong Kong shall be maintained except for those changes consequent on the establishment of the Court of Final Appeal of the HKSAR. In 1991, agreement was reached on the early establishment of the Court of Final Appeal and in June 1995 this was given practical effect with an agreement on the establishment of the court on July 1, 1997, in accordance with the provisions of the Court of Final Appeal Ordinance passed by the Legislative Council in the 1994-95 session.

Agreements have also been reached to ensure that the UK Laws currently in force in Hong Kong will continue to apply after June 30, 1997. The JLG has reached agreement on the localisation of about 80 UK enactments in the following areas of law: Merchant Shipping (Registration) (1986); Admiralty Jurisdiction (Civil) (1988);

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

Merchant Shipping (Prevention and Control of Pollution) (1989); Merchant Shipping (Liability and Compensation of Oil Pollution) (1989); Admiralty Jurisdiction (Criminal) (1990); Merchant Shipping (Limitation of Shipowners' Liability) (1991); Civil Aviation (First Stage) (1993); Internationally Protected Persons and Taking of Hostages (1994); Merchant Shipping (Seafarers) (1994); Merchant Shipping (Carriage of Goods by Sea) (1994); Dumping at Sea (1994); Merchant Shipping (Liner Conferences) (1994); Nuclear Material (Liability of Carriage) (1994); Coinage (1994); Biological Weapons (1995); Aviation Security (1995); Patents (1995); Registered Designs (1995); Copyright (1995); Whale Fisheries (1995). The JLG also reached agreement on the consultation procedures for adapting Hong Kong laws so that they will be consistent with the Basic Law (December 14, 1990).

The JLG has reached a common view on some major contracts that straddle 1997. These are: the Scheme of Control Agreement of China Light and Power and the provision of Community Electronic Trading Services (1992); the Subscription TV Licence (1993); the Scheme of Control Agreement of Hong Kong Electric (1993); the contract for the West New Territories landfill (1993); the contract for the South-East NT landfill (1993); the contract for the North-East NT landfill (1994); the management contract for the Aberdeen Tunnel (1994); four Fixed Telecom- munication Network licences (1995); the Route III (Country Park Section) BOT franchise (1995); and the new franchise for China Motor Bus Company (1995). In 1986, it agreed on the establishment of a separate Hong Kong register of shipping. Lastly, the JLG's Airport Committee has taken an active role in preparations for the new airport. It was established under the terms of a Memorandum of Understanding in 1991. The Airport Committee agreed to the principles of the overall financing arrangements of the New Airport and the Airport Railway in 1994, and the Financial Support Agreements between the Hong Kong Government and the Airport Authority and the Mass Transit Railway Corporation in 1995. The Airport Committee has also agreed to franchises for air cargo services, aviation fuel supply services and aircraft catering services. The committee also reached consensus on the Airport Authority Ordinance and the membership of the Airport Authoirty Board.

Work Still to be Done in the JLG

      Despite these achievements, there is still a significant amount of work to complete before July 1, 1997. This work can be categorised into four areas: legal, immigration, and economic issues, and the transfer of government.

The transfer of government involves issues such as the need to have consultations on the transitional Budget and related matters, the transfer of defence respon- sibilities, the implementation of the 1990 agreement on archives, and the future of the civil service. Arrangements are also needed for the actual handover ceremonies. All of these issues must, by definition, be resolved before July 1, 1997.

Several legal issues remain unresolved. For example, about 10 items regarding localisation of laws are still outstanding. Agreement is needed on the adaptation of existing Hong Kong laws with the Basic Law; on some 20 international conventions; on programmes for negotiating bilateral agreements on the reciprocal enforcement and recognition of judgements in civil and commercial matters; and on the transfer of sentenced persons. Some bilateral agreements under the existing programmes (Mutual Legal Assistance, Surrender of Fugitive Offenders, Investments Promotion and Protection Agreements and Air Services Agreements) have yet to be agreed to.

43

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

44

One of the most important groups of subjects still to be resolved relates to the remaining immigration issues on the JLG agenda. Agreement is needed on how to align the Immigration Ordinance with the relevant provisions of the Basic Law. It will also be necessary to consider how the SAR passport and travel documents will be issued from July 1, 1997. Arrangements must be made to ensure that Hong Kong residents can travel as easily as possible to third countries once the SAR is established.

  Economic issues form another category to be resolved. There is a need, for example, to reach a common view on some franchises and contracts that straddle 1997, as well as on various infrastructural projects.

Land Commission

The Sino-British Land Commission was established in 1985 in accordance with Annex III to the Joint Declaration and will be dissolved on June 30, 1997. Its function is to conduct consultations on the implementation of the provisions of Annex III on land leases and other related matters. It meets in Hong Kong and has had 31 formal meetings up to December 1995.

  The Land Commission has made solid progress since its establishment. It has reached agreement on 26 legal documents to be used in various types of land transactions covered by the provisions of Annex III; on effecting by legislation the extension of New Territories leases in accordance with paragraph 2 of Annex III; and on the principles for dealing with special purpose leases. In 1994, agreement was reached on arrangements for granting the land required for the new airport at Chek Lap Kok and the Airport Railway.

  The Land Commission held its 30th meeting in May 1995 and its 31st in November. The two sides agreed to make available, during the 1995-96 financial year, a total of about 205 hectares of land. This takes to 2 564 hectares the total amount of land that the Land Commission has agreed to make available since its establishment.

  Under the terms of the Joint Declaration, premium income obtained by the Hong Kong Government from land transactions is, after the deduction of the cost of land production, to be shared equally between the Hong Kong Government and the future SAR Government. The Hong Kong Government's share of premium income is put into the Capital Works Reserve Fund for financing public works and land development in Hong Kong. The future SAR Government's share is held in a trust fund, called the Hong Kong Special Administrative Region Government Land Fund, established by the Chinese side of the Land Commission. The fund is managed under the direction and advice of an investment committee, which includes prominent bankers in Hong Kong, as well as a monetary expert from the Hong Kong Government. By September 30, 1995, more than $84,080 million had been transferred to the fund. This represents the future SAR Government's share of premium income since the Joint Declaration came into force on May 27, 1985.

The Basic Law

The Joint Declaration provides that the basic policies of the People's Republic of China regarding Hong Kong will be stipulated in a Basic Law of the Hong Kong SAR by China's National People's Congress (NPC). The Basic Law Drafting

IMPLEMENTATION OF THE SINO-BRITISH JOINT DECLARATION

Committee and Basic Law Consultative Committee were established in 1985 to undertake the drafting of the Basic Law and to canvass public views on the drafts. The first draft was published in April 1988, followed by a five-month public consultation exercise. The second draft, endorsed in February 1989 by the Standing Committee of the NPC for further consultation, reflected many of the views expressed during the first round of consultation. The second consultation exercise ended in October 1989. The second draft of the Basic Law was further reviewed in the light of the outcome of that exercise and formally promulgated in April 1990 by the NPC, together with the designs for the flag and emblem of the SAR. The Basic Law will come into effect on July 1, 1997.

Like the Joint Declaration, the Basic Law provides that the HKSAR will enjoy a high degree of autonomy and that the capitalist system and way of life shall remain unchanged for 50 years after July 1, 1997. It also prescribes the systems to be practised in the HKSAR.

45

5 THE ECONOMY

46

THE year saw mixed performances. Exports of goods and services maintained a strong growth, with the growth rate of exports of services accelerating but that of exports of goods slowing down over the course of the year. Investment spending in machinery and equipment was robust and infrastructural construction remained intensive. On the other hand, consumer demand slackened.

Private sector building activity declined, along with continued consolidation in the property market. With labour supply growing generally faster than total employment, employers had less difficulty in filling vacancies and fewer upward pressures on their labour costs. However, employees faced more intense competition in the job market. Reflecting these developments, the Gross Domestic Product (GDP) grew more moderately, by 4.6 per cent in 1995, compared with 5.4 per cent in 1994. Consumer price inflation also moderated, after a temporary rise in the first quarter of the year. The consolidation in the property market, after several rises in interest rates since the early part of 1994, continued into 1995. Towards the end of the year there were some signs of improvement in trading activity on residential property. The stock market also rebounded in 1995 along with the peaking in the US dollar interest rates during the year.

  Externally, re-exports continued to record double-digit growth in 1995, notwithstanding a further enlarged base of comparison and a marked structural shift to transhipment. Domestic exports increased for the first time since 1992. These encouraging performances were underpinned by improved competitiveness following the weakening of the Hong Kong dollar along with the US dollar in the early part of 1995. Import demand in several major overseas markets also firmed up during the year. But export growth slowed as the favourable exchange rate effect gradually dissipated.

  The increased export activity and Airport Core Programme works generated larger import requirements. Imports rose markedly in the early part of the year, leading to a further widening in the visible trade deficit. The deficit situation improved substantially over the year as the intake of various consumer goods reduced along with slower consumer spending. However, the visible trade deficit was still somewhat higher in 1995 than in 1994.

  As to invisible trade, exports of services showed a further marked increase in 1995, bolstered by a surge in offshore trading activities particularly those involving transhipment flows into and out of China. Exports of other trade-related services, as well as professional and various business services maintained steady increases. Tourism showed a distinct pick-up over the year. The surplus in invisible trade thus

THE ECONOMY

showed a further significant increase, offsetting substantially the deficit in visible trade.

On the domestic front, fixed asset investment was underpinned by a strong absorption of machinery and equipment. Retained imports of capital goods surged by about 23 per cent in real terms in 1995, up from 11 per cent in 1994. Construc- tion output was propelled by intensive work on the Airport Core Programme, but building activities by the private sector slowed down. Consumer spending stayed weak.

The labour market has eased since the beginning of the year. In the fourth quarter of 1995, the unemployment rate and the underemployment rate stood at 3.5 per cent and 2.3 per cent, respectively, compared with two per cent and 1.5 per cent in the same quarter last year. Nevertheless, in September there were still around 51 000 vacancies in the private sector. The existence of so many vacancies along with increased unemployment reflected a degree of job mismatch in the labour market.

      The residential property market continued to consolidate. Trading activity moderated again, following a brief rebound after the Lunar New Year and in March and April. Buying interests were concentrated mainly in the primary market, where developers put in intensive promotion efforts with further price cuts and the offer of more flexible payment terms. Activity in the secondary market was subdued. Flat prices came under further downward pressures during the year. As more landlords put out their flats for lease in a sluggish sales market, rentals in new leases fell further. The sales market for office space remained quiet, and the rental market also softened. Anticipation of ample supply over the next couple of years could have prompted this adjustment.

Interest in old industrial buildings and industrial sites for redevelopment into modern multi-purpose industrial buildings was dampened by the slack conditions in the property market. The large increase in supply of industrial-cum-office premises also contributed. Leasing activity continued to be sluggish. Prices and rentals were trending down.

Consumer price inflation, measured in terms of the Consumer Price Index (A), rose to 8.7 per cent in 1995, faster than that of 8.1 per cent in 1994. The pick-up was mainly due to a greater amount of imported inflation in the early part of 1995, brought about by a weakened Hong Kong dollar along with the US dollar, an upsurge in world commodity and product prices, and high inflation in China. But as the currency effect gradually dissipated and as the US dollar rebounded in the latter part of the year, the significance of imported inflation declined somewhat. In addition, the uptrend in world commodity prices and inflation in China both moderated. Concurrently, locally-generated inflationary pressures also eased, helped by the relatively more abundant labour supply and the softening in property prices and rentals. As a result, by the fourth quarter of 1995, consumer price inflation eased back to 7.7 per cent, from 9.5 per cent in the first quarter.

Overall inflation in the economy, as measured by the GDP deflator, showed an even greater moderation over the course of 1995, but this was mainly due to a deterioration in the terms of trade consequential to the pick-up in import prices in the year. Excluding price movements in the external sector, the domestic demand deflator rose by 6.4 per cent in 1995, compared with 7.4 per cent in 1994.

47

THE ECONOMY

48

Structure and Development of the Economy

Hong Kong has a deep-water harbour and is strategically located on the inter- national time zone between Asia and Europe. It is close to China and has strong traditional links with the Southeast Asian economies. Hong Kong also has a low tax environment, free and fair market competition, a sound legal and financial framework, a fully convertible and secure currency, highly efficient transport and communication networks and, most importantly, a competent workforce and a pool of enterprising entrepreneurs. These have all contributed to the success of the Hong Kong economy.

  Hong Kong is now ranked the eighth-largest trading entity in the world. It operates the busiest container port in terms of throughput. Its airport is the fourth-busiest in terms of the number of international passengers and the second-busiest in terms of the volume of international cargo handled. It is also the world's fifth-largest banking centre in terms of the volume of external banking transactions, and the fifth-largest foreign exchange market in terms of turnover. Its stock market is the second-largest in Asia in terms of market capitalisation. All these show that Hong Kong has firmly established itself as a major international trade and financial centre. The World Competitiveness Report 1995, published by the International Institute for Management Development and the World Economic Forum, ranks Hong Kong as the third most competitive economy in the world (compared with fourth last year), after the USA and Singapore. Hong Kong owes its strength to business- friendly government policies, sound economic fundamentals, a high degree of internationalisation and cultural openness. The US Heritage Foundation also identified Hong Kong for the second consecutive year as the freest economy in the world.

  Over the past two decades, the Hong Kong economy has more than quadrupled in size. With its GDP growing at an average annual rate of 7.5 per cent in real terms, Hong Kong has outperformed the Organisation for Economic Co-operation and Development (OECD) countries and has been growing more than twice as fast as the world economy. Per capita GDP has tripled in real terms, equivalent to an average annual growth rate of about six per cent in real terms. Valued at US$23,000 in 1995, Hong Kong's per capita GDP surpassed that of the United Kingdom, Canada and Australia, and was next only to Japan in Asia. Benefiting from this respectable economic performance, the local workforce has been able to enjoy a continuous rise in income, in money terms as well as in real terms.

  As a small and open economy, Hong Kong's economic success owes a great deal to the remarkable performance of the external trade sector. Trade in goods expanded by more than 44-fold, and trade in services by more than 26 times over the past two decades. The total value of visible trade (comprising re-exports, domestic exports and imports) reached $2,840 billion in 1995, representing 256 per cent of the GDP. This compared with the corresponding ratios of 124 per cent in 1966, 148 per cent in 1980 and 221 per cent in 1990. Including also the value of exports and imports of services, the ratio was 297 per cent in 1995. The corresponding figures in 1966, 1980 and 1990 were 158 per cent, 181 per cent and 260 per cent.

  Statistics compiled for the first time, putting all external transactions together (trade in goods and services plus external factor income flows), show a ratio to GDP of 344 per cent in 1993. Final GNP estimates for 1993 are $908 billion (at 1993

Percent

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0

-2.0

THE ECONOMY

Gross Domestic Product (year-on-year growth rate in real terms)

GDP

Per capita GDP

1981 1983 1985 1987 1989

1975 1977 1979

1991 1993 1995

  Over the past two decades, the Hong Kong economy has been expanding rapidly, with GDP growing by 7% per annum and per capita GDP 6% per annum in real terms.

prices), which is 1.2 per cent larger than Hong Kong's GDP for the same year. (See Appendix 6).

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 fisheries, mining and quarrying) is very small by both

measures.

Within secondary production (comprising manufacturing; construction; and the supply of electricity, gas and water), the manufacturing sector still contributes the largest share in terms of both GDP and employment. With the continued expansion of the service sectors and the on-going relocation of manufacturing processes to China since the mid-1980s, the contribution of the manufacturing sector to GDP declined steadily, from 24 per cent in 1980 to around 22 per cent during the period 1985 to 1987, 18 per cent in 1990, and further to nine per cent in 1994. On the other hand, the share of the construction sector in GDP, after falling from seven per cent in 1980 to around five per cent in 1985, has stayed at that level. The combined share of the supply of electricity, gas and water, at two per cent in 1994, was broadly the same as the average over the past 10 years.

      China's open-door policy and economic reforms have not only provided a huge production hinterland for local manufacturers, they have also created an abundance of business opportunities for a wide range of service activities in Hong Kong, including freight transport, telecommunications, banking, real estate development,

49

THE ECONOMY

Gross Domestic Product by broad economic sector

1980

1994

Secondary production

31.6%

Secondary production 16.8%

Primary production 1.0%

Primary production 0.2%

Tertiary production 67.5%

Tertiary production 83.0%

Over the past fourteen years, the tertiary services sector has become increasingly important in terms of contribution to GDP.

50

and professional services such as legal, accounting and insurance services. Hence, since the mid-1980s, there has been a further orientation of the Hong Kong economy towards services.

  Reflecting this, the significance of the tertiary services sector as a whole (comprising the wholesale, retail and import/export trades, restaurants and hotels; transport, storage and communication; financing, insurance, real estate and business services; community, social and personal services; and ownership of premises) in terms of its contribution to GDP rose steadily, from around 67 per cent in 1980 to 70 per cent in 1985 and 74 per cent in 1990, and further to 83 per cent in 1994.

  The increasing orientation of the Hong Kong economy towards services was also evident in employment. The share of the tertiary services sector as a whole increased from 48 per cent in 1980 to 54 per cent in 1985, and further to 72 per cent in 1995. On the other hand, the share of the manufacturing sector in total employment was on a distinct downtrend, falling from 42 per cent in 1980 to 36 per cent in 1985, and further to 18 per cent in 1995.

Services

Along with the rapid growth in external trade, the services sector has flourished and diversified. Finance and business services, including banking, insurance, real estate, and a wide range of other professional services, have developed rapidly.

  Prompted by China's economic reforms and trade liberalisation, as well as by the dynamic growth in the Asia-Pacific region, trade between Hong Kong and the region increased phenomenally in the 1980s. The decade thus saw the re-emergence of Hong

THE ECONOMY

Employment by broad economic sector

1980

1995

Secondary production 50.1%

Secondary production 27.1%

Primary production 1.5%

Tertiary production 48.4%

Tertiary production 72.3%

Primary production 0.6%

With the on-going relocation of lower value-added and less skill-intensive manufacturing processes to China and steady expansion of service sector activities in Hong Kong, the tertiary services sector has overtaken the secondary production sector to become the largest employer.

Kong as a major entrepôt serving the region in general and China in particular. Nearly 90 per cent of Hong Kong's re-exports now involve China either as a source or as a destination.

      Over the years, Hong Kong has developed an efficient wholesale and retail network to cater for the growing consumption needs of a more affluent population. This has been reinforced by a continued growth in tourism, long a major source of foreign exchange for Hong Kong. With the rise in household incomes over the years, there has been growing demand for goods and services of a better quality, and services in the community, social and recreational fields have also grown substantially.

      The rapid growth in trade and other business links between Hong Kong and the Asia-Pacific region in general, and China in particular, also boosted exports of services. Trade in services continues to expand rapidly, as Hong Kong's role as a major regional trade, finance and business services centre in the region deepens further. Apart from trade-related services and tourism, there has also been a rising demand for professional and other support services. Offshore trading, cross-border land transport services and other business services, including exports of construction, legal, accountancy, computer and management consultancy services to China and other East Asian economies, have all shown rapid increases.

      Between 1985 and 1995, exports of services grew at an average annual rate of nine per cent in real terms, and imports of services, at 10 per cent. The major components of Hong Kong's trade in services are shipping, civil aviation, tourism, and various financial services. The shares of transportation services in total exports and total imports of services were 38 per cent and 27 per cent, respectively, in 1994. The

51

Transport, storage and

communication

7.4%

Financing,

insurance, real

estate and

business services

23.0%

THE ECONOMY

Gross Domestic Product by major service sector

1980

Wholesale, retail, import/export trades,

restaurants and hotels 21.4%

1994

Financing, insurance, real

Transport,

estate and

storage and communication

business services 26.1%

9.7%

Community, social and personal

Community, social

Others 36.1%

services

and personal services 12.1%

15.6%

Others 21.5%

Wholesale,

retail,

import/export trades,

restaurants

and hotels 27.0%

The distributive and catering trades as well as financing, insurance, real estate and business services remained the largest service sectors in terms of GDP.

52

corresponding shares for travel services were 26 per cent and 47 per cent. Other trade-related services such as offshore trading and purchasing/merchandising services accounted for 21 per cent of the total value of exports of services and seven per cent of the total value of imports of services. The corresponding shares for financial and banking services were seven per cent and four per cent.

Between 1984 and 1994, the net output or value added component of the financing, insurance, real estate and business services sector showed the fastest increase; followed by the wholesale, retail and import/export trades, restaurants and hotels; and transport, storage and communication. Their respective average annual growth rates were 21 per cent, 17 per cent and 17 per cent. The combined value added calculation for the service sectors as a whole rose strongly, at an average of 17 per cent per annum over this period.

The wholesale, retail and import/export trades, restaurants and hotels was the largest employer, accounting for 28 per cent of the total employment in 1995. Taken together, the services sector accounted for 72 per cent of the total employment in 1995.

Manufacturing

Manufacturing firms in Hong Kong are well known for their versatility. The existence of many small establishments, providing an extensive local sub-contracting system, has greatly aided producers in coping with changes in demand. The increasing use of outward processing facilities in China has enhanced production flexibility and helped to maintain the price competitiveness of Hong Kong's products. The bulk of Hong Kong's manufacturing output is eventually exported.

THE ECONOMY

Employment by major service sector

1980

Wholesale, retail,

Others 51.6%

import/export trades,

restaurants and hotels

Wholesale, retail, import/export trades,

28.3%

restaurants and

hotels

20.0%

Transport, storage and

commu-

nication

7.3%

Financing, insurance,

1995

Others 27.7%

Transport, storage and

Financing, insurance,

real estate and business services

Community, social and personal services 20.8%

commu- nication

real estate and

Community, social

11.4%

business

services

and personal services 16.5%

4.6%

11.8%

Over the years, the distributive and catering trades, community, social and personal services, as well as financing, insurance, real estate and business services, have become important employers in the services sector.

      Over the years, the pressure of protectionism in a number of major markets and growing competition from other economies in East Asia have led to even greater diversification in both products and markets. This is attributable to the initiative of local manufacturers and exporters as well as their own dedicated promotion efforts. To maintain competitiveness, there has also been a continuous upgrading of product quality.

In consequence, some industries have emerged and grown, the most notable one being electronics. The textiles and clothing industries remain prominent, notwith- standing their continuous declines in relative importance. Other important industries include printing and publishing, machinery and equipment, fabricated metal pro- ducts, plastic products, watches and clocks and jewellery. Labour productivity in the manufacturing sector has improved significantly.

      China has become the largest market for Hong Kong's domestic exports, accounting for about 27 per cent of domestic exports in 1995. The importance of other economies in the Asia-Pacific region as a market for Hong Kong's exports has also risen steadily over the years. Hong Kong's exports have diversified into new markets, including countries in the Middle East, Eastern Europe, Latin America and Africa.

Increasing Economic Links between Hong Kong and China

Economic links between Hong Kong and China have strengthened substantially since 1978. Both places have derived substantial benefits from this growing economic relationship. Continued economic reforms and trade liberalisation in China will open up more opportunities for further economic co-operation between the two places.

53

3333

Index

250

200

150

100

50

THE ECONOMY

Output per employee in the manufacturing sector (March 1991 = 100)

0

1985 1986 1987 1988

1989 1990 1991 1992 1993

1994

1995*

Output per employee in the manufacturing sector has been on a general uptrend over the years. * Average of Q1 to Q3 1995 only.

54

In 1995, the total value of visible trade between Hong Kong and China continued to grow strongly, by 15 per cent to $987 billion. China was Hong Kong's largest trading partner, accounting for 35 per cent of Hong Kong's overall trade value. It was also the largest market for, as well as the largest supplier of, Hong Kong's re-exports. About 88 per cent of Hong Kong's re-exports involved China in either direction.

  Hong Kong also serves as an important service centre for China generally and South China in particular. This includes facilities such as the port and airport, as well as a wide range of financial and business services. Furthermore, Hong Kong is a convenient gateway to China for business and tourism. In 1995, 26 million trips to China were made by Hong Kong residents, and another two million trips to China were made by foreign visitors through Hong Kong. These represented increases of seven per cent and six per cent, respectively, over 1994.

Besides visible and invisible trade, Hong Kong is also an important source or conduit of external direct investment in China, accounting for about three-fifths of the total. While Hong Kong's direct investment in China has been concentrated in light manufacturing industries, investment in hotels and tourist-related facilities, real estate and infrastructure has been increasing. As can be expected, Guangdong Province occupies an important position in this respect. More than four million people are estimated to be working in Guangdong for Hong Kong companies, either through joint ventures or in tasks commissioned by Hong Kong companies in the form of outward processing arrangements and compensation trade. This, in effect, provides Hong Kong with a substantial production base across the border.

THE ECONOMY

In the other direction, China has also been investing heavily in Hong Kong. Its investment ranges from traditional activities such as import/export trades, wholesale/retail trades, banking, transportation and warehousing, to newer areas such as real estate, hotels, financial services, manufacturing and infrastructural development projects.

Increasing financial links between Hong Kong and China are reflected by the rapid growth in financial transactions with China in recent years. The Bank of China group is the second largest banking group in Hong Kong, after the HongkongBank group. It is also one of the note-issuing banks in Hong Kong. In 1995, the Agricultural Bank of China, the Industrial and Commercial Bank of China, and the People's Construction Bank of China were also granted banking licences to operate in Hong Kong. On the other hand, the HongkongBank group, together with the Bank of East Asia and the Standard Chartered Bank, are among the best-represented foreign banks in China.

      Hong Kong is a major funding centre for China. Most of China's fund-raising activities in the territory have taken the form of syndicated loans. Although in some cases Hong Kong is not the direct source of funds, it serves as a window through which China can gain access to external borrowing. These loans are mostly for financing China's own economic development, but some of them are used by China- interest companies in Hong Kong to finance their investment activities in the territory or abroad. In addition to syndicated loans, China-related banks and other enterprises have been making greater use of negotiable certificates of deposit, bonds and share issuance to raise funds. Since mid-1993, large state-owned enterprises in China have raised funds through the issue of "H" shares in Hong Kong. By the end of 1995, 17 such enterprises had listed their "H" shares on the Hong Kong Stock Exchange, raising a total capital of HK$16 billion.

The Economy in 1995

External Trade

The growth rates of both re-exports and domestic exports accelerated sharply in the early part of the year. Apart from strong import demand in the overseas markets, a weaker Hong Kong dollar along with the US dollar also boosted export performance. There was however some moderation in export growth in the latter part of 1995 as the boosting effect of the earlier exchange rate movements gradually dissipated. Nevertheless, re-exports still maintained a double-digit growth throughout the year. For 1995 as a whole, re-exports rose by 17 per cent in value terms. After discounting price increase, the growth rate in real terms was about 14 per cent, up from 14 per cent in 1994.

In 1995, re-exports to China continued to be influenced by the macro-economic restraint measures implemented by China since July 1993. There was however some picking up in China's import demand over the course of the year. On the other hand, re-exports to China for outward processing, after showing a surge in the first half of the year, moderated in the third quarter. For 1995 as a whole, re-exports to China grew by about 15 per cent in real terms, representing a further moderation from the 17 per cent increase in 1994.

Re-exports to the USA likewise slowed down in growth over the course of 1995. The rebound in the Hong Kong dollar against the currencies of some neighbouring

55

THE ECONOMY

Growth in Hong Kong's visible trade (year-on-year growth rate in real terms)

Percent

50.0

Re-exports

40.0

30.0

20.0

10.0

0

Imports

Total exports

Domestic exports

-10.0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Re-export growth in 1995 was faster than in 1994. Domestic exports also resumed a positive growth. Imports continued to grow markedly.

56

economies may also have rendered Hong Kong products less competitive in the USA. For the year as a whole, re-exports to this market grew by about seven per cent in real terms. In contrast, re-exports to many other major markets, such as Japan, Taiwan, the United Kingdom and Germany, all accelerated in growth, rising by about 24 per cent, 23 per cent, 19 per cent and six per cent, respectively, in 1995. The major suppliers of Hong Kong's re-exports, apart from China, were Japan, Taiwan, the USA and the Republic of Korea.

  Analysed by end-use category, Hong Kong's re-exports comprised mostly consumer goods, and raw materials and semi-manufactures, accounting for 49 per cent and 30 per cent, respectively, of the total value. Re-exports of office machinery, telecommunications and sound recording and reproducing equipment and electrical machinery, registered faster increases than re-exports of other commodity items.

  In 1995, Hong Kong's external trade underwent further structural change, marked by a continued shift from re-exports to transshipment. Reflecting this, seaborne out- ward transshipment recorded a further robust increase of 35 per cent in tonnage terms in the first three quarters of 1995 over the same period last year. Analysed by market, transshipment to China, the USA, Germany, Japan and the United Kingdom all rose markedly, by 30 per cent, 26 per cent, 43 per cent, 78 per cent and 53 per cent, respectively. Transshipment to Taiwan however slowed down to increase by only four per cent, after a strong upsurge in 1994. As in the case of re-exports, manufactured goods accounted for the largest share of seaborne outward transshipment, followed by chemicals and related products, crude materials, foodstuffs, and machinery and transport equipment.

Workmen ride a 35,000-tonne section of tunnel across Victoria Harbour to its intended position in the Western Harbour Tunnel, one of several key projects associated with Hong Kong's new airport. In all, 12 such sections will be joined into an immersed tube containing six lanes for road traffic. The concrete sections were cast in a former quarry at Shek O, in Hong Kong's south-east, then towed to Junk Bay, in eastern Kowloon, for final checks before being tugged across the harbour where they were lowered into place, joined together and the ends were removed. Eight sections were lowered during 1995 and positioning of the last four was due to start in April, 1996. The two-kilometre tunnel will provide access to the west and south of Hong Kong Island, easing congestion at the two existing harbour crossings. A separate cross-harbour tunnel being built for rail traffic is also progressing well.

Relocated ferry piers in Central District on Hong Kong Island will soon be dwarfed by a development including shop, office, hotel and residential towers. They will rise above the Hong Kong terminus of the new Airport Railway, linking the city centre with the territory's new international airport being built at Chek Lap Kok.

NEXT PAGE: Container Terminal Eight joins Kowloon with the former Stonecutters Island in one of several new container projects needed to handle Hong Kong's increasing container traffic. The territory achieved another milestone in April 1995,

when Hong Kong was declared the world's busiest container port after handling 11.05 million twenty-foot-equivalent units (TEUs) during 1994. It was the third successive year that Hong Kong had posted a new record and affirmed its status as the world's leading container port. Preliminary figures for 1995 reinforce that status, with a

total of 12.6 million TEUS being handled, a rise of about 14 per cent on 1994.

ML

MIL

THE ECONOMY

Domestic exports recovered to an increase of about four per cent in value terms or about two per cent in real terms, in 1995. This represented a significant improvement from virtually no growth in 1992 and declines of four per cent in 1993 and two per cent in 1994. The performance of domestic exports in the first quarter was particularly robust.

      Analysed by major market, there was an almost across-the-board improvement in all the major markets. Domestic exports to China resumed a positive growth, rising by about one per cent in real terms in 1995. A large proportion of these domestic exports were related to outward processing arrangements commissioned by Hong Kong companies. Domestic exports to the United Kingdom similarly recovered to show a positive increase, by about six per cent. Domestic exports to Japan rose by about nine per cent. Domestic exports to Singapore slowed down to almost zero growth in real terms, but those to many other economies in the Asia-Pacific region recorded significant growth. On the other hand, those to Germany and the USA were still weak, recording declines of about seven and two per cent in real terms, respectively.

      Underpinned by the robust growth in re-exports and in retained imports, total imports showed a further significant increase in 1995, by 19 per cent in value terms or about 14 per cent in real terms. This followed an increase of 17 per cent in value terms or 14 per cent in real terms in 1994. Nevertheless, with retained imports of consumer goods slowing down over the year, imports decelerated in growth from 17 per cent in the first half of 1995 to about 11 per cent in the second half. The major sources of Hong Kong's imports were China, Japan, Taiwan, the USA, Singapore and the Republic of Korea.

      Retained imports grew strongly, by about 13 per cent in real terms in 1995, following an increase of 14 per cent in 1994. The robust growth was attributable mainly to the larger import requirements for raw materials and capital goods for production and major public works. Reflecting this, the volume of retained imports of raw materials and semi-manufactures rose by about 15 per cent and capital goods by about 23 per cent in 1995. On the other hand, those of consumer goods slowed down considerably to virtually zero growth in real terms. Those of foodstuffs grew by about nine per cent in real terms.

Reflecting in part the substantial rise in import requirements and in part the continued deterioration in the terms of trade, the visible trade deficit widened further to $147 billion in 1995, equivalent to 9.9 per cent of the total value of imports. This compared with the corresponding figures of $81 billion or 6.5 per cent recorded in 1994. But with a reduced intake of consumer goods along with the slow-down in consumer spending, and with a rebound in the Hong Kong dollar and a slower increase in world commodity prices, the visible trade deficit situation improved over the course of 1995.

Domestic Demand

Domestic demand grew by seven per cent in real terms in 1995, following an increase of 12 per cent in 1994. There was a continued robust growth in investment in machinery and equipment and intensive infrastructural construction in the public sector. But consumer demand moderated further.

57

Percent

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0

-2.0

THE ECONOMY

Domestic demand (year-on-year growth rate in real terms)

Investment demand in terms of GDFCF

Private consumption demand

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

In 1995, domestic demand was underpinned by continued strong growth in investment demand, but consumer demand moderated further.

58

Gross domestic fixed capital formation, as an overall measure of investment demand, recorded a further growth of six per cent in real terms in 1995. The in- crease in 1994 was 14 per cent. Among the major components, the growth rate of expenditure on machinery and equipment accelerated markedly to 20 per cent in 1995, from 16 per cent in 1994. This was attributable to the on-going trend of office automation, intensive infrastructural construction and increased local production. Expenditure on building and construction registered virtually no change in real terms in 1995, having surged by 16 per cent in 1994. There was intensive work in the public sector, particularly in regard to the construction of the new airport and its related infrastructure. Work on the public housing programme continued apace but activity in the private sector slackened along with the consolidation in the property market. Private consumption expenditure rose by one per cent in 1995, down from the six per cent increase in 1994. The setback was concentrated in higher-value items such as motor vehicles and other consumer durables. Expenditure on ordinary consumer goods and on various consumer services still recorded some increases, albeit less rapid than in 1994.

  Government consumption expenditure (in national accounts terms) rose by four per cent in 1995, broadly similar to 1994. There was a further large accumulation in stocks during the year, contributed mainly by materials for production and construction.

The Labour Market

The seasonally adjusted unemployment rate and the underemployment rate in the fourth quarter of 1995 stood at 3.5 per cent and 2.3 per cent, respectively, compared

5.0

Percent

THE ECONOMY

Labour force and the employed population (year-on-year growth rate)

4.0

3.0

Labour force

2.0

10

1.0

0

-1.0

-2.0

Total employment

1993

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1990

1991

1992

1994

1995

Total employment continued to show notable growth in 1995, but was outstripped by an even stronger growth in labour supply.

Unemployment and underemployment rates

Percent

4.0

3.5

3.0

2.5

2.0

58

1.5

10

1.0

0.5

Seasonally adjusted unemployment rate

Underemployment rate

0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1990

1991

1992

1993

1994

The labour market was on an easing trend from the beginning of 1995.

1995

59

60

THE ECONOMY

with 2 per cent and 1.5 per cent in the same quarter in 1994. A major factor under- lying the rise in the unemployment rate was a faster increase in overall labour supply, outstripping the growth in total employment which was actually quite notable. This was attributable to the return of more former emigrants, more incoming expatriates, and more immigrants from China. Another factor was the slackening in consumer demand, so that workers released from the manufacturing sector could not be as readily absorbed by the consumption sectors as in recent years. Total labour supply rose by 3.2 per cent during the year, while total employment rose by 1.9 per cent.

  Employment conditions varied considerably among occupations. Unemployment and underemployment were mainly concentrated in workers directly involved in production activities, and at the semi-skilled and unskilled levels. Professional, managerial, and administrative workers were relatively less affected, and shortages were still apparent in certain job categories.

The shift in employment from the manufacturing sector to the service sectors continued. Employment in the service sectors as a whole reached 1 874 500 in September 1995. Employment in financing, insurance, real estate and business services showed the fastest increase, by four per cent. This was followed by com- munity, social and personal services, with an increase of two per cent. Employment in the wholesale and import/export trades, and in water transport, air transport and services allied to transport, was little changed. However, employment in the retail trade and in restaurants and hotels fell by six per cent and five per cent, respectively. Employment in the manufacturing sector remained on a downtrend, falling by 12 per cent in September 1995 compared with a year earlier. Building and construction sites experienced a sharp nine per cent increase in employment. Reflecting mainly

Employment by broad economic sector

Number ('000)

2000

1500

1000

500

Service sectors as a whole (left scale)

Number ('000)

80

70

Building and construction sites (right scale)

60

Manufacturing sector (left scale)

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep

1990

1991

1993

1994

1995

1992

I The structural shift of manpower from manufacturing to services continued in 1995. Employment at construction sites rose sharply, reflecting in part the momentum of implementation of the Airport Core Programme.

50

40

Percent

15.0

10.0

5.0

0

-5.0

THE ECONOMY

Earnings by broad economic sector (year-on-year rate of change in real terms)

Manufacturing sector

Service sectors as a whole

-10.0

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Q1 Q2 Q3

1990

1991

1992

1993

Earnings continued to show increases in real terms in 1995.

1994

1995

employment in foundation and superstructure construction, employment in the building and construction industry as a whole, comprising both site and non-site workers, also showed a notable increase of seven per cent.

      The local workforce generally enjoyed a continued rise in income. For the first three quarters of 1995 taken together, average earnings in the service sectors as a whole increased by 11 per cent in money terms or two per cent in real terms. Among the major service sectors, earnings in financing, insurance, real estate and business services rose by 13 per cent in money terms or three per cent in real terms. Within this, earnings in the real estate sub-sector, however, fared less well, affected by the consolidation in the property market. Earnings in transport, storage and communication also rose by 13 per cent in money terms or three per cent in real terms. This was followed by the wholesale, retail and import/export trades, with increases of 12 per cent in money terms or three per cent in real terms. Earnings in restaurants and hotels rose by five per cent in money terms, but declined by three per cent after discounting inflation. This was largely associated with the slack restaurant business locally. Earnings in the manufacturing sector were 11 per cent higher in money terms or two per cent higher in real terms. Construction wage rates maintained a steady increase, by nine per cent in money terms but showed virtually no change in real terms.

The Property Market

The residential property market continued to consolidate in 1995, after the buoyancy in 1993 and the early part of 1994. There was a brief rebound after the Chinese New Year until around April but the market quietened thereafter. Buying interests were

61

62

THE ECONOMY

concentrated mainly in the primary market, prompted by substantial price cuts by developers and the offer of more flexible payment packages. Performance in the secondary market was generally subdued. Speculative activities subsided. Several banks cut their mortgage rate for new mortgage loans during the third quarter. As a result, activity in the secondary market recovered somewhat towards the end of the year. Market sentiment improved, as the response to a number of pre-completion sales in the fourth quarter held up well along with small increases in prices. At the end of 1995, flat prices were, on average, about four per cent above the trough in October, but still about 24 per cent below their peak in April 1994. With more landlords leasing flats in a sluggish sales market, rentals also softened.

  On commercial property, the market for office space also underwent a correction in 1995 after the buoyancy in 1994. Generally subdued investment sentiment in the property market, coupled with the anticipation of an ample supply in the next few years, prompted this correction. Tenants continued to trim costs by economising on office space and by shifting to secondary locations. Prices and rentals for office space were pushed down in 1995. Prices and rentals for shopping space also fell, along with the slack retail business.

  The industrial property market remained weak. Acquisition interest in old industrial buildings en bloc as well as in industrial sites for redevelopment into modern multi-purpose industrial buildings slackened further. Leasing activity was generally sluggish.

  The response to the various government land sales in 1995 was mixed. For auctions, while prices fetched for residential sites in prime urban areas were generally above market expectations, response to the sale of commercial sites and industrial-cum- office sites at less popular and less convenient locations was not enthusiastic. As to tenders, the price fetched for the prime commercial site at Tamar Basin was above market expectations.

Inflation

Consumer price inflation picked up in the first quarter of 1995, but soon resumed a moderating trend in the ensuing quarters. In the early part of the year, the inflation situation was exacerbated by a pick-up in imported inflation along with the uptrend in world commodity prices, a weaker US dollar, and high inflation in China. But with labour supply becoming generally more abundant and property prices and rentals softening, locally-generated inflationary pressures eased in the ensuing months. This, together with the moderation in inflation in China and less rapid increase in import prices following the rebound in the US dollar after the second quarter, helped to alleviate overall inflationary pressures.

  Reflecting these developments, the year-on-year rate of increase in the Consumer Price Index (A), after rising to 9.5 per cent in the first quarter of 1995, moderated to 9.2 per cent in the second quarter, and further to 8.6 per cent and 7.7 per cent in the third and fourth quarters, respectively. For 1995 as a whole, the CPI(A) increase averaged 8.7 per cent compared with 8.1 per cent in 1994. The CPI(B) and Hang Seng CPI showed broadly similar movements. Taking the three indices together, the Com- posite CPI decelerated from a 9.8 per cent increase in the first quarter to an 8.2 per cent increase in the fourth quarter, giving an annual average increase of 9.1 per cent in 1995.

THE ECONOMY

Consumer Price Indices (year-on-year rate of increase)

Percent

14.0

Consumer Price

Index (A)

13.0

Consumer Price

Index (B)

12.0

Composite

11.0

Consumer Price Index

10.0

Hang Heng Consumer

Price Index

9.0

8.0

7.0

6.0

1991

1992

1993

1994

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1990

1995

Consumer price inflation, after a temporary pick-up in the first quarter, moderated in the ensuing quarters.

Reflecting the easing in locally-generated inflationary pressures during 1995, those components of the CPI(A) with a large local content, such as housing rentals, transport fares; meals at restaurants and charges for various consumer services, all moderated during the year. This held for even the clothing and footwear, and consumer goods components which had a large import content and hence were affected more than the others by the earlier depreciation of the Hong Kong dollar and the uptrend in world commodity prices. Durable goods had a steadier price profile. The prices of fresh vegetables continued to exhibit considerable volatility during the year.

The GDP deflator, as a broad measure of overall inflation in the economy, showed an even greater moderation over the course of 1995. It rose by 4.6 per cent in 1995, compared with a 7.5 per cent increase in 1994. In the early part of 1995, the deterioration in the terms of trade as import prices rose faster than export prices initially slowed the increase in the GDP inflator. Later in the year, reduced domestically generated inflationary pressures led to a more moderate increase in the GDP inflator.

Economic Policy and Public Finances

Economic Policy

      The government's basic policy of minimum interference and maximum support for the economy is a key factor underlying Hong Kong's continued economic success. Owing to its small size and open nature, the economy is vulnerable to external factors, and government actions designed to offset unfavourable external influences are of limited effectiveness.

63

THE ECONOMY

  The government advocates free and fair competition. Business decisions are left to the private sector, except where social considerations are over-riding. It is considered that the allocation of resources in the economy is best left to market forces. Adopting this free-market philosophy, the government has not sought to influence the structure of industry through regulations, tax policies or subsidies. The tax system is kept as simple as possible. The corporate tax rate, at 16.5 per cent, is low by international standards.

  Maintaining a small and efficient public sector is a crucial aspect of Hong Kong's fiscal policy. In 1995, public sector expenditure accounted for only around 17.6 per cent of the GDP. The underlying principle is to ensure that the government will not crowd out an excessive amount of resources from the private sector. In concrete terms, the growth rate of public sector expenditure is to be kept within the trend growth rate of the economy.

  The government sees its major role as providing a good environment and a sound legal and institutional framework in which business can flourish. Accordingly, individual sectors in the economy are not burdened by undue government regula- tions. Industries in Hong Kong are able to adapt swiftly to changes in market conditions, and the economy as a whole is able to weather shocks. A simple tax structure with low tax rate, in particular, provides a good incentive for workers to work and for entrepreneurs to invest.

Structure of Government Accounts

In accounting terms, the public sector is taken to include the Hong Kong Govern- ment itself, the Hong Kong Housing Authority, the Urban Council, the Regional Council and the government trading funds. Government grants and subventions to institutions in the private or quasi-private sectors are included, but expenditure by organisations in which the government has only an equity stake (such as the Mass Transit Railway Corporation and Kowloon-Canton Railway Corporation) is excluded.

The government controls its finances through a series of fund accounts. The General Revenue Account is the main account for day-to-day departmental expenditure and revenue collection. Six other funds exist mainly to finance capital investments and expenditure, and government loans. They are the Capital Works Reserve Fund, Capital Investment Fund, Civil Service Pension Reserve Fund, Disaster Relief Fund, Loan Fund and Lotteries Fund.

  The Capital Works Reserve Fund finances the public works programme, land acquisitions, capital subventions, major systems and equipment items and com- puterisation. On May 27, 1985, when the Sino-British Joint Declaration on the Question of Hong Kong came into effect, the fund was restructured to enable the premium income from land transactions to be accounted for in accordance with the arrangements in Annex III to the Joint Declaration. The income of the fund is derived mainly from land premia and appropriations from the General Revenue Account.

The Capital Investment Fund finances the government's capital investments (mainly in statutory public bodies), such as equity injections in the Mass Transit Railway Corporation, capital investments in the Hong Kong Housing Authority and 64 advances to the Provisional Airport Authority. Its income is derived mainly from

THE ECONOMY

      appropriations from the General Revenue Account, dividends and interest on investments.

       The Civil Service Pension Reserve Fund was set up in January 1995 and acts as a reserve to meet payment of civil service pensions in the most unlikely event that the government cannot meet such liabilities from the General Revenue. Its income is derived mainly from appropriations from the General Revenue Account.

      The Disaster Relief Fund finances grants for humanitarian aid in the event of disasters that occur outside Hong Kong. Its income is derived mainly from appro- priations from the General Revenue Account.

The Loan Fund finances loan schemes such as housing loans and student loans. Its income is derived mainly from appropriations from the General Revenue Account, loan repayments, and interest on loans.

       The Lotteries Fund finances social welfare services through grants and loans. Its regular source of income is derived mainly from the sharing of the proceeds of the popular Mark Six lotteries.

Management of the Budget

The government manages its finances against the background of a rolling five-year, medium-range forecast of expenditure and revenue. This provides a model for the consolidated financial position of the General Revenue Account and of all the funds except the Lotteries Fund.

      The most important principle underlying the government's management of public finance is that government expenditure, over time, should not grow faster than the economy as a whole. The budget presented by the Financial Secretary to the Legislative Council each year is developed against the background of the medium- range forecast, to ensure that full regard is given to these principles and to longer- term trends in the economy.

Public Expenditure

Public expenditure in 1994-95 totalled $166 billion. The government itself accounted for $143.2 billion, excluding equity injections to the Mass Transit Railway Cor- poration, the Provisional Airport Authority and other bodies. The growth rate over the preceding year was 6.9 per cent in nominal terms or -2.2 per cent in real terms. Some $46.0 billion, or 27.7 per cent of the public expenditure in 1994-95, was of a capital nature. An analysis of expenditure by function is at Appendix 7.

Public expenditure has remained comfortably below 20 per cent of the gross domestic product for the last decade. The growth rate of public expenditure is compared with the rate of economic growth at Appendix 9.

      Total government revenue in 1994-95 amounted to $175 billion. The consolidated cash surplus, after the repayment of $2.4 billion for bond redemption, was $10.8 billion. Details of revenue by source and of expenditure by component for 1994-95 and 1995-96 (estimated) are at Appendix 10.

The draft estimates of expenditure on the General Revenue Account are presented by the Financial Secretary to the Legislative Council when he delivers his annual budget speech. In the Appropriation Bill introduced to the Legislative Council at the

65

THE ECONOMY

66

 same time, the administration seeks appropriation of the total estimated expenditure on the General Revenue Account.

  The estimates of expenditure contain details of the estimated recurrent and capital expenditure of all government departments, including estimates of payments to be made to subvented organisations and estimates of transfers to be made to the statutory funds.

For the past 10 years, the government's consolidated account has achieved a surplus every year. The accumulated surpluses, which form the government's fiscal reserves, are available to meet any calls on the government's contingent liabilities and enable the government to cope with any short-term fluctuations in expenditure relative to revenue.

  The Urban Council and Regional Council, which operate through the Urban Services Department and Regional Services Department, respectively, are financially autonomous. They draw up their own budgets and expenditure priorities. The expen- ditures of the two councils are financed mainly from a fixed percentage of the rates from property in the Urban Council area (Hong Kong, Kowloon and New Kowloon) and in the Regional Council area (New Territories). Additional income is derived from fees and charges for the services the councils provide.

  The Hong Kong Housing Authority, operating through its executive arm, the Housing Department, is also financially autonomous. Its income is derived mainly from flat sales and domestic and non-domestic rentals. If its cash flow is inadequate to meet the construction costs of new estates, it may request an injection of capital by the government. The authority is provided with land on concessionary terms to build public rental housing and Home Ownership Scheme housing. Part of the authority's recurrent expenditure, for activities such as clearances and squatter control, is financed from the General Revenue Account.

  Trading funds are individual financial and accounting entities set up to provide specific government services within the overall government accounting system. Unlike the accounting system for the rest of government revenue from services provided by trading funds is credited to the funds rather than to the General Revenue Account, and all trading fund expenditure in providing the services is met from the funds rather than through annual appropriation.

Revenue Sources

Hong Kong's tax system is simple and relatively inexpensive to administer. Tax rates are low, and the government accords a high priority to curbing tax avoidance and evasion. The major sources of revenue are salaries tax and profits tax. Others include rates on property, stamp duty on property and stock market transactions, betting duty and duties on certain specified commodities. (For the major sources of revenue, see Appendix 10).

  The Inland Revenue Department collects over 50 per cent of total revenue, including earnings and profits tax, stamp duty, betting duty, estate duty and hotel accommodation tax. Revenue from these sources is collectively described as internal

revenue.

Earnings and profits tax, which alone accounted for about 42 per cent of total revenue in 1994-95, is levied under the Inland Revenue Ordinance. Persons liable to

THE ECONOMY

      this tax may be assessed on three separate and distinct sources of income: business profits, salaries and income from property.

Profits tax is charged only on net profits arising in Hong Kong, or derived from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are currently taxed at 15 per cent and profits of corporations are taxed at 16.5 per cent. Tax is payable on the actual profits for the year of assessment.

      Profits tax is paid initially on the basis of profits made in the year preceding the year of assessment and is subsequently adjusted according to profits actually made in the assessment year. 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. In 1994-95, the government received about $47 billion in profits tax, amounting to about 27 per cent of the total revenue.

Salaries tax is charged on emoluments arising in, or derived from, Hong Kong. The basis of assessment and method of payment are similar to the system for profits tax. Tax payable is calculated on a sliding scale which progresses from two per cent on the first segment of net income (that is, income after deduction of allowances) of $20,000, to nine per cent and 17 per cent on the second and third segments of $30,000 each, respectively, and then to 20 per cent on remaining net income. No one, however, pays more than 15 per cent of their total income. The earnings of husbands and wives are reported and assessed separately. However, where either spouse has allowances that exceed his or her income, or when separate assessments would result in an increase in salaries tax payable by the couple, they may elect to be assessed jointly. Salaries tax contributed someabout $24 billion, or about 14 per cent of total revenue, in 1994-95. Due to generous personal allowances under Hong Kong tax law, about 47 per cent of the territory's workforce has no salaries tax liability at all.

Owners of land or buildings in Hong Kong are charged property tax at the standard rate of 15 per cent of the actual rent received, less an allowance of 20 per cent for repairs and maintenance. There is a system of provisional payment of tax similar to that for profits tax and salaries tax. Property owned by a corporation carrying on a business in Hong Kong is exempt from property tax (but profits derived from ownership are chargeable to profits tax). Receipts from property tax totalled about $1.5 billion in 1994-95.

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. The revenue from stamp duties accounted for about seven per cent of total revenue, or about $13 billion, in 1994-95.

Betting duty is imposed on bets at the Royal Hong Kong Jockey Club and on the proceeds of Mark Six lotteries - the only legal forms of betting in Hong Kong. The duty now accounts for about some five per cent of total revenue. The rate of duty is 11.5 per cent, or 17.5 per cent of the amount of the bet (depending on the type of bet placed), and 20 per cent on the proceeds of lotteries. The yield in 1994-95 totalled some $9 billion, accounting for about five per cent of total revenue.

Estate duty is imposed on estates valued at over $6 million, at levels ranging from six per cent to a maximum of 18 per cent, while a hotel accommodation tax of five per cent is imposed on expenditure on accommodation by guests in hotels and guest- houses.

67

THE ECONOMY

68

The Customs and Excise Department is responsible for collecting and protecting duty revenue. The Dutiable Commodities Ordinance imposes controls on the import, export, manufacture, sale and storage of dutiable items. In 1994-95, $7.6 billion was collected in duties, accounting for about four per cent of total revenue. Duties are levied on four groups of commodities hydrocarbon oil, alcoholic beverages, methyl

alcohol and tobacco.

Duties are imposed irrespective of whether the product concerned is locally manu- factured or imported. There is no discrimination on the grounds of geographic origin. The Rating and Valuation Department is responsible for assessing and billing of rates, which are levied on landed properties at a fixed percentage of their rateable value. The revenue raised helps finance the various public services provided by the government, the Urban Council and the Regional Council, as well as providing a stable and reliable revenue stream for the government.

  The rateable value is an estimate of the annual rent at which a property might be expected to be let, as at a designated date, and general revaluations are conducted at intervals to keep rateable values up-to-date. The current lists of rateable values came into force on April 1, 1994, and reflect rental values at July 1, 1993.

  The percentage charge is fixed by the Legislative Council in accordance with the financial requirements of the government, the Urban Council and the Regional Council. For 1995-96, the percentage charge was fixed at 5.5 per cent. A rates relief mechanism cushions ratepayers from the effects of the increases in rateable values following the general revaluation which came into effect on April 1, 1994. The mechanism restricts the increases in rates payable in 1995-96 to 20 per cent of the amount paid for the same premises in 1994-95.

  In 1994-95, the number of assessments in the Valuation Lists at the year-end stood at about 1 393 000, and the total net revenue from rates was $12.7 billion. Of this amount, $4.6 billion, collected from Hong Kong Island and Kowloon, was credited to the Urban Council and $3 billion, collected from the New Territories, went to the Regional Council. The remainder, amounting to $5.1 billion, was credited to the government's General Revenue Account, accounting for about three per cent of the total revenue.

  The government derives significant amounts of revenue from other sources. Fees and charges for services provided by government departments generated a total of about $9.6 billion in 1994-95. It is the government's general policy that fees charged should be set at a level to allow recovery of the full cost of providing the goods and services. Certain essential services are, however, subsidised by the government or provided free.

  A further $8.4 billion was generated by government-operated public utilities, accounting for about five per cent of the total revenue. The most important of these, in revenue terms, are water supplies, postal services and the airport. Significant sums also accrued to general revenue from the tax imposed for the registration of motor vehicles under the Motor Vehicles (First Registration Tax) Ordinance. This revenue, amounting to approximately $4.7 billion in 1994-95, was collected by the Commissioner for Transport.

  In addition, some $19.1 billion, or about 11 per cent of the total revenue of the year, was generated by land sales. Since implementation of Annex III of the Joint

THE ECONOMY

      Declaration, revenue from land transactions decided upon before the coming into force of the Joint Declaration, and from those conferring a benefit that expires on or before June 30, 1997, (amounting to $393 million in 1994-95), has been credited to the General Revenue Account. All revenue from other land transactions is credited to the Suspense Account of the Capital Works Reserve Fund, pending sharing with the future Hong Kong Special Administrative Region Government as provided for under Annex III. The sharing arrangements in 1994-95 resulted in the transfer of $18.7 billion to the Works Account of the Capital Works Reserve Fund and $16.3 billion to the future Hong Kong Special Administrative Region Government's Land Fund.

A further $2.3 billion was received in the same year by way of royalties and concessions. These are paid by certain major companies holding franchises, such as the Cross-Harbour Tunnel Company Limited and television broadcasters, as well as holders of concessions to operate taxis and petrol stations.

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6 FINANCIAL AND

MONETARY AFFAIRS

 HONG KONG's financial sector comprises an integrated network of institutions and markets which, under a market-friendly form of regulation, provide a wide range of products and services to local and international customers and investors.

  Some 549 authorised institutions and local representative offices of banks from more than 40 countries conduct business under the Banking Ordinance. The presence of 85 of the world's top 100 banks has helped promote the territory as an inter- national financial centre. The banking sector's external assets are among the highest in the world. Hong Kong was the fifth-largest centre for foreign exchange trading in 1995, up from sixth in 1992, according to a global survey conducted by the Bank for International Settlements.

Hong Kong's stock market is the second-largest in Asia after Tokyo. Buoyed by the bullish performance of the world's major stock markets, the Hang Seng Index closed higher at the end of the year. The closing index of 10 073 was 23 per cent higher than a year ago.

  In 1995, Hong Kong took further steps to improve the transparency of financial reporting by the authorised institutions. Discussions continued between the Hong Kong Monetary Authority (HKMA), the Stock Exchange of Hong Kong Limited (SEHK) and the Securities and Futures Commission (SFC) and further recom- mendations for disclosure in the 1995 accounts of authorised institutions were issued, including the disclosure of balance sheet inner reserves.

  In July 1995, the Finance Committee of the Legislative Council approved a budget of $485 million to meet the cost of holding the World Bank/International Monetary Fund Annual Meetings in Hong Kong in 1997.

  The Interest Rate Rules of the Hong Kong Association of Banks were partially lifted when the association removed the interest rate cap on Hong Kong dollar time deposits fixed for more than one month and those fixed for more than seven days on October 1, 1994 and January 3, 1995, respectively. In September 1995, it was announced that the third phase of deregulation should proceed to cover Hong Kong dollar deposits fixed for seven days or with a call or notice period of seven days and that the current programme of deregulation should then come to an end. This was a cautious approach adopted to strike a balance between liberalisation and prudence.

Financial Institutions

Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks, restricted-licence banks and deposit-taking companies which are collec- 70 tively called authorised institutions. Under the Banking Amendment Ordinance

FINANCIAL AND MONETARY AFFAIRS

enacted on June 28, 1995, the HKMA was established as the licensing authority for all three types of authorised institutions.

      The authorisation criteria for locally-incorporated applicants and overseas applicants for a banking licence are broadly the same. However, a local applicant incorporated in Hong Kong must be predominantly beneficially owned by Hong Kong interests, or, in the opinion of the HKMA, be otherwise closely associated and identified with Hong Kong. A local applicant must also have a paid-up capital of at least $150 million and a minimum trading period of 10 years as an authorised institution. The minimum requirements for assets (net of contra items) and public deposits are $4,000 million and $3,000 million, respectively. For banks incorporated outside Hong Kong, applying to establish a branch in the territory, this figure is US$16 billion. A licence may still be granted even if the asset test is not met, provided that the HKMA believes that this would help promote the interests of Hong Kong as an international financial centre.

Hong Kong imposes no major barriers on overseas banks operating domestically in the territory, whether in Hong Kong dollars or other currencies. However, over- seas banks licensed since 1978 are effectively restricted to one branch, a measure designed to avoid overcrowding in retail banking. This restriction was relaxed in September 1994, and foreign banks are now allowed to open one regional office and one back office, in separate buildings, to conduct such activities as strategic planning, general liaison with correspondent banks and corporate entities, and processing and settlement of transactions already entered into by the branch office. This was done to help foreign banks reduce their operating costs by letting them move some of their operations to areas with lower rentals. The relaxation also applies to foreign restricted-licence banks.

Hong Kong had 185 licensed banks at the end of December 1995, of which 31 were locally incorporated. They maintained a total of 1 649 offices in the territory and there were 157 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of December 1995 were $2,152 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 (to which, under their licensing conditions, all licensed banks must belong) set maximum rates payable on bank deposits in Hong Kong dollars of original maturities of less than 15 months, with the exception of deposits of $500,000 or above, for which banks may compete freely.

Applicants for restricted bank licences must have a minimum issued and paid- up capital of $100 million. Restricted-licence banks may take call, notice and time 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 December 1995, there were 63 restricted-licence banks and their total deposit liabilities to customers at the end of December 1995 were $38 billion.

Restricted-licence banks may use the word 'bank' in describing their business in promotional literature and advertisements, but this must be qualified by descrip- tion such as 'restricted-licence', 'merchant', 'investment' or 'wholesale'. To avoid confusion with licensed banks, descriptions such as 'retail' or 'commercial' are not allowed. Overseas banks seeking authorisation as restricted-licence banks may operate in branch or subsidiary form. If in branch form, they may use their registered

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72

name even if it includes the word 'bank' or a derivative, but in this case it must be qualified prominently by the words 'restricted-licence bank' in immediate conjunction.

  In addition to the criteria which apply to other authorised institutions, registration of deposit-taking companies will be granted only to companies that are 50 per cent or more owned by a bank. Deposit-taking companies are required to have a minimum paid-up capital of $25 million. They are restricted to taking deposits of not less than $100,000, with a term of maturity of at least three months. At the end of December 1995, there were 132 deposit-taking companies, with total deposit liabilities to cus- tomers of $18 billion at the end of December 1995.

  In November 1995, the HKMA published a comprehensive Guide to Applicants, which outlines the manner in which it shall apply the authorisation criteria.

  Dealers in securities, investment advisers, commodity dealers and commodity- trading advisers and their representatives have to register with the Securities and Futures Commission. To obtain registration, they must comply with the require- ments (including the 'fit and proper' test) stipulated in the Securities Ordinance, the Commodities Trading Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and the Securities and Futures Commission Ordinance. At the end of 1995, there were 17 231 registered persons. Of the 494 registered corporate securities dealers, 251 were from overseas. Of the 151 commodities dealers, 76 were from

overseas.

  Only members of the Stock Exchange of Hong Kong Limited may trade on the stock exchange. At the end of the year, the stock exchange had 559 corporate and individual members. Only shareholders who have applied for and been granted membership of the Hong Kong Futures Exchange Limited can trade on the futures exchange. At the end of 1995, the futures exchange had 130 members.

  Under the Insurance Companies Ordinance, insurance companies are authorised by the Insurance Authority to transact business in Hong Kong. At the end of 1995, there were 223 authorised companies. Of these, 123 were companies from 28 countries.

Regulation of the Financial Sector

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

  The authority for the prudential supervision of banks, restricted-licence banks and deposit-taking companies is vested in the HKMA. Its authority is derived from the Banking Ordinance, the provisions of which relate to the supervision of authorised institutions. The main objectives of the ordinance are to provide a measure of protection to depositors and to promote the general stability and effective operation of the banking system.

  The HKMA has broadened its approach to supervision, which previously relied mainly upon on-site examinations. These are still an integral part of the supervisory process, but are supplemented by off-site reviews and prudential meetings with authorised institutions.

+

Fabled characters they may be, but there is no doubt about the value of these gold statuettes in the window of a Central District jewellery store.

Hong Kong ranks high in the world of international finance and was fifth-largest centre for foreign exchange trading in 1995, up from sixth in 1992. LEFT: Hong Kong's Financial Secretary Donald Tsang (centre) sits with China's President Jiang Zemin at the Asia Pacific Economic Co-operation forum Economic Leaders Meeting in Osaka in November, which endorsed an agenda for achieving free trade in the region.

NEXT PAGE: Figures and prices of shares and commodities attract serious attention from market players big and small.

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FINANCIAL AND MONETARY AFFAIRS

Off-site reviews involve the analysis of regular statistical returns, and accounting and other management information supplied by institutions, with a view to assessing their performance and compliance with the Banking Ordinance. They are followed by prudential interviews with the senior management of the institutions, at which the business, prospects and potential areas of concern of institutions are discussed. This approach enhances the HKMA's ability to identify potential areas of concern, which can be followed up by on-site examinations.

As an international financial centre, Hong Kong follows banking supervisory policies that are in line with international standards, especially those recommended by the Basle Committee on Banking Supervision. The Basle Committee issued three consultative papers in 1993 on the subjects of netting, market risks and interest rate risk. In 1994, the committee confirmed its proposals on bilateral netting. Having ascertained from the Hong Kong Law Society that Hong Kong law is generally supportive of netting, the HKMA issued a policy paper in February 1995 based on the Basle framework. Since June 30, 1995, after the necessary legislative changes and with safeguards, authorised institutions may use this method of reducing credit risk. The Basle Committee also issued new proposals for the supervision of market risks in 1995. Market risk is defined as the risk of loss in on- and off-balance sheet transactions arising from movements in market prices. It covers transactions relating to foreign exchange, interest rates, equities and commodities. The HKMA is considering how and when a market risk supervisory framework should be implemented in Hong Kong. The local framework will be based on the Basle proposals but will take into account the generally low level of exposure to market risks of local authorised institutions. The latter has been confirmed in a Bank for International Settlements global survey on foreign exchange and other financial derivatives activities, in which the HKMA participated in April 1995.

      The Basle Committee continues to develop an agreed common framework for measuring interest rate risk by international supervisors. The HKMA will continue to monitor developments on this issue in the committee and other supervisory authorities. To enable continuous monitoring of interest rate risk by the HKMA, a regular return was introduced in August 1994.

      In view of the fast-growing derivatives markets, the HKMA strengthened its supervisory efforts in this area. In early 1995 it conducted a survey of risk man- agement practices of 53 derivatives participants. It also conducted a series of treasury visits to authorised institutions on derivatives activities and will continue to perform this task as part of its regular supervisory routine. These visits were carried out by a newly formed derivatives specialist team.

      The HKMA also required all authorised institutions which engage in the trading of derivatives to perform a review of their internal controls and to report their findings to the authority subsequent to the Baring bank crisis. Where weaknesses have been identified, the HKMA has asked institutions concerned to take immediate action to eliminate them. In December 1994, the HKMA issued a guideline to authorised institutions on risk management for derivatives. A further operational guideline is under preparation.

In February 1994, the HKMA wrote to all authorised institutions, setting out further guidelines on property lending. It suggested that institutions whose per- centage share of property-related loans was above the industry average of 40 per cent

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FINANCIAL AND MONETARY AFFAIRS

74

should consider stabilising or, if necessary, reducing their percentages. However the industry average of 40 per cent was to be regarded as a benchmark rather than an upper limit, as clarified in a subsequent letter issued to the banks in September 1995. It is accepted that some institutions (particularly those with large residential mortgage portfolios) may have percentages greater than 40 per cent. However, such institutions are generally expected to exercise additional restraint and caution in expanding their property lending. In the same letter, the HKMA also restated its continued support of the '70 per cent ceiling' in respect of the loan-to-valuation ratio. Further to the disclosure package issued in 1994, the HKMA, SEHK and SFC further issued recommendations for disclosure in the 1995 accounts of authorised institutions in December 1994 (Phase I) and in August 1995 (Phase II). The Phase I recommendations covered relatively straightforward disclosure items, such as movements in bad and doubtful debt provisions, analysis between debt and equity securities, maturity profile of investment securities, liquidity ratio and capital adequacy ratio. Phase II covered more complicated items, such as off-balance-sheet exposures, segmental analysis and information on the quality of loan assets. After a review of the disclosure of balance sheet inner reserves in mid-1995, the HKMA recommended that banks disclose their level of inner reserves in their 1995 accounts.

In October 1995, the HKMA and the SFC signed a Memorandum of Under- standing (MOU) aimed at strengthening co-operation between the two authorities. It sets out the framework for co-ordination of supervision of financial institutions or groups in which both authorities have an interest. The authorities have agreed to use their best endeavours to ensure that there will be no gaps in regulation and to minimise unnecessary duplication of effort in their supervision.

The MOU provides in broad terms for: (a) the appointment of a co-ordinator for each institution or financial group in which both authorities have an interest for the purpose of establishing regular exchange of prudential information relevant to an institution's financial position, the fitness and properness of its management and other supervisory matters; and (b) consultation on staff training, issuance of guidelines, and formulation of policy in areas covering securities, futures, fund management and leveraged foreign exchange trading as they affect authorised institutions.

The HKMA and the SFC have agreed to meet every six months to exchange information on financial institutions under dual supervision. They will meet every two months to discuss current and general policy issues. Ad hoc meetings will be arranged to deal with specific supervisory concerns. In particular, each party has agreed to inform the other before taking any disciplinary or regulatory action in relation to an institution in which both have an interest.

  Hong Kong is a member of the Financial Action Task Force, an organisation with a mandate to encourage international efforts in the fight against drug money- laundering. To help combat money-laundering, a guideline on the prevention of the criminal use of the banking system for the purposes of money-laundering was issued in 1989 by the then Commissioner of Banking.

The HKMA will revise the guideline to take into account recent legislative amendments. The Organised and Serious Crimes Ordinance, which was enacted in October 1994, has extended the money-laundering offence to other indictable offences. In addition, the enactment of amendment legislation in August 1995 has

FINANCIAL AND MONETARY AFFAIRS

made the reporting of suspicions of money-laundering transactions a statutory obligation.

The SFC, which was established in 1989 in response to weakness in Hong Kong's financial markets after the October 1987 world stock market crash, exercises prudential supervision over the securities, financial investment and commodities futures industry in Hong Kong. It administers the Securities and Futures Commission Ordinance, the Securities Ordinance, the Protection of Investors Ordinance, the Commodities Trading Ordinance, the Stock Exchanges Unification Ordinance, the Commodities Exchanges (Prohibition) Ordinance, the Securities (Clearing Houses) Ordinance, the Securities (Disclosure of Interests) Ordinance, the Securities (Insider Dealing) Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and part of the Companies Ordinance in so far as it relates to prospectuses and purchases by a company of its own shares.

The Securities Ordinance, the Stock Exchanges Unification Ordinance, together with the Securities and Futures Commission Ordinance, provide a framework within which dealings in securities are conducted and regulated. They require the registra- tion of dealers, dealing partnerships, investment advisers and other intermediaries. They also provide for the investigation of suspected malpractices in securities transactions and the maintenance of a fund to compensate clients of defaulting brokers.

      The Protection of Investors Ordinance prohibits the use of fraudulent or reckless means to induce investors to buy or sell securities, or to induce them to take part in any investment arrangement in respect of property other than securities. It regulates the issue of publications relating to such investments by prohibiting any advertise- ment inviting investors to invest without the advertisement first being submitted to the commission for authorisation.

       The Commodities Trading Ordinance and the Securities and Futures Commission Ordinance provide a regulatory framework within which futures dealers, commodity trading advisers and representatives conduct their business. It includes provisions for the registration of futures dealers and their representatives and the maintenance of a compensation fund to compensate clients of defaulting commodity dealers.

      The Securities (Clearing Houses) Ordinance provides for the recognition of clearing houses and approval of clearing house rules by the Securities and Futures Com- mission, and makes certain exceptions to insolvency law in relation to a clearing house and its role in guaranteeing the settlement of market transactions.

Two important components of the regulatory framework in Hong Kong are the Securities (Insider Dealing) Ordinance and the Securities (Disclosure of Interests) Ordinance, which were brought into operation in September 1991. The Securities (Insider Dealing) Ordinance provides much stricter penalties for insider dealing than those previously applicable. The year 1995 witnessed the successful conclusion of the second inquiry of the Insider Dealing Tribunal, set up under the ordinance to look into cases involving suspected insider dealing referred to it by the Financial Secretary. The Securities (Disclosure of Interests) Ordinance requires that company shareholders with 10 per cent or more of the voting shares of a listed company disclose their interests and dealings publicly, and that directors and executives disclose certain dealings.

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FINANCIAL AND MONETARY AFFAIRS

  The Leveraged Foreign Exchange Trading Ordinance provides for the regulation, by the Securities and Futures Commission, of the retail end of leveraged foreign exchange trading where an investor buys or sells foreign currencies by putting up a small percentage of the full value of the contract, settlement being made with reference to differences in exchange rates rather than actual delivery. Regulation of the market is effected through the licensing, by the Securities and Futures Commission, of leveraged foreign exchange traders and their representatives, who are required to fulfil 'fit and proper persons' criteria. The ordinance also provides for the investigation of suspected trading malpractices, supplemented by rules governing arbitration, conduct of business, maintenance of financial resources, accounts and audit, contract notes and appeal procedures. By the end of 1995, the SFC had issued 36 forex trader licences as well as 1 450 licences for representatives working for the traders.

  The Office of the Commissioner of Insurance exercises prudential supervision over the insurance industry in Hong Kong. It administers the Insurance Companies Ordinance, which brings all classes of insurance business under a comprehensive system of regulation and control by the Commissioner of Insurance (Insurance Authority).

To protect the interests of Hong Kong policy holders, the ordinance stipulates minimum share capital and solvency requirements for all authorised insurers and requires them to submit periodic financial statements and other relevant information to the authority. It provides that any person who is not considered by the authority fit and proper to be associated with an authorised insurance company cannot acquire a position of influence in relation to such a company. It also empowers the authority to intervene in the conduct of the business of insurance companies in circumstances where the authority has cause for concern. The authority may take remedial or precautionary measures to safeguard the interests of policy holders and claimants, including limitation of premium income, restriction of new business, placing of assets in custody and petitioning for the winding-up of the company concerned.

  During the year, legislative amendments and subsidiary legislation were brought into effect to improve insurance regulation for the better protection of policy holders. Since May 1995, a general business insurer must maintain assets in Hong Kong sufficient to meet the legitimate claims of Hong Kong policy holders in the event of the insurer's insolvency, particularly when it is involved in cross-border insolvency proceedings.

  Since October 1995, life insurers have to maintain a solvency margin which relates to the risk base of the business instead of a fixed solvency margin. Other legislative amendments were made in July to simplify procedures for the transfer of business from one insurer to another and to allow the Insurance Authority to exchange information with other financial services regulators.

Self-regulatory measures to strengthen professional discipline in the insurance market have been formulated by the insurance industry, after consultation with the government. The measures involve the adoption by the industry of two Statements of Insurance Practice governing the writing of insurance contracts of long-term and general insurance business, and the establishment of an Insurance Claims Complaints Bureau, which provides an independent avenue for resolving claims disputes arising from personal insurance policies.

FINANCIAL AND MONETARY AFFAIRS

Enabling legislation came into force in June 1995 to support the self-regulatory system, under which no person is permitted to act as an insurance intermediary unless he is a registered insurance agent or an authorised insurance broker. Insurance companies are required by law to comply with the Code of Practice for the Administration of Insurance Agents. The purpose of the self-regulatory system is to enhance the professionalism of the industry and to benefit Hong Kong as a developing international insurance centre.

The Occupational Retirement Schemes Ordinance provides a registration system for voluntarily established occupational retirement schemes. The Commissioner of Insurance, as Registrar of Occupational Retirement Schemes, is responsible for the regulation of private sector retirement schemes. The objective of the ordinance is to provide greater certainty that retirement scheme benefits promised to employees will be paid when they fall due. The ordinance requires all schemes operating in or from Hong Kong to be either registered with, or exempted by, the Registrar.

All registered schemes must meet certain basic requirements, including: asset separation (the assets of a scheme must be kept separate and distinct from the assets of the employer or the scheme administrator); independent trusteeship (there should be at least one independent trustee who must not be the employer, his employee or an associate); restricted investments (any loan to the employer of the scheme or his associate out of the scheme's assets is prohibited, as is any excessive investment in the business undertaking of the employer); funding (the assets of the scheme must be sufficient to meet its aggregate vested and past service liabilities); independent audit and actuarial reviews; and the submission of annual financial statements to the Registrar. There are also requirements for disclosure of information regarding the operation of the scheme to its members.

In July 1995, the Occupational Retirement Schemes Ordinance was amended to modify the requirement that assets of schemes in pooling agreements be kept separate, to allow investments to be made in certain securities markets and to clarify the requirement for the operation of group schemes and for notification of changes of scheme particulars. These changes seek to address practical difficulties encountered in the administration of schemes and investment of scheme assets.

By the end of the year, 12 309 schemes covering a total of 687 800 employees were registered, and 1 069 schemes were exempted.

The Securities and Futures Commission

The Securities and Futures Commission (SFC) was established in May 1989, following enactment of the Securities and Futures Commission Ordinance, which represented a first important phase in the overhaul of securities legislation in Hong Kong and the implementation of some of the major recommendations made by the Securities Review Committee in May 1988.

        The ordinance transfers to the SFC the functions of the former Securities Com- mission, the Commodities Trading Commission and the Office of the Commis- sioner for Securities and Commodities Trading. It provides a general regulatory framework for the securities and futures industries, leaving certain elements to be covered by regulations, administrative procedures and guidelines developed by the commission.

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  The SFC, established as an autonomous statutory body outside the civil service, has 10 directors (half of them executive), who are appointed by the Governor of Hong Kong. The commission must present the Financial Secretary with an annual report and an audited statement of its accounts, which are laid before the Legislative Council.

The commission seeks advice on policy matters from its advisory committee, the 12 independent members of which are appointed by the Governor and are broadly representative of market participants and relevant professions. SFC decisions relating to matters concerning the registration of persons and intervention in their business are subject to appeal to the Securities and Futures Appeals Panel, the members of which are independently appointed by the Governor.

The SFC is funded largely by the market and partly by the government, although no funding has been sought from the latter in the past three years. The market contribution is in the form of fees and charges for specific services and functions performed (on a cost recovery basis), plus a statutory levy on transactions recorded on the stock and futures exchanges. Its annual budget in 1995/96 was about $258 million. The SFC had an establishment of 250 on December 31, 1995.

  The SFC has developed a framework of securities and futures regulation that brings Hong Kong into line with internationally-accepted standards of market regulation and practice. In addition, the SFC has published various codes of conduct and guidelines regulating market conduct and criteria for approval of investment products and licensing of market intermediaries. During the year, the SFC published a guideline on core operational and financial risk-management controls for over-the- counter derivatives.

Securities transactions on the stock exchange are executed by the Automatic Order Matching and Execution System. The stock exchange planned a live run of its second trading terminal in January 1996, to enable off-floor trading and expand the trading system's capacity.

The Hong Kong Securities Clearing Company operates the Central Clearing and Settlement System (CCASS), which is one of the most important reforms to the risk management system introduced after the 1987 market crash. CCASS is an automated book-entry system that handles the settlement of securities among brokers.

The Administration and the SFC are taking steps to rationalise and update Hong Kong's securities and futures legislation into a coherent, well-organised and user- friendly corpus of securities law. A draft bill will be issued for public consultation in 1996.

Hong Kong as an International Financial Centre

Hong Kong's favourable geographical position, bridging the time gap between North America and Europe, together with strong links with China and other economies in Southeast Asia and excellent communications with the rest of the world, have helped the territory to develop into an important international financial centre. The absence of any restrictions on capital flows into and out of the territory is also an important factor.

Hong Kong's financial markets are characterised by a generally high degree of liquidity and operate under effective and transparent regulations which meet interna- tional standards. The educated work force and the ease of entry for professional

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expatriate staff further contribute to the development of financial markets in Hong Kong.

Hong Kong has a very strong presence of international financial institutions. At the end of the year, there were 154 foreign incorporated banks. Of the world's top 100 banks in terms of monetary assets, 85 have operations in the territory. In addition, 150 subsidiaries or related companies of banks operate as restricted-licence banks and deposit-taking companies.

Equally well established is the interbank money market. Wholesale deposits are traded actively both among local authorised institutions, and between local and overseas institutions, with an average daily turnover of $155 billion in 1995. The interbank money market is mainly for short-term money, with maturities ranging from overnight to 12 months, for both Hong Kong dollars and US dollars.

      The traditional lenders of Hong Kong dollars are mostly the locally-incorporated banks, while the major borrowers are foreign banks without a strong Hong Kong dollar deposit base. At the end of the year, the Hong Kong interbank market accounted for 21 per cent of the Hong Kong dollar liabilities of the banking sector.

The territory also has a mature and active foreign exchange market, which forms an integral part of the global market. The link with other overseas centres enables foreign exchange dealing to continue 24 hours a day around the world. Based on the latest survey conducted by the Bank for International Settlements, the daily average foreign exchange turnover in Hong Kong in April 1995 was US$91 billion, which represented six per cent of the world total. Hong Kong overtook Switzerland to clinch fifth position in the world, after the United Kingdom, the United States, Japan, and Singapore.

       Hong Kong's derivatives market is among Asia's largest, reflecting the increased sophistication of its financial markets. Currency derivatives contracts (including forwards, currency swaps, options and futures) registered an average daily turnover of US$56 billion in April 1995 and the outstanding contracts amounted to US$970 billion. Interest rate derivatives recorded a turnover of US$18 billion per day and the outstanding amounts stood at US$666 billion. Derivatives on stocks and commodities are less frequently used, with the outstanding amount at US$8 billion.

The local stock market was on a generally upward trend during 1995. The Hang Seng Index closed at 10 073.39 at the end of 1995, 23 per cent above the closing of 8 191.04 at the end of 1994. Average daily turnover in the local stock market was $3.3 billion in 1995, compared with $4.6 billion in 1994.

At the end of the year, 542 public companies were listed on the Stock Exchange of Hong Kong Limited. With a total market capitalisation of $2,348 billion, the Hong Kong stock market ranked eighth in the world and second in Asia. The 26 newly- listed companies raised a total of $7.7 billion. Among them were two state-owned enterprises of the People's Republic of China. They attracted particular market attention. The listing of these enterprises in Hong Kong has been one of the most important market development initiatives in recent years. The process started in July 1993 and 17 enterprises have been listed in Hong Kong so far, together raising $20 billion of capital. Besides new share issues, funds were tapped through rights issues ($1.3 billion) and private placements ($7.2 billion).

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  The stock exchange launched stock options contracts in respect of HSBC Holdings plc in September 1995. By the end of the year, options contracts in respect of eight other stocks had also been launched. During the year, the futures exchange also began trading in currency futures and three stock futures contracts.

  Hang Seng Index Options and Hang Seng Index Futures remained actively traded. Average daily turnover for index options increased from 2 446 contracts in 1994 to 2 614 in 1995. The volume of index futures trading averaged 18 407 contracts a day in 1995, compared with 16 906 contracts a day in 1994.

  Hong Kong has an active gold market, in which the main participants are banks, major international bullion houses and gold trading companies. It is commonly known as the Loco-London gold market, with prices quoted in US dollars per troy ounce of gold of 99.95 per cent fineness and with delivery in London. Trading in this market has expanded in recent years. The price of Loco-London gold moved between US$371 and US$397 in 1995. The price of gold rose from US$383 per troy ounce at the end of 1994 to US$386.50 per troy ounce at the end of the year.

  The Chinese Gold and Silver Exchange Society operates one of the largest gold bullion markets in the world. Gold traded through the society is of 99 per cent fineness, weighed in taels (one tael equals approximately 1.2 troy ounces) and quoted in Hong Kong dollars. Prices closely follow those in the other major gold markets in London, Zurich and New York. The price of gold at the Chinese Gold and Silver Exchange Society exhibited movement similar to that of Loco-London gold. At the end of the year, gold cost $3,569 per tael compared with $3,533 at the end of 1994. Turnover on the exchange totalled 18 million taels in 1995.

The number of authorised unit trusts and mutual funds increased to 1 183 at the year's end, from 978 a year earlier.

Increasing Financial Links Between Hong Kong and China

Hong Kong has been functioning as China's primary channel for international fund raising. However, the cross-border financial interactions have by no means been one- way. Direct investment and inter-bank financial flows in both directions have grown rapidly. Hong Kong banks have also stepped up their business involvement in China. Hong Kong has facilitated China's international fund-raising activities via the territory's equity and debt markets. At the end of 1995, 17 Chinese state-owned enterprises were listed in Hong Kong through the issuance of H-shares, raising a total of more than $20 billion. Bonds issued by China's Ministry of Finance, the People's Construction Bank of China, and other major financial institutions are traded on the Hong Kong Stock Exchange.

  Cross-border financial flows among financial institutions have also grown rapidly. Over the years, China has accumulated a substantial amount of funds in Hong Kong dollars and other foreign currencies from trading activities and inward investment involving Hong Kong. These funds are placed with financial institutions in China and subsequently channelled back to Hong Kong through the inter-bank market.

  Since 1980, external liabilities of Hong Kong authorised institutions to financial institutions in China have grown at an average rate of over 40 per cent per annum to well over $200 billion by December 1995. Over the same period, claims on financial institutions in China by authorised institutions in Hong Kong registered an annual growth of almost 30 per cent to approach $300 billion.

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During 1995, banks in Hong Kong further stepped up their business involvement in China. Two Hong Kong-based banks, the Hongkong and Shanghai Banking Corporation Limited and the Nanyang Commercial Bank, became two of the first foreign banks allowed to operate in Beijing. At the end of 1995, banks in Hong Kong had opened 29 offices in China.

Portfolio investment in the form of 'China funds' has also become increasingly popular. By the end of 1994, 20 such funds had been authorised by the Securities and Futures Commission investing in B-shares listed on the Shanghai and Shenzhen stock exchanges as well as H-shares listed in Hong Kong. Many of the funds have only a short history and some are accessible to institutional investors only. At the end of 1995, these funds amounted to some US$355 million.

Developments in Financial Infrastructure

Hong Kong encourages a robust financial market infrastructure. To this end, the HKMA and the banking community have worked closely to identify, minimise and, as far as possible, eliminate risk in Hong Kong's payment system.

With the benefit of studies conducted by central banking groups and advice from international experts, the HKMA concluded in early 1994 that the next-day net settlement system practised in Hong Kong fell short of the latest international standards and that the HKMA needed to move to Real Time Gross Settlement (RTGS) as soon as possible.

The timetable envisages phased implementation of RTGS starting in the first quarter of 1996 with full operation by the end of the year. It is in Hong Kong's interests to implement RTGS in the shortest possible time, considering the need to establish a Real Time Payment versus Payment (PvP) link with the US in 1997 when the Fedwire extends its operating hours from 12 to 18 hours. The HKMA has also reached agreement with the People's Bank of China to establish a PvP link between the HK dollar payment system and China's new RMB payment system (CNAPS), which is scheduled to go live on RTGS in 1997. Hong Kong also needs to catch up with other East Asian countries in the reform of its payment system. South Korea and Thailand implemented RTGS in 1994 and June 1995, respectively, and Malaysia is in the process of implementing RTGS.

An efficient and robust debt securities clearing and settlement system is particularly important to the development of the debt market in Hong Kong. The Central Moneymarkets Unit (CMU) was set up by the HKMA in 1990 to provide a clearing and settlement facility for Exchange Fund Bills and Notes, which are money market instruments issued by the Hong Kong Government to facilitate monetary policy operation for the purpose of maintaining exchange rate stability. Both the Exchange Fund Bills and Notes are issued in paperless form and the rights and interests of the holders are registered in computerised entry form in accounts maintained with the CMU. The HKMA has appointed 137 recognised dealers, all of which are institutions authorised under the Banking Ordinance and which maintain direct securities holding accounts with the HKMA. Other investors maintain their holdings in Exchange Fund Bills and Notes through the recognised dealers, 32 of which have been appointed as market makers and are obliged to quote two-way prices for the instruments during money market hours. They are permitted to go short on individual issues so long as they have an overall net long position. There is a very active secondary market for

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 these instruments; the average daily turnover in 1995 was HK$17 billion, represented by about 1 000 transactions.

  The CMU extended its service to private-sector Hong Kong dollar debt securities in January 1994. The CMU performs the role of central custodian and clearing agent for these instruments issued by the private sector, such as certificates of deposit, commercial paper and bonds. Transfer of title is also in book-entry form so that physical delivery is not required. By the end of 1995, 203 financial institutions had joined the CMU Service as members and 260 issues amounting to a total value of HK$73 billion had been lodged for clearing. Membership is open to all authorised institutions in Hong Kong, members of the Hong Kong Capital Markets Association and exempt dealers in securities under the Securities Ordinance.

  The CMU also takes up collateral management functions in the context of the Liquidity Adjustment Facility (LAF), which is the Hong Kong version of a discount window. A licensed bank wishing to obtain late overnight funding from the HKMA must enter into a 'Repo agreement'. Eligible securities are Exchange Fund Bills, Exchange Fund Notes and MTRC Notes. Some CMU instruments are also eligible, if they are of acceptable credit rating and can demonstrate a high degree of marketability in the secondary market. To help broaden the investor base of Hong Kong dollar debt paper, the CMU was linked with the international depositories Euroclear and Cedel in 1994.

  In December 1995, the CMU introduced Delivery versus Payment (DvP) settlement for CMU instruments both for end-of-day secondary market trading and new issue allotment. The DvP functionality is an optional service in addition to the free of payment (FOP) settlement. Under this new scheme, the HKMA has appointed an agent bank to handle cash settlement on behalf of CMU members. The CMU will effect transfer of title upon confirmation of settled funds from the agent bank. Hence DvP is achieved when both transfers of payment and securities title are effected simultaneously, eliminating a large part of the settlement risk associated with FoP settlement.

The Evolving Hong Kong Dollar Debt Market

 The Hong Kong dollar debt market has experienced tremendous growth in the past few years. Total outstanding public and private sector debt issues increased five-fold from around $27 billion at end-1989 to $153 billion at end-1994. The market size was further expanded to $197 billion by the end of 1995.

  The launch of the Exchange Fund Bills and Notes Programme in 1990 marked the first public sector initiative in developing the Hong Kong debt market. The 91-day Exchange Fund Bills were introduced in March 1990 to provide an additional tool for monetary management and to promote debt market development.

  Government debt paper provides a benchmark yield against which private debt issues can be priced. From a weekly issue of 91-day bills, the programme was gradually expanded to include the fortnightly issue of 182-day bills in October 1990 and the issue of 364-day bills every four weeks in February 1991. The benchmark yield curve of Exchange Fund paper has been extended with the subsequent introduction of the two-, three- and five-year Exchange Fund Notes in May 1993, October 1993 and September 1994, respectively. The yield curve was further extended to the seven-year area with the debut of seven-year Exchange Fund Notes in

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November 1995. At the end of 1995, total outstanding Exchange Fund Bills and Notes amounted to $59 billion.

       Exchange Fund Bills and Notes are welcomed by the banking community as risk- free assets for liquidity management. Trading in these instruments has been highly active, with daily turnover reaching $17 billion in 1995, equivalent to 31 per cent of the average outstanding amount. The high turnover of the paper has rendered it one of the most actively traded government securities in the world.

       A recent HKMA policy initiative is to encourage the supply of high-quality private debt issues in Hong Kong. The HKMA has broadened the scope of Repo securities for discounting under the LAF to some high quality Hong Kong dollar private debt issues in addition to Exchange Fund Bills and Notes. At the end of 1995, 14 issues totalling $26.3 billion were accepted as LAF-eligible Repo securities.

       Increased sophistication of the Hong Kong debt market was evident not only in an increase in the size of debt issues, but also in the increasing variety of debt instruments available in Hong Kong. A notable development has been the issue of asset-backed securities. After the launch of four issues of mortgage-backed securities (MBS) in Hong Kong in 1994, the market quietened down in 1995, with only two asset-securitisation issues: a car-loan backed debt issue and single-property backed securities. In 1994, the HKMA convened an informal group of representatives of prominent financial institutions to discuss issues relating to the development of the secondary mortgage market. The group's report, issued in July 1995, recommended that a simple issue structure and reduced heterogeneity among different issues would assist in market development.

The World Bank/IMF Annual Meetings in 1997

Hong Kong will host the 52nd Annual Meetings of the World Bank Group and the International Monetary Fund (IMF) from September 23 to 25, 1997. In July 1995, the Finance Committee of the Legislative Council approved a budget of $485 million for the meetings. A steering committee has been set up under the Financial Secretary and planning for this prestigious event is well under way.

Companies Registry

The Companies Registry administers and enforces the Companies Ordinance. It incorporates local companies, registers overseas companies, registers documents required to be submitted by registered companies and provides facilities for the search of company records. It also administers and enforces several other ordinances including the Trustee Ordinance, as this relates to trust companies, the Registered Trustees Incorporation Ordinance and the Limited Partnerships Ordinance.

Since 1993, the Companies Registry has operated as a trading-funded department. Unlike a vote-funded department, the registry can keep part of its income and apply it flexibly, having regard to its needs, business turnover and its customers' demands and expectations. For the financial year to March 31, 1995, the Companies Registry Trading Fund managed to generate a surplus of $16.5 million, $11.1 million more than the budgeted surplus.

During the year, the registry continued its efforts to improve its services. A new facility, enabling searchers to examine the computerised Register of Disqualification Orders, was introduced in February 1995. The computerised Control Book and

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Document Index, introduced in late 1994 to capture details of documents submitted since December 1994, was expanded in October 1995 to include all documents submitted, irrespective of their dates of submission.

As a first step towards providing direct on-line access to the records it maintains, in September 1995 the registry invited tenders to convert the company names and document indices into a CD-ROM or other electronic form. By using information provided in this way, which would be updated regularly, customers could order company records remotely by facsimile transmission. Meanwhile, following the advice of an information technology consultant, the registry is examining how it stores and retrieves company information with particular reference to what additional data should be included in its computerised records, before opening up the database to public search by remote on-line methods.

Concurrent with the registry's effort to improve the capture, retention and dissemination of company information, the department continued its accommodation improvement programme to provide a better environment for its customers and staff. The Standing Committee on Company Law Reform, established in 1984, continued to meet regularly to consider amendments to the Companies Ordinance, consistent with the needs of the public and commercial sectors. An overall review of the ordinance, by a specially appointed consultant, began in January and will take two years to complete.

The Companies (Amendment) Ordinance 1995 and Companies (Amendment) (No. 2) Ordinance were enacted during the year. The principal purposes of the former were to facilitate the use of pre-printed certificates of incorporation, to provide the framework for presenters to submit documents to the Registry in either Chinese or English and to allow small depositors of banks to receive preferential payment in the event of the bank being wound up. The latter is primarily concerned with enabling certified accountancy practices to incorporate if they so wish.

  Under section 290A of the Companies Ordinance, the Registrar of Companies is empowered to de-register a company if it has, for two consecutive years or more, failed to submit its annual return. In order to remove defunct companies from the register and encourage companies to comply with the requirement to submit annual returns, the registry has, since March 1994, been examining companies on the register with a view to striking-off companies which have failed to comply with the provisions of section 290A. At the end of 1995, a total of 214 200 companies had been so examined, 45 799 had been identified for action under section 290A and 8 743 had been de-registered.

In 1995, 33 008 companies were incorporated. On incorporation under the Companies Ordinance, a local company pays a registration fee of $1,450 plus $6 for every $1,000 of nominal capital. During the year the nominal capital of new companies registered totalled $5,919 million and 8 103 companies had increased their nominal capital by amounts totalling $35,590 million. At the end of the year, 471 883 local companies were on the register, compared with 452 789 in 1994.

Companies incorporated overseas must register certain documents with the registry, within one month of establishing a place of business in the territory. A registration fee of $715 and some incidental filing fees are payable in such cases. During 1995, 582 of these were registered. At the end of the year, 4 317 companies were registered from 76 countries, including 922 from the British Virgin Islands, 797 from the United

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      States of America, 395 from the United Kingdom, 381 from Bermuda, and 368 from Japan.

Money Lenders

Under the Money Lenders Ordinance, anyone wishing to carry on business as a money lender must apply to a licensing court for a licence. The ordinance does not apply to banks and deposit-taking companies authorised under the Banking Ordinance.

      Licence applications are, initially, submitted to the Registrar of Companies as Registrar of Money Lenders. A copy is also 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, 940 applications were received and 824 licences were granted. At the end of 1995, there were 876 licensed money lenders.

The ordinance provides severe penalties for 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. With certain exceptions (primarily authorised institutions under the Banking Ordinance), 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. Any agreement for the repayment of any such loan, or security given in respect of such a loan, is unenforceable.

Bankruptcies and Compulsory Winding-up

      The Official Receiver's Office administers the estates of individual bankrupts and companies ordered to be compulsorily wound up by the High Court. Once a receiving order is made against the property of an individual debtor or a winding-up order against a company by the High Court, the Official Receiver becomes the interim receiver or provisional liquidator of the debtor or company, respectively.

Where the assets of an estate are unlikely to exceed $200,000 in value, the Official Receiver applies to the High Court for a summary procedure order and is appointed trustee or liquidator. In other cases, meetings of creditors in bankruptcy, or of creditors and contributors in compulsory liquidations, are held to decide whether the Official Receiver or some other fit person from the private sector should be appointed trustee or liquidator. As in past years, the Official Receiver was appointed trustee or liquidator in most cases.

The work of the Official Receiver where he acts as trustee or liquidator includes the investigation of the affairs of the bankrupt or the wound-up company, the realisation of assets and the distribution of dividends to creditors. The Official Receiver also prosecutes certain offences set out in the Bankruptcy and Companies Ordinances; applies for disqualification of company directors; supervises the work of outside liquidators and trustees; and monitors the funds held by liquidators in compulsory and voluntary liquidations.

During the year, 455 receiving orders and 481 winding-up orders were made by the High Court. The assets realised by the Official Receiver during 1995 amounted to $149.06 million, while $71.7 million in dividends were paid to creditors in 242 insolvency cases.

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The Professional Accountancy

Hong Kong had 9 906 registered professional accountants at the end of 1995. Of these, 2 092 were certified public accountants (CPAs) or public accountants (PAs), who are in public practice and entitled to perform statutory audits. There were 823 CPA firms in the territory at the end of the year.

  The Hong Kong Society of Accountants is a self-regulatory body established under the Professional Accountants Ordinance with a wide range of responsibilities for maintaining accounting, auditing and ethical standards for the profession and for conducting examinations to accredit professional accountants.

Hong Kong Monetary Authority

The HKMA was established in April 1993 by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking. The Exchange Fund (Amend- ment) Ordinance 1992 provided for the establishment of the HKMA.

  The authority is responsible for the development and execution of monetary policy; maintenance of the exchange rate and monetary stability; the development of the debt market in Hong Kong; promoting the efficiency, integrity and development of payment and settlement arrangements; managing the assets of the Exchange Fund; prudential supervision of authorised institutions under the Banking Ordinance; and formulating policies relating to banking supervision. These functions are carried out by its five departments: Monetary Policy and Markets; Reserves Management; Banking Policy; Banking Supervision; and External. The last-named was set up in 1994 to develop contacts and co-operation with other central banks and multilateral financial institutions, to strengthen the HKMA's research capabilities and to monitor international monetary developments.

  The HKMA is an integral part of the government, but can employ staff on terms different from those of the civil service to attract personnel of the appropriate experience and expertise. Its staff and operating costs are charged directly to the Exchange Fund, instead of the general revenue.

  The HKMA is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee on matters relating to the control of the Exchange Fund. The involvement of the committee in respect of monetary and investment matters has become much stronger. It functions very much like a management board, meets monthly and advises the Financial Secretary on, among other things, the HKMA's annual budget.

Monetary Policy

A linked exchange rate system was introduced on October 17, 1983, after a period of volatility in the exchange rate of the Hong Kong dollar. Under the system, certificates of indebtedness (CIs) issued by the Exchange Fund, which the note-issuing banks are required to hold as cover for the issue of Hong Kong dollar notes, are issued and redeemed against payments in US dollars at a fixed exchange rate of $7.80 to US$1. In practice, therefore, any increase in note circulation is matched by a US dollar payment to the Exchange Fund, and any decrease in note circulation is matched by a US dollar payment from the Exchange Fund. In the foreign exchange market, the exchange rate of the Hong Kong dollar continues to be determined by forces of supply and demand. Against the fixed exchange rate for the issue and redemption of

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      CIs, the market exchange rate stays close to the rate of $7.80 to US$1. From January 24, 1994, banknote transactions among banks are for Hong Kong dollar value (instead of US dollar value under the previous arrangement).

With the adoption of the linked-rate system, the exchange rate is no longer a variable in the economy's adjustment process. Interest rates, the money supply and the level of economic activity adjust automatically, over time, to balance of payments pressures. If there is an outflow of money, caused, for example, by a tendency for the balance of payments to be in deficit, there will be a contraction in the money supply and higher interest rates. These changes will induce an inflow of funds to offset the original outflow arising from the balance of payments deficit, while reducing domestic demand and imports and enhancing export competitiveness, contributing to restoring the external balance.

      Alternatively, if there is an inflow of money, caused, for example, by a tendency for the balance of payments to be in surplus, there will be an expansion in the money supply and lower interest rates. These will, on the one hand, induce outflow of funds and, on the other hand, increase domestic demand and imports and erode export competitiveness, again restoring the external balance.

When there is a tendency for the Hong Kong dollar to weaken relative to the US dollar, Hong Kong dollar interest rates will rise relative to US dollar interest rates. They may rise to a level where the interest rate gap between the Hong Kong dollar and the US dollar is large enough to stem or reverse the outflow from the Hong Kong dollar. Similarly, when there is a tendency for the Hong Kong dollar to strengthen relative to the US dollar, the same mechanism will work in reverse. From the monetary policy point of view, it is sometimes desirable to expedite this adjustment process in order that the economy is not unduly disrupted by speculative flows of funds aimed at manipulating the value of the Hong Kong dollar. To ensure that the interest rate gap is large enough to produce the corrective inflows or outflows, there is no limit on how low or high interest rates can move.

The lower limit for interest rates was eliminated when the Hong Kong Association of Banks, after consultation with the Financial Secretary, introduced in January 1988 revised Interest Rate Rules, under which banks may impose deposit charges (negative interest rates) on large Hong Kong dollar credit balances maintained by their customers, if the need arises. The revised rules provided a tool to deter speculation on a revaluation of the Hong Kong dollar, which emerged in late 1987 and continued in early 1988. In practice, however, there has been no need to impose the deposit charges, as the mere threat of their imposition has been effective in deterring speculation.

The upper limit for interest rates was removed in July 1988, when the Money Lenders Ordinance was amended to exempt all authorised institutions under the Banking Ordinance from the restriction of lending money at an effective interest rate exceeding 60 per cent per annum.

To help the HKMA use the Exchange Fund to exercise more effective influence over liquidity and interest rates in the interbank market, and so to help it maintain exchange rate stability within the framework of the linked exchange rate system, accounting arrangements were entered into in July 1988 between the Exchange Fund and the Hongkong and Shanghai Banking Corporation Limited (HSBC) as the management bank of the clearing house of the Hong Kong Association of Banks.

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 Under these arrangements, the HSBC maintains a Hong Kong dollar account with the Exchange Fund. The HKMA uses the account at its discretion to effect settlement of its Hong Kong dollar transactions with the HSBC or with other banks. The HSBC is required to ensure that the net clearing balance (NCB) of the rest of the banking system does not exceed its balance in the account and that the NCB is not in debit; otherwise, it will have to pay interest to the HKMA for the account of the Exchange Fund.

  Consequently, the HKMA, through the use of the Exchange Fund, has effectively become the ultimate provider of liquidity in the interbank market, a role which was previously performed by the HSBC. Through the borrowing of Hong Kong dollars in the interbank market, or selling foreign currencies for Hong Kong dollars in the foreign exchange market, the HKMA is able to reduce the supply of Hong Kong dollars and so raise interest rates in the interbank market, in this way offsetting a weakening of the exchange rate of the Hong Kong dollar against the US dollar. Similarly, it may increase interbank liquidity and lower interest rates by taking action in the opposite direction, offsetting a strengthening of the exchange rate.

  Under the accounting arrangements, the HKMA can also influence monetary conditions in the interbank market through its buying or selling of Hong Kong dollar financial assets of acceptable quality. For this purpose, the HKMA has developed a programme for the issue of short-term and longer-term paper for the account of the Exchange Fund (the Exchange Fund Bills and Notes). The Exchange Fund paper is designed to complement the accounting arrangements by providing the HKMA with an additional instrument for conducting money market operations.

In June 1992, the Liquidity Adjustment Facility (LAF) was introduced to help banks make late adjustments to their liquidity positions. The bid rate (for taking overnight deposits from banks) and offer rate (for lending overnight money to banks) are set having regard to the level of interest rate appropriate for maintaining exchange rate stability. These rates provide an additional tool for the HKMA to influence the movements of the interbank interest rates.

Monetary Situation

 After the Mexican currency crisis in January, the Hong Kong dollar and several other Asian currencies came under speculative attack, notwithstanding the sound economic fundamentals of these economies. Selling interest in the Hong Kong dollar intensified in the second week of January, pushing the exchange rate from 7.7375 at the beginning of 1995 to 7.7725 on January 12. The HKMA responded promptly by engineering a liquidity squeeze in the interbank market, thereby pushing up the interbank interest rate to increase the cost of speculation. The overnight interbank offered rate rose from 6 per cent to 12 per cent on January 13. The following week, the HK dollar exchange rate quickly rebounded to the prevailing level before the speculative attack.

The HKMA's prompt and decisive actions successfully fended off the speculators and reinforced confidence in the link. Despite occasional rumours about the health of Chinese leaders during the year, the exchange rate of the Hong Kong dollar remained very stable. For most of the year, the exchange rate moved within a narrow range of $7.730-$7.745 to US$1.

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In the international foreign exchange market, the US dollar fell from around 100 Yen and 1.56 Deutschemark at the beginning of the year to a post-war low of 79.7 Yen on April 19 and 1.345 Deutschemark on March 8. After intervention by the Group of Seven in late May, the US dollar at one stage rebounded to 104 Yen and 1.5 D-mark in mid-September. The impact of the movement of the US dollar vis-à-vis other international currencies on the effective exchange rate index (EERI) of the Hong Kong dollar has been moderated by the heavy weight of the Renminbi (32.2 per cent) and the US dollar (17.6 per cent) in the index. During the year, the Renminbi showed a moderate appreciation of 1.5 per cent against the Hong Kong dollar.

The trade-weighted EERI of the Hong Kong dollar declined from 123.5 at the beginning of the year to the low of 117.7 on April 19 and then stabilised at around 118 at the end of June. As the US dollar subsequently gathered strength in the second half of the year, the EERI edged up and closed the year at 122.7, a 0.6 per cent decline from the beginning of the year.

On the interest rate front, the funds rate cut of 25 basis points (bps, or one- hundredths of one per cent) on July 6 was interpreted by the market as an end to the series of interest rate hikes by the US Federal Reserve ('the Fed') since February 1994. The last interest rate increase in this series took place on February 2, 1995, when the US discount rate was raised by 50 bps. Accordingly, the Hong Kong LAF bid and offer rates were raised by 50 bps to 4.25 per cent and 6.25 per cent, respectively. The LAF rates were left unchanged when the Fed funds rate was cut by 25 bps on July 6, as the US discount rate remained unchanged, and the Fed funds rate was well within the range set by the LAF bid and offer rates.

Apart from the January episode and the occasional quarter-end tightness, the overnight Hong Kong interbank offered rate (HIBOR) stayed within the range set by the LAF bid and offer rates during most of the year. Unfavourable news and market commentary on Japanese banks in the third quarter, however, increased borrowing costs of these major players in the interbank market. Temporary tightness in the interbank market pushed the HIBOR to touch the LAF offer rate on several occasions in September.

After the US interest rate hike on February 2, the HK dollar yield curve shifted downward gradually and flattened amid expectations that the US interest rate, and hence the Hong Kong dollar interest had peaked. As the Fed lowered its funds rate on July 6, the HK dollar yield curve moved downward significantly but soon firmed up again as the market expected that the Fed would not rush into another interest rate cut in the near future. The yields for three-month Exchange Fund Bills and five- year Notes fell by 15 bps and 149 bps, respectively over the period from early January to early July. Yields of the three-month bills edged up slightly by nine bps from then until the end of the year. Yields of the five-year notes, however, eased by a further 64 bps from early July to end-December, partly due to another 25 bps cut in the Fed funds rate on December 19. The spread over the corresponding US Treasuries for the five-year Exchange Fund Notes moved around 80 to 100 bps for most of the year.

After the rise in the LAF bid and offer rates in February, the Best Lending Rate quoted by major banks increased by 50 bps to 9 per cent. It was cut by 25 bps on December 27 after a corresponding cut in the Fed funds rate earlier that month. The interest rate cap on time deposits fixed for seven days or more was removed in three

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 stages, after the partial deregulation of the Hong Kong Association of Banks' Interest Rate Rules on time deposits began in October 1994.

In line with subdued retail sales in the Hong Kong economy, transaction demand for money remained steady throughout the year. Hong Kong dollar M1, comprising currency in hands of public and demand deposits rose by a mere 2.1 per cent during the year. Hong Kong dollar M3, which is the broadest measure of money supply, grew 14.9 per cent in 1995. Total loans grew at a moderate rate of 14.5 per cent in 1995 while HK dollar loans grew by 10.6 per cent. Due to a slowdown in the property market, residential mortgage loans which are a considerable share of total domestic loans, showed modest growth of 16.4 per cent over 1994.

Exchange Fund

The Hong Kong Government's Exchange Fund was established by the Currency Ordinance of 1935 (later renamed the Exchange Fund Ordinance). Since its inception, the fund has held the backing to the note issue. In 1976, its role was expanded, with the assets of the Coinage Security Fund (which held the backing for coins issued by the government) as well as the bulk of foreign currency assets held in the government's General Revenue Account being transferred to the fund. On December 31, 1978, the Coinage Security Fund was merged with the Exchange Fund.

  In 1976, the government began to transfer the fiscal reserves of its General Revenue Account (apart from the working balances) to the fund. This arrangement was introduced to avoid fiscal reserves having to bear exchange risks arising from investments in foreign currency assets and to centralise the management of the government's financial assets. The fiscal reserves are not permanently appropriated for the use of the Exchange Fund, but are repaid to the General Revenue Account when they are required to meet the obligations of the general revenue. Through this transfer of the fiscal reserves, the bulk of the government's financial assets are, therefore, with the fund.

  The Exchange Fund's statutory role, as defined in the Exchange Fund Ordinance, is to influence the exchange value of the Hong Kong dollar. It is used to intervene, when necessary, in the local money market or foreign exchange markets to maintain stability. Its functions were extended on the enactment of the Exchange Fund (Amendment) Ordinance 1992 by introducing a secondary and subsidiary role of maintaining the stability and integrity of the monetary and financial systems, with a view to maintaining Hong Kong as an international financial centre.

  The HKMA manages the fund. Apart from ensuring that the fund meets its statutory roles, the principal activity of the HKMA on a day-to-day basis is the active management of the fund's assets. These are held mainly in the form of bank deposits and marketable interest-bearing instruments in certain foreign currencies and in Hong Kong dollars.

Initiated on its formation in April 1993, the HKMA adopts an ongoing programme of reviewing its investment operations and strategy. Having regard to the statutory purposes for which the Exchange Fund was created and maintained, the investment style and strategies now in place closely resemble that of comparable central banks and monetary authorities. Strategies appropriate to a long-term fund, such as a benchmark approach and a greater use of the long-term capital markets, have been adopted, and the range of currencies and instruments used has also been increased.

FINANCIAL AND MONETARY AFFAIRS

The HKMA continues to place great emphasis on establishing links with other market participants. The management style is one of openness and co-operation with the market, with a view to encouraging close working relationships to enable the markets to play their part in assisting in the HKMA's management of the fund. In terms of day-to-day operation, the HKMA has established three portfolios: (a) a portfolio of assets to act as a hedge against the interest-bearing liabilities of the fund, to ensure that the fund can at all times meet all the claims upon it; (b) a portfolio of liquid reserves to be available whenever required to meet market operational needs; and (c) an investment portfolio to preserve the fund's value for future generations in Hong Kong. The returns from the management of the fund and the investment style adopted are set out and explained in the HKMA's annual report each year.

Another function related to the Exchange Fund is to supply notes and coins to the banking system. Bank notes in the denominations of $20, $50, $100, $500 and $1,000 are issued by the Hongkong and Shanghai Banking Corporation Limited, the Standard Chartered Bank and the Bank of China. The first two banks also issue $10 notes. Apart from a very small fiduciary issue, which is backed by eligible securities, the note-issuing banks may issue currency notes only against non-interest-bearing Certificates of Indebtedness issued by the fund. The fund bears the costs of maintaining the note issue (apart from the proportion of the costs relating to the fiduciary issue), and the net profits of the note issue accrue to the fund.

The administration of the coin circulation is the responsibility of the HKMA. Coins of $10, $5, $2, $1, 50 cents, 20 cents and 10 cents denominations are issued by the government, and the assets received against their issue are held in the Exchange Fund. The government also issued currency notes of one-cent denomination until September 30, 1995, after which they were demonetised and thus ceased to be legal tender. The introduction of the bauhinia flower series continued, with greater emphasis being placed on the higher denominations. The total currency in circulation at the end of 1995 was $81.7 billion.

       On December 31, 1994, the total assets of the fund stood at $408 billion, of which foreign currency assets amounted to US$49 billion. The accumulated earnings of the fund amounted to $129 billion. The financial position of the fund for the six years from 1989 to 1994 is shown at Appendix 16. With a view to showing the government's continued commitment to greater openness and transparency, and to providing the public with more evidence of the considerable strength of Hong Kong's external position, data on the fund are now available on a quarterly basis. Based on unaudited figures, total assets stood at $450 billion and accumulated earnings of the fund amounted to $153 billion as at June 30, 1995. The fund's foreign currency assets, including forward transactions to be settled, amounted to US$54.6 billion at September 30.

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DURING 1995, Hong Kong continued its evolution from a low-cost manufacturing entity towards a regional commercial centre and high value-added manufacturing base. A strong export performance resulted from sustained recovery in demand in the major export markets and the enhanced competitiveness of the territory's products as the Hong Kong dollar weakened along with the United States dollar, to which it is pegged.

  After two years of decline, Hong Kong domestic exports registered a 43 per cent increase, totalling $231,657 million in value in 1995. Total exports continued to register double-digit growth in the year, increasing by 14.9 per cent over the previous year. This was mainly due to the buoyancy of re-exports, given the territory's role as an entrepôt for trade with China. The gross total value of re-exports was $1,112,469 million, representing an increase of 17.4 per cent. Imports rose by 19.2 per cent to $1,491,120 million.

Trade and Industrial Policies

Hong Kong's continuing success as a leading commercial and manufacturing centre owes much to a simple tax structure and low tax rates, a versatile and industrious workforce, its excellent infrastructure, and the government's firm commitment to free trade and free enterprise. The government believes its task is to facilitate commerce and industry within the framework of a free market.

  Its industry policies aim to promote industrial development by ensuring a business- friendly environment, and by providing support services. The government zones land for general and specialised industrial use, maintains and develops advanced education and training facilities, ensures a modern legislative and regulatory environment, and funds facilities to enhance productivity and quality and encourage applied research. It also encourages technology transfer through an investment-promotion programme. However, the government neither protects nor subsidises manufacturers.

  Trade and industry policies are kept under review by the Trade and Industry Branch of the Government Secretariat. The Secretary for Trade and Industry is advised on industry matters by the Industry and Technology Development Council (ITDC), and on trade issues by the Trade Advisory Board and the Textiles Advisory Board. The members of these bodies include prominent industrialists and businessmen, representatives of major industry and trade organisations and relevant government officials.

TRADE AND INDUSTRY

External Trade

Hong Kong is the world's eighth-largest trading entity in terms of value of merchandise trade; the fifth-largest if all member countries of the European Union are taken as one entity. With total exports at $1,342 billion and imports at $1,488 billion, Hong Kong recorded a trade deficit of $147 billion in 1995.

Its largest trading partner is China, followed by the United States of America and Japan. Appendices 17, 18 and 19 provide summary statistics of external trade.

Imports

Hong Kong is almost entirely dependent on imported resources to meet the needs of its six million people and its diverse industries. Consumer goods, at $562 billion in 1995, constituted the largest share of total imports. Imports of raw material and semi- manufactured goods, at $543 billion, came second. This was followed by capital goods, foodstuffs and fuels.

China, Japan and Taiwan were the main suppliers of Hong Kong's imports in 1995, providing 36 per cent, 15 per cent and 9 per cent, respectively, of the total.

Domestic Exports

Clothing remained the largest component of domestic exports, valued at $74 billion, or 32 per cent of the total, in 1995. This percentage share has remained stable over the past decade. At $32 billion, electrical machinery, apparatus and appliances, made up another 14 per cent of the total. Other important exports included office machines and automatic data processing machines; photographic apparatus, equipment and supplies and optical goods; and textiles.

      The pattern and level of Hong Kong's export trade are closely linked to the economic conditions and commercial policies in major overseas markets. In 1995, China, the USA and Singapore were Hong Kong's largest markets, taking up 27 per cent, 26 per cent and five per cent of Hong Kong's domestic exports, respectively.

Re-exports

Re-exports showed a significant increase in 1995, reflecting the continued importance of Hong Kong as an entrepôt for China. Hong Kong's re-exports in 1995 accounted for 83 per cent of the value of total exports.

Principal commodities re-exported included telecommunications and sound re- cording and reproducing apparatus and equipment ($120 billion or 11 per cent of the total) and electrical machinery, apparatus and appliances ($114 billion or 10 per cent of the total). Other important re-exports included textiles, clothing and baby carriages, toys, games and sporting goods. China, Japan and Taiwan were the main origins of the re-exports, while the largest re-export markets were China, the USA and Japan.

The Manufacturing Sector

      Restructuring of the manufacturing sector reduced its contribution to GDP from 18 per cent in 1990 to about 10 per cent in 1994, but it continued to be an important sector of the economy. The sector was the territory's second-largest employer, employing 386 106 persons (15.3 per cent) of total employment in 1995. Due to mechanisation, automation, and relocation of labour-intensive and lower-value-

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added manufacturing processes to China, the restructuring of the manufacturing sector is characterised by the development of more knowledge-based and higher- value-added manufacturing.

  The clothing industry was the largest employer in the manufacturing sector in 1995, followed by printing, publishing and allied industries. Information on the number of persons employed by the manufacturing sector in 1995 broken down by major industries is contained in Chart 1.

Printing

11.6% (44 790)

Electronics

11.4% (44 078)

Clothing 29.0% (Ï11 917)

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Textiles

7.3% (28 194)

Metal Products

5.8% (22 281)

Food & Beverage 5.5% (21 139)

Others

29.4% (113 707)

Chart 1: Number of Persons Employed by the Manufacturing Sector in 1995

  Manufacturing establishments in Hong Kong are generally small. There were 31 114 manufacturing establishments in 1995, of which 29 821 employed fewer than 50 persons. The remaining 1 293 establishments account for about 49.6 per cent of Hong Kong's total manufacturing employment. Many smaller establishments are linked with larger factories through an efficient and flexible sub-contracting network. Such an arrangement has enabled the manufacturing sector to respond swiftly to changes in demand.

  The manufacturing sector remains export-oriented: about 80 per cent of the products manufactured were exported. Domestic exports amounted to HK$231,657 million in 1995. Major export items include clothing, electronics, textiles, watches and clocks, and chemical products. Hong Kong is one of the world's leading exporters of clothing. It was also the largest exporter of watches by quantity and the second- largest exporter of watches by value in 1993. Major export markets in 1995 were China (27.4 per cent), the United States of America (26.4 per cent), Germany and Singapore (both 5.3 per cent), and Japan (5.1 per cent). The clothing industry was also the largest export-earner in the manufacturing sector in 1995, followed by the electronics industry. Chart 2 presents the value of domestic exports of the manu- facturing sector in 1995 by major industries.

Electronics 27.7%

(HK$64,282 million)

TRADE AND INDUSTRY

Textiles

6.1%

(HK$14,030 million)

Watches & Clocks

5.9%

(HK$13,620 million)

Chemical

4.0%

Jewellery 2.5%

Clothing 31.9%

(HK$73,801 million)

Others 21.9%

(HK$51,035 million)

(HK$9,178 million)

(HK$5,711 million)

Chart 2: Value of Domestic Exports of the Manufacturing Sector in 1995

Printing

A reputation for good printing quality, quick and reliable delivery, and competitive prices continues to boost the international status of Hong Kong's printing industry. The territory is a leading centre for printing and publishing, with 4754 printing establishments employing 44 790 people, and more than 200 publishing houses, including many from overseas which have set up offices or regional headquarters in Hong Kong. Hong Kong printers are investing substantially in advanced machinery and equipment, and are taking positive steps to develop the United States market. The industry constitutes 15.3 per cent of all manufacturing establishments and 11.6 per cent of employment in the manufacturing sector. A majority of the printing factories (73.9 per cent) are engaged in general jobbing work, and most of the remainder deal with related work, such as typesetting and book-binding. There are also 34 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 both the more sophisticated printing companies and of publishers, who are becoming increasingly involved in the use of data and word- processing systems for editorial production and stock control. The output date can be converted or interfaced with typesetting equipment at a realistic cost, to pro- vide 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.

95

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TRADE AND INDUSTRY

Domestic exports of printed matter increased in value terms by nine per cent over the previous year. Material printed locally with a total value of $4,937 million was exported, with the USA, the UK, Taiwan, Australia and China being the main customers. Books, pamphlets, newspapers, journals and periodicals accounted for 68 per cent of exports of printed products. The biggest customers for this reading material were the USA, the UK and Australia. Overall, the printing and publishing industries contributed seven per cent of the gross output of the manufacturing sector.

External Investment

The Industry Department's 1995 Survey of External Investment in Hong Kong's Manufacturing Industries identified 424 manufacturing companies either wholly or partly owned by overseas interests. The total value of inward direct investment in manufacturing was $43,969 million. These companies employed 67 509 persons (16 per cent of total manufacturing employment) and accounted for 28 per cent of Hong Kong's total domestic exports.

Information on external investment in Hong Kong's manufacturing industries by sectors and by source is given in Charts 3 and 4. In addition, 2 068 multi-national companies had established regional headquarters and offices in Hong Kong to conduct and co-ordinate their regional economic activities in 1995.

The department promotes and facilitates foreign investment in Hong Kong's manufacturing industries, thereby encouraging technology transfer to enhance pro- ductivity, quality and diversification of local manufacturing. It operates overseas Industrial Promotion Units in Tokyo, San Francisco, New York, Toronto, Brussels and London, and also the One-Stop Unit in Hong Kong. These provide advice and

Industry Breakdown

31.6%

Electronics #

30.2%

Electrical products

9.6%

Textiles & clothing

Food & beverage

Chemical products

4.7%

Metal products

7.1%

Others

8.6%

8.2%

Note: #Percentage for the electronics industry excludes electronic toys, watches and clocks.

Chart 3: External Investment in Hong Kong's Manufacturing Industries

33.5%

26.8%

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14.2%

Japan

2.4%

U.S.A

3.3%

China

3.4%

6.8%

U.K.

Netherlands

Switzerland

9.6%

Singapore

Others

Chart 4: Source of External Investment

      assistance on investment opportunities in Hong Kong's manufacturing sector and help in the development of investment plans.

Hong Kong has concluded investment promotion and protection agreements with several of its major investment partners, including the Netherlands, Australia, Denmark, Sweden, Switzerland and New Zealand.

Documentation of Imports and Exports

As a free port, Hong Kong keeps its import and export licensing requirements to a minimum. Most products do not need licences to enter or leave the territory. Where licences or notifications are required, they are intended to achieve two main objectives. First, they help Hong Kong to fulfil its international obligations to restrain exports of textile products and to monitor the flow of these products into and out of Hong Kong. Secondly, they are imposed on health, safety, environmental, security or anti-smuggling grounds. Items covered include strategic commodities, reserved commodities, pharmaceutical products and medicines, pesticides, radioactive substances and irradiating apparatus, left-hand-drive vehicles and ozone-depleting substances.

Hong Kong maintains a certification of origin system that, apart from enabling the origin of goods which Hong Kong exports to be established, also supports claims for preferential tariff treatment from donor countries where such schemes are operated. The Trade Department administers this system and issues certificates of origin where required. Five other organisations have been designated by the government to issue certificates of origin. They are the Hong Kong General Chamber of Commerce, the Federation of Hong Kong Industries, the Indian Chamber of Commerce Hong Kong, the Chinese Manufacturers' Association of Hong Kong, and the Chinese General Chamber of Commerce.

Electronic Data Interchange

Hong Kong's use of electronic data interchange has continued to expand. Electronic data interchange, the computer-to-computer exchange of business information in 97

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standard formats, is one of the techniques being implemented world-wide in an attempt to curb the amount of paperwork involved in business and to improve efficiency.

Two major private sector electronic date interchange services were launched in Hong Kong during 1995: EZ*TRADE, focusing primarily on the retail, distribu- tion and manufacturing sectors; and CargoNet, focusing primarily on the freight forwarding and transportation sectors. In addition, the Community Electronic Trading Service (CETS) has begun testing computer systems installed with a view to launching a commercial service in 1996. The CETS is a joint venture involving the government and 11 leading trade-related organisations in Hong Kong. Its initial service will cover applications for export licences for textiles and clothing shipped under quota and lodgements of trade declarations. The stage is set for a significant increase in the number of companies using electronic data interchange in Hong Kong. In the interests of compatibility, the government agreed that the United Nations Electronic Data Interchange for Administration, Commerce and Transport, a standard developed by the UN for electronic trading, will be adopted for government transactions wherever applicable. The government is pleased to note that the private sector services also incorporate this standard.

The Industry Department

The mission of the Industry Department is to facilitate the further development of manufacturing and manufacturing-support industries in Hong Kong within the framework of a free market. To achieve this, the department works with its partners in government, business, tertiary institutions and industrial support organisations to provide the necessary land, physical infrastructure and trained people to facilitate access to relevant technologies; to encourage applied research and development; and to monitor developments in markets and technologies which may impinge upon the competitiveness of the local manufacturing sector.

Land

The government put up 26 438 square metres of industrial land for sale by auction or tender in 1995. Private developers provided an addition of about 26 800 square metres of flatted factory space. Construction of the second phase of Tseung Kwan O Industrial Estate, which will provide 46.6 hectares of land upon completion in 1996, has progressed well.

Technical Education and Industrial Training

The Vocational Training Council (VTC) provides technical education and indus- trial training and administers a New Technology Training Scheme which provides financial assistance to employers to train their technologists and managers in new technologies. The Clothing Industry Training Authority (CITA) runs two training centres for clothing and footwear. The department is represented on the VTC and the CITA. Higher-level education and training are provided by the tertiary education institutions.

Technology

The Hong Kong Productivity Council (HKPC) is the government's main agent for technology transfer. The Hong Kong Industrial Technology Centre Corporation

TRADE AND INDUSTRY

      (HKITCC) promotes technological innovation and the application of new technologies, apart from facilitating technology transfer. The department is represented on the HKPC and the HKITCC.

Through the Industrial Support Fund scheme set up in 1994, the government continues to provide financial support to projects recommended by ITDC that contribute to Hong Kong's industrial and technological development. By July 1995, $185.85 million was committed for 122 projects which are being under- taken by industry associations, higher-education institutes and industrial support organisations.

Quality Services

The department's Quality Services Division promotes the wider application of quality assurance in manufacturing and service sectors. The division works closely with the autonomous Hong Kong Quality Assurance Agency, which runs the ISO-9000 quality system certification scheme. The Hong Kong Government Standards and Calibration Laboratory holds Hong Kong's official measurement standards and provides a calibration service for verifying the accuracy of local measurement instru- ments. The Hong Kong Laboratory Accreditation Scheme offers formal recognition to competent local laboratories and facilitates the acceptance of local test certificates overseas. The Product Standards Information Bureau is the focal point for informa- tion on various national and international product standards.

Applied Research and Development

      Major efforts have been made to encourage applied research and development in recent years. The Applied R&D Scheme, started in February 1993, which seeks to foster the technological capabilities and competitiveness of industry. The scheme can fund up to 75 per cent of the cost of an applied R&D project. Funding support can either take the form of a loan or equity participation. As at December 1, 1995, 14 applied research and product development projects had been approved for fund- ing, with a funding commitment of $50 million, in areas such as software develop- ment, telecommunications products, security systems, pharmaceutical products and environmentally-friendly packaging materials. In June 1995, a new scheme called Co-operative Applied Research and Development Scheme (CARDS) was launched to support product development projects undertaken in collaboration with China's research institutes. As at December 1, 1995, projects in the fields of biotechnology and electronics were approved under CARDS with a funding commitment of $16 million.

Monitoring Technology and Market Trends

The department conducts periodic studies of the main manufacturing industries to look at technology and market trends and identify constraints on industrial development. In 1995, it commissioned a consultancy study on the textiles and clothing industries. Following the completion of a consultancy study on Hong Kong's software industry in 1995, action was taken to provide infrastructural support to prime the development of the software industry. A study on the establishment of a science park was also completed.

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Environmental Controls

The department supports manufacturers in complying with environmental controls. General advice is given through an annual guide on environmental legislation affecting manufacturers and a directory on environmental technology and services. Technical advice is given through design manuals and eco-audit manuals for specific industries, commissioning visits to factories and organising seminars and workshops.

Hong Kong Awards for Industry

The department co-ordinates the Hong Kong Awards for Industry, which recognises excellence in six categories of industrial performance. The six organisers are the Federation of Hong Kong Industries (for the consumer product design category), the Chinese Manufacturers' Association of Hong Kong (machinery and equipment design), the Hong Kong Productivity Council (productivity), Industry Department (quality), the Private Sector Committee on the Environment (environmental perfor- mance), and the Trade Development Council (export marketing).

Industrial Support Agencies

Hong Kong Productivity Council

The Hong Kong Productivity Council (HKPC) offers a diverse range of services in consultancy, product development, training and technology transfer with the aim of promoting productivity and enhancing the value-added content of products and services in local industries. The HKPC is also the government's representative to the Asian Productivity Organisation on industrial productivity issues.

  During the year, the HKPC introduced a number of new initiatives in promoting people, product and process development. Examples included quality management programmes offered in alliance with overseas partners, the promotion of rapid prototyping technology and the setting up of a telecommunication technology centre.

Hong Kong Industrial Technology Centre Corporation

The Hong Kong Industrial Technology Centre Corporation (HKITCC) was established to facilitate the promotion of technological innovation and application of new technologies in Hong Kong industry. It fulfils its mission through three primary functions: the incubation and accommodation of technology-based business; the provision of technology transfer services; and the provision of research and develop- ment support services.

  The Hong Kong Industrial Technology Centre was officially opened by the Governor of Hong Kong on March 14, 1995. This seven-storey intelligent building provides leasable accommodation for technology-based small- to medium-size com- panies, research and development centres set up by multinational companies, and technology-related services companies. It also provides an incubator unit to nurture technology start-ups.

Hong Kong Industrial Estates Corporation

The Hong Kong Industrial Estates Corporation is responsible for developing and managing industrial estates in Hong Kong. It offers developed land, at cost, on its industrial estates to companies with new or improved technologies and processes which cannot operate in multi-storey factory buildings. The corporation has three

TRADE AND INDUSTRY

industrial estates in the New Territories: at Tai Po, Yuen Long and Tseung Kwan O, providing a total of 210 hectares of land.

External Commercial Relations

Hong Kong possesses full autonomy in the conduct of its external commercial relations. The Governor is entrusted with executive authority to conduct external relations on behalf of the territory, including the conclusion and implementation of trade agreements, whether bilateral or multilateral, with states, regions and inter- national organisations.

      Within the context of the government's free trade policy, Hong Kong's commercial relations are designed to ensure that its trading rights in overseas markets are protected and its international obligations are fulfilled. The territory's success is reflected in the steady rise in the value and sophistication of its exports in recent years.

World Trade Organisation (WTO)

The World Trade Organisation (WTO), successor to the General Agreement on Tariffs and Trade (GATT), came into effect on January 1, 1995. The WTO oversees the implementation of the multilateral rules and disciplines agreed to at the Uruguay Round of negotiations (UR) for trade-related intellectual property rights and the trade in goods and services. It also serves as a forum for multilateral trade negotiations. The multilateral trading system under the WTO remains the corner- stone of Hong Kong's external trade policy. Hong Kong supports a strong and credible multilateral trading system, to sustain global trade liberalisation and economic growth.

Hong Kong is a founding member of the WTO. This separate membership status will continue beyond 1997, reflecting Hong Kong's autonomy in the conduct of its external commercial relations as guaranteed under the Sino-British Joint Declara- tion on the Question of Hong Kong and the Basic Law of the Hong Kong Special Administrative Region.

Hong Kong participates actively in the work of the WTO to ensure proper and full implementation of the trade liberalisation commitments agreed at the UR, and to safeguard Hong Kong's trading interests. Hong Kong will continue to play an active role in WTO's future work programmes and meetings with a view to encouraging further global trade liberalisation.

Textiles

Bilateral agreements governing Hong Kong's textiles exports to Canada, the European Union (EU), Norway and the USA were negotiated under the Multi-Fibre Arrangement (MFA). The MFA was replaced by the WTO Agreement on Textiles and Clothing (ATC), when the latter came into effect on January 1, 1995. The ATC provides for the phased removal of quantitative restrictions on these products in 10 years' time. Hong Kong attaches great importance to the full and timely implementation of the ATC, and participates in the work of the Textiles Monitoring Body (TMB), which monitors the implementation of the ATC. The TMB's ruling in September 1995 against a USA trade restraint on Hong Kong exports of woven woollen shirts and blouses was a case in point. Hong Kong continues to work closely with other exporters of textiles and clothing in the International Textiles and

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Clothing Bureau on all matters relating to the implementation of the ATC and co- operates with them on issues of common interest.

Non-textiles Issues

In response to the EU's initiation of a 'sunset' review concerning the anti-dumping measures on Hong Kong's video cassette tapes in September 1994, Hong Kong made a representation to the European Commission in February 1995 to rebut allegations made by the EU's industry to justify continuation of the anti-dumping measures.

In June 1994, the Australian authorities initiated an anti-dumping inquiry against Hong Kong companies in respect of disposable plastic cutlery. The inquiry, which was terminated in February 1995, concluded that imports from Hong Kong did not cause any injury to the Australian industry, and no anti-dumping action was applied.

During the first half of the year, the Hong Kong Government and the private sector continued to emphasise to the USA administration and members of Congress the adverse effects on Hong Kong's economy if Washington were to withdraw China's Most Favoured Nation (MFN) trading status, or to impose conditions on the renewal of the status. On June 2, President Bill Clinton announced his decision to renew China's MFN trading status unconditionally for another year. The decision removed uncertainty over Sino-USA trade relations, and has let Hong Kong businessmen plan and conduct their operations accordingly. As China and the USA are Hong Kong's two largest trading partners, good relations between them are of vital importance to Hong Kong as a trading, financial and investment centre.

Trade Department

The Trade Department is responsible for Hong Kong's commercial relations with foreign governments. It implements trade policy and agreements, and conducts import and export licensing and origin certification.

The department consists of five divisions. The Multilateral Division deals with the multilateral aspects of Hong Kong's external commercial relations, such as its participation in the World Trade Organisation (WTO). The Regional Co-operation Division takes care of activities related to the Asia-Pacific Economic Co-operation forum (APEC), the Pacific Economic Co-operation Council (PECC) and commercial relations with Asia, Australia and New Zealand.

The Americas Division and the Europe, Africa and Middle East Division deal with bilateral commercial relations with Hong Kong's trading partners in their respective geographical areas. Such work includes the conduct of trade negotiations and the implementation of textiles agreements, as well as the collection and dissemination of information on developments which may affect Hong Kong's external trade, especially those relating to trade policies and measures adopted in its major markets. The Americas Division has, in addition, responsibility for work related to trade- related discussions in the Organisation of Economic Co-operation and Development (OECD), while the Europe, Africa and Middle East Division is also responsible for origin certification.

The fifth division is the Systems Division, which is responsible for the textiles export control system, the Textiles Trader Registration Scheme, non-restrained textile licensing, the computerisation of the department's licensing systems, the import

TRADE AND INDUSTRY

and export licensing of commodities other than textiles, the rice control scheme, and common services.

      The department is assisted in its work on commercial relations by 10 overseas Hong Kong Economic and Trade Offices, including two new ones opened in 1995 in Sydney and Singapore. All overseas offices are under the administration of the Trade and Industry Branch.

Hong Kong Economic and Trade Offices

These offices seek to promote Hong Kong's economic and trade interests by enhancing understanding of the territory among opinion-formers; closely monitoring developments that might affect the territory's economic and trading interests, such as proposed legislation; and liaising closely with the business and commercial sectors, politicians and the media. They also have a role in promoting Hong Kong's image

overseas.

The Geneva Office represents Hong Kong as a contracting party to the WTO. It also represents Hong Kong as an observer on the Trade Committee as well as the Committee on Financial Markets of the OECD in Paris, and is responsible for commercial relations with Switzerland.

The Brussels Office represents Hong Kong's economic and trade interests to the European Commission and, through the Commission, to the member states of the EU. It is also responsible for Hong Kong's economic and trade relations with some other European countries and for encouraging inward investment from Europe.

      The London Office is responsible for Hong Kong's commercial relations with the United Kingdom, and inward industrial promotion activities in Finland, Norway, Sweden and the United Kingdom. It represents Hong Kong as an Associate Member of the International Maritime Organisation and co-ordinates all maritime-related matters which arise in the United Kingdom and Europe. It is also responsible for monitoring parliamentary activities in the United Kingdom that are of interest to Hong Kong.

The offices in Toronto, Tokyo, Singapore and Sydney closely monitor economic and trade developments, proposed legislation and other matters in their host countries which may affect Hong Kong's trade and economic interests.

There are three offices in the USA: in Washington, New York and San Francisco. In recognition of the importance of the USA-Hong Kong relationship to the territory's economic and trade interests, the government decided to upgrade its representation there by appointing a Commissioner in October 1993 to supervise and co-ordinate the work of the three offices.

Participation in International Organisations

As an integral part of the Asia-Pacific economy and an important regional services centre, Hong Kong has a role to play and a contribution to make in regional economic co-operation.

The territory's economic links with the region continued to expand. In 1995, some 80.1 per cent of Hong Kong's total external trade was conducted with the other 17 member economies of APEC.

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During the year, Hong Kong participated actively in the work of APEC. In April, the Secretary for the Treasury attended the APEC Finance Ministers' Meeting held in Bali. The Secretary for Economic Services attended the APEC Telecommunications and Information Industry Ministers' Meeting held in Seoul, in May, and the APEC Transportation Ministers' Meeting in Washington in June.

The Secretary for Trade and Industry attended the APEC Small and Medium Enterprises Ministerial Meeting in Adelaide in September, the APEC Ministers' Conference on Regional Science and Technology Co-operation in Beijing in October; and the APEC Ministerial Meeting in Osaka in November. The Financial Secretary represented Hong Kong at the APEC Economic Leaders' Meeting also held in Osaka in November.

Hong Kong contributed substantially to the formulation of the Action Agenda which was issued at the Economic Leaders' Meeting and which laid down a road map for APEC to achieve the goal of free trade in the region by 2020.

The Hong Kong Committee of the PECC, set up in March 1990 to advise on and co-ordinate the territory's participation in, and input to, the PECC process, continued to participate actively in the Council's various task forces and fora, including the Pacific Economic Outlook, Trade Policy Forum, Financial Markets Development Project and other activities of interest to the Hong Kong economy. A Hong Kong delegation comprising representatives from the business, academic and government sectors participated in the 11th General Meeting of the PECC, held in Beijing from September 27 to 29.

Since 1989, Hong Kong has been participating actively in workshops organised by the Organisation for Economic Co-operation and Development (OECD), as part of its informal dialogue with Dynamic Non-Member Economies. In April 1994, Hong Kong became an observer on the OECD Trade Committee which is an important forum for debates and discussions on trade policy matters, many of which are of concern to the territory. Ideas which are first introduced in this committee are often followed up in other international organisations like the WTO and translated into binding multilateral agreements or codes.

Hong Kong Trade Development Council

The Hong Kong Trade Development Council (TDC) was set up by statute in 1966 with a mandate to promote Hong Kong's trade. Over the years, it has established more than 50 offices in 34 countries, effectively serving Hong Kong's manufacturers and traders as their marketing arm.

The TDC saw strong growth in 1994-95. It organised over 300 international promotional events, providing cost-effective channels for local manufacturers and traders to reach international buyers. These events attracted a record 10 500 Hong Kong companies to participate, generating business worth more than $36 billion to them. Of the 18 fairs and exhibitions organised by TDC in Hong Kong during the year, five are the largest in Asia. The fairs attracted more than 6 600 exhibitors and 1.4 million visitors to Hong Kong.

Central to the TDC's mission is the opening of new and emerging markets for Hong Kong companies. During the year, the TDC devoted nearly two-thirds of its promotional resources to the development of new and emerging markets such as mainland China, Japan, South-east Asia, India, the Middle East, South Africa,

SPETACHS

137

¿TEAS

Hong Kong is the world's eighth-largest trading entity by value and the Hong Kong Trade Development Council (TDC) acts as its overseas trade promotion arm. During the year, the TDC organised more than 300 international promotional events, with 18 fairs and exhibitions in Hong Kong - five of them the largest in Asia. The fairs attracted more than 6 600 exhibitors and 1.4 million visitors to Hong Kong. Former TDC Chairman, the Baroness Dunn, is shown admiring exhibits at the 12th Jewellery Fair, which she opened in March.

LEFT: Fashion flair on show at a major international fair organised by the TDC to highlight the territory's clothing exporters. The industry is the territory's largest domestic export earner, accounting for more than $70 billion in 1995.

PREVIOUS PAGE: A microscope helps this technician keep a close control on product standards at Swire Technologies Limited, which provides semiconductor assembly and testing services to the electronics industry. The firm won the 1995 Hong Kong Award for Industry for quality.

     Hong Kong's - and Asia's - first integrated chemical waste- treatment centre was designed and built by Enviropace Limited, which won the 1995 Hong Kong Award for Industry in the environmental performance category. Company staff are shown monitoring treatment processes at the plant on Tsing Yi Island.

TRADE AND INDUSTRY

      Russia, Eastern Europe and Central and South America. Special emphasis was placed on identifying new business opportunities for Hong Kong companies, and promoting Hong Kong as a reliable source of world class, competitively-priced products. The newly established TDC offices in these markets serve manufacturers and traders well by providing much-needed local market knowledge and business contacts.

The established markets of North America and Europe were nevertheless not ignored. In helping Hong Kong companies to meet the challenge of increasing competition in these established markets, the TDC continued to help expand and upgrade the presence of Hong Kong companies at the world's largest trade fairs. Through business seminars and the expansion of high-level contacts, the TDC placed strong emphasis on fostering a more favourable environment for Hong Kong's trade. The extension to the Hong Kong Convention and Exhibition Centre entrusted to the TDC will greatly enhance Hong Kong's position as Asia's leading trade fair capital. Under construction on reclaimed land in North Wan Chai and scheduled for completion in mid-1997, the new extension will more than double the capacity of the current centre. Apart from being an architectural landmark for Hong Kong, the extension will provide first-class venues for large-scale exhibition activities, making it possible for a significant expansion in the number and scale of world-class events to be held in Hong Kong.

To ensure the TDC's trade and information services match Hong Kong's position as Asia's business hub, the council placed strong emphasis on upgrading its information resources and services, and making it easier for traders to access the services. The year saw the opening of a new Electronic Data Centre in the TDC Business Library, and the use of cutting-edge computer technologies to equip the TDC Fashion and Design Library. A TDC page was launched on the Internet during the year, providing the council's 35 million users world-wide with easy access to handy information on TDC services and on the ways of doing business in Hong Kong.

The Trade Enquiry Service operated by the council matches thousands of com- panies across the world with Hong Kong buyers and suppliers. The service is particularly useful to Hong Kong companies which lack the resources to build their own networks of overseas buyers. In 1994-95, the TDC handled some 350 000 trade enquiries and significantly expanded the size of its databank, which now has information on more than 66 000 Hong Kong companies, 303 000 overseas companies and 145 000 mainland business contacts.

Backed by nearly 30 years' experience, and as a pioneer of trade publishing in Hong Kong, the TDC crossed another frontier in early 1995. It entered the era of multi- media publishing by producing the world's first interactive CD-ROM for the toy industry, featuring more than 10 000 products from 651 Hong Kong companies. The council's 13 product magazines, with a combined global circulation of more than two million copies, contained more than 23 000 pages of information on Hong Kong products and suppliers, which helped to strengthen Hong Kong's position as Asia's major sourcing, distribution and trade servicing hub.

The TDC is at the forefront of efforts to project a modern, dynamic image of Hong Kong as a sourcing hub and to promote the territory's design capabilities. Through the TDC Design Gallery, the council continued to encourage and promote design excellence. The Gallery also has another function -- to help local manufacturers and

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 designers test-market more than 18 000 innovative products to the 50 000 local and international visitors who come to the Design Gallery each month.

  Fashion is a flagship for design promotion. The TDC stages regular salon shows in Hong Kong to launch the collections of local designers. It also stages large-scale catwalk shows both overseas and on the mainland to introduce Hong Kong designers and labels to international audiences. In 1994-95 the collections of more than 150 individual designers and labels were featured through the TDC's 35 fashion shows around the world.

  Most importantly, to raise Hong Kong's profile as an important trading power and to advance its business interests in world markets, the TDC conducts an active programme to develop contacts with international business leaders, policy-makers and the media. The connections built are most helpful in spreading positive messages about Hong Kong, and its advantages as a business hub in Asia. The TDC received more than 350 missions from 36 countries, involving more than 4 000 company executives during the year.

Hong Kong Export Credit Insurance Corporation

The Hong Kong Export Credit Insurance Corporation (ECIC) was created by statute in 1966 to provide insurance protection for Hong Kong exporters against non- payment risks arising from commercial and political events which are not normally insured with commercial insurers. Its capital is owned by the Hong Kong Govern- ment which also guarantees its contingent liability, currently standing at $7,500 million.

  Apart from the initial injection of HK$20 million from the government, the ECIC is required to secure sufficient revenue to meet its expenditure from one year to another. Throughout its 29 years in operation, ECIC has been able to achieve this target without any cost to Hong Kong tax-payers.

  The ECIC's achievement is mainly attributed to its commercial approach in taking on risks without prejudice to any industry or trade. To ensure that there is proper control of these risks, the classes of insurance contracts into which the ECIC may enter, and the nature of risks against which it may insure, are subject to the approval of the Financial Secretary. The ECIC also has the benefit of the advice of an advisory board comprising representatives from the banking, insurance, legal, trade and industrial sectors and government officials.

  The ECIC's most important insurance product is the Comprehensive Shipments Policy, which accounted for nearly 90 per cent of its total insured turnover in 1994-95. This policy covers consumer goods exported/re-exported from Hong Kong on credit terms of up to 180 days. Another commonly used policy is the External Trade Shipments Policy, which covers goods manufactured outside Hong Kong and exported directly to third-country buyers. Cover for services and capital goods can also be tailor-made to meet exporters' individual needs.

  During 1994-95, total insured business reached $16,674 million, representing an increase of seven per cent over that in 1993-94. Gross premium income increased by eight per cent to $99.27 million. Despite higher claims and lower investment income, the ECIC still achieved a surplus of $34.29 million.

  Internationally, the ECIC maintains close co-operation with members of the International Union of Credit and Investment Insurers (the Berne Union) - a

TRADE AND INDUSTRY

network of 43 credit and investment insurers from 34 countries through various activities including meetings, workshops and consultations.

In 1994-95, various new programmes were designed for implementation in 1995-96 and subsequent years, to further the ECIC's mission to encourage and support export trade through the provision of professional and customer-oriented services. For instance, the ECIC has introduced a new insurance facility to cover the risks incurred by banks acting as financiers for export trade. These activities aim at providing more responsive, innovative and cost-effective services to Hong Kong exporters.

Other Trade and Industrial Organisations

      Several associations have been established in Hong Kong to represent the interests of industry and commerce. Among the larger, longer-established and more influential associations are the Federation of Hong Kong Industries, the Chinese Manufac- turers' Association of Hong Kong, the Hong Kong General Chamber of Commerce and the Chinese General Chamber of Commerce. Other important organisations include the Hong Kong Management Association, the Hong Kong Exporters' Association, the American Chamber of Commerce, the Indian Chamber of Com- merce and the Hong Kong Japanese Chamber of Commerce and Industry.

The Federation of Hong Kong Industries is a statutory body, established in 1960 to promote and protect the interests of Hong Kong's manufacturing industry. It has a membership of more than 2 600. It offers a wide range of services, covering certificates of origin, the Hong Kong Quality Mark Scheme, a custom-built multi- risks insurance policy, consultancy work on ISO 9000 quality assurance, trade marks and copyrights, trade enquiries and economic research. The federation services the Hong Kong Toys Council, the Chemical and Pharmaceutical Industries Council, the Transport Services Council, the Hong Kong Watch and Clock Council, the Hong Kong Electronics Industry Council, the Hong Kong Plastics Industry Council and the Hong Kong Mould and Die Council. It also runs the annual Young Industrialist Awards of Hong Kong and is responsible for organising the consumer product design award category of the Hong Kong Awards for Industry.

The Chinese Manufacturers' Association of Hong Kong (CMA), established in 1934, is a member of the International Chamber of Commerce and has a membership of nearly 4000. Services rendered include the issue of certificates of origin, trade enquiries, trade promotion services, organisation of seminars and training courses, and operation of two pre-vocational schools on technical education. The CMA encourages product development and quality improvement. The CMA Testing and Certification Laboratories provide technical backup services, including materials and product testing, pre-shipment inspection and technical consultancy services. Since 1989, the CMA has been the organiser of the machinery and equipment design award category of the Hong Kong Awards for Industry.

       The Hong Kong General Chamber of Commerce is the oldest internationally- recognised trade association in Hong Kong and is one of the 10 largest chambers of commerce in the world. Founded in 1861, it has around 4 000 members. The chamber organises trade and goodwill missions overseas, receives in-bound delegations, and handles trade enquiries. It is authorised by the government to issue certificates of origin and is the sole local issuing authority for international Association Temporarie Admission Carnets. The chamber is represented on a wide range of official advisory committees and bodies. It founded and formed the Hong Kong Article Numbering

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Association, the Hong Kong Coalition of Service Industries and the Hong Kong Franchise Association; and sponsors the Hong Kong Committee of the Pacific Basin Economic Council.

  Established in 1900, the Chinese General Chamber of Commerce is an association of local Chinese firms, businessmen and professionals. It has a membership of around 6 000. Services provided include the issue of certificates of origin and organisation of seminars, exhibitions, trade missions and other trade promotional activities. The chamber also maintains close links with trade organisations in China. Since 1957, it has issued invitations on behalf of the Chinese Export Commodities Fair authorities to local Chinese firms to attend the fair. It has run courses on Hong Kong's economy for senior government officials of China since 1982.

The Hong Kong Management Association is a professional management organisa- tion, incorporated in 1960 to improve the efficiency and effectiveness of management in Hong Kong. With a membership of around 10 000, it organises some 1 600 training programmes yearly and provides various management services such as translation, recruitment and the organisation of exhibitions.

The Hong Kong Exporters' Association was formed in 1955, and has a membership of 400 export and manufacturing companies. It disseminates trade information, voices members' concerns and assists in solving any trade problems encountered by its members.

Customs and Excise

The Trade Controls Branch of the Customs and Excise Department is responsible for enforcement of the Import and Export Ordinance and other legislation relating to certification of origin, textile import and export control, strategic commodities control, reserved commodities control, the trade declaration system, and consumer protection.

The branch works closely with the Trade Department to safeguard the integrity of the certification of origin and textile import and export licensing systems, which are of vital importance to Hong Kong for continued access to overseas markets. For this purpose, the branch carries out a vigorous enforcement programme by way of factory and consignment inspections, investigations and prosecutions. A high level of enforcement action is maintained against country of origin and transhipment frauds. Such activities include the operation of a reward scheme and the setting up of a special task force to target suspect shipments. The branch also maintains close co- operation with the enforcement authorities in Hong Kong's major markets to combat the frauds.

The branch plays a major role in the enforcement of consumer protection legislation, which includes the Weights and Measures Ordinance, Marking Orders for gold and platinum articles and the Toys and Children's Products Safety Ordinance. Through spot checks on retailers, the branch protects consumers from fraudulent or unfair business practices in connection with quantity, weights and measures. The branch also carries out surprise inspections on gold and jewellery shops to ensure that the content of gold and platinum is correctly marked. In 1995, the branch expanded its enforcement activities in collaboration with the Consumer Council to track down unsafe toys and children's products on the local market. This has resulted in an increased number of seizures of unsafe goods and prosecutions against the suppliers.

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:

In October 1995 the branch took on the additional responsibility of enforcing the new Consumer Goods Safety Ordinance, which covers a wide variety of consumer goods not yet covered under existing legislation.

Trade in Endangered Species

The import, export and possession of endangered species of animals and plants, including parts and derivatives, are regulated by the Animals and Plants (Protec- tion of Endangered Species) Ordinance, which gives effect to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Licensing policy follows closely the principles of the Convention. Commercial import and export of highly-endangered species are prohibited, and trade in less-endangered species is subject to licensing requirements.

       The ordinance is administered by the Agriculture and Fisheries Department, and enforced by the department and the Customs and Excise Department through checking at entry points, markets, shops and restaurants, as well as inspection of licensed endangered species shipments. All suspected offences are investigated and prosecutions are instituted if there is evidence of a breach of the ordinance. During 1995, there were some 550 seizures and 410 prosecutions under the ordinance.

The ordinance was amended in January 1995 to provide for a sharp increase in penalties, which now range up to a maximum fine of $5 million and imprisonment for two years. The schedules to the ordinance were amended in July 1995 to reflect changes in the lists of endangered species subject to control as adopted in the Ninth Conference of the Parties to CITES.

Government Supplies Department

The Government Supplies Department is the government's central organisation for the procurement and supply of stores and equipment required by government departments and certain subvented organisations. It also seconds supplies staff to other departments to ensure a professional approach to the acquisition and maintenance of stores and equipment.

Since 1979, the department has represented the Hong Kong Government as an entity in the Agreement on Government Procurement of the GATT. Under the agreement, except for special requirements, all purchases exceeding Special Drawing Rights 130 000 ($1.41 million in 1995) are widely advertised and open to competi- tive bidding internationally. All purchases, ranging from simple office sundries to complex computer systems, are made entirely on the basis of the 'best value for money', regardless of the supply source. Due to its open procurement policy, goods and services are purchased from 38 countries and some 4 000 registered local and overseas suppliers.

       The department holds supplies of goods to meet general departmental needs in its main stores in Hong Kong and Kowloon. To achieve more economical use of resources and greater efficiency, the department is planning to move to a new purpose-built warehouse in 1996.

In 1994-95, the department placed orders of a total value of about $5.14 billion. In addition to local suppliers, other major sources of supply were the USA, Germany, the UK, China and Japan. Major items of purchase included food provisions, computer systems, medical supplies and equipment, and water pipes and treatment

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facilities. Air traffic control, telecommunication, meteorological and mechanised postal systems were also bought for the new airport.

Intellectual Property

The Intellectual Property Department, which includes the Trade Marks and Patents Registries, provides a focal point for the development of Hong Kong's intellectual property regime. The department is pursuing proposals for reform of the laws on trade marks, patents, copyright and designs. In November 1995, the Sino-British Joint Liaison Group agreed on the basis for the continued protection of all categories of intellectual property in Hong Kong after June 30, 1997, both under localised laws which are now being prepared, and under international conventions which will continue to apply to Hong Kong after June 30, 1997. An Intellectual Property (World Trade Organisation Amendments) Bill was introduced to the Legislative Council in October 1995 to fulfil Hong Kong's international obligations as a member of the World Trade Organisation to enhance the protection of intellectual property rights.

Trade Marks and Patents

The Trade Marks Registry is a registry of original registration. Trade marks are registered in respect of both goods and services under the Trade Marks Ordinance. The procedure in applying for registration is laid down in the Trade Marks Rules. Every mark must satisfy the requirements of the Trade Marks Ordinance before it may be accepted for registration in Hong Kong. During 1995, 16 553 applications were received, 13 816 of which were in respect of goods and 2 737 in respect of services. In all, 10 940 marks were registered in 1995, an increase of 24 per cent compared with 8 700 in 1994. The principal places of applicants' origin were:

Hong Kong

USA

Japan

France

UK

2 680

2 582

Germany Italy

533

350

1 224

Switzerland

343

612

607

Taiwan

276

Australia

204

110

The register had a total of 81 339 marks at December 31, 1995.

The Patents Registry is not a registry of original registration. It registers patents that have been granted in the UK or the European Patent Office designating the UK. The Registration of Patents Ordinance provides that any grantee of a UK Patent or an European Patent designating the UK may apply for registration of the patent in Hong Kong within five years from the date of its grant. This confers on the grantee the same privileges and rights as if the patent had been granted in the UK with an extension to Hong Kong. The privileges and rights run from the commencement of the term of the patent in the UK, and continue as long as the patent remains in force there.

Hong Kong registered a total of 1 960 patents during the year, an increase of 31 per cent compared with 1 500 in 1994.

Copyright

In May 1995, the criminal provisions of the Copyright Ordinance were amended to increase substantially the penalties against copyright piracy and to provide a second

TRADE AND INDUSTRY

tier of higher penalties against repeat offenders. The new maximum penalties for the possession of infringing copies of copyright works for trade and business are a fine of $25,000 per copy and two year's imprisonment. The penalties for possession of a plate for manufacturing infringing copies of copyright works are a fine of $250,000 and four-year imprisonment. In the case of a subsequent conviction the penalties are doubled. Moreover, the management of a body corporate or a partnership engaged in copyright piracy is now also liable to the same new penalties. The purpose is to deter criminal copyright infringement on a commercial scale.

Layout-Design (Topography) of Integrated Circuits

The Layout-Design (Topography) of Integrated Circuits Ordinance enacted in March 1994 automatically protects original layout-designs (topographies) of integrated circuits of qualified persons. There is no need to register or deposit the layout-design (topography) in Hong Kong.

Consumer Council

       Established in 1974, the Consumer Council is a statutory body charged with the responsibility for protecting and promoting the interests of consumers of goods, services and immovable property. The council's chairman, vice-chairman and 20 other members are all appointed by the Governor from a wide cross-section of the community. The council forms committees and working groups to deal with specific tasks in the field of consumer protection.

       The council's office is headed by the chief executive with a staff of 113. It is divided into seven functional divisions: complaints and advice, information and publication, research and testing, survey, trade practices, legal affairs and administration. The Trade Practices and Legal Affairs Divisions are new. The former undertakes important competition research and studies to promote fair trade practices, while the latter advises the council on legal matters affecting consumer interests and helps administer the Consumer Legal Action Fund.

       The Consumer Legal Action Fund was set up in November 1994 with a capital grant of $10 million from the government. It is a trust set up to give greater consumer access to legal remedies by providing financial support and legal assistance, with particular emphasis upon groups of consumers with similar complaints on cases involving significant public interest and injustice. The council is the trustee of the fund, and is advised by a management committee on the eligibility and merits of the cases seeking assistance. Where appropriate, the fund helps consumers to pursue their rights through court action or other ways. One case was resolved fairly promptly, to the satisfaction of a group of assisted consumers, without the need to initiate court action. The threat of legal action by the fund apparently provided the necessary deterrent.

       The council is engaged in a wide spectrum of activities promoting consumer rights. These include developing new consumer protection initiatives, conducting studies on the state of competition and trade practices of various business sectors, studying and responding to consultation papers and reports on consumer-related issues, mediating in consumer disputes, conducting product testing and surveys, dissemina- ting information and advice, and organising consumer education activities.

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In June 1995, the council, in association with the Consumers International, organised an International Conference on Fair Trading which was attended by over 200 local and overseas participants. It provided a useful opportunity for discussions among regulators, consumers and businessmen in fair trading and consumer protection issues.

-

The council's study report on gas supply, entitled Assessing Competition in the Domestic Water Heating and Cooking Fuel Market, was released in August 1995. The report concluded that, due to cultural, technical and legal factors, the three main domestic fuels in use in Hong Kong - liquefied petroleum gas (LPG), manufactured Towngas and electricity cannot be regarded as perfect substitutes for one another and that the market share of Towngas, which has a dominant position in the fuel gas market, will continue to grow. The council recommended that competitiveness in the gas supply market be improved by introducing regulation of the Hong Kong and China Gas Company Limited, the supplier of Towngas, and a 'common carrier' system under which other gas suppliers would have access to a common gas distribution network.

 In response to a competition study report of the council on the banking sector, the government accepted the recommendation to remove the interest rate cap on time deposits in phases. The first phase of liberalisation started in October 1994 followed by the second phase in January 1995. The interest rate caps on Hong Kong dollars time deposits fixed for more than seven days were deregulated. Having assessed the impact of the deregulation of time deposits, the government decided to further deregulate seven-day deposits from November 1995. The council will continue to strive for the total deregulation of interest rates on time deposits.

 During the year, the council, in conjunction with the Law Society, ICAC and trade organisations, drew up a new standardised agreement entitled Engagement Agreement of Property Agent (for Purchaser), which is meant to provide greater consumer pro- tection for property purchasers by stipulating the rights and obligations of estate agents. The agreement is also in line with the government's intention to regulate estate agents. In order to provide comprehensive and objective information on the residential property market, the council published in its monthly magazine CHOICE a regular column on the property prices, supply and trend for the reference of consumers, with a view to curbing excessive speculation in the market. Furthermore, as a member of the Law Reform Commission Sub-committee on Description of Flats on Sale, the council supported the publication of the Law Reform Commission's report on the subject in April 1995. The report recommended that developers should provide adequate and accurate sales information of uncompleted flats in Hong Kong. The government is considering the recommendations.

 The council continued to promote 'green consumerism' and sustainable con- sumption. A campaign to encourage people to use fewer plastic bags, for example, organised jointly by the Consumer Council, the Retail Management Association. and the Environmental Protection Department, was conducted in the retail sector from May 1995. More than 1 500 retail outlets participated, and over 30 per cent of participating retailers had achieved the 10 per cent reduction target. The campaign marked the success of the first industry-driven effort in reducing the quantity of plastic bags distributed in retail outlets and supermarket chains in Hong Kong. A similar campaign was carried out in some selected wet markets and was well supported by the stall operators and the public.

TRADE AND INDUSTRY

       During the year, the council responded to more than 180 000 consumer enquiries and processed 10 000 consumer complaints including 1 000 complaints from tourists. The settlement rate of consumer complaints stood at an average of 85 per cent of justifiable cases. The council also organised about 250 consumer educational activities at district level through the 16 consumer advice centres.

       In 1995, CHOICE maintained an average monthly circulation of 30 000 copies and was a regular source of consumer information to the public, as well as providing a stimulus for media coverage on a wide range of consumer issues and concerns. The council conducted a total of 34 product tests, 50 in-depth studies and 12 survey projects in 1995 with a view to collecting independent impartial information to assist consumers to make the right choice.

       The council works closely with the government through the Trade and Industry Branch, and trade and professional bodies, and was increasingly consulted on major policies affecting the interests of consumers, such as the Consultation Paper on Legal Services prepared by the Attorney General's Chambers. The council, as an executive and council member of the Consumers International, maintains regular contacts with its overseas counterparts.

Metrication

The government's policy on metrication seeks to promote and facilitate the progressive adoption of the International System of Units (SI) in Hong Kong. The Metrication Ordinance, enacted in 1976, provides for the eventual replacement of non-metric units by SI units in all legislation in the territory. Government depart- ments use metric units exclusively.

       The Metrication Committee, comprising representatives of industry, commerce, management and consumer bodies, and government officials, is the focal point of liaison on all matters concerning metrication. It advises on and encourages the commercial and industrial sectors to develop metrication programmes.

       During the year, the committee continued to direct its promotional efforts at the retail sector. It took part, for the second time, in the 6th Food Expo organised by the Hong Kong Trade Development Council. The metrication counter set up at the Expo proved to be an effective channel in enhancing public awareness of the issue. The committee also joined hands with a cookery magazine in successfully organising a metric recipe design competition targeted chiefly at housewives.

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8 EMPLOYMENT

114

THE Mandatory Provident Fund Schemes Ordinance was enacted in July 1995, giving the legislative framework for a mandatory, privately managed provident funds system. Employment in all major service sectors continued to grow during the year but declined further in the manufacturing sector as the structural shift in manpower resources continued.

  In the third quarter of 1995, the labour force had grown by four per cent compared with the corresponding period of 1994. The territory's total labour force stood at 3.1 million, of whom 62 per cent were male and 38 per cent were female. The unemployment rate for the third quarter 1995 was 3.5 per cent while the under- employment rate was 2.5 per cent, compared with 2.3 per cent and 1.1 per cent respectively a year ago.

  The majority of the employed, 77 per cent, were engaged in the service sectors 32.3 per cent in wholesale, retail and import and export trades, restaurants and hotels; 11.8 per cent in transport, storage and communication services; 12.2 per cent in financing, insurance, real estate and business services; and 20.7 per cent in community, social and personal services. About 13.3 per cent worked in the manufacturing sector. Structural shifts in employment during the past decade mean establishments in the service sectors now employ more than four times as many workers as the manufacturing sector. In September 1995, 1 874 455 persons worked in the various service sectors (not including most of the self-employed and those engaged in the provision of personal services), an increase of 0.2 per cent over the corresponding figure in 1994. Only 386 106 persons worked in the manufacturing sector (excluding outworkers), a drop of 11.9 per cent compared with a year ago.

  With this continuing shift in employment, many manufacturing workers have been displaced. The Employees Retraining Board, set up in 1992 to retrain affected workers, had put 105 947 workers through its retraining programmes by the end of the year. In April 1995, a new Job Matching Programme was launched to provide a job-matching service to displaced workers aged over 30.

  In terms of employment, the import and export trade is the largest industry group in the service sector, employing 535 793 persons in September. Other major service. industry groups include the retail trade, restaurants and business services, which employed 196 072, 182 057 and 148 225 persons, respectively.

  Despite declining employment, the clothing industry remains the largest manu- facturing industry, employing 111 539 persons in September. Establishments in the printing and publishing industry and the electronics industry are the next two largest groups of employers in manufacturing, employing 44 790 and 44 078 persons,

EMPLOYMENT

      respectively. Details of the distribution of establishments and employment by industry group are shown at Appendices 20 and 21, respectively.

Wages

Wage rates are calculated on a time basis, either daily or monthly, or on an incentive basis according to the volume of work performed. The average wage rate for employees up to the supervisory level, including daily-rated and monthly-rated employees, increased by 7 per cent in money terms between September 1994 and September 1995. After discounting for rises in consumer prices, the average wage rate decreased by 1.8 per cent in real terms.

In September 1995, the average monthly wage rate for the supervisory, technical, clerical and miscellaneous non-production workers in the wholesale, retail and import and export trades, restaurants and hotels sector was $10,153. This represented an increase of 7.2 per cent in money terms, but a decrease of 1.6 per cent in real terms, when compared with the same period of 1994.

At the same time, the average wage rate in the manufacturing sector rose by 5.6 per cent in money terms, equivalent to a decline of 3.1 per cent in real terms. For workers at the craftsman and operative levels in the manufacturing sector, 75 per cent received a daily wage of $210 or more in September 1995; while 25 per cent received $333 or more. The overall average daily wage was $280, or $7,087 per month, for these craftsmen and operatives.

Employee Benefits

The Employment Ordinance stipulates employment-related benefits and entitlements for employees including rest days, statutory holidays, annual leave, maternity leave, sickness allowance, severance payment and long-service payment. Many employers provide employees with additional fringe benefits and bonuses, such as year-end bonus of one month's pay or more before the Lunar New Year.

Mandatory Provident Fund Schemes

In January 1995, the government published the results of a consultation exercise on the proposed Old Age Pension Scheme which concluded that public opinion on the scheme was, at best, divided. The 6 665 submissions indicated that there would be greater public acceptance of a mandatory, privately managed provident fund system, particularly if it could be set up early. A system of mandatory provident fund (MPF) schemes is contained in the Mandatory Provident Fund Schemes Ordinance enacted in July 1995. The government will bring together the subsidiary legislation in about two years, the target being to have the MPF System in operation by mid-1997.

Under the MPF System, employees and employers will each contribute 5 per cent of the employee's income to a registered scheme. The accrued benefits will be fully vested and can be carried from one scheme to another when an employee changes job. A self-employed person will have to contribute 5 per cent of his income. Benefits will be preserved until retirement.

People coming from a place outside Hong Kong to work for a limited period, or who already have a home country retirement scheme, will be exempt from the provisions of the MPF Schemes Ordinance. The ordinance provides for the partial or complete exemption of employees covered by schemes registered under the

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Occupational Retirement Schemes Ordinance and their employers, provided that the schemes can satisfy requirements which are consistent with the fundamentals of the MPF System. Also exempt from the ordinance are employees covered by statutory pension schemes and their employers, and so will domestic employees and self- employed hawkers in the initial stage.

  A system of supervision will be developed to ensure that scheme members' contributions are kept in good hands and invested prudently. Only approved trustees will be allowed to operate registered schemes for the MPF System. A Mandatory Provident Fund Schemes Authority will be established to be responsible for all aspects of the MPF System, including its administration and regulation. To make good benefit losses due to any fraud and misfeasance, a Compensation Fund will be set up with an initial capital injection from the government. A Residual Provident Fund Scheme will be established to provide a last resort to those who cannot gain access to other registered schemes in the open market and where the authority cannot place them in any scheme.

  The Chinese Government has been kept informed of all developments through the Sino-British Joint Liaison Group and the government has promised that further consultation with interested sectors of the community will be conducted when drawing up the relevant subsidiary legislation.

  The government will continue to regulate voluntarily established occupational retirement schemes under the Occupational Retirement Schemes Ordinance. The two-year transitional period within which such schemes had to apply for registra- tion or exemption with the Registrar of Occupational Retirement Schemes expired on October 15, 1995. By year's end, 12 309 schemes had been registered and 1 069 schemes were exempted. All registered schemes must comply with the requirements and regulations of the ordinance.

Labour Administration and Services

 The Labour Department, headed by the Commissioner for Labour, implements labour policies and enforces labour legislation. These objectives are achieved through the promotion of the safety, health and welfare of the working community. Harmonious labour relations and responsible trade unionism are promoted and employees' rights and benefits are safeguarded. Employment services and careers guidance are provided free.

Labour Conditions

Children aged under 15 years may not be employed in the industrial sector. Children aged 13 and 14 years may take up employment in non-industrial establishments, subject to the condition that they attend full-time schooling if they have not yet completed three years of secondary education and other provisions which are aimed at protecting their safety, health and welfare.

  The Labour Inspectorate of the Labour Department monitors employers' com- pliance with requirements in the Employment Ordinance relating to the employment of women, young persons and children, payment of wages, annual leave and holidays, sickness allowance and maternity protection. The ordinance applies to local and foreign workers.

EMPLOYMENT

Labour Legislation

The Commissioner for Labour is the principal adviser to the government on labour affairs. He initiates proposals to enact new labour laws and amend existing ones. The government's labour policy is to achieve a level of safety, health and welfare for employees in Hong Kong broadly equivalent to those provided in neighbouring countries at a similar stage of economic development.

       During 1995, 14 pieces of labour legislation were enacted. Among them, the Occupational Deafness (Compensation) Ordinance set up a compensation scheme for workers suffering from noise-induced deafness by reason of their employment. The Employment Ordinance was amended to improve the provisions on severance payment and long service payment by increasing the years of reckonable service for the calculation of the payment and raising the payment ceiling. The rate of payment for female employees taking maternity leave was increased from two-thirds to four- fifths.

       The Employees' Compensation Ordinance was amended to make compensable an accident happening to an employee while travelling between Hong Kong and his place of work outside Hong Kong by means of transport arranged by or agreed with his employers for the purposes of and in connection with his employment. The levels of compensation under the Employees' Compensation Ordinance and the Pneumoconiosis (Compensation) Ordinance were raised, effective from January 1,

1996.

Enforcement of Legislation

During 1995, there were 8 978 prosecutions for breaches of various ordinances and regulations administered by the department. Fines totalling $47,831,262 were imposed.

Labour Advisory Board

The Labour Advisory Board, a non-statutory body, was set up to provide a forum for consultation on labour policies and legislation. It has six members representing employers and another six representing employees. The Commissioner for Labour, or his deputy, is the ex-officio chairman.

To cope with the increasing range and complexity of work and to encourage greater participation by employers and employees, committees have been set up under the board on special subjects including employment services, industrial safety and health, labour relations, employees' compensation and the implementation of international labour standards. The views of the employers and employees canvassed through⠀⠀⠀ consultation with the board help to formulate a progressive programme of labour legislation for the benefit of all concerned.

International Labour Standards

The International Labour Conventions of the International Labour Organisation prescribe standards on matters such as labour administration, employment rights, and occupational safety and health to be modelled on by the member states. These conventions have significant influence on the formulation of labour legislation in the territory. At the end of 1995, Hong Kong applied 49 conventions which compared favourably with most members of the International Labour Organisation in the

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region. The Commissioner for Labour ensures that Hong Kong's obligations under these conventions are observed.

Trade Unions

Trade unions must be registered under the Trade Unions Ordinance, which is administered by the Registrar of Trade Unions. Once registered, a trade union becomes a corporate body and enjoys immunity from certain civil suits.

  During the year, 21 new unions were registered. At the year's end, there were 565 unions, comprising 522 employees' unions, 26 employers' associations and 17 mixed organisations of employees and employers.

  Most employees' unions are affiliated to one of the five major labour organisations registered under the Societies Ordinance: the Hong Kong Federation of Trade Unions (97 affiliated unions with about 209 000 members), the Hong Kong and Kowloon Trades Union Council (68, 31 200 members), the Hong Kong Confedera- tion of Trade Unions (29, 79 600 members), the Joint Organisation of Unions -- Hong Kong (16, 8 200 members), and the Federation of Hong Kong and Kowloon Labour Unions (24, 18 100 members).

Labour Relations

In 1995, the Labour Relations Division of the Labour Department conciliated in 194 trade disputes involving nine work stoppages and a loss of 1 018 working days. The division also dealt with 22 180 claims for wages and other employment-related payments.

  The Labour Relations Ordinance provides the machinery for special conciliation, voluntary arbitration and boards of inquiry to settle trade disputes which cannot be resolved through ordinary conciliation. The division tries to promote harmonious labour-management relations in the private sector through visits and talks to individual establishments, employers' associations and employees' trade unions. It organises trade union gatherings, training courses, workshops, seminars and exhibi- tions; and publishes newsletters, information leaflets and pamphlets on a wide range of labour matters. During the year, two training videos which can be loaned to outside organisations were produced.

The Labour Tribunal

The Labour Tribunal is part of the judiciary and provides a quick, inexpensive and informal method of adjudicating various types of disputes between employees and employers which are not within the exclusive jurisdiction of the Minor Employment Claims Adjudication Board.

  In 1995, it heard 6 845 cases involving employees as claimants, and a further 800 cases initiated by employers. More than $102 million was awarded by the presiding officers. Of these cases, 90.28 per cent were referred by the department's Labour Relations Division after unsuccessful conciliation attempts.

Minor Employment Claims Adjudication Board

The board was set up in December 1994 within the Labour Department to adju- dicate employment claims under the Employment Ordinance and in accordance with

EMPLOYMENT

individual employment contracts. It hears all employment claims involving not more than five claimants for a sum of money not exceeding $5,000 per claimant.

In 1995, the board heard 1 412 cases involving employees as claimants, and a further 258 cases filed by employers. The board awarded a total of about $3.319 million on these claims.

Protection of Wages on Insolvency Fund

The Protection of Wages on Insolvency Fund is financed by an annual levy of $250 on each business registration certificate. Employees who are owed wages and other employment termination benefits by their insolvent employers may apply to the fund for ex gratia payment. The fund covers wages not exceeding $18,000 accrued during a period of four months preceding the date of application and wages in lieu of notice for termination of up to $6,000 or one month's wages, whichever is less.

The fund's coverage for severance payment was extended during the year from the previous maximum of $8,000 plus 50 per cent of any entitlement in excess of $8,000 to $24,000 plus 50 per cent of any entitlement in excess of $24,000. In 1995, the fund received 6 035 applications and paid out a total of $96.6 million to 5 435 applicants.

Finding Employment

The Employment Services Division of the Labour Department provides free place- ment services to help employers recruit staff and to assist job-seekers in finding suitable employment. Since 1992, employers wishing to employ workers from outside Hong Kong under the importation of labour schemes must first notify the division of the vacancies available. This requirement ensures that local job-seekers have priority in filling the vacancies.

In April 1995, the division launched a Job Matching Programme which aims at providing intensive job matching and counselling services to the unemployed job- seekers aged 30 or above. Also, a Special Placement Team was established within the division to offer employment assistance to local construction workers seeking work in contracts under the New Airport and Related Projects. Both programmes have achieved encouraging results and were well received by job-seekers and employers. During the year, 123 868 job-seekers registered with the division while employers reported 92 290 vacancies. The division made 156 948 job referrals and placed 22 327 persons in employment.

Employees Retraining Scheme

The Employees Retraining Board was set up in 1992 to provide skills retraining for local employees to cope with structural changes in the economy. It consists of a tripartite governing body comprising representatives from the government, employers and employees. Training institutions and manpower planning practitioners are also represented in the governing body.

Training is delivered through an expanding network of approved training bodies, with funding support for approved courses from the Employees Retraining Fund. The fund received a capital injection of $300 million from the government. Its regular income comes from a levy charged on employers employing foreign workers under two labour importation schemes at the rate of $400 per worker per month.

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  The Employees Retraining Scheme offers a wide variety of day and evening courses for local employees aged 30 and over. The courses fall into four main categories job search skills, job-specific skills, general skills and skills upgrading. Apart from skills upgrading courses, all courses are free and retrainees receive a retraining allowance of $4,000 per month for attending full-time courses. By the end of 1995, retraining had been provided to 105 947 persons under the scheme.

  The scheme offers a free employment service for employers wishing to employ retrainees. Financial incentives, in the form of reimbursement of training expenses, are offered under the On-the-Job Training Scheme to employers employing retrainees.

Employing the Disabled

 The Selective Placement Division of the Labour Department helps disabled persons integrate into the community through open employment. It provides a free employment counselling and placement service for the hearing impaired, sight impaired, physically disabled, chronically ill, mentally retarded and mentally restored

persons.

  During the year, the division launched a series of activities to promote the employment of the disabled. These included exhibitions; presentation of awards to outstanding employers and disabled employees; special campaigns to canvass vacancies; presentations to interested parties and publication of quarterly newsletters, pamphlets and guidebooks. With the assistance of Radio Television Hong Kong, a series of television programmes was produced to promote acceptance of the disabled and their integration into the community.

  In March, the Governor chaired the Second Summit Meeting on Employment of Disabled Persons which was attended by major employers' associations and groups representing the disabled in Hong Kong. Promotional and publicity activities were launched after the meeting to enhance the employment opportunities of the disabled.

Careers Guidance

The Careers Advisory Service of the Labour Department helps young people choose a career best suited to their talents, interests and abilities by promoting careers education. It also provides careers teachers with back-up information in conducting their careers guidance activities.

  The service operates two careers information centres in disseminating careers information through written and audio-visual materials like careers pamphlets, job sheets, slide presentations and films. All these materials are available to the public free of charge.

  The service also organises a wide range of activities to arouse the careers awareness of young people. In February, it co-organised the fifth Education and Careers Expo with the Hong Kong Trade Development Council which attracted more than 180 000 visitors. The 14th Careers Quiz for students, organised in November, attracted more than 13 600 participants. Throughout the year, it arranged student group visits to various commercial and industrial establishments.

EMPLOYMENT

Foreign Workers

The Immigration Department controls the entry of foreign workers. Foreigners may work or invest in Hong Kong if they possess a special skill, knowledge or experience of value to and not readily available in Hong Kong, or if they can make a substantial contribution to the economy.

The department applies the policy in a flexible manner. Genuine businessmen and entrepreneurs are welcome to establish a presence in Hong Kong, bringing with them capital and expertise. Qualified professionals, technical staff, administrators and managerial personnel are also admitted with minimum formalities. During the year, 19 030 professionals and persons with technical, administrative or managerial skills from more than 60 countries were admitted for employment.

      To meet the special need identified by the business sector, the government introduced a pilot scheme in April 1994 to let local employers bring in 1 000 professionals and specialists from China. So far, 349 of these professionals have been admitted. Apart from persons with special expertise, employers could also import skilled workers and experienced operatives under the General Importation of Labour Scheme. During the year, 8 000 such workers were admitted, bringing the total to 11 973. In addition, to facilitate the construction of the new airport and related projects, contractors were allowed to bring in construction workers from overseas. During the year, 5 751 workers were admitted, bringing the total to 10 879.

Foreign Domestic Helpers

The entry of foreign domestic helpers is subject to the conditions that they have experience in that field of work, that their employers are bona fide Hong Kong residents who are prepared to offer reasonable terms of employment including wages and accommodation, and that the employers are willing to provide for the helpers' maintenance in the territory as well as the costs of repatriation to their country of origin.

In the past few years, the demand for foreign domestic helpers has increased steadily. In 1995, there were 157 026 such helpers in Hong Kong, representing an increase of 11.1 per cent compared with 141 368 in 1994. About 83.5 per cent of these domestic helpers were citizens of the Philippines.

Employment Agencies

The Labour Department's Employment Agencies Administration enforces Part XII of the Employment Ordinance and the Employment Agency Regulations monitoring the operation of employment agencies through licensing. It issued 1 185 licences in 1995.

Employment Outside Hong Kong

The External Employment Service administers the Contracts for Employment Outside Hong Kong Ordinance in safeguarding the interests of local employees engaged to work outside Hong Kong for foreign employers. All such employment contracts involving manual workers, or non-manual employees with monthly wages not exceeding $20,000, must be attested by the Commissioner for Labour. The department attested 16 contracts in 1995.

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Industrial Safety

A comprehensive review on industrial safety was completed and a public consultation paper published in July. The government is implementing the recommendations, the main one being to introduce safety management systems at the company level so as to cultivate a strong safety culture among proprietors and workers and to bring about long term improvements to safety performance.

The Factory Inspectorate Division of the Labour Department enforces the Factories and Industrial Undertakings Ordinance and its subsidiary regulations. This provides for the safety and health of workers in factories, catering and cargo- handling establishments, building and engineering construction sites and other industrial undertakings. Advice and assistance are given to management on ways of providing and maintaining a safe and healthy working environment. The division also investigates industrial accidents and dangerous incidents.

  Regulation 15A of the Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations became effective in January. It requires the owner of cranes and lifting appliances to ensure that operators are competent and hold valid certificates.

Amendments to the Factories and Industrial Undertakings (Safety Officers and Safety Supervisors) Regulations came into operation in June. These state that a contractor or proprietor with 100 employees or more in one or more construction sites or shipyards must employ a safety officer, and must have a safety supervisor in any construction site or shipyard with 20 or more employees.

The Factories and Industrial Undertakings (Suspended Working Platforms) Regulation became effective in July with the section relating to the requirement on certification of trained operators scheduled for operation six months later. It establishes safety standards relating to the construction and operation of suspended working platforms.

  To promote safety management and self-regulation, the Safety Programme Pro- motion Unit helps to set up in-plant safety committees involving employers and employees. By year's end, the unit had helped set up 339 safety committees. The unit also assists management and workers to identify and assess hazards at work, and to devise safety and health programmes.

The Factory Inspectorate emphasises regulatory activities in the high-risk areas of factories, catering establishments and construction sites. Special enforcement campaigns were launched to cover machinery safety, chemical safety, fire prevention and safety on construction sites including those of the airport core projects. During these campaigns, 20 355 factories, 232 catering establishments and 1 196 construction sites were inspected.

  The Industrial Safety Training Centre conducts legislative-related safety training courses for workers, supervisors and managers. It gives safety talks to university and post-secondary students and to other organisations. The centre continued to assist the Hong Kong Polytechnic University and the City University of Hong Kong to organise evening courses leading to the award of certificates in industrial safety. It also helped the Construction Industry Training Authority to run certificate courses for construction safety officers.

EMPLOYMENT

      In conjunction with the Information Services Department, the inspectorate launched a major publicity campaign to promote industrial safety and health. Six television and radio announcements of public interest were produced. An award scheme was introduced for safety officers and symposia and seminars were held on safety and health management, lift and escalator safety, and safety and health education and training.

Special enforcement teams were set up to inspect construction sites at the new airport projects and to ensure marine work safety in a joint effort with the Marine Department. The inspectorate helped company and site level safety committee meetings to formulate safety policies, review safety standards and procedures, and monitor safety performance on site. Construction site safety award schemes were launched for the construction industry and airport core programme projects.

Boiler and Pressure Vessel Safety

The Pressure Equipment Division of the Labour Department administers the Boilers and Pressure Vessels Ordinance and the Gasholders Examination Ordinance to ensure the safe use and operation of such equipment.

The division conducts regular spot checks to ensure pressure equipment meets the required safety standards; investigates accidents involving pressure equipment; conducts examinations for the issue of certificate of competency to boiler and steam receiver attendants and promotes safety. It approves the design of gasholders and carries out inspections during construction, and annually thereafter. The division also gives the Fire Services Department technical advice on the approval and initial inspections of pressurised containers and storage installations for compressed gases. The division processed 3 057 equipment registration applications, inspected 5 280 factories and 5 825 items of pressure equipment, and issued 452 certificates of com- petency and endorsements during the year. It also continued to assist the Haking Wong Technical Institute and the Occupational Safety and Health Council in organising training courses on the safe operation of pressure equipment. Four publicity safety seminars were held, attended by 671 persons, and 22 safety training courses were conducted.

Occupational Health and Hygiene

The Occupational Health Division of the department provides an advisory service to the public and the government on worker health and workplace hygiene, and complements the Factory Inspectorate Division in supervising health standards and practices in industry.

      It has published a series of booklets and codes of practice on occupational health and the prevention of occupational diseases. The Pictorial Guide on Occupational Health in Office Environment is the most recent publication.

      A major 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 were conducted in various industries and epidemiological studies on health and hygiene conditions were completed. These included surveys of health hazards in carparks, the dry cleaning industry, school dental clinics, toll booth collectors and the effect of ultraviolet radiation in the work environment. Programmes to monitor various occupational health hazards were also carried out.

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  The division undertakes medical examinations on persons exposed to ionising radiation, users of compressed-air breathing apparatus and government employees engaged in diving, asbestos work or pest control. It runs an occupational health clinic providing consultative services to workers with work-related illnesses, and provides medical support services to decompression sickness patients treated in the decom- pression chamber. It also takes part in the Pneumoconiosis Medical Board to assess workers suffering from silicosis under the Pneumoconiosis (Compensation) Ordinance.

  Its nurses handle medical clearance for employees' compensation cases. Its occupational health officers are appointed to special assessment boards and prostheses and surgical appliance boards under the Employees' Compensation Ordinance.

  The laboratory of the division, which is a member of the Hong Kong Laboratory Accreditation Scheme, continued to carry out analytical tests on environmental samples taken during site visits.

Occupational Safety and Health Council

The Occupational Safety and Health Council aims to promote a safer and healthier working environment through education and training; promoting the use of modern technology; dissemination of technical knowledge; provision of consultancy services; and encouraging co-operation and communication among government and non- government bodies with similar goals. It is a statutory body financed by a levy on the premium of employees' compensation insurance policies in Hong Kong.

The council has established 10 industry-based committees and two advisory committees - the Chemical Safety and Health Advisory Committee and the Occupational Health Advisory Committee. With the establishment of an Education and Information Centre in 1995, the council plans to expand its training and educational role in the dissemination of safety and health knowledge to the public both in variety and number of courses. A series of new safety and health management courses for managers, professionals and supervisors was organised during the year. The council continued to provide safety and health career professional development courses for graduate engineers in conjunction with the Hong Kong Institution of Engineers, and laboratory safety training for laboratory technicians with the Government Laboratory. Co-operating with the City University of Hong Kong, the council organised a certificate programme to boost the number of safety officers in Hong Kong. Tailor-made courses were also available to construction contractors, hotels, building management companies and manufacturing firms. A total of 6 000 people attended the council's courses in 1995. The council organised 12 seminars and symposia on current topics of safety and health and undertook several research projects. It continued to provide consultancy services, in particular for small estab- lishments, on a cost-recovery basis.

  Campaigns to arouse public interest included the Occupational Safety and Health Week held in November. There was a significant increase in co-operation with district-based organisations in staging promotional activities.

  To fulfil its role in dissemination of technical information, the council produces safety and health literature, codes of practice and guidebooks, the bi-monthly journal Green Cross, safety advice pamphlets, bulletins for individual industries and posters.

EMPLOYMENT

A comprehensive library of up-to-date videos, journals, microfilms, books and magazines on occupational safety and health is open for public use.

The council's Occupational Safety and Health Employees' Participation Scheme continued to offer financial assistance to employees' organisations running safety and health activities. The scheme subsidised 52 employees' organisations in 1995.

Employees' Compensation

The Employees Compensation Division of the Labour Department administers the Employees' Compensation Ordinance and the Pneumoconiosis (Compensation) Ordinance. It ensures that injured employees and dependants of deceased employees covered by the Employees' Compensation Ordinance obtain compensation from their employers for occupational diseases, injuries or deaths caused by accidents arising out of and in the course of employment. It also ensures that persons covered by the Pneumoconiosis (Compensation) Ordinance obtain speedy compensation from the Pneumoconiosis Compensation Fund. It administers a loan scheme to provide quick financial relief in the form of interest-free loans to employees injured at work and to dependants of employees who die from work-related accidents.

      Employees with work-related injuries which are likely to result in permanent incapacity are assessed under the two-tier Employees' Compensation Assessment Board system. Boards sit in 12 major hospitals throughout the territory. The Occupa- tional Deafness Compensation Scheme compensates employees suffering from occupational noise-induced deafness. It is administered by the Occupational Deafness Compensation Board which started to receive applications in July, 1995.

      The Employees Compensation Assistance Scheme makes payments of statutory compensation and damages awarded under common law, which are due to an injured employee or dependants of a deceased employee where an employer defaults or an insurer becomes insolvent. It also covers claims from employers who fail to obtain indemnity from their insolvent insurers.

During the year, 216 pneumoconiosis cases were awarded compensation from the Pneumoconiosis Compensation Fund for the first time. The Pneumoconiosis Com- pensation Fund Board, established to administer the fund, also financed research, educational and publicity programmes to enhance awareness of pneumoconiosis and to promote prevention of the disease. Pneumoconiosis sufferers diagnosed before January 1, 1981, and who are not covered by the Pneumoconiosis (Compensation) Ordinance, receive ex gratia payments on a quarterly basis from the government.

Telephone Enquiry Service

The General Enquiry Telephone Service of the Labour Department handles enquiries on labour legislation and matters relating to the employment of local and imported workers. It provides information on various services and callers can obtain infor- mation leaflets through the system if they have a fax machine. The system, with Cantonese, Putonghua and English language options, operates around-the-clock. Staff operators deal with the more complicated enquiries during office hours. During the year, the answering capacity of the service was enhanced and a record high of 1 620 100 calls were handled.

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AGRICULTURE is a comparatively small sector in Hong Kong which is characterised by rapid urbanisation. Farming is largely undertaken on the urban fringes and only about 3.4 per cent of the land is under cultivation. In 1995, local production accounted for 26 per cent of vegetables, 23 per cent of live poultry, seven per cent of live pigs, 11 per cent of freshwater fish and 71 per cent of all live and fresh marine fish consumed.

  Each day, Hong Kong people consume about 890 tonnes of rice, 940 tonnes of vegetables, 7 540 pigs, 360 head of cattle, 270 tonnes of poultry, 470 tonnes of fish and 1 680 tonnes of fruit. About 47 per cent of Hong Kong's food requirements are imported from China.

The Hong Kong Government does not give direct subsidies to the local agricultural industry or attempt to protect it from the free operation of market forces. It does, however, provide a variety of infrastructural and technical support services to facilitate local agricultural development.

The Agriculture and Fisheries Department implements government policies on agriculture and fisheries. It provides support services including wholesale marketing facilities, irrigation and drainage works, technical and development advice, adminis- tration of agricultural and fisheries loan funds, and development programmes such as the accredited farm scheme, the agricultural land rehabilitation scheme, and the moist pellet feed scheme for mariculture. Local production statistics are given at Appendix 25.

The Agricultural Industry

 Local agriculture is directed towards the production of high quality fresh food through intensive land use. This has resulted in the change from traditional rice farming to small but intensive crop and livestock farming over the past decades. The most common crops cultivated are leafy vegetables and high-value cut flowers. Production was valued at about $566 million.

Pigs and poultry are the principal animals reared for food. Livestock production has suffered a decline in recent years due to the implementation of a livestock waste control scheme. The trend is towards fewer but bigger farms. The value of locally- produced pigs in 1995 amounted to $265 million and that of poultry, including chickens, ducks, pigeons and quails, amounted to $386 million.

Agricultural Development

 Strong competition from imports, land and labour constraints, and progressive implementation of environmental pollution controls, have forced the agricultural

PRIMARY PRODUCTION

sector to adopt more modern farming methods. The department has been researching modern techniques suitable for application in Hong Kong.

      To increase the competitiveness and value of local produce, farmers are encouraged to cultivate premium vegetables and to introduce good quality breeding stocks of pigs and poultry. The department provides infrastructural and financial support through low-interest loans to farmers to enhance agricultural productivity and promote safe and environmentally friendly production methods.

To better protect the environment and consumers against pesticide residues, the department launched an Accredited Farm Scheme in late 1994. Accredited farms are strictly monitored and supervised on their use of pesticides. Produce is further checked for pesticide residues by the Vegetable Marketing Organisation, a quasi- government body, before marketing. Accredited produce is sold from specially labelled baskets at retail outlets selected by the Vegetable Marketing Organisation. The scheme has been generally well received and, in April 1995, it was extended to accredit farms in China supplying vegetables to Hong Kong. Progress has been encouraging.

The department implemented an agricultural land rehabilitation scheme in 1988 to return to cultivation fallow land not earmarked for development. The scheme effects improvements in irrigation, drainage and 'farm road access. Assistance - including tenure arrangements, advance payment of rents, soil improvement and marketing facilities is also available and the scheme has made good progress.

Since mid-1994, the department has been implementing a three-year Livestock Keeping Licensing Scheme under which all livestock farms are required to install and operate waste treatment systems to prevent pollution. At the end of 1995, the department had issued 115 licences and a further 269 applications were in process. The department has developed a non-polluting, odourless and effluent-free pig-on- litter method of pig raising which uses sawdust as bedding material on which pigs are raised. The used sawdust is recycled as soil conditioner or organic fertiliser for crop cultivation.

Besides technical support, the department administers loan funds which provide low interest loans to the agricultural sector. They are the Kadoorie Agricultural Aid Loan Fund, the J.E. Joseph Trust Fund and the Vegetable Marketing Organisation Loan Fund. At the end of 1995, loans issued since the inception of these funds reached $328 million.

The Fisheries Industry

Marine fish constitute one of Hong Kong's most important primary products. In 1995, total production from marine capture and culture fisheries was estimated at about 203 300 tonnes, with a wholesale value of $244 million. This represented a decrease of seven per cent in weight and a decrease of seven per cent in value compared with 1994. Marine capture fisheries contributed 96 per cent towards total production by weight while the rest came from culture operations.

The Hong Kong fishing fleet, manned by 21 600 fishermen, comprises some 4 800 vessels of which 4 400 are mechanised. It supplied over 62 per cent of all marine produce consumed locally during the year.

      Major fishing methods include trawling, lining, gill-netting and purse-seining. Trawling accounted for 76 per cent, or 149 000 tonnes, of marine fish landed in

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 1995. The total catch of live and fresh marine fish available for local consumption amounted to 86 350 tonnes, with an estimated wholesale value of $1,160 million.

  Marine fish culture is practised within 26 designated fish culture zones, most of which are on the coast of the eastern New Territories. Fish culture licences are issued by the Agriculture and Fisheries Department. At the year's end, there were 1 591 licensed mariculturists. They supplied 2 950 tonnes of live marine fish valued at $181 million during the year.

  Freshwater fish are also cultured in ponds covering 1 190 hectares, mostly in the north-western New Territories where they form part of the wetland system of conservation interest. The area devoted to fish ponds has gradually declined with the increasing urbanisation of the New Territories. During the year, pond culture yielded 5 250 tonnes, or 11 per cent, of freshwater fish for local consumption.

Fisheries Development

The inshore marine environment is under unprecedented pressure from large-scale dredging for marine fill, dumping of mud and reclamation. This affects water quality and destroys extensive areas of seabed habitats that support the marine fauna and fisheries resources. To mitigate such damage, the Agriculture and Fisheries Department has been pursuing a fisheries habitat enhancement project. It aims at using artificial reefs to enhance the marine habitat favoured by commercial fish. A variety of artificial habitats will be introduced over a significant area to help rehabilitate damaged seabed, protect sensitive nursery areas and increase fish production.

  Aquaculture studies are directed towards the development of more efficient culture systems and improved husbandry techniques to increase productivity and minimise the impact on the environment. A moist pellet preparation, which has higher nutritional value and lower adverse impact on the marine environment than the traditional trash fish feed, was introduced to mariculturists.

  The larger vessels in Hong Kong's fishing fleet are among the most modern in the region, despite their traditional wooden hulls. The department continues to stimulate the modernisation trend by maintaining development input and providing free advisory services on fishing vessel hull design (including steel hulls) and fishing methods, as well as fishing equipment.

  Training classes are held for operators, covering the conventional skills required for safe and effective operation of fishing vessels as well as the use of more sophisticated electronic aids such as radar, weather facsimile and, most recently, satellite communications. The department also organises sea-fishing endorsement courses to train operators to standards required by the Marine Department for steel-hulled fishing vessels. The courses are organised regularly at major fishing ports.

  The department administers four loan funds servicing the fishing industry: the Fisheries Development Loan Fund, the Fish Marketing Organisation Loan Fund, the World Refugee Year Loan Fund and the Co-operative for American Relief Everywhere Loan Fund. By December 31, loans issued since the inception of the four funds totalled $288 million.

PRIMARY PRODUCTION

Marketing

      Much wholesale marketing of fresh foods is conducted in markets run by the Agriculture and Fisheries Department, the Vegetable Marketing Organisation and the Fish Marketing Organisation. The Western Wholesale Food Market and the Cheung Sha Wan Wholesale Food Market Phase I are the two biggest market complexes developed and managed by the department. Each is in fact an integration of several markets. The Western Complex, for example, accommodates markets for freshwater fish, vegetables, fruit, poultry and eggs. This allows buyers to purchase a variety of fresh foods under one roof.

      Apart from these market complexes, the department also operates temporary wholesale markets at North District in the New Territories for agricultural products, and at Cheung Sha Wan in Kowloon for poultry. Plans are under way for the development of Phase II of the Cheung Sha Wan Wholesale Food Market. On completion, it will reprovision the dilapidated Yau Ma Tei Fruit Market and the temporary poultry market at Cheung Sha Wan.

During the year, the government wholesale markets handled 270 440 tonnes of local and imported vegetables, 79 290 tonnes of local and imported poultry, 45 460 tonnes of local and imported freshwater fish and fisheries products, 148 560 tonnes of imported fruit and 63 670 tonnes of imported fresh and preserved eggs. The total value amounted to $5,782 million.

The Vegetable Marketing Organisation is a financially autonomous and non-profit- making body operated under the Agricultural Products (Marketing) Ordinance, which also provides for the establishment of a Marketing Advisory Board to advise the Director of Marketing (currently the Director of Agriculture and Fisheries). Its primary function is to provide wholesale marketing facilities to local vegetable farmers and wholesalers. Revenue comes from a commission on the proceeds of sales, and surpluses are ploughed back into the development of marketing services and the farming industries, and scholarships for farmers' children. During the year, 23 470 tonnes of vegetables valued at $976 million were sold through the organisation at Cheung Sha Wan.

The Fish Marketing Organisation operates under the Marine Fish (Marketing) Ordinance which also provides for the establishment of a Fish Marketing Advisory Board. The organisation operates seven wholesale fish markets, earning a commission on the proceeds of sales. Surplus earnings are channelled back into the industry in the form of services such as low-interest loans to fishermen, improvements to the markets and financial support for schools and scholarships for fishermen's children. In 1995, 53 700 tonnes of marine fish valued at $540 million were sold through the organisation.

Mining and Quarrying

The Mines and Quarries Division of the Geotechnical Engineering Office of the Civil Engineering Department enforces legislation relating to mining, quarrying and explosives, and administers quarrying contracts. It processes mining and prospecting applications and inspects mining and prospecting areas, stone quarries, blasting sites and explosives stores.

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  Hong Kong used 22 million tonnes of aggregates and other rock products in 1995. About 43 per cent of the territory's demand for aggregates and rock products was met locally, with the balance imported from China.

  Six quarrying contracts were under way and a kaolin mine was operating under a mining lease in 1995. Negotiations are being carried out with the operators of the quarries at Anderson Road and Lamma Island to rehabilitate the sites. They will be rehabilitated within a defined period, in return for the granting of rights to the quarry operators to process and sell surplus rock excavated during the course of the works. The rehabilitation works involve recontouring and extensive planting to blend with the surrounding hillsides in accordance with the guidelines set down in the Metroplan Landscape Strategy for the Urban Fringe and Coastal Area.

  In the past year, the division managed three government explosives depots which provided bulk storage facilities for imported and locally-manufactured explosives. It undertakes the delivery of explosives from the depots to blasting sites. It also issues shotfirers' blasting certificates.

  The largest use of explosives during the year was for site formation works for the new airport project. A government explosives depot is in operation at the airport site on Chek Lap Kok Island to ensure uninterrupted supply for site preparation work. Explosives were also used in Hong Kong for quarrying works, sewerage tunnel construction and seismic surveys. The overall consumption of explosives was 10 250

tonnes.

The division is responsible for issuing storage licences and removal permits and provides technical support to the Recreation and Culture Branch in assessing the suitability of pyrotechnics and pyrotechnicians. In 1995, there were 24 applications for the use of pyrotechnics in the production of television programmes and theatrical performances.

10 EDUCATION

A range of initiatives was introduced during 1995 to improve the quality of education. They included a kindergarten direct subsidy scheme, support for immigrant children from Mainland China, and school curriculum reform. Proposals for a comprehensive language improvement strategy were unveiled in the Education Commission Report No. 6 issued for public consultation at the end of the year.

Two reviews on schools offering non-local curricula in Hong Kong were completed during the year. One concerns the funding arrangements for the English Schools Foundation; the other focuses on provision of international schools places.

The Structure of the Education System

Educational opportunities encompass kindergartens, primary and secondary schools, technical institutes, technical colleges and tertiary institutions. The majority of places from primary school upwards are provided either free of charge or at highly subsidised rates. Kindergartens are run by private organisations, as are international schools and commercial schools providing language, computer and business courses. All children must, by law, be in full-time education from the age of six to their 15th birthday or completion of Secondary 3, whichever is earlier.

Most children attend kindergarten from the age of three. Primary school normally begins at the age of six, and lasts six years. At about 12, children progress to a three- year junior secondary course. After Secondary 3, most stay on for a two-year senior secondary course leading to the first public examination, the Hong Kong Certificate of Education Examination (HKCEE); others join full-time craft courses of vocational training and a few leave formal education at this point.

After the HKCEE, students progress to a two-year sixth form course leading to the Hong Kong Advanced Level Examination (HKALE); to a two or three-year vocational course leading to a certificate or diploma; or to a three-year course of teacher education. Post-HKALE opportunities include a place on a three-year first degree or diploma course, or on a two-year teacher education programme. Those leaving full-time education at the end of the senior secondary or sixth form courses have opportunities for part-time study or vocational training through to degree level. Most primary and secondary schools are publicly-funded. The government directly manages some primary and secondary schools, but most are operated by non-profit- making voluntary organisations which receive public funds under a code of aid. Tertiary institutions are autonomous statutory bodies. Seven of them receive public funds through the University Grants Committee. A comprehensive, publicly-funded

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system of technical education and vocational training is provided by the statutory Vocational Training Council (VTC).

  About 1.2 million students, or 19 per cent of the total population, were in full-time education during the year. They attended 2 200 institutions, and were taught by some 58 000 teachers assisted by a large number of support staff. There were some 145 700 candidates for the two local public examinations and 204 000 entries for overseas examinations.

The Legislative Framework

Any institution offering education to 20 or more students in a day, or to eight or more students at any one time, must operate in accordance with statutory requirements. School operations (including kindergartens, primary and secondary schools, and commercial colleges) are governed by the Education Ordinance, which provides for the registration of schools, teachers and managers, and for compulsory attendance by children between the ages of six and 15. The Education regulations cover matters including health and safety, fees and charges, and teacher qualifications.

  The Vocational Training Council Ordinance covers technical colleges, technical institutes, training centres, and skills centres for the disabled. The Post-Secondary Colleges Ordinance covers institutions offering post-secondary courses outside the tertiary sector. Two important statutory bodies with a quality control role are the Hong Kong Examinations Authority (HKEA) and the Hong Kong Council for Academic Accreditation (HKCAA). The Education Scholarships Fund Ordinance provides for the administration of many scholarships donated by members of the public.

  The Non-Local Higher and Professional Education (Regulation) Bill was introduced to the Legislative Council on November 8, 1995. It seeks to establish a legislative framework for regulating the standards of courses delivered in Hong Kong by non-local institutions of higher education or professional bodies which lead to the award of non-local qualifications. It offers a measure of consumer protection to people undertaking such courses.

The Government's Role

The Secretary for Education and Manpower, who heads the Education and Manpower Branch of the Government Secretariat, formulates and reviews education policy, secures funds in the government budget, liaises with the Legislative Council on educational issues, and oversees the effective implementation of educational programmes.

  The Director of Education, who heads the Education Department, implements educational policies at kindergarten, primary and secondary levels. She directly manages all government schools and the Curriculum Development Institute.

  The main responsibilities of the Education Department include the provision and allocation of public sector school places to pupils entering the primary, junior secondary, senior secondary and sixth form levels; developing school curricula; monitoring teaching standards; and administering the public funding to schools. The department also contributes to policy development and review.

EDUCATION

Community Participation

Members of the community play an important part in the planning, development and management of the education system at all levels, sitting on advisory bodies such as the Education Commission, Board of Education, Curriculum Development Council (CDC), University Grants Committee (UGC), and Research Grants Council (RGC); on executive bodies such as the Vocational Training Council (VTC), HKEA and HKCAA; on management committees of schools; and on the governing bodies of tertiary institutions. Public response is sought on major changes to existing policy and practices in education through extensive consultation exercises and regular public fora.

The Education Commission

The commission advises the government on the development of the education system, as a whole, in the light of community needs. Its terms of reference are to define overall objectives; formulate policies and recommend priorities for implementation, having regard to the resources available; co-ordinate and monitor the planning and development of education at all levels; and initiate educational research.

It has 16 members, of whom 14, including the chairman, are appointed from outside the government to bring a wide range of personal and professional experience to the issues under review. They include the chairmen of the Advisory Committee on Teacher Education and Qualifications (ACTEQ), the Board of Education, the UGC and the VTC. The two government members are the Secretary for Education and Manpower, who is the vice-chairman, and the Director of Education.

In December 1995, the commission published its sixth report, outlining a comprehensive improvement strategy for language in education. The strategy involves a wide range of recommendations covering the formulation, implementation, monitoring and evaluation of policy, language goals and language development, education of language teachers, medium of instruction, the teaching of Chinese and English as subjects, the promotion of Putonghua, support services, and public perception and community participation.

The Working Group on Educational Standards, which was set up under the auspices of the Education Commission, issued its report in December 1994 for a three-month public consultation. Entitled The Quality in School Education, it presented a detailed analysis of standards in the present school education system and made many recommendations to enhance quality. Major recommendations included the creation of a Quality Assurance Unit (QAU); an effective set of quality indicators and a modified School Management Initiative (SMI) scheme.

The consultation exercise has generated useful discussions. Educators welcomed the concept of the quality improvement strategy, although doubts were expressed on certain recommendations such as the setting up of a QAU. The commission was preparing its recommendations to the government in the light of public responses.

The commission visited Melbourne, Australia, during the year to study reforms in the school education system of the State of Victoria, especially in relation to funding. The government commissioned a consultancy to develop performance indicators for Hong Kong's school funding system and to produce a revised funding model.

After several years of discussing the professional status of teachers and analysing international practice, the government set up the non-statutory Council of

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Professional Conduct in Education. It agreed to review the need for a General Teaching Council (GTC) to regulate a Professional Code for Education Workers. A working group was set up under the Education Commission during the year to review the case for the establishment of a GTC.

The Board of Education

The board is a statutory body appointed to advise the government, through the Director of Education, on educational matters at school level. It focuses on the implementation of approved policies, and the need for new or modified policies relating to education in schools. Its members include the chairmen of advisory and executive bodies concerned with the school system - the CDC; the Private Schools Review Committee; and advisory committees on home-school co-operation, school administration and finance, school guidance and support services, and school places allocation systems. Other members have experience in kindergartens, special schools, school administration, teaching, teacher training, tertiary education, business and the professions. Two government officials sit on the board: the Director of Education as vice-chairman, and the Deputy Secretary for Education and Manpower.

  During the year, the board set up a new sub-committee to review major aspects of school education with special reference to the implementation of compulsory education. The Sub-committee on Special Education, set up in 1994, continued to consider how the special education service could be further improved.

The Curriculum Development Council

The council is appointed by the Governor to advise the government, through the Director of Education, on matters relating to school curriculum development, from kindergarten to the sixth form. It has a three-tier structure and operates through a system of co-ordinating committees and subject committees. Membership of the CDC and its co-ordinating and subject committees includes heads of schools, teachers, tertiary academics, HKEA representatives, parents and employers.

  During the year, the council completed research on a sex education and civic education curriculum, developed school-based curricula for students of varying abilities, and identified new curriculum needs to meet the changes of the community. In April, a study visit was made to Melbourne to exchange views with officials and educators about curriculum matters and, in particular, to learn how their projects, which are similar to the Target Oriented Curriculum (TOC) were developed, implemented and assessed.

The Curriculum Development Institute

The Curriculum Development Institute (CDI), established in 1992 as a new division of the Education Department, is staffed by civil servants and educators recruited from outside the civil service. It develops and reviews curricula, liaising with the HKEA and teacher-training institutions; helps schools implement curriculum policies and innovations; provides a secretariat for the CDC; and conducts research, experimentation and evaluation in curriculum planning.

  In 1995, the institute continued to develop the TOC and prepare for its full implementation in schools by phases. Progress was also made in the TOC assessment mechanism and relevant guidelines were sent to schools for consultation.

EDUCATION

A working group was set up to review the guidelines on civic education in schools, which was scheduled for implementation in 1996. Work continued on projects including curriculum integration, and the development of curricula for the academically-gifted and the less able. The Fung Hon-chu Gifted Education Centre was established to develop school-based projects for academically gifted children and as a venue for related training programmes. A school-based curriculum tailoring scheme for academically low achievers was piloted in 10 schools and has been extended to 53 others.

The Language Fund Advisory Committee

The Language Fund Advisory Committee, set up in 1994 and comprising language experts, educators and business people, advises the government on policies and procedures governing the operation of the Language Fund. By the end of the year, on the advice of the committee, grants amounting to $95.2 million for 70 projects were approved. They aimed to raise standards in Chinese (including Putonghua) and English.

University Grants Committee

The UGC is appointed by the Governor to advise on the development and funding of higher education, and administer public grants to the seven publicly-funded tertiary institutions. It comprises 10 overseas academics, four local academics and four local professionals and businessmen. Its secretariat is staffed by civil servants.

Since the UGC was set up in 1965, full-time equivalent student numbers have increased more than 15 times, from 4 100 in two universities to 62 000 in seven institutions. The major expansion of places which began in 1988 was completed by 1994-95.

After publishing its interim report on the review of development of higher education in Hong Kong for consultation in 1994, the UGC proceeded to the next stage of the review in 1995 to consider the development of higher education beyond the 1995-98 triennium. It aims to submit a report to the government in early 1996. In early 1995, the committee decided to undertake teaching and learning quality process reviews of the UGC-funded institutions, starting in January 1996, to ensure that mechanisms for promoting and improving the quality of teaching and learning in the institutions are operating properly.

In April, the UGC paid a fact-finding visit to Guangdong Province, China. Useful discussions were held with Guangdong officials and institutions on many education issues. Delegates gained a better understanding of Guangdong's higher education system and its industrial and economic development.

Research Grants Council

The RGC advises the government, through the UGC, on the needs of tertiary institutions for academic research and the funding required, and monitors the use of public research grants. It comprises seven local academics, six overseas academics and three local professionals and industrialists.

      Grant applications are considered by four specialist panels composed mostly of local academics, covering physical sciences, engineering, biology and medicine, and humanities, social sciences and business studies. An independent network of academic

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referees provides impartial advice. In 1995-96, the council received a record 888 applications and disbursed $275.7 million in earmarked grants for academic research.

  During the year, the RGC and the British Council again jointly sponsored the United Kingdom-Hong Kong Joint Research Scheme, aimed at strengthening existing links between local and British institutions.

The Vocational Training Council

The VTC advises the government on measures to ensure Hong Kong has the benefit of a comprehensive system of technical education and industrial training suited to the territory's developing needs. It also administers technical colleges, technical institutes, training centres, skills centres for the disabled and the statutory apprenticeship scheme. Industrialists, academics and government officials comprise its membership.

  Under the VTC are 20 sector-specific training boards and eight general committees. The training boards determine the manpower needs of the economic sectors for which they have been established. They also prescribe job specifications, and design training programmes and trade test guidelines. The general committees deal with the training aspects which affect one or more sectors of the economy.

The Hong Kong Examinations Authority

The HKEA is an independent, self-funding statutory body, with members drawn from the teaching profession, tertiary institutions and the business community. It operates two local public examinations: the Hong Kong Certificate of Education Examination (HKCEE) and the Hong Kong Advanced Level Examination (HKALE). It also offers proficiency tests in Putonghua aimed at adults. On behalf of overseas examining bodies, the authority conducts many examinations leading to academic, professional or practical qualifications.

  During the year, 117 400 candidates sat for the HKCEE and 28 200 sat for the HKALE. A total of 42 subjects were offered in the HKCEE; 21 A-level subjects and 18 advanced supplementary (AS) level subjects were offered in the HKALE. The latter included two core language subjects: Use of English and Chinese Language and Culture. AS level subjects were offered for the first time in 1994 with a view to broadening the sixth-form curriculum. There was a 20 per cent increase in AS-level non-language entries compared with 1994.

  The year 1995 also saw the HKCEE English Language (Syllabus B) listening test conducted for the first time using a radio broadcast. Over 106 000 candidates took the test at the same time, each bringing their own portable radio. The HKALE results of the school candidates were similar to those of 1994, with the percentage of awards at grade E and above for A-level subjects being 71.5 (70.9 in 1994). Percentages at grade E and above in the two AS-languages and non-languages AS-level subjects were 83.4 and 71.6, respectively (83.5 and 69.5 in 1994). The percentage of grade awards at grade E and above for school candidates in the HKCEE was 60.8 compared with 60.5 in 1994.

  Candidates sitting for overseas examinations totalled 204 000, of whom 64 600 sat for the London Chamber of Commerce and Industry examinations, 46 600 for the Associated Board of the Royal Schools of Music, and 18 500 for the Test of English as a Foreign Language.

Hong Kong's leading action man, film actor Jackie Chan,

beams as he receives an honorary doctorate at the Hong Kong Baptist University.

高管及資訊系統學院

計及語文學院

築及地政學院

程學院

原及社會科學院

THE HONG KONG

POLYTECHNIC UNIVERSITY

First

Congregation

Some of Hong Kong's 470,000 primary school students prepare to enjoy a Christmas celebration.

Academic staff make a blaze of colour at the first Congregation

of the Hong Kong Polytechnic

University. It marked the end

of the institution's first year with the title university.

Students come to grips with

the world outdoors, checking water quality in a New Territories stream and examining trees and undergrowth. Hong Kong children are obliged to attend school from the age of six until their 15th birthday. About 1.2 million students-about 19 per cent of the total population-attended 2 200 institutions during 1995.

EDUCATION

The Hong Kong Council for Academic Accreditation

The HKCAA is an independent statutory body with 22 members, comprising senior academics from Hong Kong and overseas, and local industrialists and professionals. It is managed by a full-time staff with experience in quality assurance and in higher education, and supported by more than 1 000 local and overseas expert consultants. The HKCAA reviews the non-university, degree-awarding institutions of Hong Kong and their individual programmes, to ensure that the degrees they award meet internationally-recognised standards. During the year, reviews were carried out at Lingnan College, the Open Learning Institute of Hong Kong and the Academy for Performing Arts.

On teacher education, the council works with the Hong Kong Institute of Education to prepare for a review of the work of the latter, and is represented on the Advisory Committee on Teacher Education and Qualifications (ACTEQ). Seminars and professional development workshops on topics of quality assurance in higher education are also held for participants from tertiary institutions.

       The council provided expert advice to the government and others on the standards of local and overseas institutions and the status of their awards, and to professional bodies on accreditation procedures. An academic programmes guide, which contains comprehensive information on courses and programmes offered by overseas organisations in the territory, was published during the year.

The HKCAA works with quality assurance and accreditation bodies around the world. It was a founder member of an international network for quality assurance agencies in higher education, for which it provides administrative and editorial support. It maintains a close relationship with higher education and accreditation authorities in the region, particularly China. During 1995, its members visited China a number of times for discussions and meetings. It is also the co-organiser of a major international conference on quality assurance to be held in Beijing in May 1996.

Advisory Committee on Teacher Education and Qualifications

The committee is a non-statutory body set up in 1993, upon the recommendation of the Education Commission Report No. 5, to provide a single source of authoritative advice on teacher education programmes, and on qualifications acceptable for teaching purposes in Hong Kong. Of its 23 members, 17-including the chairman - are appointed from outside the government. They include school heads, teachers, academics, and businessmen. The six ex officio members are the Deputy Secretaries for Education and Manpower and Civil Service, the Director of Education, the Secretary-General/UGC, the Director of the Hong Kong Institute of Education (HKIED) and the Executive Director of the HKCAA.

The committee has advised the government on bids for the Bachelor of Education in Primary Education Course Development Grant, the strategy for supporting teacher development, the planning of non-graduate teacher supply and measures to improve the in-service course of teacher-training programmes provided by the HKIED. To improve the quality of teachers, ACTEQ has recommended to the government to require, by phases, both non-local and local degree holders to have a local post-graduate certificate in education qualification for appointment as graduate teachers in public sector secondary schools. The committee also advised the government on the pace at which graduate posts in primary schools were to be

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provided. It recommended that the HKIEd be commissioned to run several kindergarten teacher training courses in the next four years. It has set up two working groups, one to develop a set of criteria for identifying the needs of schools and the community which teacher education activities should aim to meet, and the other to develop a framework for in-service professional development qualifications.

School Management Committees

Each school registered under the Education Ordinance has a management committee, which is responsible for the proper education of the pupils and operation of the school. One manager must be registered as the supervisor, whose main role is to be the point of contact between the management committee and the Education Department.

Each aided primary or secondary school is operated under a letter of agreement with a sponsoring body, which contributes the full cost of furnishing and equipping the premises, and nominates the first supervisor of the school. In the 1995-96 school year, a total of 1 048 aided schools were in the care of 398 sponsoring bodies, the largest of which operated 129 schools.

  By September, 222 government and aided primary, secondary and special schools had joined the School Management Initiative (SMI) Scheme. This was started in 1991 to give government and aided schools more decision-making power and more flexibility in the use of resources, in return for more formal procedures for planning, implementing and evaluating their activities. During the year, the Advisory Committee on the SMI updated its manual on school administration and other reference materials, which were circulated to both SMI and non-SMI schools. A newsletter, the SMI Quarterly, was sent regularly to school heads and teachers to keep them informed of developments. The SMI Resource Centre was set up to provide professional support for the implementation of the scheme.

Governing Bodies of Tertiary Institutions

Each tertiary institution has its own structure of governance, set out in its ordinance. In all cases, that structure includes a governing body (called the court, the council or the board of governors), and a body to regulate academic affairs (called the senate or the academic board). Some institutions operate under three bodies: a governing body, an executive body and a body dealing with academic affairs. The Governor of Hong Kong is empowered by the ordinances to appoint the chairman of each governing body, as well as a prescribed number of members. This ensures a balanced distribution of members from the industrial, commercial and academic fields.

Funding of Education

Approved public spending on education in the 1995-96 financial year amounted to HK$34,000 million, representing 22 per cent of the government's total recurrent expenditure and six per cent of capital expenditure. Public funds cover about 94 per cent of the capital cost of an aided primary or secondary school and virtually the full cost of tertiary institution campuses, the entire recurrent cost of providing tuition from Primary 1 to Secondary 3, and about 90 per cent of the recurrent cost from Secondary 4 up to courses at degree level.

  Non-profit-making kindergartens are eligible for rent and rates reimbursements, and financial assistance from the government under a new Kindergarten Subsidy

EDUCATION

      Scheme introduced in September. Needy parents of kindergarten pupils may apply for fee remission. Private primary schools and pupils receive no public funding, on the grounds that there are sufficient places in the public sector; but some private secondary schools receive public funds under two schemes. Under the Direct Subsidy Scheme, a private secondary school meeting a specified standard may receive a recurrent subsidy related to the cost of an aided school place and the fee charged by the school. Under the Bought Place Scheme, a private secondary school, from which the government buys places to make up shortfalls in government and aided school places, is given financial assistance to help raise standards.

Student Finance

The Student Financial Assistance Agency administers several schemes which ensure, as far as possible, that students are not denied access to education because of a lack of means. The agency also administers scholarships awarded on the basis of academic merit. These schemes are described below.

Student Travel Subsidy

Students aged between 12 and 25 in full-time study up to first degree level are eligible for a subsidy to cover part of their study-related travel expenses. In the 1994-95 academic year, 166 503 students received assistance totalling $179.1 million.

Textbook Assistance

Primary and junior secondary students who need help to meet the cost of textbooks and stationery may apply for a grant. In 1994-95, 121 774 students received assistance totalling $59.5 million.

Fee Remission

The Senior Secondary Fee Remission Scheme aims to relieve needy students from Secondary 4 upwards of half or all of the standard school fee. In 1994-95, 80 558 students were granted fee remissions amounting to $183.7 million.

       The Kindergarten Fee Remission Scheme provides assistance to eligible kindergarten pupils, in the form of 50 or 100 per cent of the weighted average of fees charged by non-profit-making kindergartens, or the actual fee, whichever is lower. In 1994-95, $99.4 million was granted to 30 120 kindergarten pupils.

Local Student Finance Scheme

       Full-time students studying eligible courses in UGC-funded institutions, the two technical colleges of the Vocational Training Council, the Prince Philip Dental Hospital, and the Hong Kong Institute of Education, may apply for assistance under this means-tested scheme. It provides for loans to meet living expenses and grants to cover tuition fees, academic expenses and student union fees. In the 1994-95 academic year, 29 290 students received assistance. Of these, 26 588 received grants totalling $481.4 million, and 28 857 received loans totalling $616.9 million. In the 1995-96 academic year, an Extended Loan Scheme was introduced as an additional component of the Local Student Finance Scheme with a slightly higher interest rate to benefit those applicants who would otherwise have marginally failed the means test and those successful applicants with low assistance under the main scheme.

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Student Finance Assistance Scheme

Loans and grants are awarded to eligible full-time students of Hong Kong Shue Yan College. In 1994-95, 812 students received loans totalling $6.5 million; of these, 789 also received grants totalling $4.5 million.

United Kingdom-Hong Kong Joint Funding Scheme

Under this scheme, the British and Hong Kong governments help Hong Kong students undertaking first degree or Higher National Diploma courses in the UK. The scheme is means-tested and provides assistance in the form of grants and loans to eligible students. In 1994-95, grants of £1.76 million and loans of $4.1 million were made to 560 students. With the expansion of tertiary education in Hong Kong, the scheme is being phased out over three years starting from 1994-95.

United Kingdom-Hong Kong Scholarships Scheme

This scheme aims to help outstanding students from Hong Kong to pursue tertiary education in the UK. The scholarship fund is financed equally by the British Government and the Royal Hong Kong Jockey Club, on behalf of the Hong Kong Government. Eight scholarships were awarded in 1994-95.

Sir Edward Youde Memorial Fund

The fund was established to manage public donations made in memory of the late Governor, Sir Edward Youde, who died in service in 1986. It promotes education and learning among Hong Kong people, and encourages research. It disbursed $9.3 million in 1994-95. Twelve students were awarded fellowships or scholarships for postgraduate or undergraduate study overseas. Of this figure, one scholarship was awarded to a disabled student. Locally, 44 postgraduate students were awarded fellowships; and 77 undergraduate, diploma and certificate students received scholarships. Awards were also made to three students excelling in public examinations; eight disabled students at secondary, post-secondary and tertiary levels; and 698 outstanding senior secondary students nominated by school heads.

Other Scholarship and Assistance Schemes

In addition to the above, there are other scholarship and assistance schemes for school students, endowed by private benefactors. Many scholarships are administered by the Student Financial Assistance Agency under the Education Scholarships Fund Ordinance.

Schools and Kindergartens

Kindergartens

In September, 180 317 children, most of them aged three to five, were enrolled in 731 kindergartens. Most kindergartens operate two half-day sessions, but the number offering whole-day places is increasing.

  The Education Department gives professional advice to kindergartens through inspection visits; produces curriculum materials; and organises seminars, workshops and exhibitions to help heads and teachers develop their professional skills. It also publishes guidelines to help teachers organise curriculum and learning activities.

  To improve the quality of kindergarten education, the government introduced two new regulatory requirements during the year. First, the minimum qualification for

EDUCATION

kindergarten teachers was raised from completion of Secondary 3 to completion of Secondary 5 with at least two passes in the HKCEE. Secondly, a minimum proportion of 40 per cent trained teachers in each session of a kindergarten should be maintained. A new Kindergarten Subsidy Scheme was introduced in September to minimise the impact on parents of fee increases resulting from the government's new regulatory requirements on kindergartens. Under the new scheme, eligible kindergartens can apply for a direct subsidy at a rate of $695 per pupil per annum for the 1995-96 school year.

Primary Schools

Primary schooling, beginning at the age of six and lasting six years, is free. Although enough places are available in the public sector, about 10 per cent of parents prefer to send their children to private primary schools. Admission to Primary 1 in the public sector is processed through a central allocation system, which has helped to eliminate pressure on children caused by intense competition for entry to popular schools.

During the year, 467 718 children were enrolled in 860 primary schools. Most primary schools operate bi-sessionally. With effect from September 1993, the normal class size in public sector schools is being reduced from 40 to 35, starting with Primary 1 and extending upwards by one class level each year. In schools adopting the activity approach a more lively, pupil-oriented approach to teaching - the class size of 35 is being similarly reduced to 30. In September, this was extended to Primary 3.

       A new school design for primary schools has been drawn up to provide more facilities for activities other than formal teaching and administration. The first school with this design is expected to be completed in 1997. The first phase of a school improvement programme, to bring existing schools up to the new standard started in 1994.

Whole-day schooling for all primary students is the long-term goal. Any primary school wishing to convert to whole-day operation is encouraged to do so if the supply of school places in the district will not be adversely affected. New primary schools are run as whole-day schools wherever possible. During the year, 17 half-day primary schools converted to whole-day operation, bringing the total to 162.

       The first phase of the policy to upgrade 35 per cent of primary school teachers to graduate status started in 1994 with a provision of 180 graduate posts. Another 180 posts were provided for the 1995-96 school year. The intention of the policy is to upgrade the professional and managerial skills of staff in government and aided primary schools. The teacher-to-class ratio is 1.4:1 for whole-day classes (improved from 1.2 since September 1992). For bi-sessional classes, the phased improvement to 1.3 teachers per class began in September 1993.

       Chinese is the medium of instruction in most primary schools, with English taught as a subject from Primary 1. Many schools teach Putonghua as a separate subject or during after-school activities. A few primary schools use English as the language of instruction.

       The primary school curriculum aims to provide a coherent and well-balanced programme to promote the all-round development of the child. All public-sector primary schools adopt a core curriculum including Chinese, English, mathematics, social studies, science, health education, music, physical education, and arts and

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craft. General studies, a new core subject which will integrate social studies, science and health education, is planned for introduction in 1996. Other learning programmes such as civic education and environmental education are offered on a cross-curricular basis or as separate optional subjects. A syllabus for each core subject is prepared by the CDC. The syllabuses for physical education and art and craft were revised and updated to meet changing educational and community needs. Awareness of the benefits of the activity approach is growing, and this is now adopted in 393 schools, which is equal to 46 per cent of the total number of primary schools.

  Twenty-five primary schools successfully completed the Target-Oriented Curriculum (TOC) Co-operative Scheme in the 1994-95 school year. Phase I of the full implementation of the TOC initiative started at Primary 1, and 76 primary schools began to implement the TOC in the three core subjects of Chinese, English and Mathematics in the 1995-96 school year.

  At the end of the primary course, students are allocated places in government or aided secondary schools, or offered bought places in private schools. The allocation system is based on internal school assessments scaled by a centrally-administered academic aptitude test, and on parental choices. For allocation purposes, the territory is divided into 18 school regions. In the 1995 exercise, 83 626 primary pupils took part, of whom 74 601 (89.2 per cent) were allocated places in government and aided grammar and technical secondary schools, 5 015 (6 per cent) in prevocational schools, and 4 010 (4.8 per cent) in private schools in the Bought Place Scheme.

Secondary Schools

Secondary education is divided into two levels: junior secondary and senior secondary. The junior secondary curriculum aims to provide a well-balanced and basic education suitable for all students, whether or not they continue formal education beyond Secondary 3. This curriculum consists of a common core and, combined with the curriculum at the primary level, provides students with an integrated curriculum for nine years of free, compulsory and universal education. Universal free education was extended to junior secondary classes in 1978.

  The senior secondary curriculum aims to prepare students for education beyond Secondary 5 as well as for work, and offers a diverse range of subjects from which schools and students may select according to the needs and interests of individuals, school traditions and the facilities available.

  After Secondary 3, the aim is broadly to meet the demand for places on senior secondary or vocational courses. In 1995, there were subsidised Secondary 4 places for 82.73 per cent of the Secondary 3 students, with places for a further 6.33 per cent on full-time craft courses of vocational training. The target for sixth form provision is to provide one public sector Secondary 6 place for every three public sector Secondary 4 places two years earlier.

There are five types of secondary school: grammar, technical, prevocational, practical and skills opportunity schools. In 1995, the 419 grammar schools had a total enrolment of 416 151. They offer a five-year secondary course in a broad range of academic, cultural and practical subjects leading to the HKCEE. Most also offer a two-year sixth form course leading to the HKALE. The 21 technical schools, which 142 prepare students for the HKCEE with an emphasis on technical and commercial

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      subjects, had an enrolment of 21 395. Qualified candidates can continue their studies in the sixth form or in technical institutes.

The 26 prevocational schools, with an enrolment of 22 299, emphasise practical and technical subjects upon which future vocational training may be based, while providing a good foundation of general knowledge. The curriculum in Secondary 1 to 3 has a technical and practical content of about 40 per cent, but it is reduced to about 30 per cent in Secondary 4 and 5. Students completing Secondary 3 in prevocational schools may enter an approved apprenticeship scheme, or continue in school and take the HKCEE. Qualified students can then proceed to the sixth form, or a course in a technical college or technical institute.

       The two practical schools, with a total capacity of 900 places, offer a curriculum with a practical orientation and strong guidance support. They help students develop their interest in, and motivation towards, studies and prepare them for further studies in vocational training or senior secondary education. The three skills opportunity schools, with a total capacity of 900 places, offer a tailor-made and skills-orientated curriculum to help students who have severe learning problems to acquire basic social and vocational skills.

Secondary 3 leavers are selected for subsidised places in Secondary 4 or basic craft courses, according to internal school assessments and parental preference. The selection process aims to enable as many students as possible to progress to Secondary 4 within the same school. In 1995, 77 674 students took part in the exercise, of whom 64 256 (82.73 per cent) secured Secondary 4 places in public sector schools, and 4 915 (6.33 per cent) were admitted to basic craft courses. Admission to Secondary 6 depends on results in the HKCEE. In 1995, all 23 790 places available were filled. To meet provision targets, new secondary schools are built and places are bought from private schools. During the year, seven new secondary schools, including one prevocational school, were completed, providing 8 120 places.

       Most new schools are built to the standard design introduced in 1990. The first phase of the school improvement programme, which will provide more space for non- teaching activities, covered more than 100 primary and secondary schools.

       The staffing ratio in government and aided secondary schools is 1.3 teachers per class in Secondary 1 to 5, and two teachers per class in the sixth form. Additional teachers are supplied to strengthen language teaching; provide remedial teaching, careers guidance, counselling, extra-curricular activities and library services; and to enable split-class teaching of cultural, craft and technical subjects, as well as some sixth form subjects. The ratio of graduate to non-graduate teachers is about 7:3. The student/teacher ratio is about 20:1.

       The Direct Subsidy Scheme (DSS) was introduced in 1991 to enhance the private secondary school sector and improve the quality and diversity of education. Private secondary schools meeting specified standards can receive a government subsidy for each eligible student. They are free to decide on their own curriculum and to set entrance requirements and fee levels. A total of 12 schools have joined the DSS. A review of the scheme was started in 1995. As part of the same policy package, the Bought Place Scheme will be phased out. Schools in the scheme are being helped to raise their standards so that they may, if they wish, apply to join the DSS. During the year, 18 private schools operated under contracts with the government which specify improvements in areas such as whole-day operation, class structure, teacher

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 qualifications and school facilities. The contracts will expire in the year 2001, unless terminated earlier by either party, or when a school joins the DSS.

  Secondary schools are encouraged to adopt Chinese as the medium of instruction, and discouraged from using a mixture of English and Chinese in classroom teaching. To support this policy, they were advised to choose the appropriate medium of instruction according to the language proficiency profiles of their Secondary 1 intakes from 1989 to 1994. Primary 6 leavers were grouped, for purposes of admission to secondary schools, into three categories: those able to learn effectively in either Chinese or English (33 per cent); those who would learn best through Chinese (60 per cent); and those who would learn better through Chinese but would probably also be able to learn in English (7 per cent).

  Parents were informed of their children's grouping and the medium of instruction chosen by individual schools, to help them choose secondary schools most suited to their children's language ability. Schools were advised to ensure a good match between their medium of instruction and the language proficiency of their incoming students. In September, 69 schools used Chinese for all subjects except English language, and more schools increased their use of Chinese, either for some Secondary 1 classes, or for all classes in some subjects.

To broaden the existing secondary curriculum, travel and tourism was introduced as a new Secondary 4 and 5 subject. A total of 41 schools, including grammar, technical and prevocational schools, took part in this pilot scheme and the subject had its first public examination during the year.

  Teaching guidelines and supporting materials are provided to schools for cross- curricular studies in such areas as civic education, moral education, sex education and environmental education. Sex and AIDS education is integrated into various subjects in primary and secondary schools. The aim is to enable students to understand sex as part of overall personal and social well-being, and not as something isolated from other aspects of behaviour.

  Teaching syllabuses are prepared by the CDC for all subjects offered at the secondary level, and examination syllabuses are prepared by the HKEA. There is close co-ordination between the two bodies, and syllabuses are reviewed and revised as necessary to meet the changing needs of society. During the year, the syllabus for advanced level chemistry was revised. A guide to the Secondary 1 to 5 curriculum was published and distributed to schools, to help them develop a curriculum suited to their students' needs and interests. All sixth form courses last two years. Subjects available include 18 at the advanced supplementary (AS-level) and 22 at the advanced level.

  To help teachers implement the sixth form curriculum and become familiar with syllabuses, teaching approaches and strategies, the CDI and Advisory Inspectorate offered short courses and seminars. The Education Department also funded in-service teacher education programmes on individual AS-level subjects which were mounted by tertiary institutions. The CDI published and distributed to schools a guide to the sixth form curriculum.

  Cross-curricular studies including civic education, moral education, environmental education, sex/AIDS education and drug education are promoted by making use of learning opportunities in subjects across the curriculum and in extra-curricular activities.

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       The pilot scheme on school-based drug education was introduced to study the feasibility of developing and implementing a drug education programme in secondary schools. Seven courses on drug education were organised for secondary school teachers and two for primary school teachers. A Sex Education Resource Catalogue and Sex Education News were published and issued to schools. To enhance distribution of information as well as exchange of ideas and experience on the promotion of civic and moral education in schools, bulletins and a newsletter were issued to schools. The Student Environmental Protection Ambassador Scheme was introduced to primary and secondary schools to help organise environmental education activities. To promote heritage awareness, the Lord Wilson Heritage Trust Project Scheme 1995 and the Second Inter-school Competition of Study Projects on Local History were organised.

       The class library service provides supplementary reading materials to support learning and encourage the habit of leisure reading in secondary school students. All public sector secondary school libraries are staffed by a teacher-librarian. In-service courses and seminars were organised for teachers on managing, developing and promoting the use of class libraries. The 1995 Reading Award Scheme for Primary 5 and 6 attracted 63 500 pupils from 343 schools and the 1995 Reading Award Scheme for Secondary 1 to 5 attracted 34 700 students from 208 schools. The School Library Newsletter continued to provide a channel of communication for schools on managing, developing and using the library to support the curriculum.

The Chinese Textbooks Committee

To encourage greater use of Chinese as the medium of instruction in secondary schools, the Chinese Textbooks Committee was set up to ensure the availability of good quality Chinese textbooks. Under an Incentive Award Scheme, a total of 82 sets of textbooks for 27 subjects at secondary level and 10 sets of reference books for five subjects at advanced level have been published. During the year, the committee surveyed the availability of quality Chinese textbooks in secondary schools.

Home-School Co-operation

The Committee on Home-School Co-operation aims to improve communication between schools and parents. Its members include educators, parents, Parent-Teacher Association chairmen and officers of the Education Department. During the year, the committee followed up the recommendations of a report on a large-scale survey conducted in 1994 to determine the perception of home-school relations among various people involved in education. It also organised promotion activities which included carnivals, seminars, exhibitions and competitions. The committee further launched a pilot scheme to set up a parent hotline in schools and a Parent-Teacher Association network.

Extra-curricular Activities

      Extra-curricular activities are an integral part of school life, complementing and enriching formal learning in the classroom. The Education Department provides guidance and advice through in-service teacher education programmes and school inspections, subsidises some activities, and co-ordinates

                     activities, and co-ordinates many inter-school programmes and activities. These include the Community Youth Club, the Duke of Edinburgh's Award Scheme, the Lions' Sister Schools Scheme, the Schools Drama

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Festival, sports and recreational activities as well as subject-based and interest-based activities.

Special Education

The main policy objective of special education is to integrate the disabled into the community through co-ordinated efforts by the government and non-governmental organisations. In April, policy responsibility for special education (hitherto under the Secretary for Health and Welfare) was transferred to the Secretary for Education and Manpower.

  Early identification is an important preventive measure. Screening and assessment services identify special education needs among school-age children, so that appropriate follow-up and remedial treatment can be given before problems develop into handicaps. Under the combined screening programme, all Primary 1 students are given hearing and eyesight tests. Teachers are given checklists and guides to help them detect children with speech problems and learning difficulties. Children requiring further assessments are given audiological, speech, psychological or educational assessments at special education services centres. Some are referred for ophthalmic advice.

Children identified as having special education needs are integrated into ordinary schools as far as possible. They are placed in special schools only when their handicaps are such that they cannot benefit from the ordinary school programmes. At April 1995, there were 63 special schools, including a hospital school, for children who were blind, deaf, physically handicapped, mentally handicapped or maladjusted and socially deprived. Seventeen schools provided residential places. Besides teachers, the special schools were supported by specialists such as educational psychologists, speech therapists, physiotherapists, occupational therapists, school nurses and social workers.

Special education classes in ordinary schools cater for partially-sighted and partially-hearing children, and children with learning difficulties. Services for children integrated into ordinary classes include school-based or centre-based intensive remedial support in the basic subjects, behavioural guidance to children and advice to teachers on how to help children with special needs. A home-based teaching programme was in place to enable children who were home-bound for health reasons to continue their education. A school-based remedial support programme was also implemented to support secondary schools with a high intake of academically less- able students. These schools were given greater flexibility and additional manpower to operate remedial services for their students.

  In general, special schools and special education classes follow the ordinary school curriculum, with adaptations or special syllabuses, where appropriate, to cater for the children's varied learning needs. Special schools give particular attention to daily living skills, and offer extra-curricular activities to enrich the practical life experiences of day and residential students. The CDC's Special Education Co-Ordinating Committee, with members from government departments and schools, advises on special education needs.

The operation of the Supportive Remedial Service for hearing-impaired primary school students who attend mainstream schools is very effective and a two-year pilot

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      project was launched in September 1994, aiming at extending the programme to such students in secondary schools.

       During the year, a research project on the identification of academically-gifted children continued, and a resource centre for such children was opened. A Schools Support Scheme providing school-based psychological services to secondary schools was also introduced.

International Schools

In keeping with Hong Kong's international character, a number of schools offer curricula designed to meet the needs of particular cultural or linguistic groups.

       The English Schools Foundation (ESF) operates nine primary schools (known as junior schools) and five secondary schools for children whose first language is English, and a special education school for English-speaking students with moderate to severe learning difficulties. The education provided is similar in content and method to that available in schools in Britain, and leads to British public examinations. The ESF receives public grants based on grants paid to local aided schools, and charges fees to meet additional costs. A review on the funding arrangements for ESF was conducted during the year to take account of developments since the last review in 1980 while adhering to the principle of parity of subsidy vis-à-vis the local aided school sector.

       Other international schools provide education based on the American, Canadian, French, Japanese, German-Swiss, Australian, Singaporean and Korean curricula and systems. In 1995, there were 18 such schools operating up to secondary level, 23 at primary level, and 22 kindergartens. Many non-profit-making international schools were eligible for the Hong Kong Government's grants of land at nominal prices and reimbursement of rates and sponsorship by their home governments or communities. A review on provision of international schools was conducted in 1995, and a new package of assistance was introduced. Under this, the government has systematised the procedures to deal with land grant applications from non-profit-making international schools, and will provide a new interest-free loan up to the cost of constructing a standard-design primary or secondary public-sector school.

Teacher Education

The Hong Kong Institute of Education (HKIEd) held its first graduation ceremony in July. Of the 2 133 graduates, 1 256 attended the full-time programmes and 877 the part-time in-service programmes. The HKIEd offers a variety of teacher training programmes for secondary school leavers and in-service teachers. In the 1994-95 academic year, it offered more than 40 courses for over 8 200 full-time and part-time students. These included the new pre-service Certificate in Education programme; in- service initial training for kindergarten, primary, secondary, technical, commercial and special education teachers; refresher training courses for serving teachers in primary and secondary schools; and advanced courses of teacher education for non- graduate secondary school teachers of cultural, practical and technical subjects.

       As part of the institute's quality assurance processes, it has started a comprehensive review of all courses currently being offered. At the same time, the HKCAA has started an institutional review of the HKIEd to assess the suitability of its academic environment and processes for the development, introduction, conduct and

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maintenance of degree and related programmes. Lastly, consideration is being given to bringing the HKIEd under the aegis of the UGC.

  Site formation work for the institute's new campus in Tai Po started in early 1995. Estimated to cost $2,312 million, the new campus will provide purpose-built academic, sports and amenities facilities and should be completed in 1997.

Pre-service and in-service teacher education programmes, at sub-degree and degree levels, are also provided by some tertiary institutions funded through the UGC. In- service professional development courses for teachers are also provided by the Education Department and professional organisations.

Management Courses

The Education Department provides basic training in educational management and administration for primary/secondary school heads and senior teachers, and professional officers of the Education Department. Special school-based team- building workshops were conducted for teachers in secondary schools which joined the SMI Scheme in 1994-95.

The Council on Professional Conduct in Education

The council, set up in 1994, is a non-statutory body to promote professional conduct in education, draw up operational criteria defining the conduct expected of an educator, and advise the Director of Education on cases of disputes or alleged professional misconduct. It has 25 elected members from schools and educational organisations, and three members appointed by the Director of Education. It aims to enhance the image and professionalism of teachers and to attract more high-calibre young people to join the teaching profession.

Support Services

A wide range of services, mostly provided or supported by the Education Department, reinforce teaching and learning in schools. The Education Department's Educational Research Section conducts research, develops tests, evaluates education programmes and monitors educational standards. The Hong Kong Attainment Tests developed by this section are administered yearly by primary and secondary schools to diagnose areas of strength and weakness so that appropriate guidance, counselling and remedial teaching can be provided. The results also help the Education Department to monitor standards over the years and across grade levels. This section also compiled education indicators for the school education system, and conducted an evaluation of the implementation of the medium of instruction grouping.

  The department encourages a whole-school approach to student guidance. The Student Guidance Section organises workshops and seminars in support of this approach and provides training to Student Guidance Officers/Teachers. It enforces compulsory education through identification of school dropouts and providing follow-up services, and ensures an adequate provision of study room facilities.

The Educational Services Liaison Sub-committee of the Board of Education has monitored the department's performance since the publication of its performance pledges. The monitoring results show the department fulfilled over 99 per cent of its major performance pledges during the year. To explore the feasibility of extending

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the performance pledge programme to schools, a pilot scheme was launched in April covering government schools.

      The Advisory Inspectorate advises schools on curriculum implementation, teaching methodology and educational resources; and offers in-service teacher education programmes in the form of short courses, seminars and workshops. Its teaching and resource centres offer resources and advice to kindergarten, primary and secondary teachers about language, mathematics, science, humanities, computer education, cultural crafts, music, kindergarten teaching and cross-curricular issues including civic education, moral education, environmental education, sex/AIDS education and drug education.

The Hong Kong Extensive Reading Scheme was in its fifth year of operation at the secondary level benefiting 68 400 students from 1 710 Secondary 1 to 3 classes. It was extended to Primary 5 and 6, by phases, from September 1995. A total of 5 480 pupils from 137 classes took part in Phase 1 of the scheme.

      The Hong Kong Teachers' Centre, set up in 1989 to promote professionalism and a sense of unity among teachers, is supervised by an advisory management committee with wide representation from schools, teacher organisations and educational bodies, with support staff provided by the Education Department. During the year, the centre organised, sponsored or hosted more than 750 activities for 50 000 participants.

Educational television (ETV) programmes offer syllabus-based and enrichment programmes from Primary 3 to Secondary 3 to support and supplement classroom teaching. Subjects covered include Chinese language, English language, mathematics, science, and social studies. Health education programmes are offered to pupils from Primary 3 to 6. Teachers' and pupils' notes are also produced to help teachers fully utilise these programmes. All educational television programmes are jointly produced by ETV and Radio Television Hong Kong and are transmitted to schools by the two local television stations.

A five-year information systems strategy was launched in 1993 to extend the use of information technology in the school education programme. Computer networks are being developed to link up public sector schools with various sections of the department. Teachers and school heads are also involved in the programme development.

The 19 district education offices provide advice and assistance to schools, teachers, parents and students, and facilitate communication with the Education Department. District education officers attend district board meetings for discussion of educational matters.

The Careers and Guidance Services Section organises annual training courses, conferences and workshops for careers/guidance teachers, and operates a guidance teacher resource centre to provide support materials for them. Its careers education centre provides a reference library on careers, local and overseas study opportunities for the use of the public, and a free public advisory service on overseas studies. During the year, about 2 979 students left to study in the UK, 2 603 left for Canada, 4187 for the USA, and 3 579 for Australia. Exhibitions promoting overseas education were staged by organisations of these countries.

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The Non-graduate Teacher Qualifications Assessment Scheme was introduced in 1992-93 to assess the qualifications and professional competence of intending teachers who obtained their qualifications and training outside Hong Kong. The assessment helps to increase the supply of qualified primary school teachers. A total of 87 candidates passed the required examinations in the 1995 cycle.

New Immigrant Children from Mainland China

 In April, the Education Department, with the assistance of voluntary agencies, introduced an induction programme for new immigrant children from mainland China to help them adapt to the local social and school environment. A total of 19 agencies participated in running the programme, benefiting 3 500 new immigrant children. Feedback so far from teachers, students and the community has been very positive.

  To help the new immigrant children from China catch up with schooling in Hong Kong, an extension programme on remedial English was added, and advice was given to teachers on tailoring the curricula in the subjects Chinese language and English language, from Primary 1 to Secondary 3, to cater for the needs of these children.

Technical Education and Industrial Training

A comprehensive system of technical education and industrial training provides the economy with well-trained manpower at all levels. Publicly-funded courses are provided in the VTC's two technical colleges, seven technical institutes and 24 training centres. Separate levy-funded authorities provide industrial training for the clothing and construction industries.

  During the year, 12 training boards/general committees conducted manpower surveys to assess the demand for trained manpower in their respective sectors. Some training boards and general committees have organised out-centre training courses, conferences, symposia and seminars.

Technical Education

Technical education at higher technician level is provided by the VTC's two technical colleges at Chai Wan and Tsing Yi. These colleges offer higher diploma courses (normally over three years, full-time) and higher certificate courses (either two or three years, part-time) in applied science, business administration, computing and mathematics, construction, design, electrical and communications engineering, electronic engineering, hotel catering and tourism management, manufacturing engineering and mechanical engineering.

  Short courses are also offered to people in employment. In October, enrolment totalled 4900 full-time students on 32 courses, and 1 430 day release and 6 630 evening students on 39 part-time courses.

  The seven technical institutes provide a range of technician and craft level courses related to Hong Kong's major industries. Technician level courses are offered for Secondary 5 leavers and craft level courses for those who have completed at least Secondary 3. These are offered on either a full-time, part-time day release, or part- time evening basis. In July, 4 410 full-time, 1 780 mixed full-time, 3 660 part-time day and 7 600 evening students graduated from the technical institutes. In November, the

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total enrolment in technical institutes was 10 000 full-time, 3 950 mixed full-time, 11 140 part-time day and 23 300 evening students on some 310 courses.

Industrial Training

In addition to offering pre-employment training to new entrants to the labour market, some of the VTC's 24 training centres also offer upgrading for in-service personnel at all levels. Such upgrading training includes courses in precision tool and die design, application of CAD/CAM to die manufacturing, electronic systems design, object-oriented technology and open systems in information technology. Some 45 300 full-time and part-time places were available during the year. Trade tests were offered for employees in the automobile, building and civil engineering, electrical, jewellery, machine shop and metal-working, and plastics and printing industries.

The Construction Industry Training Authority, established in 1975, operates three training centres and a management training and trade testing centre offering a total of 7 959 training places. Full-time courses are offered to train craftsmen, operatives and supervisors in the construction field, and there are also part-time management and upgrading courses for in-service construction personnel.

The authority is funded by a levy of 0.25 per cent on the value of all construction works exceeding $1 million. To help improve construction site safety, about 2 800 certification tests for crane operators were conducted during 1995. The authority is also conducting trade tests for construction workers of principal trades with a view to upgrading the quality of construction works.

The Clothing Industry Training Authority was established in 1975 to provide training centres for the woven garment, knitwear, fur and footwear industries. It is financed by a levy of 0.03 per cent on the FOB value of clothing and footwear products exported from Hong Kong. In 1994-95 two training centres trained 7 397 people at technician, craftsman and operative levels on full-time and part-time

courses.

The Engineering Graduate Training Scheme, administered by the VTC, helps engineering students and graduates to complete their training necessary for obtaining the corporate membership of the Hong Kong Institution of Engineers or equivalent professional bodies. During the year, 87 firms took part in the scheme, providing 300 places.

Management Development

The VTC's Management Development Centre of Hong Kong aims to develop, promote and extend managerial effectiveness in Hong Kong. Major activities include the development and distribution of locally relevant management learning material, the provision of workshops and seminars for managers, and courses for management trainers. The centre operates a pilot management development programme with the University of Oxford Delegacy for Local Examinations.

Training in New Technologies

The VTC's Precision Tooling Training Centre houses a precision sheet metal processing training unit. It was set up in 1990 with financial and expert help from the Japan International Co-operation Agency under an inter-governmental agreement.

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  The New Technology Training Scheme provides matching grants to assist companies in sending their employees to acquire skills in new technologies.

Apprenticeship Schemes

The Apprenticeship Ordinance promotes and regulates the employment and training of apprentices in 42 designated trades. Anyone aged below 18 working in any of the 42 designated trades must, unless they have already completed an apprenticeship in the trade, enter into a contract of apprenticeship with the employer. This must be registered with the Director of Apprenticeship, who is concurrently the executive director of the VTC. Contracts in other trades may also be registered voluntarily.

  Inspectors advise and help employers and apprentices in training and employment matters, and visit workplaces to ensure training schemes are properly implemented. A free placement service is offered to job-seekers interested in an apprenticeship. By the end of December, 7 905 apprentices were being trained (2013 in non-designated trades), covering 6 333 craft and 1 572 technician apprentices.

Training for People with a Disability

 Five skills centres, three run by the VTC and two by voluntary agencies, prepare disabled people for open employment or mainstream technical education and industrial training. They provide 798 full-time places, of which 303 are residential.

Support services provided by the VTC include a vocational assessment service, using internationally-recognised tests and work samples designed to match local skill profiles. All mildly mentally handicapped students attend an assessment programme in their final school year. A comprehensive programme is used in assessing the more complex cases.

  The VTC's Technical Aids and Resource Centre designs and makes aids for disabled people to enhance their training and employment prospects, and provides information and resource materials on vocational rehabilitation.

  An inspectorate unit advises skills centres on administration, curriculum, training methods and standards, and guides disabled students on training courses. The unit works closely with the Labour Department's selective placement service to ensure that training matches local employment market demand. About 75 per cent of disabled people completing full-time courses in technical institutes and skills centres entered into open employment or enrolled in further courses in mainstream technical education during the year.

Tertiary Education

Ten years ago, less than five per cent of the 17-20 age group could receive tertiary education in Hong Kong. By 1994-95, this figure had been increased to 18 per cent, with 14 500 places available for first-year, first-degree courses,

  Degrees up to doctorate level awarded locally are recognised by institutions of higher learning around the world. Academic standards are guaranteed by the appointment of external examiners from prominent overseas universities and colleges. The HKCAA validates courses and programmes offered by Hong Kong's non- university, degree-awarding institutions.

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The Tertiary Institutions

The City University of Hong Kong, founded in 1984 as the City Polytechnic of Hong Kong, has 9 655 full-time, 6 881 part-time and 406 sandwich course students. The four faculties of business, humanities and social sciences, law, and science and technology offer first-degree courses, postgraduate diplomas, and taught master's degree courses, as well as Master of Philosophy and Doctor of Philosophy programmes by research. Diploma and higher diploma courses are offered by the College of Higher Vocational Studies through its divisions of commerce, humanities and social sciences, and technology. There is a School of Graduate Studies to oversee all postgraduate programmes, and seven research centres are engaged in a wide range of research activities.

The Hong Kong Baptist University was founded in 1956 as the Hong Kong Baptist College by the Baptist Convention of Hong Kong. In 1983, it was incorporated under its own ordinance and became fully funded by the government. Since 1986, it has been empowered to award degrees. The University now offers first-degree courses, and taught and research postgraduate courses. It has 4 146 full-time and 600 part- time students in three faculties: arts, science and social sciences; and two schools: business and communication. The university also administers part-time courses, some of which lead to the award of degrees/higher degrees through its School of Continuing Education for the working population of Hong Kong.

Lingnan College was founded in 1967 to continue the traditions of the former Lingnan University in Guangzhou (Canton), China. It offers four honours degree programmes. In December, enrolment was 2 059 full-time and two part-time students. A Master of Philosophy in humanities will be introduced in 1996-97, and Master of Philosophy degrees in Chinese and in business in 1997-98. Student numbers are expected to grow to 2 100 by the academic year 1997-98. The college moved to a new campus at Fu Tei, Tuen Mun, at the start of the 1995-96 academic year, and is expected to become the first fully-residential higher education institution in Hong Kong when all its student hostels are completed in 1996-97.

The Chinese University of Hong Kong was established in 1963 by bringing together New Asia College (founded in 1949), Chung Chi College (1951) and United College (1956). A fourth college, Shaw College, was founded in 1986. The university has 9 400 full-time and 1 060 part-time undergraduate students, and 988 full-time and 1 476 part-time postgraduate students in seven faculties: arts, business administration, education, engineering, medicine, science and social sciences.

The Hong Kong Polytechnic University, established in 1972 as the Hong Kong Polytechnic, offers postgraduate, degree and sub-degree courses in six faculties: applied science and textiles, business and information systems, communication, construction and land use, engineering, and health and social studies. It has close links with industry, commerce and the community; and concurrent work and study are encouraged through part-time and sandwich courses. Enrolment in December was 11 157 on full-time and sandwich courses, and 9 289 on part-time courses.

      The Hong Kong University of Science and Technology opened in 1991 as a publicly-funded technological institution dedicated to educating today's men and women with the skills they will need to enhance the economic and social development of Hong Kong and the Asia-Pacific region. It awards bachelor's, master's, and doctoral degrees in three schools: Science, Engineering, and Business and Manage-

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ment. A fourth school, Humanities and Social Science, offers graduate degrees and provides general education for all undergraduates. In December, the university had 5 139 undergraduates and 1 156 graduate students. At its third congregation in November, 1 104 bachelor's and 216 advanced degrees were conferred.

  The University of Hong Kong, is the territory's oldest tertiary institution. It was founded in 1911, continuing the work of a college of medicine dating from 1887. Its 10 325 full-time and 2618 part-time students are enrolled in nine faculties: architecture, arts, dentistry, education, engineering, law, medicine, science and social sciences. Courses and programmes are at first degree, taught master's and postgraduate research levels. In addition to teaching, the university is also committed to excellence in research.

  The Open Learning Institute of Hong Kong was established in 1989 to provide adults with more opportunities for higher education through open access and distance-learning courses. In October, about 20 000 students were enrolled in 125 courses leading to degree, sub-degree and post-graduate qualifications in four schools: Arts and Social Sciences, Business and Administration, Education, and Science and Technology and the Centre for Continuing and Community Education. Three new honours degree programmes were introduced during the year, the Bachelor of Arts in International Studies, the Bachelor of Business Administration in Banking and Finance and the Bachelor of Education (in Secondary Education). In October, the institute's first post-graduate programme, an MBA, was launched and the 500 course places available were eagerly taken up. A student loan scheme was introduced in June to supplement the existing bursary provision and improve access for needy students. The topping-out ceremony of the institute's new headquarters in Ho Man Tin was held in July. Occupation of the new campus is expected to take place in April 1996.

  Each tertiary institution publishes detailed information about admission criteria, courses, staff and other matters in its annual report, calendar and prospectus, obtainable through its information office.

Post-Secondary Colleges

Hong Kong Shue Yan College, registered in 1976 under the Post Secondary Colleges Ordinance, operates a four-year diploma programme. Its faculties of arts, social sciences and commerce include 13 departments offering day and evening courses to 2 548 students. The college receives no public funding, but its students may apply for cash limited government grants and loans.

Adult Education

 Many formal and informal opportunities are available for adults to study in their spare time, either for personal development or to update knowledge and skills relevant to their work. Private schools offer language, business and computer courses. The British Council, Alliance Française, Goethe Institute and Japanese Consulate all offer language courses.

  During the year, the Education Department provided formal courses of second chance education from primary to secondary six levels to adult learners at 42 centres and ran non-formal courses in 10 adult education and recreation centres. The

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department also subvented adult education programmes organised by voluntary agencies.

The British Council

      The aim of the British Council in Hong Kong is to offer British skills and expertise in the key areas of science and technology, education, training, the arts and English language teaching and learning, to assist Hong Kong's continuing educational and economic development into the next century.

       English language teaching is one of the council's major programmes in Hong Kong. It collaborates increasingly with the Education Department, the HKIEd and bodies such as the Language Fund, to improve standards of English teaching and learning in the territory. Through its general and business English courses, intensive summer programmes for Chinese-medium S6 and S7 students, distance-learning programmes, summer schools and teacher training courses, the English Language Centre provided English language-learning opportunities for more than 40 000 Hong Kong residents in 1994-95. The council also arranged for 111 student teachers to visit the UK for courses jointly funded by the HKIEd.

The council works closely with the government, higher education and other organisations to provide access to British expertise in areas such as the environment, law, planning, education, medicine, nursing, and public administration. In November 1995, the council will organise a major seminar and exhibition on management training funded by the UK Government. A programme of research jointly funded with the Hong Kong Research Grants Council supported some 30 joint projects in 1995. British Studies modules are to be presented to nascent Centres for European Studies at the University of Hong Kong and Hong Kong Baptist University, and a series of electronic mail links will be established between schools in the UK and schools in Hong Kong.

The council's library and information services are open to all Hong Kong residents and cover aspects of contemporary British life and culture, with an emphasis on management skills and English-language teaching. The collections include books, magazines, newspapers, videos, CD-ROM, music on CD and audio tapes. The library facilities are computerised and free to students of the Council's English Language Centre. Others are charged a nominal annual subscription.

The Education Counselling Service provides free and impartial advice to students on educational opportunities available in Britain. In 1994-95, nearly 30 000 students used the service, which also organises regular exhibitions, seminars and interviews so that students can learn first-hand about studying in Britain.

The council opened a Distance Learning Centre in January 1995 to provide potential students in Hong Kong with a reliable and objective source of detailed information about UK courses and awarding institutions. It provides easy access to sample course materials in order to help candidates make an informed choice of the course best suited to their qualifications, professional development and career requirements.

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11 HEALTH

 HONG KONG'S comprehensive range of services and improvements in the standard of living have fostered a good general level of health. The cornerstone of the government's health policy is that no one should be denied adequate medical treatment through lack of means and it works to ensure that proper services and facilities are available from public and private sector providers.

The Organisational Framework

The Department of Health is the government's health adviser and the agency for executing health care policies and statutory functions. It safeguards the health of the community through a comprehensive programme of promotional, preventive, curative and rehabilitation services. It works in collaboration with the private sector and teaching institutions to provide a wide range of primary health care services.

The Hospital Authority is an independent body responsible for the management and control of all public hospitals in Hong Kong. It was established in December 1990 to integrate government and government-assisted hospitals with a view to optimising the use of resources, facilitating hospital management reforms and enhancing community participation. Medical treatment and rehabilitation services are provided to patients through hospitals, specialist clinics and outreaching services operated by the authority. Since 1992, management reforms have been introduced in most public hospitals, with the emphasis on defining clear lines of accountability and providing greater devolution of responsibilities.

The year saw an increase of 1 770 hospital beds, making a total of 29 342- representing 4.77 per thousand. Of these, 25 000 are in public hospitals under the Hospital Authority 3 484 are in private institutions, 773 in correctional institutions and 85 in institutions under the Department of Health. In December, 8 476 doctors were registered with the Hong Kong Medical Council. The Hong Kong Nursing Board had registered 35 501 nurses.

Health of the Community

 Hong Kong's health indices remain among the best in the world. Infant mortality is below 4.7 per 1 000 live births. The average life expectancy at birth is 81 years for females and 76 for males. The leading causes of death in 1995 were cancers (31 per cent), heart diseases (16 per cent) and cerebrovascular diseases (11 per cent). These diseases mainly affect the elderly and will continue to dominate the mortality picture as the population ages.

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Infectious diseases

Infectious diseases are well under control. In 1995, there were 7 906 notifications of infectious diseases, including 6 193 cases of tuberculosis and 666 cases of viral hepatitis.

       Children in Hong Kong are immunised against tuberculosis, diphtheria, pertussis, poliomyelitis, tetanus, hepatitis B, measles, mumps and rubella. The vaccine coverage is high. As a result, diphtheria and poliomyelitis have been virtually eliminated.

A large food poisoning outbreak in August 1995 affected 681 people in a staff canteen. Investigation revealed improper processing of jellyfish by a food supplier as the cause.

HIV Infection and AIDS

In 1995, 122 cases of HIV (Human Immunodeficiency Virus) infection and 45 AIDS (Acquired Immunodeficiency Syndrome) patients were reported. This represented an increase of 17 per cent and 18 per cent respectively when compared with 1994. The cumulative total was 642 cases of HIV infection and 175 AIDS patients.

       The Advisory Council on AIDS plays a key role in supervising Hong Kong's overall AIDS programme. Its Strategies for AIDS Prevention, Care and Control in Hong Kong paper serves as the blueprint for Hong Kong's policy on all AIDS-related issues.

The AIDS Trust Fund, established by the government in 1993, provides financial assistance to those infected with HIV through transfusion of blood or blood products in Hong Kong before August 1985. It supports community projects which provide direct services to those with HIV and AIDS, increase AIDS awareness or remove discrimination against those infected with the virus. So far, about $58.9 million has been disbursed.

The AIDS Unit of the Department of Health provides counselling and medical consultation for persons infected with HIV or at risk of infection. Members of the public can use a telephone hotline (2780 2211) to hear recorded messages in Cantonese, English and Putonghua to obtain fax messages or talk in confidence to trained counsellors. Recorded messages in Thai, Tagalog and Vietnamese are also available. In 1995, the theme of the government's media campaign on AIDS centred on support for people living with HIV/AIDS.

The participation of non-governmental organisations is crucial in the fight against AIDS. The Hong Kong AIDS Foundation and AIDS Concern provide counselling and education as well as patient support services. The Community Charter on AIDS, which is a collaborative programme organised by the Department of Health in conjunction with the Lions Club International District 303 Hong Kong and Macau, achieved continued success in 1995. A total of 39 companies and organisations have joined this project to adopt a positive and non-discriminatory policy towards people with HIV or AIDS.

Hospitals and Development Programmes

Demand for hospital services remained high, as reflected by the 909 800 hospital admissions and 6 270 700 attendances at out-patient and specialist clinics. Accident

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and emergency departments of major public hospitals saw 1 912 300 attendances or 5 240 per day.

  Projects in the hospital development programme progressed satisfactorily. Tuen Mun Hospital, which opened in 1990, had 1 420 beds available at the end of the year. When in full operation, the hospital will provide 1 606 beds. The Pamela Youde Nethersole Eastern Hospital, which opened in 1993, had 1 180 beds and will eventually have 1 620.

  The Geriatric Day Hospital at Wong Tai Sin Hospital was completed in February and the Wong Chuk Hang Complex for the Elderly was completed in March, providing 200 beds for the care of infirmary patients. The territory's first cancer centre was completed in June at the Prince of Wales Hospital to conduct multi- disciplinary cancer research, diagnosis, treatment, counselling and public education. The Bradbury Hospice in Sha Tin, which provides 26 beds for hospice care, was incorporated into the management of the authority in April.

  New or additional services are being progressively introduced at Tuen Mun Hospital, the Pamela Youde Nethersole Eastern Hospital, Ruttonjee Hospital and Yan Chai Hospital. Major projects in hand include construction of the Tai Po Infirmary and Convalescent Hospital, the 618-bed North District Hospital and relocation of Nethersole Hospital to Tai Po. Haven of Hope Hospital and Castle Peak Hospital are being redeveloped, while extension or refurbishment are under way at the United Christian, Queen Elisabeth, Princess Margaret and Kwong Wah hospitals. The Tseung Kwan O Hospital is at an advanced stage of planning.

Primary Health Care

Primary health care, which emphasises the promotion of general health and prevention of disease, is recognised world-wide as the most cost-effective way to provide health care services. Intense efforts are ongoing to implement the 102 recommendations in the report of the Working Party on Primary Health Care, endorsed by the government in 1991.

District Health System

The District Health System delivers primary health care services. It emphasises the need for efficient co-ordination among the various providers of medical and health services. The setting up of district health committees, with members drawn from other health care and community service providers and the public, provides a forum for community participation in service planning and health promotion.

Clinics

The Department of Health operates 59 general out-patient clinics, providing afford- able care to the public. Mobile dispensaries, floating clinics and a flying doctor service cater to residents of remote areas and outlying islands. The department also operates 17 tuberculosis and chest clinics, 11 social hygiene clinics, five dermatology clinics, five clinical genetic clinics and four child assessment centres. Total attendance in 1995 was 10.8 million.

Private-sector services are provided by medical practitioners under the Estate Doctors' Association, who run clinics in housing estates to offer a low-cost service for 158 residents; medical practitioners in private practice; 84 clinics operated by various

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charity organisations and 122 exempted clinics registered under the Medical Clinics Ordinance.

Health Education

The Department of Health's Central Health Education Unit plans, organises and promotes health education activities. In 1995, its focus included healthy lifestyles, organ donation, safe use of herbal medicine and prevention of accidents. The unit liaises closely with government and non-governmental organisations.

       A computerised, 24-hour telephone health education system (2833 0111) delivers voice and fax messages on many health topics and attracts some 90 000 calls a month. With support from the Royal Hong Kong Jockey Club, the unit is working on two innovative health promotion approaches. A sophisticated computer learning system will be installed in 1996, offering an interactive way to learn about 19 health topics. A new 'donormobile' van will start touring around Hong Kong in 1996, educating the public on organ donation.

The Health Ambassador Scheme continued to win acclaim in 1995. Volunteers were recruited and trained to carry out further health promotional activities in schools and among families. Special training courses and seminars were arranged for teachers. Health talks and presentations were delivered to schools, voluntary agencies, private companies and government departments.

Dental Services

The department's Dental Service aims to improve the oral health of the population. Activities targeted at all members of the public are organised throughout the year to raise the awareness of oral care. The community has benefited from the fluoridated water supply, resulting in a reduced rate of dental decay.

       All of Hong Kong's 200 000 pre-school children are covered in an oral health education programme delivered through maternal and child health centres, kinder- gartens and pre-school centres. A further 380 000 primary school children (or 80 per cent), receive annual dental check-ups and basic dental care through the School Dental Care Service. The pilot Youth Dental Care Programme continued in Tuen Mun and Sha Tin in 1995. This provides continuity of care for more than 4 000 secondary school students.

       The Dental Service also provides dental care to hospital patients and patients with special oral health needs. An emergency dental service is provided at several district dental clinics.

Family Health

The Family Health Service of the Department of Health offers a comprehensive health programme for women and children aged below six years through 46 maternal and child health centres. Immunisation, health advice, physical examination and comprehensive observation services are provided. During the year, about 94 per cent of new-born babies attended such centres. Antenatal, postnatal medical consultation and family planning services are available for women of child-bearing age. The first women's health centre opened in 1994 to provide a health promotion and screening programme for women aged 45 and above.

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  The government-subvented Family Planning Association of Hong Kong runs nine birth control clinics and three youth health care centres, providing services such as contraception, sterilisation, vasectomy, gynaecological check-ups, pre-marital check- ups, youth counselling and advice on fertility. It also provides family planning, family life education and sex education.

Student Health Service

A new Student Health Service under the Department of Health replaced the School Medical Service in 1995. Its main objectives are health promotion, disease preven- tion and continuity of care. Seven student health service centres and one special assessment centre were opened to provide free health assessment, individual health counselling, health education and referral services to primary day school students.

  School health inspectors from the department also visit schools regularly, advising them on environmental hygiene and sanitation of school premises. School health officers and nurses advise on the control of communicable diseases, and organise health education activities and immunisation campaigns.

Medical Care for the Elderly

The provision of medical services for geriatric patients has been made an urgent priority. Since 1994, geriatric teams in acute hospitals have been integrated with general medical teams to provide more efficient assessment and treatment for patients in acute hospitals. In addition, 415 day-places were provided for elderly patients.

A network of nursing homes with medical and nursing facilities is being developed for elderly patients. Non-profit making organisations are being invited to build and manage some of the nursing homes with assistance from the government in the form of land and part of the capital and running costs. By 1997, six nursing homes providing 1 400 beds will be in operation.

The first pilot elderly health centre in Nam Shan began in 1994, followed by a second in Kwun Tong in 1995. They provide screening and health counselling services for elderly patients as recommended by the Working Party on Primary Health Care. Four extra specialist medical teams are being established in 1995-96 to provide medical and psychiatric care to 9 500 old people living in institutions.

Services for the Mentally Ill and Mentally Handicapped

 Medical services for mentally ill persons include treatment in hospitals, out-patient clinics, day hospitals and outreaching services. The Hospital Authority, in conjunc- tion with various government and non-government organisations, provides a comprehensive psychiatric service for the territory. Patients are treated, as far as possible, in the community. Emphasis is placed on continuity of care and integrating rehabilitation with medical treatment.

  At the end of 1995, 4054 beds were provided in psychiatric hospitals, and 1 563 beds in public psychiatric units of general hospitals. An additional 1 010 beds are being planned for psychiatric patients in public hospitals by the year 2000. Psychiatric day hospital places remained at 575 at the end of 1995.

Community work and aftercare units of psychiatric hospitals help discharged patients. The community psychiatric nursing service and domiciliary occupational

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therapy service, in particular, aim to provide continual care and treatment pro- grammes for discharged mental patients in their home settings. This assists patients' social readjustment while educating them and their families on mental health. Five community psychogeriatric teams have been set up to provide designated care and rehabilitation programmes to psychogeriatric patients. There are 12 community psychiatric nursing service centres. Other complementary rehabilitative services include day-centres, half-way houses, long-stay care homes, vocational training, selective placement and social clubs, run by government departments and non- government organisations.

      Severely mentally handicapped persons requiring intensive nursing care and rehabilitation services are cared for at Tuen Mun Hospital (200 beds), Caritas Medical Centre (300 beds), the Duchess of Kent Children's Hospital (25 beds) and the Siu Lam Hospital (300 beds).

Community Nursing Service

The Hospital Authority's Community Nursing Service (CNS) provides rehabilitative nursing care and treatment to the sick, the elderly infirm and the disabled. The service is provided through a network of 37 CNS centres. During the year, 22 683 patients were served and 321 446 home visits were made.

Port Health

The Port Health Service is the control authority for preventing the entry of quarantinable diseases into Hong Kong by air, land or sea. It enforces the measures stipulated under the Quarantine and Prevention of Diseases Ordinance and inter- national health regulations. Surveillance measures at the airport and other entry points were strengthened after an outbreak of Ebola virus infection in Zaire, to prevent its introduction into Hong Kong.

Radiation Health

Inspectors of the Radiation Board carried out 850 on-site radiological safety inspections on medical, commercial and industrial premises in 1995. The centralised radiation monitoring service of the Radiation Health Unit monitored the radiation. exposure of 5 880 workers. It detected an average individual occupational dose of 0.2 millisievert against a regulatory limit of 50 millisievert. The Environmental Radiation Monitoring Programme detected no significant change in the background radiation level in Hong Kong during the year.

The unit is collaborating with the Environmental Protection Department in commissioning a consultant project to set up a low-level radioactive waste storage facility. Work to condition the waste currently in store in the Queen's Road East Tunnel storage facility is continuing, in preparation for its transfer to a new facility by the end of 1996.

Medical Charges

Health promotion and preventive care services are generally free. Under a policy that nobody should be denied adequate medical treatment through lack of means, other medical charges (especially for hospital treatment) are heavily subsidised. Fees are reviewed regularly.

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  Patients in general wards of public hospitals are charged $60 a day. This covers a comprehensive range of services from meals, medicine and tests to surgery or other treatment. The charge may be reduced or waived in cases of hardship certified by a medical social worker. Some private beds are provided at major public hospitals with higher maintenance and treatment charges.

A consultation at general out-patient clinics costs $34, while that at specialist clinics is $40. Physiotherapy, occupational therapy and child assessment services cost $40 per session. Attendance at geriatric or psychiatric day centres and home visits by community nurses cost $48 per session. These fees may also be waived if warranted.

  The charge for injections and dressings in general out-patient clinics is $14, while charges for visits to family planning clinics and methadone clinics remain at $1. Free medical services continued to be offered at maternal and child health centres, tuberculosis and chest clinics, social hygiene clinics, and accident and emergency departments.

To assist financially-needy, chronically-ill patients, the government in 1995 abolished charges for many items used in medical treatment. Eligibility criteria for the Samaritan Fund were also relaxed, so that patients with earnings below the Median Monthly Household Income level could apply for financial assistance with their medical expenses.

A pilot scheme to introduce semi-private rooms is being carried out in three hospitals and arrangements for a co-ordinated voluntary insurance scheme are being examined in conjunction with the medical insurance industry.

Smoking and Health

The Hong Kong Council on Smoking and Health is an independent statutory body, established in 1987 to acquire and disseminate information on the hazards of using tobacco products, and to advise the government on matters relating to smoking and health.

After a public consultation exercise on further anti-smoking proposals in 1992, amendments to the Smoking (Public Health) Ordinance were passed in 1994 and came into effect on various dates between 1994 and 1995. These extend require- ments for health warnings on cigarette packaging and advertising to cigars and pipe tobacco; prohibit the sale (or giving for the purposes of promotion) of tobacco products to people under the age of 18, with tobacco retailers having to display a sign to this effect; and require all restaurants to display a sign stating whether or not they have a non-smoking area. Further anti-smoking measures are being considered in line with World Health Organisation plans.

Training of Medical and Health Personnel

Basic training of doctors is provided by the University of Hong Kong and The Chinese University of Hong Kong, where the medical student intake in 1995 was 171 and 162, respectively. Under the Licentiate Scheme of the Hong Kong Medical Council, 25 externally-trained doctors passed the local licentiate examination in 1995. The Hong Kong Academy of Medicine is an independent statutory body with the authority to approve, assess and accredit all post-internship medical training. Since

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its inauguration in December 1993, the 12 founding colleges have conducted training and examinations to award specialist qualifications to qualifying candidates.

The School of Public Health Nursing in the Department of Health provides full- time and part-time public health nursing training programmes which leads to a diploma in public health nursing studies for registered nurses.

       Training in dentistry is available at the University of Hong Kong. A total of 37 dentists graduated in 1995.

Government Laboratory

As the centre of authoritative and impartial analytical services, the Government Laboratory protects public health through the provision of scientific support and the regular examination of food, pharmaceuticals and consumer goods.

       Food products sampled from markets accounted for over 50 000 surveillance tests in 1995. The main focus was on the detection of non-permitted additives as colours, preservatives and sweeteners, as well as contaminants such as mycotoxins, hormones, antibiotics, pesticide residues and potential carcinogens. The occurrence of these substances in foods was found to be generally insignificant.

Pharmaceutical products used in public institutions or sold locally were routinely tested for compliance with the required standards of safety and quality. Increasing effort has been devoted to the study of traditional Chinese medicines following the government's policy to promote, develop and regulate the Chinese medicine profession. Meanwhile vigilance checks on proprietary Chinese medicines for adulteration by synthetic drugs continued.

The year-round programme of over 20 000 cigarette analyses culminated in the annual publication of tar and nicotine tables. These results reinforced cigarette health warnings and helped to keep higher-tar brands off the local market.

      The testing of consumer products intensified in line with growing public concern over safety. A large variety of toys and children's products was examined. The introduction of the Consumer Safety Ordinance in 1995 saw the Government Laboratory involved in investigating hazards associated with common household goods such as ceramic ware, hair dyes and cosmetics.

       Other statutory duties undertaken during the year included certification analyses relating to the illegal use of marked diesel oil in road vehicles, unlicensed storage of dangerous goods, adulteration of wines and spirits, and offences under the Trade Description Ordinance.

Traditional Chinese Medicine

In October 1994, the Working Party on Chinese Medicine released the Report of the Working Party on Chinese Medicine. A Preparatory Committee on Chinese Medicine was set up in April 1995 to advise inter alia on the criteria and procedures for the eventual statutory registration of practitioners of traditional Chinese medicine (TCM). A territory-wide enrolment was started to compile a profile of all TCM practitioners (generalists, bone-setters and acupuncturists) in Hong Kong, on which criteria would be devised for their eventual registration. The Preparatory Committee would also advise on the development and regulation of TCM in Hong Kong, leading to the eventual establishment of a statutory regulatory body.

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Drug Abuse and Trafficking

The government aims to stop the illicit trafficking of drugs into and through Hong Kong; to develop a comprehensive treatment and rehabilitation programme for drug abusers; to dissuade people, in particular the young, from experimenting with drugs; and to eradicate drug abuse from the community.

Data collected by the government's Central Registry of Drug Abuse in 1995, based on 33 000 reports on 20 000 persons, indicated that 89 per cent of drug abusers were male and 11 per cent female; 53 per cent were aged over 30 years, 27 per cent were 21 to 30 years old and 20 per cent were under 21. The most common drug of abuse was heroin, which was used by 90 per cent of the persons reported to the registry. Common drugs of abuse among people aged below 21 included heroin, cannabis and cough medicines.

  A total of 4 000 drug abusers came to the notice of the registry for the first time in 1995. Of the new cases, 79 per cent were male, 21 per cent were female and 50 per cent were people under 21.

Overall Strategy and Co-ordination

The government's anti-drug programme has achieved considerable success. It adopts a five-pronged approach - law enforcement, treatment and rehabilitation, preventive education and publicity, research and international co-operation.

Effective law enforcement induces abusers to seek treatment voluntarily, as a result of short supply of drugs. Treatment and rehabilitation are undertaken by the govern- ment and voluntary agencies which offer a wide range of services to meet the different needs of drug abusers from varying backgrounds. The effectiveness of these treatment programmes reduces the demand for illicit drugs. At the same time, the government places great emphasis on preventive education and publicity to heighten public awareness of the drug problem and to promote the advantages of a drug-free lifestyle. Research studies are conducted to identify trends in the nature of addiction and the addict population in Hong Kong. International co-operation through exchange of information and experience and joint action against illicit trafficking, enhances the effectiveness of efforts in these areas.

  These efforts are co-ordinated by the Action Committee Against Narcotics (ACAN), a non-statutory body which includes non-official and government members. The committee is the government's advisory body on all anti-drug policies and activities, including those undertaken by non-government agencies. It is serviced by the Narcotics Division, which is headed by the Commissioner for Narcotics.

Governor's Summit Meeting on Drugs

In March 1995, the Governor chaired the first Drugs Summit. This brought together 240 participants from a wide sector of the community to plan a community-wide education and support effort to try to halt the growing trend in drug abuse by young people. The Governor launched the Beat Drugs campaign and announced the government's 26-point Forward Action Plan to tackle the drug problem. Proposals from the summit were considered by ACAN and, in July, the government published a further 42-point action plan to follow them up.

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Legislation and Law Enforcement

Progress was made during the year towards enabling the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances to be extended to Hong Kong. Enactment of the Drug Trafficking (Recovery of Proceeds) (Amendment) Ordinance 1995 gave effect to the provisions of Articles 3 and 5 of the Convention. The other main international agreements in this area, the 1961 Single Convention on Narcotic Drugs as amended by the 1972 Protocol and the 1971 Convention on Psychotropic Substances, have already been extended to the territory.

In 1995, the Royal Hong Kong Police and the Customs and Excise Department seized some 15 kilograms of methamphetamine, 373 kilograms of heroin, 1 070 kilo- grams of cannabis, and two kilograms of cocaine. Joint operations with overseas law enforcement agencies neutralised several international drug-trafficking syndicates. Substantial quantities of dangerous drugs were seized and ringleaders arrested locally and abroad. Police and customs action resulted in the arrest of 16 143 people for drug offences during the year.

Since enactment of the Drug Trafficking (Recovery of Proceeds) Ordinance in 1989, assets to the value of $117.1 million have been ordered to be confiscated and further assets amounting to $161.9 million have been placed under restraint. Of the assets ordered to be confiscated, $207.9 million had been paid to the Hong Kong Government by the end of 1995.

Treatment and Rehabilitation

      More treatment facilities were made available during the year to young drug abusers. A new counselling centre for psychotropic substance abusers began service in January 1995. It is known as Direction and is operated by the Society for the Aid and Rehabilitation of Drug Abusers (SARDA). Five more substance abuse clinics were established in different hospital clinics during 1995 to provide medical services to psychotropic substance abusers. Progress was made towards setting up three more residential treatment centres for young opiate abusers and one more out-patient counselling centre for psychotropic substance abusers in the New Territories.

ACAN continued its efforts to improve public acceptance of drug-treatment facilities. Efforts were made to build local support for SARDA's project to relocate its Sister Aquinas Memorial Women's Treatment Centre from Sha Tin to the North District. The new centre is going to expand from 39 to 57 beds. Following the success of the pilot project in 1994, a training course on the prevention of drug abuse and HIV infection for participants from China, Hong Kong and Macau was held in December at the Chinese University of Hong Kong, with financial assistance from the World Health Organisation.

Preventive Education and Publicity

Anti-drug publicity in 1995 focused on encouraging young people to adopt a healthy lifestyle and to say 'no' to all drugs; educating them on the building up of self-esteem and confidence; and helping them to resist temptation from their peers. Programmes were also designed to foster a community-wide education and support effort to try to halt the growing trend in drug abuse by young people. In all, 12 district campaigns

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were held, involving the community through carnivals, variety shows, competitions and exhibitions.

  The Narcotics Division's school talk team gave 330 drug education talks to 85 369 students in 236 primary and secondary schools and technical institutes. A new talk was launched in September, aimed at increasing its effectiveness and integrating it more fully into the work of schools. Talks were also organised for members of youth organisations, parents, and juvenile offenders at the boys' and girls' homes operated by the Social Welfare Department.

  To better equip prospective teachers, in-service teachers and social workers to cope with the issue of drug abuse, drug education workshops and courses were organised for students of the Hong Kong Institute of Education and in-service teachers, and a territory-wide seminar was held for social workers. In support of the annual International Day Against Drug Abuse and Illicit Trafficking, a large-scale exhibition and a radio show disseminating anti-drug messages were held in Tsim Sha Tsui in June. Six more similar radio shows were held during the year, reaching out to about 1.5 million young people. The anti-drug message 'Say NO to Drugs' was applied as a postmark on all mail for two weeks in June.

  The Community Against Drugs Scheme continued to provide encouragement and grants of up to $6,000 to interest groups to plan and implement their own anti- drug education and publicity projects. The 70-member ACAN Youth Volunteer Group took part in district campaigns and organised several community involvement projects. The ACAN Drug Abuse Telephone Enquiry Service provided information on 12 types of commonly abused substances. Information on treatment facilities was also available. In all, 72 772 calls were received during the year. An anti-drug theme song performed by movie star Jackie Chan was produced during the year and used in various publicity events.

Research

 Drug-related research supplements data collected from the Central Registry of Drug Abuse to give a better portrait of the drug scene. Since 1993, it has been co- ordinated by the ACAN Sub-committee on Research, which recommends specific areas for research, advises on research methodology and proposes action in the light of research findings. Seven projects were identified by the sub-committee for implementation in 1995, of which five were funded by ACĂN for conduct by outside researchers.

  After a comprehensive review in 1994, a new record sheet for completion by reporting agencies such as the Police, Correctional Services Department, treatment agencies and social welfare agencies, was adopted in January 1995. The new system became fully operational at the end of the year.

International Action

 Hong Kong continued to play an active international role, maintaining close links with the United Nations, individual governments and inter-governmental agencies such as the Financial Action Task Force, Interpol and the World Customs Organisation. The territory took part in 23 international meetings and seminars concerned with anti-drug policies, law enforcement, treatment and rehabilitation, and preventive education.

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       Hong Kong's techniques and methods have made it an important venue for training anti-drug personnel from overseas. During the year, 330 people from 25 countries and international bodies came to the territory on study visits and training courses. Co-operation continued with other jurisdictions to provide mutual assistance in the fight against international drug trafficking and money laundering. Bilateral agreements with the United States, Canada and Australia were extended.

Auxiliary Medical Services

The Auxiliary Medical Services (AMS) form a disciplined medical civil defence corps, established in 1950 to provide supplementary resources to augment regular medical and health services in times of natural disasters and emergencies. In recent years, the AMS has promoted public awareness of disaster medicine in Hong Kong.

The AMS has 90 permanent staff and 5 258 volunteers from all walks of life, including physicians, nurses, paramedical personnel, civil servants and laymen in the private sector. By statutory requirement, the Director of Health is the Commissioner of the AMS and is responsible to the Governor for its efficient operation.

Volunteer members receive comprehensive training in areas covering first aid, life- saving, squad drill, ambulance aid, practical nursing, casualty evacuation, paramedic, clinical and hospital ward attachment, leadership and management development. Recently, disaster management has been included in the training programme. The AMS has conducted visits to overseas medical authorities and participated in international conferences as well as training courses organised by other countries.

       AMS volunteer members are deployed to accident scenes to provide immediate treatment to the injured, convey casualties to hospitals and render nursing care to patients at both acute and convalescent hospitals. If required, the AMS Emergency Response Task Force is available at short notice to provide paramedical assistance at the scene.

Apart from providing emergency services, the AMS committed a total of 17 016 man-hours in 1995 to provide first aid coverage at country parks, cycle tracks, school activities and major public functions. It also committed 322 062 man-hours to assist in the daily manning of 22 methadone clinics and providing round-the-clock clinical services at eight sick bays in five Vietnamese boat people centres.

       Members of the public were able to obtain information and materials concerning home safety and first aid through the newly-constructed First Aid Education Workshop in the AMS Headquarters or a 24-hour enquiry hotline (2762 2033) which started to operate through an Interactive Voice Response System from August. The AMS further provides first aid, nursing and casualty evacuation training to front-line civil servants. Regular seminars and demonstrations are organised to promote the public's awareness of home safety.

Environmental Hygiene

Working under the policy guidance of the two municipal councils, the Urban Services Department (USD) and the Regional Services Department (RSD) are responsible for environmental hygiene in the territory. This includes street cleaning, collection of household waste and animal carcasses, management of public toilets and bathhouses, licensing and inspection of restaurants and food premises, pest control, and provision

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of meat inspection services in slaughterhouses and services for the disposal of the dead.

  Streets and lanes are swept from four times a day for busy thoroughfares to once every two days for village lanes. Mechanical sweeping is employed where manual sweeping is not practicable. Streets and lanes are also hosed down where conditions warrant. The departments mount regular joint operations with the Marine Department to clear floating refuse.

  The USD collects 3 100 tonnes of refuse and junk each day, 1 200 in Hong Kong and 1900 tonnes in Kowloon. It has 200 refuse collection points in the urban area, most of them fitted with equipment to contain smells. The RSD manages 971 refuse collection points and 1 566 bin sites and collects about 2 255 tonnes daily, including 92 tonnes removed by a contractual barging service from the outlying islands for disposal on the mainland. Following the successful trial of a static compactor for continuous refuse loading at Yeung Uk Road Market in Tsuen Wan, the device has been extended to six other refuse collection points, bringing about noticeable improvement to the environment.

The Urban Council hosted the 1995 International Symposium on Public Toilets in May and renovated 28 public toilets during the year. The RSD collects nightsoil from fibreglass toilets and both departments undertake desludging of aqua privies and septic tanks. Services for private facilities are available on a charge basis on request. The departments provide a separate clinical waste collection service for government clinics.

About $283 million was earmarked for improvement works at refuse collection points and toilets in 1995. To cope with the demand for public toilet facilities by visitors to the Tian Tan Buddhist Statue on Lantau Island, the RSD has built a 24-compartment modern flush-toilet at Ngong Ping. To meet the stringent environmental standards, waste generated from the toilet is stored up in a large cesspool, which is then conveyed by tankers to the sewage treatment works.

The Keep Hong Kong Clean Campaign, organised by the Joint Urban Council/ Regional Council Keep Hong Kong Clean Steering Committee, continues its efforts to educate the public not to litter. Highlighted by two community involvement programmes, the publicity efforts were complemented by district-based activities. District bodies were encouraged to apply for subsidies under the Keep Hong Kong Clean Activities Funding Scheme. Stringent law enforcement action was maintained, resulting in a total of 34 116 litterbugs being prosecuted and fined a total $11.9 million during the year.

A one-year trial scheme on plastic waste recycling was launched in October 1994 jointly by the RSD and a charitable organisation in the Sha Tin district. The scheme received enthusiastic support from members of the public.

Controls

The USD and RSD carry out integrated pest control programmes to prevent vector- borne diseases. Measures included environmental improvement, eradication of breeding places, health education and law enforcement. Special surveillance is main- tained to prevent outbreaks of malaria in Vietnamese detention centres. Technical support is provided by the Pest Control Advisory Section of the Department of Health.

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A newborn baby basks under an ultra-violet lamp, her eyes carefully shaded, as Dr Grace Poon

checks on her condition at the Tsan Yuk Hospital in Western District. Hong Kong people are

among the world's greatest survivors: women can expect to reach 81 years of age, and men have a life expectancy of 76 years.

H.

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SHAR

纤纤伦

Keen calligraphers brush up on Chinese character

strokes in a session at the Cheung Sha Wan

community work unit, which is operated by the Social Welfare Department.

Medical aides load an injured person on board

a Government Flying Service helicopter for a flight

to hospital from Cheung Chau.

NEXT PAGE (top): Young people get into the swing of an exercise routine during a fitness drive sponsored by Radio Television Hong Kong. (Below) Santa Claus gets a hearty welcome during a party for disabled children at Government House.

HEALTH

Environmental Health Education

The Health Education Unit of the Department of Health's Hygiene Division promotes environmental health and food hygiene through territory-wide educa- tion. Working with the two municipal councils, the unit conducted several health educational activities during the year, including the 1995 Home Environmental Hygiene and You Exhibition and the Food Hygiene Campaign organised for school teachers and members of the food trade. Other publicity campaigns on mosquito and rodent prevention, and prevention of nuisance from dripping air-conditioners, were also staged during the year.

Health messages are disseminated through telephone hotlines and the mass media. Health education materials are also available to general public at the unit's resource centre to publicise the importance of personal, food and environmental hygiene. The unit's resource centre provides telephone hotline services and publicity materials for distribution to the general public.

Food Hygiene

The Hygiene Division controls imported and locally produced foods. The aim is to ensure that consumers are able to buy good, wholesome food which is unadulterated, uncontaminated and properly labelled. Food samples are taken regularly for chemical analyses, bacteriological examinations and toxicity tests to ascertain their fitness for human consumption.

      Food items are sorted for laboratory sampling according to the nature of the food and the risks that they may pose to consumers. The Food and Drugs (Composition and Labelling) Regulations were amended in 1995 to update food labelling require- ments. This was to strengthen consumer protection and ensure that local regulations were consistent with international developments.

      Hong Kong maintains close ties with the World Health Organisation, the Food and Agriculture Organisation of the United Nations and other international authoritative bodies on food. As the bulk of the local food supply comes from China, the territory works closely with the Chinese authorities. Regular meetings are held with officials from the Guangdong and Shenzhen Commodities Inspection Bureaus to promote food safety and better food hygiene.

In response to sporadic outbreaks of chemical food poisoning from contaminated vegetables, a food control office was built at the Man Kam To Checkpoint to step up inspection of imported food. Funded jointly by the two municipal councils, the $35 million office houses a vehicle holding area, vegetable inspection bays, a fully- equipped laboratory to conduct confirmatory tests for pesticide-contaminated vegetables, and a workplace for detection of radioactive-contaminated food.

      To counter the sale of meat from illegal sources, the Regional Council amended the Food Business (Regional Council) Bylaws to increase the maximum penalty for this offence from $5,000 to $25,000. The two municipal services departments also work closely with the Department of Health in the investigation and control of food poisoning incidents, substandard foods and infectious diseases. In 1995, there were 200 reported cases of food poisoning, involving 1 968 persons.

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Food Premises

The USD and RSD grade licensed food premises according to their hygiene standards. The frequency of inspections is determined by the grade of the premises to better utilise manpower and resources. Both departments maintain a demerit points system for the suspension or cancellation of licenses or permits, to deter breaches of health regulations. The system is regularly reviewed to ensure its effectiveness. Strict control is exercised over food premises which fail to apply for a licence, or which have not complied with the specified requirements. Weekly prosecution of repeated offenders has led to a drastic reduction in the number of unlicensed food premises.

The processing time for licence applications fell markedly after a central, inter- departmental vetting panel was set up to give initial comment on the suitability of the premises intended to operate as a restaurant and provide an opportunity for applicants to seek instant advice.

To further encourage applicants to speed up compliance with the licensing pre- requisites, both municipal councils agreed to issue 'provisional licences' to applicants for full restaurant licences. Premises where major structural work and fitting-out had been completed and fundamental health, structural and fire safety requirements met would be issued with 'provisional licences'. Applicants could operate business with the provisional licences while waiting for full licences.

Markets

The municipal councils manage public markets in their respective areas. The Regional Council administered 45 markets in the New Territories, providing a total of 5 289 market stalls and 406 cooked food stalls.

As its first air-conditioned public market in Shek Wu Hui was very well received, the Regional Council plans to provide air-conditioning in all future markets and cooked food centres. Where economically viable and technically feasible, existing facilities will also be air-conditioned. Toilets, lighting, drainage and ancillary facilities are being improved at 16 selected markets. Cleaning operations in 16 public markets have been contracted out to enhance cost-effectiveness and efficiency.

The Urban Council operated 62 retail markets in 1995. Old and outdated markets have gradually been replaced and the council managed 17 multi-complexes during the year. These house markets and cooked food centres on the lower floors and a variety of facilities for indoor sports activities and cultural and recreational pursuits.

The new Causeway Bay Market was opened in April and the Pei Ho Street Market, Sham Shui Po, in August.

Hawkers

The two municipal councils maintain control over on-street hawkers. The Regional Council has implemented all the recommendations by its Working Group on Illegal Hawking and Illegal Shop Extension. A sub-committee was re-constituted to monitor the implementation and review the effectiveness of the various measures in combating such illegal activities. During the year, the councils' hawker control teams, totalling 3 173 trained staff members, secured 139 204 court convictions on illegal hawking offences.

HEALTH

Abattoirs

There are two abattoirs in the urban area and three slaughterhouses in the New Territories. The Cheung Sha Wan Abattoir is run by the Urban Council and the others are managed by licensed private operators. To meet long-term demand, a site has been reserved for a new slaughterhouse in Sheung Shui.

During the year, these abattoirs and slaughterhouses handled 3 029 518 pigs, 109 064 cattle and 8 827 goats, which accounted for virtually all of the local fresh meat supply. All slaughtered animals were inspected by qualified health inspectors of the municipal services departments.

The USD and RSD also maintain vigilance against illegal slaughtering activities. In 1995, health inspectors carried out 43 raids on suspected illegal slaughterhouses. Staff also carried out spot checks on meat stalls and 15 persons were prosecuted for processing unstamped carcasses for sale.

Cemeteries and Crematoria

In land-short Hong Kong, the government encourages cremation rather than burial of the dead. During the year, over 70 per cent of the territory's dead were cremated. Human remains buried in public cemeteries have to be exhumed after six years and are either cremated or re-interred in an urn cemetery.

The Urban Council operates one public funeral parlour in Kowloon which provides free funeral services for the needy and three service halls are open to the public free of charge. The council manages five public cemeteries and two public crematoria, and monitors 18 private cemeteries. Four cremators were installed at Cape Collinson Crematorium in mid-1995 to meet increasing demand. The Commonwealth War Graves Commission manages two war cemeteries.

The Regional Council manages four public crematoria and six public cemeteries in the New Territories. It also oversees nine private cemeteries and six private crematoria. Columbaria are provided at Kwai Chung, Fu Shan, Cheung Chau, Wo Hop Shek, Lamma and Peng Chau for the disposal of cremated ashes.

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HONG KONG is not a welfare state but the community cares deeply about its state of welfare. Its residents expect the government to help the disadvantaged maintain an acceptable standard of living. The government plans to increase recurrent spending on social welfare by 26 per cent, in real terms, between 1993 and 1997. Spending in 1995-96 rose by 25.6 per cent to $12,918 million.

Current social security arrangements were comprehensively reviewed during 1995 by an inter-departmental working group chaired by the Director of Social Welfare. The primary task was to assess the adequacy of payment rates of Comprehensive Social Security Assistance (CSSA) for different categories of clients, in the light of the data on the spending patterns of different types of household including those on CSSA collected in the 1994/95 Household Expenditure Survey.

  The review also covered the administration of the CSSA Scheme with a view to improving services to clients. It is expected that the review will be completed in early 1996.

The responsibility for carrying out government policies on social welfare rests with the Director of Social Welfare. It is based on the objectives set out in three White Papers, the most recent being Equal Opportunities and Full Participation: A Better Tomorrow for All (1995).

The government is advised on social welfare policy by the Social Welfare Advi- sory Committee, covering the whole area of social welfare, and the Rehabilitation Advisory Committee (the former Rehabilitation Development Co-ordinating Com- mittee), on matters of rehabilitation. Committee members are appointed by the Governor, chaired by non-officials. The Social Welfare Department maintains a close working partnership with non-governmental organisations, most of which are affiliated with the Hong Kong Council of Social Service and subvented by the government.

Many services were expanded in 1995, with the addition of 894 day nursery places, 220 day créche places, 45 occasional child care places, 14 extended-hour child care service places, 13 small group homes, 18 home help teams, 21 urban hostels for single persons, 19 family activity and resource centres, 99 family caseworkers, 17 family aides, one clinical psychologist and three family life education workers. For young people, 22 additional school social workers were provided and six combined children and youth centres were established through the reprovisioning of existing centres. For the elderly, a further 22 places in homes for the aged, 397 care-and-attention home places, 10 social centres, five day-care centres and three multi-service centres were set up.

SOCIAL WELFARE

       For people with a disability, 200 places in sheltered workshops, 230 day activity centres, 341 hostel places, 50 care-and-attention home places for severely disabled persons and 18 care-and-attention home places for aged blind persons were established.

       Co-ordinated by the Social Welfare Department, the Working Group on Battered Spouses was set up in April 1995. During the year, it recommended new measures to tackle the problem, and worked out a set of multi-disciplinary procedural guidelines on the handling of cases involving battered spouses.

       Public education programmes were also enhanced to arouse community awareness of the problem and existence of the services. During the year, the Working Group on Child Abuse launched a large-scale publicity campaign and public education programmes to prevent child abuse, set up five District Committees on Child Abuses, devised new procedures to handle child sexual abuse cases, and promoted multi- disciplinary co-operation through joint training among the police, social workers, clinical psychologists and other professionals to facilitate the implementation of legislative amendments relating to vulnerable witnesses, including child abuse victims giving video-recorded evidence in court.

       The Working Group on Services for Youth at Risk, chaired by the Director of Social Welfare under the Co-ordinating Committee for the Welfare of Children and Youth at Risk, has since mid-1993 examined problems of youth at risk. It has completed its deliberations on the issue of teenage suicide and drug abuse by young people. Its recommendations were followed up by the Social Welfare Department and various Task Groups.

In 1995, the Department and Task Groups undertook a study of risk potential among junior secondary school students and improved co-ordination of youth hot- line services. They produced a video on parental support in the early detection and handling of children's drug problems. Social work staff were equipped with updated knowledge and skills in working with young drug abusers and district co-ordination of local efforts was improved.

After the Governor's Summit on Drugs, held on March 6, recommendations by the Working Group were incorporated in the Government's Forward Action Plan to be monitored by the Special Action Group of the Hong Kong Action Committee Against Narcotics. The Working Group is now examining the issue of teenage sexuality and will later look at run-away youth.

Social Security

      Social security aims to help vulnerable groups in the community who require financial or material assistance. The CSSA Scheme and the Social Security Allowance (SSA) Scheme are the key elements in the non-contributory social security system and are administered by the Social Welfare Department. They are supplemented by three other schemes: the Criminal and Law Enforcement Injuries Compensation Scheme, the Traffic Accident Victims Assistance Scheme and Emergency Relief.

The CSSA Scheme is means-tested and is designed to raise the income of needy individuals and families to a level where basic and special needs are met. Persons who have resided in Hong Kong for not less than one year may be eligible if their income and other resources are below the prescribed levels. However, an able-bodied

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unemployed person aged between 15 and 59, who is available for work, is required to register with the Labour Department for job placement to qualify for assistance.

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The scheme has a range of standard rates for different categories of recipients and special grants to meet individual needs. The standard rates apply to four broad categories of recipients the elderly, people with a disability, children and able- bodied adults to meet their basic and essential needs. The monthly standard rates range from $1,210 to $3,910 for a single person and from $1,045 to $3,610 for a family member. Special grants are available to meet individual recipients' special needs such as rent, educational expenses, medically recommended diet, spectacles and dentures. An annual long-term supplement, ranging from $1,340 to $4,020, depending on the size of the household, is paid to those who have received assistance continuously for 12 months to meet the cost of replacing household wares and durable goods. To encourage self-help, an individual's monthly earnings may be disregarded up to a maximum of $1,210 in the calculation of assistance payable.

 Improvements have been implemented since April 1995. These include giving each single-parent family a supplement of $200 a month; increasing the standard rates for children by $205 a month; extending the standard rates for children to full-time students aged 18 to 21; raising the maximum level of disregarded earnings and disregarding the first month's income of those elderly, disabled and family carers who secured a full-time job. Standard rates and other related payments were increased by 8.5 per cent in April 1995 to keep pace with inflation.

 At year's end, the CSSA Scheme covered 127 800 cases, compared with 105 600 cases in 1994. The elderly, the sick, people with a disability and single-parent families made up the majority. Expenditure on comprehensive social security assistance during the year amounted to $4,236 million, representing an increase of 31 per cent over the previous year.

The SSA Scheme provides flat-rate allowances for the severely disabled and elderly who are not on comprehensive social security assistance. Any person who is certified as severely disabled and has resided in Hong Kong for at least one year immediately before application, is eligible for disability allowance. Twice the normal allowance is payable to severely disabled persons who require constant attendance from others in their daily life but are not receiving such care in government or subvented institutions. The current monthly rate for the disability allowance is $1,050, and for the higher disability allowance, $2,100. The allowances are not means-tested.

The old age allowance is also not means-tested for those aged 70 and above, and they are entitled to $595 per month. For those aged 65 to 69, the monthly allowance is set at $525 subject to a declaration that their income and assets do not exceed the prescribed levels. To be eligible for an old age allowance, a person must have resided in Hong Kong for at least five years since the age of 60. The disability and old age allowances were raised by 8.5 per cent in April to reflect the rise in the cost of living. At the end of the year, 492 400 were receiving such allowances compared with 484 600 at the end of 1994. Expenditure on social security allowances during the year was $3,559 million, representing an increase of 10.8 per cent over the previous year. The Criminal and Law Enforcement Injuries Compensation Scheme, also non- means-tested, provides cash assistance to victims (or their dependants in case of death) who are injured or killed in crimes of violence or by law enforcement officers using weapons in the execution of their duties. During the year, 564 applications were

SOCIAL WELFARE

approved for assistance amounting to $11.1 million, compared with $12.5 million in the preceding year.

       The non-means-tested Traffic Accident Victims Assistance Scheme provides cash payments to victims of traffic accidents or their dependants, regardless of fault. Payments cover personal injury and death, but not damage to property.

An applicant may claim damages or compensation from other sources for the same accident. Successful claimants are required to refund either the payment received from the scheme or the amount of damages or compensation, whichever is the less. During the year, 5 263 applications were approved for assistance, with payments totalling $110.4 million, compared with $97.3 million in 1994.

       Emergency relief, in the form of material assistance such as hot meals and other essential relief articles, is provided to victims of natural or other disasters. Grants from the Emergency Relief Fund are also paid to victims or their dependants to relieve hardship caused by disasters.

During the year, emergency relief was given to 1 955 people on 63 occasions. The Social Welfare Department also assisted in providing hot meals to refugees and boat people from Vietnam.

       The rates of grants payable under the Criminal and Law Enforcement Injuries Compensation Scheme, the Traffic Accident Victims Assistance Scheme and the Emergency Relief Fund were increased in April to cover the rise in living costs.

Social Security Appeal Board

The Social Security Appeal Board is an independent body of non-official members appointed by the Governor. It heard 117 appeals in 1995. Of these, 31 related to CSSA, 84 to SSA and 21 to traffic accident victims assistance.

Services for Offenders

      The Social Welfare Department is responsible for statutory duties to implement the directions of the courts on the treatment of offenders through social work. The overall objective is to rehabilitate offenders through probation supervision, the Community Service Orders Scheme, residential training for young offenders, community support service scheme and after-care services with the aim of rein- tegrating the offenders into the community.

Probation service is available to offenders aged seven and above. Probation officers make inquiries into the background and home surroundings of offenders as the court may direct, and of prisoners whose sentences are being considered for reduc- tion. They also supervise the offenders in complying with the requirements of the probation order.

The Community Service Orders Scheme is a community-based initiative with punitive and rehabilitative objectives. It requires an offender who is over the age of 14 and convicted of an offence punishable by imprisonment, to perform unpaid work of benefit to the community and to receive counselling and guidance from a probation officer.

      A pilot community support service scheme was introduced in the latter half of 1994. It provides community service projects, job training packages and counselling groups 175

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for young offenders to stimulate their interest in school or in work and to develop their social skills.

The Young Offender Assessment Panel, run jointly by the Social Welfare Department and the Correctional Services Department, provides magistrates with a co-ordinated view on the most appropriate programme of rehabilitation for convicted young offenders aged between 14 and 25.

Seven residential institutions with a total capacity of 602 places are operated to provide custodial educational, pre-vocational and character training to assist juvenile offenders and youths at risk to return to the community. Besides work done by the department, two subvented organisations also provide hostel, employment, case- work and volunteer services to help ex-offenders and young people with behavioural problems re-integrate into the community.

Family and Child Welfare

The Social Welfare Department and non-governmental welfare organisations provide a variety of family and child welfare services. The overall objective is to preserve and strengthen the family as a unit through assisting individuals and families to prevent, identify and solve their problems.

About 3 500 programmes such as talks, small group activities, mass media pro- grammes were conducted by 71 Family Life Education workers of the department and non-governmental organisations.

The territory has 62 family services centres. Services provided include counselling, referrals for child care, elderly and rehabilitation services, job placement, financial and housing assistance. With an establishment of 575 family caseworkers at the end of 1995, the centres handled a total of 60 398 cases during the year.

A family aide service is provided to train clients on home management and child care and help families attain self-reliance. A family care demonstration and resource centre provides training in practical home management and caring skills, as well as resource materials for clients and social workers. Nineteen family activity and resource centres were set up in government-run community centres to provide a drop- in service, mutual support and early identification and referral of cases in need of intensive casework service.

The clinical psychological service, involving 33 clinical psychologists, provides indepth assessment and treatment to people suffering from psychological and behavioural problems, and support to the services of caseworkers and residential homes.

Two refuge homes provide 80 short-term residential places for women and their children who are victims of domestic violence and for girls at risk; while 107 home- help teams provide meals, personal care and household services to those in need.

The department continues to tackle the problem of street-sleeping with services provided by its outreaching teams and family services centres, plus temporary shelters, urban hostels, and day relief centres operated by non-governmental organisations.

A wide range of child welfare services is provided. Residential child care services are provided for children and young persons who, because of family crises or their own behavioural or emotional problems, need care and protection. At the end of

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       1995, there were 560 foster care places, 89 small group homes and 26 residential institutions, three of which were operated by the department. The development of the service is guided by the principle that a family setting is the best environment for the healthy development of a child and should be the preferred choice over an institutional setting, particularly for young children.

       Child care centres provide day-care services for children under the age of six. The department's Child Care Centres Advisory Inspectorate registers and inspects all child care centres to ensure they meet standards laid down in the Child Care Centres Ordinance and Regulations. Occasional child care service was expanded to assist families to take care of their children for brief periods in attending to urgent business. Five day nurseries extended their operating hours to meet the needs of working parents. The Fee Assistance Scheme assists low-income families to pay child care centre fees.

       The qualification requirements for child care centre staff were raised in September 1995 with a corresponding improvement in their pay scales. The Working Party on Kindergarten Education was re-convened in 1995. Recommendations on the practicalities of unifying pre-primary services were submitted to the Administration at the end of the year. The Social Welfare Department operates a telephone hotline service.

Medical Social Service

The Social Welfare Department and the Hospital Authority continue to provide medical social services to help patients and their families deal with their personal and family problems arising from illness or disability.

Care of the Elderly

Care in the community, and by the community, is the guiding principle for the planning and development of services for elderly people. During the year under review, the government embarked on a large number of initiatives recommended by the Working Group on Care for the Elderly. An Elderly Services Division has been established in the Health and Welfare Branch to co-ordinate and oversee the overall policy on care for elderly people.

       Residential care is provided for old people who, for personal, social or health reasons, have to be cared for in a residential setting. At the end of 1995, there were 1 156 self-care places, 6 411 home for the aged places and 7 644 care-and-attention home places. In addition, community support services were provided to enable the elderly to live in the community for as long as possible. At the end of the year, there were 163 social centres, 24 multi-service centres, 23 day-care centres, 107 home help teams, 17 respite care places, two volunteer worker programmes, eight older volunteer programmes, two outreaching teams, one holiday centre, one pool bus service and 58 400 senior citizen cards issued. Financial assistance as well as housing assistance continue to be provided for those in need.

The Residential Care Homes (Elderly Persons) Ordinance, with the exception of the penalty section, came into operation on April 1, 1995. It aims to ensure that residential care homes for the elderly provide services of a reasonable standard and that the welfare of the residents is safeguarded. Under the Ordinance, residential care homes are regulated either by licence or certificate of exemption. The Residential

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 Care Homes (Elderly Persons) Regulation states requirements for residential care homes. The Social Welfare Department's Registration Office of Private Homes for the Elderly has been restructured and renamed the Licensing Office of Residential Care Homes for the Elderly to administer the licensing system provided under the legislative scheme.

Services for Young People

The overall objective of services for young people is to help those aged between six and 24 to develop into mature, responsible and contributing members of society. A Working Group on Services for Youth at Risk has been established to assist the formulation of youth policies.

At the district level, 16 youth offices of the department co-ordinate and strengthen existing youth groups and community organisations, promote new groups and help them develop programmes to meet community needs.

In December 1995, there were 222 children and youth centres operated by non- governmental organisations. With the recommendation of the Report on Review of Children and Youth Centre Services, the children and youth centre service was re- focused to strengthen guidance and support services to young people, apart from developmental and preventive programmes.

All secondary schools have social workers who aim to identify and help students whose academic, social and emotional development is at risk. Twenty-two additional school social workers were provided in 1995. At the end of December 1995, 250 school social workers served a student population of 449 000. The department achieved its white paper target in 1994-95 of providing one school social worker to 2 000 students one year in advance.

The outreaching social work service provides counselling and guidance to young people who do not normally participate in conventional social or youth activities and who are vulnerable to undesirable influences. In December 1995, there were 30 teams serving priority areas with a high juvenile crime rate and a high youth population. A review completed in 1995 recommended continual expansion of the service as an effective means to reach out and help young people at risk.

With the introduction of the integrated team service model in 1994, youth services including children and youth centres, outreaching social work, school social work and where possible, family life education, were provided by one team of social workers under one management. Five teams were set up in 1995, giving a total of 10 integrated teams. Three pilot projects under the community support service scheme, which started in October 1994, were targeted to help children and youths who have infringed the law to re-integrate into society. The services will be evaluated in 1996. Uniformed organisations offer young people opportunities to join organised activities with progressive training programmes for the development of character and leadership, to help them become responsible members of the community. This year, 92 100 youths benefited from this service provided by eight subvented organisations. The Duke of Edinburgh's Award Scheme has attracted a membership of 41 200 through its 19 operating authorities.

The Opportunities for Youth Scheme offers funding support to youth groups to plan and implement community service projects. In the 1994-95 year, 127 projects were approved involving 2 600 young people and 75 900 service customers benefited.

SOCIAL WELFARE

Rehabilitation of People with a Disability

The objective of Hong Kong's rehabilitation services is to integrate people with a disability into the community. The territory has about 264 000 individuals with some form of disability. Services provided by government departments and non- governmental organisations help disabled people to fully develop their physical, mental and social capabilities. These services are co-ordinated by the Commissioner for Rehabilitation, who also conducts regular reviews of the Rehabilitation Pro- gramme Plan which projects the requirements for, and identifies shortfalls and overprovision in, rehabilitation services in the following five years. A White Paper on Rehabilitation was issued in June, setting out the government's policy decisions on the further development of rehabilitation services for the next decade and beyond.

       The Legislative Council passed the Disability Discrimination Ordinance in July. It gives people with a disability the means to seek redress against discrimination on the grounds of their disability which may arise in areas of employment; education; transport; access to buildings and other services; and participation in partnerships, professional organisations, clubs and sports. To enforce it, the purview of the Equal Opportunities Commission to be set up under the Sex Discrimination Ordinance, will be expanded and a new District Court will be established.

       Equally important is public education, which plays a vital role in changing people's perception of and attitude towards people with a disability. That is why the government is spending $34 million between 1993 and 1997 on strengthening public education on integration.

Several government departments provide rehabilitation services to people with a disability. The Department of Health is providing immunisation programmes against various communicable diseases while promoting health education to pre- vent disabilities. It also provides screening services for the early detection and identification of disabilities. The Hospital Authority is responsible for medical rehabilitation services. The Social Welfare Department plans and develops a wide range of social rehabilitation services, either through direct service provision or subvention to non-governmental organisations. The Education Department plans and develops education and related supportive services for school-aged children with a disability. The Labour Department provides job placements for people with hearing impairment, visual impairment, physical handicap, chronic illness or mental handicap and ex-mentally ill persons. The Transport Department subvents a Rehabus service for people who have difficulties in using public transport. The Vocational Training Council provides and co-ordinates vocational training for people with a disability.

The Social Welfare Department and non-governmental organisations provide a wide range of rehabilitation services. Services for children include integrated programme (910 places); special child care centres (1 047 places); early education and training centres (905 places) and occasional child care service (36 places). Rehabilitation services for adults include day activity centres (2 715 places) which provide day care and training for people with a mental handicap; sheltered workshops (5 095 places) which provide employment for those unable to compete in the open job market; hostels (3 036 places); supported housing/hostel (107 places) and small group homes (56 places) for those who cannot live independently; homes/care and attention homes (325 places) for aged visually impaired persons; long-stay care home (200 places), half-way houses (857 places) and activity centres for discharged

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mental patients (160 places); and respite service. Twelve home-based training teams for people with a disability and pre-school children and 22 social and recreational centres for all categories of people with a disability are also provided. Professional back-up from clinical psychologists, physiotherapists and occupational therapists is provided to these facilities and services.

The supported employment scheme continues to provide jobs for people with a disability. With additional provision of 300 places, there was a total of 360 places. provided by 14 supported employment units. To identify further ways to promote employment opportunities for people with a disability, a Working Party on Training and Employment for People with Disabilities, set up under the chairmanship of the Director of Social Welfare, reported in July.

The Queen Elizabeth Foundation for the Mentally Handicapped, set up in 1988, aims to further the welfare, education and training of mentally handicapped persons and to promote their employment prospects. The management and use of the foundation's funds are determined by a council appointed by the Governor. During the year, the foundation allocated $10 million in the form of grants or sponsorship to 35 non-governmental organisations and four government departments, enabling them to undertake projects for the benefit of mentally handicapped persons. The fund stood at $127.9 million on March 31, 1995.

Community Chest

و

The Community Chest, which organises and co-ordinates fund-raising activities for its member agencies, aims to raise a total of $188 million in the 1995-96 campaign year, compared to $181.6 million in 1994-95.

Founded in 1968, the Chest is a non-government statutory body. It spreads the donations it collects from the community to 138 member welfare agencies, helping children and youth, the elderly, families in crisis, the handicapped, former drug addicts and ex-offenders who are in need.

The Chest's own costs are covered by endowment funds, interest income, com- mercial sponsorships and grants. This means, in effect, that every dollar given by the public is passed on without deduction to its member agencies.

Staff Training and Development

Pre-service qualifying social work training at degree and sub-degree levels and post- graduate specialised courses are provided for students and practising social workers by five local universities and one post-secondary college.

  Social work and welfare staff of the Social Welfare Department and non- governmental organisations are also provided with in-service induction and staff development programmes through the department's Lady Trench Training Centre. During the year, 13 835 participants attended 360 courses or seminars organised by the training centre.

  To learn specialised skills in professional practice and the latest developments in social services, 180 social welfare personnel undertook 42 advanced local and overseas courses or attachments, and 451 participated in 45 international conferences, with financial support or full sponsorship in 1995. The Social Work Training Fund and other training grants administered by the department assisted 459 social welfare

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personnel in the year to pursue training courses locally or overseas to upgrade their professional knowledge and skills.

The Advisory Committee on Social Work Training and Manpower Planning advises the government through the Social Welfare Advisory Committee on the training and planning of social work manpower to meet welfare service needs. As recommended by the committees, the intake of sub-degree diploma courses of the Hong Kong Polytechnic University and the City University of Hong Kong will be increased by 200 per year from 1995 to 1998 to provide additional social workers at diploma level to meet the manpower shortage.

Research and Statistics

The department conducts surveys and research studies, develops and maintains data systems and undertakes statistical compilation and estimation for the monitoring, planning and development of social welfare services. The data systems provide management information over a wide range of areas including planned welfare projects, social welfare manpower and customers awaiting and receiving various social welfare services.

Subvention and Evaluation

Financial assistance is given to 168 non-governmental organisations for the provision of social welfare services in accordance with government policies. Financial assistance for capital and special expenditure is also provided through the Lotteries Fund. The Subventions and Lotteries Fund Advisory Committee advises on the allocation of subventions and Lotteries Fund grants to agencies providing social welfare and rehabilitation services.

The department's Evaluation Unit is responsible for monitoring and assessing services provided by subvented non-governmental organisations. Departmental staff make regular visits to the agencies which, in turn, submit service statistics quarterly. In March 1995, the government commissioned consultants to conduct an 18-month review with a view to improving the administration of the social welfare subvention system so that subvented non-government organisations (NGOs) will be given greater flexibility to provide their services cost-effectively and with better accountability through individual NGO administrators and the DSW.

The consultancy review will be delivered in three stages. The first stage, on investigation, ended in July 1995 and the second phase, on detailed workings, will end around January/February 1996 depending on the actual progress. The entire consultancy is expected to be completed around August 1996.

Community Building

      Several government departments and non-governmental organisations (NGOs) con- tribute towards the community-building programme, which serves to foster among the people of Hong Kong a sense of belonging, mutual care and civic responsibility as society undergoes rapid socio-economic changes.

      Community-building efforts involve providing purpose-built facilities for group and community activities, the formation of citizens' organisations, and the encouragement of community participation in the administration of public affairs, solving community problems, promoting social stability and improving the quality

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of life in general. While the Home Affairs Branch has policy responsibility for the programme, the Home Affairs Department and the Social Welfare Department are principally responsible for its implementation. The Home Affairs Department, through its network of district offices, 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, through a wide range of group and community work activities by the department and the NGOs, promotes social relationships and cohesion within the community and encourages individuals to help solve community problems. Some of these activities offer welfare services where provision is inadequate or to meet the welfare needs of special groups of individuals or families.

Commission On Youth

The Commission on Youth was established in February 1990 with members appointed by the Governor. Its main objectives are to advise on matters pertaining to youth, initiate research, promote co-operation and co-ordination in the provision of youth services and serve as a liaison point with other international youth organisations for exchange programmes.

  During the year, the commission began preparing for the first biennial review of the Implementation of the Charter for Youth which was developed in April 1993. The review conference was held in November 1995 with about 500 participants. A proposal will be developed setting out the areas of common concern for youth service providers' reference.

The commission completed a study on underage drinking and another on classification of films and publications in 1995. Recommendations on these two subjects were presented to the relevant government departments. After completing a study on a supportive system for youth in 1994, a working group was set up to undertake a second-phase study targeted on working youth. Two other working groups have also been established to examine the moral values of youth and AIDS- related issues among marginal youth.

  A youth resource centre was opened in December 1995. The centre, which aims to promote the well-being of young people in Hong Kong, provides resource material on youth matters to parties concerned. More than 1 000 reference books, reports, video tapes and youth-related journals are provided at the centre.

Committee on the Promotion of Civic Education

The Committee on the Promotion of Civic Education was set up by the government in May 1986 to promote civic awareness and responsibility throughout the com- munity. Made up largely of non-government members, it advises the government and community organisations on the objectives and scope of civic education. It encourages, through sponsorship, community efforts in organising civic education activities among different age groups.

  With an extra grant of $20 million over a three-year period from 1995-96, the committee was able to expand its educational programmes on equal opportunities and human rights. In 1995-96, it focused on several issues under the general theme of human rights education, including civic rights and representative government, equal

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      opportunities and elimination of discrimination. Its programmes included an 'All- rounder Contest' to promote sex equality; a cartoon and illustration competition on equal opportunities and elimination of discrimination; an essay competition on the Basic Law; seminars to promote human rights and equal opportunities; and touring exhibitions to enhance public awareness of equal opportunities, rights of the child and the Basic Law.

A media campaign was launched to generate awareness of the concept of human rights, and the Basic Law was promoted through a series of television programmes. Teaching materials were developed to make the younger generation aware of their rights and responsibilities and to encourage their participation in community activities. These included a teaching kit on human rights produced for children between seven and 14. Books were published to promote children's rights and the Basic Law. The committee continued to liaise closely with voluntary agencies and district civic education bodies. It continued to offer them sponsorship under the Community Participation Scheme to encourage them to organise civic education activities. Approximately $2 million was made available for 47 projects in 1995-96.

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13 HOUSING

 HONG KONG'S housing has been transformed over the past 20 years. More than 1.2 million public and private flats have been built. Many of the older public rental housing estates have been redeveloped. Today, more than half the population lives in public housing compared with 1.7 million in 1975. Some 41 per cent live in increasingly modern rental flats and about 10 per cent in flats provided under various home ownership schemes. Since 1978, the government has built about 215 000 sub- sidised flats for sale. As a result, the overall home ownership rate has risen to 52 per cent, compared with 35 per cent a decade ago.

  In 1995, the public sector produced about 32 500 flats, of which about 15 200 were for sale, and the private sector produced 22 600 flats.

  The government introduced legislation to regulate the operation of estate agents and embarked on a major review of its long-term housing strategy.

Housing Policy

The government's policy is to help all households to have access to adequate and affordable housing. It seeks to achieve this goal:

by providing quality public housing at reasonable rents for those who cannot afford any other type of housing and by providing sufficient land to achieve this;

by encouraging home ownership through the provision of subsidised housing or financial assistance;

⚫ by supplying enough land and facilitating private development to meet the

demand for private housing; and

by monitoring the private housing market and, where necessary, introducing measures to curb speculation or to provide adequate consumer protection.

Production Targets

The government aims to produce 511 000 new flats over six years from April 1995 to April 2001, made up of:

⚫ 141 000 public rental flats.

• 175 000 subsidised flats for sale (under the four home ownership schemes).

• 195 000 private housing flats.

דו

Toddlers play on brightly coloured playground equipment in a public housing estate. Recreational facilities are an increasingly common feature of public housing schemes where about half of Hong Kong's 6.3 million people live. Initially a response to a huge influx of refugees from the mainland, public housing has come to set the standard for Hong Kong's high-rise accommodation.

High-rise apartments are a notable aspect of Hong Kong's urbanised life-style.

The New Territories (top left) offer space for flowers and gardens, but the rest is not all concrete and glass. People living at Repulse Bay, the Gold Coast development near Tsuen Wan, and Pak Pat Shan on Hong Kong Island (opposite page, bottom and below) reap the benefit of striking views across the harbour or the South China Sea.

NEXT PAGE: Imaginative styling marks the commercial complex in the centre

of the Yiu Tung Housing Estate at Shau Kei Wan. Hong Kong's public housing schemes are highly self-contained, with a wide range of shopping and other activities incorporated into the plans.

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Policy Review

In November, the government embarked on a review of its long-term housing strategy. The review, scheduled for completion in mid-1996, will consider what changes in current policies are required to meet forecast demand for public and private housing and will enable the government to set housing production targets for the period up to April 2006.

     Organisational Framework Housing Branch

The Secretary for Housing has overall responsibility for public and private housing matters in Hong Kong. Set up in November 1994, the Housing Branch is respon- sible for setting government policy on the provision of housing in the public and private sectors. It oversees the public housing programmes, monitors the operation of the private housing market, and ensures the provision of sufficient land and infrastructure to meet housing targets.

Housing Authority

The Housing Authority is an independent, statutory body responsible for carrying out Hong Kong's public housing programmes. The Housing Department is its execu- tive arm. Established in 1973, the authority plans and builds public sector housing, either for rent or sale. It manages public housing estates, Home Ownership Scheme (HOS) courts, temporary housing areas, cottage areas, transit centres, flatted factories, commercial facilities and other community and ancillary facilities throughout the territory. Increasingly, it has contracted out the management of some of these facilities to private agencies. It also administers the Private Sector Participation Scheme (PSPS) and the Home Purchase Loan Scheme, and acts as the government's agent to clear land and control squatting.

      The government provides land on concessionary terms and finance, where necessary, to enable the authority to meet the government's public housing targets. At the end of March, the government's capital investment and contribution stood at about $31.4 billion. This comprised non-interest-bearing permanent capital of $13.5 billion, loan capital of $12.5 billion, contributions to domestic housing of $4.8 billion and non-domestic equity of $600 million. The historical value of land provided on concessionary terms was $141.9 billion.

Housing Society

The Housing Society is an independent, non-profit-making organisation, established in 1948. It provides housing for specific low-income groups in Hong Kong. At the end of 1995, it had 32 307 rental housing units and 8 791 flats for sale under the Urban Improvement and Flats-for-Sale Schemes. Its annual production averaged about 1 684 flats over the past five years.

      The society administers a sandwich-class housing scheme on behalf of the govern- ment. The main scheme provides subsidised flats for sale to middle-income families who are neither eligible for public housing programmes nor able to afford a private- sector flat. An interim loan scheme provides low-interest loans for the purchase of flats in the private sector.

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Private Sector Housing

The total private housing stock amounts to about 886 000 units.

Property Prices

In June 1994, after a period of rapid price increases between 1989 and 1993, the government introduced a package of measures designed to dampen speculation, to increase housing supply and land supply, and to strengthen consumer protection and the administration of housing policy.

The anti-speculation measures have achieved the desired effect. Prices for selected residential developments in the secondary market were 25 per cent lower in November than at the peak in April 1994 and 19 per cent higher than in January 1993. Prices of new flats in December were between 25 and 35 per cent lower than at the peak in April 1994, depending on location.

  In December, the government announced technical adjustments to the condi- tions of consent for pre-sale of uncompleted flats which were designed to provide greater operational flexibility to property developers and home buyers in property transactions.

Housing Supply

To speed up flat and land supply, the government has set up a housing project action team under the Secretary for Housing to monitor, facilitate and expedite the process of housing developments which would each produce 500 or more flats. Currently, more than 50 projects with a potential production of about 120 000 flats are being fast-tracked and closely monitored to ensure that both the land and required infrastructure will be available on time for development.

  The government has earmarked $8 billion (in December 1993 prices) to be spent over the next five years on housing-related infrastructure projects, such as water supply, sewerage and transport links, to speed up housing production. In 1995-96, 42 public works projects have been included for funding.

  The government has commissioned studies on transport, environmental and planning issues to examine the housing development potential of sites in the urban area, and at former military establishments, Sham Tseng Reclamation, Ma On Shan and Tin Shui Wai Reserve Zone. Another study is in hand to assess further redevelopment potential and preliminary findings are expected to be available by March 1996.

Consumer Protection

Regulation of Estate Agents

In November, after public consultation in 1994, the government introduced legis- lation to regulate the operation of estate agents in Hong Kong. The Bill seeks to establish a statutory Estate Agents Authority responsible for licensing estate agents and regulating their activities, to enshrine the obligations of estate agents in law and to prescribe the use of written agency agreements.

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Sales Descriptions on Uncompleted Flats

After public consultation in 1994, the Law Reform Commission published a report in April, recommending the introduction of legislation to require developers to provide sales literature with clear and accurate descriptions about uncompleted properties put on sale, and to impose penalties for non-compliance. The government is consulting property developers and relevant professional bodies on these recommendations and expects to reach a decision in early 1996.

Rent Control

Statutory controls on rents and security of tenure date from 1921. Certain domestic tenancies have both their rent levels controlled and receive security of tenure. They

are:

-Tenancies in pre-war domestic premises.

-Tenancies in post-war domestic premises completed or substantially rebuilt after August 16, 1945, and before June 1981 (but not new lettings created on or after June 10, 1983, or to tenancies of premises having a rateable value of or above $30,000 as at June 10, 1983).

Nearly all other domestic tenancies receive security of tenure, providing the tenant is prepared to pay the prevailing market rent.

The legislation provides for controlled rents to be increased progressively up to market levels so that rent controls can be removed by the end of 1996. The provisions for security of tenure will, however, continue to apply. 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. Provisions exist to facilitate an agreed surrender by the tenant of his protected tenancy in exchange for a consideration.

The Rating and Valuation Department administers the Landlord and Tenant (Consolidation) Ordinance and publishes explanatory pamphlets to help people understand their position in relation to the legislation. It provides an advisory and mediatory service to handle the many practical problems arising from rent controls. Its rent officers also attend district offices to deal with referred cases and answer enquiries on landlord and tenant matters.

Public Housing

Expenditure on public housing and related infrastructure is expected to amount to some $25 billion in 1995-96, or 12 per cent of total public expenditure.

Public Rental Housing

The stock of public rental housing amounts to about 700 000 flats.

Rent Policy

Rents for domestic units are based on tenants' ability to pay. Tenants may choose to live in the minimum space standard of 5.5 square metres per person, at a median rent- to-income ratio not exceeding 15 per cent. If they wish to occupy 7 square metres per person, the maximum median rent-to-income ratio is 18.5 per cent. With rents being

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charged at $55.30 per square metre for the newest urban estates and $31.70 for the newest New Territories estates, domestic rents represent, on average, 8.5 per cent of the median household income of Housing Authority tenants. Rents are reviewed every two years, taking into account rates increases, maintenance, location, facilities, and tenants' ability to pay.

Housing Subsidy Policy

 Under a modified housing subsidy policy introduced in April 1993, tenants who have lived in public housing for 10 years or more, and whose incomes are more than twice but less than three times the waiting-list limit, are required to pay 1.5 times the rent plus rates. Tenants whose income exceeds three times the waiting list income limit are required to pay double rent plus rates. There are some 332 700 households with 10 years' residence in public housing, and 16 per cent of them are required to pay extra

rent.

  In December, the Housing Authority published proposals to ensure that public housing subsidy is enjoyed by those most in need. In future, tenants already paying double rent and whose household income and net assets exceed specified limits will be required to pay market rent or to move out. The public consultation period will end in March 1996.

Rent Assistance

Temporary relief is granted to domestic tenants facing financial hardship. Those whose rent-to-income ratio exceeds the qualifying percentages as a result of an increase in rent or a reduction in household income, may apply for a reduction of rent for 12 months, subject to annual review. In 1995, 920 families received rent assistance under the scheme. Tenants who continue to face financial difficulty after receiving assistance for 24 months may seek a transfer to cheaper housing in the same district with a domestic removal allowance and a rent-free period of one month.

Allocation

In 1995, 21 943 new flats and 15 688 refurbished flats were let to the various categories of eligible applicant. Some 9 809 flats (26 per cent) went to waiting list applicants. Applicants are considered in the order of their registration and in accordance with their choice of district. Accommodation is offered to those who are eligible in respect of their family income and residence in Hong Kong (normally seven years). There were 149 047 applications on the general waiting list at the end of the year and 23 917 applications on the single-person waiting list, established in January 1985.

  Two other large groups of allocation were tenants affected by the comprehen- sive redevelopment programme (32 per cent), and families affected by development clearances (20 per cent). The remainder of the flats were allocated to junior civil servants, victims of fires and natural disasters, occupants of huts and other struc- tures in dangerous locations, and compassionate cases recommended by the Social Welfare Department. The Housing Department has computerised the information on applicants to enable faster allocation and duplication checks.

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Housing the Elderly

Under the Housing for Senior Citizens Scheme, introduced in 1987, more than 2 599 housing units have been provided for able-bodied elderly persons aged 60 years or over who are self-reliant and independent. A warden service is provided to deal with emergencies. As a priority scheme, elderly couples or single elderly persons applying in groups of two or more are allocated public housing within two years. In 1995, 1 631 people were rehoused under this scheme and 792 flats were allocated. Persons requiring a higher level of health care are referred to the Social Welfare Department for transfer to more suitable housing.

      Since June 1994, priority for public housing has been given to families applying with elderly parents or dependants. So far, 1864 families have benefited from this scheme. New housing for the elderly will be built on small urban sites over the next few years and in the five-year period from 1995 to 1999, the Housing Authority will provide 36 000 flats suitable for small households, 60 per cent of which will be used to rehouse elderly people.

Assisted Home Purchase

Home Ownership Scheme and Private Sector Participation Scheme

The Home Ownership Scheme (HOS) was introduced in 1978 to provide flats for sale to lower- and middle-income families and public housing tenants at prices well below market value. About 222 000 flats have so far been sold to eligible families. This includes 68 284 flats produced under the complementary Private Sector Partici- pation Scheme (PSPS), which makes use of the resources of the private sector to produce flats for sale at subsidised prices.

Private sector applicants are not allowed to own domestic property within two years of the submission of their applications and are subject to a household income limit of $25,000 a month. These restrictions, however, do not apply to public housing tenants, residents of temporary housing areas and cottage areas managed by the authority, households displaced by the clearance of squatter areas for development, natural disaster victims and junior civil servants.

As an encouragement, public housing tenants are given higher priority than private sector applicants in selecting HOS flats, receiving about two-thirds of the total number available. About 48 per cent of the families who bought property under the schemes were public housing tenants who surrendered their rental flats in return. This incentive has also been extended to prospective tenants so as to release more public rental units for those in greater need.

      Favourable mortgage terms are provided by 46 financial institutions for HOS and PSPS flats purchasers. The authority, in return, undertakes to indemnify them against loss in cases of default. Purchasers can borrow between 90 and 95 per cent of the flat price at a favourable interest rate, with repayment periods of up to 20 years.

During the year, some 10 518 flats and 2 270 flats were sold under the HOS and the PSPS schemes. The schemes were over-subscribed by 10 times. The prices of flats sold ranged from $293,800 for a flat with a saleable floor area of 19.8 square metres at Hing Ming Court, Tseung Kwan O, to $1,595,100 for a flat of 59.9 square metres at Tsz Oi Court, Tsz Wan Shan. Prices were, on average, 45-48 per cent below market values.

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Sandwich Class Housing Scheme

 The Sandwich Class Housing Scheme was introduced in 1993 to help families with monthly incomes of between $25,001 and $50,000 to buy their own home. It com- prises an interim loan scheme and a main scheme.

  The loan scheme, with a grant of $2 billion from public funds, is designed to assist 4 000 families to purchase their own home in the private sector. Successful applicants can borrow up to 25 per cent of the flat price or $550,000, whichever is less, to buy a property that is not older than 20 years and worth not more than $3.3 million. The loan is repaid, in 120 equal instalments starting from the fourth year after the loan is made. Interest is charged at 2 per cent a year. By the end of 1995, 2 650 loans with a total value of $1.2 billion had been granted.

  The main scheme involves the granting of land on concessionary terms to the Housing Society. Sixteen sites with a total flat production capacity of about 20 000 have been earmarked for this purpose. The scheme was expanded in October to produce a total of 30 000 flats by 2003.

  To date, production is well on schedule. The first 1 024 flats at Tsing Yi were put on the market in December 1994 at a discount of over 30 per cent to market value and 1 015 flats were sold. The flats were ready for occupation in December. Another 882 flats at Ma On Shan were offered for pre-sale in December.

Home Purchase Loan Scheme

The Home Purchase Loan Scheme was introduced in 1988 to help lower and middle- income families to buy flats in the private sector. In 1995, 2 430 families benefited from the scheme. Eligible applicants are offered an interest-free loan, repayable over the same period as the bank mortgage on the property, up to a maximum of 20 years. Alternatively, they may opt for a monthly subsidy for 48 months, which need not be repaid.

  As an incentive to attract more sitting public housing tenants to buy property and give up their rental flats for reallocation, the scheme was enhanced in 1995 with a considerable increase in the amount of interest-free loan and non-repayable monthly subsidy granted to eligible applicants. The loan and the monthly subsidy given to public housing tenants were $600,000 and $5,100 respectively, while that for private sector applicants were $400,000 and $3,400 respectively. This offer will last for the financial years 1995-96 and 1996-97. So far, 10 951 loans and 561 subsidies have been granted. As a result, 6 263 public housing units have been recovered.

Construction

The Housing Authority has about 107 100 flats under construction. In 1995, some 31 900 flats were completed, of which 45 per cent were for sale. Construction during the year was characterised by redevelopment of older housing estates in urban areas coupled with the exploitation of small infill sites, using a new range of non-noise- sensitive building designs.

  Construction activity within the New Towns was primarily concentrated in Tin Shui Wai, Tseung Kwan O and Tung Chung. In Tin Shui Wai, 17 740 flats for 59 160 people will be completed within the next three years, while in Tseung Kwan O an additional 51 hectares are being developed to provide homes for 86 000 persons. In Tung Chung, work has started on building public housing for 15 000 people. This

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new town is near Hong Kong's new international airport, being built at Chek Lap Kok.

Redevelopment

Redevelopment projects are in progress at Tsz Wan Shan Estate, Lam Tin, Sau Mau Ping and Ko Chiu Road. Work began in August on the redevelopment of Kwai Chung Estate and the demolition of old blocks nearby at Shek Yam and Lei Muk Shue Estate. The development will improve the environment in both estates for 32 400 people. Another project at Shek Lei, which includes the construction of a major new commercial centre, will rehouse 26 500 people over the next eight years.

Since the launching of the Comprehensive Redevelopment Programme in 1988, 282 housing blocks in older estates have been redeveloped, improving the living con- ditions for some 91 300 families. Over the next five years, another 164 older blocks will be redeveloped.

Quality Assurance

All contractors working for the Housing Authority must meet the latest ISO 9000 quality standards. All of the 87 contractors on the authority's list of building contractors are certified to ISO 9002. The requirement for certification has been extended to building services contractors. By January 1995, 12 electrical contractors and nine lift and escalator contractors had obtained certification. Air-conditioning, fire services and water pump contractors on the authority's lists all obtained certification in October 1995. The authority will require all active listed consultants to obtain certification by April 1996.

Estate Management

The Housing Authority will gradually introduce privatisation to improve the quality of estate management in public rental housing. A pilot scheme will be carried out in selected estates in 1996.

Following a successful trial in four estates in mid-1994, the Customer Service Assistant (CSA) Scheme will be extended to all public rental estates by April 1996. So far, 29 estates have been provided with CSAs who register tenants' complaints and requests, and refer matters to appropriate estate officers for action.

      In April, the Estate Management Advisory Committee Scheme was launched to encourage tenants' participation in estate management. The committee advises the Housing Manager on day-to-day management matters, and has funds to implement minor improvement works and to organise community activities in estates. So far, eight committees have been formed. The scheme will cover all public housing estates by 1997.

The Housing Department has launched a programme to improve security facilities in all estates. Tenants will be able to speak to and see visitors over their own tele- phones and television screens. Staff will also be able to monitor estates through a comprehensive network of closed-circuit television (CCTV) connected to a central control room in each estate.

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Community Liaison

The Housing Authority has established three Housing Information Centres in conjunction with the Home Affairs Department. These centres provide compre- hensive advisory services to residents affected by redevelopment of private buildings or urban renewal projects, and to applicants for public rental housing and Home Ownership Scheme flats. The authority also plans to set up information centres in districts with a high concentration of elderly residents in old private tenements in a bid to provide better services.

Welfare Services

 Some 1 129 welfare premises in the Housing Authority's estates and courts were let for welfare and community services at a concessionary rent of $33 per square metre a month. Non-domestic premises in less-popular locations were let at a fair market rate to community organisations. The authority also undertakes fitting-out works for welfare projects and 204 projects have been fitted out since 1984.

The Estate Liaison Officer scheme, providing outreaching services to elderly public housing tenants, has been expanded. Housing management staff visit the elderly, offer assistance and encourage them to take part in various community activities. As an additional safety measure, emergency alarm systems have been being installed, and by the end of the year 1 164 alarm sets were provided in 10 estates.

Commercial Properties

 Commercial facilities and car parks are an integral part of public housing estates. Apart from providing convenience to tenants, they generate income for the Housing Authority. The authority's total retail stock stood at 1.25 million square metres and vacancies remained low at 2 per cent at the end of the year. The income, including car park revenue, grew by 13 per cent over the previous year to $3.6 billion. Car parks in housing estates are let without subsidy and demand remains high for the 70 000 spaces available. Privatisation of management has produced good results and the number of spaces under contract management increased to 60 000 during the year.

A trial scheme was introduced to place two shopping centres under private management. The scheme will be extended to all factory estates over the next few years. The practice of letting large spaces to single commercial tenants with specialist expertise continued.

The authority's portfolio also includes 17 flatted factory estates and 3 400 shops in former resettlement estates. The shops and half of the factory units are let at below market rents. Other premises are let at market rents, normally for three-year terms. Lettings are primarily by tender supplemented by negotiation, which provides flexi- bility and assists in attracting anchor tenants and large-space users.

Maintenance Services

 Maintenance and improvement works for the Housing Authority's property stock are carried out under various established programmes. Total maintenance expenditure for the year amounted to $4 billion. The authority is expected to spend $23.5 billion within five years on maintenance and improvement works. An improvement fund of $2 billion has been established to finance large-scale works that may be identified in coming years.

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      Under the CARE (Condition, Appraisal, Repair and Examination) programme launched in June 1992, properties are surveyed every six years with necessary main- tenance works implemented accordingly.

Some of the authority's older estates have problems with concrete breaking up. A special repair programme plans to speed up their repair on a flat-by-flat basis. The first survey programme has been completed and repair works have been carried out

on 15 500 flats.

Refurbishment of vacant flats continued during the year with 12 087 flats refur- bished for reletting. At the same time, 19 shopping centres were at various stages of upgrading. Programmes for modernisation of lifts and conversion of the existing fire service dry riser to a wet riser system were in full swing. So far, 164 lifts have been replaced and conversion of dry risers for 95 blocks had been completed.

Under an on-going electrical reinforcement and rewiring programme, 18 blocks were rewired and 81 blocks electrically reinforced during the year costing $59 million and $82 million, respectively. A life-cycle concept in the planning of electrical rewiring has been developed, under which each building will be rewired every 15 to 20 years.

A security package is being installed in Harmony and Trident blocks. This includes a tower guard, security gates at all entrances, a telephone entry system, and CCTV inside lift cars as well as at main entrances. Installation works on 155 blocks have been completed. The improvement works for some 1 000 rental blocks will be com- pleted by the end of 1997.

Initiatives to enhance maintenance service to tenants have been introduced, including a computer-based maintenance information system, day-to-day repair system, water pump replacement and provision of cable TV. A new maintenance information system was implemented in April 1995. It provides tenants with a faster and more efficient day-to-day maintenance and repair service, and allows main- tenance works to be planned more effectively.

Old water pumps are being replaced with new stainless steel ones. Seven pump rooms have already been completed and preparatory work is in progress for 12 estates with 51 pump rooms. Galvanised iron pipes are also being phased out to ensure better fresh water quality in housing estates. Trial schemes have been carried out under the CARE programme to use non-ferrous piping materials for refurbish- ment projects.

Squatter Control

The squatter population has been reduced to 29 500 in the urban area and to 217 500 in the New Territories as a result of rehousing. The 1982 squatter structure survey provides a baseline for control of new squatting on government land and private agricultural land. Squatter control is maintained by carrying out daily patrols and regular hut-to-hut checks.

Meanwhile, the Housing Authority repairs and maintains the facilities in existing squatter areas. In the event of fire and natural disasters, squatter control staff attend the scene and provide transit accommodation for victims rendered homeless. Eligible households will be offered rehousing accordingly. A total of 1 300 people who lost their homes as a result of fires or other natural disasters were given either permanent or temporary housing in 1995.

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Squatter Clearance

The government will offer rehousing to all squatters on government land in the urban area by 1996. During the year, 257 hectares of land were cleared, with 8 900 and 4 700 affected people given permanent or temporary rehousing. Some 500 industrial, com- mercial and agricultural undertakings affected by clearances were awarded ex-gratia allowances. A non-development clearance programme was devised on the advice of the Geotechnical Engineering Office of the Civil Engineering Department. Some 5 300 persons living in squatter huts on slopes vulnerable to landslips were provided with either permanent or temporary housing.

Temporary Housing Areas

 Temporary Housing Areas (THAS) provide accommodation for people rendered homeless by clearances, fires and natural disasters and who are not eligible for permanent public housing. An accelerated programme to clear all pre-1984 THAS is in progress. During the year, 11 THAs were cleared. At the end of the year, the territory had 34 THAS, housing 38 000 people.

To improve the quality of temporary accommodation, blocks in older housing estates in the urban area will be converted for use as THAS. In addition, a new design for purpose-built accommodation will be introduced in 1996.

Transit Centres

Transit Centres provide free emergency shelters for the homeless and victims of fires and natural disasters, pending assessment of their eligibility for rehousing to permanent or temporary housing. The Housing Department manages seven transit centres with a capacity of 1 030 persons.

Cottage Areas

 Cottage Areas, an early form of public housing, are being phased out gradually. They comprise single-storey structures built of stone or less permanent materials on hill- sides. The territory's six cottage areas house 9 000 people. The largest one, in Tiu Keng Leng, is being cleared for permanent development.

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The Polluter Pays Principle was put into practice in Hong Kong with the introduc- tion of sewage charges on April 1, 1995. The funds from the sewage charges will be used to maintain and operate sewage collection and treatment facilities in order to achieve the objectives of water quality improvement in the territory.

     Cross-border co-operation between the Hong Kong Government and the Shenzhen Municipal Government on flood prevention took another step forward in 1995 with the commencement of works for the first stage of the Shenzhen River Regula- tion Project. The project is important in alleviating flooding in the Northern New Territories and Shenzhen. The two governments have continued to work closely with the aim of implementing the second stage of this important project at the earliest possible date.

After building collapses between August and September 1994, the government announced an initiative to improve safety at construction sites. In 1995, a consultancy was commissioned to study the conditions of cantilevered structures and to prepare a code of practice for the safe demolition of buildings. A task force in the Buildings Department was set up to monitor safety measures at construction and demolition sites. Consideration was being given to strengthening the provisions in the Buildings Ordinance. Hand-dug caissons were banned except in special circumstances.

      A major milestone in the development of a land information system was reached in the year with the use of digital maps. The Land Survey Ordinance was enacted in 1995 to require proper definition of boundaries by authorised land surveyors.

      To promote public awareness of town planning and architecture in Hong Kong, an exhibition entitled "Hong Kong City of Vision" was held at several loca- tions, attracting more than 200 000 people. To create a stronger deterrent against unauthorised development in the New Territories, the maximum fine for such offences was substantially increased.

     A computerised Public Works Management System was brought into operation in 1995 to help to ensure timely and efficient completion of capital works projects. Dedicated project management teams were set up in seven works departments to improve implementation of all major public works projects.

      The government aims to complete the new airport at Chek Lap Kok by early 1998. The airport island has been substantially formed and the terminal building and associated airfield works are under construction. Roadworks from the new airport to Kowloon and the infrastructure for Tung Chung New Town are well advanced.

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  A Port Projects Co-ordination Office was set up in March to provide centralised co- ordination for the development of port-related projects. It is initially concentrating on the Lantau Port development and will gradually develop its role to co-ordinate work on other strategic port projects.

  In a continuing effort to improve construction site safety in Hong Kong, safety advisory units have been set up in all works departments to advise on and monitor construction safety matters. In addition, contractual provisions on safety measures have been introduced into government contracts.

  Work has continued on major river training and flood control programmes. Recommendations on slope safety in a report by Professor N. R. Morgenstern, a Canadian geotechnical expert, are being implemented and the Government's Landslip Preventive Measures Programme has been accelerated.

The Organisational Framework

The main objectives of the government's lands and works policies are to ensure an adequate supply of land to meet the needs of the public and private sectors, to optimise the use of land within the framework of land-use zoning and develop- ment strategies, and to ensure the co-ordinated development of infrastructure and buildings.

  The Secretary for Planning, Environment and Lands is chairman of a committee, which is responsible for monitoring the general progress of the physical development of the territory, as well as considering and approving detailed planning briefs, layouts and development plans. He is also chairman of the Town Planning Board, and has policy responsibility for conservation.

  In addition to his policy functions, the Secretary for Planning, Environment and Lands oversees the operation of the Buildings Department, Drainage Services Depart- ment (jointly with the Secretary for Works), Environmental Protection Department, Lands Department and Planning Department, as well as the Land Registry, which is operated on a trading fund basis. He also oversees part of the work of the Agriculture and Fisheries Department, Civil Engineering Department, Electrical and Mechanical Services Department, Marine Department and Territory Develop- ment Department.

  The Secretary for Works oversees, and has policy responsibility for, the works agency activities of the Architectural Services Department, Civil Engineering Depart- ment, Drainage Services Department, Electrical and Mechanical Services Depart- ment, Highways Department, Territory Development Department and Water Supplies Department. In addition, he oversees the operation of the Architectural Services Department (in part), Civil Engineering Department, Electrical and Mechanical Services Department and the Water Supplies Department's services. He is also responsible for the Sewage Services Trading Fund in the Drainage Services Department. The New Airport Projects Co-ordination Office (NAPCO) was set up in February 1991 under the Secretary for Works to co-ordinate the implementation of the Airport Core Programme (ACP).

Planning

Town planning is carried out by the Planning Department under policy directives from the Planning, Environment and Lands Branch and the Housing Branch.

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       During the year, the department was involved in the drafting of an amendment bill to the existing Town Planning Ordinance; reviewing the Territorial Development Strategy; updating the North-West, South-West and North-East New Territories Sub-regional Development Strategies and the Hong Kong Planning Standards and Guidelines; identifying housing sites, assessing housing demand and forecast of land supply for housing and other major land uses; follow-up work on the Port and Airport Development Strategy, the Metroplan Selected Strategy, and the Rural Planning and Improvement Strategy.

      It was also engaged in forward planning and development control for the districts, including co-ordination of various urban renewal efforts; and in undertaking enforcement action against unauthorised developments in designated rural areas.

Review of the Town Planning Ordinance

The Town Planning Ordinance was enacted in 1939. In 1987, the Executive Council ordered that an overall review of the ordinance should be undertaken, with a view to introducing new legislation to meet Hong Kong's changing circumstances.

      Public consultation on the comprehensive review of the Town Planning Ordinance was carried out in 1991. As part of the review, a special committee was set up to consider specifically the complex and contentious issue of compensation and betterment arising from planning actions. After careful consideration of the sub- missions and views from various sectors, the special committee completed its work and submitted a report to the Governor in 1992.

      The administration has completed analysis of the public comments received and the recommendations of the special committee. An amendment bill to the existing ordinance will be introduced to the Legislative Council in the 1995/96 session.

Hong Kong Planning Standards and Guidelines

This is a government document of planning criteria and guidelines for determining the quantity, scale, location and site requirements of various land uses and facilities. It is applied to planning studies, the preparation or revision of town plans and development control. It is constantly under review to take account of changes in government policies, demographic characteristics as well as social and economic trends. Major work undertaken during the year included the formulation and revision of planning standards and guidelines for hospital facilities, social service for the elderly, conservation, and port back-up and open storage uses.

To promote public awareness of planning and to facilitate the use of the document by non-government bodies, it has been made available in various libraries. The document is also available for sale to the public, on a chapter-by-chapter basis.

Territorial Development Strategy

The Territorial Development Strategy (TDS) is the highest tier in the hierarchy of town plans in Hong Kong. It provides a broad, long-term framework on land use, transport and environmental matters for the planning and development of the territory. It aims to facilitate the continued growth of Hong Kong as a regional centre of business and finance, a high-capacity container port and an international focal point for aviation.

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  A comprehensive review of the strategy commenced in 1990. Two development scenarios have been postulated in the current TDS Review. The first scenario assumes the Pearl River Delta area as Hong Kong's primary economic hinterland, and the second includes both Guangdong Province and some inner provinces of China as Hong Kong's economic hinterland.

  The TDS Review consists of three main streams of work: the foundation studies, including identification of goals and objectives key issues and evaluation criteria; the formulation and evaluation of TDS development options on the basis of the foundation studies; and the formulation of a recommended development strategy for the territory and a medium-term implementation plan. The second stage includes a public consultation exercise and meetings with planning officials in Guangdong. The three streams of work have been concluded. The TDS Review Final Technical Report is being prepared and will be issued in due course.

Sub-regional Development Strategies

These strategies serve as a bridge between the TDS and district plans. They trans- late long-term, broad-brush territorial concepts and goals into district planning objectives for the five sub-regions of Hong Kong -the Metro area, North-East New Territories (NENT), South-East New Territories (SENT), North-West New Territories (NWNT) and South-West New Territories (SWNT).

The Metroplan Selected Strategy was approved by the Governor in Council in 1991 as a planning framework for developing and upgrading the Metro sub-region, including Hong Kong Island, Kowloon, Tsuen Wan and Kwai Tsing, up to the year 2011.

  Following the approval of the Metroplan Selected Strategy, steps have been taken to prepare a series of Development Statements to translate the Metroplan concepts into more specific district planning objectives. The Development Statements for West Kowloon, South-East Kowloon and Tsuen Wan-Kwai Tsing were completed and released for public consultation in 1994. The Hong Kong Island West Development Statement was also completed in 1995. Preparation of the Central and East Kowloon Development Statement is expected to be completed in 1996.

  Work on the review of the NWNT and SWNT sub-regional development strategies is expected to be completed in 1996. These reviews aim at producing an appropriate land-use, transport and environmental framework to guide the planning and develop- ment of the sub-regions up to 2011. An NWNT (Yuen Long District) Development Statements Study was completed in 1994 to provide a wider district planning context for the preparation of the outline zoning plans for the rural areas of the NWNT. ·

  The NENT Development Strategy Review was completed in 1995. A review for the SENT is considered unnecessary at this stage, as the general planning policy of conservation of the countryside and the enhancement of the recreation potential in SENT (except for the new town development in Tseung Kwan O) remains unchanged.

District Planning

Development projects are implemented in accordance with statutory or departmental district plans. These plans aim to regulate and provide guidance to development in

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terms of land-use, building density and development characteristics, to ensure that they are in line with the planning objectives of the districts.

Statutory Planning

Two types of statutory plans are prepared by the Town Planning Board (TPB) under the Town Planning Ordinance: the outline zoning plans (OZPs) and development permission area (DPA) plans. The DPA plans are prepared for areas not previously covered by OZPs and they mainly cover the rural areas in the New Territories. Development scheme plans prepared by the Land Development Corporation (LDC) are also approved by the TPB.

OZPs are intended to show the broad land-use framework for specific areas, including the major roads and other transport systems, and provide statutory planning controls such as specific development parameters within the concerned areas. DPA plans, on the other hand, are less comprehensive and definitive than OZPs. They are interim plans to be replaced by OZPS within three years in accordance with the provision of the Town Planning Ordinance. In areas covered by DPA plans and their replacement OZPs, the Planning Authority can take enforcement actions against unauthorised development.

      In 1995, two new OZPS (one replacing a DPA plan) were published, and 23 existing plans were amended by the TPB. At the end of the year, there were 84 OZPs (30 of them replacing DPA plans) and five DPA plans.

      Under the Town Planning Ordinance, any person affected by the statutory plan, including the LDC development scheme plans, can lodge objections with the TPB. In 1995, 66 objections to statutory plans were lodged, and 1 582 objections (including those brought forward from the previous year) were considered by the TPB. Draft plans, together with amendments made to meet objections and unwithdrawn objections, will be submitted to the Governor in Council for approval. In 1995, two draft plans were approved or referred back for amendments.

      Attached to each statutory plan is a set of Notes indicating the uses which are always permitted and uses for which the TPB's permission must be sought in particular zones. In 1995, the TPB considered 734 applications for planning per- mission and 125 reviews of planning applications.

      Guidelines were formulated by the TPB to help applicants submit planning applications. The TPB has promulgated 14 sets of such guidelines. The TPB has also published an annual report since 1990.

      The Town Planning Appeal Board, a body independent of the TPB and government departments, was set up in 1991 to deal with appeals lodged by applicants who feel aggrieved by the decisions of the TPB upon review of their planning applications.

      Including those cases brought forward from the previous year, the Appeal Board heard 10 cases in 1995 and all were dismissed. Eight cases were abandoned by the appellants.

Departmental Plans

Apart from statutory plans, the Planning Department also prepares departmental outline development plans (ODPs) and layout plans (LPs) for individual districts or areas to show the planned land uses, development restrictions and transport networks in greater detail. At the end of the year, there were a total of 92 ODPs and 328 LPs.

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Enforcement

 Under the Town Planning Ordinance, no person should undertake or continue a development in a development permission area unless the development was a use in existence before the gazetting of the relevant Interim DPA/DPA plans, or is permitted under the DPA plan or the replacement OZP, or has been approved by the TPB. Any development that does not satisfy any of these criteria is an unauthorised development. The Planning Authority may serve notices on the respective land- owners, occupiers and responsible persons, requiring them to discontinue the unauthorised development by specified dates unless planning permission for the development is obtained, or demanding a reinstatement of the land. It is an offence in law if the requirements of the notices are not complied with.

  The Planning Authority can also instigate immediate prosecution action if any person undertakes or continues an unauthorised development.

  Most of the unauthorised developments detected in 1995 were related to site formation; earth-filling; the open storage of vehicles, containers, trailers/tractors and construction materials; and vehicle repair workshops. These caused the serving of 378 enforcement notices for 93 cases, and 38 reinstatement notices for 13 cases. Prosecutions were conducted in respect of 66 cases, and 58 defendants in 41 cases were convicted.

  In July 1995, the Legislative Council increased the maximum fine for unauthorised development offences under the Town Planning Ordinance in order to provide a more effective deterrent.

Urban Development Areas

Work on new urban development areas generally follows the broad pattern of land-use and guidelines in the Metroplan and integrates with the replanning and redevelopment of adjoining old areas in a co-ordinated manner.

Hong Kong Island

The Central and Wan Chai Reclamation, extending along the waterfront from Sheung Wan to Causeway Bay, will cover an area of 108 hectares. The project is being implemented in phases.

  The first phase of the Central Reclamation involves reclamation of about 20 hectares of land between Sheung Wan and Pedder Street, to provide land for the construction of the Hong Kong Station of the airport railway and the extension of the Central business district. Progress of Phase I works has been satisfactory. Construction of the Hong Kong Station is now under way, and supporting infrastructure will be available for the operation of the station in mid-1998. Some of the new ferry piers were completed and operational in 1995.

  The second phase of the Central Reclamation which involves the creation of about 5.3 hectares of land in the Tamar Basin area for commercial and open space development commenced in December 1994. The detailed design for Phase III of the Central Reclamation, which will connect Phase I and Phase II with the Wan Chai Reclamation, commenced in February 1995.

  Wan Chai Reclamation Phase I, which will provide land for the extension of the Hong Kong Convention and Exhibition Centre, commenced in March 1994.

Two striking new bridges are among the projects being built in association with Hong Kong's new international airport at Chek Lap Kok. Tsing Ma suspension bridge is the larger of the two and spans Ma Wan Channel between Tsing Yi and Ma Wan Islands. Kap Shui Mun Bridge uses the cable-stayed method. Here, Kap Shui Mun Bridge edges out across Kap Shui Mun Channel between Ma Wan and Lantau Islands.

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Larger than San Francisco's Golden Gate Bridge, Tsing Ma Bridge has already become a landmark in Hong Kong. More than 200 metres high and with a main span of 1,377 metres, it is the world's longest suspension bridge carrying both road and rail traffic.

共國

Sunlight glows off Western Harbour and outlines Tsing Ma Bridge, Hong Kong's

link with the future. The bridge is due for completion in May 1997.

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     Completion of the works is scheduled for January 1997, to tie in with the target opening date of the extension in mid-1997.

On the western side, the Belcher Bay Reclamation will provide about 10 hectares of land, mainly for the construction of the Belcher Bay Link, a dual carriage- way connecting the existing, upgraded, Connaught Road West with Smithfield in Kennedy Town. Both the reclamation and the construction of the link commenced in May 1993, for targeted completion in 1996-97, to tie in with the opening of the Western Harbour Crossing.

      On the eastern side, the Aldrich Bay development will produce about 30 hectares of land for private and public housing, open space and other uses. The new typhoon shelter was put into use in early 1991, while reclamation of the old typhoon shelter started in August 1992 for completion, in phases, from 1995 to 1999.

      The Siu Sai Wan development includes the formation of about 56 hectares of land for residential, government, institutional, community and other uses. Two secondary schools and one Private Sector Participation Scheme housing development have already been completed. Another secondary school, a Private Sector Participation Scheme housing development and an Urban Council sports ground are under construction.

Kowloon

Large-scale reclamation work is currently under way at West Kowloon. Some 340 hectares of land are being formed in West Kowloon, including reclamation at Stonecutters Island, to tie in with the government's proposed programme for the development of Hong Kong's new international airport at Chek Lap Kok. The reclamation is used for private and public housing, commercial and industrial development, and strategic transport links to the airport such as the third harbour crossing, the West Kowloon Expressway and the airport railway. The area will house about 91 000 persons. It will also be used to compensate for land-use deficiencies in adjacent areas by providing more open space and government facilities. Steady progress has been maintained in the West Kowloon Reclamation and more than 95 per cent of the area has been formed. A large open space fronting the residential estate at Mei Foo Sun Chuen was completed in June 1995 and will act as a buffer zone between the residential area and the future West Kowloon Expressway.

      Reclamation at Hung Hom Bay is complete, providing 36 hectares of land for private and public housing, commercial development, extension of the existing Kowloon-Canton Railway freight yard, government facilities, institutional and com- munity facilities, schools, open space and roadworks. The area will house about 11 500 people. Engineering infrastructure, including two trunk roads (the Hung Hom Bypass and Princess Margaret Road Link), is being designed and will be completed in early 1999.

Upon the relocation of Hong Kong International Airport to Chek Lap Kok, an area of about 670 hectares in South-East Kowloon will be released for development in line with the Metroplan. Of this, about 300 hectares will be reclaimed from Kowloon Bay, about 270 hectares will be obtained from the existing airport site and about 100 hectares will be reserved for the proposed typhoon shelter and cargo-working area at Cha Kwo Ling. The adjoining 260 hectares of existing urban areas at Hung Hom, To Kwa Wan, Ma Tau Kok and Kowloon City will also offer

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opportunities for urban restructuring. The development and restructuring of South- East Kowloon will require a wide range of engineering works, including the reprovisioning of marine and land-based facilities; reclamation; highway construction and the provision of drainage, sewerage, sewage treatment and other public utilities. The development will be implemented in phases, into the next century. Upon com- pletion, it will accommodate about 285 000 people and provide about 110 000 jobs. A detailed development feasibility study was commenced in late 1995 and will take about 20 months to complete.

  Also in line with the Metroplan is the proposed Kowloon Point Development which covers an area of about 60 hectares at the southern end of the West Kowloon Reclamation. A feasibility study started in August 1995 and will take 16 months to complete. The study will investigate the essential aspects of planning, urban design, landscaping, traffic and transport, engineering, environmental impact assessment, port and marine works, programming and costing in developing Kowloon Point. It will formulate practical and optimum solutions for the phased and integrated development of the study area within the framework of the latest strategic planning, traffic and transport proposals.

Urban Renewal

In preparing the Metroplan and development statements, urban renewal frameworks are prepared for various districts in the urban area. The older urban districts were seen as offering redevelopment opportunities for comprehensive renewal to create a better urban environment.

  The Land Development Corporation (LDC) was established in 1988 to undertake, encourage, promote and facilitate urban renewal. Since its inception, seven urban renewal projects have been completed and 21 projects are under way in the old urban districts.

  Scheme plans for comprehensive redevelopment in the older parts of Yau Ma Tei, Tsim Sha Tsui and Wan Chai were drawn up and published under the Town Planning Ordinance in 1995. Comprehensive redevelopment scheme plans for some dilapidated areas in Central, Sheung Wan and Mong Kok are being implemented by the LDC. They will all provide office buildings, community facilities and much-needed open space. The LDC has also undertaken some smaller commercial and residential redevelopment projects aimed at environmental improvement. The Hong Kong Housing Society has contributed to the urban renewal process by undertaking several urban improvement schemes in the older areas.

  In recognition of the need for review of policies, programmes and institutional arrangements to facilitate urban renewal, the government published a document entitled "Urban Renewal" for public consultation in July. Its suggestions include a review on the terms of acquisition and compensation, and having the LDC act as a facilitator to ease the private redevelopment process.

New Towns and Rural Townships

The development of new towns in Hong Kong continued steadily in 1995, with the formation of additional land, the construction of new and improved infrastructure and the addition of further community facilities.

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About 130 hectares of new land were formed for new town development, the bulk of it at Tseung Kwan O. Plans were being considered to accelerate the provision of additional land and the construction of new infrastructure to activate the use of land reserves already formed. Concurrent with the rapid development was the landscaping and greening of the new towns, which housed more than 2.5 million people at the end of the year.

Tsuen Wan

Tsuen Wan new town embraces the areas of Tsuen Wan, Kwai Chung and Tsing Yi Island. Its population is expected to stabilise over the next 10 years at around 700 000, as a result of the gradual reduction in family sizes and increased provision of larger flats.

The new town has Hong Kong's container terminals in its midst in the Kwai Chung area. The new Container Terminal 8 development is operational. Container Terminal 9 is planned for South-East Tsing Yi.

      Major highway projects will further extend and reinforce the principal road network. Detailed design work for the duplicate Tsing Yi South Bridge was finalised and construction work is expected to start in early 1996. Improvements to Texaco Road Phase II, Tsuen Wan, were completed in early 1995, alleviating the existing traffic congestion at Tsuen Tsing Interchange.

Additional community facilities are under construction, including Kwai Tsing Civic Centre, which will provide a 900-seat auditorium and auxiliary facilities such as an exhibition hall, dance room and restaurant.

Sha Tin

Sha Tin new town is, to a large extent, complete and already home to over half a million people. Developed in the early 1970s, it is well known for its planning and integrated development.

       Since 1981, development works have extended to Ma On Shan where reclamation was completed in 1994 and has boosted the total development area to about 1 950 hectares. Work on the last section of the primary road link to Ma On Shan Town Centre is scheduled for completion in 1998. The land use scheme for the Ma On Shan South Area has been finalised and will provide housing for some 30 000 persons. Three additional public housing estates/Home Ownership Schemes are proposed.

The programme to improve conditions in the many old villages in and around Sha Tin continued. The village improvement schemes for Hin Tin, Sheung Keng Hau and Ha Keng Hau were completed in 1994.

Tai Po

      In the past 20 years, Tai Po has grown from a small market town of 25 000 into a new town with a population of 258 000 on about 1 270 hectares.

      Most of the new town's engineering infrastructure is in place. A further expansion of the Tai Po sewage treatment works will cater for the remaining development in the town area and the industrial estate.

The Nethersole Hospital and the Tai Po Convalescent/Infirmary Hospital will be completed respectively in 1996 and 1997. With a combined capacity of 1 662 beds, the

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region's needs for medical service will be met. The Waterfront Park near Fu Shin Estate will also be ready for use in September 1996.

Fanling and Sheung Shui

 Fanling and Sheung Shui, just a few kilometres from China, have grown from a group of villages in 1973 to a 515-hectare town of 170 000 people. Their combined population is expected to increase to 200 000 by the turn of the century.

Flood control measures were carried out within a section of the River Indus Minor downstream of the railway bridge. Further flood control measures are planned in the upstream and downstream sections of the River Indus, as well as along sections of the Beas and Sutlej rivers. The school building programme continues, as does construction of the North District Hospital.

Tuen Mun

Tuen Mun, in the West New Territories, is developed mainly on land reclaimed from Castle Peak Bay and on platforms formed in the valley between Castle Peak and the Tai Lam Hills. About 1 200 hectares of land have been provided by the government and the private sector for development.

  About 73 per cent of the town's 430 000 people live in public housing developments, which comprise 11 public rental estates and 16 home ownership and private sector participation schemes. Within the next five years, five more home ownership and private sector participation schemes and one public rental estate will be developed to accommodate an additional 63 000 people. Together with some low-density private housing developments along the southeastern coast, the new town will provide homes for about 460 000 people by 2001.

  Light manufacturing industries, including plastics, garments, metal, electronics and textiles, dominate in Tuen Mun. The existing industrial areas provide floor space for about 2 200 companies and jobs for about 40 000 people. Over 80 per cent of the workers employed in the factories live in the Tuen Mun and Yuen Long areas.

  The backbone of the transport service serving the town, and linking it with Yuen Long, is the Light Rail Transit (LRT) system. A large-scale recreation project has been completed north of Butterfly Beach, providing a horse-riding school, a golf- driving range and other recreation facilities such as a children's play area.

  A 125-hectare site in western Tuen Mun has been earmarked for special industries and a terminal for river trade with China is to be developed by the private sector. Reclamation work for the special industry area began in mid-1995. A new thermal power station, with a 5 000MW capacity, is being built at Black Point.

Yuen Long, Tin Shui Wai and the North-West New Territories

Yuen Long town was first developed in the early 1970s. Its population, which stood at 120 000 at the end of the year, is expected to grow to 150 000 early in the next decade.

  Development is spreading to the Tuen Mun-Yuen Long Corridor. The rural area is being rejuvenated, with new infrastructure providing for improved rural development.

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Tin Shui Wai is becoming the next focal point after Yuen Long in the NWNT because of improvements in the transportation network. Being strategically located, Tin Shui Wai's status will be further strengthened with the increasing linkage between China and Hong Kong. It is estimated that by the end of 1997 the population of the new town will reach 150 000. With the increasing demand for land supply to meet future development, it is proposed that the Tin Shui Wai Reserve Zone will accommodate an additional population up to about 120 000. The ultimate total population will be more than 300 000.

All major infrastructural works for Tin Shui Wai Development Zone have been completed. An LRT terminus and a bus terminus north of the civic square provide convenient public transport for local residents. The North-West New Territories Sewerage Scheme, which provides for a sewage treatment plant, pumping station, nine-kilometre sewer tunnel and 3.1-kilometre submarine outfall, was commissioned in March 1993.

Large tracts of low-lying land north and west of Yuen Long are particularly susceptible to flooding during heavy rains. A series of major flood prevention projects have been planned to solve this problem. Flood control works for the Shan Pui River and the downstream section of the Kam Tin River are in progress and works for the mid-stream section of the Kam Tin River began in October 1995.

Tseung Kwan O

The development of Tseung Kwan O new town, which started in 1982, is divided into three phases. Phase I has been substantially completed, with about 460 hectares of land being formed at Tseung Kwan O new town. Engineering infrastructure has been provided to cater for private and public housing and the associated community facilities.

       Phase II is the reclamation of the town centre area, to be completed in early 2000. It will provide additional land for commercial, residential, government, institutional and community uses.

Phase III Work for the provision of land and services for the Tseung Kwan O Industrial Estate is also in progress. An initial 30 hectares of land were completed in March 1995. Upon completion in 1997, an additional 65 hectares will be available for industrial development. The southern part of Siu Chik Cha is being developed for industrial use.

In preparation for further industrial development, some 100 hectares of land south of Tseung Kwan O will be developed for deep waterfront industries and potentially hazardous installations. Reclamation works started in October 1995. The population of the new town, which stood at 146 000 at the end of March 1995, will be more than 400 000 upon full development by 2010.

Islands District

Hong Kong's ninth new town is about to take shape at Tung Chung on northern Lantau Island and will provide a supporting community for the new airport at nearby Chek Lap Kok. The new town will be developed on about 760 hectares of land and will be designed to modern international standards - incorporating residential, industrial and commercial facilities and all the necessary supporting infrastructure.

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The new town will comprise two discrete urban development areas at Tung Chung and Tai Ho, with proposed populations of 150 000 and 50 000 respectively, by the year 2011. Possible expansion areas in the new town have the potential to accommodate an additional 60 000. Residential and commercial developments will be concentrated in the town centre and two district centres in Tung Chung and Tai Ho, each incorporating a Lantau Line railway station and a public transport terminus. The town centre will be the retail, commercial and cultural core of the new town. Other necessary retail and commercial facilities will be distributed in the district centres serving Tung Chung and Tai Ho, and local centres within housing areas. Land will be reserved at Siu Ho Wan for airport-related industrial uses and major utilities, including a water treatment works, a sewage treatment works, railway depot and a refuse transfer station.

There will be five phases of development for the new town between now and post- 2001. The first phase is earmarked as one of the Airport Core Programme projects and will be largely completed by 1997. It will accommodate about 20 000 residents at Tung Chung. Construction of the first stage of the North Lantau sewage collection, treatment and disposal system is under way. Work is expected to be completed in late 1996.

Elsewhere in the Islands District, major capital works including site formation for the rural public housing estate and Home Ownership Scheme in Sin Yan Tseng, Cheung Chau; upgrading of sewage treatment works in Mui Wo; and construction works for the first rural public housing estate in Peng Chau, are progressing well.

Rural Planning and Improvement Strategy

The Rural Planning and Improvement Strategy (RPIS) aims to improve the quality of life in the rural areas of the New Territories. It is implemented at both strategic and district levels.

At the strategic level, land-use policies are continuously reviewed to control incompatible developments and provide a more sustainable and cost-effective basis for public and private investments. Several reviews and studies have been, or are being, undertaken, including studies of open storage and port back-up land require- ments, and a review of the rural improvement concept.

At the district level, improvement projects are undertaken under the rural develop- ment programmes. These are initiated, implemented and monitored by various district working groups.

The Home Affairs Department (formerly the City and New Territories Adminis- tration), by virtue of its close contacts with rural residents and groups, knowledge of local needs and well-established consultation mechanism, assumed control for the planning, management and implementation of minor rural improvement schemes. More local participation will also be promoted.

  Major improvement works, such as river-training works, continued to be controlled by the Territory Development Department through either agent departments or consultants. The two-pronged, multi-tiered approach is expected to bring about progress in real terms both at the local and regional levels.

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Planning Studies

     During the year, the Planning Department worked on several major reclamation and development projects, notably the Central and Wan Chai, West Kowloon and Green Island reclamations. Studies were completed on shopping habits; population in the new towns and rural areas; amortisation of non-conforming existing uses; and layout plans for the Tin Shui Wai Reserve Zone.

      Studies are being undertaken on site design parameters for the West Kowloon Reclamation; the provision of industrial premises and development of planning guidelines and design parameters for new industrial areas and business parks; visitors and tourism in Hong Kong; case studies arising from the study on restructuring of obsolete industrial areas; ecological value of fish ponds in Deep Bay Area; leisure habits/recreation preferences; office decentralisation and the formulation of an Office Land Development Strategy; military sites in the New Territories for residential development; assessment of redevelopment potential in the metro areas; and future use of Tsing Yi Town Lot 46 R. P. and possible foreshore reclamation at Tsing Yi power station site. Other planning studies relating to the Territorial Development Strategy and the Sub-regional Development Strategies were also conducted during the year.

Building Development

The Private Sector

     Private building development underwent another year of consolidation in 1995. There were, however, some signs of picking up. Building plan submissions rose from 14 428 in 1994 to 14 899 in 1995 and 1 089 buildings with a total floor area of 4.4 million square metres were completed at a cost of $29,550 million, compared with 1 273 buildings with a total floor area of three million square metres built at a cost of $26,176 million in 1994.

      Rejuvenation of built-up areas continued in two ways: through redevelopment of old buildings and through major repair of structural elements and renewal of services and facilities in buildings. Some points were noted from these processes: demolition of old hotels to make way for office buildings; conversion of industrial buildings to be interchangeably used for offices and the improving attitudes of building owners towards preventive maintenance and repair.

      Better safety assurance was a particular focus in 1995. Legislation was enacted to ban hand-dug caissons to protect the lives and health of workers and to promote industrial safety. Codes for building designs and practice notes on many practical aspects were revised.

In the wake of building collapses in August and September 1994, a thorough review of the Buildings Ordinance was conducted. This has resulted in the introduction into the Legislative Council of the Buildings (Amendment) (No. 3) Bill 1995 which, among other things, aims to set higher standards for site supervision and building safety and to provide a statutory framework for architects, engineers, surveyors and contractors to regulate themselves. There has been much public debate on some of the proposals. Procedures for demolition works were tightened up. A consultancy was com- missioned to prepare a code of practice for the safe demolition of buildings. A special task force was set up in the Buildings Department to monitor safety in building and

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demolition sites. A policy for more rigorous prosecution of offenders of the Buildings Ordinance was adopted.

  For the first time, regulations were made to promote energy conservation: all commercial and hotel buildings may not exceed overall thermal transfer values calculated in accordance with a code of practice. Work was in hand to revise regulations and the design manual to improve the standards of buildings in terms of access facilities for people with disabilities. In addition to locomotory disability, consideration was also given to people with sensory disabilities.

  The programme, initiated by the Buildings Department in 1989, for the planned survey of buildings substantially completed inspection of 16 700 buildings on the current target list. Need for remedial works was assessed. This resulted in the issue of 407 statutory orders to require the demolition or repair of buildings. To ascertain more reliably the patterns and trends of steel corrosion and material deterioration in reinforced concrete buildings, the Buildings Department would commission a study of buildings built between 1959 and 1980: this is similar to an earlier study on buildings of 1946-1958. The results of these studies will help to formulate strategies for keeping buildings safe.

  Several major operations to clear illegal rooftop structures attracted considerable public attention and discussion on government policies for controlling unauthorised building works and rehousing dispossessed occupants from illegal rooftop structures. The government's pragmatic approach has enabled it to protect public safety and contain the problem of unauthorised building works. During the year, 10 872 advisory letters followed by 3 830 orders were served to require the rectification or removal of unauthorised building works and 68 offenders were prosecuted.

The Public Sector

The Architectural Services Department is a large organisation which provides planning and technical advice on building-related matters to all government departments, financial control and project management of public building develop- ments under the Public Works Programme, and for subvented building projects financed by the government. It is also responsible for professional design services for the government, Hospital Authority, Urban Council, Regional Council and British Forces in Hong Kong; and provides maintenance services for buildings owned or occupied by these bodies.

  During 1994-95, 275 projects valued at $36 billion were under design or construction. In addition, 507 projects valued at $15.6 billion were monitored by the department. The actual expenditure on building projects undertaken or monitored by the department totalled $5.9 billion, with a further $2 billion being spent on routine maintenance and minor alteration works.

  A centralised government godown at Chai Wan will be completed in 1996. This will replace the existing Government Supplies Department accommodation in North Point and Cheung Sha Wan and house several government departments currently in leased premises. A new joint-user office building in Java Road, which will accommodate the new Government Supplies Department's Headquarters, is being planned and is due for completion by the end of 1997. A purpose-built Public Records Office at Kwun Tong is also planned to start in early 1996 and be completed by mid-1997.

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      Construction is nearly complete on several projects in support of the new airport. These comprise radar and telecommunication stations on hill-tops and island sites around Chek Lap Kok. On Chek Lap Kok itself, the construction of the Air Traffic Control Complex and Air Traffic Control Tower, airport police station, sub- divisional fire station and Government Flying Service base is on track. Work on the air mail centre is due to start in 1996.

      Major medical projects started during the year include the specialist out-patient clinic at the Prince of Wales Hospital, the Hospital Authority Building, the Military Hospital at Gun Club Hill, the specialist out-patient clinic at Queen Elizabeth Hospital, the Tai Po Infirmary and Convalescent Hospital, and refurbishments and improvements to the Kwong Wah Hospital and the Princess Margaret Hospital, all of which are expected to be completed in 1997. Projects due for completion in 1996 include the Ha Kwai Chung Polyclinic, plus refurbishments and improvements to the Queen Elizabeth Hospital, and redevelopments of the Castle Peak Hospital and the Jockey Club Institute of Radiology at Queen Elizabeth Hospital. Projects completed during 1995 include the Queen Mary Hospital extension and improvement, the extension block at Princess Margaret Hospital, the Wong Chuk Hang Complex for the elderly, and major improvement works at the Prince of Wales Hospital, the Buddhist Hospital, the Kowloon Hospital and the Hong Kong Eye Hospital.

Six primary and four secondary schools were completed in 1995 under the School Building Programme. One prevocational school and one secondary technical school were also completed. Construction started on nine primary schools, eight secondary schools, one prevocational school and two special schools.

Several Urban Council projects were completed, including Fung Tak Road Park; the Chinese garden at the former Kowloon Walled City; and the new jaguar enclosure at the Hong Kong Zoological and Botanical Gardens.

Regional Council projects completed during the year included district open spaces at Tai Po, Tseung Kwan O and Sha Tin, the first phase of the conversion of the water sterilisation systems to ozone at several swimming pools, and a public toilet to serve the increasing number of visitors to the Po Lin Monastery at Ngong Ping on Lantau. Work on the Regional Council Heritage Museum, at Sha Tin, should begin early in 1996.

Projects completed for the disciplined services included the Fire Services married quarters at Tseung Kwan O and the new Police Headquarters Complex Phase II. Projects under construction included Causeway Bay Divisional Fire Station, Tung Chung Police Station and quarters at Wong Tai Sin, Ngau Chi Wan, Chai Wan and Pik Uk.

      Planning for various military reprovisioning projects continued during the year. These included the construction of a naval base on the south shore of Stonecutters Island, a military hospital in the Gun Club Hill Barracks, a military warehouse in Shek Kong and a joint movement unit at the new airport at Chek Lap Kok. Construction of a government dockyard on the north shore of Stonecutters Island was completed in 1995.

Project management services offered to subsidised projects included the permanent campus of the Open Learning Institute in Ho Man Tin, construction of which was completed in 1995. Vetting and advisory services on building developments, repairs and maintenance continued to be provided to other departments and private

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 organisations including the seven universities, the Hospital Authority, the Hong Kong Institute of Education and social welfare agencies.

The department also gave advice on facilities to be provided to the government by private developers in connection with land grant arrangements. These included office accommodation, transport interchanges and neighbourhood social welfare facilities. Maintenance and minor improvement works are the main tasks of the department's Property Services Branch which is responsible for a portfolio of about 7 000 buildings and facilities. The branch has a full programme of refurbishment works at the older properties in government use, and also tackles the fitting-out of new accommodation. The branch's Antiquities Group specialises in the restoration and conservation of historical listed buildings and gazetted monuments throughout Hong Kong. Its work continues to attract media and public interest and to attract awards for the quality of its work. Among other projects, it is developing a new Heritage Trail at Kam Tin. Protection of the external environment and the provision of a healthy and pleasant internal environment are among the most important facets of the department's design work. Special working groups have conducted investigations and implemented measures in areas of indoor air quality (IAQ), energy conservation, environmentally friendly refrigerants, improved standards of thermal insulation materials for air- conditioning installations and better water sterilisation for swimming pools.

  More efficient air-filters are being used and air-duct cleaning facilities are being provided in government buildings. The department is monitoring the regulations and requirements on IAQ in other developed countries to ensure that the latest prac- tices are followed. It also assists the Environmental Protection Department in the consultancy study on IAQ.

The department constantly promulgates energy-efficient designs. The "Energy Conservation in Building" booklet has been re-issued, incorporating up-to-date energy conservation measures. The department ceased using ozone-depleting refrigerants for air-conditioning installations and refrigerants with zero ozone- depleting potential danger are being introduced under the programme. The chlorine gas sterilisation system for all existing Urban Council and Regional Council swimming pools is being replaced by an ozone sterilisation system which eliminates the potential problems and hazards associated with the use of chlorine gas and thus enhances the pools' amenity value.

Land Administration

The Lands Administration Office of the Lands Department, which consists of a headquarters and 14 District Lands Offices, administers land throughout the territory. Its main functions are to acquire land and make land available for the government's development programmes; to dispose of land in accordance with a programme approved by the Sino-British Land Commission; to manage all unallocated government land; and to ensure the use of private land complies with its lease conditions. Land usage statistics are included in the appendices.

Land Acquisition

When private property is needed in the public interest, which in most cases is for the implementation of public works projects, and cannot be acquired by negotiation, the use of compulsory powers becomes necessary. Property may then be acquired under

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ordinances that provide for payment of compensation, based on the value of the property, and for business loss, where appropriate, at the date of acquisition. If agreement cannot be reached on the amount payable, either party can refer the claim to the Lands Tribunal for adjudication. Apart from statutory compensation, a system of ex-gratia payments also applies. Additionally, an ex-gratia Home Purchase Allowance is normally paid upon resumption of domestic units within the urban area. About 1 012 000 square metres of private land were acquired in the New Territories during 1995 to carry out various public works projects. The total land acquisition costs amounted to about $3,106.85 million. The major projects included work at Tung Chung on North Lantau and around Yuen Long and North Districts.

       In the urban areas of Hong Kong Island and Kowloon, about $116.5 million was paid in compensation for land and buildings acquired during the year for public works, either under compulsory powers or by agreement. These projects included the open space developments in Sai Ying Pun, Wan Chai, Central, Yau Ma Tei and Tai Hom, and road schemes such as the Smithfield Extension and Lung Cheung Road- Ching Cheung Road Improvement.

The Lands Administration Office was also very much involved in the resumption of land for implementation of urban renewal schemes carried out by the Land Development Corporation and the Hong Kong Housing Society. Private streets continued to be resumed to facilitate their repair and maintenance by the government.

Land Disposal

All land in Hong Kong is held by the government, which sells or grants leasehold interests. Such grants and leases are made in accordance with the terms set out in Annex III to the Sino-British Joint Declaration on the Question of Hong Kong. The new land to be granted each year is not to exceed 50 hectares or such other area as may be agreed by the Land Commission, excluding land granted to the Hong Kong Housing Authority for public rental housing.

The land disposal limit for 1995-96 is 204.93 hectares. This includes land for airport railway property developments at Kowloon and Tsing Yi stations, and the Home Ownership Scheme and Sandwich Class Housing Scheme. Premium income obtained from land transactions is shared equally, after deduction of the average cost of land production, between the Hong Kong Government and the future Hong Kong Special Administrative Region Government.

Land grants and leases are normally made for terms expiring not later than June 30, 2047. They are made at premium and a nominal rental until June 30, 1997, after which an annual rent equivalent to three per cent of the property's rateable value will apply.

A land sales programme is issued at the beginning of each financial year and updated regularly, showing the details of public auctions and tenders normally held each month. Although most government land available for private sector development is sold by public auction or tender, land is also made available at nominal premium to the Hong Kong Housing Authority for its public rental estates and Home Ownership Scheme, and to non-profit-making charitable, medical and educational institutions which operate schools, hospitals, and social welfare and other community services.

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  Four sites with a total area of 13.62 hectares, were tendered under the Private Sector Participation Scheme in 1995. Sites granted to the Housing Authority for the development of Home Ownership Scheme projects included two sites comprising 11.84 hectares in Tin Shui Wai, Yuen Long, five sites comprising 2.75 hectares in Kowloon East and a 1.68-hectare site in Fanling.

  Land for the construction of about 3 400 flats was granted in 1995-96 to the Hong Kong Housing Society for an assisted housing scheme for Hong Kong's 'sandwich class' (those families not eligible for existing public housing assistance but who are unable to afford private sector flats). This was the third year in which land was granted to the Society for the scheme.

  Major land transactions included the sale by auction of a commercial site in the Tamar Basin, Central (IL 8822, 0.348 hectare), for $3.351 billion; a 12.5-hectare site in Tai Po for a new campus for the Hong Kong Institute of Education and a five-hectare extension of the Third Industrial Estate at Tseung Kwan O.

Land Registration

Hong Kong operates a deeds registration system under the Land Registration Ordinance. The Land Registry is responsible for registering all documents affecting land. The Land Registry comprises the Urban Land Registry and eight New Territories Land Registries.

  A land document is registered by delivering it to the appropriate land registry with a form containing the essential particulars of the document and the prescribed fee. These particulars are then entered into a register for the relevant piece of land or property.

  Each land register provides a complete picture of all transactions affecting a property, from the grant of the government lease. The registers, memorials and related land documents are available for search by members of the public at the respective land registries on payment of a small fee. A purchaser or mortgagee will, therefore, be able to check and satisfy himself from the land register as to the nature of the title he is intending to purchase or accept by way of security. An on-line computer search facility called the Direct Access Service (DAS) is also available. Subscribers to the DAS, mainly solicitors and other professional firms, can have direct access to the computerised registers and can place orders for copies of land records from computer terminals in their own offices without calling at the Land Registry.

  All land registers in the Urban Land Registry are computerised. The land registers in the New Territories, presently in book form, are being computerised. The project is expected to be completed in early 1997.

  All land documents presented for registration in the Urban Land Registry are microfilmed. Land documents kept by the New Territories Land Registries are still in paper form. The Land Registry is setting up a Document Imaging System (DIS) to convert land documents into electronic images which will be stored on optical discs. The imaged documents can be speedily retrieved and transmitted electronically through the DAS or other means. The DIS is scheduled to commence operation in mid-1996. The conversion of land documents will take 18 months.

  The Land Registration Ordinance provides that all land documents registered under it shall have priority according to their respective dates of registration. If a

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document is registered within one month of execution, priority shall relate to the date of execution of the document. Registration is essential to the protection of a land title but does not guarantee it. A Land Titles Bill was introduced into the Legislative Council in November 1994 to replace the existing deeds registration system with one of title registration which will provide certainty of title to property, protect property owners and purchasers, and simplify title-checking procedures. The Legislative Council decided to curtail examination of the Bill in the legislative session which ended in July 1995. The Administration is considering re-introduction of the Bill.

Land Registration statistics are at Appendix 38.

Government Conveyancing

The Legal Advisory and Conveyancing Office of the Lands Department provides professional legal services to the government for all government land trans- actions and associated matters. It is responsible for the issue, renewal, variation and termination of government leases as well as the drafting and completion of conditions of sale, grants and exchanges of government land, the apportionment of government rents and premia, and the recovery of outstanding rents. It 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, the purchase and sale of government accommodation in private developments, mortgages to secure interest-free loans to private schools, the purchase of properties for government staff quarters and group housing schemes for the elderly. It is also responsible for the processing of consent applications which are governed by the rules of the Land Authority' Consent Scheme. During the year, nine applications involving 4 300 residential units in the urban areas were approved and in the New Territories, 25 applications involving 14 076 residential units were approved.

Survey and Mapping

The Survey and Mapping Office of the Lands Department is responsible for defining and recording land boundaries of all existing and new land developments, providing and maintaining the territory-wide survey control networks, producing maps of the territory in various scales for land administration, engineering and legal purposes and managing a computerised land information system.

Survey control networks covering the whole territory have been established and maintained by the office to provide the necessary horizontal and vertical reference points. Cadastral surveying is one of the most important functions of the Survey and Mapping Office. It provides survey services to support all government land transactions by defining and setting out boundary corners and marking out the limit of all land of sale, grant/regrant or other methods of disposal. The office also maintains a comprehensive record of all leasehold and government land boundaries in the territory. The record is being digitised into the computerised land information system.

      The office's mapping coverage of Hong Kong is extensive. The series of maps serving as the foundation of all other mapping is the large-scale (1:1 000) basic topographic series (3 000 sheets). Conversion of this basic series into digital form is completed. Smaller scale maps include the monochrome map series at 1:5 000 and the coloured map series of scales ranging from 1:20 000 to 1:300 000. All topographic

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maps, except the 1:1 000 basic map series, are bilingual. Guide book, tourist guide and leisure maps in the form of the Countryside Series produced by the Office are very popular.

  The Survey and Mapping Office provides extensive Cartographic services for many government departments. These include the production of coloured geological maps, thematic maps, weather forecasting plans, aeronautical charts, electoral boundary maps and pollution control maps. Plans are also prepared for legal purposes, land disposals, street and place naming, government gazette notices, setting out of private land parcels, and for land boundary identification.

  The computerised Land Information Systems being implemented in the District Survey Offices contain all the necessary basic mapping data and the land boundary or cadastral survey data. The Land Information Centre of the Survey and Mapping Office has completed the digitisation of the basic 1:1 000 survey sheets. The conversion work of the land boundary record is proceeding district by district, enabling the phased implementation of the district systems. The main benefits of using the systems are that many jobs can now be performed in a shorter time and the quality of the products is also improved because of the timeliness of the land information and the wide choice of plan sizes, scales, and colours available. As with the hard copy maps, digital maps at 1:1 000 and 1:20 000 are now on sale at the Land Information Centre. Digital maps are widely used by public utility companies, engineering consultants and construction firms.

  The Photogrammetric Survey Section provides aerial photographs and photo- grammetric mapping as well as digital data for engineering design work, volumetric calculations for quarry and controlled tipping operations, environmental studies and town planning work. The Air Survey Unit is also on call for record photography after storms, landslides and aircraft crashes.

  The Land Survey Ordinance was enacted in May 1995 and will be fully imple- mented by January 1996. It controls the quality of land division surveys which can be done only by Authorised Land Surveyors.

Drainage Services

The Drainage Services Department is responsible for planning, designing, con- structing, operating and maintaining the sewerage, sewage treatment and stormwater drainage infrastructures.

Treatment and Disposal of Foul Water

The treatment and disposal of foul water, including domestic sewage and trade and industrial effluent, are based on standards, strategies and programmes drawn up by the Environmental Protection Department. Planning, design and construction of the associated projects are carried out by the Drainage Services Department.

  Foul water disposal projects are broadly divided into three categories: sewerage or sewage treatment projects which were in the public works programme before the new strategy to combat water pollution evolved; 'sewerage masterplan schemes' which are 16 territory-wide sewerage rehabilitation and improvement projects; and the 'Strategic Sewage Disposal Scheme' under the new strategy. The latter is a massive project to collect, treat and discharge all sewage from Hong Kong Island, Kowloon, Tsuen Wan, Kwai Chung and Tseung Kwan O into carefully selected waters.

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Projects under these three categories, valued at some $9 billion, are now under construction by the Drainage Services Department, and projects worth a further $3 billion are at various stages of development.

The largest existing project in hand in 1995 was the Tolo Harbour Effluent Export Scheme. This will export sewage effluent from the Sha Tin and Tai Po sewage treatment works into Victoria Harbour and help to prevent the occurrence of red tides in Tolo Harbour. Stage I of the works between Sha Tin and Victoria Harbour was completed in April 1995 and included the construction of a sewer tunnel, 3.2 metres in diameter and 7.5 kilometres in length, under Tsz Wan Shan. Stage II of the works between Tai Po and Sha Tin was completed in August 1995 and included the construction of a one-metre diameter, six-kilometre long, steel rising main buried under the seabed of Tolo Harbour.

Another major project in this category completed in 1995 was a sewage screening plant to serve a population of 700 000 and various industries in Tsuen Wan and Kwai Chung. This represents a major step in reducing pollution in the Western Harbour. Under the sewerage masterplan schemes, planning and design work was in hand to improve the sewage collection, treatment and disposal facilities in Tuen Mun; North District; Wan Chai East and North Point; Central, Western and Wan Chai West; Aberdeen, Ap Lei Chau and Pok Fu Lam; and the outlying islands. Construction work was in progress in the remainder of the sixteen sewerage masterplan schemes. In the North and South Kowloon masterplan area, contracts to clean and inspect sewers, and to build and refurbish sewers and pumping stations, were awarded in 1995.

       A contract to build new sewers identified in the North-West Kowloon masterplan was awarded in 1995. A consultancy to design and build the remaining sewers, together with the first stage of the stormwater drainage improvements in the same area, was also awarded in 1995.

In the area covered by the Tsuen Wan, Kwai Chung and Tsing Yi sewerage masterplan, work continued on a sewer contract awarded in late 1994 and two further contracts were awarded in 1995.

      Under the Yuen Long and Kam Tin sewerage masterplan, construction works started in 1995 and includes the laying of 2.8 kilometres of rising mains from Yuen Long to Ha Tsuen, some of which will be installed by trenchless methods to avoid inconveniencing the public.

       Construction work continued in the Southern District of Hong Kong Island. In Stanley, the sewage treatment plant, built in an underground cavern, was completed in 1995. Other sewerage rehabilitation and improvement works in the Stanley and Tai Tam areas were completed in late 1994. The sewage treatment plant treats and disinfects the sewage from these areas before their discharge to the sea. The works in Repulse Bay and Shek O were expected to be completed towards the end of 1995 and in mid-1996, respectively. Besides improving sewerage facilities, this project will protect the popular bathing beaches in this scenic area.

       The construction of new sewers in East Kowloon continued. A contract to extend sewers already completed began in June 1995 and is expected to be completed in April 1997. The design for the stage II sewerage works which are situated in the San Po Kong and Kwun Tong Industrial areas is in progress.

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  Implementation of the $5.32 billion Principal Collection and Treatment System of the massive Strategic Sewage Disposal Scheme was in full swing in 1995. All 15 works contracts had been awarded. Construction of 26 kilometres of deep sewage tunnels and the chemically-enhanced primary sewage treatment works on Stonecutters Island, which will discharge the sewage into the Western Harbour, were progressing on schedule for completion in mid-1997.

  The Director of Drainage Services is also the General Manager of the new Sewage Services Trading Fund, established on March 11, 1994, with a $6.8 billion injection of government capital for the sewerage infrastructure programme. Its initial objective is to bring about early improvements to the water quality around Victoria Harbour through the high-priority implementation of some of the above-mentioned projects. With the introduction of sewage charges on April 1, 1995, the trading fund began receiving revenue directly from the public to fund the operating costs of sewage services.

Stormwater Drainage and Flood Control

 The North and North-West districts of the New Territories are particularly vulnerable to flooding. The main causes leading to the aggravation of flooding in the New Territories have been the urbanisation of the rural areas and uncontrolled developments on the floodplains of the main rivers. To assist planners, the department has developed basin management plans for the five flood-prone basins in the North and North-West New Territories. They have been used to help prepare outline zoning plans and development permission area plans. Furthermore, proponents of infrastructural projects with significant drainage impacts are also required to carry out drainage impact assessments so the effect can be limited to an acceptable standard.

  Seven drainage masterplan studies will be carried out in the coming five years. They will address the secondary and local drainage problems for the five flood-prone basins in the North and North-West New Territories. In addition, ageing storm- water drainage systems in the urban areas, will be subject to a comprehensive and systematic review.

The government continued to implement schemes aimed at alleviating flooding in the North and North-West New Territories. Projects valued at some $7 billion are at various stages of planning, design and construction.

Construction work on the improvement of the Kam Tin River and the Shan Pui River in Yuen Long progressed satisfactorily. The works upstream commenced in late 1995. Design work was in progress to build a further 24 kilometres of drainage channels in Kam Tin, Ngau Tam Mei and San Tin.

As an associated measure, 15 flood water pumping systems have been constructed and are in operation to mitigate the impact of flooding in low-lying villages in the New Territories. About a dozen more are under planning and design.

  The government has agreed to entrust the construction of the first stage of the three-stage Shenzhen River Regulation project to the Shenzhen Municipal Govern- ment. First-stage work, which comprises straightening the bends at Lok Ma Chau and Liu Pok, started in May 1995 and are due for completion in mid-1997. The construction and management cost, totalling about $300 million, will be shared equally between the two sides. Both sides have also begun the preparatory works and

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statutory procedures to make way for the implementation of the Stage II works. The completed project will provide a higher flood protection level to the communities along the river.

       The Land Drainage Ordinance is an essential component of the strategy to alleviate flooding in the New Territories. It authorises government staff to gain access to, inspect, clear and maintain main watercourses running through or bordering on private land, in a further attempt to reduce the risk of flooding. It also empowers the government to control the erection of structures within main watercourses, to ensure their water-carrying capacity is not undermined. The ordinance is now effective in the Yuen Long, Kam Tin, Ngau Tam Mei and Indus drainage basins. It is planned to implement the ordinance in San Tin, Ganges and Tin Shui Wai drainage basins by the end of 1996.

Operation and Maintenance of the Drainage System

The volume of sewage treated by the department has increased from 385 million cubic metres in 1989 to 670 million cubic metres in 1995, of which 146 million cubic metres receive full biological treatment. This is handled by 80 sewage pumping stations and 66 sewage treatment plants throughout the territory.

*

      Since the establishment of the department, the approach to the operation and maintenance of the public drainage system has progressively shifted from crisis management to preventive maintenance. The efficient maintenance of the drainage infrastructure is essential to ensure the proper and effective disposal of foul and storm water, and to prevent blockages and leaks which also cause bad odours, flooding or other nuisances to the public.

      · The department maintains more than 3 000 kilometres of watercourses, drains and sewers. Some 50 000 clearance exercises are carried out annually to remove more than 300 000 cubic metres of silt from drains and watercourses, to keep them free-flowing and their pollution level low. A 24-hour hotline service operates to receive complaints on blocked drains and sewers.

      The department also operates an Emergency Storm Damage Organisation. It is run by staff on a rotational basis and is supported by the department's own labour force and contractors. Its operation ensures that emergency situations are dealt with efficiently.

      Recurrent expenditure on operations and maintenance in 1994-95 was $644 million. This sum is increasing steadily.

Geotechnical Engineering

The Geotechnical Engineering Office (GEO) of the Civil Engineering Department was established after the landslip disasters of the 1970s. The control of geotechnical aspects of construction works, to reduce landship risk by geotechnical checking, continues to be its foremost duty in terms of staff deployed. Checks were made on 9 314 design proposals during the year.

      Works to upgrade unsatisfactory old man-made slopes are continuing at an increased rate. Five consultancies are in place to accelerate the Landslip Preventive Measures (LPM) Programme to complete the necessary upgrading works for slopes in the 1977-78 Slope Catalogue by the year 2000. During 1995, a total of $175 million was spent on the LPM programme. Landship preventive works were completed on 60

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government slopes and statutory notices were recommended for 77 private slopes. Preliminary studies were carried out on 1 140 slopes, and detailed geotechnical investigations were completed on 109. Along with slopes in the old catalogue, a new catalogue is being prepared.

  A public works project on the 'Systematic Identification and Registration of Slopes in the Territory' (SIRST), which began in 1994, will lead to a computerised Slope Information System containing important information on sizeable man-made slopes in the territory. Preparatory work for SIRST, which began in 1992, involves territory- wide systematic aerial photograph interpretation and field checks to identify additional old fill slopes, cut slopes and retaining walls that have not previously been registered.

  The GEO enhanced its public education campaign to increase awareness of the importance of slope maintenance and the responsibility of land owners to maintain their slopes. An animated 30-second TV announcement has been produced in collaboration with the Information Services Department to convey more dramatically the message of slope maintenance. New posters and leaflets have been prepared and widely disseminated to promote the importance of slope maintenance. A 'Guide to Slope Maintenance' and a bi-lingual 'Layman's Guide to Slope Maintenance' were published in September 1995.

  The GEO has begun to implement the recommendations of the Slope Safety Review conducted in 1994. These included extending the scope of the LPM upgraded programme to cover selected roadside slopes; developing proposals for improved statutory geotechnical control of private slopes and developments; introducing into the LPM process a supplementary procedure involving a more integrated slope stability assessment; and assisting the Lands Department in carrying out the Systematic Identification of Maintenance Responsibility for all registered slopes (SIMAR).

  The GEO continues to be concerned about the landslip hazard to squatters on hillsides. The squatter clearance programme and work to improve village conditions over the last decade have significantly reduced such landslip hazards. During 1995, inspections of about 23 squatter villages in the New Territories were completed. Recommendations were made for the clearance of more than 180 squatter huts and rehousing for their occupants. Since this work began in the early 1980s, some 71 500 squatters have been rehoused away from steep hillsides because of concerns about landslips during heavy rainfall.

  The GEO operates the Landslip Warning System in conjunction with the Royal Observatory and provides a 24-hour landslip emergency service throughout the year. Its staff attended to 302 reports of landslips to advise on immediate measures to reduce danger and, for public slopes, on permanent remedial measures as well.

  The Hong Kong Geological Survey published three 1:20 000 scale geological maps for Lantau and Cheung Chau, along with the remaining 1:5 000 scale detailed geological maps of north Lantau. A 1:100 000 scale map of the geology of Hong Kong and an explanatory document are being prepared. The computerised borehole data for Hong Kong is expanding, facilitated by the new requirement for contractors to submit ground investigation and laboratory testing records in a standardised, computer-readable format.

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      The extensive collection of historical and recent aerial photographs was supplemented by satellite data. These were used to monitor suspended sediment offshore and for studies of areas affected by landslips. Engineering geological studies are under way on slopes near Tung Chung new town, presently under construction in North Lantau.

      The GEO's Geotechnical Information Unit (GIU) houses the largest collection of geotechnical data in Hong Kong. It served more than 8 800 users during the year.

      Further major ground investigations were undertaken for main drainage channels in the New Territories and north-east Lantau development studies. In all, more than 240 land and marine ground investigations (including geophysical surveys) and over 120 laboratory test schedules were completed. Additional ground investigation and laboratory testing term contracts were let for the accelerated LPM Programme.

      The GEO manages the Public Works Central Laboratory at Kowloon Bay and seven Public Works Regional Laboratories in various parts of the territory. These laboratories are accredited under the Hong Kong Laboratory Accreditation Scheme (HOKLAS) to carry out specific tests on construction materials and to provide laboratory calibration services. More than 90 tests have been accredited. A new section of the laboratory has been set up to extend the services to cover rock mechanics testing.

      The GEO provides geotechnical advisory services to government departments. In 1995, it undertook detailed geotechnical design for 120 capital works projects and provided advice on the geotechnical aspects for 160 projects.

Fill Management

The territory's fill resources are managed by the Fill Management Committee, whose secretariat is a division of the Geotechnical Engineering Office. The committee was set up in 1989 to make decisions on the reservation, allocation and efficient utilisation of fill resources for government and major private projects. It consists of representatives from a broad spectrum of government departments and policy branches involved in the development of the territory.

      From the beginning of 1990 up to the end of 1995, about 235 million cubic metres of marine fill and 150 million cubic metres of land-based fill had been used for reclamation projects. A further 375 million cubic metres of fill from both land and marine sources are needed for reclamations over the next 10 years. The committee will continue to identify suitable fill sources to meet project requirements, with considerable attention being focused on the supply of sand from waters outside Hong Kong.

      A second role of the committee is to plan the marine disposal of dredged mud, including contaminated mud, and to allocate disposal capacity at the gazetted marine spoil grounds. During the year under review, approximately 30 million cubic metres of uncontaminated mud and 2.2 million cubic metres of contaminated mud were disposed of under licences issued by the Environmental Protection Department. The uncontaminated mud was dumped in submarine spoil grounds and in worked-out marine borrow pits, and the contaminated mud was placed in disposal pits especially designed to ensure containment.

      In connection with the management of the territory's fill resources and mud disposal capacity, the GEO, on behalf of the Fill Management Committee, continues

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to undertake a series of environmental studies to examine the effects of the dredging and dumping activities, and to investigate possible ways to avoid or minimise adverse effects on the marine environment. Phase VI of the Fill Management Study began in July 1995 at an estimated cost of $74.2 million over the next two years.

Hydraulic Studies

 Large reclamation projects can have significant effects on the flow of water, sediment transport and wave activity in the harbour. Any adverse effects could be very costly or difficult to remedy. To avoid these problems, the Civil Engineering Department employs sophisticated hydraulic models to analyse the likely effects of proposed schemes and check that they are within acceptable limits. The facilities used include computer-based mathematical models and a large physical model housed in the Harbour Hydraulics Laboratory at Tuen Mun.

  The assessments provided by these models are used for planning reclamation layouts, the design of marine structures, navigation studies, and the planning of future maintenance dredging requirements. Recently, hydraulic model studies have been carried out for the Lantau Port Development project, the Central and Wan Chai Reclamation, the Green Island Reclamation, and the West Kowloon Reclamation. These analyses showed that the impact of these reclamations would be within acceptable limits. With an increasing awareness of environmental disturbance, the hydraulic models will continue to form an essential tool in the planning and design of future reclamation and marine projects.

Water Supplies

Water from China

 China is the major single source of water supply for Hong Kong, and all future increases in demand will be met from this source. This arrangement dates from 1960, when a scheme was formulated for receiving a piped supply of 22.7 million cubic metres a year. The supply from China stipulated under the agreements was increased to 690 million cubic metres a year in 1995. This will continue to increase in stages to 840 million cubic metres per annum by the year 2000. Extra purchases may be made in years of low rainfall in Hong Kong.

  Following the agreement reached with the Chinese authorities in December 1989 to increase the China water supply up to a maximum of 1 100 million cubic metres per year to cope with anticipated demands beyond 1994 and into the early 2000s, a conceptual plan was developed for the necessary works to receive and distribute the additional supply. The works are being implemented in stages, with Stage I substantially completed and operating.

Water Storage and Consumption

 Full supply was maintained throughout the year. At the end of 1995, there were 497 million cubic metres of water in storage, compared with 423 million cubic metres at the end of 1994. Hong Kong's two largest reservoirs, High Island and Plover Cove, held 436 million cubic metres. Rainfall for the year was 2 754 millimetres, compared with the average of 2 214 millimetres.

A peak daily consumption of 2.78 million cubic metres was recorded on June 26, compared with the 1994 peak of 2.73 million cubic metres. The average daily

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ņ

consumption throughout the year was 2.52 million cubic metres, a decrease of 0.4 per cent compared with the 1994 average of 2.53 million cubic metres. The consumption of potable water totalled 919 million cubic metres, compared with 923 million cubic metres in 1994. In addition, 159 million cubic metres of sea water was supplied for flushing, compared with 142 million cubic metres in 1994.

Water Works

     Major construction work completed during the year included the Au Tau Treatment Works Stage II, Sham Tseng Treatment Works Stage I; and extension of the Sheung Shui Treatment Works and Yau Kom Tau Treatment Works. The Sham Tseng project brought fully-treated water to the area for the first time.

       Construction work for the Ma On Shan Treatment Works and several service reservoirs was in progress. Planning work continued for increased capacity to meet the demand from new developments in Central and Western on Hong Kong Island, Sham Tseng, Kwun Tong, Yau Tong, Tsing Yi, Yuen Long, Tin Shui Wai, the northwestern New Territories and Ma On Shan.

      Feasibility studies for two major treatment works at Tai Po and Ngau Tam Mei were completed and detailed design began. Detailed design for the major renovation of the sea water supply system for Central Kowloon was completed. Other major design work mainly concentrated on the provision of additional service reservoirs, pumping stations and water supply networks in Tai Po, Tseung Kwan O, Tsing Yi, Tuen Mun and the Western Mid-Levels, and the extension of water supply to the West Kowloon Reclamation.

Work on the permanent water supply system for the new airport at Chek Lap Kok and other developments in North Lantau associated with the Port and Airport Development Strategy was being implemented in stages. Stage I works to be commissioned by mid-1996 include submarine and land mains, a water treatment works, pumping stations, a service reservoir and an aqueduct between Siu Ho Wan and Silver Mine Bay. Other Stage I works to supply Port Development will be completed in 1998.

To eliminate the risks associated with chlorine storage, replacement of gas chlorination plants by on-site hypochlorite generation plants at sea water pumping stations continued. Hazard assessment on the chlorination installations of five minor treatment works was completed. Reprovisioning of Tai Lam Chung Prechlorination House was in progress.

Water Accounts and Customer Relations

The number of consumer accounts continued to rise at a rate of about two per cent and the consumer account base expanded to approximately 2.1 million accounts at the end of 1995. The Sewage Services Ordinance came into effect on April 1, 1995. For administrative convenience, sewage charges and water charges are combined into one single bill and the Water Supplies Department acts as an agent to collect general sewage charges on behalf of the Drainage Services Department.

      Computer systems were widely employed to provide efficient enquiry services; to handle applications for water supply and change of consumer particulars; and to issue demand notes for water and sewage charges, connection fees and water deposits.

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An Interactive Voice Response System was enhanced to incorporate new features of self-meter-reading and phone-call-for-form services.

  Efforts to promote the autopay service continued, and the number of consumer accounts using autopay for payment of water charges reached 281 000, or about 13 per cent of all consumers. The Payment-by-Phone service was also well received and the number of consumers registered to use this service reached 214 000 at the end of 1995, or about 10 per cent of all consumers.

  A new Customer Enquiry Centre was opened in Tuen Mun on July 28, 1995 to provide enquiry and other services to the residents in the northwestern New Territories. In May, the department announced its achievements against performance targets for the past year, and these showed improvements over those of the previous year in most areas. Most achievement rates were close to, or reached, 100 per cent. New enhanced performance targets were also publicised.

Electricity

The Hongkong Electric Company Limited (HEC) supplies Hong Kong Island and the neighbouring islands of Ap Lei Chau and Lamma; China Light and Power Company Limited (CLP) supplies the whole of Kowloon and the New Territories, including Lantau and several outlying islands. The supply to consumers is at 50Hz alternating current while the voltage is being upgraded to 220 volts single-phase and 380 volts three-phase from 200 and 346 volts, respectively.

  The two supply companies are investor-owned and do not operate on a franchise basis. The government monitors their financial arrangements through mutually- agreed scheme of control agreements. New agreements with CLP and HEC came into effect on October 1, 1993, and January 1, 1994, respectively. Both will last for 15 years. The agreements require each company to seek the approval of the government for certain aspects of their financing plans, including projected tariff levels.

  Electricity for HEC's supply areas is supplied from the Lamma Power Station. At the end of 1994, the total installed capacity at the Lamma Power Station was 2 605MW. A new 350MW unit was commissioned in late 1995. The government has also approved the installation by HEC of another 350MW unit at the Lamma Power Station in late 1997.

  HEC's transmission system operates at 275kV, 132kV and 66kV and distribution is effected mainly at 11kV and 380 volts. Apart from a small proportion of 132kV overhead transmission lines, all supplies are transmitted and distributed by under- ground or submarine cables.

  The Castle Peak Power Company Limited (CAPCO), which is 60 per cent owned by Exxon Energy Limited and 40 per cent by CLP, supplies electricity to CLP from its Castle Peak 'A' (1 752MW), Castle Peak 'B' (2 708MW) and Penny's Bay (300MW) power stations and two gas turbines at Tsing Yi (150MW), with the total installed capacity being 4910MW. Tsing Yi 'A' and 'B' Power Stations (1 520MW) were decommissioned in stages over 1994 and 1995.

The government has approved CLP's installation of four 625MW blocks of additional generating capacity, the first two of which will be installed in a new power station at Black Point, Tuen Mun, in 1996 and 1997. The other two 625MW blocks will be split into four 312.5MW units and commissioned in 1998, 1999, 2000 and

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2001. All will be fuelled by natural gas piped from the Yacheng 13-1 gas field off Hainan Island in China.

       The associated transmission and distribution systems are wholly owned by CLP. Its transmission system operates at 400kV, 132kV and 66kV, and distribution is effected mainly at 33kV, 11kV and 380 volts. CLP has 182 primary and 8 398 secondary sub- stations in its transmission and distribution network.

An extra-high-voltage transmission system at 400kV was completed in 1986 to transmit power from the Castle Peak Stations to the various load centres. Currently it comprises a double-circuit overhead line system encircling the New Territories, underground cables and nine extra-high-voltage sub-stations. Construction and planning work for the addition of new extra-high-voltage sub-stations and for reinforcement of the existing system is in progress.

       The transmission systems of CLP and HEC are interconnected by a cross-harbour line. This provides emergency back-up and achieves cost savings to consumers through economic energy transfers between the two systems and a reduction in the amount of generating capacity that needs to be kept as spinning reserve against the tripping of other units. The interconnection, commissioned in 1981, currently has a capacity of 720MVA.

CLP's system is also interconnected with that of the Guangdong Electric Power Holding Company (formerly named the Guangdong General Power Company) of China and electricity is exported to Guangdong Province. Such sales are made from existing reserve generating capacity and are governed by an agreement with the government, signed in March 1992, under which CLP's consumers receive priority of supply and 80 per cent of the profit from the sales.

       CLP has a contract with the China Merchants Steam Navigation Company Limited for the supply of electricity, for a 10-year period starting from late 1986, to the industrial zone of Shekou and the adjacent Chi Wan area, both in Guangdong. The arrangements, which afford Shekou a reliable electricity supply without subsidy from Hong Kong consumers, is illustrative of the close co-operation on energy matters which has developed on both sides of the border.

       In 1985, the Hong Kong Nuclear Investment Company (a wholly-owned subsidiary of CLP) and the Guangdong Nuclear Investment Company (wholly owned by the Chinese Ministry of Nuclear Industry) established the Guangdong Nuclear Power Joint Venture Company, to construct and operate a nuclear power station at Daya Bay in Guangdong. This comprises two 985MW pressurised water reactors which went into commercial operation in February and May 1994, respectively. CLP under- took to buy about 70 per cent of the station's power to meet part of the longer-term demand for electricity in its supply area.

CLP through its affiliated company, the Hong Kong Pumped Storage Development Company Limited, has bought the right to use 50 per cent of the capacity of the Guangzhou Pumped Storage Power Station, at Conghua. The total installed capacity of the current phase is 1 200MW. Off-peak electricity from the Castle Peak Stations and Guangdong Nuclear Power Station is used to pump water from a lower reservoir to an upper one. The water is allowed to flow downhill during the day to generate electricity to meet Hong Kong's peak demand.

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The Electricity Ordinance, enacted in 1990, provides, among other things, for the registration of electrical workers and contractors. The registration of electrical workers and contractors started in November 1990 and November 1991, respectively. To be eligible for registration, applicants must possess the necessary experience and qualifications. The Electricity Ordinance and its subsidiary regulations also require all electrical work to be undertaken or supervised only by registered contractors, and set out the standards for electrical wiring to which registered electrical contractors and workers have had to adhere from June 1992 onwards. At the end of December 1995, more than 55 500 qualified electrical workers and 8 500 qualified contractors had been registered.

The government plans to introduce statutory controls over electrical products. As a first step, legislation to ensure the sale of safe plugs and adaptors came into effect in early 1995. Comprehensive safety legislation covering all household electrical products is under preparation. In May 1990, the government decided that the electricity supply voltage in Hong Kong should be upgraded from 200 volts single phase or 346 volts three phase, to 200 volts single phase or 380 volts three phase. The voltage upgrading is being carried out in two phases. Phase I conversion, covering existing installation inside government buildings, started in August 1990 and was completed in November 1992. Phase II conversion, covering existing installations in buildings managed by the Housing Authority and those of the private sector, began in January 1993 and will be completed in 1997. Electricity statistics and sales figures are at Appendix 40.

Gas

Gas is widely used throughout the territory for domestic, commercial and industrial purposes. Two main types of fuel gas are available: Towngas, distributed by the Hong Kong and China Gas Company Limited (HKCG); and Liquefied Petroleum Gas (LPG), supplied by major oil companies based in Hong Kong: Shell, Mobil, Esso, Caltex, Concord Oil and China Resources. The constituents of LPG are butane and propane mixed in approximate proportions of 70 and 30 per cent respectively. Hong Kong has about 1.96 million gas customers. In 1995, Towngas accounted for 70 per cent of the total fuel gas sold in energy terms, and LPG for 30 per cent.

HKCG manufactures Towngas at two plants, both of which use naphtha as a feedstock. They currently have output capacities of 2.2 and 8.4 million cubic metres per day respectively.

Towngas is supplied for cooking and heating purposes through an integrated distribution system to about 1.11 million customers. The mains network extends throughout the territory's urban areas. New towns in the New Territories are supplied via an 80-kilometre high-pressure pipeline. Another 10 kilometres of high- pressure pipeline has been installed to supply the new development areas of Tin Shui Wai and Tuen Mun. A further 30 kilometres of high-pressure pipeline are under construction to supply Towngas to the new airport at Chek Lap Kok and to Tung Chung and other housing developments on Lantau Island.

Natural gas became available in Hong Kong at the end of 1995 exclusively for power generation at the Black Point and Castle Peak power stations. The gas is imported from the Yacheng 13-1 gas field off Hainan Island in China, via a 780- kilometre, high-pressure, submarine pipeline.

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LPG is imported into Hong Kong by sea. About 62 per cent of total sales is distributed to customers, via dealer networks, in portable cylinders. The rest is dis- tributed through piped gas systems from bulk LPG storage and vaporiser installations which are in, or near, the developments being supplied.

About 522 LPG distributors operate within the territory. Additionally, 23 LPG site operators manage 520 bulk storage installations under government-monitored arrangements. Altogether, there are 850 000 LPG customers.

Since 1982, the government has encouraged the installation of a piped gas supply in new buildings, to discourage growth in the use of gas cylinders in domestic dwellings. It also began a programme of encouraging the upgrading of sub-standard gas water heaters. The percentage of domestic dwellings now using cylinders fell to less than 32 per cent in 1995; and the number of upgraded gas water heaters amounts to some 79 500. Apart from suicide cases there were two fatalities arising from fuel gas incidents during 1995.

As further means of safeguarding the general public and gas consumers, the Gas Safety Ordinance was introduced on April 1, 1991. This ordinance and its subsidiary regulations constitute a comprehensive package of safety legislation covering all aspects of fuel gas importation, manufacture, storage, transport, supply and use of gas. The Director of Electrical and Mechanical Services was appointed as the Gas Authority and the Gas Safety Advisory Committee was established for the purpose of advising the authority upon all relevant matters. Since April 1, 1992, all gas supply companies, gas installers and contractors must be registered with Gas Authority in order to carry out their operations. In 1995, eight gas supply companies, 3 282 gas installers and 403 gas contractors were registered under the scheme.

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REGISTRATIONS of new private cars fell during the first half of 1995, but traffic congestion remains a concern. Hong Kong faces the challenge of persuading an increasingly affluent community to continue using public transport instead of buying private cars. Levels of private car ownership in Hong Kong are low compared with other places, and the potential for growth is enormous. Given the obvious geographical constraints on new road building, particularly in the urban area, unrestrained growth in car numbers and usage will inevitably lead to traffic gridlock.

Against this background, the Working Group on Measures to Address Traffic Congestion published its report in late 1994, as a basis for public consultation. It reaffirmed the government's commitment to continued substantial investment in transport infrastructure and to extending and improving public transport services. It also proposed measures aimed at tackling traffic congestion. Public consultation on the report ended on February 28, 1995. There was general public support for introducing electronic road pricing as an important measure to combat traffic congestion. A feasibility study will start in 1996.

The government decided not to increase the First Registration Tax or Annual Licence Fee on private cars, but to prepare for the implementation of such measures if the rate of growth in private car numbers again rises significantly beyond the acceptable level of two to three per cent a year. In addition, preparations would be made for the imposition of passage tax at the Eastern Harbour Crossing should this become necessary. Tax concessions would be withdrawn from company cars, which otherwise form an incentive to growth in the private car fleet. More traffic management measures would be introduced, for example, giving greater priority to buses in the use of road space and establishing stricter controls over goods vehicle loading and unloading. A nine-kilometre, bus-only lane has already been introduced in Tuen Mun Road during the morning peak hours.

A total of $30 billion will be spent on new roads up to the year 2000. These projects include improvements to Lung Cheung and Ching Cheung Roads, the Ting Kau Bridge, the Hung Hom Bypass and Princess Margaret Road Link, the Central-Wan Chai Bypass and Island Eastern Corridor Link, and road projects under the Airport Core Programme.

After the announcement of the Railway Development Strategy in December 1994, the Kowloon-Canton Railway Corporation (KCRC) was invited to submit a proposal for building the Western Corridor Railway from the border to West Kowloon. It is planned that this railway should include a freight line, a cross-border passenger service and a domestic passenger service for residents of the North-West

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New Territories. Similarly, the Mass Transit Railway Corporation (MTRC) has been invited to submit a proposal to extend its line to Tseung Kwan O New Town. The government is also considering a third priority railway project - extending the Kowloon-Canton Railway (KCR) from Hung Hom to Tsim Sha Tsui while building a new line from Ma On Shan to Tai Wai.

      The Transport Department is pressing ahead with plans to improve the capacity and safety of existing road networks. This includes the continued upgrading of area traffic control systems, introduction of traffic surveillance and information systems, and the implementation of more traffic management schemes. Stricter drink-driving legislation was brought into operation at the end of the year, backed by a publicity campaign aimed at persuading motorists not to drive after drinking alcohol. The installation of cameras at traffic-light-controlled junctions has deterred motorists who ignore the signals, and is being extended.

A franchise was awarded during the year to a private consortium for the construction and operation of the Route 3 (Country Park Section). This will be completed in mid-1998. Together with the Ting Kau Bridge, also under construction, it will provide a greatly improved access from the border to the urban area, including the container port.

      Work on constructing major transport links between the new airport at Chek Lap Kok and the urban area proceeded smoothly. An operator will be contracted to manage and maintain the Tsing Ma Control Area. This control area - a 17- kilometre highway system with four bridges, a tunnel and expressways linking the urban area and the new airport will be covered by a single traffic control and surveillance system.

      The China Motor Bus Company was granted a new three-year franchise from September 1, 1995, but 14 of its former routes have been allocated to Citybus Ltd. At the same time, amendments were made to the Public Bus Services Ordinance to give the government the necessary powers to deal with emergencies and maintain bus services should a franchised bus company cease to operate.

      The Hongkong & Yaumati Ferry Company Ltd will be permitted to undertake commercial development above its new piers in Central District as a means of generating funds to improve ferry services, to cover ferry operating losses and to limit ferry fare increases to the rate of inflation.

The Administrative Framework

The Transport Branch of the Government Secretariat, headed by the Secretary for Transport, is responsible for overall policy formulation, direction and co-ordination of internal transport matters. The Secretary is assisted by the Transport Advisory Committee, which advises the Governor in Council on major transport policies and issues. The committee has 15 appointed members, including the chairman and six government officials, and is supported by a Transport Complaints Unit, which received 13 847 complaint cases on traffic and transport matters in 1995. On local transport matters, the government is advised by the district boards, and their traffic and transport committees.

The Commissioner for Transport, as head of the Transport Department, is the authority for administering the Road Traffic Ordinance and legislation regulating public transport operations other than railways. His responsibilities cover strategic

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transport planning, road traffic management, government road tunnels, carparks and metered parking spaces, and the regulation of internal roads and waterborne public transport. The Commissioner for Transport is also the authority for the licensing of drivers and the registration, licensing and inspection of vehicles.

  While the police force is the principal agency for enforcing traffic legislation and prosecuting offenders, the Prosecutions Unit of the Transport Department handles prosecutions involving safety defects found on buses, disqualifications under the Driving Offence Points System, and breaches of vehicle safety regulations and government tunnel regulations. In 1995, the unit handled 37 prosecutions in respect of buses, 4 590 cases for which disqualification was sought under the Driving Offence Points System, and 920 prosecutions in respect of breaches of tunnel and other regulations.

  A Transport Tribunal, with chairman and members all appointed from the public and set up under the Road Traffic Ordinance, provides the public with a channel of appeal against decisions made by the Commissioner for Transport in respect of the registration and licensing of vehicles, the issue of hire car permits and passenger service licences, and designation of car-testing centres.

  The Transport Department also operates an Emergency Transport Co-ordination Centre, which co-ordinates traffic and transport arrangements during serious traffic and transport disruptions, rainstorms and typhoons. The centre undertook 30 opera- tions in 1995.

  To tackle the area-wide traffic congestion at the Kwai Chung container port, the police operate, when necessary, the Emergency Container Port Traffic Control Centre jointly with representatives of the Transport Department, Kwai Tsing District Office, the three terminal operators, the Container Tractor Owners Association and the Container Transportation Employee's General Union. The control centre is within the container port and is equipped with a closed-circuit television system and efficient communication links.

  The Director of Highways heads the Highways Department, which is responsible for designing and building all highways, their repair and maintenance, and also for studying new railway proposals.

Planning

The Freight Transport Study, which was completed in 1994, has put forward recommendations to improve the efficiency and operation of the freight industry. A freight transport strategy is being drafted taking into consideration comments received during the public consultation on the study recommendations. It will be published in 1996.

Preparatory work was in hand during the year for the Third Comprehensive Transport Study to examine the territory's strategic transport requirements. It will commence in mid-1996.

A study to assess parking demand in Hong Kong was completed in 1995. It provided forecasts for future demand, identified shortfalls in parking spaces for the territory and made recommendations to tackle parking problems.

  The Sha Tin-Ma On Shan District Traffic Study was also completed this year. It identified traffic problems in the district and recommended improvement measures.

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Cross-Border Traffic

There are three road crossing points between Hong Kong and China - at Sha Tau Kok, Man Kam To and Lok Ma Chau - which together can handle about 32 000 vehicles per day. The Lok Ma Chau crossing started operating 24 hours a day on November 3, 1994. The Sha Tau Kok and Man Kam To crossings open at 7 am each day and close at 6 pm and 10 pm, respectively.

      Cross-border vehicular traffic increased by about four per cent during the year, compared with 1994. The increase was registered mainly at Lok Ma Chau. The average daily traffic figures at the three crossing points in 1995 were about 1 780, 9 100 and 12 400 at Sha Tau Kok, Man Kam To and Lok Ma Chau, respectively. Goods vehicles accounted for 95 per cent of the traffic, reflecting the rapid growth in trade and industrial links with China. At the end of the year, 31 companies operated tourist coach services across the border. Plans are being made to increase the number of channels manned at Lok Ma Chau for processing vehicles and passengers. In the longer term, this crossing point will be expanded.

      The Kowloon-Canton Railway continued to play an important role in carrying freight and passenger traffic between Hong Kong and China. Some 1.97 million revenue tonnes of freight were brought into Hong Kong by rail, compared with 2.35 million tonnes in 1994. Exports to China by rail accounted for 860 000 revenue tonnes, a decrease of 19 per cent from the 1.06 million tonnes carried in 1994. There are five goods yards, at Hung Hom, Ho Man Tin, Mong Kok, Sha Tin and Fo Tan, and a marshalling yard at Lo Wu. Freight trains are hauled by a fleet of 12 diesel locomotives. Some 45.4 million passengers crossed the border by rail in 1995, compared with 43 million the previous year. A further extension of the terminal building at Lo Wu was completed in early 1995, doubling its capacity.

      Ferry services between Hong Kong and China carried 7 million passengers in 1995, up slightly on the 6.9 million in 1994. At year's end, 10 companies offered a choice of 28 routes.

      The opening of the Shenzhen Airport in October 1991 provided a further impetus to the growth of cross-border traffic, and coach and ferry services now operate between the airport and Hong Kong. The completion of Phase I of the Guangzhou- Shenzhen-Zhuhai Superhighway, linking Guangzhou and Shenzhen, in 1994 led to a further increase in cross-border traffic, particularly through Lok Ma Chau.

Road Network

Hong Kong's roads have one of the highest vehicle densities in the world. At the end of 1995, there were 458 785 licensed vehicles and about 1 717 kilometres of roads: 420 on Hong Kong Island, 397 in Kowloon and 900 in the New Territories, representing 267 vehicles per kilometre of road. This, combined with the difficult terrain and dense building development, poses a constant challenge to transport planning, road construction and maintenance. There are eight major road tunnels, more than 850 flyovers and bridges, 487 footbridges and 296 subways to help vehicles and people move around.

      To cope with increasing transport demands, the Highways Department runs an extensive road construction programme. About 60 road projects are under construc- tion and another 40 are being planned.

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The department's budget for the financial year ending March 1996 totals $9,359 million, of which $8,717 million is for major highway construction, and $642 million for road and public lighting maintenance work.

Strategic Road Network

The spine of the strategic road network is Route 1, which runs from Aberdeen on the southern shore of Hong Kong Island, and cuts through Kowloon peninsula and the New Territories to the Lok Ma Chau border crossing point.

On Hong Kong Island, Route 8 runs along the northern shore from the Cross- Harbour Tunnel, via the Island Eastern Corridor, to Shau Kei Wan and Chai Wan in the east. Route 7 stretches westwards from the Cross-Harbour Tunnel along the northern shore, via Gloucester Road, Harcourt Road and Connaught Road to Hill Road at Kennedy Town.

  On the mainland, Route 2 runs from the Kowloon Bay Reclamation, through the Airport Tunnel, via the East and West Kowloon Corridors, Tsuen Wan Road, Tuen Mun Road and Yuen Long Southern Bypass to the junction of Castle Peak Road and Lok Ma Chau Border Link Road.

Route 4 runs along the base of the foothills separating Kowloon from the New Territories, and connects Lai Chi Kok with Kwun Tong and extends to Tseung Kwan O via the Tseung Kwan O Tunnel.

Route 5, another strategic road, is a seven-kilometre, two-way trunk road con- necting Sha Tin with Tsuen Wan, via the Shing Mun Tunnel. It forms part of the New Territories Circular Road System.

Route 6 covers the Eastern Harbour Crossing, Kwun Tong Bypass, Tate's Cairn Tunnel and the approach road linking Tate's Cairn Tunnel to the Tolo Highway.

Improvements to Major Road Networks

To cater for the traffic demand between Western District and the upgraded Connaught Road, the construction of the Belcher Bay Link started in May 1993. It should be completed in January 1998 and will be a dual carriageway on the new reclamation in Belcher Bay.

  To provide a direct access between Sai Ying Pun and Pok Fu Lam Road, work on the Smithfield Extension started in February 1995. It will link Kennedy Town with Pok Fu Lam Road and is scheduled for completion in June 1997.

The construction of the Yau Ma Tei Section of the West Kowloon Corridor began in phases from mid-1992 to improve traffic in the Mong Kok and Yau Ma Tei area. Phase I works, involving an extension along Ferry Street and the construction of a 700-metre flyover along Tong Mi Road and Ferry Street, will be completed by early 1996. Phase II works, involving the associated footbridge and subway system, will be ready by mid-1997.

The Lung Cheung Road and Ching Cheung Road Improvements started in July 1994. The works include the widening of Ching Cheung Road and the section of Lung Cheung Road between Ching Cheung Road and Lion Rock Tunnel Road from dual two-lane to dual three-lane. When completed, in mid-1997, it will improve the Route 4 link between the eastern Kowloon peninsula and the new airport.

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The construction of the Hung Hom Bypass and the Princess Margaret Road Link started in October 1995 and is scheduled for completion in late 1998. It will be an elevated highway built on Hung Hom Bay Reclamation, including the 1.3-kilometre Hung Hom Bypass from Salisbury Road to Hung Hom Road and the 1.2-kilometre Princess Margaret Road Link connecting the Hung Hom Bypass to Princess Margaret Road.

To improve cross-border traffic and access to the north-western New Territories, the construction of the country park section of Route 3 started in May 1995 under a build, operate and transfer franchise scheduled for completion in late 1998. It will be a dual, three-lane carriageway, connecting Ting Kau with Au Tau in Yuen Long.

The construction of additional climbing lanes in the most congested uphill sections of Tuen Mun Road started in May 1994. Climbing lanes with a total length of 8.5- kilometre will be constructed at Sam Shing Hui, So Kwun Wat, Tai Lam and Ting Kau. When completed, in July 1996, they will relieve the traffic in Tuen Mun Road.

New Airport Access

Work is progressing well on all major highway projects related to the new airport at Chek Lap Kok. These include the Western Harbour Crossing, the West Kowloon Expressway, the Kwai Chung and Tsing Yi sections of Route 3, the Lantau Fixed Crossing and the North Lantau Expressway.

The Airport Core Programme also includes a rail link which will provide a fast and efficient train service to the new airport and a domestic service to relieve congestion in the Nathan Road Corridor of the Mass Transit Railway. The rail link will also serve new developments on the West Kowloon Reclamation and in Tung Chung new town. (For further details, see Chapter 16.)

Environmental Impact of Road Construction

The environmental impact of new road projects is carefully appraised at the planning stage by the Highways Department. Where practical, measures such as landscaping works, artificial contouring of surrounding hillsides and installation of noise barriers are considered. Measures taken include the application of decorative wall panels to the retaining wall of the Kowloon Park Drive Flyover project, and the installation of a noise barrier in the Tate's Cairn Tunnel approach road near Richland Gardens, in Kowloon Bay. Air-conditioning units and double-glazing are provided in domestic premises where noise levels cannot be brought within the required standard by any other means.

Road Opening Works

      Besides carrying vehicles and pedestrians, the highways also accommodate utility services such as water and gas mains, sewers, and electricity and telephone cables. To cope with the increasing demand for utility services and maintenance work, utility companies often have to excavate the carriageways and footpaths to lay more pipes, cables and ducts, and to carry out repair work. On average, there were about 200 new road openings on each working day in 1995. Road openings are co-ordinated and controlled by the Highways Department through a permit system, under which utility companies are required to carry out work to a required standard and within a time limit. To co-ordinate work more effectively and to minimise traffic disruption, the department holds monthly Road Opening Co-ordinating Committee meetings with

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the utility companies, the police and the Transport Department. Measures are being introduced to improve the management of road openings, to reduce their duration and frequency.

Tunnels

The management and operation of the five government-owned tunnels - the Lion Rock, Aberdeen, Airport, Tseung Kwan O and Shing Mun tunnels have been contracted out to private operators. Toll charges at these tunnels remain under government control.

The Lion Rock Tunnel, linking Kowloon and Sha Tin, began single-tube operation in 1967, with a second tube added in 1978. It is the most heavily used government tunnel, with 87 000 vehicles daily in 1995. The toll was $6 per vehicle.

The Aberdeen Tunnel, opened in 1982, links the north and south sides of Hong Kong Island. It was used by 58 000 vehicles daily in 1995, each of which paid $5.

The toll-free Airport Tunnel provides direct access from Hung Hom to Hong Kong International Airport, and passes underneath the airport runway to Kowloon Bay. Opened in 1982, it was used by 54 000 vehicles daily in 1995.

The Shing Mun Tunnel, opened in 1990, links Sha Tin to Tsuen Wan. The toll was $5 per vehicle. The average daily traffic volume was 52 000 vehicles in 1995.

The Tseung Kwan O Tunnel, opened in 1990, links Kowloon and the Tseung Kwan O new town. It was used by 36 000 vehicles daily in 1995, each paying $3.

The Cross-Harbour Tunnel, the Eastern Harbour Crossing and the Tate's Cairn Tunnel were all built by the private sector under build, operate and transfer franchises.

The Cross-Harbour Tunnel, opened in 1972, connects Causeway Bay on Hong Kong Island and Hung Hom in Kowloon. Used by a daily average of 123 000 vehicles in 1995, it is one of the world's busiest four-lane road tunnels. The tolls varied from $4 to $30 per vehicle, including a government passage tax.

The Eastern Harbour Crossing is Hong Kong's second cross-harbour road tunnel. Opened in 1989, it links Quarry Bay on Hong Kong Island and Cha Kwo Ling in Kowloon. It is connected by an elevated section of Route 6 to the Kowloon portal of the Tate's Cairn Tunnel. A daily average of 86 000 vehicles used the tunnel in 1995. The tolls ranged from $5 to $30.

The Tate's Cairn Tunnel was opened to traffic in 1991, providing an additional direct road link between the north-eastern New Territories and Kowloon. Measuring about four kilometres from portal to portal, it is the longest road tunnel in the territory. It was used by an average of 77 000 vehicles daily in 1995. The tolls ranged from $6 to $15.

An automatic toll collection (Autotoll) system was installed at the Cross-Harbour and Aberdeen Tunnels in August 1993, the Lion Rock Tunnel in August 1994 and the Eastern Harbour Crossing in September 1995, enabling motorists to drive through designated toll booths without stopping.

At the end of 1995, about 75 000 registered Autotoll users made an average of 39 100, 24 200, 25 600 and 18 800 trips daily through the Cross-Harbour, Aberdeen,

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PRECEDING PAGE: Vehicles

mark their passing in a trail of lights at the Hong Kong Island entrance to the Cross-Harbour Tunnel at Causeway Bay.

The trail winds away at the top to the Island Eastern Corridor,

which connects with Hong Kong's second harbour crossing, the Eastern Harbour Tunnel. A third tunnel in the western harbour is rapidly

nearing completion as part

of the major projects being built

in conjunction with Hong Kong's

new international airport at Chek Lap Kok.

Passengers queue for the express service to Stanley,

a popular shopping and dining

destination for visitors

and residents. Increased competition between Hong Kong's three main bus lines has seen the introduction of new, air-conditioned vehicles

at reasonable fares. Several

services run across the border into Guangdong Province and

are increasingly patronised by tourists and business travellers.

Workmen replace part

of a tram track in busy Central District. Hongkong Tramways Limited has operated its

electric service since

1904 and has six

overlapping services running on 13

kilometres along Hong Kong Island's north

shore, plus almost three kilometres of single track around Happy Valley. The trams, long disappeared

in many other cities,

are one example of the

comprehensive network

of transport services

that exist in Hong Kong,

from the traditional to

the most modern.

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and Lion Rock tunnels, and the Eastern Harbour Crossing, respectively. An Autotoll system was being tried out in the Tate's Cairn Tunnel.

Traffic Management and Control

A continuing programme of traffic management and control measures is being implemented to improve traffic flows. At the end of the year, there were 1 228 signalised junctions in the territory: 317 on Hong Kong Island, 449 in Kowloon and 463 in the New Territories.

      On Hong Kong Island, the signalised junctions on the northern shore, from Kennedy Town to Shau Kei Wan, are generally under the control of the Hong Kong Area Traffic Control (ATC) system. This is being expanded to cover Chai Wan and Southern District. At the end of the year, 276 junctions on the Island were under ATC, and 38 closed-circuit television (CCTV) cameras were in use for traffic surveillance.

The Kowloon ATC system, which had been in operation since 1977, has been replaced by a new system to increase capacity and upgrade technology. One notable feature of the new system is 'traffic adaptive control', through which signal timings can be automatically adjusted in response to changes in traffic flow. The signalised junctions in Kowloon are now generally under the control of the new system. Work on expanding the CCTV system in Kowloon began in August 1995. This involves adding 66 new cameras to the existing 26-camera system by early 1997, for better monitoring of traffic conditions in Kowloon.

      A new ATC system has also been installed to control traffic signals in the Tsuen Wan and Kwai Tsing districts. Signalised junctions in the two districts are now generally under control of the system and 22 CCTV cameras are being installed for commissioning in early 1996. This system will incorporate the existing four cameras for traffic surveillance of the container port road network. Planning for the expansion of ATC to other new towns is continuing.

       The first stage of a traffic surveillance and information system for the whole length of Tuen Mun Road, involving 19 CCTV cameras, was commissioned in July 1995. Work on the second stage for implementing an automatic incident detection and variable message sign system is now under way and due for commissioning in 1997. The full system will reduce response times to accidents and vehicle breakdowns, and provide safety and diversion information to motorists. Similar facilities are being investigated for a section of Tolo Highway.

Parking

The management and operation of on-street, metered parking spaces have been contracted out to a private operator. On-street parking is provided only where traffic conditions permit. At the end of the year, there were 13 670 metered spaces in the territory, most of which operate between 8 am and midnight from Mondays to Saturdays.

      Meter operation in areas of high demand has been extended to include Sundays and public holidays to facilitate a better turnover of parking spaces. The maximum meter charge was $2 per 15 minutes.

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  The government also owns 14 multi-storey carparks which provide a total of 8 050 parking spaces. They are operated and managed by two private operators under two separate management contracts.

  Off-street public parking is also provided by the Civil Aviation Department at the Hong Kong International Airport, the Housing Department in its housing estates and the KCRC at its terminus in Hung Hom. Private sector multi-storey and open-air public carparks in commercial/residential buildings and open-air lots provide more than 120 000 parking spaces.

Central-Mid-Levels Escalator and Walkway System

This covered system opened to public use in October 1993. From the harbour it crosses at two footbridges over Des Voeux Road Central, passes through Central Market and over the narrow streets in Central and ends at Conduit Road. The system was used by an average of 33 000 people daily in 1995. It is managed by a private contractor.

Licensing

By year's end, Hong Kong's total of 458 785 licensed vehicles in all classes represented an increase of 0.85 per cent over 1994. New private car registrations fell 36.52 per cent, from 36 634 in 1994 to 23 257 in 1995. This brought the number of licensed cars to 285 467 in December, an increase of 2.16 per cent over the past year. With effect from August 1, 1994, the published retail prices of motor vehicles replaced the cost, insurance and freight values as the basis for calculating the first- registration tax.

  Registered goods vehicles numbered 136 316 in December, which was 3.71 per cent less than the 141 574 in 1994. Of these, 96 070 were light goods vehicles, a decrease of 6.25 per cent from 1994. To remove the disparity in the tax levy and licence fee for van-type light goods vehicles and private cars, the first-registration tax and annual licensing fees of van-type light goods vehicles were increased substantially in 1991.

  There were 1 071 079 licensed drivers at the end of 1995, an increase of 2.36 per cent over 1994. The average number of new learner-drivers fell from 5 664 per month in 1994 to 4 865 per month in 1995.

  Since the introduction of the Driving Offence Points System in August 1984, 31 670 drivers have been disqualified. A total of 323 551 notices have been served and 424 284 drivers have incurred penalty points for committing offences under the Road Traffic (Driving Offence Points) Ordinance. The figures for 1995 were 4 590, 41 328 and 23 520, respectively.

  A performance pledge scheme for licensing services provided by the Transport Department has been in effect since December 1992. This scheme, which initially covered the issue of learner and full driving licences and registration and licensing of vehicles, was extended to other licensing and vehicle examination services in October 1994. Two customer liaison groups, covering the licensing services on Hong Kong Island, and in Kowloon and the New Territories, were formed in September 1993 to gauge customers' opinions on services provided and improvements desired.

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Road Safety

Traffic accidents involving injury decreased by 4.2 per cent in 1995. There were 14 790 accidents, of which 3 238 were serious and 244 fatal. This compares with 15 440 accidents in 1994, of which 3 279 were serious and 279 fatal.

In-depth investigations were carried out at 147 traffic accident blackspots to identify accident causes. Accident-prevention measures were recommended at 143 of these locations. Accidents have fallen 30 per cent at spots where measures were implemented.

      Accident records are regularly updated, using a microcomputer-based traffic accident data system installed in 1991. The database provides a basis for traffic accident blackspot analysis and road safety strategy formulation. (Accident statistics are at Appendix 43.)

In the continuing exercise to deter motorists from disobeying traffic signals, more red-light cameras were installed in June 1995, and work has begun for additional cameras to be installed at the Light Rail Transit road junctions. The cameras auto- matically film red-light violations at traffic signals.

Road safety campaigns continued to play an important role in reducing traffic accidents. The major theme in 1995 was drink-driving. Stricter legislation to tackle the problem was passed in June and enforcement commenced on December 15. Posters, radio and television announcements, and a leaflet were produced and widely distributed. Also, in anticipation of new legislation on the fitting and wearing of rear seatbelts in private cars, posters, radio and television announcements were produced to advise the public.

At the end of 1995, 241 student road safety patrol teams of the Road Safety Association and 323 school staff crossing patrols operated in 555 schools to ensure the safety of school children going to and from school. The Road Safety Council, an advisory body, continued to co-ordinate all road safety matters in the territory.

Public Transport

Rail, ferry, bus and other transport services offer Hong Kong commuters a good range of choices at reasonable fares and different levels of comfort, speed and convenience.

Railways

The territory has five rail systems: a heavily-utilised mass transit system, a busy suburban railway, a modern light rail transit system, a traditional street tramway and The Peak funicular railway. The first three are operated by public corporations, wholly-owned by the government. The other two are privately owned.

Mass Transit Railway

The Mass Transit Railway Corporation operates a three-line metro system, comprising 43 route-kilometres with 38 stations, served by a fleet of 759 cars operating in eight-car trains. The system was opened in stages between October 1979 and August 1989. Patronage increased slightly during the year and by the year's end, the railway was carrying 2.5 million passengers a day. It is one of the busiest

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underground railways in the world. Adult fares ranged from $4 to $11 per trip, according to distances travelled.

  Construction of the Airport Railway is progressing to programme. When opened for traffic in mid-1998, it will have a dedicated express service linking the new airport at Chek Lap Kok to Hong Kong Station at Central; and a separate domestic service between Lantau Island and Central, with stations at Tung Chung, Tsing Yi, Lai King, Tai Kok Tsui, Kowloon and Central. The domestic service will interchange with the Tsuen Wan Line of the existing MTR system at Lai King and with the Island Line at Hong Kong Station, bringing relief to the MTR Nathan Road corridor.

Kowloon-Canton Railway

The Kowloon-Canton Railway opened in 1910 and was double-tracked and elec- trified in the early 1980s. Operation of the system, formerly run by a government department, was vested in the Kowloon-Canton Railway Corporation (KCRC) in 1982.

  The 34-kilometre railway provides a service to the new towns in the north-eastern. New Territories, a freight service into China, and passenger services to and from Changping/Guangzhou and Foshan/Zhaoqing. The suburban service has grown substantially since electrification, and in 1995, the railway, with 13 stations, handled 632 700 passenger journeys daily. Passenger traffic was carried in a fleet of 351 cars, operated in train formations of 12 cars. Ordinary adult fares ranged from $3 to $8.

  In 1995, the KCRC continued efforts to improve its facilities to the public by renovating Lo Wu station, redeveloping the Kowloon terminus, straightening the sharp curves of its track north of the University station at Pak Shek Kok, and constructing more noise barriers.

Light Rail Transit

The KCRC also operates the Light Rail Transit (LRT) system in the north-western New Territories, at Tuen Mun, Yuen Long and Tin Shui Wai. The system began operating in 1988. With the commissioning of its Tin Shui Wai Phase III extension in March 1995, the system now extends over 32 kilometres with eight routes, 57 stops and a fleet of 100 cars, either operating singly or in pairs. The LRT operates zonal fares and provides free feeder-bus transfers from one route to another within zones and to and from stations. Ordinary adult fares range from $3.20 to $4.70. At the end of the year, the LRT and its feeder and auxiliary buses carried about 370 000 passengers a day.

Trams

Electric trams have operated on Hong Kong Island since 1904. Hongkong Tramways Limited has six overlapping services, using 13 kilometres of double track along the north shore of Hong Kong Island, between Kennedy Town and Shau Kei Wan, and nearly three kilometres of single track around Happy Valley. The company's 163 trams, including two open-balcony trams for tourists and private hire, make up the only fully double-decker tram fleet in the world. Tramway patronage rose marginally during 1995, with an average of 12 720 boardings daily. Fares were $1.20 for adults and 60 cents for children. A senior citizen concessionary fare of 60 cents is offered to all persons aged 65 or above.

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Funicular Rail

Hong Kong's other 'tramway' is a cable-hauled funicular railway, operated by the Peak Tramways Company Limited from Central to The Peak. The 1.4-kilometre line began operations in 1888 and climbs 373 metres on gradients as steep as one-in-two. The line was modernised in 1989. The service caters largely for sightseers but also serves Peak District residents. The line serves an average of 11 000 passengers a day. One-way fares for adults and children were $14 and $4, respectively.

Ferries

Ferries are essential for travelling to Hong Kong's outlying islands and provide important links to the new towns in the north-western New Territories. In the inner harbour, they are a supplementary mode of transport to cross-harbour buses and the Mass Transit Railway. Services are provided largely by two franchised operators the Star Ferry Company Limited and the Hongkong & Yaumati Ferry Company Limited (HYF).

      The Star Ferry operated 12 vessels across the harbour and, during the year, carried 94 679 passengers daily on its three routes. Fares ranged from $1.40 to $2. Passengers aged 65 and above can enjoy free travel on all Star Ferry services.

      HYF owned 80 vessels and operated 24 ferry routes, including daily passenger and vehicular services and chartered services. In 1995, the company carried 95 000 passengers and 1 200 vehicles daily. Fares ranged from $3.80 to $26.50. Passengers aged 65 or above can enjoy concessionary fares, set at the same level as children's fares, on all ferry services except the deluxe class.

A further 11 other ferry services were operated by seven licensed operators, including the service to Discovery Bay on Lantau. These were supplemented by kaitos, or local village ferry services, which were licensed to serve remote coastal settlements. At the end of the year, 86 kaitos were in operation.

Road Passenger Transport

Road passenger transport accounted for two-thirds of all public transport journeys. More than half the public transport journeys made on the road were on franchised buses, and the rest on public and private light buses, taxis and non-franchised buses.

Franchised Buses

The standard and capacity of franchised bus services continued to improve through effective planning and co-ordination. The four franchised bus companies together carried 3.51 million passengers daily on a network of 501 routes in 1995.

      The largest operator is the Kowloon Motor Bus Company (1933) Limited (KMB). It ran 302 bus routes in Kowloon and the New Territories; 37 cross-harbour routes jointly with the China Motor Bus Company (CMB); eight cross-harbour routes with Citybus Limited and seven cross-harbour routes of its own. KMB also operates 'Airbus' services to and from the airport, comprising three routes to Hong Kong Island and two within Kowloon.

      The KMB fleet at the end of the year comprised 3 507 registered vehicles, with 2 532 double-decker conventional buses, and 667 and 308 air-conditioned double and single-decker buses, respectively. In 1995, KMB made 996 million passenger trips and

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covered 271 million kilometres. KMB's current franchise extends until August 31, 1997. Fares ranged from $1 to $23 for non air-conditioned services, and from $24 to $30.60 for air-conditioned services. Passengers aged 65 and over are entitled to concessionary fares on every KMB route, except the Airbus services.

  To relieve peak-hour congestion on the MTR along the Nathan Road Corridor, KMB operated a total of 27 air-conditioned bus routes during the year from the New Territories and North Kowloon to Hong Kong Island and South Kowloon. These services, run jointly with CMB or Citybus, helped keep the MTR passenger flows along Nathan Road at acceptable and safe levels.

  Bus services on Hong Kong Island are provided by two operators: (CMB) and Citybus. CMB operates 86 routes on the island. It was granted a new three-year franchise from September 1, 1995, although 14 routes (including two cross-harbour routes) were re-allocated to Citybus.

  In September 1995, CMB started its first airport service, Route A20, operating between Central and the airport. At the end of 1995, CMB's registered fleet comprised 853 double-deckers and 30 single-deckers, of which 111 double-deckers and 30 single-deckers were air-conditioned. They made 191 million passenger trips and travelled 44.3 million kilometres during the year. Fares ranged from $1.90 to $30. Concessionary fares are offered to passengers aged 65 and over on all CMB Hong Kong Island routes.

  Citybus began franchised operations on September 1, 1993, and in 1995 took over 14 Hong Kong Island routes previously serviced by CMB. Citybus operates 47 routes on the island and, jointly with KMB, eight Cross-Harbour Tunnel routes.

  At the end of the year, Citybus had a registered fleet of 338 franchised double- decker and 22 single-decker buses, of which 242 double-deckers and all single deckers were air-conditioned. Fares ranged from $2 to $3.50 for non air-conditioned trips, and from $2.40 to $15.50 for air-conditioned services.

Passengers aged 60 and over are entitled to concessionary fares on Hong Kong Island routes, except the night bus and recreation services. In addition, passengers aged 65 or over are charged half of the adult single fare for cross-harbour services. The company's franchised bus services made 88 million passenger trips and travelled 17.11 million kilometres during the year.

  The New Lantao Bus Company (1973) Limited (NLB) operates eight franchised routes on Lantau Island seven regular, and one recreational with a fleet of 69 single-decker buses. Most NLB services connect with the ferries at Mui Wo.

  NLB's average weekday patronage in 1995 was 10 658 passengers. Boosted by recreational traffic, the average patronage on Sundays and public holidays was 19 339 passengers. Fares ranged from $1.20 to $21. Passengers aged 65 or above are entitled to a half-fare concession on most NLB franchised routes. The concession is not available on routes to Po Lin Monastery at Ngong Ping on Sundays and public holidays.

  To meet peak recreational demand, in June 1991 NLB introduced a special service between Mui Wo and Po Lin Monastery, using non-franchised, air-conditioned coaches ferried to Lantau at weekends. This special service has been extended to Saturdays to cater for passenger demand after the opening of the Tian Tan Buddha statue at Ngong Ping. The average patronage on this special service was 4816

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passengers per day during the year. The company's franchise has been extended to March 31, 1997.

Minibuses

Hong Kong's minibuses are licensed to carry a maximum of 16 passengers. There were 6 971 minibuses in 1995. Of these, 4 350 were public light buses (PLB), and 2 621 private light buses.

      The PLBs are authorised to carry passengers paying separate fares. The private light buses are authorised only to carry group passengers and may not collect separate fares.

      There are two types of PLBs: green minibuses and red minibuses. Green minibuses provide services according to fixed schedules. There were 1 819 of these, operating on 267 approved routes, each with fixed fares and timetables. They carried 826 000 passengers a day. Red minibuses operate without a schedule. They do not have fixed routes, timetables or fares. The 2 508 red minibuses carried about 904 000 passengers daily in 1995.

      In line with government policy to convert more red minibuses to green minibuses, more new scheduled routes will be identified. During the year, an exercise was conducted to select green minibus operators, and minibus operators were invited to apply for the right to operate a total of 21 new routes.

Taxis

Hong Kong had 15 250 urban taxis, 2 838 New Territories taxis and 40 Lantau taxis at the end of the year. They carried a daily average of 1 101 000, 190 000 and 2 000 passengers, respectively.

In April 1994, the Executive Council approved the Transport Advisory Committee's recommendations to improve the taxi licensing system, fare structure and quality of service. These recommendations were implemented in stages during 1994 and 1995.

Non-Franchised Bus Operators

Residents' services were introduced in 1982 to give commuters an additional choice of transport modes. These services operate mainly to and from housing estates primarily during peak hours, supplementing services provided by the franchised bus operators. Residents' organisations may invite a non-franchised bus operator to operate such a service under a passenger service licence issued by the Transport Department. Residents' services operate in accordance with approved schedules which specify the routing, timetable and stopping places.

      At the end of the year, the 136 residents' services ran 94 800 passenger-trips a day. During the year, 25 residents' services were introduced, providing bus services from various residential areas mainly in the New Territories, the Mid-Levels and southern Hong Kong Island. Non-franchised bus operators also carry factory employees, tourists and students on a group-hire basis.

       At the end of 1995, the licensed fleet of non-franchised buses totalled 4 780 vehicles, of which 308 were double-deckers. An increasing proportion of these vehicles was air-conditioned.

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Marine Facilities

The Technical Services Division of the Civil Engineering Department inspects and maintains public marine facilities including public piers and landings, public cargo- working areas and light beacon structures. It oversees the maintenance dredging of fairways and mooring buoys.

  In 1995, the Port Works Division of the Civil Engineering Department finished building two jetties and carried out the planning for six piers.

The Port

The port handles about 90 per cent, by weight, of the territory's trade. In 1995, Hong Kong's port remained the world's busiest container port, handling some 12.5 million TEUS (20-foot equivalent units). It also remained one of the busiest in terms of vessel arrivals and departures, and cargo and passenger throughput.

  About 214 000 ocean-going and river trade vessels arrived in Hong Kong during the year. These vessels handled over 169 million tonnes of cargo and around 21 million international passengers, most of whom were carried on the world's largest fleet of high-speed ferries.

  Container handling, vessel arrivals and departures, cargo, and passenger numbers saw a growth rate in 1995 of 13 per cent, 11 per cent, 20 per cent and one per cent, respectively, compared with 1994. Details of international movements of vessels, passengers and cargo are given at Appendix 41.

Port Administration

The Marine Department administers the port. The department's mission is to promote excellence in marine services. As a further step to meet the ever-growing demand for its services, the department plans to commercialise some of its operations with the aim of becoming a self-financing entity within the government.

  Advice from users and operators of port facilities is an important factor in port administration. A wide range of private-sector interests are represented on advisory bodies such as the Port Development Board, which advises the government on port planning and development; the Pilotage Advisory Committee, which advises the Director of Marine on all matters relating to marine pilotage services; the Port Operations Committee, which advises the Director of Marine on the operational needs of the port; and the Provisional Local Vessel Advisory Committee, which advises on local craft matters.

Vessel Traffic

The Marine Department's Vessel Traffic Centre (VTC) helps ensure a safe and efficient marine traffic flow in the densely-populated waters in and around the port. The movements of ocean-going vessels are directly regulated from the VTC through a computer-assisted radar network, a database on ships and VHF radio telephone communications.

  In order to improve radar coverage in the congested western harbour waters, a new radar station was installed on Kau Yi Chau in 1994. A further extension to coverage will be achieved with the planned construction of a radar station in Mirs Bay scheduled to open in mid-1998. All ocean-going vessels of 300 gross registered tonnes

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      (GRT) and above must follow VTC directions. Rapid growth in the numbers of such vessels and the need to accelerate response times has generated an eightfold boost to the capacity of the computerised ship database. This improvement will accommodate anticipated growth in ship movements into the next century.

Fairways and Anchorages

      Since mid-1994, the principal fairways and anchorages in the western harbour and at Yau Ma Tei have been reorganised to enhance safe vessel movements and to achieve a more organised usage of the available waters. To make the main approaches to the port of Hong Kong safer, the traffic separation scheme in the East Lamma Channel has been extended southwards as a traffic-organising measure.

Harbour Patrol and Local Control Stations

Marine Department launches, in continuous radio contact with the VTC, patrol the main harbour area and its approaches to maintain order and respond to emergencies. A special team monitors marine traffic in the central harbour. To tighten the surveillance and control of certain high risk spots such as the Ma Wan Channel, local marine traffic control stations, supported by dedicated launch patrols, are being progressively established. The first, at the Ma Wan Channel, opened in June 1995, and the programme envisages stations at Green Island and Kwai Chung Port.

Pilotage Service

Pilots play an important role in navigation safety by assisting shipmasters who are unfamiliar with the port of Hong Kong. Ships of 3 000 GRT or over and certain other vessels must engage pilots when moving within the port and its approaches.

The Director of Marine regulates and monitors the pilotage service although the pilots themselves operate as a private company. The number of pilots and the quality of their service are kept under constant review and closely monitored by the Pilotage Advisory Committee, whose membership covers a wide spectrum of port users and shipping interests.

After a pilotage review consultancy study completed in 1994, compulsory pilotage was extended to ships of 3 000 GRT, or over, and gas carriers of any tonnage with effect from October 1, 1995. It is also planned to relocate the pilot boarding station seawards from Green Island to the outer entrance of the East Lamma Channel in the near future. These measures, together with legal changes to the institutional arrangements of the service, will enable marine pilotage to meet the needs of the port well into the next century.

Hydrographic Office

Continued growth in the number and size of visiting ships together with the increasing pace of reclamation in the port have meant increasing demand for accurate nautical charts and more frequent surveys. Since the Hydrographic Office was established in 1994, two nautical charts of the harbour area have been completely revised and a major re-survey programme for the port is under way. With the launching of a 12-metre survey boat in October 1995 and more sophisticated equipment to be delivered in the next year, the Hydrographic Office expects by 1997 to take over the existing services provided by the British Admiralty.

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Dangerous Goods

Well-equipped fleets of fire boats, tugs, oil pollution control vessels and marine police launches are available to respond to any emergency. A prototype Dangerous Goods Control System attempts to establish more accurately the quantities and types of dangerous goods being moved into and out of Hong Kong. When the results of the prototype control system are available-which is scheduled for 1997 - the department will introduce a stricter control regime, using the International Maritime Dangerous Goods (IMDG) Code as its cornerstone.

Risk Assessment

To improve the safety and efficiency of the harbour and provide a long-term strategic plan for the optimum use of Hong Kong waters, the Marine Department has com- missioned a consultancy study which started in September 1995. It will survey existing marine activities, predict future trends and demands and finally deliver a comprehensive action plan for the management of marine activities up to 2011. The findings are expected to be available by late 1996.

Public Cargo Working Areas

Public cargo working areas on the waterfront were established in 1975. In order to maximise the usage of this facility and enhance the efficiency of cargo operations, the Marine Department has commissioned a financial viability study on improved management and operation of public cargo-working areas. Subject to the findings of the study, the Marine Department will draw up a comprehensive action plan.

Looking Ahead

Hong Kong will remain a major shipping centre and a hub port for the region. Not only will there be additional marine traffic to Hong Kong but there will also be increases in traffic moving to new and developing Chinese ports through the Ma Wan Channel and Mirs Bay.

  The territory will continue its efforts to maintain a safe port while improving efficiency. Traffic management will be strengthened through the provision of more local control stations and traffic regulations. The possibility of increasing the flow of traffic through the narrow Ma Wan Channel by relaxing tidal windows will also be high priority.

Participation in International Shipping Organisations

International Maritime Organisation

Hong Kong is an associate member of the International Maritime Organisation. This status will continue after 1997 in accordance with the Sino-British Joint Declaration on the Question of Hong Kong. The territory participates actively in the proceedings of the organisation, especially in the development of measures to improve shipping safety and prevent pollution of the sea.

Maritime Search and Rescue

By international agreement, the Marine Department is the Maritime Search and Rescue Co-ordinator for the area of the South China Sea north of latitude 10°N and

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west of longitude 120 ̊E, excluding the immediate coastal waters of neighbouring

states.

      The Maritime Rescue Co-ordination Centre is manned continuously. It monitors all emergency communications channels and the Global Maritime Distress and Safety System.

      All search-and-rescue missions are activated and run by professionally-trained staff. Fully-equipped vessels and aircraft are available, and assistance can be obtained from nearby ships and other rescue co-ordination centres in the region.

      During 1995 the centre responded to 82 incident calls, and co-ordinated 54 actions concerning ship emergencies including 28 medical evacuations.

Port State Control

Many marine casualties and pollution cases can be attributed to the use of substandard ships. This situation could be improved if each port state stepped up inspections of incoming vessels, but this would place a considerable strain on their resources. Also, ship operators would acquire a significant burden if their vessels were subject to port state control at all the ports at which they call. Accordingly, various Asia-Pacific countries have agreed to share the workload and the information on inspected vessels. They have concluded an Asia-Pacific Regional Memorandum of Understanding on Port State Control. Hong Kong supports this initiative and, in Beijing in April 1994, signed the memorandum accepting regional co-operation on port state control.

      During 1995, 160 ocean-going ships visiting Hong Kong were inspected to check compliance with international safety and environmental protection conventions. This represented about three per cent of the ships visiting Hong Kong. About 95 per cent had deficiencies which had to be made good before they could proceed.

Services in the Port

Container Handling

About 66 per cent (or 8.3 million TEUs) of the 12.5 million containers loaded and discharged in 1995 were handled at the Kwai Chung Container Port. Ships at mid- stream mooring buoys and anchorages handled 23 per cent (or 2.9 million TEUs). This represented a growth rate of 14 per cent at container terminals and four per cent at mid-stream facilities, compared with 1994. The eight container terminals at Kwai Chung are privately-owned and operated. They have a total of 19 berths for ocean- going vessels.

International Ferry Services

More international passengers are using the two ferry terminals managed by the Marine Department. In 1995, 7.2 million passengers used the China Ferry Terminal in Tsim Sha Tsui, and 13.5 million used the Macau Ferry Terminal in Central. The total was a 0.4 per cent increase over 1994. Most of these passengers travelled on the world's largest fleet of modern, high-speed passenger ferries, comprising jetfoils and catamarans operating from Hong Kong to Macau and various Chinese ports.

The department has enhanced the safety of high-speed passenger ferries by intro- ducing statutory requirements for operators to predict and minimise the effects of shipboard system failures and to improve crew training.

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An enhancement project is in progress to cope with the increase in passenger throughput at the China Ferry Terminal. In 1995, one conventional ferry berth was converted into three high-speed ferry berths. Extra handrails were installed at the arrival hall to improve crowd control. The next phase includes the installation of additional immigration counters. It is expected to start in 1996 and be completed by mid-1997.

Immigration and Quarantine Services

 Immigration and quarantine services, including advance clearance, may be applied for by radio through a ship's agent. The Western Quarantine Anchorage provides these services round the clock, while services are available between 6 am and 6 pm daily at the Eastern Quarantine Anchorage. An immigration anchorage which provides services at Tuen Mun between 1 am and 11 am is a particularly convenient facility for river trade vessels not intending to enter the central harbour.

Mooring Buoys

The department provides and maintains 67 buoys within the port for ships to work cargo in the stream. The buoys can be booked through the VTC. Most are typhoon moorings, where vessels may remain secured during tropical storms.

  As a result of reclamations, the arrangement of mooring buoys has been reviewed and planning is under way to expand and improve the provision of harbour moorings from 1996.

Bunkering

 Bunkering is readily available at commercial wharves and oil terminals, or from a large fleet of private bunkering barges. Fresh water can also be provided alongside berths, or from a private fleet of water boats.

Ship Repair and Dry-docking

 The port has extensive facilities for repairing, dry-docking and slipping all types of vessels of up to 150 000 dead-weight tonnes, including oil rigs. A floating dock, with a lifting capacity of 40 000 gross tonnes, has recently come into service. Smaller shipyards are able to build and maintain workboats and pleasure vessels. The department provides a free inspection and advice service to promote safe working practices in ship repairing, ship-breaking and cargo-handling afloat.

Reception of Marine Wastes

The department provides refuse-collection services for ocean-going vessels and picks up refuse floating in the harbour. An average of 4 800 tonnes of refuse is collected annually. Floating refuse remains a nuisance to the general public and inter- departmental effort has been made to tackle problem. The existing refuse collection and scavenging services will be expanded over the next few years.

  A chemical waste treatment centre on Tsing Yi Island provides reception facilities for oily and chemical wastes from ships, as required under the International Convention for the Prevention of Pollution from Ships. Fees are levied by quantity.

C

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Local Craft

Harbour workboats are essential to the efficient running of the port, and Hong Kong has many of them. More than 1 600 lighters and 400 motorised cargo boats move cargo between ocean-going ships at mooring buoys or anchorages and cargo-working areas ashore. They are part of Hong Kong's fleet of 16 000 local craft, which include ferries, barges, workboats, fishing boats and pleasure vessels.

      The Marine Department sets and enforces safety standards for local craft. Certification, safety and control requirements are being rationalised to improve safety by clearly redefining the duties and responsibilities of owners, operators and the government.

      Reclamations such as those at Central and Wan Chai have also increased pressures on local craft navigating the harbour. Special traffic measures have been adopted to ease the situation so that passenger ferries and other vessels can continue to operate safely from existing piers and landing steps while work proceeds around them. Eventually, the piers and landing steps will be relocated to the new reclamations.

Government Fleet

The government fleet of 355 powered vessels is highly visible in the port. Besides harbour patrol launches, fire boats and police vessels, the government has launches used for immigration, port health, customs clearance, and surveys of international shipping. The fleet includes lighters, airport rescue craft, pollution control craft, floating clinics and launches for transporting government staff.

      The department designs, procures and maintains all government vessels. It has a rolling 10-year development plan to replace old vessels and provide new ones as they are needed. In 1995, the department awarded construction contracts for 18 vessels, worth $86 million, to shipbuilders in Hong Kong and overseas.

Shipping

     Hong Kong is a prominent centre for ship-owning, ship-financing and ship- management. Members of the Hong Kong Shipowners Association control a significant percentage of the world's shipping tonnage. At the end of 1995, their fleet stood at 1161 ocean-going vessels, totalling 33.1 million GRT. These ships are registered under many flags, but principally with the Hong Kong, Panamanian and Liberian shipping registers.

The association represents the interests of many local shipping interests in international shipping affairs. Besides shipowners, its members include banks, classification societies, maritime lawyers, average adjusters, shipbrokers, shipbuilders, insurers and surveyors. This broad-based membership provides a particularly effectively forum for liaison on current shipping issues with government and international organisations.

Hong Kong's Shipping Register

The Hong Kong Shipping Register is administered by the Marine Department. Its supporting legislation embodies international standards for vessel construction, equipment and manning, and is consistent with the territory's obligations under the International Maritime Organisation and International Labour Organisation

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conventions, including those on safety of life at sea, training and certification of crew, and protection of the marine environment.

  The department's surveyors or authorised classification societies undertake statutory surveys of Hong Kong-registered vessels world-wide to ensure that these standards are met. The register had a total fleet of 578 vessels, amounting to 8.7 million GRT, at the end of 1995.

Seafarers

Hong Kong is a centre for employing well-trained seafarers. Some 2 000 registered Hong Kong officers and ratings serve on foreign-going ships flying flags of more than 20 different maritime administrations. The Marine Department's Mercantile Marine Office registers Hong Kong seafarers and regulates and supervises their engagement on board ships, and the Examination Section monitors training provided to seafarers and examines candidates for certificates of competency.

  The Hong Kong Seamen's Training Centre, a modern and well-equipped learning institute operated by the Vocational Training Council, provides training courses for new entrants and in-service training. The falling recruitment of local seafarers nevertheless continues to remain a major concern. The Hong Kong Shipowners Association continues to sponsor cadets and trainees joining the Seamen's Training Centre.

Civil Aviation

The year saw continued growth in passenger traffic, and strong growth in cargo throughput at Hong Kong International Airport, at Kai Tak. A total of 27.4 million passengers passed through the terminal, which was 8.7 per cent more than the 25.2 million in 1994.

Some 1.45 million tonnes of cargo, valued at 563.8 billion, were handled, an increase of 12.4 per cent when compared to 1.29 million tonnes, valued at $447.6 billion, in 1994. Air transport continues to play an important role in Hong Kong's external trade in that goods carried by air account for about 22 per cent, 33 per cent and 15 per cent in value terms, of Hong Kong's total trade in imports, exports and re- exports, respectively. The USA remains the major market for exports and re-exports by air, accounting for 33 per cent and 23 per cent, respectively.

An increase of 4.8 per cent in aircraft movements was recorded in 1995, bringing the annual total to 150 118, of which 79 per cent were wide-bodied aircraft. The first Airbus A330 aircraft was entered into the Hong Kong register in February and at the end of the year the total number of these aircraft had risen to 10.

Throughout the year, tripartite meetings were held between air traffic control experts of the Civil Aviation Administration of China, the Civil Aviation Authority of Macau and the Hong Kong Civil Aviation Department. The instrument flight procedures for air traffic control for the four airports in the Pearl River delta region Hong Kong, Macau, Shenzhen and Zhuhai were co-ordinated and streamlined with a view to ensuring safety while promoting flight operation efficiency.

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Implementation planning for the new airport at Chek Lap Kok continued. Delivery and installation of air traffic control equipment began at the end of 1995 and site acceptance tests will be carried out in phases.

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C.

Improvements to the Airport

A number of works to improve the facilities or to increase the capacity of the Hong Kong International Airport passenger terminal building at Kai Tak were completed during the year. These included the rationalisation of an airside restaurant area to provide additional seating and waiting area for passengers in the airside depar- ture hall, and the provision of 37 additional airlines desks for processing transfer passengers.

      A new seating lounge was built for arriving group passengers, the arrival baggage- handling facility was expanded to provide extra baggage dolly unloading points, and lighting and fire alarm systems in the corridors of the terminal building office block were upgraded. Further improvements are under way, including expansion of the arrival greeting hall, the modification of the outsize baggage-handling facility to provide four additional check-in counters, and the acquisition of an aircraft noise and flight track monitoring system.

     All these improvements are aimed at enabling the airport to handle the passenger traffic growth arising from the anticipated increases in runway movements, aircraft size and passenger load factors during the remaining life of Kai Tak.

     A computerised check-in counter allocation system was tested and will be commissioned in early 1996. The existing check-in information directory boards are being replaced by large-screen colour television displays. Completion is expected in early 1996.

      The first information display system was further upgraded in October 1995 to allow the display of free-format messages, in both Chinese and English, for use during special situations such as tropical cyclone alerts.

      In order to meet the airlines' growing demand for airport office accommodation, a project to convert part of the seventh floor of the multi-storey carpark into offices is under way and is scheduled for completion in early 1996.

As part of the air traffic control modernisation programme, obsolescent equipment was replaced and facilities were introduced to improve the standard of service and operating efficiency. A new Directional Finding System was installed in August 1995, a replacement radar was installed at Mt. Parker, and enhancement of the existing Radar Data Processing and Display System was completed in October.

Contracts were also awarded for a new Terminal Area Radar at Tai Mo Shan and replacement equipment for the Very High Frequency Omnidirectional Radio Range and Distance Measuring Equipment at Cheung Chau. Both installations are expected to be commissioned in early 1996.

Construction of an additional exit taxiway at the seaward end of the runway was completed in October. This helps reduce overall runway occupancy time and, coupled with enhancements to the air traffic control system, will allow a small increase in runway capacity.

The Integrated Access Control and Permit Production System was improved in November and now provides automated production of Crew Member Certificates. A scheme to extend the system to cover access control of all staff entrances to the restricted areas is being devised and is due for commissioning in mid-1996.

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An additional fire appliance with a hydraulic platform for improving the fire- fighting and rescue capabilities at Kai Tak was put into operational use in May. Replacement of the existing four fire-fighting vehicles, with more than 10 years' service, is under way.

An additional aviation fuel tank and a new fuel pipeline were installed in October, improving the on-airport aviation fuel storage and replenishment capacity by 30 per cent. The airport will now be able to provide fuel for 3.5 days without replenishment if tropical cyclone alerts preclude the barging of fuel. Previously only about 2.5 days of fuel were available under such circumstances.

Air Services

Hong Kong is home to three international airlines. Cathay Pacific Airways (CPA), the largest of the three, started scheduled passenger services to Stockholm in March and to Surabaya in June. To upgrade its fleet, CPA has acquired two B747-400s, one of which is a freighter, seven A330-300s and two A340-200s to replace nine of its L1011s. At the end of 1995, its fleet comprised eight L1011s, seven B747-200s, six B747-300s, 19 B747-400s, seven A330-300s, four A340-200s, four B747-200Fs and two B747-400Fs a total of 57 aircraft.

Hong Kong Dragon Airlines (Dragonair) continued to operate scheduled services to seven cities in China and seven other destinations in Asia, together with non- scheduled passenger services to other cities in the region, mostly in China and Japan. Dragonair also continued to participate in the joint services between Bandar Seri Begawan and Hong Kong operated by Royal Brunei Airlines. The airline has added three A330-200 aircraft to its existing seven A320-200s and now operates a fleet of 10.

Air Hong Kong continued to operate scheduled all-cargo services to Manchester, Brussels, Dubai and Nagoya, and non-scheduled cargo services to other destinations in Asia, using two B747F aircraft.

With the introduction of scheduled services to Hong Kong by Southern Air Transport and Air Canada in July and December respectively, the number of scheduled airlines serving Hong Kong increased to 60. At the end of the year, these airlines together operated about 1 370 direct round-trip services weekly between Hong Kong and some 100 cities. In addition to the scheduled services, an average of 230 non-scheduled flights were operated each week.

  Under specific authorisation from the British Government, the Hong Kong Government continues to negotiate air services agreement (ASAs) and hold regular air services consultations with foreign aviation partners, to review and update current bilateral arrangements to cope with changing market circumstances. In 1995, 34 rounds of air services negotiations were held with 17 countries. An agreement was signed with Germany, bringing Hong Kong's bilateral ASAs to 11. In addition, negotiations were concluded and stand-alone ASAS initialled with the USA and Japan at the end of 1995.

In 1995, the Air Transport Licensing Authority granted four licences to Hong Kong airlines: one to CPA and three to Dragonair. At the end of the year, CPA held licences to operated scheduled services to 74 cities, Dragonair to 78 and AHK to 37.

$

Workmen make adjustments to what will become one wall of the central concourse in Hong Kong's new international airport at Chek Lap Kok. Travellers will be able to travel the length of the 750-metre concourse on a driverless train system called the Automated People Mover, or use two kilometres of moving walkways.

;

$..

Roofing modules for the passenger terminal being built at the new airport are 36 metres long and weigh between 43 and 136 tonnes.

Smoke and dust plumes shooting into the sky mark the last blast in the

excavation and reclamation work that created the airport platform for Hong Kong's new international airport. Contractors moved 10 tonnes of material every second for 31 months to create an airport from the 302-hectare island of Chek Lap Kok,

and its eight-hectare

neighbour, Lam Chau.

Road, rail and ferry links will provide swift travel to the new airport. The passenger terminal's vaulted and cantilevered roof was designed to act as an insulator, making it five times more energy efficient than the typical Hong Kong roof.

16 THE AIRPORT CORE PROGRAMME

GOOD progress continued to be made on implementing the Airport Core Programme (ACP), both in the construction of all 10 core projects and in financing arrangements for the new airport at Chek Lap Kok and the Airport Railway. The ACP, one of the world's largest civil engineering programmes, is designed to provide modern, efficient air transport facilities, together with associated road and rail facilities and new land, that will support the territory's continued economic expansion well into the next century.

      Apart from the new airport and the Airport Railway, the ACP projects comprise five road projects, including tunnels and bridges, stretching from Central District under the harbour, along the western shore of the Kowloon peninsula, across the islands of Tsing Yi and Ma Wan, and along the North Lantau coast; two major land reclamations in West Kowloon and Central District (in addition to the land reclaimed for the airport); and a new town at Tung Chung, North Lantau.

      In May, 1995, agreement was reached by the British and Chinese sides of the Airport Committee on the Airport Authority Bill, which provides for the recon- stitution of the Provisional Airport Authority (PAA) as the Airport Authority (AA) to enable it to provide, develop, operate and maintain the new airport. The Bill was passed by the Legislative Council in July. On December 1, the AA Ordinance came into operation and a 17-member AA Board was established on the same day.

      The British and Chinese sides of the Airport Committee agreed on June 30 that the Hong Kong Government could enter into Financial Support Agreements (FSAs) for the new airport and the Airport Railway with the AA and the Mass Transit Rail- way Corporation (MTRC) respectively. These agreements provide the government assurances needed to enable the two statutory bodies to launch their borrowing programmes in a cost-effective manner and press ahead with the airport and the Airport Railway projects. The agreements with the MTRC and the AA were then signed on July 5 and December 1, respectively. The MTRC raised a syndicated loan of $6 billion in Hong Kong in September, and issued its first Yankee Bond (US$300 million) in New York in October, part of the proceeds of which will finance con- struction of the Airport Railway. In November, the then-PAA signed an under- writing agreement with a group of 11 leading banks for the arrangement of an $8.2 billion syndicated loan facility. The credit agreement is expected to be signed in early 1996.

      Agreement was reached with the Chinese side on the award of several critical franchises for air cargo, aircraft catering and aviation fuel supply services. These franchises were to be awarded by the AA in late 1995 or early 1996.

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  Last year, excellent progress was made on all the 10 ACP projects with 48 per cent of work completed. By the end of the year, 157 major contracts valued at about $94.3 billion had been awarded by the government, the AA, the MTRC and the Western Harbour Crossing franchisee - the Western Harbour Tunnel Company Limited (WHTC).

  Major developments in works during the year included the completion of land formation for the airport platform and of the deck of the first road bridge linking the new airport island with Tung Chung, erection of main span deck sections for the Tsing Ma Bridge and the Kap Shui Mun Bridge, and immersion of the tunnel units for the Airport Railway. The excavation of the Route 3 Cheung Ching Tunnel also was completed.

  The seven projects directly funded by the government, together with the Western Harbour Crossing project, are scheduled to be completed by June 30, 1997. Physical works on the new airport are expected to be substantially complete by mid-1997. Allowing nine months for commissioning and trial operations, the target opening date of the new airport is April 1998. The Airport Railway is expected to be com- pleted in the same month and to open by June 1998 after tests and trial running.

The Need to Replace Kai Tak

A new airport is urgently needed because the international airport at Kai Tak is already operating at capacity in terms of passenger throughput. In 1994, Kai Tak ranked second in terms of international cargo and fourth in international passenger traffic. In 1995, more than 27.4 million passengers passed through Kai Tak, a rise of 8.7 per cent compared with 1994. Tourism receipts amounted to over 72 billion, representing a growth of 12 per cent. Kai Tak handled more than 1.45 million tonnes of international air cargo, a 12.4 per cent rise over 1994. Moreover, 33 per cent of domestic exports, 15 per cent of re-exports and 22 per cent of imports by value passed through Kai Tak.

  It is expected that there will be a continuous robust growth in air traffic and Kai Tak will be unable to accommodate the forecast passenger demand. Hong Kong will stand to suffer serious economic losses if Kai Tak has to operate at, or beyond, its designed capacity for a protracted period of time.

Memorandum of Understanding

The Memorandum of Understanding (MOU), signed by the British and Chinese Governments in 1991, recognises the 'urgent need for a new airport in Hong Kong' and requires the Hong Kong Government to complete the ACP projects 'to the maximum extent possible' by June 30, 1997.

The Airport Committee, which was set up in accordance with the MOU under the auspices of the Sino-British Joint Liaison Group, met frequently at the expert level during 1995 to discuss the overall financing arrangements for the new airport and the Airport Railway, the AA Bill, critical airport franchises and other issues.

  In reaching agreement on the financing arrangements for the new airport and the Airport Railway in June, the British and Chinese sides of the Airport Committee expressed their determination and confidence that construction of the new airport and the Airport Railway would proceed with all due speed to full completion as soon

THE AIRPORT CORE PROGRAMME

as possible. The Chinese side also reaffirmed its support for the new airport and related projects.

      The MOU provides that an AA will be established and that the ordinance setting up the body will be modelled, as far as possible, on the MTRC Ordinance. After consultations with the Chinese side of the Airport Committee in accordance with the MOU, a Blue Bill was introduced into the Legislative Council in May and was passed in July. The Airport Authority Ordinance came into operation on December 1.

Implementing and Financing the ACP

The ACP is being implemented by the government, two statutory bodies wholly owned by the government, and a franchisee for the Western Harbour Crossing. The government is responsible for seven of the 10 projects, which cover land reclamations and the construction of highways and a new town near the new airport. The AA is responsible for building and operating the new airport. The MTRC is responsible for building and operating the Airport Railway. The Western Harbour Crossing is being designed and built, and will be operated, by the WHTC under a 30-year franchise. The 10 ACP projects are projected to cost $158.2 billion in money of the day (MOD) value (sometimes known as out-turn prices). This takes into account the impact of inflation on the value of the dollar while projects are designed and built. This is particularly relevant to the ACP because most contracts are let on a fixed- price lump sum basis, which means that contract prices have been adjusted to cover inflation over the contract period.

Under an agreement on financing arrangements for the new airport and the Airport Railway signed in November 1994, the government will inject equity of not less than $60.3 billion into the two projects. The government will therefore meet a total of $112.8 billion, or more than two-thirds of the total ACP cost, in the form of direct funding of works projects ($52.5 billion) and through equity injection ($60.3 billion) into the AA and the MTRC.

Benefits for the Community

The main benefits for the community, in addition to the airport itself, will come from improved road and rail facilities, which will ease congestion in the West Kowloon and Kwai Tsing areas, besides opening up North Lantau. The closure of the existing airport at Kai Tak will also provide substantial environmental benefits for the 350 000 residents living under its flight path, who will escape the noise of aircraft.

      The projects will also provide further local job and business opportunities. The projects have already generated more than 16 800 job opportunities for local workers during the construction period. It is estimated that the new airport and the Airport Railway alone upon opening will create 6 000 new jobs.

The New Airport at Chek Lap Kok

Development of the new airport has entered its most intensive phase. In 1995, the focus shifted from design and site formation to above-ground construction, coupled with the finalisation of many institutional arrangements and agreements essential to the completion and operation of the new airport.

       After the Airport Authority Ordinance was enacted, the PAA was reconstituted as the AA when the Ordinance came into operation on December 1. It is a government-

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owned statutory body and conducts its business according to prudent commercial principles. It will continue with the work of the PAA in the provision and construction of the new airport, and will be responsible for the airport's future operation.

  The new airport at Chek Lap Kok is set to expand on the quality and range of aviation services currently available at Kai Tak. It will open with the first of its two runways, and could operate 24 hours a day. It will be able to handle 35 million passengers and three million tonnes of air cargo annually. The airport facilities have been designed to be expanded in stages, ultimately serving 87 million passengers and handling nine million tonnes of cargo a year.

Construction progress

A notable achievement was the completion of the 1 248-hectare airport platform in mid-June, after 31 months of reclamation and excavation. Work also began in many

new areas.

  At the beginning of the year, the $10.1 billion terminal building contract, the largest contract in the ACP, and the $1.88 billion contract for building services in the terminal building were awarded. The $2.61 billion airfield works contract was awarded in April 1995. The awarding of these major contracts brought the level of construction activities on the airport island towards its peak.

Passenger terminal building

The passenger terminal will be the focal point of the new airport and provide a dynamic gateway to Hong Kong. Its architecture, inspired by the concept of flight, is being matched by service innovations focused on passenger convenience and technical performance.

  More than 1.2 kilometres long with a gross floor area exceeding 490 000 square metres, the terminal will provide 30 000 square metres of space in the departures and arrivals areas and concourses for more than 150 commercial and retail outlets and services. It will connect with a ground transportation centre, which will provide the new airport with integrated road and rail systems and related facilities. The contract for construction of the centre was awarded in December.

Commercial franchises and operations

 Commercial opportunities at the new airport will be as diverse as Hong Kong's own economic profile. The Authority will encourage the private sector to provide a world- class, user-friendly airport with support services at competitive prices for all airport users: passengers, air cargo shippers, commercial franchisees and concessionaires alike.

  The franchises for air cargo, aircraft catering and aviation fuel supply system were either awarded in 1995 or were about to be awarded in early 1996. The franchise award process for other major support services in respect of aircraft maintenance and ramp handling also reached an advanced stage. All these services will have more than one franchise in order to provide competition and choice for airport users. An exception is the aviation fuel supply system where competition will be ensured through the provision of open access to the fuel facilities by all qualified aviation fuel suppliers.

THE AIRPORT CORE PROGRAMME

Government Facilities

Government facilities at Chek Lap Kok, which include the air traffic control complex and tower, meteorological, air traffic control, and postal mechanisation equipment and a police station, are estimated to cost $5,539 million in MOD. Work on these facilities is progressing well.

Formation of Land

In all, 1 669 hectares of new land will be created for the ACP. This consists of a 1 248- hectare platform for the new airport; 67 hectares of reclamation along the northern shore of Lantau for Phase I of Tung Chung new town; a 334-hectare reclamation at West Kowloon; and a 20-hectare section of a larger reclamation extending Central and Western Districts on Hong Kong Island.

The West Kowloon Reclamation will provide housing for 91 000 people, com- mercial space and vital road and rail arteries linking Kowloon with the new airport and north-western New Territories. The target completion date is mid-1997 and the project was 89 per cent complete at the end of 1995.

Phase I of the Central reclamation will provide opportunities for the development of Hong Kong's central business district, plus a site for the Airport Railway's terminus on Hong Kong Island. The project is scheduled for completion by mid-1997 and by the year's end it was 82 per cent complete.

Tung Chung new town will ultimately occupy two valleys at Tung Chung and Tai Ho on North Lantau, plus a coastal strip of reclamation in between. It is planned to house 14 000 people by 1997 and up to 200 000 people by 2011. Besides providing support services for the new airport, it will accommodate commercial and industrial developments and serve as an impressive gateway to Hong Kong for visitors. Housing will be a mixture of private and public rental, and the government's home ownership scheme. It will have several shopping centres; an office and hotel complex in the town centre, and an industrial area. Strong emphasis has been placed on community facilities, local and long-distance rail and bus transport links. Work on Phase I of the new town started in April 1992, with completion scheduled for the first quarter of 1997. The reclamation work has been completed and infrastructure works have begun. At the year's end, about 58 per cent of the project was finished.

New Transport Facilities

The five major highway projects in the ACP are designed to cater for the new airport's traffic and to relieve congestion on existing roads. They are the Western Harbour Crossing, West Kowloon Expressway, the Kwai Chung and Tsing Yi sections of Route 3, the Lantau Fixed Crossing, and the North Lantau Expressway. Together with the Airport Railway, these highways will provide a rapid transit system between the new airport, Tung Chung new town and the Central District, and stimulate developments on North Lantau.

New Highways

      The Western Harbour Crossing will be a dual, three-lane, immersed-tube road tunnel. It will link the West Kowloon Expressway on the West Kowloon reclamation with a new section of elevated road in Hong Kong Island's Western District connecting to Connaught Road Central. Apart from providing a key part of the airport highway

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route, it will relieve congestion at the two existing cross-harbour tunnels. Con- struction work started in September 1993 and is progressing well, with eight tunnel units sunk into position in Victoria Harbour. The project was 73 per cent complete at the end of 1995 and well on schedule for completion by mid-1997.

  The West Kowloon Expressway will run 4.2 kilometres from the northern portal of the Western Harbour Crossing to Lai Chi Kok, forming an important part of Route 3, with a dual three-lane carriageway. It will serve developments on the West Kowloon reclamation and help relieve pressure on existing local and distri- butor roads. Physical work on the expressway started in August 1993 and aimed at completion by the end of 1996. At the year's end, 70 per cent of the project was complete.

The Kwai Chung and Tsing Yi sections of Route 3 will link the northern end of the West Kowloon Expressway to the approaches of the Lantau Fixed Crossing. Its three major civil contracts cover the construction of the Cheung Ching Tunnel, Kwai Chung Viaduct and Rambler Channel Bridge. Work on these three contracts com- menced in 1993, for scheduled completion in early 1997. Significant milestones were reached during the year with the completion of excavation and concrete arch lining for the Cheung Ching Tunnel and completion of erection of bridge segments across the Rambler Channel. Overall, 78 per cent of the project is complete.

  The two-deck Lantau Fixed Crossing, carrying a railway as well as roads, consists of the Tsing Ma suspension bridge linking Tsing Yi to Ma Wan; a viaduct over Ma Wan; and the cable-stayed Kap Shui Mun Bridge linking Ma Wan to Lantau. The Tsing Ma Bridge is already a major Hong Kong landmark. Its main span of about 1.4 kilometres will make it the world's longest suspension bridge carrying both road and rail traffic. Work on the Lantau Fixed Crossing began in May 1992 and is due for completion in mid-1997. Spinning of the main suspension cables of the Tsing Ma Bridge was completed in April and suspended span erection started in August. Approach span construction is well advanced. Construction of the main span of the Kap Shui Mun Bridge began in May. Overall, 79 per cent of the Lantau Fixed Crossing project is complete.

  The North Lantau Expressway will be a 12.5-kilometre, dual three-lane highway along the northern coast of Lantau, linking the Lantau Fixed Crossing to Tung Chung new town and the new airport at Chek Lap Kok. Work started in 1992 and is scheduled for completion in early 1997. During the year, work for the first road bridge linking the new airport island with Tung Chung was completed. The project was 89 per cent complete at the year's end.

Airport Railway

The 34-kilometre Airport Railway will provide two separate rail services, operating mainly on the same tracks but with separate platforms. There will be a fast passenger link to the new airport at Chek Lap Kok, called the Airport Express, and a domestic service called the Lantau Line. Both will have maximum operating speeds of 135 kilometres per hour, compared with 80 kilometres per hour on existing Mass Transit Railway (MTR) lines.

  The Airport Express is designed as an all-seated, business class-type, express service providing a 23-minute link between the Hong Kong Island terminus and the new airport, stopping only at Kowloon and Tsing Yi. It is envisaged that six-car trains

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will be used initially at eight-minute frequencies, increasing, as required, to a maxi- mum of 10-car trains, operating every 4.5 minutes.

      Serving northern Lantau, West Kowloon and Central, the Lantau Line is designed as a conventional mass transit commuter service. It will bring much-needed relief to the MTR's Tsuen Wan Line, particularly along the Nathan Road Corridor. Stations will be built at Central, West Kowloon, Tai Kok Tsui, Lai King, Tsing Yi and Tung Chung new town, with provision for later additions.

Five sites, totalling approximately 62 hectares, have been identified along the railway route for residential and commercial property development. These are at Central, West Kowloon, Tai Kok Tsui, Tsing Yi and Tung Chung.

      During the year, the MTRC completed the detailed design of the railway and the award of the outstanding major civil and electrical and mechanical contracts. By the end of the year, all the major contracts had been awarded. The breakthrough of the first Airport Railway tunnel (the Tsing Yi tunnel) was achieved in December.

Contracts and Tenders

Up to the end of 1995, a total of 157 major contracts, worth about $94.3 billion, had been awarded. They included 88 contracts worth about $37.8 billion awarded by the government; 37 contracts worth about $33 billion awarded by the AA; 31 contracts at a total cost of $17.8 billion awarded by the MTRC and one construction contract awarded by the WHTC at a cost of $5.7 billion.

The government, AA, MTRC and WHTC welcome international participation in the ACP contracts and strictly apply Hong Kong's traditional 'level playing field' approach in tendering procedures and the award of contracts. A significant number of international companies, from a wide range of countries have won ACP contracts, often in joint ventures. By the end of 1995, Japan had won the largest share by value with 27 per cent of the total, followed by Hong Kong (22 per cent), the United Kingdom (16 per cent), the People's Republic of China (eight per cent), the Netherlands (six per cent), France (six per cent), Belgium (three per cent), New Zealand (three per cent), the United States of America (two per cent), Spain (two per cent) and Australia (two per cent). The remaining three per cent was shared by Germany, Italy, South Africa, Austria, Norway and Denmark. Firms winning consultancy contracts have come from Hong Kong, the United Kingdom, the United States of America, Australia, Japan, the Netherlands, France, Sweden, New Zealand and Germany.

Management and Cost Control

After the establishment of an overall strategy on the scope, programme and budget for the ACP, regular reviews were conducted in 1995. The strategy is the basis for the overall programme and its project management system. Fixed-price, lump sum contracts are being used for most projects to minimise risks to the government, especially from inflation and changes in the estimation of quantities.

Management and control systems have been implemented for the ACP, laying down procedures for monitoring and controlling programme progress and costs during the design and construction of the projects. Early warnings of possible cost increases are reported to the New Airport Projects Co-ordination Office (NAPCO) and relevant department heads. Upward trends, which could lead to cost increases,

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 are identified at an early stage. If cost increases are accepted, off-setting savings are sought in the same or other ACP projects. On top of this, the government's competitive tendering system has enabled it to obtain value for money on the ACP

contracts.

Government works departments, and other participants such as the AA, MTRC and WHTC, have full responsibility for their own project-level planning, execution, control and management. They are required to complete projects on time and within budget, and to report progress and co-ordinate their work through NAPCO.

  NAPCO's job is to ensure compliance with ACP plans, programmes and budgets, and to act as a focal point for the management of project interfaces and resolution of problems. It is made up of staff from the government and the ACP project management consultant.

Protecting the Environment

Environmental impact assessment (EIA) studies have been undertaken for each ACP project as an integral part of project planning and design. These studies have generally shown that, with suitable mitigation measures in operation, the projects will be environmentally acceptable. Such measures include the installation of noise barriers and enclosures and window insulation to mitigate noise exposure from construction sites and future highway and railway operations; plus general con- struction site housekeeping to minimise dust.

The island formed at Chek Lap Kok for the airport platform was designed to allow tidal water to flow between the airport and the North Lantau coastline, flushing partially-enclosed areas of water to the east. Much of the north coastline of Lantau involves reclamation, but most of the natural coastline west of Tung Chung will be retained. Several mitigation measures have been initiated for the loss of wildlife habitats along North Lantau and at Chek Lap Kok. These include ecological studies of local wetlands, seagrass beds and mangrove communities; the relocation of a colony of Romer's Tree Frogs from Chek Lap Kok; and the replanting of mangroves and woodlands.

Extensive environmental monitoring and audit programmes are being conducted by the project offices and reported to the Environmental Protection Department (EPD) to ensure the acceptable performance of individual projects. In addition, environmental project offices for the West Kowloon and Kwai Chung/Tsing Yi project areas were established by the EPD in 1992 and 1993, respectively, to monitor and audit the cumulative effects of the construction works and to ensure that environmental issues are quickly identified and acted upon by the works agents. Staffed by EPD and environmental consultancy teams, these offices also help to deal with local community concerns on environmental issues arising from the construction works.

Safety at Work

The government continues to promote safety at work on the ACP sites. The ACP Construction Safety Award Scheme is organised annually to recognise contractors and workers of ACP sites which have implemented sound safety management systems and achieved good safety records. Other measures have been taken to improve the safety awareness and knowledge of workers and supervisory staff. The Labour

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Department conducted 29 safety talks on sites to explain to the contractors' management and supervisory staff the general duties provisions set out in the Factories and Industrial Undertaking Ordinance. To ensure that the safety message reaches workers on site, contractors are required to conduct regular safety training for their workers.

Efforts to improve compliance with safety requirements on ACP sites have also been stepped up. The Labour Department has expanded its special team that checks ACP projects' construction safety standards and more staff have been assigned by the works agents to manage construction safety matters at ACP sites.

In 1995, the industrial accident rate for ACP contracts was 63 reportable accidents per thousand workers per year, compared with the corresponding rate of 275 for the construction industry as a whole in 1994.

Community and Public Relations

A comprehensive programme of community and public relations activities was implemented throughout the year. For schools, seminars and briefings on the ACP projects were conducted and boat tours to the ACP sites were organised. An ACP exhibition-cum-competition for secondary schools was held in February 1995. The ACP teaching kit for primary schools first issued in early 1994 was updated and issued in October to tie in with the revision of the primary school syllabus.

In all, 11 ACP district exhibitions were organised throughout the territory in 1994 and 1995. Briefings were given to a wide range of audiences, both locally and overseas. ACP presentations were made at international forums including the APEC Transportation Working Group Meeting in Beijing; the Pacific Rim TransTech Conference in Seattle, USA; Airport, Communication & Environment '95 in Osaka, Japan; and the Hong Kong Promotion in Tokyo, Osaka and Fukuoka. Tours of ACP sites were organised for groups including members of the Legislative Council; the Airport Consultative Committee; overseas government officials and parliamentary members; major business, professional and financial groups; consular representatives and the media.

      Promotional publications included a brochure, a bilingual leaflet describing the whole range of projects, and regular issues of a newsletter and a fact sheet on the progress of works. In addition, press releases and photographs were issued throughout the year to highlight project milestones.

NAPCO has provided an ACP Exhibition Centre in Ting Kau, open to the public from January 1996. NAPCO also manages a Public Resource Centre in Causeway Bay which has a wide range of technical papers on the ACP as well as publicity materials and videos.

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HONG KONG, the world's busiest container port, handled about 12.6 million 20-foot equivalent units (TEUs) in 1995. This represents an increase of some 14 per cent over 1994.

  Handling that cargo added significantly to Hong Kong's economy. Studies by the Government's Census and Statistics Department and Planning Department have indicated that port-related industrial and commercial enterprises contributed some 20 per cent towards Hong Kong's GDP and provided employment for 350 000 of its workforce. Matching supply of port facilities with demand will, hence, ensure economic growth and optimise employment opportunities for the community.

The Port Cargo Forecasts published early in 1994 predicted that, by the year 2011, there would be a demand for Hong Kong to handle 32 million TEUS a year. This will mean handling one TEU every second, 24 hours a day, every day of the year.

To cope with this demand the territory is planning a completely new container port on Lantau Island with twice the capacity of the present port at Kwai Chung. Building this new port, on a series of artificial islands stretching south-east from Lantau, will be one of the world's biggest civil engineering projects.

  The new port is vital, not only for Hong Kong, but for southern China, one of the world's fastest-industrialising areas. Some 65 per cent of cargo passing through Hong Kong is entrepôt trade with China. Despite the upgrading of Chinese port facilities, Hong Kong is likely to remain the hub port for the region well into the next century.

  To complete new terminals to cope with the demand, capacity equivalent to the annual total throughput of Britain's busiest container port will have to be added each year for the next 16 years. As has been the case with the existing container port, all the new terminals will be built and operated by private enterprise.

Hong Kong is the only major port in the world not run by a port authority. This is a system which has worked well to make Hong Kong not only one of the busiest, but also one of the most efficient ports in the world.

Port Development Board

 Hong Kong was founded as a port for the China trade just over 150 years ago. Since then it has flourished, not only as a port, but as a centre of demand-led, free market economics. Its port has grown along with its own economy and that of China. A decade ago, it became apparent that growth would be greater than expected. The demand for future facilities would be on a scale requiring careful co-ordination so that the development would integrate into overall plans for developing the territory.

PORT DEVELOPMENT

From recognition of this need came the Port Development Board (PDB), established in April 1990. It is not a port authority, but it advises the government on all aspects of port development and links government and private sector involvement in the process.

To do this, the board brings together key players from the private sector and the government to determine and promote solutions to problems. It acts as a focal point for ideas and opinions expressed by port operators and for anyone affected by port expansion. One of the board's main tasks is to determine what port facilities will be needed in the future and to advise on the best means of ensuring that those facilities are in place, on time.

Current Strategic Planning

While detailed planning and design proceeded for the first phase of Lantau Port, expansion continued at the present port at Kwai Chung. The four-berth Container Terminal Eight (CT8), on reclaimed land at Stonecutters Island, came into full operation early in 1995.

The completion of CT8, and significant investments in upgraded equipment and systems in the existing terminals, enabled Hong Kong to handle the growth in throughput in 1995. Nevertheless, at present rates of growth of demand for such facilities, it is expected that the Kwai Chung terminals will be operating at full capacity by the fourth quarter of 1996.

After the completion in mid-1995 of a PDB review of the container-handling capacity for existing terminals, it was confirmed that the first berth of Container Terminal Nine (CT9) on Tsing Yi Island was ideally required by September 1996. However, the continuing lack of China's endorsement of the grant of the develop- ment rights has delayed the start of work on this.

The delay to CT9 highlighted the need to complete the planning of Container Terminals 10 and 11 (CT10 and CT11), to be built at Lantau Port, and detailed design work has now been completed. Environmental considerations have played an important role in this planning. Terminals will be oriented to minimise visual and noise impact, while safety and operational efficiency are optimised.

With the continuing growth in cargo throughput, shippers are seeking additional means of transporting goods to and from China. They are increasingly using the natural highway of the Pearl River and there has been a substantial increase in container barge traffic on the river.

The PDB has forecast that by 2001 some 49 million tonnes of freight will be carried by river, rising to some 85 million tonnes in 2011. About 24 per cent of river cargoes were containerised in 1994. By 1995, this had reached some 27 per cent and it is forecast to reach 41 per cent by 2011.

River cargo-handling facilities, now mainly public cargo-working areas, are expected to reach capacity by 1996. To cope with the growing demand thereafter, plans have been finalised for the development by the private sector of Hong Kong's first River Trade Terminal (RTT) specifically designed to handle river cargoes. It is proposed to build this near Tuen Mun in the North-West New Territories. This would allow most river vessels to avoid the busy Ma Wan Channel and to keep clear of the ocean-going vessels using Kwai Chung and the new Lantau Port. The first phase of the RTT is planned to begin operations by late 1997. The development was

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put to tender at the end of 1995. In a related development, barge berth facilities have been included in the designs for CT10 and CT11 in Lantau Port.

Port Cargo Forecasts

According to the latest Port Cargo Forecasts, container throughput is expected to reach 32 million TEUS by 2011. This is startling, but it is as accurate a prediction as it is possible to make. It reflects an average growth rate of 7.6 per cent annually over the period from 1992 to 2011. Total cargo to be put through the port in 2011 would be in the order of 350 million tonnes, growing by 5.5 per cent each year over the same period.

The PDB's Port Cargo Forecasts are the basis of the government's Port Development Plan and Programme. The forecasts are revised every two years to ensure that they are kept as up-to-date as possible. The board will publish its next forecasts in early 1996.

  In compiling the forecasts, the board takes into account trends in Hong Kong and the projected growth of the world economy, the economy of China, particularly southern China, expected competition from regional and Chinese ports and likely changes in the related shipping and cargo patterns.

The development of these new Chinese ports is expected to stimulate growth and facilitate the further development of the economy. That will be good not only for China but also for Hong Kong. The additional traffic will increase the chance of additional shipping calls at Hong Kong and enhance its maritime support services. Any spur to competition can only be good for Hong Kong. As all sides recognise, the new ports will be complementary to Hong Kong and vice versa and this will help to ensure continuing high standards and quality of service in Hong Kong.

Port Development Plan

A report on the outline planning, feasibility and environmental studies for the Lantau Port was presented to the government in 1993. It described a recommended plan up to the year 2011 under which four container terminals providing up to 17 berths would open. They would form artificial islands having two port basins linked by a transport corridor.

  The selected layout permits flexible and phased development of container facilities and maximises wave protection. It also gives scope for further expansion.

Subsequently, the government appointed a consultant to carry out preliminary design studies for CT10 and CT11 which included measures needed to minimise any adverse environmental effects. At the same time, a separate consultant undertook ancillary works design for back-up land, transport links and other services for these terminals.

  Detailed design work was undertaken during 1995 so that as little time as possible would be lost between the tender award and commencement of construction. Feasibility studies for Container Terminals 12 and 13 (CT12 and CT13) will start in 1996.

PORT DEVELOPMENT

Lantau Port Container Berths

The current configuration is that each berth will have a 320-metre quayface with a terminal area of about 20 hectares and be supported by 10 hectares of off-terminal back-up land. This back-up area will be used for container storage, repair and refurbishment, as well as godowns, container freight storage facilities and lorry and trailer parking.

Depths alongside will accommodate post-Panamax vessels (which are so big they cannot use the Panama Canal) and the quays are designed for container gantry cranes with an outreach of 45 metres to service these larger vessels. The terminals will have sufficient flexibility to incorporate automated systems of handling containers.

Initially, marine access to CT10 and CT11 will be from the east using a short channel dredged from the East Lamma Channel/Victoria Harbour approaches. Dredging of the West Lamma Channel will be required with the construction of CT12. Its six berths will be on a central island facing south whose access will be by road bridges at the eastern end of the development. CT13 will provide a further four berths on a linked island developed close to Kau Yi Chau. Scope will exist for north- facing berths to be introduced on the central island as the final stage of development (Container Terminal 14).

Lantau Port Ancillary Works

Within the Lantau Port, River Trade Terminals are being planned to act as an import/export link for Pearl River cargoes going through the container port. The economic viability of these terminals would be reviewed in the light of eventual experience of operation of the RTT at Tuen Mun. These dedicated wharves would provide a sheltered basin with 2 000 metres of quays when fully developed.

Dockyard support facilities and new typhoon shelters are also planned as part of the ancillary works, as is a marine services support area, centrally located for both Victoria Harbour and the new port. This will provide a harbour for tugs, pilot boats, launches and floating cranes as well as shore support facilities for servicing and maintenance. As these ancillary works develop, it may become necessary to relocate floating docks presently operating off North Lantau.

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HONG KONG remains one of the safest cities in the world. The overall crime rate increased slightly in 1994, mainly due to increases in petty crimes such as shop theft and other miscellaneous theft, but violent crime continued to decline for the fourth year in succession.

  In the fight against organised and other serious crimes, the police effort was further enhanced in 1995 with the full implementation of the Organised and Serious Crimes Ordinance, whereby proceeds of these crimes may be confiscated, and the estab- lishment of the Witness Protection Unit.

  In June 1995, a Hong Kong-bound jetfoil from Macau was hijacked and robbed of about $10 million. Joint investigations by police in Hong Kong, China and Macau resulted in prompt detection of those responsible and recovery of the stolen property.

The Organisational Structure

The Fight Crime Committee, chaired by the Chief Secretary, provides valuable advice and puts forward recommendations on areas of public concern and on measures to improve the maintenance of law and order.

  The Royal Hong Kong Police has operational responsibility for crime prevention and detection; the maintenance of law and order; traffic matters and the detection of illegal immigration, other than at entry and exit points.

Fight Crime Committee

In 1995, the Fight Crime Committee continued to provide advice on measures to combat crime. Specific subjects considered included the social causes of juvenile crime, the crime victimisation survey, and the extension of the Police Super- intendents' Discretion Scheme to include certain drug offences. The committee also monitored the progress of the Neighbourhood Watch Trial Schemes, the imple- mentation of legislation to counter organised and serious crimes and regulate the security and guarding services industry, and launched a publicity campaign to fight youth crime.

  The Organised and Serious Crimes Ordinance aims to effectively tackle organised crime, including triad-related crime, and other serious crimes through, among other things, enhanced investigative powers and provisions for heavier sentences. It was put into full operation in April and updated in July this year.

  The Security and Guarding Services Ordinance is aimed at regulating the security and guarding services industry through the licensing of security companies and the

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issuing of permits to persons who undertake security work. Most of its provisions began operating in June 1995. The application period for security permits and licences began in November 1995.

      The committee has devoted much of its attention to the problem of juvenile crime. In September 1992, a sub-committee of the Fight Crime Committee commissioned the research team of the Social Science Research Centre of the University of Hong Kong to conduct a study into the social causes of juvenile crime. The research was completed in January 1995 and a report on social causes of juvenile crime was endorsed by the committee in April and released in May 1995. The report was distributed to district boards, District Fight Crime Committees, the Legislative Panel on Security, relevant government departments and other interested organisations. The recommendations drawn from these findings coincide with most of the existing government policies and services for juvenile delinquents.

Under the auspices of the Fight Crime Committee, Crime Victimisation Surveys (CVS) were conducted by the Census and Statistics Department in 1979, 1982, 1987 and 1990, respectively. The fifth round of CVS was conducted in January 1995 and a report was issued in September 1995 after endorsement by the committee. The survey findings give the government a separate source of information for planning anti-crime strategies and crime prevention measures, as well as assessing the level of success in encouraging the public to report crime.

      The Fight Crime Committee endorsed a recommendation to extend the Police Superintendent's Discretion Scheme to allow juveniles who have committed minor drug offences for the first time to be cautioned instead of prosecuted. This aims to rehabilitate juveniles who have committed minor drug offences, and facilitates close supervision of these juvenile offenders by giving them access to aftercare programmes.

      The Fight Crime Committee also monitored the progress of the six-month Neighbourhood Watch Trial Schemes which started in late 1994 in Mong Kok, Tuen Mun and Yuen Long. The schemes were based on the idea of self-help; namely, the mobilisation of the public to combat crime, especially burglaries in residential premises, through activities such as organising mutual aid groups and reporting suspicious activities to the Police. In April 1995, the committee noted that the schemes had met with an enthusiastic public response in all three districts, and endorsed a proposal to extend the schemes for another six months.

      District Fight Crime Committees continued to play an important role. They monitored the crime situation in their districts, and helped foster both community awareness of the need to prevent crime and community participation in combating crime. In September 1995, the committee endorsed the recommendation of the Action Committee Against Narcotics to make explicit reference to drugs in the terms of reference of the District Fight Crime Committees.

Police Force

Continued co-operation between the Royal Hong Kong Police and their mainland counterparts was evidenced in the successful joint operations and investigations conducted during the year. These operations not only resulted in the recovery of stolen vehicles and a reduction in smuggling activities, the success of mutual co- operation was epitomised in the prompt apprehension of a gang of armed robbers

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who hijacked a Hong Kong-bound jetfoil from Macau and stole about $10 million in June 1995. The subsequent joint investigation by police in Hong Kong, China and Macau resulted in arrests in all three jurisdictions and the recovery of the stolen property.

The year 1995 saw the enactment and implementation of the Organised and Serious Crimes Ordinance, and the establishment of a Witness Protection Unit on April 28. Key points in this legislation are that, subject to judicial approval, authorised officers can require the making of statements or the production of material by witnesses and, similar to anti-narcotics legislation, ask the courts to confiscate the proceeds of organised crime. The WPU can provide a witness with a wide range of protection measures to best suit the needs of that witness and counter any potential threat. A Witness Protection Appeals Board was also formed to arbitrate in grievances raised by witnesses concerning the protection offered or refused. The board comprises a senior police officer, a Security Branch representative and four distinguished members of the community appointed by the Governor.

In March 1995 the Commissioner of Police made public his commitment to the ongoing development of a Service of Quality. He advocated the adoption of the philosophy of continuous improvement, the development of qualitative measurement, the advance of awareness of all Force members as to the desires of the community through Customer Liaison Groups and the aim to respond to these expectations; greater emphasis on the best use of resources; and the development of further Performance Pledges.

The Force has introduced a strategy aimed at promoting a corruption-free working environment for its members. In August 1995, a Steering Committee was set up containing a cross-section of senior police officers, representatives of the Independent Commission Against Corruption and an adviser on human behaviour. It was tasked to identify and address those areas of police activities which present opportunities for corruption and the phenomena that influence susceptibility to corruption.

  Training was introduced at the Police Training School aimed at bringing women officers to the same standard as their male counterparts in using the Smith and Wesson Model 10 revolver. The first batch of 21 women recruits passed this training on August 19 and are now deployed throughout the territory joining women officers in the Emergency Units who were trained and armed in a separate pilot scheme. Meanwhile, women officers who joined before 1995 are being canvassed to gauge their interest in obtaining this skill and arrangements will be made to train and equip volunteers.

Crime

 Reported crimes in 1995 totalled 91 886, an increase of 4.6 per cent compared with the 87 804 crimes recorded in 1994. The crime rate stood at 1 484 cases per 100 000 of the population. This represented a slight increase of 2.4 per cent, compared with 1994.

  Violent crime, which includes murder, wounding, serious assault, rape, indecent assault, kidnapping, blackmail, criminal intimidation, robbery and arson, declined to 17 087 cases, compared with 17 232 in 1994. Robbery, wounding and serious assault accounted for some 73.2 per cent of the total number of violent crimes in 1995.

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The situation regarding vehicle theft improved considerably. Overall, 4 261 motor vehicles were reported missing in 1995, a drop of 6.1 per cent compared with 1994. The number of robberies involving the use of firearms- both genuine and pistol-like objects - was 162, a marked decrease of 13.4 per cent compared with 1994.

      A total of 47 780 crimes, or 52 per cent, were detected, with 53 098 people arrested for various criminal offences. Of those arrested, 6 723 were juvenile offenders (aged between seven and 15 years) and 8 961 were young persons (aged between 16 and 20 years).

Violent Crime

     The overall incidence of violent crime did not change significantly, but the number of robberies in which genuine firearms were used continued to drop. The reasons for this included successful police action against firearms suppliers, both within Hong Kong and in China, and the increasing difficulty experienced by criminals in disposing of the proceeds of this type of crime.

      One worrying trend however, was the increase, particularly in the early part of the year, in the incidence of bank robbery, reflecting a general tendency towards 'quick cash' crime.

Vehicle Theft

The pattern of vehicle theft changed dramatically during the year. The theft of luxury vehicles continued to decline due to continued police enforcement action in the territory and a heightened awareness of this particular problem in China. However, mid-range saloons and small-capacity motorcycles continued to be popular targets for vehicle thieves, reflecting a continued demand in China.

Seizures of smuggled left-hand drive vehicles in transit through the territory increased, indicating the effectiveness of the clampdown by the Chinese authorities on the registration of right-hand drive vehicles.

      A significant new trend was the theft of articulated tractor units for re-sale in China. The relatively remote parking locations for container trucks aided the syndicates specialising in this type of crime, as did the ever-growing volume of cross-border traffic. Several syndicates involved in this type of vehicle theft were neutralised in operations mounted with the assistance of other government departments.

Organised Crime and Triads

Sustained action against triad activities met with substantial success throughout the year. One prolonged intelligence-based operation resulted in the arrest of several prominent triad personalities in Kowloon West Region. Co-operation with other government departments was instrumental in interrupting triad involvement in the wholesale food trade and in the decoration of residential premises, both traditional areas of triad activities. A specific focus on triad involvement in the entertainment industry resulted in a substantial reduction in the number of intimidation and extortion cases in this sector.

Regional and territory-wide initiatives resulted in the disruption of a number of loan-sharking syndicates during the year. Recognition of the degree of organisation involved in offences of this type, as well as the serious social consequences of loan-

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sharking, resulted in the increasing involvement of the Organised Crimes and Triad Bureau in investigations into the activity. One notable success was the neutralisation of a syndicate which had targeted civil servants.

  However, set against these successes was an increase in wounding cases, assault and intimidation, which were crimes regarded as being typical of triad activity, and indicative of the continuing threat posed by triads.

  The continuing liaison with the Chinese authorities, together with a high level of enforcement action, halted the previous trend of recruiting illegal immigrants to commit armed robberies or other crimes in Hong Kong.

  The Organised and Serious Crimes Ordinance was put into full operation on April 28, 1995. The main provisions empower the police to require witnesses to give evidence, allow the confiscation of crime proceeds, and make money-laundering an indictable offence. This, coupled with the introduction of an expanded Witness Protection Scheme, gives the law enforcement authorities a useful weapon in the fight against organised crime and triads.

Witness Protection Unit

The Witness Protection Unit was formed in April 1995 to tie in with the new police powers under the Organised and Serious Crimes Ordinance. Its measures range from the provision of an emergency telephone number to round-the-clock protection in a Police-operated safe house. The unit has 34 specially-trained officers. Additional staff can be assigned if necessary.

Vulnerable Witnesses

With the enactment of the Evidence (Amendment) Ordinance and the Criminal Procedure (Amendment) Ordinance with respect to vulnerable witnesses, the Force and the Social Welfare Department established a joint-investigation programme in November for all child-abuse cases. Five dedicated Regional Child Abuse Investigation Units were set up to investigate cases involving children who had been sexually or physically abused; mentally handicapped persons; and to assist in cases involving witnesses in fear.

  In tandem with this move, three interview suites with video recording equipment were established. The suites are being used to video tape interviews with victims and witnesses and conduct forensic medical examinations in a friendly and non- threatening environment.

Before the legislation was enacted, the first multi-disciplinary Training Programme for Video Recorded Interviews of Vulnerable Witnesses, jointly sponsored by the Police and Social Welfare Department, was held at the Police Training School between June 5 and 30. The presenters of the course - three British experts in child protection - addressed more than 1000 officials from government departments and non-government organisations concerned with the welfare of the child and the family. Sixty officers underwent more intensive training covering: understanding of child development; the problems related to child sexual and physical abuse; investigative processes and procedures; and advanced skills and techniques for interviewing both children and the mentally handicapped on video tape specifically for the purpose of investigation and prosecution.

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Commercial Crime

The Commercial Crime Bureau maintained its emphasis on the investigation of fraud within the financial and trading sectors. The Leveraged Foreign Exchange Trading Ordinance, which came into effect on September 1, 1994, has brought about a dramatic decrease in the number of complaints against unscrupulous foreign exchange companies.

Since its inception in 1993, the Computer Crime Section has been tasked with enforcing the Computer Crimes Ordinance. Cases handled varied from hacking via the Internet to the destruction of company databases by employees. The section forged links with similar units in other police forces throughout the world.

The Counterfeit and Forgery Division enjoyed another fruitful year in the fight against the production and use of counterfeit credit cards. Within a six-month period, four counterfeit credit card factories, including one operated in China by Hong Kong criminals, were successfully detected. These operations saved billions of dollars in potential losses for the credit card industry.

Narcotics

Strict enforcement initiatives in Burma and China noticeably disrupted supplies in 1995. The purity of No. 4 heroin continued to fluctuate slightly and, by the end of 1995, it was 23.34 per cent, compared with 23 per cent in 1994. Prices fluctuated throughout the year, and by the end of 1995, one gram of heroin cost $380, as against $463 for the same period in 1994.

In 1995, 379.9 kilograms of opiate drugs, comprising opium and No. 4 heroin, were seized, compared with 455 kilograms in 1994. There were 16 143 arrests for narcotics offences, compared with 15 601 in 1994.

Narcotics enforcement resulted in 21 heroin manufacturing or cutting centres being neutralised. Additionally, the territory's demand for methylamphetamine or 'ice' increased. A total of 14.53 was seized in 1995.

       Since the introduction of the Drug Trafficking (Recovery of Proceeds) Ordinance in September 1989, and the establishment of the Financial Investigation Unit, a total of $91,252,525 has been confiscated from drug traffickers in Hong Kong. As a result of international co-operation, a total of $299,423,517 has been seized from local drug traffickers overseas.

Crime Prevention

The Crime Prevention Bureau continued its public education programmes on the principles of crime prevention and the provision of specific security advice to vulnerable targets within the community. A new Mobile Exhibition Centre, which displays various security equipment, has greatly enhanced the bureau's efforts in promoting domestic premises security.

       The bureau also worked closely with the Security and Guarding Services Authority, which was established on June 1, 1995, with a view to improving the service standard of the security industry. The bureau's capability in the fields of secure environmental design and computer security was further enhanced by the creation of dedicated units for these functions. Close liaison with the Housing Department has achieved considerable improvements in the security of public housing estates.

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  The purchase of a new model 'Robotcop' enabled the continuation of anti-crime campaigns to juveniles through schools, youth organisations and public exhibitions.

Crime Information

The Criminal Records Bureau (CRB) is the sole repository for criminal records in Hong Kong, housing complete records on all persons convicted of crime in the territory. These records and indices provide details of persons wanted, suspected offenders, missing persons, stolen property, outstanding warrants and missing vehicles.

The CRB also has an Enhanced Police Operational Nominal Index Computer System (EPONICS), which operates round-the-clock to provide immediate enquiry support to all operational officers. The bureau has embarked on a programme to improve efficiency and effectiveness with gradual introduction of a fully computerised system to house all records.

Ballistics and Firearms Identification

Cross-border co-operation has continued to cut down the number of arms surfacing in Hong Kong. This is reflected in the figures of arms seized during the year, 36 in 1995 compared with 43 in 1994. The bureau dealt with 248 cases in 1995, a slight decrease against the figure of 265 in 1994.

The bureau, in addition to acquiring a comparison microscope, is considering the purchase of a computer-assisted comparison system. The system, at present is still in the early stages of development, shows great promise of reducing the amount of time required to complete cases compared with the traditional, labour-intensive method. The bureau remains active in assisting the private sector to test bullet-resistant materials for the security industry.

Identification

The Identification Bureau supports all units in the Force in fingerprint technology and forensic photography. In fingerprint identifications, it continued to achieve improved levels of efficiency and service in 1995. The Computer Assisted Fingerprint Identification System (CAFIS), coupled with traditional methods of comparing fingerprints, led to 1 078 people being linked to 1 071 criminal cases during the year. Full computerisation of the bureau's fingerprint records has been approved and the system should become operational in mid-1996.

  Officers from the Scenes of Crime Section attended 24 645 crime scenes to examine fingerprints in 1995. Various measures were introduced to reduce the time taken to reach crime scenes, including experimental deployment schemes and the use of advanced communications equipment.

As the sole repository for fingerprint records in Hong Kong, the Main Finger- print Collection Section's principal task is confirming people's previous criminal convictions. In 1995, the section processed the fingerprints of 212 409 persons and identified 88 328 as having criminal records.

The Photographic Section produced 82 301 monochrome photographs and 871 900 colour prints and slides during the year. It also made videos of crime re-enactments, video-taped statements from suspects and prepared photographic exhibits for presentation in court.

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Interpol

The Royal Hong Kong Police joined the International Criminal Police Organisation (ICPO) - better known as Interpol in September 1960 as a sub-bureau of the United Kingdom National Central Bureau. In 1995, ICPO had a membership of 176 member countries or bureaux and 11 sub-bureaux including Hong Kong. A Hong Kong police officer is seconded to the ICPO Secretariat General in Lyon, France, to form part of a specialised group.

Interpol aims to ensure and promote the widest possible mutual assistance among police authorities in the prevention and suppression of crime, pursuant to the laws existing in different ICPO member countries and within the spirit of the United Nations Declaration of Human Rights.

      Interpol Hong Kong acts as a co-ordination centre in dealing with criminal information and associated inquiries between Hong Kong and Interpol member countries which have diplomatic relations with the UK. It also maintains close liaison with local consulate officials and police agencies.

Partly as a result of increased cross-border criminal activities, liaison with China has expanded in the past few years. Contacts with Chinese law enforcement organisations have been established at national, provincial and municipal levels, and two Chinese liaison officers have been stationed in Hong Kong since 1993.

Public order

The Public Order (Amendment) Ordinance 1995 was enacted on July 28. It updates provisions which deal with public meetings and processions, in the light of police experience in handling public gatherings and having regard to the Bill of Rights. The previous requirement for the licensing of public processions is replaced with a requirement for advance notification. It is not necessary to notify the police before public meetings and public processions consisting of fewer than 50 persons, and 30 persons, respectively. The ordinance also establishes an Appeal Board on Public Meetings and Procession to consider appeals against any police decision to prohibit the holding of, or to impose conditions on, public gatherings.

No major incidents affected Hong Kong's internal security in 1995. The Police Tactical Unit (PTU) was committed to anti-crime patrols, illegal immigration operations and crowd management throughout the territory during festive occasions. It also played an important role in maintaining law and order at demonstrations and public gatherings. The PTU provided support to the Correctional Services Department in Vietnamese Migrant Centres with regard to the Orderly Repatriation Programme. The PTU twice had to restore order in the centres after serious rioting. The PTU Headquarters at Fanling houses some highly advanced training facilities. These include a shooting range complex including a 100-metre outdoor range, a 25- meter indoor range and eight mini-ranges using video wall simulation. There are also an assault course, a firearms tactical training tower, a multi-purpose sports ground, a gymnasium and a swimming pool.

       More than 2 000 police officers, from the rank of superintendent to constable, were trained in the PTU companies during the year. The PTU is also responsible for the continuation training of the District Internal Security Companies, 22 of which are in the Police Force. The all-female company, 'Tango' Company, which consists of five

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 platoons, attended three days' training at PTU. This training focused on crowd control, Internal Security, and working with Black Hawk helicopters.

  The Special Duties Unit, the Force's counter-terrorist response unit which is also based at PTU Headquarters, was used several times to assist Crime Units against dangerous armed gangs.

Illegal Immigration

 Illegal immigration from China continued to be a major problem. During the year, the police arrested 26 824 illegals from China, representing a 14.9 per cent decrease over 1994. Most were immediately repatriated.

  Among those arrested, 52.5 per cent claimed to have entered the territory by sea and the rest by land. An increasing number of these land-crossers resorted to hiding in trains or cargo vehicles, instead of climbing over the border fence.

The police continued their responsibility for the border and, on average, deployed over 1 365 officers each day to counter illegal immigration. The upgrading of the border fence, enhanced at the expenditure of more than $50 million was completed at the end of 1995. The Marine Police had an average deployment of 75 vessels per day at sea to prevent incursions by illegal immigrants.

  About 54.6 per cent of arrested illegals had entered the territory previously. Most intended to enter Hong Kong to seek employment, but an increasing number tended to come as mendicants or to reunite with family members. Moreover, a significant proportion of illegal immigrants from the northern provinces of China sought to enter Hong Kong to obtain money by criminal means.

Vietnamese Migrants

 During the year, the police continued to carry out regular searches of camps for home-made weapons, illegal items and alcohol-brewing equipment. They also provided support in the transportation of Vietnamese migrants (VMs) between detention centres, from these centres to the airport, and escorts to Vietnam, under the Orderly Repatriation Programme (ORP).

  Although there have not been regular demonstrations in detention centres during the year, a number of transfers of VMs between detention centres during the year have been met with strong resistance. In May, a joint operation by the police and the Correctional Services Department (CSD) to move about 1 500 inmates from Section 1 of the Whitehead Detention Centre to the High Island Detention Centre met with strong resistance from all sections in the camp. Tear gas had to be used to restore law and order, and some police and CSD officers were injured by home-made spears and other missiles. In June, the VMs in High Island set fire to buildings before an operation to move 100 inmates to Victoria Prison in preparation for an ORP flight. Again, tear gas had to be used to restore law and order.

Traffic

The Road Traffic (Amendment) Bill 1995, enacted in mid-1995, introduces a pre- scribed limit for alcohol levels and specific requirements for the taking of samples of either breath, blood or urine. Previous legislation did not give the police the power to demand such samples for analysis. This limited the number of prosecutions that could be initiated. The new provisions came into operation towards the end of 1995

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and gave the police extra powers to identify persons driving under the influence of alcohol. Coupled with public awareness, this should help reduce the number of accidents associated with alcohol intoxication.

      Vehicular traffic between Hong Kong and Shenzhen via the three crossing points at Man Kam To, Lok Ma Chau and Sha Tau Kok continued to rise during 1995. Lok Ma Chau, which began 24-hour operations in November 1994, was the busiest vehicular crossing point.

      The proliferating cross-border traffic, and the additional amount of traffic that came as the Airport Core Project works gathered momentum, exerted yet greater pressure on the road infrastructure, which was already strained by the increased vehicle population. Serious congestion problems arose in many areas, notably, the tunnel approaches, Tuen Mun Road, and the container port area.

Besides the many measures proposed by the Transport Branch, the Police regions had contingency plans and procedures to tackle traffic congestion in various areas. Better co-ordination in road works, positioning of patrol officers at strategic locations and increased enforcement action against illegal parking were other tactics adopted to forestall anticipated congestion. Enforcement action continued at a high level.

      Having weighed all arguments for cross-harbour taxi stands, the Transport Branch introduced a six-month trial scheme from July 30. Two locations on either end of the Cross-Harbour Tunnel were designated cross-harbour taxi stands. A single toll charge of $10 was charged for a cross-harbour journey originating at these stands. The locations are being closely monitored by patrol officers to ensure there are no undue problems.

During 1995, there were 14 802 traffic accidents causing casualties, representing a decrease of 4.2 per cent against the previous year. The number of fixed penalty tickets issued decreased slightly compared with 1994. The police and traffic wardens issued 1.92 million tickets for parking offences during the year, representing a decrease of 7.4 per cent when compared with the 2.07 million tickets issued in 1994.

Marine Police

The accelerating pace of construction at Chek Lap Kok Airport and north-west Lantau, the partial opening of the River Trade Cargo Terminal in Tuen Mun, and the ongoing reclamation in Victoria Harbour contributed to a significant increase in sea traffic in the year, particularly in the harbour and western waters areas.

Sharks returned to Sai Kung waters in June 1995, resulting in three fatalities. Extensive shark-monitoring patrol operations were carried out throughout the summer in the territory's eastern waters.

       Marine Islands District saw a considerable increase in workload as the PADS projects gained momentum. The outlying islands, particularly Lantau, continued to attract many visitors, with the Tian Tan Buddha at the Po Lin Monastery remaining the main attraction.

      Smuggling activity involving speedboats, particularly dai feis and chung feis, continued to decrease during the year. In May 1995, the Small Boat Division was created, comprising the Anti-smuggling Task Force and the Small Boat Unit. The

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new setup allows resources to be more effectively deployed to combat smuggling and illegal immigration.

  The Marine Police continued to play an important role in combating illegal immigration from China. During the year, 2410 people were apprehended when trying to sneak in by sea, representing an increase of 10 per cent compared with 1994.

  The majority of arrivals originated from Haifeng, Dongguan and Taishan in Guangdong Province. Economic incentives and family reunion continued to be the major motivating factors behind illegal immigration. Mirs Bay and Deep Bay remained the most popular crossing points.

  During 1995, a total of 762 Vietnamese migrants arrived in the territory by sea on 44 vessels. Of these, 670 elected to have their vessels refuelled and reprovisioned and to continue their voyage. In the latter half of the year, a number of Vietnamese vessels, operating from larger craft outside the territorial boundary, were found to be involved in thefts from the shores of the outlying islands and from merchant vessels moored in Hong Kong waters.

Bomb Disposal

The Explosive Ordinance Disposal Bureau rendered safe more than 7 000 explosive devices during the year. These ranged from improvised devices constructed by criminals, to pyrotechnics, and unexploded shells and bombs left over from World War II and even earlier.

  The bureau maintains contacts with other units throughout the world and is constantly upgrading procedures and equipment to enhance safety and flexibility when dealing with explosive devices.

Public Relations

The Good Citizen Award Scheme and the Good Citizen of the Year Scheme remained effective vehicles for gaining public support in the ongoing fight against crime. The schemes have been running successfully since their introduction in 1972 and 1984, respectively, as a long-standing project jointly administered by the Police and Hong Kong General Chamber of Commerce. So far, the schemes have given recognition to a total of 2 533 public-spirited citizens.

  The police telephone hotlines, as in previous years, functioned productively throughout the year. The general hotline, 2527 7177, registered calls which led to arrests. The enhanced triad hotline, 2527 7881 - now known as the Organised Crime and Triad Hotline was very well received and produced positive results.

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  Another favoured avenue for crime reporting, the Crime Information Form, continued to provide useful information. Altogether, 234 completed forms were received, resulting in arrests.

  One of the most successful bridges between the police and the community has been a youth organisation - Junior Police Call (JPC) - set up in 1974. At the end of 1995, the JPC had 197 195 members and leaders. The JPC helps to guide its members towards becoming responsible and law-abiding citizens.

  Apart from participation in fight-crime activities and crime-prevention campaigns, members are provided with a wide range of sports, recreational and educational programmes, organised to foster a positive attitude towards a healthy life. In

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conjunction with Radio Television Hong Kong (RTHK), the Force produces a weekly radio programme Voice of JPC, which provides a good forum for the co- ordination and promotion of youth activities.

      The Force also jointly produces, with RTHK, three television magazines: Crime Watch, Police Report, and Police Magazine. These programmes, broadcast in English and Cantonese, ask the public for information on undetected crimes and issue advice on crime prevention. Special features on current crime trends, as well as the various facets of police work, are also highlighted. The programmes score a consistently high audience rating.

       Visits to the Force are also encouraged. During the year, local and overseas visitors were received by the Police Public Relations Branch (PPRB). The Police Museum, police stations and other formations and units, remained favourite spots for the visitors.

Information on crime, police action and activities are disseminated to all news organisations in the territory 24 hours a day through the PPRB. Staff seconded from the Information Services Department deal with press enquiries and assist media coverage at major scenes of crimes and incidents. During the year, they organised 175 press conferences and briefings, attended 115 incidents, and issued 3 390 press releases. The PPRB also produces a fortnightly newspaper, Off Beat; monitors media coverage of police and criminal activities; and promotes various campaigns.

Planning and Development

Planning went ahead for the new airport at Chek Lap Kok. Work started in May on the new Lantau District Headquarters/Tung Chung Police Station; and on the Chek Lap Kok Airport District Police Station in September. Work is also well under way on the police facilities inside the new airport terminal.

      The development of a comprehensive property strategy for the Force was started, entailing a detailed study of the police estate. When completed, the strategy will serve the Force well into the next century.

      During the year, the Force embraced a no-smoking-in-the-workplace policy and planning was completed for the implementation of Phase I of the policy on January 1, 1996.

      Projects completed during the year included the Kowloon East indoor ranges complex, enhancement of the border fence, and the refurbishment of Caine House at Police Headquarters. The new 32-storey Police Headquarters building, to be named: Arsenal House West Wing, was handed over to the Force in stages, commencing December 1995. The refurbishment of quarters at the New Territories Depot and at the Police Training School was completed in October and December respectively. Work will start soon on projects including a new detective training school, the refurbishment of May House, Police Headquarters and enhanced tactical firearms training facilities.

      New married quarters at Wong Tai Sin are expected to be completed by the second quarter of 1996, providing 429 units for junior police officers. Work on married quarters at Chai Wan and Ngau Chi Wan began in June and 808 units will be allocated to junior police officers upon completion towards the end of 1996.

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Communications

An interactive voice response system is being installed at the PPRB, the Licensing Office, the Certificate of No Criminal Conviction Office and the Force Recruitment Group to help handle public enquiries. To enhance the quality of the 999 hotlines service, a bilingual recorded message has been installed, which, when all operators are busy, will assure users of the 999 hotlines that they have reached the correct number and will be answered as soon as an operator is available.

  A program to replace all the police analogue cellular phones by digital phones was completed. A sophisticated service centre for the repair of thermal imagers will be set up

in 1996. A new digital radio system for Traffic police is being designed to provide secure communications with better and wider radio coverage and less interference. It is scheduled for completion in mid-1996.

The planning and development of communications needs for other major projects are proceeding. They include the mini-firing ranges at Kowloon East Operations Base, the alarm and intercom system for 427 detention cells in 50 police stations, a surveillance CCTV system for Phase II of the new Police Headquarters, the replacement of the Mass Transit Railway District radio control facilities, the police communications systems at Chek Lap Kok airport and, the new Marine police communications system.

Transport

The Force has about 2 300 vehicles, comprising nearly 800 motorcycles, 500 large vans, 240 lorries and 450 saloon cars, plus a range of specialist vehicles such as Saxon armoured personnel carriers and tow trucks. After a review of the role and equipment of the small motorcycle primarily used by District Traffic Teams and Divisions for patrol purposes, a new, larger model was introduced in 1995.

A replacement vehicle for the police lorry was tested in 1995. The lorries, which form the backbone of the Internal Security fleet and are used daily by the Police Tactical Unit, will be replaced in a six-year program starting in 1996. The new vehicle, an enclosed 19-seater, is equipped with air-conditioning, power-steering and enhanced protection.

Information Technology

Top priority has been given to system development since the review of the Force's Information Technology (IT) Strategy in 1994. Three systems-Modus Operandi, Police Training School and Commercial Crime Fraud Investigation Management - are already operating. The Communal Information and Personnel Information Communal systems, which assist in day-to-day operations and improve personnel administration, respectively, were in the design stage. Process re-engineering studies which examine existing procedures and determine the most efficient way to carry out tasks continued on systems including leave recording, reference materials and

traffic operations.

Large-scale site preparation work for the Police Data Communication Network, which will interconnect all information systems within the Force, continued through- out the year and the Police Email Network (PEN) replaced DATANET as the new Force-wide message switching network in November.

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      In addition to the systems defined in the IT Strategy, the Force implemented the Bilingual Charge Sheets System. Copies of this system have been given to other government departments, including the ICAC, Customs and Exercise, and Immigration for their operational use. Some existing computer systems used in the regions were enhanced with the use of CD-ROM reader and PC-based enquiry tools.

Service Quality Wing

The Service Quality Wing, established in May 1994, has three branches: Performance Review, Research and Inspections and Complaints and Internal Investigations.

       On March 9, 1995, after several months of research and consultation undertaken by the Performance Review Branch, the Commissioner announced the Force's commitment to a continually improving 'Service of Quality'. A follow-up programme disseminated the broad objectives of this commitment to all Force members. The branch undertook several efficiency and policy option studies during the year and continued to have responsibility for the administration of the Police Staff Suggestion Scheme, introduced in 1994. This scheme promotes better work practices in line with the Force's commitment to quality service.

      The Research and Inspections Branch monitors inspections within Police regions and conducts thematic studies throughout the Force. The emphasis is directed at developing an effective, efficient and economic service which meets the needs of the public. It also carries out research into a variety of issues which may have an impact on strategic planning and on Force policy.

The Complaints and Internal Investigations Branch investigates all complaints against police officers, including civilian staff and auxiliary police officers. The results are monitored and reviewed by the Independent Police Complaints Council (IPCC), which monitors the investigation of all complaints againt police.

Complaints Against Police

The Complaints Against Police Office investigates all complaints from the public concerning the conduct and behaviour of members of the Force, including civilian staff and auxiliary police officers. In 1995, 3 454 complaints were received. This represented an increase of 370 cases, or 12 per cent over 1994. Over 96.5 per cent of complaints in 1995 came from people either involved with, or subjected to, constabulary action. Complaints of assault, neglect of duty and conduct/manner made up the majority of cases, or 78.4 per cent of total complaints received. Investigations into 3 195 cases were completed and endorsed by the IPCC. The substantiation rate for complaints fully investigated was 15.5 per cent. The number of cases classified as Withdrawn or Not Pursuable was 2 126, representing 66.5 per cent of the total. Altogether, 566 cases or 17.7 per cent of all complaints were dealt with through an Informal Resolution Scheme. A total of 64 police officers were disciplined and 23 charged with offences resulting from the complaints.

      The Complaints Against Police Office is also responsible for advising Force members on how complaints can be prevented. Throughout the year, lectures and seminars on complaint prevention were organised for junior police officers, with the aim of improving public relations and reducing conflict situations. A Complaints Prevention Committee, made up of various ranks in the Force, was established in 1992 to make recommendations on how complaints can be prevented and how its recommendations can best be implemented.

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Police Licensing Office

The Commissioner of Police, through the Police Licensing Office, is the Licensing Authority for various licences and permits. As the Societies Officer, he also accepts notification of the establishment of local societies.

  In 1995, a total of 1 112 notifications of public meetings, 401 applications for public procession licences and 895 applications for lion dance permits were received. The office also processed 31 applications for massage establishment licences, four applications for pawnbroker licences and 90 applications for temporary liquor licences. The office ceased to issue loudspeaker permits on June 6 and the total number of applications dropped to 964.

  During the year, 1 099 societies notified the Societies Officer of their establishment and 622 societies were dissolved. At the year's end, a total of 6 579 societies had provided notification of their establishment.

  In 1995, 28 781 persons applied to register as watchmen; 22 382 permits were granted and 1 438 of them were granted arms licences. At the year's end, a total of 163 589 watchmen were registered. A total of 183 persons applied to possess firearms for competition or target shooting.

  In the first three months of 1995, 14 auctioneer licences were issued and there was no application for marine store dealer licences. In April, both licences were repealed.

Police Dog Unit

 Formed in 1949, the Police Dog Unit is now accommodated in purpose-built accommodation within Queen's Hill Camp, Fanling, which provides a full range of support services including veterinary care and breeding facilities. All dog-handlers are volunteers and each is expected to remain with the unit for the working life of the dog he or she is assigned. Overseas training is provided to enhance acquired skills in both dog-handling and instruction.

  During the year, some 90 dogs were deployed in duties such as drug detection, tracking, searches for explosives and firearms, and street patrols. Projects have been initiated to evaluate the future use of dogs in emergency response vehicles and on border duties.

Recruitment

A total of 3 045 applications for inspector were received in 1995, an increase of 98.6 per cent compared with the 1 533 in 1994. In all, 112 officers were appointed as inspectors, of whom 89 were direct-entry officers, and 23 were promoted from the ranks.

  A further 13 227 applications were received for the position of constable, compared with 8 322 in 1994, and 975 recruits were taken on. The encouraging recruitment results and declining wastage rate meant the strength of the Force improved and stood at 27 533 disciplined and 5 873 civilian staff, against an establishment of 27 551 and 6 113, respectively.

Civilian Staff

 Civilians play a vital role in the Force and have a wide variety of duties. The civilian establishment in the Force consists of 59 grades, of which 30 are General Grades

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which provide executive, accounting, clerical, secretarial and other general support for the administration of all formations. The rest includes various professionals, supplies staff, interpreters, communications and computer specialists, armourers, traffic wardens, cooks and workmen.

      Recruitment of civilian staff was satisfactory, particularly for the posts of traffic warden and police communications officer. A total of 99 officers were recruited for various grades.

Training

Most training is designed and provided by the Force using its own resources, and when necessary, overseas training is also available. Newly-recruited constables and inspectors attend a 27-week and a 36-week residential course, respectively, at the Police Training School at Wong Chuk Hang, an 18-hectare, purpose-built campus. All officers are instructed in foot drill, firearms, tactics, physical fitness, swimming and lifesaving, self defence and first aid, and are required to reach similar standards regardless of rank. They must study criminal law, police and court procedures, as well as social matters. Inspectors are required to demonstrate wider knowledge on these subjects. Inspectors also study management topics and their leadership and supervisory skills are developed through a series of exercises.

      After initial training, constables carry out duties under a tutor and attend a day of instruction per month, while inspectors receive familiarisation training on-the-job and attend a further two-week training course in their fifteenth month of service. Most officers are sent to the Police Tactical Unit in their second or third year of service where they are taught internal security roles and where the leadership and management skills of inspectors are further developed. Promotion and refresher training are given later.

      In-service management training is provided at three levels in the form of com- mand courses run by the Higher Training Bureau. All inspectors attend the Junior Command Course when they have served for five years in the rank. Chief inspectors and superintendents attend the Intermediate and Senior Command Courses, respec- tively, within a year after promotion to each rank. Further training is given to officers who undertake specialist duties.

      In conjunction with the Civil Service Training Centre, the Force offers its officers language courses in English and Putonghua. Officers of all ranks are encouraged to attend educational and training courses to enhance their knowledge and skills in their off-duty hours. Partial or full reimbursement is provided as an incentive, and time off is granted where necessary, to facilitate studies and examinations.

      Distance learning which leads to a first degree in policing and police studies is available through a special arrangement with the University of Portsmouth. Oppor- tunities are available for officers to receive development and vocational training courses overseas and $6,103,000 was set aside for this purpose in 1995.

Two new areas for training planned in 1994 were further developed in 1995: revolver training for women police officers and refresher training in cardiac pulmonary resuscitation (CPR) for most uniform branch officers. Women police recruited since January 1995 have received the same revolver training as their male colleagues during initial training at the Police Training School. They have carried arms on duty after that training as a part of the trial. Some serving women police

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 officers have also volunteered for revolver training. Training in CPR is provided to officers during initial training but their skills deteriorate with time. A small team of specially-trained and equipped instructors visits police units so that all uniform branch officers can receive one day of refresher training every three years.

  Throughout the year, emphasis continued to be placed on firearms training to enhance officers' ability to deal with armed confrontations. Firearms tactics training was also introduced.

Promotions

Promotion prospects in the Force remained good at most levels. During the year, 12 officers were promoted to the rank of senior superintendent and above, 28 chief inspectors advanced to superintendent, 58 senior inspectors to chief inspector, 125 sergeants to station sergeant and 11 constables to sergeant. In addition, exceptionally experienced station sergeants advanced to the rank of inspector.

  Overall, 335 officers retired from the Force, 25 officers were invalided out, 357 resigned, 102 were transferred to other departments, and 50 were either dismissed or had their services terminated in 1995. Within the civilian grades, 66 general grade officers and 33 departmental grade officers were promoted.

Awards

A total of 1 056 officers were awarded the Colonial Police Long Service Medal after 18 years of continuous police service; 540 officers were awarded the 1st Clasp to the Medal after 25 years' service and another 474 officers were awarded the 2nd Clasp after 30 years' service. In addition, eight officers were awarded the Queen's Police Medal for Distinguished Service and 39 officers the Colonial Police Medal for Meritorious Service. The Queen's Gallantry Medal was awarded to three officers, the Queen's Commendation for Bravery to two officers and two officers were awarded the Governor's Commendation. Among the civilian officers, one officer was awarded the Imperial Service Medal, one officer was awarded the Most Excellent Order of the British Empire. 187 were awarded Long and Meritorious Service Certificates and 190 officers received the Long Service Travel Award.

Welfare

The Force Welfare Branch was renamed the Personnel Services Branch in 1994, to reflect more accurately the services provided. In addition to its original roles, the branch takes on the responsibility for the allocation and up-keep of departmental quarters for police officers. The branch continued to provide a wide range of support services to members of the Force and their families, in the areas of personal and family welfare, sickness, psychological problems, sports and recreation, catering, collective bargain purchases and assistance on retirement.

  Welfare staff conducted 5 018 casework interviews and made 7 980 visits to sick and injured officers in hospitals or at their homes. The Family Education Programme placed emphasis on family finance management and was well received.

  The Police Catering Division continued to monitor canteens in Police stations to ensure the meals served were of good quality and reasonably priced. It also provided catering support at emergency turn-outs, such as disturbances at refugee camps,

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and at routine duties such as crowd management, race meetings and other public gatherings.

      A total of 1 781 children of regular and auxiliary police officers were awarded bursaries from the two police education trusts. An increasing number of beneficiaries were able to pursue tertiary education.

The two clubs and three recreational centres saw an increase in patronage. In June 1995, a new centre was opened at Queen's Hill, providing a much-needed facility in this fast-growing area. Activities organised in these venues were very popular among police officers and their family members.

      The 26 sports clubs continued to be very active and in February 1995, a Force contingent was sent to participate in the World Police and Force Games in Melbourne, Australia. It won a total of 160 medals. Three police crews also competed in the World Police Off-shore Sailing Championships in Cres Croatia in September and were placed fourth, 12th and 13th, overall.

Force Housing

The Force manages a total of 12 074 quarters, of which 10 968 are for junior police officers. The construction of 429 quarters in Wong Tai Sin is under way and scheduled for completion by 1996. As a result of redevelopment of quarters sites in Hollywood Road and Canton Road, 808 new quarters at Chai Wan and Ngau Chi Wan will be provided to the Force as replacements. They are expected to be completed in 1997. In 1995, the Force was again allocated 400 units under the Disciplined Services Quota of the Government Public Housing Scheme. Alternative sources of accommodation which remain open to eligible junior police officers include the Home Purchase Scheme, Housing Loan Scheme and Home Ownership Scheme.

The programme to refurbish 4 500 married quarters for junior police officers was progressing well. Since the introduction of the scheme in 1987, 1 862 quarters have been refurbished, resulting in a marked improvement in the structural condition and standard of these old residences.

      The policy to provide housing for all eligible married police officers, including those in the inspectorate and superintendent cadres, continued to be progressively implemented. Every effort was made to acquire more quarters of higher grading, rather than opting for sheer numbers.

Royal Hong Kong Auxiliary Police Force

The Royal Hong Kong Auxiliary Police Force is manned by volunteers from all walks of life and has a proud history dating from its establishment in 1914. Traditionally, the role of the Force was to provide manpower support to the regular police during emergencies.

      Since 1973, depending on the overall policing commitments and numbers of the regular police, the auxiliary police have been called upon to supplement their regular counterparts in day-to-day policing. In 1995, the average daily turnout was 750 officers. Their duties included crime prevention, crowd control, traffic control, operation duties, communications and community relations. The strength of the Force at the end of the year stood at 5 476, of whom 10.8 per cent were female officers.

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Independent Police Complaints Council

The council's main function is to monitor and review investigations of public complaints against the police. The investigations are made by the Complaints Against Police Office (CAPO) of the Royal Hong Kong Police.

The council is an independent body appointed by the Governor. The chairman and the two vice-chairmen are normally drawn from the Executive and the Legislative Councils. Its members include eight Justices of the Peace, the Attorney General and the Commissioner for Administrative Complaints, or their representatives.

During the year, the council endorsed 3 195 complaint investigations and interviewed 18 witnesses in six selected cases. It proposed some changes to police practices, procedures and the police complaint system, to improve overall effec- tiveness and to help reduce public complaints against the Police. The council also participated with the administration in a comparative study of police complaint systems in selected overseas jurisdictions. To acquire a more distinctive image, the council selected its logo from the winners of a logo design competition organised in mid-1995.

Customs and Excise

The Customs and Excise Department is organised into the Headquarters, Operations, Investigation, and Trade Controls branches; and the Civil Secretariat. It is primarily responsible for the collection and protection of revenue on dutiable goods, the suppression of illicit trafficking in narcotics, the prevention and detection of smuggling, and the protection and enforcement of intellectual property rights. It has an establishment of 4 133 posts.

Revenue Protection

The department collects and protects duty revenue on four groups of dutiable com- modities in Hong Kong: liquor, tobacco, hydrocarbon oil and methyl alcohol. In 1995, the department collected $7,788 million in revenue from dutiable commodities, compared with $7,512 million in 1994, an increase of $276 million.

A 7.9 per cent increase in cigarette duty in March 1995 widened the price difference with cigarettes sold in Hong Kong and China. The smuggling of illicit dutiable cigarettes into the territory, either directly across the border or by less-direct diversionary routes, was still a problem. Besides the effective action already being taken by the task force set up to counter cigarette-smuggling, the department also stepped up co-operation with the tobacco industry and overseas enforcement agencies. In 1995, the department acted against offenders in 20 425 cases in which 323.6 million cigarettes were seized with a duty potential of $201.9 million.

The illegal use of industrial diesel oil by road vehicles and the unauthorised removal of markers and colouring from industrial diesel oil were still widespread. Diesel oil was also smuggled into Hong Kong from China by road and sea. The department immobilised nine illegal plants for removing colouring substance from industrial diesel oil, dismantled 228 illicit diesel oil outlets and interdicted 11 smuggling ventures. In all, 1 469 799.5 litres of diesel oil were seized and 1 212 people arrested. The department also assesses the first registration tax on motor vehicles under the Motor Vehicles (First Registration Tax) Ordinance. In 1995, the Motor Vehicles

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Windows

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SHIRLEST SHIRLEY

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ABOVE: Civil Aid Services rescuers

practise recovering an injured

walker during training at Tsing Lung

Tau in the New Territories.

RIGHT: A Fire Services fireboat

lets loose with all hoses during

a display on Victoria Harbour

to mark Fire Prevention Day.

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and Excise Officer Ronny HK Tsang sorts through a display of illegal software and CDs impounded by his department.

SHICA SAM

MO

3

A police sergeant chats with a mother and child. Hong Kong's 27 000 police maintain law and order and keep Hong

Kong one of the world's safest cities, with 1 484

crimes per 100 000 citizens. The comparable figure for Tokyo is 2 216

and for the United

Kingdom it is 10 402.

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Valuation Group registered a total of 64 motor traders and assessed the provisional taxable value on 38 057 vehicles.

Anti-narcotics Operations

The department continued to take vigorous enforcement action to prevent and suppress illicit trafficking in dangerous drugs. Apart from maintaining a high-level of vigilance against the import and export of illicit drugs, the department counters the illicit manufacture, distribution and street-level peddling of drugs. Investigations and surveillance operations are launched by its major investigative arm, the Customs Drug Investigation Bureau. The department co-operates closely with the police and with foreign and international drug enforcement agencies on the exchange of intelligence and in the arrest and extradition of fugitive drug criminals.

In 1995, the department cracked 23 drug syndicates, with the smashing of 10 heroin attenuating and nine packing centres. The department seized 95 kilograms of heroin, 29.1 kilograms of cannabis and four kilograms of methamphetamine. In addition, 244 746 tablets of psychotropic drugs were seized. A total of 1 144 people were prosecuted for drug-related offences.

Recovery of Drug Trafficking Proceeds

The department enforces the Drug Trafficking (Recovery of Proceeds) Ordinance. This is an effective weapon which enables the department to conduct financial investigations and to trace and seize assets derived from drug trafficking.

        In 1995, it obtained five court orders and restrained assets worth $3.9 million. Joint investigations with foreign law enforcement agencies resulted in the restraint of assets valued at $1.4 million in Hong Kong and $3.8 million overseas.

Control of Chemical Precursors

During the year, the department established a unit to control essential chemicals used in the manufacture of narcotic drugs and psychotropic substances under the newly-enacted Control of Chemicals Ordinance. These new measures are aimed at suppressing the supply and preventing the diversion of chemicals used in the manufacture of drugs.

Anti-smuggling and Import and Export Controls

Smuggling between Hong Kong and China continued to be a major issue confronting the department. The taxation systems and controls on imports and exports in China and Hong Kong are different and smuggling continues of various commodities, such as computers, video cassette recorders, radio pagers, portable phones and vehicles into China, and cigarettes and diesel oil into Hong Kong. During the year, the department detected 355 smuggling cases under the Import and Export Ordinance, arrested 484 persons and seized goods worth $169.3 million.

The Joint Police/Customs Anti-Smuggling Task Force had another successful year in controlling the use of high-powered speedboats. This form of smuggling has been dramatically reduced and now occurs only sporadically.

      Seaborne containers are commonly used to smuggle electrical appliances and vehicles to China using false declarations. Smugglers have continued to make use of the increasingly heavy land border traffic to smuggle computer parts and

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communication equipment into China. In 1995, 86 cases of smuggling were detected at the land border control points. Seizures amounted to $76.3 million and 48 vehicles used for smuggling. Smuggling of antiques from China through the land border continued. Seizures valued at $28.8 million were made in the four cases discovered.

  Illegal imports through the postal network continued to grow. The department has reinforced its intelligence gathering to select parcels for examination more effectively. In 1995, 113 cases of smuggling through the postal system were detected. Seizures included dangerous drugs, pharmaceutical products, poisons, obscene articles, copyright infringing goods, and false travel documents.

  The Organised and Serious Crimes Ordinance enacted in late 1994 has proved an effective weapon, giving additional powers to Customs and Excise officers to investigate organised crimes, which include smuggling offences, and to apply for the confiscation of the proceeds of serious crimes.

Strategic Commodities

The department works closely with the Trade Department and other agencies to exercise control over imports and exports of strategic commodities. The objective is to prevent Hong Kong from being used as a conduit for the proliferation of weapons. The territory's effective control system has inspired its trading partners' confidence and has helped Hong Kong to gain access to a wide range of high technologies. To deter illegal diversions, the department has stepped up its enforcement action by carrying out more physical checks on import and export consignments. During the year the department investigated 350 cases.

Enforcement of Intellectual Property Rights Protection

The department is the sole enforcement agency responsible for the protection against copyright infringement and trade mark forgery. The protection is provided through the Copyright Ordinance and the Trade Descriptions Ordinance and extends to trade marks registered under the Trade Marks Ordinance. In enforcing these laws, the department investigates complaints about infringements and initiates action against piracy and counterfeiting. Close liaison is maintained with copyright and trade mark owners, their legal representatives, intellectual property rights organisations and foreign enforcement agencies.

  The department continues to take vigorous action against the sale of pirated audio CD, video CD and CD-ROM, and counterfeit watches, leather goods, clothing and electrical products. Operations are conducted at hawking areas, retail shops, storage places, distribution centres and the border control points. In 1995, the department seized pirated goods worth $42.5 million and prosecuted 1 507 persons under the Copyright Ordinance. It also seized $248.6 million worth of counterfeit and falsely- labelled goods and prosecuted 827 persons under the Trade Descriptions Ordinance.

World Customs Organisation

Hong Kong is a member of the World Customs Organisation (WCO) (established as the Customs Co-operation Council). The WCO's objectives are to improve and rationalise international customs operations and facilitate international trade.

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      The department is active in WCO's meetings and seminars, particularly those concerning customs enforcement and customs techniques. Hong Kong will host the 1996 Policy Commission meetings and its plenary sessions.

The WCO's Regional Intelligence Liaison Office for the ESCAP region has been based in Hong Kong since 1987 and works closely with the department. Officers of the department also assist in WCO training activities, both here and overseas.

The department fully supported the WCO's declaration of 1995 as the 'Year of the Traveller'. The campaign aimed, first, to enlist the support of WCO members in focusing their officers' attention upon the importance of treating travellers with professionalism, and facilitating entry procedures without sacrificing enforcement objectives.

      Its second aim was to sensitise the travelling public to the important function which customs authorities undertake on their behalf in protecting society, in order to gain more understanding and support from travellers, thereby promoting voluntary compliance. In response to this initiative, the department launched the campaign locally on January 26, 1995, the International Customs Day.

Performance Pledges

During the year, the department achieved its main performance targets in respect of vehicular traffic clearance at border control points, the clearance of detained cargo and air passengers, the conducting of factory registration and consignment inspections, the processing of applications for licences and permits, hire of customs attendance and counter services.

      As part of its continuing efforts to improve efficiency, the department held quarterly meetings with customer liaison groups to review the general standard of services delivered. These related, in particular, to air cargo, sea cargo and dutiable commodities.

      In December, the department completed its third set of performance pledges for publication in 1996, including new pledges on the registration of importers/ distributors of motor vehicles and assessment of First Registration Tax. Performance results pertaining to the second set of performance pledges announced in 1994 will also be published.

Independent Commission Against Corruption

The Independent Commission Against Corruption (ICAC) is independent of the civil service; its Commissioner is directly responsible to the Governor. It fights corruption through investigation, prevention and education, carried out through three functional departments: Operations, Corruption Prevention and Community Relations.

The ICAC received 3 232 reports alleging corruption in 1995. Of these, 1878 concerned the private sector, a decrease of 11 per cent compared with 1994. Another 1 245 reports were made against civil servants, a decrease of 10 per cent. There were 109 reports against employees of public bodies, compared with 101 in 1994. The Legislative Council elections in September attracted 90 reports of election malpractices.

The public also uses the ICAC to report alleged criminal activities and general grievances against government departments. In 1995, the ICAC received 1 950 non-

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corruption complaints, 1059 of which (including 469 criminal allegations) were subsequently referred to relevant government departments or the police.

Operations

The Operations Department receives and investigates reports of suspected corruption under the Prevention of Bribery Ordinance, election malpractices under the Corrupt and Illegal Practices Ordinance, and ICAC-related offences under the ICAC Ordinance.

  Of the 3 232 corruption reports received in 1995, 2 342 contained sufficient information for investigation to commence. The department's caseload was 1 130 at the end of the year with 443 persons prosecuted and 107 cautioned for minor offences including nine for trivial election malpractices.

  To deal with the higher number of corruption reports received in the last three years, specially-trained staff of the Community Relations Department now work closely with investigators of the Operations Department to deal with the initial stages of some investigations. This procedure accelerates the response to complaints and ensures a more efficient use of human resources.

Corruption Prevention

The Corruption Prevention Department makes recommendations to eliminate opportunities for corruption that may exist in the government and the public sector. On request, it also advises the private sector on corruption prevention techniques.

  The department studies new procedures or policies, and monitors the implementation of previous studies. It also gives corruption prevention advice through consultation and participation in a variety of committees and working groups. In 1995, the department completed 96 assignment studies and advised 118 businesses.

  Government departments, public bodies and private businesses continued to consult the department on anti-corruption measures in areas such as purchasing, tendering and stores management. To tackle the problems associated with building management, advice was given to owners' corporations through the Home Affairs Department and a Code of Practices on procurement of goods and services was promulgated. The department also participated in the Working Group on Regulation of Estate Agents.

  Passenger clearance procedures at immigration control points of the Immigration Department were reviewed, and recommendations were made to reduce opportunities for collusion between passengers and immigration officers. Rural election procedures were also reviewed to ensure that the elections are open and fair.

  The department was also consulted on the guidelines for declaration of interests by members of statutory boards and advisory committees. It continued to advise on the procedures used by Government departments and statutory authorities for the letting and administration of contracts for the construction and associated facilities and infrastructure of the new airport at Chek Lap Kok.

Community Relations

The Community Relations Department educates the public against the evils of corruption and enlists community support to fight the problem. It also aims to

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promote higher ethical standards in social and business matters. It works through the mass media and personal approaches by its eight regional offices to different target audiences.

      The department launched a business ethics campaign in 1994 to encourage all companies listed on the Hong Kong Stock Exchange and large private companies (those with more than 100 staff) to formulate corporate codes of conduct. By the end of 1995, 2 084 such companies had been approached, with 61 per cent having either formulated new codes of conduct or updated their existing ones. To further the campaign, the Hong Kong Ethics Development Centre was set up in May 1995 under the auspices of the ICAC, providing a full range of free services to business organisations.

      To uphold a clean civil service, the department launched a 'Support Clean Government' programme in mid-1995. In two phases, the programme aimed to reach all of the civil service through a comprehensive prevention guide for senior civil servants and a series of seminars.

      To promote fairness in the elections to the municipal councils and the Legislative Council in 1995, the department's staff visited individual candidates and their agents to explain the Corrupt and Illegal Practices Ordinance. A specially-produced diary was also given to each candidate for easy reference. In addition, the department provided an election enquiry service and sent information pamphlets to the voting public.

In view of the large number of corruption reports involving building management, the department produced a practical guide on building management for owners corporations/committees, organised a television programme and training seminars, and distributed information pamphlets.

      In June 1995 the department co-produced, with the Guangdong Provincial People's Procuratorate in China, a practical guide which contained comprehensive informa- tion on PRC and Hong Kong anti-corruption laws and guidelines for Hong Kong investors when conducting business in Guangdong. Procuratorate officials also came to Hong Kong to speak at preventive education seminars on cross-border trade.

      A series of advertisements was produced to motivate the public to support the ICAC's work and to report corruption. These won four 1995 Creative Awards from the Hong Kong Association of Accredited Advertising Agents.

International Co-operation

As business transactions and transfer of funds become more international, so does corruption. Liaison and co-operation with foreign corruption investigation and law enforcement agencies are essential.

      In May, the Operations Department hosted its third regional seminar on corruption-related crime. Delegates represented law enforcement agencies from Australia, Brunei, Canada, China, Japan, Macau, Malaysia, Singapore, Thailand, the Philippines, the United States of America and Hong Kong.

      The ICAC sent a full delegation to attend the seventh biennial International Anti- Corruption Conference held in Beijing in October 1995, which was organised by the Supreme People's Procuratorate and the Ministry of Supervision.

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  During the year, the ICAC received 199 visitors from law enforcement agencies and other organisations in various countries. The Operations Department sent its officers to China on 58 occasions and to other countries on 74 occasions in the course of investigation. It assisted investigators from China on 62 occasions, and from other countries on 14 occasions, in their inquiries in Hong Kong.

Checks and Balances

To minimise the possibility of any abuse of power, the ICAC is subject to a stringent system of checks and balances. However, social and political changes in Hong Kong have been such that the public demands greater transparency and accountability from the ICAC. To that end an independent review committee appointed by the Governor made several recommendations which have been accepted by the administration. In effect, they subject the ICAC to closer judicial supervision and give the various advisory committees a greater role in monitoring and supervising its work.

  At the policy level, the ICAC is guided by the Advisory Committee on Corrup- tion, which comprises prominent citizens, with the Director of Administration, the Commissioner of the ICAC and its Head of Operations sitting as ex-officio members. The committee meets quarterly to review the ICAC's overall policy and draw to the Governor's attention any matter relating to its organisation or operation.

  Once begun, an investigation can be ended only by a decision to prosecute made independently by the Attorney General, or on the advice of the Operations Review Committee, which has to be satisfied that the enquiry has been exhaustively pursued and merits no further investigative action. The Operations Review Committee, whose membership and terms of reference have been enlarged during the year, now receives and considers reports on current major investigations, all investigations over one year old and all bail cases of six months or more. It may draw to the Governor's attention any aspect of the work of the Operations Department or any problem encountered by the Committee.

Two other committees, the Citizens Advisory Committee on Community Relations and the Corruption Prevention Advisory Committee, review and advise on the work of the Community Relations Department and Corruption Prevention Department, respectively.

In response to a recommendation of the review committee non-officials were appointed chairmen of the Corruption Prevention Advisory Committee and Citizens Advisory Committee on Community Relations. A non-official is expected to be appointed chairman of the Operations Review Committee.

Members of the public can lodge formal complaints against ICAC officers to the ICAC Complaints Committee. Its membership consists of members of the Execu- tive and Legislative Councils, prominent citizens, the Attorney General and the Commissioner for Administrative Complaints. The commission also has an internal investigation group which monitors the conduct of its officers and investigates complaints or allegations of corruption against ICAC officers.

The Commission's Objective

With the community, the ICAC is committed to fighting corruption through effective law enforcement, education and prevention to help keep Hong Kong fair, just, stable and prosperous.

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Government Laboratory

The Government Laboratory's Forensic Science Division plays a vital role in the criminal justice system in Hong Kong by providing comprehensive scientific services and expert opinion in respect of scientific evidence to the Judiciary and other law enforcement departments. The high quality of its services has gained increasing recognition and attracted more demand for them from the private sector. This is subject to availability of resources and on a fee-paying basis.

The division has 144 staff, of whom 55 are experts in various scientific disciplines. Its nine specialist sections are organised into two functional groups: the Physical and Biochemical Evidence Group and the Drugs and Toxicology Group. The Instrumentation and Quality Assurance Section works directly under the head of the division, maintaining advanced instrumentation and organising quality assurance programmes.

The division has a wide range of modern instrumentation capable of sensitive and sophisticated analysis to the highest standards. These facilities enable staff to carry out a comprehensive range of forensic analytical services such as detailed analysis of paint, glass, textile fibres, body fluids, drugs, hydrocarbon fuels, plastics and a host of other materials commonly encountered in crimes such as homicide, armed robbery, sexual offences, arson, manufacturing and trafficking of dangerous drugs, commercial frauds and fatal traffic accidents. Specially trained experts are on 24-hour stand-by to assist in investigation scenes of crime.

      In response to rising demands, the Physical and Biochemical Evidence Group's DNA Profiling Section has developed rapidly both in terms of technique and database compilation. Casework and the number of profiles done increased by 25 per cent over the year. The year also saw the first disputed DNA case brought to Hong Kong's courts and, despite the presence of an international DNA expert for the defence, the laboratory's findings were totally accepted.

The Questioned Document Section collaborates with experts of the US Secret Service Laboratory in the field of credit card forgery recognition and classification. A joint computer system has been developed which is about to be adopted by Interpol as the universal standard for world-wide investigation in the field.

The workload of the Drugs and Toxicology Group continued to increase substantially in 1994. A 13 per cent increase in controlled drug cases and 10 per cent increase in toxicology and urinalysis cases were recorded. The great majority of drug cases involved the opiates, but there were record seizures of both cannabis (3 116Kg) and methylamphetamine (133Kg). The increasing requests from Social Welfare Department to monitor the urine samples of young offenders on probation have added greatly to the group's work, since the greater number of samples cover a wider range of controlled drugs, requiring alternative confirmation methods.

Since the beginning of the year the division has put great effort into the revision and enforcement of a thorough quality management programme including a code of practice laying out the professional standards set for all staff. It is complete and awaits inspection by an accreditation authority from the USA. The laboratory is confident that the programme will meet the standards required for successful accreditation on any international scale.

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  In line with the government's pledge to provide an open and quality service to the community, the division publishes and maintains clear performance targets and statistical data, undertakes regular consultation and briefing sessions with related departments and other concerned bodies, such as local fight crime committees, and welcomes enquiries from the public regarding any of its activities.

Immigration Department

By controlling entry to Hong Kong, the Immigration Department plays an important role in maintaining law and order. Through examination at control points and the vetting of visa applications, undesirable persons, including international criminals and terrorists, are detected and denied entry. In 1995, 17 038 such travellers and persons not in possession of proper documentation were refused permission to land and 3 764 persons were refused visas.

Detection of Forged Travel Documents

 Officers detected a total of 2 660 forged travel documents during the year, repre- senting an increase of 7.9 per cent on the 2 465 detected in 1994. Strict measures were taken to guard against the use of forged travel documents by travellers, as well as illegal immigrants.

Frequent contacts with local and overseas law enforcement agencies and consulates were maintained. Special operations were mounted against forgery syndicates.

Interception of Wanted Persons

In 1995, 112 991 wanted persons were intercepted at immigration control points and other offices. Of these, 1 099 were connected with murder cases, 2 827 were suspected robbers, 42 662 were suspected of involvement in the trafficking of dangerous drugs and 66 280 were wanted in connection with other criminal offences. In addition, 123 known or suspected terrorists were identified at points of entry.

Illegal Immigration and Unlawful Employment

 Employment opportunities in Hong Kong continued to attract large numbers of illegal immigrants to the territory. The lower wages accepted by these immigrants encouraged unscrupulous employers to offer them employment. With the formation of a task force, more frequent checks were conducted at targeted locations, including construction sites, factories, restaurants and other places of employment. Illegal immigrants and visitors who breached their conditions of stay were intercepted taking up unapproved employment. In 1995, 2 160 operations were conducted, and 5 833 illegal workers arrested.

The illegal workers were prosecuted and were either fined or gaoled before being repatriated to their places of origin. Employers of illegal workers, including principal contractors in the construction industry, were also prosecuted and fined and, in serious cases, custodial sentences were imposed. In 1995, 1 170 employers of illegal workers were prosecuted.

Overall, including illegal immigrants arrested by the police or found working, 30 747 illegal immigrants were apprehended and repatriated during the year. This figure represents a decrease of 13.5 per cent on the 35 537 apprehended in 1994.

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Investigation and Prosecution of Immigration Offences

A total of 23 883 charges were laid against persons who had committed various immigration offences. These included remaining in Hong Kong illegally, breach of conditions of stay, making false statements or representations, and using or possessing forged documents.

Deportation and Removal

The department processes deportation and removal orders. During the year, 10 475 persons who had been convicted of possessing or trafficking in dangerous drugs, deception, theft, forgery and other criminal offences were considered for deportation and 472 were deported. Another 1 172 persons were removed from Hong Kong under removal orders. These included 19 illegal immigrants, mostly of Chinese origin, and 1 153 persons who had breached their condition of stay.

Fire Services

The primary roles of the Fire Services Department are to fight fires, protect life and property in case of fire and other calamity, to provide emergency ambulance services and to give fire protection advice to the public.

      The department had an establishment of 8 160 staff, comprising 7 411 uniformed and 749 civilian members. It has one of the best reputations of any fire brigade in the world, with well-trained personnel, advanced communications systems, and modern appliances and equipment.

      The department responded to 31 014 fire calls, 21 420 special service calls and 425 343 ambulance calls during 1995, representing an average of 1 309 calls a day. July and August were a particularly busy time, with three No. 4 alarm fires, a prolonged ship fire and numerous landslides throughout the territory.

Notwithstanding these heavy operational commitments, the department made a variety of significant advances during the year. These included increasing its contacts with its mainland counterparts through visits and work attachments: the improved exchange of views and experiences led to the first cross-border joint fire exercise with the Shenzhen Fire Brigade; the upgrading of telecommunications systems to improve efficiency; the completion of the last phase of transferring non-emergency ambulance services to the Hospital Authority and the commissioning of an operational research consultancy on the emergency ambulance service.

Fire Suppression

Of the 31 014 fire calls received during the year, 43 were classified as major fires of No. 3 alarm and above. Unwanted alarms, caused mainly by faulty automatic alarm systems or their poor positioning, contributed to about 46 per cent of the total number of fire calls. Careless handling or disposal of smoking materials is still the major cause of fires, totalling 5 035 cases in all, followed by accidents involving the preparation of foodstuffs and electrical faults, which accounted for 2 558 and 1 608 cases, respectively.

Fires claimed 23 lives and 594 injuries, including 64 firemen, and 1 954 people were rescued by fire personnel. Notable fires during the year included a No. 3 alarm at a Yeung Uk Road bedspace apartment on March 23, killing three occupants; a No. 4 alarm at the State Theatre Building, North Point, on May 13, injuring five firemen

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 and severely damaging more than 20 units in the shopping arcade; a No. 4 alarm which damaged a polyurethane manufacturing factory in Tai Po Industrial Estate on July 6; a No. 3 alarm at Yue Wan Estate, Chai Wan on July 11, claiming two lives with nine injuries; a fire on board the Panamanian passenger ship Zenith off Penny's Bay on July 19, which took firemen 47 hours to put out; a No. 4 alarm two days later at a plastic toy factory in Aberdeen, another No. 4 alarm at a North Point factory on July 23, in which 15 people were injured, nine of them firemen and a No. 4 alarm at an industrial building in Kwai Chung on December 12, in which 20 firemen were injured.

Special Services

The department also provides wide-ranging rescue services in incidents such as traffic accidents, people trapped in lifts or locked in rooms, gas leakages, house collapses, floodings, landslides, industrial accidents and attempts to jump from a height. In 1995, the department received 21 420 calls for special services.

  The major incidents included landslips on August 13 in Chai Wan and Aberdeen in which three people died. Extremely heavy rainfall in early October caused widespread flooding in parts of the territory and firemen had to use dinghies to rescue about 190 villagers in the New Territories.

Ambulance Services

The demand for ambulance services from the public remained high during the year, despite the transfer of non-emergency ambulance services to the Hospital Authority. The last phase of this exercise was completed by October. During the year, ambulances answered 425 343 calls, conveying a total of 451 488 patients and casualties.

  The year saw the paramedic ambulance service expand, with the fleet of ambulances increased to 33. More than 150 personnel have qualified as Emergency Medical Assistant II (EMA) and are now able to give patients enhanced pre-hospital care such as cardiac monitoring, defibrillation and application of selected drugs.

  In May, the department commissioned a consultant to review emergency ambulance services and to recommend ways to improve the effectiveness of emergency cover in a cost-effective manner. Some of the recommendations made by the consultant are already being implemented, and others will be implemented as additional resources become available.

Communication

The department is replacing its existing radio network system with a computer-aided Trunked Radio System. The new system, which can provide more channels and maintain better communications between the Fire Services Communication Centre and all fire appliances, fireboats and ambulances, will improve operation efficiency. It will be fully operational in late 1996.

  The department introduced an Incident Resources Control System during the year to enhance the efficiency of monitoring fire and ambulance resources deployed to incidents. This system, which uses bar code technology, has been installed on every Mobile Command vehicle since mid-August.

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Fire Prevention

The department formulates and enforces fire safety policies and regulations, besides assisting and advising the public on fire protection measures and the abatement of fire hazards. The Fire Protection Bureau attaches great importance to public education on fire prevention. A territory-wide fire prevention publicity campaign with the special theme 'Fire Prevention in Commercial Premises' was launched on November 19. With the help of the Information Services Department, the bureau produced 3 100 video tapes and 25 000 pamphlets for distribution to banks, department stores, supermarkets, off-course betting centres, shopping arcades and property managers of commercial buildings as training materials for their staff. Other publicity activities included radio talk shows, fire station open days and exhibitions. Fire officers gave 727 fire prevention talks to people from different sectors of the community. The talks were supplemented by exhibitions and demonstrations.

Fire Services personnel inspected 95 564 premises of all types, and issued 5 306 fire hazard abatement notices for the removal of fire hazards during the year, to ensure that fire prevention measures met the required standards, and also to enhance public awareness of fire safety. There were 143 prosecutions in cases of non-compliance, with fines amounting to $606,800. In addition, prosecutions for obstructing the means of escape in buildings resulted in 97 convictions, with fines totalling $561,100. Joint visits with Labour Department officers were conducted to older industrial buildings not protected by sprinkler systems. During these visits, factory proprietors were served with an advisory letter urging them to improve fire protection measures including, in particular, the installation of sprinkler systems and the maintenance of a clear means of escape for the safety of workers and property.

      The department also sets fire service requirements for new buildings, to ensure proper protection for the public. Some 5 968 submissions of building plans, including plans for new airport-related projects, were processed during the year.

Appliances and Equipment

The department operates 649 appliances and vehicles fitted with up-to-date fire- fighting and rescue equipment. During the year, nine new mini fire engines were bought to serve the residents of outlying islands. The more powerful vehicles replaced the old fleet, which had served the islanders for more than nine years. A new, faster fireboat, with a slightly higher displacement and fitted with modern equipment and installations, was put into service to replace the ageing No. 2 fireboat.

      The Workshops Section of the department, which is responsible for all engineering matters relating to fire appliances and equipment, continues to provide effective correctional and maintenance services on all fire appliances and equipment to optimise the performance of operational resources. It also helps to evaluate new products from different parts of the world.

Staff Training

The Fire Services Training School and the Ambulance Command Training School offer a 26-week initial training for new recruits. For recruit firemen, this covers basic fire-fighting techniques, appliances and equipment, breathing apparatus, ambulance aid and physical training. Subjects such as fire protection, legislation, physics and the science of combustion are included. In addition to the basic fire-fighting and rescue

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techniques, courses for recruit Station Officers cover incident command-and-control elements.

The Ambulance Command Training School also offers refresher and advanced training to all ambulance personnel. The Fire Services Training School gave 1 734 staff of other government departments and private organisations training on basic fire-fighting and the use of breathing apparatus. Training courses were conducted for fire and police officers from Brunei, Thailand and Macau during the year.

After a tragic fire at Yue Wan Estate in Chai Wan, the department arranged special one-day fire-fighting and fire prevention courses for about 180 staff members of the Housing Department.

In-service training was provided to 509 fire and 1 341 ambulance personnel, while 24 officers were selected to attend various overseas training programmes in the UK, the USA, Japan, Canada, Germany and China. The department appointed 26 station officers, 17 senior firemen and firewomen (control) and 198 firemen during the year.

Joint Border Exercise

A joint fire-fighting and rescue exercise involving Shenzhen Fire Brigade and Hong Kong Fire Services was held in Fook Tin District, Shenzhen, on October 18. This was the first time the neighbouring fire brigades had enjoyed an opportunity to co- operate in an exercise designed to exchange professional skills and experience, to enhance cross-border emergency co-ordination links and to become familiar with their counterparts' operational procedures and equipment. The exercise established a direct link between the two brigades which may now be developed. More than 150 fire and ambulance personnel from both sides took part.

The department established further contacts with its Chinese counterparts through visits and work attachments during the year. These contacts help promote a mutual understanding of the available professional expertise and technology and the department will continue to widen these exchanges.

Buildings and Quarters

In line with government policy to provide an emergency response to all areas within minimum set times according to the category of risk, the department continues to plan and build fire stations and ambulance depots at strategic locations to cope with local developments.

At the end of the year, there were 65 fire stations, 29 ambulance depots/stations and 15 fireboat stations in the territory. The Fire Services manages a total of 3 352 quarters, of which 3 079 are for other ranks uniformed officers. These include 320 new quarters at the Tseung Kwan O Fire Services Married Quarters. The Ngau Chi Wan quarters project is under way and scheduled for completion by late 1996.

Public Liaison Group

 The Public Liaison Group was set up in 1994 to encourage public participation in monitoring and improving the delivery of fire emergency services, and to foster better understanding between the public and the department. It will enter its third term in April. Thirty members of the public were selected from more than 100 applicants by a random draw-10 each from Hong Kong Island, Kowloon and the New Territories geographical areas.

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Correctional Services

The Correctional Services Department administers a wide range of services for both adult and young offenders, drug addicts and the criminally insane. These fall broadly under two programme areas - prison management and re-integration. The depart- ment also manages detention centres for Vietnamese migrants and ex-China Viet- namese illegal immigrants.

At the year's end, the department was managing 21 correctional institutions, four halfway houses, a staff training institute, an emergency support group, two custodial wards (one each at the Queen Mary Hospital and Queen Elizabeth Hospital), and three detention centres for Vietnamese migrants and ex-China Vietnamese illegal immigrants. A total of 7 183 staff were looking after 13 007 inmates, 13 673 Vietnamese migrants, 219 ex-China Vietnamese illegal immigrants, and 3 668 persons under supervision after discharge from custody.

In 1995, penal population remained high and averaged 26 per cent over the certified accommodation. Despite overcrowding which stretched resources, the department was able to implement its programmes effectively as reflected by the very low level of escapes and incidents of indiscipline.

The number of Vietnamese migrants (VMs) continued to drop in 1995, despite a slowing repatriation rate during the year. The number of VMs repatriated in 1995 dropped by 58 per cent when compared with 1994. The workload of the department in managing the VM detention centres remained heavy. The year proved eventful as the Vietnamese migrants displayed uncooperative and aggressive behaviour against the Orderly Repatriation Programme as well as camp transfer exercises.

Male Offenders

Prisoners are assigned to institutions according to their security rating, which takes into account, among other things, the risk they pose to the community and whether they are first-offenders. There are 12 prisons for adult males, four in each category of maximum, medium and minimum security. The Siu Lam Psychiatric Centre, a maximum-security prison, accommodates the criminally insane and those requiring psychiatric treatment.

Adult prisoners released under the Pre-release Employment Scheme are provided with accommodation at a halfway house. Residents must go out to work during the day and return in the evening.

Young Offenders

Prisoners aged under 21 are detained at correctional institutions separate from adult prisoners. In 1995, 873 young men and 632 young women were sentenced to imprisonment and 3 651 young men and 544 young women were received for custody on remand.

       People aged between 14 and 20, who are convicted of an offence punishable with imprisonment, may be remanded in custody for a period not exceeding three weeks for assessment of their suitability for admission to a training centre or detention centre. Young adults aged between 21 and 24 may also be remanded to detention centres. A comprehensive report, together with the appropriate recommendations, is then forwarded to the courts concerned. In 1995, 2 069 offenders were remanded for suitability reports, of whom 1 571 were deemed suitable for admission to training or

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 detention centres by the Selection Board. Of these, 1 438 were male and 133 were female.

  Training centres provide correctional training for young offenders, for an indeterminate period, ranging from a minimum of six months to a maximum of three years. Inmates must have suitable employment or a place in school, and will be subject to a statutory period of supervision of three years upon release.

They undergo half-day educational classes and half-day vocational training. Recreational and physical activities are held in the evenings and on Sundays and public holidays. Visits to youth centres, large factories, sports centres and country parks are arranged for advanced grade inmates on Sundays and public holidays to provide additional educational and training opportunities and to assist in their reintegration into the community upon discharge. In 1995, 408 boys and 36 girls were sentenced to detention in a training centre while 158 boys and 13 girls were recalled for breach of supervision conditions for further training. After discharge from training centres, 68 per cent of the male offenders and 88 per cent of the female offenders completed the three-year aftercare supervision period without reconviction.

An effective detention centre programme is carried out at the Sha Tsui Detention Centre. One section is for offenders aged between 14 and 20 years, and the other for young adults aged between 21 and 24. The programme emphasises strict discipline, strenuous training, hard work and a vigorous routine. After release, detainees are subject to a statutory period of supervision for one year. During 1995, 338 young offenders completed the supervision process and 316 were not reconvicted during the period a success rate of 93 per cent.

Young male offenders identified as having special needs are, on discharge from a training centre or detention centre, housed at Phoenix House for up to three months before they are permitted to live at home or in other places while continuing after- care supervision.

Female Offenders

 Adult females serve their sentences at the Tai Lam Centre for Women, which also has sections for remand prisoners and those undergoing drug-addiction treatment. Most of the women are employed in an industrial laundry, which provides services to government departments and public hospitals.

To cope with the increased penal population, the Chi Ma Wan Detention Centre (Upper) was converted to a medium security institution, in December 1994 to accommodate adult and young female prisoners.

A halfway house is provided for women and girls released under supervision from the training centre or under the Pre-release Employment Scheme. Residents also go out to work, or attend full-time school, during the day and return in the evening.

Drug Addiction Treatment

Drug addicts found guilty of an offence punishable by imprisonment may be sentenced to a drug addiction treatment centre under the Drug Addiction Treatment Centres Ordinance. They can be detained for two to 12 months, depending on their progress. In-centre treatment is followed by 12 months of statutory after-care supervision.

PUBLIC ORDER

      The drug addiction treatment programme aims to detoxify, restore physical health and, through the application of therapeutic and rehabilitative treatment, wean addicts from their dependence on drugs. Assistance is also given to addiction treatment centre inmates with post-release employment and accommodation. Temporary accommodation is available at halfway houses for those in need of such support immediately after release.

Young Offender Assessment Panel

The Young Offender Assessment Panel, comprising staff from the Correctional Services and Social Welfare Departments, was established in 1987 to provide magistrates with recommendations on the most appropriate programmes of rehabilitation for young offenders between 14 and 25 years of age. The service provided by the panel is available to juvenile courts and certain magistracies.

Education and Vocational Training

Offenders under the age of 21 attend educational and vocational training classes, conducted by qualified teachers and instructors.

      For educational classes, textbooks compiled by the department are used to provide inmates with suitable and practical learning material matching their maturity in personal growth and development. Adult offenders attend evening classes, on a voluntary basis, run by part-time teachers recruited by the department. Self-study packages and external correspondence courses are also available for those who are interested.