Hong Kong Yearbook - Annual Report for the Year 1996

HONG KONG 1997

113°50'E

22°30ND

The Territory of HONG KONG

DEEP BAY

114°00'

SHENZHEN

 MMIS 在線閱讀

 

22°20'

Peaked Hill

ARIAU

LANTAU CHANNEL

22°10'N

113°50'E

Lung Kwu Chau

SHEKOU

Sha Chau

Black

Nim War

Nai

Point

Tap Shek

URMSTON ROAD

CHEUN TAI HOM SHAME

TAI LONG WAN

Kok

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San Wai Tsuen

WANG CHAU

Wai

TSUEN

YUEN ONG

HEUNG

PILLAR POINT

CASTLE PEAK

BAY

Pearl Island

The Brothers

GO KWUNG

LÀM CHU

LUNG TAU

YAM O

TO WAN

Tsing Chau

Chek Lap Kok

New Airport under construction

SHA LO

WAN

TUNG CHUNG BAY

STUNG CHUNG

Airport Railway under construction

KANTAU ISLAND.

LANTAU PEAK

LO FU

TAU

SILVER MINE

BAY

DISCOVERY BAY

CHI MA WAN

PUI O

WAN

CHEUNG SHA

Rescapir

TONG FUK

MIU WAN

。 Cha Kwo

Chau

Siu A Chau

Series HM 200CL Edition 21 1997

Tai A

Chau

Soko Islands

ADAMASTA CHANNEL

Shek Kwu

Chau

Cheung

Chau

MA

SHEUNG SHUTT

SPEKU

Lin Tong Mei

WO HOP SHEK

KAI KUNG

TAI TO YAN

HEUNG.

WAN

CHANNEL

SHUI MUN

Peng Chau

Ma

Wan

Siu Kau Yi Chau

Kau Yi

Green

Chau

Island

Sunshine Island

Hei Ling

CHANNEL

RAMBLER

TAIMO

SHANN

STONECUTTERS

ISLAND

KOWLOO

WEST LAMMA CHANNEL

SULPHUR CHANNEL

Chau

EAST LAMMA 'Œ

YUNG SHUE

WANA

LUK CHAU WAN

HONG

HA ME!

WAN

KONG

香港中央

圖書館

*

George

Island

PICNIC BAY

Zamma Island

TUNG I WAN

kri

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Scale

114°00'

4

6

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Che

Hang

ROBIN'S

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SKOK,

STARLING INLET

KWAI TAU

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WONG LENG

639

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Brooked

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Plover Cove Perervoir

LEI YU MUN

VIOLET Rese

MOUNT COLLIN

TOLO CHANNEL

THREE FATHOMS D COVE

SAI KUNG

114°20'E

Crescent Island

DOUBLE HAVEN

WONG CHUK KOK HOI

MOU

MONG

▾ Yim Tip

HEBE HAVEN,

Sharp Island

Kau Sai Chau

JUNK BAY

FAT TONG?

CHAU

BIG WAVE

BAY

NORTH CHANNEL

MIRS BAY

Port Island

MIDDLE CHANNEL

LONG HARBOUR

Grass

Island

468 SHARP

TAKLONG

High Island Reservoir

HIGH ISLAND

Ping Chau

LEGEND

Built-up Area

22°30'N

TAI LONG

Cultivation

Country Park / Reserve

Main Road Tunnel

Secondary Road

Railway Tunnel

Light Railway

Contour (vertical

interval 100 metres with supplementary contour at 50 metres)

PORT SHELTER

ROCKY HARBOUR

Jin Isaind

SILVERSTRAND

Shelter Island

Town Island

Hole Island

Bluff Island

PUBLIC

CLEA WATER BAY

10

Basalt Island

.20

Sea depth in metres

30

CHINA

JOSS HOUSE

BAY

FAT TONG MUN

Tung Lung

Chau

Ninepin Group

LINDIA

TATHONG CHANNEL

Middle Island

REPULSE

SHEK O

CHUNG

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Round Isaind

STANLEY

200 000

8

114°10'

10

122

SHEUNG SZE MUN

Beaufort Island

14 km

Po Toi

Islands

Sung Kong

Waglan

Island

114°20'E

MONGOLIA

Belling

SOU

KOREA

Nanjing.

Shanghai

RHNA

Chongqing

SEA

Fuzhou

Guangzhou.

\MACAU HONG

Taiwan

MYANMAR

LAOS

THAILAND

CAMBO

DIA/

Sumatra

FACIFIC OCENI

Guam

KONG

SOUTH CHINA

SEA PHILIPPINES

BAUNEI

MALAYSIA

SINGAPORE

ສສ

22°

20

Scale

km

0

1000

km 20001

Borneo

Sulawesi

Irian Jaya NEW

PAPUA

GUINEA

INDONESIA

Cartography by Survey and Mapping Office, Lands Department

(c) Copyright reserved

reproduction by permission only

22°10'N

香港公共圖書館

HONG

·KON

LIBRARIES

PUBLIC LIBRAR

Cover Illustration

The Tsing-Ma Bridge

gives off a diamond's sparkle

as workers press on into the evening to complete the major link between the territory and Hong Kong's new international airport at Chek Lap Kok.

End-paper Maps

Front

The Territory of Hong Kong Back

Hong Kong in its Regional Setting

Frontispiece

A dream becomes reality

as a major extension

to the Hong Kong Convention and

Exhibition Centre takes shape

on the Wan Chai waterfront.

市政局公共圖書館 UCPL

3 3288 03769524 6

HONG KONG 1997

A REVIEW OF 1996

Photo courtesy of the Hong Kong Trade Development Council

A

mi

פי

Hong Kong: The Facts

Population: 6.3 million

Hong Kong Island

1.34 million

21.4%

Age structure

Kowloon

2.02 million

32.2%

New Territories

2.90 million

46.1%

Outlying Islands

0.06 million

0.3%

Median age: 34 Under 15: 18.5% Over 64: 10.1%

Sex ratio

Overall: 1 000 males per 1 000 females

Under 15: 1 075

Over 64: 816

Overall density

Nationalities

Languages

5 780 people per square kilometre.

Kwun Tong District has 53 610 people

per square kilometre.

Housing

3.1 million people live in public housing, which includes 660 200 flats. In 1996,

Hong Kong had 1.85 million domestic households, 44.5% occupied by the owner, 50.8% by tenants, and 4.6% either rent-free or employer-provided.

Predominantly of

Percentage

Chinese descent

95%

who can speak:

Largest foreign

Cantonese

95.2

passport-holder groups

English

38.1

(mid-1996):

Putonghua

25.3

Philippines

128 300

Chiu Chow

5

USA

32 600

Hakka

4.9

Canada

28 200

Fukian

3.9

UK

26 700

Sze Yap

1.4

Indonesia

25 900

Shanghainese

1.6

Thailand

25 500

Filipino

1.8

Birth rate

Death rate

11.2 per 1 000 popn

5.1 per 1 000 popn

Japan

21 500

Japanese

1.2

India

20 900

Life expectancy

Australia

20 500

Male 76

Female 81.5

Malaysia

14 200

Religion and custom

Buddhists and Taoists make up the vast majority. Christians 497 400; Muslims 50 000; Hindus 12 000; Jews 1 000.

Area: 1 095 square km

Highest point

Hong Kong Island

80 square km

Tai Mo Shan 957 metres

Kowloon

47 square km

New Territories

794 square km

Outlying Islands

174 square km

Reclamation since 1851

60 square km

Country Parks

 Hong Kong's 21 country parks and 14 designated special areas cover 41 351 ha-almost 40% of the land area. A further 58 sites of special scientific interest mark particular habitats. About 10.7 million visitors use the country parks each year. Three marine parks and one marine reserve are planned to cover about 2 160 ha of sea. Mai Po

Marshes Nature Reserve, a declared site under

the international Ramsar Convention for the

Conservation of Wetlands, covers 380 ha.

Deepest point

Lo Chau Mun (Beaufort Channel)

66 metres.

Tallest building

Central Plaza, Wan Chai, 374 metres

Weather

Average annual rainfall 2 124.3 mm

Wettest period Hourly daily

109.9 mm (May 8, 1992)

534.1 mm (July 19, 1926)

monthly

1 241.1 mm (May 1889)

Driest

10% humidity (January 16, 1959)

Highest temperature

36.1°C (August 18 and 19, 1900)

Lowest temperature

0.0°C (January 16, 1893)

Highest wind speed

230 km/h (September 5, 1964)

June/July norms

mean temperature

average total rainfall

Transport

27.8°C

28.8°C

376 mm-323.6 mm

397 metres above sea level, 11 000 passengers daily mostly tourists but four intermediate stops service

commuters.

Air movements

1996-158 797 flights; 23.4 million passengers; 1.56 million tonnes of freight

Shipping movements

1996-40 808 ocean vessel arrivals;

40 865 departures; total cargo 123.67 million tonnes

Container throughput

13.2 million TEUS.

Roads

The 1 717 km of roads carry 466 068 licensed vehicles, or about 270 vehicles per kilometre.

Bridges

Longest: Tsing Ma suspension bridge (main span 1 377 metres) and the 463-metre cable-stayed Kap Shui Mun bridge. A 280-metre viaduct links the

two.

Tunnels

Eight tunnels, 900 metres to 4 km long, carrying 573 000 vehicles a day, fares from $3 to $30. Third cross-harbour tunnel, 2 km, to open during 1997, 180 000 vehicle capacity.

Railways

Mass Transit Railway-First stage opened in 1979; 43 km of track; 38 stations. 2.5 million passenger journeys daily.

      Lantau-Central (34 km)-Airport Expressway and North Lantau Line under construction. Kowloon-Canton Railway-Opened in 1910;

34 km of track between Hung Hom and the border; 13 stations; 632 700 passenger journeys daily. Light Rail Transit-Opened in 1988; 32 km Tuen Mun-Yuen Long-Tin Shui Wai;

57 stops, 379 000 passengers daily.

Hong Kong Tram-Opened in 1904, 13 km double track along Hong Kong Island's north shore, plus three km single track around Happy Valley. Peak Tram-Opened in 1888; Hong Kong's oldest public transport. Funicular railway rising 373 metres from Garden Road, Central, to Victoria Gap;

Employment

(Total workforce: 3.16 million at October 96)

Major sectors

Wholesale, retail and import/export, trades, restaurants and hotels

Finance, insurance, real

estate and business

services Community, social and personal services

Civil Service

Transport storage and communications

Unemployment rate

Average wages

(Selected industries)

1.03 million

28% of workforce

386 940

12% of workforce

310 099

10% of workforce

183 110

5.8% of workforce

176 319

5.5% of workforce

2.9%

$9.772 per month

GDP per capita (Expenditure based) $1.195 billion

Flying time to:

Bangkok 2 hrs 20 mins Beijing 2 hrs 30 mins Bombay 5 hrs 40 mins Guangzhou 20 mins

London 13 hrs

Manila 1 hr 30 mins

Moscow 9 hrs 30 mins

New Delhi 5 hrs

New York 17 hrs

Paris 12 hrs 45 mins

Rome 12 hrs 15 mins

San Francisco 14 hrs 30 mins Shanghai 1 hr 45 mins

Seoul 2 hrs 45 mins Singapore 3 hrs 20 mins Sydney 9 hrs 30 mins Taipei 1 hr

Tokyo 3 hrs 40 mins

Toronto 16 hrs 45 mins Washington 17 hrs 30 mins

HONG KONG 1997

Editor

Bob Howlett

Information Services Department

Photography

Daniel Wong, Tsui Chee-kwong, Jacob Ho, Anthony Chu, Au Yeung Yiu-man, Kris Chan, Rydstik Chu, Augustine Chu, David Ho, Andy Mou, Stanley Ng,

Albert Yu, John Choy, Information Services Department

Design

Denny Yu

Information Services Department

Special contributor The Governor, the Right Honourable Christopher Patten (Chapter 1)

Statistical sources

Census and Statistics Department

The editor acknowledges

and thanks all contributors and sources.

URBAN COUNCIL PUBLIC LIBRARIES

No.

1657328

Class

951.25

Author

HKCr

HON

Copyright reserved

Code No. F30019700EO |(ISBN 962-02-0233-3)

Price HK$88

http://www.info.gov.hk

Published by Information Services Department

Printed by Government Printer, Hong Kong

Printed on paper made from woodpulp derived from renewable forests

CONTENTS

Chapter

CALENDAR of Events IN 1996

HONG KONG HISTORY

Page

1

1-3

234

CONSTITUTION AND ADMINISTRATION

4-25

THE LEGAL System

26-35

4

ARRANGEMENTS FOR THE TRANSITION

36-45

5

THE ECONOMY

46-69

6

FINANCIAL And MonetaRY AFFAIRS

70-92

7

TRADE AND INDUSTRY

93-115

EMPLOYMENT

116-128

9

PRIMARY PRODUCTION

129-133

10

EDUCATION

134-160

11

HEALTH

161-176

12

SOCIAL WELFARE

177-187

13

HOUSING

188-200

14

LAND, PUBLIC WORKS AND UTILITIES

201-232

15

TRANSPORT

233-256

16

THE AIRPORt Core ProgRAMME

257-264

17

PORT DEVELOPMENT

265-268

18

PUBLIC ORDER

269-309

19

THE ARMED SERVICES

310-313

20

TRAVEL AND TOURISM

314-320

21

COMMUNICATIONS AND THe Media

321-338

22

RELIGION AND Custom

339-343

23

RECREATION, SPORTS AND THE ARTS

344-372

24

THE ENVIRONMENT

373-395

25

POPULATION AND IMMIGRATION

396-401

26

HISTORY

402-410

APPENDICES

411-490

INDEX

491-501

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 1996

January

6

8

9

10

14

15

22

The British Foreign Secretary, Mr Malcolm Rifkind, arrives for his first official visit to the territory. He meets the Governor, the Right Honourable Christopher Patten, Executive and Legislative Councillors, visits the new airport site at Chek Lap Kok and tours Yiu Tung Estate in Shau Kei Wan.

The Secretary for Planning, Environment and Lands, Mr Bowen Leung, leads the Hong Kong team to Guangzhou for the sixth meeting of the Hong Kong-Guangdong Environmental Protection Liaison Group. The meeting is co-chaired by the Director of Guangdong Province's Environmental Protection Bureau, Mr Wang Yinkun. Both sides express concern over serious water pollution in Deep Bay.

Vitasoy International Holdings withdraws all Vitasoy and Vita products packed in paper cartons after complaints of sour taste. The Department of Health finds abnormal acidity in four samples out of 240 tests but says this is not health-threatening. About 8 200 tonnes of Vitasoy cartons and contents are incinerated, buried or passed through sewage treatment works.

British and Chinese members of the Joint Liaison Group initial agreed minutes on the issuing of passports by the Hong Kong Special Administrative Region.

The Secretary for Security, Mr Peter Lai, and the Refugee Co- ordinator, Mr Brian Bresnihan represent Hong Kong in Bangkok at a meeting of the Steering Committee of the International Conference on Indo-Chinese Refugees which considers the Comprehensive Plan of Action.

The Postmaster General, Mr Robert Footman, leads a Post Office delegation on a courtesy visit to the Ministry of Posts and Tele- communications in Beijing.

Hong Kong and Guangdong exchange information and review cross- border co-operation arrangements at the 16th Annual Border Liaison Review meeting.

CALENDAR OF EVENTS IN 1996

29

31

February

1

10

16

28

a

HO

The Secretary for Trade and Industry, Miss Denise Yue, meets senior officials of the European Union in Brussels, including vice-presidents Sir Leon Brittan and Mr Manual Marin. They discuss Hong Kong's relationship with the EU and the multilateral trading system.

Hong Kong and Germany sign an investment promotion and protection agreement in Bonn.

The Financial Secretary, Mr Donald Tsang, flies to Davos, Switzerland, to attend the annual summit of the World Economic Forum.

A new Supplementary Labour Scheme comes into in force under which employers are allowed to bring in workers if locals cannot be recruited. It will be reviewed when 2 000 visas are issued.

In the year's first flight under the Orderly Repatriation Programme, 109 Vietnamese fly back to Hanoi.

Two teachers and three children die in a scrub fire while on a school outing in the Pat Sin Leng hills north of Tai Po. Another 13 children are injured.

Law reforms come into effect giving greater protection for vulnerable witnesses giving evidence in criminal cases. These allow witnesses to give evidence by television from a room outside the court and recorded on video.

Chairmen of the 18 District Boards or their representatives pay the first formal visit by such a body to Macau. They meet their Macau counterparts and visit various municipal projects, including the new airport on Taipa. The trip is organised by Hong Kong's Home Affairs. Department.

March

2

3

4

The British Prime Minister, Mr John Major, arrives in Hong Kong for a two-day visit. He tours the sites of Tsing Ma Bridge and Chek Lap Kok airport. He meets the Governor, businessmen, members of the Executive and Legislative Councils and community leaders.

The Secretary for Works, Mr Kwong Hon-sang, accompanied by seven officials, visits Beijing and Dalian for general familiarisation. The visit ends on March 12.

Mr Major announces the granting of visa-free access to the UK for holders of Special Administrative Region passports and a special arrangement for war widows and Hong Kong ethnic minorities.

Principal Crown Counsel Stephen Wong leads a team to a UN hearing in Geneva to answer questions on the implementation of the Convention on the Elimination of All Forms of Racial Discrimination in the territory.

CALENDAR OF EVENTS IN 1996

6

8

10

14

15

29

31

April

1

2

8

10

The Financial Secretary, Mr Donald Tsang, presents his first Budget to the Legislative Council.

The Secretary for Health and Welfare, Mrs Katherine Fok, announced improvements in Comprehensive Social Security Assistance payments, to benefit single parents, family carers and adults in ill health.

The Director of the Chinese Foreign Ministry's Hong Kong and Macao Affairs Office, Mr Wang Guisheng, leads a Chinese delegation on a nine-day visit to the territory. This is one in a series of sponsored visits between China and Hong Kong.

A criminal case was conducted in Cantonese in the District Court for the first time. The High Court heard Hong Kong's first civil case in Cantonese in 1995.

The Marine Department announces that, for the fourth consecutive year, Hong Kong remains the busiest container port in the world with. an annual throughput of more than 12.5 million 20-foot equivalent units of containers in 1995.

The Secretary for Trade and Industry, Miss Denise Yue, attends the Hong Kong-US and US-Hong Kong Economic Co-operation Committee Plenary Session in Washington DC. During her week in the US capital, she meets the US Trade Representative, Ambassador Mickey Kantor, and the Assistant Secretary of State for East Asian and Pacific Affairs, Ambassador Winston Lord.

Hong Kong and the Republic of Korea sign an air services agreement, providing a firm legal and regulating framework for the continuation of bilateral air services links beyond 1997.

The Secretary for Trade and Industry, Miss Denise Yue, makes her first official visit to Beijing to exchange views with her Chinese counterparts on matters of mutual interest.

The Official Languages Agency is set up to promote the greater use of Chinese in the Civil Service.

The Executive Council grants a new franchise to Citybus Limited for 10 years from September 1, 1996.

It also approves an Education Department scheme that will make up to 90 per cent of all kindergartens eligible for subsidy.

The Refugee Co-ordinator, Mr Brian Bresnihan, accompanies the Minister of State for Foreign and Commonwealth Affairs, Mr Jeremy Hanley, on a visit to Vietnam. It is agreed that the orderly repatriation programme will be accelerated with extra flights in May.

The Governor pays a duty visit to London. He holds discussions with the Prime Minister and Foreign Office officials on developments in Hong Kong.

CALENDAR OF EVENTS IN 1996

11

12

15

18

19

25

29

30

May

1

The Deputy Director of the Chinese Ministry of Justice's Foreign Affairs Department, Mr Wu Minying, leads an eight-member delegation on a visit to the territory, part of a series of reciprocal legal study visits that began in 1988.

Shenzhen officials involved in intellectual property protection meet representatives of Hong Kong Customs and the Intellectual Property Department. Both sides affirm their high level of commitment to the protection of intellectual property in their respective jurisdictions.

The Housing Society, the Land Development Corporation, the Airport Authority and the Vocational Training Council are brought within the jurisdiction of the Commissioner for Administrative Complaints. They are the second batch of statutory bodies included under its jurisdiction since June 1994.

The Attorney General, Mr Jeremy Mathews, attends a Commonwealth Law Ministers' meeting in Kuala Lumpur.

Mainland and Hong Kong Customs officials meet in Shantou to plan further expansion of co-operation in anti-smuggling and intellectual property protection.

The Chief Secretary, Mrs Anson Chan, dines with the visiting Director of the Hong Kong and Macao Affairs Office of the Chinese State Council, Mr Lu Ping. They discuss a range of transitional issues of concern to the community. Mrs Chan pays a reciprocal visit to Mr Lu in Beijing on April 26.

Radio Television Hong Kong goes off the air for 47 minutes after lightning strikes a transmitter during one of the year's wettest thunderstorms.

Hong Kong plays host to a series of four meetings of the Pacific Economic Co-operation Council.

The 12th and final tube of the Western Harbour Crossing, Hong Kong's third road tunnel linking the island with Kowloon, is laid on the seabed under 17 metres of water off West Kowloon.

The Governor leaves for a 10-day visit to Canada and the United States. Hong Kong and Singapore sign an air services agreement, which will guarantee the continuation of air services links between both places beyond 1997.

A Chinese delegation led by the Director of Vocational Skills Development of the Ministry of Labour, Mr Zhang Xiaojian, arrives in Hong Kong as part of a series of sponsored visits.

The Director of Marine, Mr Ian Dale, visits Beijing to discuss maritime safety and operational transitional issues with the Chinese Maritime Safety Administration.

CALENDAR OF EVENTS IN 1996

7

9

11

13

14

22

23

27

28

29

Hong Kong plays host to the 12th meeting of the Asia Pacific Economic Co-operation (APEC) Working Group on Regional Energy Co- operation. More than 70 officials from 17 economies exchange views on energy supply and demand in the region.

The Governor meets President Bill Clinton at the White House. Mr Patten argues for unconditional renewal of China's Most Favoured Nation status.

The Director-General of Industry, Mrs Regina Ip, leaves for a two-week visit to the United States in a bid to promote inward investment in local manufacturing industries.

Members of various national parliaments take part in the eighth Commonwealth Parliamentary Seminar in Hong Kong.

The Financial Secretary, Mr Donald Tsang, leads a delegation to Kuala Lumpur, Singapore and Bangkok to strengthen business ties with members of APEC and to identify opportunities for building a strategic business partnership with them.

The Sino-British Land Commission agrees that the 1996/97 Land Disposal Programme should amount to 153.01 hectares.

The Commissioner for Labour, Miss Jacqueline Willis, visits Beijing to meet officials of the Department of Foreign Economic Co-operation and the Ministry of Labour. They discuss the regulation of Chinese imported to work in Hong Kong.

At his second Drugs Summit, the Governor unveils a $30 million package of initiatives to boost a campaign against drug abuse. The 32 proposals cover law enforcement, preventive education, treatment, rehabilitation and research.

The Chief Secretary, Mrs Anson Chan, embarks on a three-week visit to seven US cities. She launches the Hong Kong-USA '96 promotion in New York on June 3.

The Commander British Forces Hong Kong, Major-General Bryan Dutton, goes to Shenzhen to meet the Commander of the future Hong Kong garrison of the People's Liberation Army (PLA), Major-General Liu Zhenwu.

The Governor in Council endorses measures to address the issue of better-off tenants in public rental housing. They will be encouraged to buy their own homes.

The Chief Justice, Sir Ti Liang Yang, pays a three-day visit to Beijing at the invitation of the Chinese Judges' Association.

The Secretary for Recreation and Culture, Mr T H Chau, (retitled Secretary for Broadcasting, Culture and Sport on June 8), visits Singapore at the invitation of the Minister for Information and the Arts, Brigadier-General George Yeo.

CALENDAR OF EVENTS IN 1996

30

June

3

6

11

12

14

18

28

The British and Chinese sides of the Airport Committee sign an agreement to build a second runway at the new airport at Chek Lap Kok.

Hong Kong organises a large-scale promotion, Hong Kong-USA '96, in New York, Dallas and Los Angeles up to June 11. Activities feature business conferences, fashion shows, concerts, film festivals, lectures, an exhibition and a variety show.

Prominent businessman Mr Tung Chee Hwa resigns from the Executive Council after three and a half years in that body.

Six workers die when a cantilever scaffold collapses at an airport railway construction site in Kwai Chung.

Maritime administrators from seven Asian countries attend the second Asian Shipping Forum in Hong Kong. Safety at sea and protecting the environment are among topics discussed.

More than 300 delegates of 140 member countries and territories of the World Customs Organisation and various associated international bodies gather in Hong Kong for their 1996 conference. Hong Kong became a member in 1987 and will continue to be a separate customs territory and a full organisation member beyond July 1, 1997.

Urban renewal measures are announced to speed up and widen the scope of redevelopment. In the longer term, the government will consider upgrading the Land Development Corporation to a statutory Urban Renewal Authority and setting up a fund to encourage proper building maintenance.

A Sino-British agreement on new air traffic rights covering Hong Kong lets the territory's airlines overfly China on major services to Hanoi, Europe and North America.

The Chief Secretary, Mrs Anson Chan, meets the US Secretary of State, Mr Warren Christopher, in Washington DC. She has discussions with the National Security Adviser, Mr Anthony Lake and Senate majority leader, Senator Trent Lott.

Governor Patten formally approves a 123-hectare extension to Sai Kung Country Park covering the Wan Tsai Peninsula and three adjacent islands at Hoi Ha Wan.

The Secretary for Transport-designate, Mr Gordon Siu, leads a delegation to Beijing and Fuzhou for general familiarisation.

A delegation led by Secretary for Trade and Industry, Ms Denise Yue, leaves for Switzerland to attend an informal ministerial meeting in Lausanne. The meeting discusses the programme of the World Trade Organisation.

CALENDAR OF EVENTS IN 1996

July

1

3

5

13

16

26

27

29

31

August

9

The Chief Secretary, Mrs Anson Chan, pays a three-day visit to London. She meets the British Prime Minister to discuss latest developments in Hong Kong.

The Exchange Fund Advisory Committee approves in principle the setting up of a mortgage corporation, initially to be owned by the government. It will buy mortgage loans for its own portfolio and issue mortgage-backed securities.

The Governor leaves for Brussels and London. He will meet the President of the European Commission, Mr Jacques Santer, and the President of the European Parliament, Mr Klaus Hansch. In London he will meet the Prime Minister and Foreign Office officials.

The Director-General of Industry, Mrs Regina Ip, departs for a four- day visit to Toronto in bid to attract overseas industrialists to invest in Hong Kong.

A comprehensive planning framework for Hong Kong up to the year 2011 is spelt out in a consultative document on a territorial development strategy review.

The Commander of the future PLA garrison in Hong Kong, Major- General Liu Zhenwu, makes his first visit to Hong Kong, where he meets Major-General Dutton and visits units of the Royal Navy, the Army and the Royal Air Force.

The government publishes the Town Planning White Bill, which seeks to make the statutory planning process more accountable to the public and more effective in guiding developments towards a more efficient land use pattern. Two months are allowed for public inspection.

Locally enlisted Chinese soldiers of the Hong Kong Military Service Corps become British Army pistol shooting champions after nine days of competition at Bisley Ranges, England.

The local telecommunications market will expand significantly after the Sino-British Joint Liaison Group agrees to the issuing of six personal communications services licences.

In Atlanta, USA, windsurfer Miss Lee Lai-shan wins Hong Kong's first gold medal in its Olympic history.

The underlying foreign currency reserves held in the Exchange Fund rank the seventh-largest in the world at the end of June.

The Acting Governor, Mrs Anson Chan, announces the setting up of a fund for athletic development in recognition of Hong Kong's Olympic success. It will give one dollar for every dollar contributed by the community. The government's commitment is capped initially at $8 million.

CALENDAR OF EVENTS IN 1996

15

24

27

28

29

September

1

6

9

The Equal Opportunities Commission issues draft codes of practice on employment under the Sex Discrimination Ordinance and the Disability Discrimination Ordinance for a month-long consultation.

Nominations open for the 400-strong Selection Committee which will choose the Chief Executive and members of the Provisional Legislature of the Hong Kong Special Administrative Region.

Future PLA garrison Commander Major-General Liu starts a nine-day working visit to Hong Kong.

Attorney General Mr Jeremy Mathews attends the 11th Commonwealth Law Conference in Vancouver.

A wheelchair fencer, Mr Ben Cheung Wai-leung, wins his fourth gold medal at the Paralympic Games in Atlanta. Hong Kong wins a total of five gold, five silver and five bronze medals, the territory's finest achievement at the Paralympics.

The Financial Secretary, Mr Donald Tsang, pays a courtesy call on Indonesian President Soeharto to update him on the latest developments in the territory and preparations for the change of sovereignty in 1997.

The visiting Japanese Foreign Minister, Mr Yukihiko Ikeda, meets the Acting Governor, Mrs Anson Chan. They discuss a wide range of issues of mutual concern. Mrs Chan welcomes his assurance that Japan will treat holders of Hong Kong Special Administrative Region passports differently from Chinese passport holders.

The Financial Secretary, Mr Donald Tsang, calls on New Zealand Prime Minister, Mr James Bolger, during a three-day visit to the country. The visit is part of his mission to strengthen ties between Hong Kong and other APEC economies.

A Chinese delegation led by the Director-General of the Department of Statistics on Investment in Fixed Assets under the State Statistical Bureau, Mr Liu Chengxiang, visits Hong Kong. This is one in a series of sponsored visits between China and Hong Kong.

The Secretary for Health and Welfare, Mrs Katherine Fok, visits Beijing and Xian under a sponsored visit programme to enhance mutual understanding of systems in Hong Kong and the mainland.

The Chief Justice, Sir Ti Liang Yang, announces his resignation with effect from November 4, saying he wishes to known as Mr Yang Ti Liang following his decision to accept nomination for the post of Chief Executive of the Hong Kong Special Administrative Region.

The Hong Kong Monetary Authority is invited to join the Bank for International Settlements, the Swiss-based forum promoting co- operation among central banks. The invitation is considered a clear

CALENDAR OF EVENTS IN 1996

12

14

15

17

19

23

26

27

recognition of Hong Kong's status as a leading and autonomous international financial centre.

The Governor chairs his third. summit meeting to address unemployment and to discuss training programmes for local workers. The session concludes with a government commitment to raise local workers' skills, clamp down further on illegal workers, and to establish a generally accepted scheme for labour importation.

The British Minister with responsibility for Hong Kong, Mr Jeremy Hanley, visits the territory to update himself on the latest developments.

The Secretary for Health and Welfare, Mrs Katherine Fok, leaves for Auckland to attend the 18th World Congress of Rehabilitation International.

A total of 5 791 people nominate themselves for the 400 positions available on the Selection Committee that will choose the HKSAR's first Chief Executive and members of the Provisional Legislature.

The Director-General of Trade, Mr Alan Lai, leaves on a four-day visit to Beijing and Dalian to further contacts between the Trade Department and corresponding mainland authorities.

The Sino-British Joint Liaison Group, meeting in Beijing, endorses an agreement reached by commercial parties to the Container Terminal No. 9 project on the rationalisation of berths at Kwai Chung.

Hong Kong launches its first promotion in Australia, which is staged in Sydney, Canberra and Melbourne. It aims to strengthen economic and trade links and boost Australian confidence in the territory's future. Programmes feature business seminars, luncheons, discussions with business leaders and a pop concert. The Chief Secretary, Mrs Anson Chan, leads a delegation of businessmen and senior officials to the country. She officiates at the opening of Hong Kong House in Sydney, home to the Hong Kong Economic and Trade Office, the Trade Development Council and the Hong Kong Tourist Association.

Activist Mr David Chan Yuk-cheung drowns during a protest trip to the Diaoyu Islands, ownership of which is disputed by China, Japan and Taiwan.

The Financial Secretary, Mr Donald Tsang, leaves for Washington to attend the 1996 annual meetings of the boards of governors of the International Monetary Fund and the World Bank.

British and Chinese team leaders in the Sino-British Joint Liaison Group sign an agreement on the handover ceremony for Hong Kong, which will take place around midnight on June 30, 1997.

The Chief Secretary, Mrs Anson Chan, calls on Australian Prime Minister John Howard. Mr Howard assures her that his government will do everything possible to facilitate travel of Hong Kong people to Australia.

CALENDAR OF EVENTS IN 1996

30

October

2

3

7

8

9

10

11

14

Senior business executives from 18 member economies of the Asia- Pacific Economic Co-operation forum visit Hong Kong for the third meeting of its Business Advisory Council.

The Chief Secretary unveils the 1996 Progress Report, which shows that the government has completed, on target, 646 out of 692 policy commitments made between 1992 and 1995. This represents a success rate of 93 per cent.

The Governor presents his final policy address to the Legislative Council.

Crown Solicitor Ian Wingfield leads a team to a hearing in Geneva on Hong Kong's initial report on the implementation of the United Nations Convention on the Rights of the Child.

The Hong Kong Monetary Authority opens its first overseas representative office in New York. The Financial Secretary officiates.

Protesters from Hong Kong and Taiwan break through a cordon of Japanese vessels to land on the Diaoyu Islands.

The Financial Secretary, Mr Donald Tsang, signs an investment promotion and protection agreement with Belgium and another with Luxembourg at Palais d'Egmont.

The Director-General of Industry, Mr Francis Ho, leads a delegation of the Electronics Committee of the Industry and Technology Development Council to Korea to study the development of high-tech industries.

The Financial Secretary, Mr Donald Tsang, meets Luxembourg Prime Minister Jean-Claude Juncker. The following day he signs the Hong Kong-Italy Air Services Agreement at the Italian Ministry of Transport and meets the Italian Foreign Minister, Mr Lamberto Dini, in Rome.

The Director of Home Affairs, Mrs Shelley Lau, leads a delegation from the Home Affairs Department to Beijing for a four-day visit as part of their normal contacts with Chinese officials.

The Secretary for Economic Services, Mr Stephen Ip, signs an air services agreement with India.

The Financial Secretary, Mr Donald Tsang, signs an investment promotion and protection agreement with the State Secretary of Austria, Mrs Benita Ferrero-Waldner.

Nominations for the post of the Chief Executive of the Hong Kong Special Administrative Region open. The exercise will end on October 28.

The United Nations Convention on the Elimination of All Forms of Discrimination Against Women extends to Hong Kong.

CALENDAR OF EVENTS IN 1996

16

18

22233

28

29

The Secretary for Planning, Environment and Lands, Mr Bowen Leung, announces measures to protect the Indo-Pacific hump-back dolphin commonly called the Chinese white dolphin. These include establishing marine parks in Hong Kong's western waters where the animals are mostly found.

The Governor leaves for London on a duty visit to brief ministers on the latest developments in Hong Kong.

A team headed by the Solicitor General, Mr Daniel Fung, attends a hearing of the United Nations Human Rights Committee in Geneva to answer questions arising from a supplementary report on Hong Kong.

The Secretariat of the Special Administrative Region Preparatory Committee says 31 applications have been received from people hoping to be selected Chief Executive of the Hong Kong Special Administrative Region. The application forms will be vetted by the presidium of the Preparatory Committee.

The Attorney General, Mr Jeremy Mathews, launches a victim's charter setting out the rights of crime victims and their immediate family members as well as the standards of services they can expect from law- enforcement agencies and government departments.

November

1

2

8

10

11

The last Gurkha infantry battalion in Hong Kong, 1st Battalion The Royal Gurkha Rifles, makes a ceremonial farewell to Hong Kong by beating the retreat at its headquarters at Malaya Lines, Shek Kong.

The Royal Air Force's last squadron in the region, 28 (Army Co- operation) Squadron, returns to Kai Tak after an absence of almost 20 years. It will depart from the territory in June 1997

Eight people are confirmed as candidates for the post of Chief Executive of the HKSAR after a list of 31 applicants is vetted by the presidium of the Preparatory Committee of the Hong Kong Special Administrative Region.

The membership of the 400-strong Selection Committee is announced at the sixth plenary session of the Preparatory Committee of the Hong Kong Special Administrative Region.

Hong Kong starts a two-day conference on AIDS, its first on the subject.

Governor Patten leaves for London, Paris and Bonn for a brief visit. The main purpose of the trip is to lobby for the easiest possible access for holders of the Special Administrative Region passport.

Hong Kong is ranked the world's fifth-best city for business after Toronto, London, Singapore and Paris, according to Fortune magazine.

CALENDAR OF EVENTS IN 1996

13

14

20

28

December

5

10

11

16

18

21

23

31

Senior representatives of the joint Liaison Group sign an agreed minute on arrangements for the transfer of the Exchange Fund to the HKSAR Government on July 1, 1997.

The Hang Seng Index passes 13 000 points for the first time.

Hong Kong's worst commercial building fire in almost 50 years, in Nathan Road, Jordan, kills 40 people and leaves 80 injured. Another fire in Causeway Bay two days later adds to calls for upgrading old premises.

Governor Patten meets Japanese Prime Minister Mr Ryutaro Hashimoto in Tokyo. Mr Hashimoto assures Mr Patten that Japan will treat the SAR passport differently from that of the People's Republic of China. The following day Mr Patten discusses Hong Kong matters with the Canadian PM, Mr Jean Chretien, in Tokyo.

The Refugee Co-ordinator, Mr Brian Bresnihan, says Whitehead detention camp will close on January 3 and all Vietnamese migrants will be returned by mid-1997.

Two groups totalling 243 Vietnamese migrants return to Hanoi on the 84th and 85th flights under the Orderly Repatriation Programme. They bring to 8 415 the total number repatriated under the programme since November 1991.

Mr Tung Chee Hwa is elected first Chief Executive of the Hong Kong Special Administrative Region, which will come into being on July 1, 1997.

For the third consecutive year, the Washington-based Heritage Foundation declares Hong Kong to have the world's freest economy. Mr Tung Chee Hwa receives from Chinese Premier Li Peng a decree appointing him the first Chief Executive of the Hong Kong Special Administrative Region. Mr Tung meets President Jiang Zemin.

A 60-member provisional legislature of the HKSAR is returned by the Selection Committee in Shenzhen.

The Code on Access to Information is extended to cover all 91 government branches and departments.

Governor Patten meets Chief Executive (Designate) Tung Chee Hwa at Government House and discusses government help with staff and premises during the remaining transition period.

An estimated 200 000 people watch Hong Kong's first New Year's Eve fireworks display, staged off Tuen Mun.

T

Hong Kong House

Accompanied by the Speaker of the New South Wales Legislative Assembly, Mr John Murray (Left) and the Australian Attorney- General, Mr Daryl Williams, the Chief Secretary,

Mrs Anson Chan, officiates at the opening of Hong Kong House, in Sydney, in September.

YT

LAGAN

ASPHALT SURFACES

LAGAN

LAGAN

SURFACES

AGAN

SPHALT SURFACES

▲ British Prime Minister John Major sits at the wheel of a steam roller used in forming the surface of the southern runway at Hong Kong's new airport at Chek Lap Kok. Mr Major visited the territory in March and met the Governor,

business leaders, Executive

and Legislative Councillors,

and community leaders.

RIGHT: Britain's Foreign Secretary, Mr Malcolm Rifkind, has a firm grasp of matters as he leads the topping-out ceremony for Britain's new official headquarters in Admiralty.

VACAN

ti

HO

Chief Secretary Mrs Anson Chan with actor Charlton Heston, film mogul Raymond Chow and actress Siao Fong-fong during her visit to Washington in June as part of the Hong Kong-USA '96 promotion. BELOW: Hong Kong's Financial Secretary, Mr Donald Tsang (left), chats with the Thai Deputy Prime Minister, Dr Amnuay Viravan,

in Bangkok as part of a regional visit to promote ties with members of the Asia Pacific Economic Co-operation forum.

The President of the European Commission, Mr Jacques Santer,

welcomes the Governor, Mr Christopher Patten, to Brussels during his visit in July.

1 HONG KONG HISTORY

By the Governor, the Right Honourable Christopher Patten

In the hall of Government House hangs a picture by one of my favourite young Hong Kong artists, Wang Hai. It is called 'Hong Kong History'. It is a dark, brooding picture, with only the slightest touches of colour in it to tell you that it is not simply an enlargement of a black-and-white photograph from the time depicted, October 1910. The occasion it shows is the last visit that Mandarins from Imperial China made to Hong Kong, for the opening of the Kowloon-Canton railway, a development that was to accelerate Hong Kong's growth and by the late 1920s help it to overtake Shanghai in the handling of China's international trade. The Mandarins in their traditional costumes stand around a dignified, elderly, Viceroy of Guangdong and Guangxi, all looking a little lost, out of place, out of time. At the end of the line, self- assured, hands thrust haughtily into pockets, stands a top-hatted European, the Chairman of the railway company, perhaps. The world he represented would wait until 1941 to be swept away. The world the Mandarins knew would last for only a few months before the 1911 revolution brought down the Ching Dynasty. And, in the date of its composition, June 1989, the painting carries yet another reference to the stirring events that have formed the backdrop to Hong Kong's history.

Since 1898, the year 1997 has been marked down in the calendar as a date of special significance, and today we are all hearing a lot about history. Films are being made, articles written, books published. Two themes tend to predominate, 'End of Empire' and 'Return of the Dragon'. Under the first, Hong Kong is looked at nostalgically, the last significant outpost and one of the most singular successes of Britain's imperial adventure. 1997 is the end of that story. The second theme is also largely about what is ending in 1997: the imperialist, opium-pushing intrusion into China, the end of humiliations inflicted on a weak Chinese government in the nineteenth century. It is very easy to become partisan on either of these interpretations, to overlook the truth in each, to overlook Hong Kong's own history, to overlook what Hong Kong now is.

Whatever the arguments about the rights and wrongs of the imperialist past, what has happened in Hong Kong is the coming together of two civilisations. The mostly Chinese men and women of this community have drawn on their own culture, but also on the ideas, the laws, the education and the arts of many other lands, adopting and adapting them to the growing needs of this city and its people. They have fashioned their own, usually successful solutions to maintaining a lively, harmonious society under unparalleled constraints of space and population density. This is not the debris from the collision of two civilisations but a new creation of them, offering fresh ideas to both.

1

HONG KONG HISTORY

2

  What I've written so far begs some statement about what I think Hong Kong is like today. The statistics on that are to be found copiously throughout the rest of this book. But figures need to be fleshed out. I find my thoughts drawn back often to two very personal moments. One was shortly after my arrival as Governor here in 1992, when I was finding out about welfare services. On a hot, wet day in July, I had been to a rehabilitation centre and emerged to find a number of parents of handicapped children waiting in the rain to petition me. I was struck by their patience, by the moderation of their requests compared to the difficulties they faced, by their love and concern for their children. Those are qualities that I have met time and time again here. The moderation, particularly in the politics, is remarkable given the extraordinary changes that Hong Kong has experienced and is going through. It is a testimony, also, to the social stability that has been fostered in Hong Kong through deliberate change in response to social need. The second event was more traumatic, seeing the families of those who had died or been injured in the terrible fire at the Garley Building, poor people devastated by the loss of children, brothers, sisters. It was a salutary reminder that while the boosters of Hong Kong, myself included, often talk about how median incomes here have exceeded US$25,000 a head, the majority of Hong Kong's citizens have not attained that level of comfort, that their hopes for the future are not founded on financial resources but on prospects for their sons and daughters, on the exchanges and satisfactions of family life.

  The glitz of society life, the full throttle thunder of economic activity, the fascination of living on the edge of the extraordinary changes that have swept through China over the past 150 years, all those things tend to take the eye away from a vital part of Hong Kong's story, the creation of a resilient, sophisticated, highly educated society, ambitious to improve the lot of its members, caring to those in need, offering freedom to exercise abilities. How many would have predicted such an outcome from a community of refugees and merchant venturers ruled over by a colonial power? How many realise how important it is to Hong Kong's present success and future prospects?

  Economic opportunity has been indispensable to Hong Kong, but without the freedom and ability to take and to create that opportunity it would have meant little. Investment in education has been of greater importance than equities, while civil liberties have become inextricably linked with the success of the economic liberties this city affords. And it is worth asking how far history, or rather the fact that people coming here have been able to leave old histories behind them and start again, has been important to the shaping of this society. That is not to suggest that people here have forgotten their pasts, no-one does that. Memories of home towns from Hankow and Santau to Bombay and Arbroath have been brought here, but the liberty that Hong Kong has offered to people to live at peace with the past has not been the least of the freedoms that it has given.

  To ask China to forget the colonial episode is no more realistic than to expect local people to have any deep commitment to a colonial administration, an administration that, despite near-complete localisation, could never become 'our government' in the way that 'Hong Kong people ruling Hong Kong' might do if the words are allowed to mean what they say. But when the convenient paper target of the last veneer of colonial rule is peeled away with my departure at midnight on the 30th of June, there is an opportunity to look afresh at what lies underneath. And what is that? Not some seething pot of repressed ambitions, conflicting ideologies and burning grievances,

HONG KONG HISTORY

but a mature, well-balanced society. A society that has argued cogently and successfully for a steadily increasing say in the way that it is governed. A community that has developed institutions and procedures through which matters of public interest can be debated and settled openly, through which tensions and difficulties can be detected early and addressed, not repressed. A society in which law is respected because it is developed in harmony with changes in society, through a process that is understood and accepted by the community, and because it is upheld impartially. A city that is tolerant of different ideas, so is able to respond smoothly and promptly to changing conditions. A place that by safeguarding the liberties of every one of its citizens can be invigorated by each in return.

Hong Kong remains a community with many problems. We face distortions and disparities in housing, discrimination against the handicapped and new immigrants, demands to improve primary and secondary education. Doubtless when those matters have been addressed, others will have emerged to be debated and resolved. But there can be no doubt that Hong Kong has the ability, the ideas, the resources, the tested mechanisms of public administration, to deal competently with whatever conditions arise locally. The real difficulties for Hong Kong will only come from local laws and institutions being warped to suit external pressures and demands, and so becoming less sensitive to local needs and conditions. It is my hope, it must be the hope of anyone who cares for Hong Kong, that no such threat attains reality.

Hong Kong, for all its imperfections, is a window on the future, for China, for the region. It is an island of stability and social progress, a model for anyone seeking to build a peaceful, prosperous and successful community. It would be a tragedy for far more than Hong Kong if anyone who has a hand in shaping Hong Kong's history today is blinded to that by remembrance of things past. Looking back at history can be an uncomfortable experience at the best of times, but the dangers come not from forgetting but from making history a tool of ideology, from attempts to rectify a past that is already fixed, rather than to respond open-heartedly to what the present has to offer, to welcome reconciliation and the building of new things.

3

2 CONSTITUTION

AND ADMINISTRATION

4

THE Hong Kong Government is headed by the Governor, who represents the Queen in the territory. He has the ultimate direction of the administration of Hong Kong. An Executive Council offers advice to the Governor on important matters of policy. At the central level of the three-tier system of representative government, the Legislative Council legislates, controls public expenditure and monitors the performance 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. The development of these institutions has evolved over the years to meet the aspirations of the community. The 1994/95 cycle of elections further strengthened the basis of Hong Kong's electoral system established through an open and fair process.

  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 responsibility 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 proceedings there, and the nature of legislation which may not be passed.

  Various well-established practices determine the way in which these constitutional arrangements are applied. The Hong Kong Government seeks wide consultation with the community in determining its needs and in designing policies to meet such needs. Although from the constitutional instruments described above, Her Majesty's

CONSTITUTION AND ADMINISTRATION

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.

The System of Government

Executive Council

The Executive Council consists of three ex officio members- the Chief Secretary, the Financial Secretary and the Attorney General - and eight other members appointed by the Governor with the approval of the Secretary of State. 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. 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 elected 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

5

CONSTITUTION AND ADMINISTRATION

6

Council are to enact laws, control public expenditure and monitor the performance of the government. The government is responsible for initiating legislative and public funding proposals to the Legislative Council for consideration.

Major 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 1995-96 session, the Legislative Council passed 65 bills.

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 a new session in October each year; and the budget debate on financial and economic affairs concerning the annual Appropriation Bill, which takes place in March.

^

Members of the council may question the government on policy issues, either by 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, 140 oral and 659 supplementary questions on a wide range of topics were asked during the 30 regular sittings in 1995-96, and 433 questions were tabled for written reply by the administration.

The council meets in public, normally on Wednesdays, to transact council business. About once every two months, the Governor answers questions from members at a special sitting held on a Thursday.

All Legislative Council sittings and almost all meetings of its committees and subcommittees 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 has 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 matters concerning the council's business.

Finance Committee

The Finance Committee of the Legislative Council comprises 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 to consider proposals which entail changes to the approved estimates or to note financial implications of new policies. These meetings are held in public. From time to time, the Financial Secretary briefs members on important financial issues and on budget matters.

The Finance Committee is assisted by two subcommittees, Establishment and Public Works, in the performance of its functions. The subcommittees also meet in

CONSTITUTION AND ADMINISTRATION

      public. The Establishment Subcommittee examines the administration'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 to the Finance Committee on such proposals 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 and makes recommendations to the Finance Committee on 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.

The Finance Committee may determine the functions of its subcommittees. In June. 1996, it decided to expand the terms of reference of the Public Works Subcommittee to cover the examination of capital subvention works projects under the Capital Works Reserve Fund.

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 President of the council. It examines the reports of the Director of Audit on the government's annual statements 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.

7

CONSTITUTION AND ADMINISTRATION

8

House Committee

The House Committee comprises all members of the Legislative Council 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.

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

  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 relating to the business of the council.

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 among members of the bills committee.

  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. It may also consider the bill's detailed provisions and any amendments relevant to the bill. A bills committee may appoint subcommittees for the purpose of assisting the committee in the performance of its functions. A bills committee is dissolved as soon as the bill it has considered passes through the Legislative Council or when the House Committee so decides.

Panels

Panels are committees of the Legislative Council set up to monitor and examine government policies and issues of public concern. Eighteen panels have been formed covering 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, including legislative and financial proposals, 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, and may table the report at a council sitting.

  A panel may form subcommittees to study specific issues. In 1996, six subcommittees were formed to assist the respective panels studying specific subject areas: reviewing matters related to the transparency of advisory and statutory bodies in Hong Kong, monitoring the Long Term Housing Strategy Review, examining the Police Management Review Reports, monitoring progress of the Western Corridor

CONSTITUTION AND ADMINISTRATION

      Railway projects, studying the Comprehensive Social Security Assistance Scheme and monitoring progress of the legislation for the mentally handicapped.

A panel can also conduct public hearings to solicit views from the public on issues of public concern. Public hearings were held in 1996 by the Panel on Home Affairs to solicit views on issues related to human rights and racial discrimination. The Panel on Constitutional Affairs also conducted public hearings on matters relating to the transition leading up to the change in sovereignty in 1997.

       On matters of wide public concern, a panel may conduct enquiries and, for such purposes, may seek authority from the council to exercise the power to summon under the Legislative Council (Powers and Privileges) Ordinance, Cap 382. In 1996, the Panel on Manpower was granted such authority for the purpose of conducting an enquiry into the circumstances surrounding the labour disputes involving imported workers under the Special Labour Importation Scheme for the Airport Core Programme Projects and related issues, and made a series of recommendations to improve the vetting mechanism and administration of the scheme in the light of the findings of the enquiry.

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 report their findings and recommendations to the council. All select committees are dissolved at the end of a session.

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.

       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 concerned 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 1995-96 session, more than 1 450 new cases were handled. About 22 per cent were group representations, while the rest were complaints and requests for assistance from individuals. Members initiated 63 case conferences with representatives of the Administration. More than 1 800 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

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chaired by the President of the Legislative Council and comprises 10 other members of the council. It 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 its committees, legal services, centralised research and library services, translation and interpretation 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 responsibility for the provision of municipal services to some 3.3 million people in the urban areas, representing 53 per cent of the population of Hong Kong. The council plays a key role in safeguarding environmental hygiene and public health as well as providing cultural programmes and recreational facilities.

The council has 41 members: 32 elected from geographical constituencies and one each from the nine urban district boards. It meets formally in public once a month to pass by-laws and deal with financial matters, formal motions and questions on its activities.

The Standing Committee of the Whole Council meets twice monthly to conduct the council's routine business, while its 14 select committees, set up to deal individually with various disciplines among the wide field of civic responsibilities, generally meet at least once a month. There are also 29 sub-committees and working groups which meet regularly to handle specific matters under their parent select committees. All council meetings are open to the public, except for sensitive items which must be discussed in private.

The council's chief executive is the Director of Urban Services, who oversees the operations of the Urban Services Department, which is the largest civilian department in the government structure with a staff of about 16 000. The director is responsible for carrying out the council's policies and implementing its decisions.

The council is financially autonomous and spent about $6.01 billion on council-run activities and projects in 1995-96. A share of the rates forms the main part of its income, with the balance coming from licence fees and other charges.

The council has ward offices throughout the urban areas, where councillors meet the public and advise on a wide variety of matters. Urban residents may also make their views known through the Members' Duty Roster System, whereby councillors 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 environmental hygiene, public health, sanitation, liquor licensing and the provision of recreational, sports and cultural facilities and services for about three 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-

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chairmen of the Heung Yee Kuk. The council's chairman and vice-chairman 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 10 700. The council is financially autonomous, with its main source of revenue being rates collected in the council area. In 1995-96, 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 1995-96, total revenue amounted to $4.16 billion and total expenditure stood at $3.88 billion.

The council discharges its responsibilities through four functional select committees and a Liquor Licensing Board. The four select committees are responsible for finance and administration, capital works, environmental hygiene, and recreation and culture. The Liquor Licensing Board meets quarterly to consider contested applications.

The council has established nine geographically-based committees to monitor the provision of municipal services and facilities. Each district committee comprises Regional Council members and other members co-opted from district boards and the local community.

      All proceedings of the council and its committees are open to the public except when confidential issues such as financial details touching on commercial arrangements are discussed.

The council is represented on several organisations, including the Hong Kong Sports Development Board and the Hong Kong Arts Development Council, whose work is closely related to the council's responsibilities.

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.

       The main function of the district boards, established in 1982, is to advise the government on 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 1996-97, $105 million has been made available to the district boards for the implementation of minor environmental improvement and community involvement projects in the districts.

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.

Each district has a district management committee, chaired by the district officer, comprising representatives of departments providing essential services in the district.

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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 local

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 District Board Members' meet-the-public scheme, the free Legal Advice Scheme and Rent Officer Scheme. The public enquiry service centres and central telephone enquiry centre received 2.34 million clients in 1996.

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

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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. A registration exercise is conducted each year, although applications for registration can be made at any time of the year. The 1996 General Electoral Roll contains 2.55 million registered electors.

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 constituency, 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.

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) 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.

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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 constituency 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 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. 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 commission's direction and carries out its decisions.

Advisory Boards and Committees

The network of advisory boards and committees is a distinctive feature of the system of government. It seeks to obtain, through consultation with interested groups and individuals in the community, the best possible advice on which to base decisions.

Advisory bodies give advice to the government through a branch secretary or a head of department. They can broadly be divided into two categories- statutory bodies (such as the Antiquities Advisory Board) and non-statutory bodies (such as the Construction Advisory Board). 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. Some of these bodies also carry out

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      executive functions, such as the Hospital Authority. There are also local committees concerned with the affairs of particular areas and neighbourhoods, such as 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 290 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. Government constantly keeps in view the composition and operation of the advisory bodies to ensure that they meet the needs of the community. Where appropriate, suitable measures are introduced to enhance their transparency and repre-

sentativeness.

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.

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 organisations and pressure groups and the academic communi. undertakes in-

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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 1996, it produced more than 380 reports and papers on a wide range of economic, social, administrative, political and other issues.

Role of the Efficiency Unit

The Efficiency Unit reports directly to the Chief Secretary and aims 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 a Serving the Community programme.

 The unit has integrated various public sector reform initiatives into a new management framework. This approach, which builds on traditional strengths, gives a clear direction to management tasks across the government and provides the momentum for continuous improvement. The objective is to devolve more authority to those who carry responsibility for policy formulation and service delivery; and to place greater emphasis on serving customers and raising service standards.

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 15 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's reporting directly to the Legislative Council; the Independent Commission Against Corruption 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 Ombudsman

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The Ombudsman - formerly known as the Commissioner for Administrative Complaints (COMAC) is an independent authority, established in 1989 under the COMAC 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. The Ombudsman has jurisdiction over practically all government departments, except the Police and the Independent Commission Against Corruption, which have their own separate bodies to deal with complaints from the public.

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

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extended to cover major statutory bodies. He can initiate investigations on his own volition and may publish investigation reports of public interest. Direct investigations conducted by the Ombudsman included 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, bursting of water mains and general outpatient services.

       In December 1996, the ordinance was amended to bring about a change in COMAC's English title to 'The Ombudsman', a title widely used internationally. The amendment ordinance also enhances the Ombudsman's operation and empowers him to investigate complaints of non-compliance with the Code on Access to Information against departments/agencies in the government not covered by the ordinance, such as the Police, the Independent Commission Against Corruption and the Secretariats of the Independent Police Complaints Council and the Public Service Commission. The code was introduced in March 1995 and gradually extended to all government departments/agencies by December 1996 with the Ombudsman as the common independent review body for alleged breaches.

       The office received 6 129 enquiries and 2 870 complaints in 1996, compared with 4 881 enquiries and 2 607 complaints in 1995.

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

Office of the Director of Audit

The Audit Department is one of the oldest departments in Hong Kong. The first Auditor-General was appointed in 1844.

The Audit Ordinance, enacted in 1971, 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 of Audit has wide powers regarding access to books, documents and records, and the explanations which may be required. He 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, six trading funds and more than 60 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.

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The Director of Audit carries out two types of audit: regularity audits and value for money audits. Regularity audits 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. The Audit Ordinance gives the Director statutory authority for conducting regularity audits.

Value for money audits are intended to provide independent information, advice and assurance about the economy, efficiency and effectiveness with which any branch of the Government Secretariat, department, agency, other public body, public office or audited organisation has discharged its functions.

Except for some public organisations where the Director of Audit has obtained statutory authority to conduct value for money audits in the respective ordinances, 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.

After the Director of Audit's report has been submitted to the President of the Legislative Council and laid before the Council, it is considered by the Public Accounts Committee. In 1996, the Director submitted three reports. The first report, tabled in April, covered the results of value for money audits completed. The second and third reports, in November, covered the audit certification of the government's accounts for the preceding financial year and the results of completed value for money audits.

The Director of Audit'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 Commonwealth 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 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.

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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. However, in most day-to-day matters these missions deal directly with the relevant departments of the Hong Kong Government.

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. At October 1, 1996, the total strength of the Public Service was 184 000. More than 99 per cent are local officers.

      Overall responsibility for the management of the Public Service lies with the Civil Service Branch of the Government Secretariat. The branch deals policies and case work on such matters 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. In addition, its General Grades Office manages the 30 000 executive, clerical and secretarial staff.

The principle of open and fair competition is the cornerstone of the government's appointment policy which aims to recruit the 'best person for the job. The appointment process is open, transparent and non-discriminatory. For checks and balances, 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.

The government is advised on matters relating to pay and conditions of service by four independent bodies - the Standing Committees on: Directorate Salaries and Conditions of Service (senior officers); Judicial Salaries and Conditions of Service (judicial officers); and Disciplined Services Salaries and Conditions of Service (the disciplined services); plus the Standing Commission on Civil Service Salaries and Conditions of Service (all other civil servants).

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 and receive local conditions of service.

Localisation of the Civil Service is a long-established policy of the government, dating from 1950 when the Public Service Commission came into being. Since then, recruitment of overseas candidates has been considered only when there are no fully

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qualified and suitable local candidates available and the qualification for appointment cannot be modified to enable a local candidate to be appointed. The determination of a candidate's 'overseas' or 'local' status is not based on race or nationality, but on habitual residency, general background and social ties and potential dislocation or up-rooting when appointed.

Historically, the terms of appointment and conditions of service for overseas officers and local officers have been different. Over the years, the government has narrowed the gap and now local and overseas conditions of service are close.

Apart from the distinction between local and overseas conditions of service, officers may be appointed either on permanent and pensionable (P&P) terms or agreement (contract) terms. It is government policy to provide a long-term career for civil servants and thus civil servants are employed on P&P terms whenever possible. P&P officers may thus aspire to serve up to the normal retirement age, except where compulsorily retired, dismissed on disciplinary grounds, invalidated on medical grounds, removed from office for unacceptable performance, retired under the provisions of an abolition of office scheme or a compensation scheme.

For all agreement officers, each renewal of agreement depends on service need, satisfactory conduct and performance, and physical fitness. Agreement terms are used to employ staff only when there are circumstances that justify so, e.g. when P&P terms fail to attract and retain sufficient qualified and suitable candidates. As a result, officers on agreement terms comprise less than 2 per cent of the Civil Service. In furtherance of the localisation policy, the government requires that the renewal of agreements of officers on overseas terms should be subject to, apart from the normal criteria applicable, the lack of a suitable local replacement. Since March 1985 all overseas officers have been appointed on overseas agreement terms only. At October 1, 1996, the Civil Service had a total of 1 450 or 0.8 per cent overseas officers, 557 of whom were on overseas P&P terms and the rest on agreement terms. Local officers constitute about 87 per cent of the 3 000 officers at senior management/professional level, and 72 per cent of the 1 400 officers at the directorate

level.

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, the government decided that the localisation policy should be modified to reflect this. In July 1994, after extensive discussions with staff associations and the Legislative Council, a modified policy was introduced under which overseas agreement officers who were also permanent residents could apply to transfer to agreement terms modelled on local conditions of service.

In December 1994, the government announced long-term arrangements to deal with the renewal of agreements expiring on or after September 1, 1995. Under these arrangements, an agreement officer at a promotion rank, whether overseas or local, has to succeed in competing with eligible officers one rank below, if any, in order to obtain a further agreement on local or locally modelled conditions.

In 1995, the Association of Expatriate Civil Servants (AECS) applied for judicial review on various measures of the government in implementing the localisation policy in the Civil Service. The High Court judgement handed down on October 31, 1995, upheld the majority of the government's decisions save in four areas. The AECS appealed and the government cross-appealed on a range of matters.

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The Court of Appeal handed down its judgement on November 22, 1996, which overturned some aspects of the High Court judgement and ruled several decisions of the government as unlawful. Having considered legal advice that there is no reasonable chance of success in a further appeal on those major decisions, the limited impact of the judgement on the localisation policy of the Civil Service and the interests of all parties concerned, the government decided not to appeal further to the Privy Council. Instead, it will work closely with the staff side to find workable solutions that will give effect to the judgement in a way that is fair to all and upholds the localisation policy.

       As a long-term measure, after wide-ranging consultation, the government has proposed introducing a uniform set of terms of appointment and conditions of service for all staff to remove the differences between local and overseas terms and conditions for new appointments and to converge with the Basic Law. The proposals were passed to the Chinese side of the Sino-British Joint Liaison Group in November 1994 for discussion.

       Some of the proposals have already been implemented, including the requirement of Chinese language proficiency for appointment on P&P terms and the cessation of overseas education allowance to new recruits who are offered appointment on or after August 1, 1996. The remaining proposals are the subject of discussion with the Chinese side.

       The Personal Data (Privacy) Ordinance will come into force in late 1996. It places a statutory duty on data users to comply with the requirements of six Data Protection Principles, based on internationally-accepted standards, and applies also to the government. It also gives data subjects certain rights, including the right to be informed of whether any data user holds their personal data, to be supplied with a copy of such data and to request correction of any data they consider to be inaccurate. A procedural guide on the processing of employment-related personal data has been issued for the guidance of all data users in the Civil Service. It reminds all data users to bear in mind, when collecting, using, handling, storing and transmitting personal data, that the interests of the individuals who are the data subjects should be a primary concern.

       The government values regular communication and consultation with staff. There are four consultative councils at the central level: the Senior Civil Service Council, the Model Scale 1 Staff Consultative Council, the Disciplined Services Consultative Council and the Police Force Council. More than 80 consultative committees operate at the departmental level. A Civil Service Newsletter is published quarterly to provide an added link with serving and retired civil servants.

       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 staff. Civil servants demonstrated their community spirit and gave strong support to the Dress Casual Day charity event organised by the Community Chest on September 27, 1996. Some 5 000 civil servants also raised $1.7 million in 1996 for the Community Chest under an employee contribution programme.

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Public Sector Reform- Serving the Community

The government recognises the need to engender in the public service a culture that goes beyond the provision of the bare minimum; a culture that recognises the public as the paying customer and treats him or her accordingly.

 The Efficiency Unit, reporting directly to the Chief Secretary, serves as the focal point to direct and co-ordinate efforts towards achieving this aim. Key initiatives have included:

A performance pledge programme, whereby all government departments directly serving the public now produce performance pledges, informing their customers what services are available, the standards set and how these standards are monitored. All departments with substantial interface with the public have also set up Advisory Groups or Customer Liaison Groups.

A programme management system, to help branches and departments manage performance better. Under this system each department has developed its own programme structure, setting out the key programmes and activities needed to deliver its aims and objectives. Programmes and activities represent the basic building blocks of the system and are defined in terms that describe the nature of the work in each area.

A Trading Funds Ordinance, to enable selected departments to provide services on a commercial or quasi-commercial basis. The staff of trading funds remain civil servants but the accounting arrangement allows such departments to retain revenue and to operate with more financial autonomy to improve services.

A Helping Business Programme, to improve the overall efficiency and effectiveness of the way the government provides services to the private sector. In particular this programme seeks to eliminate unnecessary bureaucracy and outdated regulatory activities, thus reducing the cost of compliance for the business sector and the cost of enforcement for government departments. It also seeks to introduce new services or improve existing services in response to reasonable demands from the private sector and, where appropriate market conditions prevail, transfer government services to the business sector.

 Over time, the Efficiency Unit has gradually integrated these and other initiatives into a new management framework based on the four basic principles of Being Accountable; Living Within Our Means; Managing for Performance and Developing Our Culture of Service. This framework builds on traditional strengths to give a clear direction to management tasks across the government and provide the momentum for continuous improvement.

 Key objectives include devolving more authority to those who carry responsibility for policy formulation and service delivery, placing greater emphasis on serving customers and generally seeking to raise standards across the whole spectrum of services provided by the government.

 To ensure the delivery of quality service to the public, the government has embarked on a new approach to personnel management. This involves the development of a more dynamic management environment wherein staff will be motivated, developed and managed to maximise their contribution to the Civil Service. As a result of this approach, departments now have greater devolved authority in matters such as staff management and professional training.

CONSTITUTION AND ADMINISTRATION

Civil Service Training and Development

The government attaches great importance to the training and development 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. When necessary, staff are also sponsored on local or overseas training courses or attachments.

To achieve effective use of training resources, the Civil Service Training Centre and Senior Staff Course Centre were amalgamated in April 1996 to become the Civil Service Training and Development Institute, which strives to be a centre of excellence for Civil Service training. It conducts a wide range of management, language, China studies and computer courses, and co-ordinates the management training undertaken by civil servants at local and overseas institutes. It also provides training services to support management initiatives launched by the central government and helps departments with their training programmes.

Transition to 1997

      Stability and continuity are high on the agenda of the Civil Service in making its transition to Chinese sovereignty. Turnover in the Civil Service has always been low compared with the private sector and the wastage rate of the overall Civil Service in 1995/96 was 4.4 per cent - its lowest in seven years. Continuity at the management level is particularly important. For this purpose the government has a well-organised staff planning system. The Secretary for the Civil Service holds regular meetings with Heads of Departments and their Policy Secretaries to review succession planning of senior staff and to identify and groom officers with potential for senior management, in order to ensure a steady supply of talent to senior positions.

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       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 the 23 or so Principal Official posts the most senior posts. The government has localised 22 of the posts by promoting talented civil servants. The government will fulfil its commitment to fill all posts at future Principal Official level before July 1, 1997, by officers who meet the Basic Law's requirements by localising the last such post, Attorney General.

       A Civil Service Pension Reserve Fund was established in 1995 to provide an additional assurance to civil servants on the security of pensions. The fund reinforces the strong guarantees in the existing pensions legislation, the Joint Declaration and the Basic Law. The fund, which stood at $7.4 billion in March 1996, will be topped up as and when necessary in order to maintain the balance at a minimum of one year's pension expenditure.

       The government runs an extensive 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. 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 and visits also

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

Tsinghua Course:

Familiarisation Visit:

China Seminars:

Each course consists of four weeks of classroom lectures at the Tsinghua University in Beijing, followed by 10 days of visits to major cities in China. Five courses, each with 26 students, are organised annually.

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

Speakers knowledgeable about China-related issues are invited from within and outside the government to deliver seminars to public servants.

Self-learning Packages: Videos, booklets and computer software on China-related

subjects are developed for use by civil servants.

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

Government Records Service

The Government Records Service manages government records. It undertakes two different but related programmes. The Records Management Office is responsible for a records management programme to handle current and inactive records; and the Public Records Office for an archives administration programme to look after the preservation and use of records of historical value.

a

The appropriate management of records affects the efficiency of business in government. The Records Management Office oversees and develops comprehensive system to manage records effectively and efficiently, from their creation to their final disposal. 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 year 1996 saw the successful conclusion of the first phase of the strategy, and the launching of the second phase, which aims to achieve full-scale implementation of a proper records management system within the civil service by mid-1998. The other initiatives being planned for the new phase include the introduction of centralised microfilming facilities and development of a civil service records back-up and recovery system.

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.

Construction of the territory's first purpose-built permanent archives began in January 1996 in Kwun Tong, Kowloon, and is expected to be completed in mid-1997. The new building has been designed to the latest international standards required for the permanent preservation of various types of records.

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       To further enhance efficiency in archival management, and in the provision of reference services to the public, plans are in hand to automate the accession listing and search-aid facilities of the Public Records Office. The new systems will be installed in the new archives building when it opens in mid-1997.

Language

The official languages of Hong Kong are English and Chinese. Reports and publications of public interest issued by the government are always produced 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. Correspondence from the public in Chinese is replied to in Chinese.

       The government is vigorously promoting wider use of Chinese in the civil service. The government's ultimate objective is to develop a civil service which operates efficiently in Chinese and English and is conversant in spoken Cantonese, English and Putonghua. The establishment of the Official Languages Agency on April 1, 1996, gave impetus to the drive to promote the use of Chinese. The Agency has published guidelines and reference materials on Chinese writing to facilitate preparation of official documents in Chinese. In 1996, $24.3 million was spent on acquiring computers and training civil servants in Chinese word processing.

       Good progress continued to be made by the Bilingual Laws Advisory Committee in advising the Governor in Council on the authentication of Chinese texts of laws enacted before April 1989. Since July 1992, the Chinese texts of 268 ordinances have been declared to be authentic. All new principal legislation enacted since April 1989 is in English and Chinese.

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THE legal system in Hong Kong is firmly based on the rule of law and the independence 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.

In June 1995, the Sino-British Joint Liaison Group reached an agreement on the establishment of the CFA in Hong Kong on July 1, 1997. This agreement ensures that- there will be no judicial vacuum between the end of Hong Kong's right of appeal to the Privy Council and the establishment of the CFA in Hong Kong. To give effect to this agreement, the Hong Kong Court of Final Appeal Ordinance was enacted, with the advice and consent of the Hong Kong Legislative Council, in August 1995. Work has begun on renovating the former French Mission Building in Central as the new CFA building and on the drafting of rules of procedure for the CFA.

The British Government has given an assurance that the Privy Council will retain its jurisdiction over cases from Hong Kong courts up to June 30, 1997, and that it will give priority to Hong Kong appeals in the months immediately before July 1997. Any unfinished appeals will be transferred from the Privy Council to the CFA. Discussions with the Privy Council regarding ways of ensuring the orderly transfer of any unfinished business to the CFA on July 1, 1997, are in progress.

 The past year saw major developments in the area of human rights protection and legal aid services. Among these were the implementation of legislation against discrimination as well as the establishment of the Equal Opportunities Commission and the Legal Aid Services Council.

Law in Hong Kong

The Governor, acting by and with the advice and consent of the Legislative Council, has the power to make 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 both Chinese and English, and for translating legislation enacted in English only into Chinese. Both the Chinese and English texts are authentic texts of the laws. The first bilingual ordinance was enacted on April 13, 1989. Since then, all new principal

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legislation and legislation amending bilingual legislation have 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 ordinances enacted only in English. The committee 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 enacted only in English was declared authentic in July 1992. Since then, the Chinese texts of about 326 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 reached about 22 800 entries and is growing at a rate of about 80 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 second edition, containing about 15 000 entries, was published in June 1996. The next edition will be published towards the end of 1997 or in 1998.

       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 the loose-leaf edition. The loose-leaf edition will be updated continuously. In addition, all new laws are 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 Hong Kong 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 several English Acts, such as the Habeas Corpus Act 1816, to Hong Kong. It will be superseded on July 1, 1997, by the Basic Law, which provides for the adoption of the laws previously in force in Hong Kong as the laws of the Hong Kong Special Administrative Region (HKSAR). Useful provisions in the English Acts applied by the ordinance will be re-enacted in local legislation.

       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 July 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 several topics (including civil aviation, merchant shipping, fugitive offenders and intellectual property) or if it is required in order to give effect to an international

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agreement which applies to the territory. Legislation has already been enacted to localise laws in fields including admiralty jurisdiction, marine pollution, merchant shipping, civil aviation, coinage, dumping at sea, protection of trading interests and biological weapons, and work in other areas is in progress.

A Localisation and Adaptation of Laws Unit has been established in the Attorney General's Chambers. Its role is to give legal advice on the localisation of UK 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 HKSAR, which was promulgated in April 1990. In that respect, a review by policy branches of all ordinances within their spheres of responsibilities has been completed with a view to appropriate amendments being made on, or shortly after, July 1, 1997.

Human Rights

Hong Kong abides by several international conventions on 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 and the Basic Law of the HKSAR of the People's Republic of China both guarantee that the provisions of the two covenants, as applied to Hong Kong, shall remain in force after 1997.

The Bill of Rights Ordinance, which was enacted in 1991, gives effect in local law to the provisions of the ICCPR. At the same time, the Letters Patent for Hong Kong were amended to provide that no laws shall be made which restrict the rights and freedoms enjoyed in Hong Kong in a manner inconsistent with the ICCPR as applied to the territory.

In 1994, the Convention on the Rights of the Child was extended to Hong Kong, placing the territory under international obligations to respect children's rights and protect their interests. The initial report on Hong Kong under the convention was submitted to the UN in early 1996 and examined in October by the UN Committee on the Rights of the Child.

A proposal seeking to extend to Hong Kong the Convention on the Elimination of All Forms of Discrimination Against Women was agreed at the Joint Liason Group and the extension took effect on October 14, 1996.

On the domestic front, the Sex Discrimination Ordinance, enacted in July 1995, renders unlawful discrimination on the grounds of sex, marital status, pregnancy and sexual harassment. It also provides for the establishment of an Equal Opportunities Commission tasked with the responsibility of eliminating discrimination and promoting equal opportunities between the sexes. The Equal Opportunities Commission was formally established in May 1996 and began operation in September. It also oversees the implementation of the Disability Discrimination Ordinance enacted in August 1995.

The Personal Data (Privacy) Ordinance, enacted in August 1995 to protect the individual's right to privacy with respect to personal data, gives statutory effect to internationally recognised data protection principles and provides for the establishment of an independent regulatory authority, the Privacy Commissioner for Personal Data, to promote and enforce compliance with the legislation. The

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Commissioner assumed office in August 1996 and the ordinance commenced operation in December.

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 Commission on International Trade Law. The Attorney General has proposed certain amendments to the Arbitration Ordinance which aim to minimise the differences in conducting arbitration proceedings under the two regimes. Awards made in Hong Kong can be enforced in more than 120 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 overseas. It operates panels of international and local arbitrators, and maintains lists of mediators. HKIAC's premises are in Exchange Square in Central District where it provides 10 purpose-built hearing and conference rooms and full support facilities. The number of cases involving the HKIAC has substantially increased in recent years. It is anticipated 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, as well as a member of the Judicial Service Commission and the Operations Review Committee of the Independent Commission Against Corruption.

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

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 The Attorney General's Chambers comprise the Attorney General's Office and 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, headed by the Chambers Manager, deals with administrative matters. The Attorney General's Office provides legal and administrative support to the Attorney General in respect of his many functions which include being the principal legal adviser to the Governor and to the government as a whole, serving as a member of the Executive Council, promoting legislation relating to the administration of justice and legal services, and answering questions raised by members of the Legislative Council.

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, China law and Basic 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 responsible 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.

 Since its establishment in 1980, the commission has published 30 reports covering subjects as diverse as commercial arbitration, homosexuality, bail, sale of goods and supply of services, bankruptcy, fraud, and illegitimacy. The recommendations in 18 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, description of flats on sale, and 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,

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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 tendering advice on the policy and legislation 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

Hong Kong has 3 876 solicitors and 514 local law firms, plus 56 registered foreign law firms, 383 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.

       The territory has 626 practising barristers, whose governing body is the Bar Association. Their conduct and etiquette are governed by the Code of Conduct for the Bar of Hong Kong.

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 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 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 the District Court. Until June 30, 1997, further recourse for appeal will be with the Judicial Committee of the Privy Council in London. With the change of sovereignty, in July 1997, the Court of Final Appeal which will be established on July 1, 1997, will assume the role of the highest appellate court in Hong Kong.

       The High Court's jurisdiction 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 defamation. For criminal trials, they sit with a jury of seven, or sometimes nine on special direction of the Judge.

       The District Court is one level below the High Court. There is a Chief District Judge and 32 Judges, who sit without a jury. The District Court's civil jurisdiction is 31

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limited to disputes with a monetary value of up to $120,000. The District Court tries more serious criminal cases but not murder, manslaughter and rape. The maximum term of imprisonment is seven years. It has appellate jurisdiction in stamp duty appeals and in its family jurisdiction decides divorce, adoption and custody 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 62 professional magistrates sitting in 10 magistracies spread around the territory. The magistrates exercise criminal jurisdiction over a wide range of offences. Although there is a general limit of two years' imprisonment or a fine of $100,000, many ordinances empower magistrates to impose sentences of up to three years' imprisonment and heavier fines, in some cases up to $5 million. They also try cases in the Juvenile Court, which has jurisdiction in charges against children and young persons up to 16 years, except in cases of 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. The Lands Tribunal has a special jurisdiction in rating and valuation and assesses compensation when land is resumed by the government or reduced in value by development. The Labour Tribunal hears civil claims arising from contracts of employment. The Small Claims Tribunal hears minor civil claims, up to a limit of $15,000 at present. The Obscene Articles Tribunal determines 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.

 Steady progress has been made in implementing the plan drawn up by the Steering Committee appointed by the Chief Justice to further the use of Chinese in the higher courts. At present, cases in the District Court, magistracies and tribunals can be tried in either English or Chinese. Also, since December 1, 1996, The High Court may use Chinese or English in hearing appeals from the Magistrates' Courts, the Labour Tribunal and the Small Claims Tribunal. Restrictions on using Chinese in the High Court and Court of Appeal will be removed by stages in the first half of 1997. Meanwhile, the judiciary is identifying suitable cases to be tried in Chinese in the High Court in advance of the programme. A bilingual court system will be in operation before July 1997.

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 Hong Kong 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,

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

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 contract and professional negligence.

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

An applicant who is refused legal aid may appeal to the Registrar of the Supreme Court; or in Privy Council cases, to a committee of review. The department's total expenditure for 1996 was $240 million in civil cases. During the year, 25 300 applications were received, and 9 200 were granted legal aid. Altogether, $620 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 1996 was $4 million, 170 applications were received, and 100 were granted legal aid.

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.

If satisfied that it is in the interests of justice to do so, the director has discretion to grant legal aid to an applicant who is charged with a criminal offence even if he fails

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the means test. Most people charged with criminal offences have therefore been granted legal aid.

 Total expenditure on legal costs on criminal cases for 1996 was $100 million. During the year, 4 600 applications were received, 2 900 applicants were granted legal aid.

Legal Aid Services Council

The Legal Aid Services Council was established on September 1, 1996. The council has been charged with overseeing the administration of the services provided by the Legal Aid Department and to advise the Governor on legal aid policy. The council consists of a chairman and four persons who are not connected in any way with the practice of law; two barristers and two solicitors; and the Director of Legal Aid. It is required to submit a report each year to the Governor. A copy of the annual report should also be laid before the Legislative Council.

The Official Solicitor

The Director of Legal Aid was appointed the first Official Solicitor after the Official Solicitor Ordinance Cap. 416 came into force in August 1991.

 A separate office was established to provide legal representation to persons under legal disability, estate or trust in court proceedings in Hong Kong. Up until July 1996, the Official Solicitor had received 376 requests for representation in matters involving receivership, unclaimed estates, proceedings for or against mental patients, adoption, guardianship and application for care and protection order under the Protection of Children and Juveniles Ordinance. The Official Solicitor assigned less than 5 per cent of the cases to private lawyers and litigated the balance himself.

Duty Lawyer Service

The Duty Lawyer Service was established in November 1978. It was then known as the Law Society Legal Advice and Duty Lawyer Schemes. In August 1993, it was incorporated into a company limited by guarantee and renamed.

 The Duty Lawyer Service is subvented by the Hong Kong Government but independently administered by the legal profession of Hong Kong. The Hong Kong Bar Association and the Law Society of Hong Kong each nominate four members to sit on the council of the service, which manages and administers its operations. A lay member has also been invited to sit on the council.

 The service operates three schemes: the Duty Lawyer Scheme, the free Legal Advice Scheme and the Tel-law Scheme.

The Duty Lawyer Scheme provides legal representation to defendants who are charged and brought before a magistrate. When it commenced its service in January 1979, it covered only six offences and was available in three magistracies. It was extended gradually. In 1983 it was extended to all the magistracies in Hong Kong and covered nine offences. After the introduction of the Bill of Rights Ordinance in 1991, the scheme was extended to cover almost all of the criminal offences in magistracies. To be eligible for legal assistance, a defendant has to pass the means and merits tests. Each eligible defendant has to pay a handling charge of $300. In 1996, the financial eligibility limit was increased from $90,000 to $108,000 gross annual income. The Administrator of the service may exempt a defendant from payment of the

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handling charge. In 1996, 39 202 defendants were assisted under the scheme, which also assigns lawyers to represent defendants facing extradition, to represent suspects attending one-way viewer identification parades and to represent hawkers at the hearings of their appeals to the Governor in Council. There were 924 barristers and solicitors on the Duty Lawyer Panel.

The free Legal Advice Scheme was set up in 1978 to provide members of the public free legal advice at legal advice centres located in the District Offices. A new centre was opened in January 1996 in the Central and Western District Office, increasing the number of advice centres to six. Any member of the public can make an appointment to meet volunteer lawyers for legal advice through one of the 120 referral agencies which include all the District Offices, Caritas Service Centres and the Social Welfare Department. In 1996, there were more than 580 volunteer lawyers participating in this scheme and 5 117 people were given advice.

The Tel-law Scheme was introduced in 1984 to provide members of the public with taped legal information by telephone. In 1995, the Tel-law system was fully computerised and upgraded into a 24-hour automatic answering service. The tapes are in Chinese and English and cover aspects of the law including matrimonial, landlord and tenant, criminal, commercial, employment, environmental and administrative law. They are constantly updated and new tapes are added when a new subject is identified as being of interest to the public. In 1996, there were 69 topics available and 19 168 calls were received.

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4 ARRANGEMENTS FOR

THE TRANSITION

36

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;

ARRANGEMENTS FOR THE TRANSITION

(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 HKSAR will be the responsibility of the

HKSAR itself, 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 SAR, much would need to be done to prepare Hong Kong for its new status. To this end it provided for the establishment of the Joint Liaison Group (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 38 plenary meetings since 1985: 15 in Hong Kong, 12 in London and 11 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

37

ARRANGEMENTS FOR THE TRANSITION

38

ensure the maintenance of Hong Kong's participation in the General Agreement of 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 (now known as World Trade Organisation - WTO) and also that Hong Kong should become a separate Member of the Customs Co-operation Council (now known as the World Customs Organisation - WCO).

 The JLG has also agreed that Hong Kong should continue to participate in 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); Asian-Pacific Postal Union (1986); the UN Food and Agriculture Organisation and its subsidiary bodies in the Asia-Pacific Region (1987); United Nations Economic and Social Commission 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); International Atomic Energy Agency (1988); United Nations Commission on Narcotic Drugs (1988); International Hydrographic Organisation (1988); Network of Aquaculture 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); International Telecommunications Satellite Organisation (1990); International Maritime Satellite Organisation (now known as International Mobile Satellite Organisation) (1990); World Intellectual Property Organisation (1994); International Textiles and Clothing Bureau (1996); and the International Civil Aviation Organisation (1996).

 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 some 200 international conventions to Hong Kong after June 30, 1997. Agreement in principle has also been reached on the framework of the mechanism to notify the international community of the continued application of these conventions to Hong Kong after June 30, 1997.

 The JLG has also agreed to a network of bilateral agreements between Hong Kong and various conutries. These will continue in force after June 30, 1997.

(a) Investment Promotion and Protection Agreements with: The Netherlands (agreed to in the JLG, March 1992, signed November 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), Germany (December 1993, January 1996), Italy (June 1994, November 1995), France (September 1994, November

ARRANGEMENTS FOR THE TRANSITION

   1995), Canada (agreed to in June 1992), Belgium (July 1995, October 1996) and Austria (February 1996, October 1996).

(b) Surrender of Fugitive Offenders Agreements with: The Netherlands (agreed to in the JLG, August 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), the USA (September 1996, December 1996), India (December 1994) and Indonesia (October 1996).

(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), India (September 1993), Singapore (February 1996, April 1996), South Korea (February 1996, March 1996), Italy (June 1996), Mynamar (September 1996), Thailand (September 1996) and Japan (November 1996). Agreement was also reached in September and December 1996 on a model text which will be used as the basis for the negotiation of overflight agreements and 22 negotiating partners, respectively.

(d) Mutual Legal Assistance in Criminal Matters Agreement with: Australia (agreed to in the JLG February 1996, signed September 1996). Nineteen negotiating partners agreed.

(e) Transfer of Sentenced Persons: Model agreement agreed in the JLG in

February 1996. Six negotiating partners agreed.

       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 HKSAR 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

39

ARRANGEMENTS FOR THE TRANSITION

40

agreement was reached in respect of the Hong Kong Government's archives on measures needed as a result of the establishment of the SAR.

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 postage stamps, and the future arrangements for international call sign services for Hong Kong. In January 1996, agreement was reached on the preparations for the issue of HKSAR passports. In September 1996, agreement in principle was reached on the issue of travel documents other than the HKSAR passports after July 1, 1997. In the same month, an Agreed Minute on the principles for the Handover Ceremony that will be held around midnight of June 30, 1997, was signed. In November 1996, an Agreed Minute on the transfer of the Exchange Fund was signed.

One of the JLG's most important achievements has been to ensure the continuity of the independent judiciary in Hong Kong. Both the Joint Declaration and the Basic Law provide that the judicial system previously practised in Hong Kong shall be maintained except for those changes consequent upon the establishment of the Court of Final Appeal of the HKSAR. In June 1995, agreement was reached in the JLG on the establishment of the Court of Final Appeal on July 1, 1997, in accordance with the provisions of the Court of Final Appeal Ordinance passed by the Hong Kong Legislative Council in the 1994-95 session. This agreement ensures that the Court of Final Appeal will be established in accordance with the established principles and practices of the Privy Council and that there with be no judicial vacuum in 1997.

Agreements have also been reached to ensure that the UK Laws currently in force in Hong Kong, apart from those which can be allowed to lapse, will continue to apply after June 30, 1997. The JLG has reached agreement on the localisation of about 130 UK enactments in the following areas of law: Merchant Shipping (Registration) (1986); Admiralty Jurisdiction (Civil) (1988); 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) (1944); Coinage (1994); Biological Weapons (1995); Aviation Security (1995); Patents (1995); Registered Designs (1995); Copyright (1995); Whale Fisheries (1995); Submarine Telegraph (1996); Surrender of Fugitive Offenders (1996), Carriage by Air (1996) and Official Secrets (1996).

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 (1992), 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

        contract for the Aberdeen Tunnel (1994); four Fixed Tele- communication Network licences (1995); the Route III (Country Park Section) BOT franchise (1995); the new franchise for China Motor Bus Company (1995); the management contracts for the Lion Rock and Airport, and Shing Mun and Tseung

British and Chinese representatives on the Joint Liaison Group,

Mr Hugh Davies (left) and Mr Zhao Jihua, start discussions with a handshake at the JLG's 38th plenary session and the last for the year, held in Hong Kong from December 4 to 6. Issues discussed included the transitional Budget, the Handover Ceremony, and matters relating to Hong Kong's international rights and obligations.

110

HD

The Commander British Forces Hong Kong, Major-General Bryan Dutton, escorts the Commander of the future garrison of the People's Liberation Army in Hong Kong, Major-General Liu Zhenwu, as he inspects a Gurkha Guard of Honour at the Prince of Wales Barracks, Central.

BOTTOM: Major General Liu looks over operations during a visit to 28 (Army Co-operation) Squadron, RAF. A trip to Shenzhen by Major-General Dutton in May - the first time Hong Kong's British Commander has made an official visit to China since the establishment of the People's Republic of China in 1949 - marked the first formal contacts between the British Forces and Hong Kong's future garrison.

Photos courtesy of the Joint Service Public Relations Staff

       Rugby players from the People's Liberation Army and the British Forces team up against the visiting Kidderminster team (gold and black stripes) from the UK. The PLA players were in Hong Kong for a 10-a-side rugby tournament and the British Forces offered to make up a full 15 during Kidderminster's 'social' tour of the region. Kidderminster won 30-7.

Electoral staff record the votes during the poll for Chief Executive of the Hong Kong Special

Administrative Region, held in the Convention and Exhibition Centre on December 11, won by shipping executive and businessman, Mr Tung Chee Hwa. BELOW: Governor Christopher Patten congratulates the Chief Executive (Designate), Mr Tung Chee Hwa, in a photo session after discussions at Government House. Mr Patten said the government would provide Mr Tung with staff and premises as he prepared for the territory's return to China's sovereignty on July 1, 1997.

吳光正

董建華

楊鐵樑

· #fikri - il 11,

ARRANGEMENTS FOR THE TRANSITION

      Kwan O Tunnels (1996); the new franchise for Citybus Company (1996); six Personal Communications Services Licences (1996); a satellite television uplink and downlink licence (1996) and the new franchise for New Lantao Bus Company (1996). A common view was also reached in September 1996 on the development of Container Terminal No. 9. 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. In 1996, the two sides. completed a comprehensive review of the progress of the Airport Core Programme and the implementation of the financial agreements for the new airport and airport railway.

       The Airport Committee has also agreed to seven airport-related franchises, including franchises for air cargo services, aviation fuel supply services and aircraft catering services. It also reached consensus on the Airport Authority Ordinance and the membership of the Airport Authority Board for the new airport. On May 30, 1996, the committee signed an Agreed Minute on the early commissioning of the new airport's second runway.

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 includes the transfer of government, legal and immigration issues.

The transfer of government involves issues such as consultations on the transitional Budget and related matters, the transfer of defence responsibilities and the framework which governs the future Chinese Garrison in Hong Kong, the implementation of the 1990 agreement on archives, and the future of the civil service. Arrangements are also needed for the implementation of the Agreed Minute signed in September 1996 on the Handover Ceremony. All of these issues must, by definition, be resolved before July 1, 1997.

       Several legal issues remain unresolved. For example, about eight items regarding localisation of laws are still outstanding and early resolution is needed on the modalities for the adaptation of existing Hong Kong laws with the Basic Law. Agreement is needed on the continued application of a few international conventions, and on the commencement of bilateral agreements on the reciprocal enforcement and recognition of judgements in civil and commercial matters. Further bilateral agreements under the existing programmes (Mutual Legal Assistance, Surrender of Fugitive Offenders, Transfer of Sentenced Persons, Investments Promotion and Protection Agreements and Air Services Agreements) also need to be agreed to.

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 implement the agreement on the preparations for the issue of HKSAR passports. Arrangements must be made to ensure that Hong Kong residents

41

ARRANGEMENTS FOR THE TRANSITION

42

can travel as easily as possible to third countries once the SAR is established. It will also be necessary to work out the actual arrangements for the issue of travel documents other than HKSAR passports after July 1, 1997.

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 had 33 formal meetings up to end 1996. It last met in November 1996.

 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. Land grants for a River Trade Terminal in Tuen Mun and the development of Container Terminal No. 9 were agreed in 1995 and 1996 respectively.

As at December 1996, the two sides agreed to make available, during the 1996-97 financial year, a total of about 310 hectares of land. This takes to 2 874 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 deducting 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 June 30, 1996, about $105 billion 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 HKSAR adopted by China's National People's Congress (NPC). The Basic Law Drafting 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

ARRANGEMENTS FOR THE TRANSITION

      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.

Co-operation with the Preparatory Committee and Chief Executive (Designate)

The method for the formation of the First Government of the Hong Kong Special Administrative Region (HKSAR) is set out in a Decision of the National People's Congress of China adopted on April 4, 1990. The Decision provides that, within 1996, the National People's Congress shall establish a Preparatory Committee, which shall be responsible for preparing the establishment of the HKSAR and shall prescribe the specific method for forming the first Government and the first Legislative Council.

      Hong Kong Government is committed to co-operate with the Preparatory Committee on the basis of three parameters, namely:

(a) that the arrangements for co-operation are fully consistent with the Joint

Declaration and the Basic Law, and are in the interests of Hong Kong;

(b) that the authority and credibility of the Hong Kong Government are not

compromised; and

(c) that the morale and confidence of the civil service are not affected, and that

civil servants are not subjected to conflicting loyalties.

To this end, a Liaison Office, headed by the Secretary for Constitutional Affairs, was set up as the designated channel of communication between the Hong Kong Government and the Preparatory Committee. The government has provided assistance in various areas to the Preparatory Committee, including supply of information and briefings on government policies and the use of airtime on television and radio for the Preparatory Committee to publicise the formation of the Selection Committee.

The National People's Congress Decision of April 4, 1990, also provides for the establishment of a Selection Committee by the Preparatory Committee. The Selection Committee shall recommend the candidate for the first Special Administrative Region Chief Executive through local consultations or through nomination and election after consultations, and report the recommended candidate to the Central People's Government for appointment.

The Governor reiterated in his 1996 Policy Address the Hong Kong Government's commitment to give the Chief Executive (Designate) all necessary assistance.

On December 11, 1996, Mr Tung Chee Hwa was selected by the Selection Committee as the Chief Executive (Designate) of the Hong Kong Special Administrative Region. The Governor and the Chief Secretary had their first meetings with Mr Tung on December 23 and 28 to discuss the assistance which Mr

43

ARRANGEMENTS FOR THE TRANSITION

44

Tung might require. As a first step, Mr Tung will be provided with accommodation and staff for his private office. He will also be provided with other necessary assistance to facilitate his assumption of office on July 1, 1997.

Continuity of the Legislature

In his 1992 Policy Address, the Governor put forward proposals for the 1995 Legislative Council elections. The objective was to ensure that the electoral arrangements were open, fair and acceptable to the community and, at the same time, were within the framework of the Joint Declaration and the Basic Law.

 The government would have preferred to legislate the proposals on the basis of agreement with the Chinese side. Hence, 17 rounds of talks with the Chinese side were conducted in 1993. Regrettably, no agreement could be reached. Because of the need to introduce legislation and given the constraints of the electoral timetable, the government had no choice but to press ahead and put forward the proposals to the Legislative Council in 1994. The proposals were approved by legislators. The elections held in September 1995 attracted a record number of candidates and a historically high voter turnout. The elections were widely regarded as open and fair.

.

Since the breakdown of talks, the Chinese side has said on various occasions that there would be no 'through-train' Legislative Council. The Standing Committee of China's National People's Congress decided on August 31, 1994, that the Legislative Council elected in 1995 shall come to an end on June 30, 1997. At its second plenary meeting on March 24, 1996, the Preparatory Committee endorsed the setting up of a provisional legislature. According to the decision of the committee, this body is to exist until the first Special Administrative Region legislature is established, which will be no later than June 30, 1998.

Despite popular support for the current Legislative Council, China proceeded with its plan for a provisional legislature. On December 21, 1996, the body was chosen by a 400-member Selection Committee.

The corporate position of the British and the Hong Kong Governments on the continuity of the legislature is clear and well known. The electoral arrangements for the 1995 Legislative Council were open, fair and fully consistent with the Joint Declaration and the Basic Law. There is no basis for a provisional legislature in the Joint Declaration or the Basic Law. Until British sovereignty ends on June 30, 1997, the only constitutional legislature in Hong Kong is the current Legislative Council, elected openly and fairly by a record number of voters, and with a clear and legitimate mandate.

This position was reaffirmed by the Prime Minister and the Foreign Secretary on various occasions, and again in a statement issued by the British Government on December 20, 1996, which:

(a) explained why China's plan to have the provisional legislature start operating before July 1, 1997, would make a bad situation worse and was both undesirable and unnecessary;

(b) reminded China that it had a clear duty to return as soon as possible to unambiguous compliance with the Joint Declaration and to minimise the damage which a provisional legislature may cause;

ARRANGEMENTS FOR THE TRANSITION

(c) called on China to honour the undertaking, given by the Chinese Foreign Minister to the Foreign Secretary, that the provisional legislature would not assume its functions before July 1, 1997;

(d) called on China to ensure that the provisional legislature is replaced as soon as

possible by a substantive legislature constituted by genuine elections;

(e) stated Britain's readiness to join China in submitting the question to

international legal settlement; and

(f) announced steps to promote future implementation of the Joint Declaration. The Hong Kong Government also issued a statement on the same day to give full support to the Foreign Secretary's statement. It reaffirms that up to June 30, 1997, the current Legislative Council is the only constitutional legislature in Hong Kong, and that the Hong Kong Government is committed to working with it.

1

45

46

5 THE ECONOMY

HONG KONG'S economy picked up steadily during 1996, after a temporary setback towards the latter part of 1995. For 1996 as a whole, the Gross Domestic Product (GDP) grew by 4.7 per cent in real terms, the same as the growth rate attained in 1995. Exports of goods registered a considerably slower growth in 1996. There was, however, a concurrent marked slow-down in imports of goods for local use, resulting in a further narrowing of the visible trade deficit. This, together with a large and growing surplus in invisible trade, has contributed positively to the growth of GDP in 1996. Conditions in the labour market improved with the unemployment rate edging lower.

 Earnings in most major sectors continued to show notable increases both in money terms and in real terms. The property market revived in 1996 after the consolidation in 1995. Consumer price inflation moderated markedly.

 Like many economies in the region, Hong Kong suffered a setback in export growth in 1996, affected to various extent by the slow-down in import demand in some of the major markets and the abrupt global downturn in the electronic product cycle. Compounding the adverse demand effect was the relative strength of the Hong Kong dollar in line with the US dollar, which reduced the competitiveness of Hong Kong's exports in the world market. The North American Free Trade Agreement (NAFTA) could have also diverted to Mexico and Canada some US import demand formerly sourced from Asia.

 Nevertheless, the growth in imports also decelerated significantly, contributed partly by the deceleration in re-export growth and partly by inventory adjustment leading to a decline in retained imports. As a result, the visible trade deficit narrowed to $138 billion, or 9 per cent of the value of imports in 1996, from $147 billion, or 9.9 per cent of the import value in 1995.

 Exports of services continued to grow strongly in 1996, albeit less rapidly than in 1995. Apart from the strong growth in tourism, offshore trading and exports of professional and business services increased further. The surplus in invisible trade should be able to offset substantially the deficit in visible trade.

 On domestic demand, consumer spending revived steadily. Of particular note was the resurrected buying interest in luxurious or durable items such as cars and home appliances in the latter part of 1996. Overall investment spending was generally sustained. Activities related to the major infrastructural projects, particularly those under the Airport Core Programme (ACP), remained intensive. However, growth should have tapered as the ACP progressed towards its peak.

THE ECONOMY

       Labour market conditions improved during the year. In the fourth quarter of 1996, the seasonally adjusted unemployment rate was 2.6 per cent, down from the peak of 3.6 per cent in the three months ending November 1995. As manpower utilisation intensified, the underemployment rate also eased, to 1.6 per cent in the fourth quarter of 1996 from the peak of 2.5 per cent in the third quarter of 1995. The improvement was underlined by a broad-based strengthening in labour demand in 1996. Although labour supply still recorded a notable growth during the year, underpinned by substantial inflows of returnees, incoming expatriates and Chinese immigrants, total employment rose even faster. As a result, the overall balance of supply and demand in the labour market tightened. Labour earnings in most of the major sectors continued to increase both in nominal and in real terms.

       The residential property market showed a marked pick-up, with active trading in 1996. Apartment prices rose substantially during the year. The sales market for office space also showed a notable revival, but the rental market remained generally soft. Shopping premises in popular locations had an improvement in sales, while rentals bottomed out in the latter part of the year. Activity in the industrial property market however remained subdued. Prices and rentals continued to decline.

        The GDP deflator, as a broad measure of overall inflation in the economy, showed an increase of 5.3 per cent in 1996, compared with a 2.4 per cent increase in 1995. Consumer price inflation, measured in terms of the Consumer Price Index (A), rose by 6 per cent in 1996, considerably slower than the 8.7 per cent increase in 1995. Inflationary pressures from both domestic and imported sources moderated over the year. Export prices were broadly stable, while import prices eased.

Structure and Development of the Economy

Hong Kong, a small territory inhabited by more than six million people, is probably one of the most densely-populated urban economies in the world. With virtually no natural resources, Hong Kong has a deep-water harbour and is strategically located on the international time zone that bridges the time gap between Asia and Europe. It is also characterised by its proximity to China and strong traditional links with the South-East Asian economies.

       A low tax environment, free and fair market competition, a sound legal and financial framework, a fully convertible and secure currency, a highly efficient network of transport and communication and, not least, a competent workforce working along with a pool of enterprising entrepreneurs are all precious assets of Hong Kong. These together have 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 third-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 Asia's second- largest in terms of market capitalisation. All these show that Hong Kong has firmly established itself as a major international trade and financial centre. Hong Kong owes its strength to business-friendly government policies, sound economic fundamentals, high degree of internationalisation and cultural openness. On these

47

THE ECONOMY

virtues, the US Heritage Foundation ranks Hong Kong the freest economy in the world, while the World Economic Forum ranks Hong Kong the world's second-most- competitive economy, one place higher than in 1995.

Over the past two decades, the Hong Kong economy has nearly quadrupled. With its GDP growing at an average annual rate of about seven 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 almost tripled in real terms, equivalent to an average annual growth rate of about five per cent in real terms. Valued at US$24,500 in 1996, Hong Kong's per capita GDP was next only to Japan and Singapore in Asia. It has surpassed that of the United Kingdom, Canada and Australia, and was broadly at par with that of France. Benefiting from this respectable economic performance, the local workforce has been able to enjoy a continuous rise in income, both in money terms and in real terms.

Chart 1

Percent

18.0

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0

-2.0

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

L

LIBRAR

GDP

Per capita GDP

1975

1977 1979 1981 1983 1985 1987 1989 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 by 5% per annum in real terms.

48

As a small and open economy, Hong Kong's economic success owes a great deal to the remarkable performance of its external trade sector. Trade in goods and services expanded markedly over the past two decades with average annual growth rates of 14 per cent and 9 per cent respectively in real terms. Reflecting the highly externally- oriented nature of the Hong Kong economy, the total value of visible trade (comprising re-exports, domestic exports and imports) reached $2,940 billion in 1996, at a ratio of 246 per cent to the GDP. This compared with the corresponding ratios of 143 per cent in 1970, 148 per cent in 1980 and 221 per cent in 1990. Including the value of exports and imports of services, the ratio was 286 per cent in 1996. The

THE ECONOMY

corresponding ratios in 1970, 1980 and 1990 were 181 per cent, 181 per cent and 260 per cent.

      External investment has played an important role in Hong Kong's economic development. At the end of 1994, the total stock of inward direct investment in Hong Kong rose to $730.2 billion, from $674.5 billion in 1993. There was an increase of 8.3 per cent in value terms.

      The preliminary estimate of GNP, comprising GDP and net external factor income flows, was $1,018 billion at current prices in 1994. This was 0.7 per cent higher than Hong Kong's GDP in the same year. Reflecting the role of Hong Kong as an international financial centre, both the external factor income inflows and outflows were large, at $371 billion and $364 billion respectively, equivalent to slightly over one-third of GDP.

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. There is little primary production (agriculture and fisheries, mining and quarrying) in Hong Kong. Its contribution to GDP and employment is very small.

Chart 2

Gross Domestic Product by broad economic sector

1980

1995

Secondary production 31.6%

Secondary production 16.0%

Primary production 1.0%

Primary production 0.2%

Tertiary production 67.5%

Tertiary production 83.8%

Over the past 15 years, the tertiary services sector has become increasingly important in terms of contribution to GDP.

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. In line with the continued expansion of the service sectors and the on-going relocation of manufacturing

49

THE ECONOMY

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 9 per cent in 1995. On the other hand, the share of the construction sector in GDP, having fallen from 7 per cent in 1980 to around 5 per cent in 1985, has stayed at around 5 per cent since then. The combined share of the supply of electricity, gas and water, at 2 per cent in 1995, was broadly the same as the 3 per cent level averaged over the past 10 years.

 The open-door policy and economic reforms in China 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, 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 communications; 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 84 per cent in 1995.

Employment by broad economic sector

Chart 3

1980

1996

Secondary production 50.1%

Secondary production 20.7%

Primary production 1.5%

Tertiary production 48.4%

Tertiary production 78.7%

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 in the economy.

50

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

THE ECONOMY

from 48 per cent in 1980 to 54 per cent in 1985, and further to 79 per cent in 1996. 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 11 per cent in 1996.

The Service Sectors

Along with the structural change in the economy, the services sector has flourished and diversified in types of activities. Of particular note is the rapid growth and development in finance and business services, including banking, insurance, real estate, and a wide range of other professional services.

      Driven 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 showed phenomenal growth in the 1980s. The past decade saw the re-emergence of Hong Kong as a major entrepôt serving the region in general and China in particular. Nearly 90 per cent of Hong Kong's re-exports 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. Supermarkets, large department stores, convenience stores and modern shopping centres have become increasingly popular. This has been reinforced by a continued growth in tourism, which hereto has been 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 an increasing 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 1986 and 1996, exports of services grew at an average annual rate of 8 per cent in real terms, and imports of services, at 9 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 36 per cent and 25 per cent respectively in 1995. The corresponding shares for travel services were 27 per cent and 49 per cent. Other trade- related services such as offshore trading and purchasing/merchandising services contributed 21 per cent of the total value of exports of services and 6 per cent of the total value of imports of services. The corresponding shares for financial and banking services were 7 per cent and 4 per cent.

      Analysed by sector, the contribution to the GDP of the wholesale, retail and import/export trades, restaurants and hotels was the largest, rising from 21 per cent in 1980 to 23 per cent in 1985, and further to 27 per cent in 1995. The second-largest contributor was financing, insurance, real estate and business services, contributing

51

THE ECONOMY

25 per cent to the GDP in 1995. The corresponding share in 1980 was 23 per cent, but it fell to 16 per cent in 1985, affected by the slump in the property market in the early 1980s. The share of community, social and personal services in the GDP reached 17 per cent in 1995. It rose from 12 per cent in 1980 to around 17 per cent in 1985, before falling back to about 14 per cent in 1988. Transport, storage and communication had a steadily rising share in the GDP, from 7 per cent in 1980 to 8 per cent in 1985 and further to 10 per cent in 1995.

Chart 4

Transport, storage and

communication

7.4%

Gross Domestic Product by major service sector

1980

Wholesale, retail, import/export trades. restaurants and hotels 21.4%

1995

Financing. insurance, real

estate and

Transport, storage and communication

business services 24.9%

9.8%

Financing.

insurance, real

estate and

business services

23.0%

Community, social and personal

Community, social

Others 36.1%

services

17.1%

and personal services 12.1%

Others 20.8%

Wholesale,

retail, import/export trades,

restaurants and hotels

27.4%

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

52

 Between 1985 and 1995, the net output or value added component of the financing, insurance, real estate and business services sector showed the fastest increase (by 20 per cent); followed by the wholesale, retail and import/export trades, restaurants and hotels; and transport, storage and communication (both by 17 per cent). The combined value added of the service sectors as a whole rose markedly, 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, sharing 35 per cent of the total employment in 1996. This was followed by community, social and personal services (21 per cent); transport, storage and communication (11 per cent); and financing, insurance, real estate and business services (12 per cent). Taken together, the services sector accounted for 79 per cent of the total employment in 1996. The respective shares of these sectors in employment in 1981 were 19 per cent, 16 per cent, 8 per cent and 5 per cent, giving a total of 48 per

cent.

Chart 5

Wholesale, retail.

import/export trades,

restaurants and

hotels

20.0%

Transport, storage and

commu-

nication

7.3%

Financing. insurance.

THE ECONOMY

Employment by major service sector

1980

1996

Others 51.6%

Wholesale, retail, import/export trades, restaurants and hotels

34.7%

Others 21.3%

Transport, storage and

Financing. insurance,

real estate and business services

Community, social and personal services 21.4%

commu- nication

real estate and

Community, social

11.0%

business

services

and personal services 16.5%

4.6%

11.6%

 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.

The Manufacturing Sector

Hong Kong's manufacturing firms are well known for their versatility. An extensive local sub-contracting system, comprising a large number of small establishments, has greatly facilitated production in coping with the frequent changes in demand in the overseas markets. Moreover, the increasing use of outward processing facilities in China has enhanced the flexibility of production capacity and helped to maintain the price competitiveness of Hong Kong's products. A predominant proportion of Hong Kong's manufacturing output is for export.

      Over the years, the pressure of protectionism in several 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 effort. To maintain competitiveness, there has also been a continuous upgrading of product quality.

In consequence, many industries have emerged and grown, the most notable one being electronics. The textiles and clothing industries remain prominent, notwithstanding their continuous declines in relative importance. Other important industries include printing and publishing, machinery and equipment, fabricated metal products, plastic products, plastic watches and clocks and jewellery.

      Of particular note is the significant improvement in labour productivity in the manufacturing sector. During the period 1980 to 1995, the value of net output by the manufacturing sector grew at an average annual growth rate of 7 per cent, while

53

THE ECONOMY

manufacturing employment fell at an average annual rate of 5 per cent. Even after taking into account the effect of price increases on the output value, labour productivity improved significantly.

Chart 6

Index

250

200

150

100

50

0

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

1985 1986 1987 1988

1989 1990 1991 1992 1993 1994 1995 1996*

Output per employee in the manufacturing sector has been on a general uptrend over the years.

Average of Q1 to Q3 1996 only

HONG K

54

China has become the largest market for Hong Kong's domestic exports, accounting for about 29 per cent of domestic exports in 1996. 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 also 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 grown from strength to strength, since China adopted economic reform and open-door policy in 1978. This has brought about substantial economic benefits to both places.

Specifically, visible trade between Hong Kong and China has grown strongly since 1978, at an average annual rate of 29 per cent. In 1996, the two-way trade grew further, albeit only moderately, by 6 per cent. Growth performance varied among the main trade aggregates. While imports from China and re-exports to China were up by 6 per cent and 9 per cent respectively in 1996, domestic exports to China recorded a decrease of 3 per cent. Nevertheless, as the pace of growth in Hong Kong's visible trade with other overseas economies also decelerated, China still accounted for 36 per cent, the largest share in Hong Kong's total trade and hence remained Hong Kong's

THE ECONOMY

largest trading partner in 1996. Its share in Hong Kong's re-export trade was even higher at 90 per cent, making China both the largest market for and source of Hong Kong's re-exports. Reciprocally, Hong Kong was China's third largest trading partner in 1996 (after Japan and the United State), accounting for 14 per cent of China's total trade.

       Likewise, there has been a substantial increase in invisible trade and investment flows between Hong Kong and China. At present, Hong Kong is a major service centre for China generally and South China in particular, providing a wide range of financial and business support services like banking and finance, insurance, accounting, transport, warehousing etc. It is at the same time a principal gateway to China for business and tourism. In 1996, 29 million trips were made by Hong Kong residents to China and another 2 million trips were made by foreign visitors to China through Hong Kong. These represented increases of 9 per cent and 11 per cent respectively over 1995.

      Moreover, Hong Kong is the largest source of external direct investment in China. By end-1996, the cumulative value of Hong Kong's realised direct investment in China reached about US$100 billion, accounting for about three-fifths of the total value. Also worthy of note is that there has been a notable shift in the composition of Hong Kong's direct investment in China in more recent years, from outward processing industries to other economic sectors such as hotels and tourist-related facilities, real estate and infrastructure development. Hong Kong's economic links with Guangdong are far more intimate than those with other places in China. At end- 1996, the cumulative value of Hong Kong's realised direct investment in Guangdong was estimated at US$40 billion, accounting for about 80 per cent of the total value. Currently, some four million Chinese workers are regularly employed in the Province by Hong Kong industrial ventures. This is more than 10 times the size of Hong Kong's own manufacturing workforce.

      In the opposite direction, there has likewise been a sizeable flow of investment capital from China to Hong Kong over the past years. By end-1994, China invested a total of US$17 billion in the territory, making it the third-largest external investor, after the United Kingdom and Japan. While China maintains a high investment stake in such traditional lines of business as import/export trades, wholesale/retail trades, banking, transport and warehousing, there has recently been a growing diversification of such investment into other spheres such as real estate, hotels, financial services, manufacturing and infrastructure development.

      Along with the surge in these cross-border trade, investment and people flows, financial links between Hong Kong and China have also been on a rapid increase over the years. By end-1996, external liabilities of Hong Kong authorised institutions to entities in China reached about $300 billion, while their external claims on entities in China were even larger, at about $360 billion. These represented increases of around 32 per cent and 24 per cent respectively over a year earlier. The Bank of China Group, which has been established here for decades, is now the second-largest banking group in Hong Kong after the HongkongBank Group. It started issuing Hong Kong dollar bank notes in May 1994. The other three state specialised banks, namely the People's Construction Bank of China, the Agricultural Bank of China, and the Industrial and Commercial Bank of China, were granted banking licences to operate in Hong Kong in 1995. On the other hand, the HongkongBank Group, the

55

56

THE ECONOMY

Bank of East Asia and the Standard Chartered Bank, are among the best-represented foreign banks in China.

 Hong Kong has been playing an important role as the major funding centre for China. As well as a direct source of funds, Hong Kong often serves as a window through which foreign funds are channelled efficiently into China for financing the various development projects there. So far, most of China's fund-raising activities in the territory have taken the form of syndicated loans, but more recently an increasing number of China-related banks and enterprises have raised funds through issues of negotiable certificates of deposit, bonds and shares. Since mid-1993, H shares have been listed in Hong Kong's stock market by large state-owned enterprises in China. At end-1996, a total of 23 such enterprises were listed on the Hong Kong Stock Exchange, raising a total equity capital of $26.8 billion.

The Economy in 1996 External Trade

Re-exports and domestic exports showed weaker performance in 1996 than in 1995. The strengthening of the Hong Kong dollar along with the US dollar after the second quarter of 1995 reduced the competitiveness of Hong Kong's exports in the world. market. The situation was further aggravated by the slow-down in import demand in some of the major markets, and the abrupt global downturn in the electronic product cycle.) NAFTA could have also diverted to Mexico and Canada some USA import demand which was formerly sourced from Asia. For 1996 as a whole, the value of re- exports rose by 7 per cent. (As there was little price change, the increase in real terms

Chart 7

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 1996 Re-export growth in 1996 was considerably slower than in 1995. Domestic exports declined. Imports also grew more slowly.

The leaders of countries taking part in the Asia-Pacific Economic

Co-operation forum in Manila line up for a group photograph wearing the local traditional dress - in this case the Philippines barong shirt.

།3

    · Service industries provide an ever-increasing proportion of jobs in Hong Kong as workers refine their skills. Hong Kong's aircraft workers have provided the region with world-class maintenance and repair facilities for half a century at Kai Tak airport. Plans are well advanced to build on that tradition when operations shift to the new airport at Chek Lap Kok.

ONG

Hong Kong picked up six medals, including four golds, at the International Culinary Olympics in Berlin during June. Hong Kong's seven-chef team created a winning wonton appetiser using prawns, scallops, black fungus and vermicelli, with a lemon grass sauce. The team also excelled in hot food preparation, cold food preparation (with six seafood appetisers) and the pastry section. The super-chefs, pictured at Berlin's Brandenburg Gate, are (from left): Kelvin Kiang, Hong Kong Jockey Club; Ivan Man, The Regent Hotel; Andy Chow, Hyatt Regency Hong Kong; Bruno von Siebenthal, Hotel Furama; Perry Yuen, Island Shangri-La Hong Kong; Matthias Schubel and Eric Shum (both Hotel Furama). BOTTOM: Sweet perfection is the promise at workers pay close attention to creating top-quality chocolates at Lucullus Food & Wines, which won an Industry Department Quality Award for 1996.

LUCULLUS

Mülhe

Photo courtesy of Mr Bruno von Siebenthal

Restaurants and telecommunications make a valuable contribution to the

Hong Kong economy, as the signs make clear in this evening view of busy Causeway Bay.

麵仔車 *

廳餐茶

·第

北美洲 3/F.

B

:

The

Snack and Stein

ISI PIDOr

STAR

中西美食通宵營

52525

聖蘿

SAINT LAUREN

BAKERY

光傳訊

PAGING

銀座商場

銅鑼灣

教育 雞湯翅

2836 6010

|

SHANGHAI PO KON

RESTAURANT

猶着

大家樂

神記

GINZA

CENTRE/

SHOPPING

TAXI

THE ECONOMY

was 8 per cent.) Domestic exports fell by about 8 per cent both in value terms and in real terms in 1996.

Re-exports to China for meeting its own demand rose further in 1996 albeit it at a slower rate than in 1995. The moderation, amid a continued strong growth in retail sales in China, probably reflected an increasing shift in the pattern of consumer spending from consumer goods to consumer services, as well as from imports to locally produced goods. However, re-exports to China for outward processing purposes were slack, affected by the slow-down in import demand in the US market, the cut in value-added tax rebate on export items by the Chinese government, and the increasing trend towards direct shipment and transshipment from ports in China. There was, nevertheless, a significant rebound in the third quarter. Taken together, growth in re-exports to China eased to 12 per cent in real terms in 1996, from a 15 per cent increase in 1995.

Re-exports to the USA grew only modestly-by 4 per cent in real terms in 1996- with a decline of 3 per cent in the first half of the year and an increase of 10 per cent in the second half. Indeed, USA imports from many sources in East Asia and the European Union also slowed down over the course of 1996. Nevertheless, Hong Kong's re-exports to Japan and the United Kingdom remained robust, rising by 15 per cent and 13 per cent respectively in real terms in 1996. Re-exports to Germany showed a steady growth of 2 per cent in real terms in 1996, compared with 6 per cent in 1995. China remained the largest supplier of Hong Kong's re-exports, followed by Japan, Taiwan, the USA and the Republic of Korea.

      Analysed by end-use category, consumer goods, and raw materials and semi- manufactures remained the two largest categories in Hong Kong's re-exports, with respective shares of 48 per cent and 29 per cent of the total value in 1996. Re-exports of tobacco manufactures, cameras, flashlight apparatus and supplies for photography, cotton yarn and thread, and paper and paperboard registered faster increases than re-exports of other commodity items.

In the first three quarters of 1996, seaborne outward transshipment fell by 5 per cent in tonnage terms over a year earlier, representing a consolidation after the upsurge of 30 per cent in 1995. The decline was concentrated mainly in transshipment flows originating from North China, as enhancement in port infrastructure in places such as Shanghai and Tianjin reduced the need to transship through Hong Kong. A slow-down in this stream of transshipment probably entailed less adverse impact on value-added and income for Hong Kong, unlike transshipment flows in South China which were more of an outward processing nature.

                   outward processing nature. Analysed by market, transshipment to Japan, Taiwan, China and the USA rose by 11 per cent, 11 per cent, 6 per cent and 4 per cent, respectively, in tonnage terms in the first three quarters of 1996 over a year earlier. On the other hand, transshipment to Germany, and the UK fell, by 19 per cent and 20 per cent, respectively. Manufactured goods continued to account for the largest share of seaborne outward transshipment, followed by chemicals and related products, crude materials, foodstuffs, and machinery and transport equipment.

Affected by the same factors that influenced re-export growth, domestic exports to most of the major markets showed weaker performance in 1996 than in 1995. For the year as a whole, domestic exports to Singapore, the USA, Germany, the UK, China and Japan all fell in real terms by 17 per cent, 13 per cent, 7 per cent, 4 per cent, 3 per

57

THE ECONOMY

58

cent and 3 per cent, respectively. These six markets together accounted for 75 per cent of Hong Kong's total domestic exports in 1996. Meanwhile, domestic exports to many other economies in the Asia-Pacific region and the European Union also moderated in 1996, compared with 1995.

 Imports showed a modest increase of 3 per cent in value terms in 1996. Discounting the drop in import prices, there was an increase of 4 per cent in real terms. This was much slower than the 14 per cent increase in 1995. Apart from the marked deceleration in re-export growth, the significant slackening in retained imports also contributed. The latter fell by 2 per cent in real terms in 1996, contrasting with the large increase of 13 per cent in 1995. The moderation in retained imports in 1996 reflected mainly an adjustment to the large inventory build-up in 1995. Analysed by major supplier, China remained the largest source of Hong Kong's imports, followed by Japan, Taiwan, the USA, Singapore and the Republic of Korea.

 The visible trade deficit narrowed to $137.7 billion, equivalent to 9 per cent of the total value of imports in 1996. The corresponding figures in 1995 were $147 billion and 9.9 per cent. This result was helped by a gradual improvement in the terms of trade as import prices eased, while export prices remained generally stable. A slower intake of raw materials and semi-manufactures, consumer goods and capital goods following the substantial inventory build-up in 1995 also contributed.

Domestic Demand

Local consumer spending revived steadily during the year. Of particular note was the resurrected buying interest in luxurious or durable items such as cars and home appliances. Total retail sales rose by 3 per cent in volume terms in the third quarter of 1996 over a year earlier, led by 12.1 per cent growth in the sales of consumer durables. This followed growth rates of 0.1 per cent, 0.7 per cent and 2.5 per cent, respectively, in the first, second and third quarters. Private consumption expenditure recorded a growth of 4.4 per cent in real terms in 1996. Government consumption expenditure rose by 4.6 per cent in real terms in 1996 on a national accounts basis. The growth in overall investment spending was generally sustained in 1996. Activities related to the major infrastructural projects, particularly those under the Airport Core Programme (ACP), remained intensive. However, growth should have tapered as the ACP reached its peak. The Public Housing Programme maintained its momentum. Also, the revival in the residential property market should have led to increased private sector building output. Meanwhile, the on-going process of automation, mechanisation and office computerisation continued to support growth in spending on machinery and equipment.

The Labour Market

The labour market improved during the year. In the fourth quarter of 1996, the seasonally adjusted unemployment rate and the underemployment rate stood at 2.6 per cent and 1.6 per cent respectively, compared with 3.5 per cent and 2.3 per cent in the same quarter in 1995. The improvement was underpinned by a faster growth of total employment than total labour supply. In 1996, total labour supply rose by 3.1 per cent, while total employment rose by 3.5 per cent. The increased demand for labour in recent quarters was rather broad-based, with employment in most of the major service sectors picking up to various extent, and with employment in construction also strengthening markedly. But employment in the local manu-

Chart 8

Percent

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

THE ECONOMY

Domestic demand

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

Investment demand

in terms of GDFCF

Private consumption demand

0

-2.0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

In 1996, domestic demand was underpinned by continued strong growth in investment demand and a steadily reviving consumer demand.

facturing sector remained slack, amid the weak performance of domestic exports and a continuing trend of relocating production processes across the border.

      Employment conditions varied considerably among occupations. Unemployment and underemployment were mainly concentrated in the production-related workers and at the semi-skilled and unskilled levels. Professional, managerial, and ad- ministrative workers recorded considerably lower unemployment and under- employment rates.

The on-going structural change of the economy prompted a continued shift in employment from the manufacturing sector to the service sectors. Between September 1995 and September 1996, employment in the service sectors as a whole rose by 3 per cent to 1 932 000, and vacancies increased by 4 per cent to 43 300. Among the various service sectors, employment in transport, storage and communications showed the fastest increase, by 6 per cent. This was followed by community, social and personal services, by 5 per cent; and financing, insurance, real estate and business services, by 4 per cent. Concurrently, employment in the wholesale, retail, import/export trades and restaurants and hotel rose by 2 per cent. Employment and vacancies in the manufacturing sector remained on a downtrend, falling by 15 per cent and 14 per cent to 327 500 and 5 900 respectively in September 1996 compared with a year earlier. Employment increased in building and construction sites, by 16 per cent, while vacancies fell sharply by 43 per cent. Reflecting mainly 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 18 per cent.

59

60

Chart 9(a)

Percent

5.0

4.0

3.0

2.0

1.0

0

-1.0

-2.0

THE ECONOMY

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

Labour force

Total employment

1992

1993

1994

1995

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

1991

1996

The growth in total employment outpaced that in labour supply particularly in the latter part of 1996.

Chart 9(b)

Unemployment and underemployment rates

Percent

4.0

3.5

3.0

2.5

Seasonally adjusted unemployment rate

2.0

1.5

Underemployment rate

1.0

0.5

0

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

1991

1992

1993

1994

1995

The labour market improved during 1996, following the easing in 1995.

1996

THE ECONOMY

Chart 10

Employment by broad economic sector

Number ('000)

2000

Service sectors as a whole (left scale)

1500

Number ('000)

80

70

Building and construction sites (right scale)

1000

60

500

Manufacturing sector (left scale)

0

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

1991

1994

1995

1996

1992

}

1993

The structural shift of manpower from manufacturing to services continued in 1996. Employment at construction sites rose sharply, reflecting in part the momentum of implementation of the Airport Core Programme.

Chart 11

Percent

15.0

10.0

5.0

0

-5.0

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

Service sectors

as a whole

Manufacturing sector

-10.0

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

1991

1992

1993

1994

1995

1996

Earnings continued to rise in real terms in 1996, underpinned by more moderate inflation.

50

40

10

61

THE ECONOMY

62

The local workforce generally enjoyed a continued rise in income. In the third quarter of 1996, average earnings in the service sectors as a whole registered increases of 8 per cent in money terms or 3 per cent in real terms. Among the major service sectors, earnings in the wholesale, retail, import/export trades and restaurants and hotels had the most rapid increase, by 11 per cent in money terms or 5 per cent in real terms. This was followed by earnings in community, social and personal services; and in financing, insurance, real estate and business services, both with increases of 8 per cent in money terms. After discounting inflation, the corresponding increases in real terms were 3 per cent. Earnings in transport, storage and communications rose by 7 per cent in money terms and 1 per cent in real terms.

The Property Market

The residential property market picked up distinctly in 1996. Primary sales generally met with a good response, with substantial over-subscription in many instances. Trading in the secondary market was also active. While this was supported by a strong end-user demand, the cyclical downturn during 1995 had also rendered flats relatively more affordable to prospective buyers in the beginning of the year. The cuts in the local interest rate and the offer of more favourable mortgage terms by the banks as competition for business intensified, plus the intensive sales promotion and offers of more flexible payment terms by developers further stimulated demand for residential property. By the end of 1996, both market activity and prices returned to the previous peak in early 1994. Flat prices in selected major residential developments in December 1996 on average surpassed the previous peak in April 1994, and were also 37 per cent above the trough in October 1995. Rentals for newly leased flats were on a moderate rise. Towards the end of the year, there were signs of growing speculative activities, particularly at the luxurious end of the market. The sales figures of some popular new developments showed a very high proportion of new flats being purchased by shell companies for quick resale.

On commercial property, the market for office space recovered noticeably in 1996, following the correction in 1995. Investment interest in Grade A office space in prime locations was particularly strong. However, trading in Grade B and Grade C office strata titles was relatively more moderate. Prices for office space showed some increase but the rental market remained soft. With better retail business, the sales market for shopping space in prime locations turned more active.

Sales activity in the industrial property market showed no signs of recovery in 1996. Despite some revived interest in acquiring conventional flatted factory buildings for redevelopment or for godown use, this market remained generally slack. The market for industrial-cum-office premises also remained slack.

Government land sales in 1996 were met with enthusiastic response. For auctions, prices fetched for residential as well as commercial sites were all above market expectations. In particular, the price fetched for the site at Hung Hom Bay Reclamation was the highest ever achieved for a single site at government land

auctions.

Inflation

Consumer price inflation was generally on a moderating trend in most of 1996. With a stronger US dollar and reduced or continued low inflation in the major supplier economies like China, Japan and the USA, there was little price pressure from

THE ECONOMY

imported sources. Reflecting this, import prices were generally on a decline in recent quarters. Domestically generated inflationary pressures from labour costs and rental costs were largely contained. However, with the gradual firming of wages and rentals, and with the pickup in economic growth beginning to add pressure on consumer prices, the moderating trend in inflation tended to be reversed towards the end of 1996.

       Reflecting these developments, the Consumer Price Index (A) recorded year-on- year increase of 6.2 per cent and 6.4 per cent in the first and second quarters of 1996 respectively. It then moderated to 5.4 per cent in the third quarter, before picking up to 6 per cent in the fourth quarter. For 1996 as a whole, the CPI(A) rose by 6 per cent, substantially lower than the 8.7 per cent increase in 1995. The increase in the CPI(B) averaged 6.4 per cent, also below the corresponding increase of 9.2 per cent in 1995. Similarly, the average increase in the Hang Seng CPI, at 6.6 per cent, was also significantly slower than the increase of 9.6 per cent recorded in 1995. The Composite CPI, as a combined measure of consumer price inflation covering these three sub- indices, rose by 6.3 per cent in 1996, well below its corresponding increase of 9.1 per cent in 1995.

Chart 12

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

Percent

14.0

13.0

12.0

11.0

Consumer Price Index (B)

10.0

9.0

8.0

7.0

6.0

5.0

4.0

Hang Heng Consumer Price Index

Composite Consumer

Price Index

Consumer Price Index (A)

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

1992

1993

1994

1991

Consumer price inflation was on an easing trend for most of 1996.

1995

1996

       Benefiting from the stronger dollar and low inflation in China, the prices of those components of the CPI(A) with a greater import content, such as food, other consumer goods and consumer durables, generally showed much slower increases than the overall annual average increase. On the other hand, the prices or costs of those components with a greater domestic input content, such as, housing,

63

THE ECONOMY

64

miscellaneous services and transport, recorded faster increases than the average, but still represented significant moderation over 1995.

The GDP deflator, as a broad measure of overall inflation in the economy, showed an increase of 5.3 per cent over the course of 1996, compared with a 2.4 per cent increase in 1995.

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. However, its small size and open nature leave the economy vulnerable to external factors, and government actions designed to counter these influences are of limited effectiveness.

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. 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.

Another important role played by the government is to provide 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 regulations. 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. The simple tax structure and low tax rate, in particular, provide 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 Government 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 not spending by organisations in which the government has only an equity stake (such as the Mass Transit Railway Corporation, the Kowloon-Canton Railway Corporation and the Airport Authority).

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 ECONOMY

      The Capital Works Reserve Fund finances the public works programme, land acquisitions, capital subventions, major systems and equipment items, and computerisation. 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 set out in Annex III to the Joint Declaration. The income of the fund is derived mainly from land premiums 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 Airport Authority and the Mass Transit Railway Corporation, and capital investments in the Hong Kong Housing Authority. Its income is derived mainly from appropriations from the General Revenue Account and dividends.

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

The Disaster Relief Fund finances grants for humanitarian aid in the wake of disasters outside Hong Kong. Its income is derived mainly from appropriations from the General Revenue Account and interest on investments.

The Loan Fund finances 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 welfare services through grants and loans. Its 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 the 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 this principle and to longer-term trends in the economy.

Public Expenditure

Public expenditure in 1995-96 totalled $191.3 billion. The government itself accounted for $161.6 billion, excluding equity injections to the Mass Transit Railway Corporation, the Airport Authority and other bodies. The growth rate over the preceding year was 15.3 per cent in nominal terms or 6.2 per cent in real terms. Some $52.6 billion, or 27.5 per cent of the public expenditure in 1995-96, was of a capital nature. An analysis of expenditure by function is at Appendix 9.

65

THE ECONOMY

66

 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 11.

 Total government revenue in 1995-96 amounted to $180 billion. The consolidated cash deficit for the year was $3.1 billion. Details of revenue by source and of expenditure by component for 1995-96 and 1996-97 (Revised Estimate) are at Appendix 12.

 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 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.

 The government's consolidated account recorded a deficit of $3.1 billion in 1995-96, after a continuous string of consolidated surpluses in the previous 11 years. The accumulated surpluses at the end of 1995-96 stood at $147.9 billion. These surpluses form the government's fiscal reserves and are available to meet any calls on its contingent liabilities and enable it 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 expenditures 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 the Housing Department, is also financially autonomous. The government provides the authority with capital and land on concessionary terms to build public housing for rent and for sale. Part of the authority's recurrent expenditure, for clearances and squatter control, is financed from the General Revenue Account.

 A trading fund is a department or part of one providing services on a commercial or quasi-commercial basis through the operation of a separate accounting system. Unlike a vote-funded department, trading funds are allowed to retain revenue generated to meet expenditure in providing the services and to finance future expansion.

Government Supplies Department

Purchases of goods and related services required by government departments are undertaken centrally by the Government Supplies Department, which provides similar services to certain non-government organisations, such as the Hospital Authority and the Vocational Training Council. These goods and related services are normally obtained by competitive tendering, without giving preference to any

THE ECONOMY

      particular source of supply, to ensure that users' needs are met at the best possible price, having regard to life-time cost and reliability of supply. Helping users to derive the best value in their purchases, the department formulates a specific strategy for each type of purchase based on market conditions, focusing on meeting requirements for high-value and critical items by cost-effective and reliable means.

Depending on circumstances, open, restricted or single-tenders are issued for the purchase of required supplies. Single tenders are used mainly for the purchase of patented items or for compatibility with existing equipment. Tender invitations are published in the Government Gazette and four local newspapers and are mailed to suppliers registered with the department. All purchases valued at more than $1.41 million are open to competitive bidding internationally. To allow easy access by overseas suppliers, the department has, since November 1995, included its tender invitations and related information on the World Wide Web. In 1995-96, the department placed orders of a total value of $4.65 billion, purchasing from 37 different countries. The major sources of supply were the USA, the UK, China, Germany, Japan and Hong Kong. Major items of purchase included computer systems, medical supplies and equipment, water pipes, electrical appliances, telecommunication equipment and services, and food provisions.

Supplies of goods to meet general needs are held in the department's new, purpose- built warehouse in Chai Wan, which was put into operation in late 1996 to replace two older warehouses in North Point and Cheung Sha Wan. The department also seconds supplies staff to other departments to ensure a professional approach to acquisition and maintenance of stores and equipment.

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 evasion and minimising tax avoidance. The major sources of revenue are profits tax and salaries tax. Other significant sources include stamp duty on property and stock transactions, betting duty, duties on certain specified commodities and rates on property. (For major sources of revenue, see Appendix 13).

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.

Earnings and profits tax, which alone accounted for about 43 per cent of total revenue in 1995-96, is levied under the Inland Revenue Ordinance. Persons liable to 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 1995-96,

67

THE ECONOMY

68

the government received about $47 billion in profits tax, or about 26 per cent of 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 in 1996 progressed from 2 per cent on the first segment of net income (that is, income after deduction of allowances) of $20,000, to 9 per cent and 17 per cent on the second and third segments of $30,000 each, respectively, and then to 20 per cent on the remaining net income. No one, however, pays more than 15 per cent of 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 some $26 billion, or about 15 per cent of total revenue, in 1995-96. Due to generous personal allowances under Hong Kong tax law, about 53 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 $1.6 billion in 1995-96.

 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 6 per cent of total revenue, or about $11 billion, in 1995-96.

 A duty is imposed on bets at the Hong Kong Jockey Club and on the proceeds of Mark Six lotteries the only legal forms of betting in Hong Kong. The rate of duty is 12 per cent or 18 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 1995-96 totalled some $11 billion, accounting for about 6 per cent of total revenue.

 Estate duty is imposed on estates valued at over $6.5 million, at levels ranging from 6 per cent to a maximum of 18 per cent, while a hotel accommodation tax of 5 per cent is imposed on expenditure on accommodation by guests in hotels and guest- houses.

 The Customs and Excise Department collects and protects duty revenue. The Dutiable Commodities Ordinance imposes controls on

                             on the import, export, manufacture, sale and storage of dutiable items. Duties are levied on four categories of commodities - hydrocarbon oil, alcoholic beverages, methyl alcohol and tobacco. Duties are imposed irrespective of whether the product concerned is locally manufactured or imported. There is no discrimination on the grounds of geographic origin. In 1995-96, $7.9 billion was collected in duties, accounting for about 4 per cent of total revenue.

 The Rating and Valuation Department is responsible for the assessment and billing of rates, which are levied on landed properties at a fixed percentage of their rateable value. The revenue raised helps to finance the various public services provided by the

THE ECONOMY

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. During the year, the government prepared new lists of rateable values to take effect on April 1, 1997. These rateable values reflect rental values at July 1, 1996.

The rates 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, it was fixed at 5.5 per cent.

In 1995-96, the number of assessments in the Valuation Lists at the year's end stood at about 1 474 000, and the total revenue from rates was $14.6 billion. Of this amount, $5.2 billion, collected from Hong Kong Island and Kowloon, was credited to the Urban Council and $3.46 billion, collected from the New Territories, went to the Regional Council. The remainder, amounting to $5.8 billion, was credited to the government's General Revenue Account, accounting for about 3 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 $9.9 billion, or about 6 per cent of total revenue, in 1995-96. It is government policy that fees should in general be set at levels sufficient to recover the full cost of providing the goods and services. Certain essential services are, however, subsidised by the government or provided free.

Also, in 1995-96, the government collected $8.7 billion, amounting to about 5 per cent of the total revenue, from investments and rents from government properties. A further $7.2 billion was generated by government-operated public utilities, accounting for about 4 per cent of the total revenue. The most important of these, in revenue terms, are waterworks and the airport.

In addition, some $19.4 billion, or about 11 per cent of the total revenue in 1995- 96, was generated by land sales. Since implementation of Annex III to the Joint 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 $418 million in 1995-96), 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 1995-96 resulted in the transfer of $19 billion to the Works Account of the Capital Works Reserve Fund and $17 billion to the future Hong Kong Special Administrative Region Government's Land Fund.

69

6 FINANCIAL AND

MONETARY AFFAIRS

70

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 368 authorised institutions and local representative offices of banks from more than 40 countries conduct business under the Banking Ordinance. The presence of 80 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 1996, up from sixth in 1992, according to a global survey conducted by the Bank for International Settlements (BIS).

 Hong Kong's stock market is the second-largest in Asia after Tokyo and the tenth- largest in the world. 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 13 451.45 was 34.42 per cent higher than a year earlier.

 In 1996, Hong Kong took further steps to improve the transparency of the banking sector. Further financial disclosure packages were developed. A Code of Banking Practice, which aims to improve the standard and transparency in the provision of banking services, also was developed.

 A mortgage corporation to be initially owned by the government through the Exchange Fund with a capital base of $1 billion will be established in 1997. The decision to go ahead was made following a consultation exercise by the Hong Kong Monetary Authority (HKMA) that ended in mid-June. The establishment of a mortgage corporation will help promote banking and monetary stability and facilitate the development of a secondary mortgage market in Hong Kong.

 To maintain and enhance Hong Kong's status as an international financial centre, the HKMA has worked closely with the banking community to develop an efficient and robust payment system in Hong Kong. In December, Hong Kong's interbank payment system moved to Real Time Gross Settlement under which settlement risks in the banking system has been considerably reduced.

The HKMA became a shareholder and member of BIS in November 1996. The invitation to join the BIS is a clear recognition of Hong Kong's status as a leading and autonomous international financial centre and Hong Kong's increasingly active role in co-operation among central banks. The fact that the People's Bank of China, China's central bank, was separately invited to join the BIS shows that the

FINANCIAL AND MONETARY AFFAIRS

international financial community is fully supportive of the 'one country, two systems' policy enshrined in the Basic Law.

Financial Institutions

are

Hong Kong maintains a three-tier system of deposit-taking institutions - licensed banks, restricted licence banks and deposit-taking companies which collectively called authorised institutions under the Banking Ordinance. The HKMA is 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, in the opinion of the HKMA, be 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 billion and $3 billion, respectively. For banks incorporated outside Hong Kong applying to establish a branch in the territory, the figure for total assets 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 to 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, overseas 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 182 licensed banks at the end of December 1996, of which 31 were. locally incorporated. They maintained a total of 1 476 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 1996 were $2,375 billion. Only licensed banks may operate current or savings accounts. They may also accept deposits of any size and any maturity from the public. All licensed banks must belong to the Hong Kong Association of Banks (HKAB). The HKAB's Interest Rate Rules set maximum rates payable on Hong Kong dollar savings deposits and time deposits of original maturities of less than seven days, 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 1996, there were 62 restricted licence banks and their total deposit liabilities to customers at the end of December 1996 were $42.9 billion.

71

72

FINANCIAL AND MONETARY AFFAIRS

Restricted licence banks may use the word 'bank' in describing their business in promotional literature and advertisements, but this must be qualified by a description 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 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.

Besides the criteria which apply to other authorised institutions, registration of deposit-taking companies will generally be granted only to companies that are 50 per cent or more owned by a bank (or, exceptionally, by another fully supervised financial institution). 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 1996, there were 124 deposit-taking companies, with total deposit liabilities to customers of $15.5 billion.

Dealers in securities, investment advisers, commodity dealers and commodity- trading advisers, leveraged foreign exchange traders and their representatives have to register with the Securities and Futures Commission (SFC). To obtain registration, they must comply with the requirements 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 1996, there were 17 892 registered persons. Of the 715 registered corporate securities dealers, 241 were from overseas. Of the 474 commodities dealers, 78 were from

overseas.

Only members of the Stock Exchange Hong Kong Ltd (SEHK) may trade on the stock exchange. At the end of 1996, the stock exchange had 563 corporate and individual members. Only shareholders who have applied for and been granted membership of the Hong Kong Futures Exchange Limited (HKFE) can trade on the futures exchange. At the end of 1996, the HKFE had 134 members.

Under the Insurance Companies Ordinance, insurance companies are authorised by the Insurance Authority to transact business in Hong Kong. At the end of 1996, there were 223 authorised companies. Of these, 123 were overseas companies from 28 countries.

Regulation of the Financial Sector

The government has consistently worked towards providing a favourable environment 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.

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.

聖食

AED SISUKA KUNG MINS,

|Lights blaze out on both sides of the harbour in an

annual extravaganza that brightens Christmas and the

Lunar New Year from Tsim Sha Tsui (left) to Central (below).

11111

The East Tsim Sha Tsui promenade has become a favourite spot for designers to create fantasies in light. RIGHT: The air is rich with pine scent inside major shopping malls over Christmas, such as in this scene at Pacific Place. BELOW, RIGHT: The display at Harbour City, near the Star Ferry's Kowloon-side pier, draws thousands of viewers each year.

KAMER

SONO

SON BLAZA 26

T

HARBOUR

· Christmas carollers from United Evangelical Mission Tsuen Shing Church entertain crowds at a public housing estate in Tsuen Wan. BELOW: Santa sails into the celebration season in a cheery reference to Hong Kong's 1996 Olympic Games gold medal winner, Lee Lai-shan.

H.K

નાં

FINANCIAL AND MONETARY AFFAIRS

      The supervisory approach of the HKMA is based on a policy of 'continuous supervision'. This involves the on-going monitoring of authorised institutions using a wide variety of techniques which are aimed at detecting any problems at an early stage. Consolidated supervision is exercised by the HKMA on a global basis over institutions which are incorporated in Hong Kong.

      Prudential supervision in Hong Kong is carried out mainly through on-site examinations, off-site reviews and prudential meetings. On-site examinations provide the HKMA with the opportunity to assess at first hand how an institution is managed and controlled. They are particularly useful for assessing asset quality and the adequacy of internal controls. 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 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 survey on market risk based on the Basle framework conducted by the HKMA in April/May 1996. To start the implementation of the local market risk supervisory regime, locally incorporated institutions have been required to report to the HKMA on a regular basis their market risk exposures since the end of 1996. 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 view of the fast-growing derivatives market, the HKMA strengthened its supervisory efforts in this area. Since 1995, it has conducted a survey of risk management practices of derivatives participants, conducted a series of treasury visits to authorised institutions on derivatives activities and strengthened the staff resources of a specialist team with the recruitment of additional expertise on derivatives products and financial models.

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's crisis. Where weaknesses have been identified, the HKMA has asked institutions concerned to take immediate action to eliminate them. Further to a guideline issued to authorised institutions on risk management for derivatives in 1994, the HKMA issued in March 1996 an operational

73

FINANCIAL AND MONETARY AFFAIRS

74

 guideline on risk management of derivatives and other traded instruments, incorporating the lessons learned from its reviews and examination of controls during 1995 and the Baring's and Daiwa Bank incidents.

In 1996, Hong Kong took further steps to improve the transparency of financial reporting by the authorised institutions. Discussion continued between the HKMA, the SEHK and the SFC and further recommendations for disclosure in the 1996 accounts of authorised institutions were issued, including the disclosure of cash flow statement and market risk exposure.

The HKMA formed a Working Group in January 1996 comprising representatives from the HKMA and the industry associations to develop a Code of Banking Practice in Hong Kong. Its purpose is to improve the standard and transparency in the provision of banking services, establish a fair and cordial relationship between banks and customers, and enhance banking stability by fostering customer confidence and loyalty in banks. In view of the public concern on the issues of personal referees and the use of debt collection agencies, the chapters on these two issues were released in August 1996 and the full Code would be ready for issue in the first half of 1997. Pursuant to the Memorandum of Understanding signed between the HKMA and the SFC in October 1995, the two authorities continued to strengthen co-operation to ensure that there will be no gaps in regulation and to minimise unnecessary duplication of effort in their supervision. Regular meetings were held between the two authorities to discuss policy matters and supervisory issues relating to institutions in which they both have an interest.

  Hong Kong is a member of the Financial Action Task Force (FATF), an international organisation comprising 26 governments with a mandate to encourage international efforts in the fight against 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 has revised guidelines to take into account the revised Forty Recommendations of the FATF and the amendments to the money-laundering legislation. The Organised and Serious Crimes Ordinance, which was enacted in October 1994, has extended the money-laundering offence to all indictable offences. In addition, the enactment of amendment legislation in August 1995 has made the reporting of suspicions of money-laundering transactions a statutory obligation.

In December 1996, the Legislative Council was preparing to enact the Banking (Amendment) Ordinance, which introduces a legal framework for the regulation of the issue of multi-purpose stored value cards and money brokers. On multi-purpose cards, the framework provides that the issue of general purpose multi-purpose cards will be confined to licensed banks (which are the only entities having access to the payment system). Flexibility is, however, allowed for the Monetary Authority to approve a special purpose vehicle (which may be authorised as a deposit-taking company) whose principal business is to issue multi-purpose cards which would have a more restricted usage or to exempt cards where the usage is even more limited and the stored value is below a certain limit.

  On money brokers, the framework prohibits any person from acting as a money broker unless he is approved by the Monetary Authority under the Banking Ordinance. The Monetary Authority would be empowered to approve or revoke the approval of a broker on the basis of a set of fit and proper criteria specified in a

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     schedule to the Ordinance. The main approval criteria include fitness and propriety of the management, financial soundness, prudent conduct and adequacy of accounting and control systems.

The SFC was established in 1989 after the October 1987 world stock market crash. It exercises prudential supervision over the securities, financial investment and commodities futures industry in Hong Kong. It administers the Securities and Futures Commission Ordinance, all securities and futures-related ordinances, 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 Exchange 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 registration 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 advertisement 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 advisors 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 SFC, and makes certain exceptions to insolvency law in relation to a clearing house and its role in guaranteeing the settlement of market transactions.

      The Insider Dealing Tribunal is an important feature of the regulatory framework in Hong Kong. It was established under the Securities (Insider Dealing) Ordinance to look into cases involving suspected insider dealing referred to it by the Financial Secretary. Since it began operation in 1994, the tribunal has successfully concluded four cases. A second division of the Insider Dealing Tribunal was set up in March 1996 so that two or more cases can be dealt with concurrently.

      The Securities (Disclosure of Interests) Ordinance requires company shareholders with 10 per cent or more of the voting shares of a listed company to disclose their interests and dealings publicly, and directors and executives to disclose certain dealings.

      The Leveraged Foreign Exchange Trading Ordinance provides for the regulation, by the SFC, 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,

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 by the SFC, 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.

In September 1996, the SFC issued for public consultation a review of the ordinance in light of experience gained during its initial phase of implementation. By the end of 1996, the SFC had issued 24 foreign exchange trader licences as well as 1 042 licences for their representatives.

In April 1996, the SFC issued for public consultation a draft of a composite Securities and Futures Bill. It seeks to consolidate and streamline the existing laws governing the securities and futures markets, which are currently spread over some 11 ordinances and parts of the Companies Ordinance

  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 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.

  A general business insurer must maintain assets in Hong Kong sufficient to meet the amount of 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. Life insurers have to maintain a solvency margin which relates to the risk base of the business.

  During 1996, various legislative amendments were brought into effect to improve insurance regulation for the better protection of policy holders. Since June 1996, the minimum capital and solvency margin requirements for insurers have been updated to ensure that they will have sufficient financial resources to pre-finance their operations and to meet the claims of the insuring public. The use of the word 'insurance' or 'assurance' in business names will also be restricted to persons regulated under the Insurance Companies Ordinance with effect from late 1997 in order to prevent the public from being misled.

  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

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Bureau, which provides an independent avenue for resolving claim disputes arising from personal insurance policies.

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 in registering and controlling their agents. An insurance broker must satisfy certain minimum requirements before he can be authorised. The purpose of the self-regulatory system is to enhance the professionalism of the industry which in turn will 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 his 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 and the scheme shall be funded in accordance with the terms of the scheme); independent audit; actuarial reviews (for defined benefit schemes); 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.

By the end of 1996, 14 923 schemes covering a total of more than 830 000 employees were registered, and 1 859 schemes were exempted.

Mandatory Provident Fund Schemes

After the enactment of the Mandatory Provident Fund Schemes Ordinance in August 1995, the government began to prepare the subsidiary legislation necessary for bringing the ordinance into effect. It provides the framework for a privately managed mandatory provident fund (MPF) system that will cover members of the workforce aged 18 and above. It will provide for joint contributions by the employer and employee, each contributing 5 per cent of the employee's income to a registered trust scheme managed by approved MPF trustees. The accrued benefits will be fully vested in the scheme members and can be transferred from scheme to scheme when employees change or cease employment. A self-employed person will have to contribute 5 per cent of his income. Benefits must be preserved until retirement.

       In February 1996, the Mandatory Provident Fund Office was set up under the Financial Services Branch with the special responsibility for developing the draft subsidiary legislation. The government has also established a formal advisory

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structure comprising a Panel of Specialists and an Advisory Board with a view to ensuring that the MPF System will be effective in serving the best interest of the community. Panel members, working in six specialist groups, offer expert advice on technical matters and the advisory board provides advice on policy and strategic issues.

  The government's policy is to achieve a high degree of security of retirement protection through an effective system of prudential regulation and supervision. During 1996, the MPF office made good progress in developing detailed proposals for the regulations and rules to be promulgated. Proposals were finalised on major issues, including the registration of schemes, standards for and operation of the registered schemes, the regulation and supervision of MPF approved trustees, the setting of investment standards and guidelines, and interface arrangements for existing voluntarily established occupational retirement schemes. In the process, the MPF office consulted interested parties including employer groups, labour unions and other organisations on relevant subjects in the proposed system. The target is to complete the draft subsidiary legislation in early 1997.

The Securities and Futures Commission

The SFC was established in May 1989 under the Securities and Futures Commission Ordinance. The SFC took over the functions of the former Securities Commission, the Commodities Trading Commission and the Office of the Commissioner for Securities and Commodities Trading.

The SFC is an autonomous statutory body outside the civil service. It has 10 directors (half of them executive) who are appointed by the Governor of Hong Kong. The commission is required to present the Financial Secretary 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 the SFC 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 four years. The market contribution is in the form of fees and charges for specific services and functions performed, plus a statutory levy on transactions recorded on the stock and futures exchanges. Its budget for 1996-97 was $266 million and it had an establishment of 256 at the year's end.

  The SFC has developed a framework of securities and futures regulation that brings Hong Kong into line with internationally-accepted standards. 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.

  Securities transactions on the stock exchange are executed by the Automatic Order Matching and Execution System. In January 1996, SEHK members commenced trading via a second terminal located in their own offices which supplements those terminals already available on the trading floor. It has greatly enhanced order entry

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      and trade confirmation efficiency and has further expanded the availability of audit trails.

       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. The CCASS is an automated book-entry system that handles the settlement of securities.

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 South-East 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 international standards. The educated work force and the ease of entry for professional 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 166 foreign-owned banks. Of the world's top 100 banks in terms of monetary assets, 80 have operations in the territory. In addition, 168 subsidiaries or related companies of banks operate as restricted-licence banks and deposit-taking companies, and 157 banks have representative offices.

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 $165 billion in 1996. The interbank money market is mainly for short-term money, with maturities ranging from overnight to 12 months, for both Hong Kong dollars and foreign currencies. 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 19 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 co-ordinated by the BIS, 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 become the fifth-largest in the world.

        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

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outstanding contracts US$666 billion. Derivatives on stocks and commodities are less frequently used, with the outstanding amount at US$8 billion.

HKMA became a member of the BIS in November 1996. It offered the membership in recognition of the size of Hong Kong's financial markets and its contribution to the international monetary co-operation. As a member of the BIS, the HKMA will be able to participate more fully in BIS activities and policy discussions. Eight other central banks/monetary authorities were also offered membership of the BIS, including the People's Bank of China. The fact that both the HKMA and the People's Bank of China are invited to join the BIS clearly shows that the international financial community is supportive of the 'one country, two system' concept enshrined in the Joint Declaration and the Basic Law.

The local stock market was on a generally upward trend during 1996. The Hang Seng Index closed at 13 451.45 at the end of 1996, 34.42 per cent above the closing of 10 007.39 at the end of 1995. Average daily turnover in the local stock market was $5.67 billion in 1996, compared with $3.3 billion in 1995.

At the end of the year, 583 public companies were listed on the SEHK. With a total market capitalisation of $3,476 billion, the Hong Kong stock market ranked eighth in the world and second in Asia. The 49 newly-listed companies raised a total of $31.18 billion. Besides new share issues, funds were tapped through rights issues ($4.65 billion) and private placements ($38 billion).

The SEHK launched stock options contracts in respect of HSBC Holdings plc in September 1995. At the end of 1996, options contracts in respect of 11 other stocks had been launched. The futures exchange also traded in three 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 2 614 contracts in 1995 to 4 393 in 1996. The volume of index futures trading averaged 18 699 contracts a day in 1996, compared with 18 407 contracts a day in 1995.

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 process 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$365.7 and US$417.7 in 1996. The price of gold fell from US$386.85 per troy ounce at the end of 1995 to US$367.8 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, weighted 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 $3,409 per tael compared with $3,569 at the end of 1995. Turnover on the exchange totalled 15 million taels in 1996.

  The number of authorised unit trusts and mutual funds increased to 1 311 at the year's end, from 1 183 a year earlier.

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Increasing Financial Links Between Hong Kong and China

Hong Kong has been China's primary channel for international fund-raising. However, the cross-border capital flows have by no means been one-way. Direct investment and inter-bank fund flows in both directions have grown rapidly. Hong Kong banks have also stepped up their business activities in China.

Hong Kong has facilitated China's overseas fund-raising activities via Hong Kong's equity and debt markets. At the end of 1996, 23 Chinese state-owned enterprises were listed in Hong Kong through the issuance of H-shares, raising a total of more than $20.5 billion. Bonds issued by China's Ministry of Finance, the People's Construction Bank of China, and other major financial institutions are traded on Hong Kong's Stock Exchange.

Cross-border fund flows among financial institutions have also grown rapidly. Over the years, China has accumulated a substantial amount of funds in Hong Kong dollars from trading activities and inward investment. 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 $250 billion by December 1996. Over the same period, claims on financial institutions in China by authorised institutions in Hong Kong registered an annual growth of almost 25 per cent to approach $300 billion.

Many banks from Hong Kong have expanded their businesses in mainland China. A total of 17 locally incorporated banks have established 29 branches and 28 representative offices there at the end of 1996.

Portfolio investment in the form of 'China funds' has also become increasingly popular. By the end of 1995, 19 such funds, amounting to some US$814.3 million, had been authorised by the SFC investing in B-shares listed on the Shanghai and Shenzhen stock exchanges as well as H-shares listed in Hong Kong.

Developments in Financial Infrastructure

To ensure that Hong Kong has an efficient and robust financial infrastructure, the HKMA and the banking community have been working closely to identify, minimise and, as far as possible, eliminate risk in Hong Kong's interbank 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 a move to move to Real Time Gross Settlement (RTGS) should be made as soon as possible.

The timetable provides for a phased implementation of RTGS starting in the first quarter of 1996 with full operation by the end of the year. The Hong Kong Interbank Clearing Limited (HKICL), jointly and equally owned by the HKMA and HKAB, was set up in May 1995 to take over in phases the Hong Kong dollar clearing facilities. from the Management Bank (the Hongkong and Shanghai Banking Corporation Ltd) of the HKAB Clearing House. This process started in August 1996 and will be completed in April 1997.

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  The HKMA, HKAB and HKICL had an extremely busy year in getting the system and the banks ready for full implementation of RTGS in December 1996. This RTGS system is a single-tier settlement structure with all banks maintaining settlement accounts with the HKMA. All RTGS payments are settled in real time and are final, irrevocable and unconditional. The banks' settlement accounts are not allowed to go into overdraft and intraday liquidity, which is often the most difficult issue facing any RTGS system, can be obtained by the banks through the use of their Exchange Fund Bills and Notes for intraday 'repo' agreements with the HKMA.

  The Central Moneymarkets Unit (CMU) Service, which was established in 1990 and operated by the HKMA to provide a clearing and custodian system for Exchange Fund Bills and Notes, was extended to cover private sector debt issues in 1994. It has recorded remarkable growth since then and 259 CMU members, which are mostly financial institutions in Hong Kong, participate in the system. There are 444 issues with a total value of $133.6 billion lodged with the CMU. Since 1994, a number of enhancements have been added to the CMU Service, such as the acceptance of foreign currency debt instruments and the introduction of end of day delivery against payment functionality for both Hong Kong dollar and foreign currency debt instrument.

The CMU system was fully integrated with the new interbank payment system when the latter went live on RTGS in December 1996. Delivery-versus-payment, both real time and end of day, became available. This matches international best practice in providing efficient, robust and risk-free clearing and settlement facilities for debt securities. It also enables the banks to obtain intraday liquidity through intraday 'repos' in a safe and efficient manner.

  The CMU is linked to Euroclear and Cedel, the two largest international clearing systems in the world, in December 1994. These links, the first of their kind in East Asia, allow overseas investors and traders easy access to the Hong Kong dollar debt market.

The Hong Kong Dollar Debt Market

 There have been impressive developments in the domestic debt market in recent years. The outstanding amount of Hong Kong dollar debt instruments stood at $281.4 billion as at end-1996, which was equivalent to about 23 per cent of the GDP. Exchange Fund Bills and Notes accounted for 33 per cent of the market while the rest consisted of private sector issues such as negotiable certificates of deposit, bonds, floating rate notes and asset-backed securities. Reflecting the increasing importance of the local debt market as a fund-raising avenue, $70.7 billion was raised through debt issues by the private sector during 1996.

The growth of the domestic debt market can be attributed partly to a combination of government initiatives and continued improvement in supply and demand conditions. The launch of the Exchange Fund Bills and Notes Programme in 1990 marked an important milestone in the development of the Hong Kong debt market. 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

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of Exchange Fund paper has further been extended with the subsequent introduction of the two-, three-, five- and seven-year Exchange Fund Notes in the past three years. A major development in the Exchange Fund Bills and Notes market in 1996 was the introduction of 10-year Exchange Fund Notes in October.

The tender results were very encouraging with an oversubscription rate of 13.52 times. The average accepted yield was 7.57 per cent, or about 92 basis points above that of the 10-year US Treasury Notes. In another development, four tap issues of 28- day Exchange Fund Bills were launched towards the end of 1996 to facilitate the liquidity management of banks in the initial stage of implementing the RTGS system. The total amount of outstanding Exchange Fund Bills and Notes increased to $92 billion at the end of 1996, compared with $59 billion at end-1995.

Exchange Fund Bills and Notes are one of the world's most actively traded government securities. The daily turnover in 1996 was $16 billion, representing 25 per cent of the entire amount outstanding. Contributing to the liquid secondary market is a market-making system under which 33 market makers are obliged to quote two-way prices.

      To encourage the supply of high-quality debt issues in Hong Kong, profits tax exemption has been granted to the Hong Kong dollar debt securities issued by nine multilateral financial organisations such as the World Bank and the Asian Development Bank. To facilitate further the development of the local debt market, the government introduced in May 1996 a scheme under which the interest income and trading profits derived from eligible debt securities issued in Hong Kong enjoy a concessionary profits tax rate equal to 50 per cent of the profits tax rate.

Since 1994, the HKMA has broadened the scope of repo securities eligible for discounting under the Liquidity Adjustment Facility (LAF) to cover high quality Hong Kong dollar private debt issues (in addition to Exchange Fund Bills and Notes). At the end of 1996, 33 private debt issues totalling $60.1 billion qualified as LAF-eligible repo securities.

Development of a Secondary Mortgage Market

The secondary mortgage market in Hong Kong started to develop in 1994 when four issues of mortgage-backed securities (MBS) were launched. However, the market has been slow to evolve because of the heterogeneity and complexity of the MBS products, the prepayment risk and the lack of secondary market liquidity in the MBS issues.

      At the suggestion of some private sector market participants, the HKMA conducted a study on the mortgage corporation proposal which concluded that the setting up of a mortgage corporation in Hong Kong was both feasible and beneficial in terms of promoting banking and monetary stability, the development of the local debt market and home ownership. It was also considered to be an effective way to kick-start the development of a secondary mortgage market.

In April 1996, the HKMA undertook a two-month public consultation on the mortgage corporation proposal. A wide spectrum of the community, including the banking sector, capital market participants and academics, indicated broad support for the mortgage corporation proposal. In July, the Exchange Fund Advisory Committee approved the setting up of the mortgage corporation, which would

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initially be wholly owned by the government through the Exchange Fund. Its business would be developed in two phases, starting with the issue of unsecured debt securities to finance the purchase of mortgage loans for its own portfolio, followed by the MBS issue. The corporation is expected to commence operation in the latter half of 1997.

The World Bank/International Monetary Fund Annual Meetings in 1997

 Preparation work for the 1997 World Bank/International Monetary Fund Annual Meetings, which will be held in Hong Kong from September 23 to 25, is well under way. The steering committee chaired by the Financial Secretary has been overseeing the co-ordination of various planning areas and good progress has been made. The HKMA as the implementation agency of the 1997 Annual Meetings has solicited sponsorship from the banking sector and relevant organisations, both in kind and in cash, of more than $70 million.

Companies Registry

The Companies Registry administers and enforces certain sections of 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 been operating as a trading fund 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, 1996, the Companies Registry Trading Fund managed to generate a surplus of $9.9 million, $8.8 million more than the budgeted surplus.

During the year, the registry continued to improve its working environment and services. By March 1996, the department had completed all its improvement programmes covering the public areas. The document registration area and the public search hall had been expanded and improved. These areas are now more spacious and provide far better facilities to the customers. Customer liaison officers, well experienced in company registration and company search matters, are now available to provide on-the-spot advice or assistance to customers.

  One of the registry's long-term objectives is to provide direct on-line access to the records it maintains. In January 1996, as a first step towards achieving this goal, all the company names and company document indices were converted into a CD-ROM and made available to customers. By referring to this CD-ROM and its regular updates, customers are able to order company records remotely by facsimile transmission.

In addition, the registry commenced its data expansion project in the middle of 1996. Under this project, vital company information, such as details of directorships, capital structure, the registered addresses of companies and whether or not a company has any registered charges, will be recorded on the database maintained by

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the department. It is expected that this project will be completed towards the end of 1997. Once this expanded database is available, the registry can proceed to allow direct on-line access to its customers. Meanwhile, the department continues its search for a cost-effective alternative method of capturing, retaining and retrieving company information which can effectively replace the current use of microfilm. Although the latter is functionally effective and reliable, it is a labour-intensive mode of technology which can be neither updated nor accessed electronically.

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 the commercial sectors. An overall review of the Companies Ordinance by a specially appointed consultant continued during the year. The Companies (Amendment) Bill 1996 was introduced into the Legislative Council in April 1996. The principal purposes of the Bill were to abolish the doctrine of ultra vires in its application to companies and to empower the Registrar of Companies to specify forms necessary for the purposes of the Companies Ordinance. The opportunity was also taken to amend certain prescribed wording in the ordinance so as to provide for the appropriate Chinese equivalents. Upon enactment of the Bill into law as proposed, the old forms prescribed under the Companies Ordinance will be 'deregulated'. The Registrar will specify more user-friendly and bilingual forms to replace the old ones.

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, systematically examined companies on the register with a view to striking off those which have failed to comply with the provisions of section 290A. At the end of 1996, a total of 445 600 companies had been so examined, 81 117 had been identified for action under section 290A and 36 097 had been de-registered.

In 1996, 49 734 new companies were incorporated. On incorporation under the Companies Ordinance, a local company pays a registration fee of $1,310 and a lodgement fee to $270 plus $3 for every $1,000 of nominal capital. During the year the nominal capital of new companies registered totalled $6.24 billion and 7 415 companies had increased their nominal capital by amounts totalling $45.52 billion. At the end of the year, 483 181 local companies were on the register, compared with 471 883 in 1995.

      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 $780 and some incidental filing fees are payable in such cases. During 1996, 665 of these were registered. At the end of the year, 4 604 companies were registered from 77 countries, including 1 121 from the British Virgin Islands, 800 from the USA, 423 from Bermuda, 402 from the UK, and 381 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 institutions authorised under the Banking Ordinance.

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  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, 1 024 applications were received and 860 licences were granted. At the end of 1996, there were 1 018 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. In most cases, the Official Receiver is appointed trustee or liquidator either by a summary procedure order, where the assets of an estate do not exceed $200,000, or by a meeting of creditors in bankruptcy, and meetings of creditors and contributories in compulsory liquidation.

When he acts as trustee or liquidator the Official Receiver investigates the affairs of the bankrupt or the wound-up company, realises assets and distributes 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.

The Bankruptcy (Amendment) Bill 1996 was introduced into the Legislative Council during the year. The purpose of the Bill was to rationalise and update the statutory framework for personal insolvency based upon recommendations of the Law Reform Commission. The main changes included abolishing the outdated concept of 'acts of bankruptcy', providing for automatic discharge for bankrupts after a certain period and for new voluntary arrangements to encourage debtors to resolve their problems without having to become bankrupt, and substantially simplifying procedures under the ordinance.

During the year, the High Court made 543 receiving orders and 557 winding-up orders. The assets realised by the Official Receiver during 1996 amounted to $113.32 million, while $62.91 million in dividends were paid to creditors in 249 insolvency

cases.

Professional Accountancy

 Hong Kong had 11 655 registered professional accountants at the end of 1996. Of these, 2 203 were certified public accountants (CPAs) or public accountants (PAs)

FINANCIAL AND MONETARY AFFAIRS

who are in public practice and entitled to perform statutory audits. There were 855 CPA firms and one corporate practice 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 registering professional accountants, maintaining accounting, auditing and ethical standards for the profession and conducting professional accountants examinations.

      The Professional Accountants (Amendment) Ordinance 1995 was brought into effect in August 1996. Its principal purpose is to allow accountancy practices to incorporate with limited liability subject, inter alia, to taking out adequate professional indemnity insurance.

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 (Amendment) Ordinance 1992 provided for the establishment of the HKMA.

The policy objectives of the HKMA are to maintain currency stability, within the framework of the Linked Exchange Rate System, through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; to ensure the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorised institutions; and to promote the efficiency, integrity and development of the financial system, particularly payment and settlement arrangements. The HKMA is divided into five departments: Monetary Policy and Markets; Reserves Management; Banking Policy; Banking Supervision; and External.

      The HKMA is an integral part of the Hong Kong 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 committee's involvement in respect of monetary and investment matters has become much stronger. It functions like a management board, meets monthly and advises the Financial Secretary on, among other things, the HKMA's annual budget.

Monetary Policy

The 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 three note- issuing banks are required to hold as backing for the issue of Hong Kong dollar notes, are issued and redeemed against 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 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 CIs, the market exchange rate stays close to the rate of $7.80 to US$1.

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FINANCIAL AND MONETARY AFFAIRS

88

Under the Linked Exchange Rate System, it is essential that interest rates should be flexible in order to minimise deviations of the exchange rate from the fixed level. This was why the lower limit for interest rates was eliminated when the HKAB 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, the Accounting Arrangements were entered into in July 1988 between the Financial Secretary and the Hongkong and Shanghai Banking Corporation Limited (HSBC) as the management bank of the clearing house of the HKAB.

  Under the Accounting 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 penal interest to the HKMA.

  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 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 downward pressure on 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 upward pressure on 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 (Exchange Fund Bills and Notes). The Exchange Fund paper is designed to complement the Accounting Arrangements by providing the HKMA with an additional instrument to conduct 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 rates appropriate for maintaining

Floor traders scramble for business at the Stock Exchange of Hong Kong, where the Hang Seng Index pushed past 13 000 points in November for the first time. The Index finished the year on 13 451.45, up 34 per cent on the closing figure for 1995. The Exchange began trading operations in its gleaming granite and glass harbourfront premises on April 2, 1986, with 51 corporate and 708 individual members; while 253 public companies were listed with a total market capitalisation of $419 billion. A decade later this had become 354 corporate and 209 individual members; and 583 listed- - companies with a total market capitalisation of $3,475.9 billion.

'An architectural talking point from its conception in 1979 to its completion

in 1986, the HongkongBank Headquarters Building is a striking part of Central. It has been joined by the Bank of China Building (below) and the Standard Chartered Building (right), which between them and the muscular towers of Admiralty (below, right), form the heart of Hong Kong's financial district. Almost 200 authorised institutions and local representative offices of banks from more than 40 countries conduct business in Hong Kong, and have helped promote the territory as an international financial centre. The banking sector's external assets are among the highest in the world.

t

i

-

Y

LAGOS

Traders at the Chinese Gold and Silver Exchange Society operate in one of the world's largest

gold bullion markets. They trade in gold of 99 per cent

fineness, weighed in taels (one tael equals 1.2 troy

ounces) and quoted in Hong Kong dollars.

紐約

NEW YORK

129

067

FINANCIAL AND MONETARY AFFAIRS

exchange rate stability. These rates provide an additional tool for the HKMA to influence the movements of the interbank interest rates.

      As a step to strengthen co-operation with regional central banks/monetary authorities, the HKMA has entered into bilateral repurchase agreements with eight Asian central banks/monetary authorities, including Australia, China, Indonesia, Japan, Malaysia, the Philippines, Singapore and Thailand. Under these bilateral agreements, the central banks/monetary authorities would, when needed, provide liquidity on a bilateral basis using US dollar government securities as collateral. This helps to enhance the liquidity of each other's foreign currency reserves.

      The HKMA set up a Representative Office in New York in October 1996. The establishment of the office helps enhance HKMA's capability to monitor the financial markets outside the Asia time zone as well as strengthen the liaison between the HKMA and the Federal Reserve Bank of New York and other US regulatory authorities.

Monetary Situation ·

During 1996, the Hong Kong dollar exchange rate remained stable against the US dollar under the Linked Exchange Rate System, moving within a narrow range between $7.7310 and $7.7450 to US$1. Reflecting an inflow of funds into the local stock market at the beginning of the year (as evidenced by the surge in the Hang Seng index from 10 073 at end-1995 to a high of 11 595 on February 16), the HK dollar exchange rate strengthened marginally from $7.737 in early December 1995 to $7.731 towards the end of February. In mid-June, amidst the trade dispute between China and the USA, the HK dollar eased slightly from $7.735 to $7.745 but it quickly rebounded upon successful conclusion of the trade negotiation. In the second half of the year, the HK dollar exchange rate stayed around $7.732 to $7.741, closing the year at $7.736.

      In the international currency markets, continuing the trend in the second half of 1995, the US dollar appreciated against other major currencies during 1996. The Yen/US$ exchange rate appreciated from 103.9 yen at the beginning of the year to 116 by end of the year, representing a rise of 11.6 per cent. The US dollar also strengthened marginally against the Deutschmark during the year, by 7.3 per cent. On the other hand, the Renminbi remained stable against US dollar, moving within a narrow range between RMB8.30 and RMB8.34. Reflecting these movements, the Effective Exchange Rate Index of the Hong Kong dollar rose from 122.7 at end-1995 to 125.3 at end-1996.

Under the Linked Exchange Rate System, Hong Kong dollar interest rates tracked closely US interest rates. On February 1, the US Discount Rate was lowered by 25 basis points (bps, or one-hundredths of one per cent). In line with the move, the LAF bid and offer rates were adjusted downwards by the same magnitude, to 4 per cent and 6 per cent respectively. The savings deposit rate and the best lending rate of major banks were also lowered by 25 bps. By the end of the year, the savings deposit rate and the best lending rate stood at 3.75 per cent and 8.5 per cent respectively, compared with 4 per cent and 8.75 per cent at the end of last year.

      In September 1996, the HKMA changed the reference rate for the bid and offer rates under the LAF from US Discount Rate to the Fed Funds Target Rate, subject

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FINANCIAL AND MONETARY AFFAIRS

90

to the US Federal Reserve continuing with the present practice of making timely announcement of changes in the Fed Funds Target Rate.

  The overnight interbank interest rate remained stable and moved within the corridor set by the LAF bid and offer rates. Towards the end of June, share subscriptions and mid-year settlements by some banks and companies led to a sudden increase in the demand for liquidity. Overnight HIBOR briefly firmed to 6.625 per cent, exceeding the then LAF offer rate, at 6 per cent. Upon the injection of $420 million by the HKMA, tightness in the interbank market eased.

Moving in line with the three-month Euro dollar deposit rate, the three-month HIBOR fell from 5.75 per cent at the beginning of the year to around 5.30 per cent in early February. Following the cut in the US Discount Rate and the Fed Funds Target Rate, the three-month HIBOR edged up slightly, reflecting the market expectation of a possible upward adjustment in the US interest rate later in the year. In mid-March, following the release of strong US economic indicators, the three-month HIBOR rose further from 5.375 per cent in early April to 5.688 per cent in mid-July. For the year as a whole, the three-month HIBOR fell by 37.5bps to 5.5 per cent at end-December. The interest rate spread between the three-month HIBOR and Euro dollar interest rate remained narrow. The average differential in 1996 stood at only 9.7bps. Longer term interest rates were more affected by the market expectation of a US interest rate hike and the Hong Kong dollar yield curve steepened from February. By end-1996, the yields of the five-year and seven-year Exchange Fund Notes stood at 6.7 per cent and 7.01 per cent, respectively, 46bps and 43bps above the yields at the beginning of 1996.

Reflecting an increase in transaction demand for money, contributed in part by a recovery of retail sales, Hong Kong dollar M1 rose by 15.8 per cent (to November), significantly higher than the growth rate of 2.2 per cent recorded in 1995. Hong Kong dollar M3, the broad money supply, rose by 19 per cent, consistent with the growth rate of nominal GDP and broadly in line with the growth of total HK dollar loans of 16.9 per cent in the same period.

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. 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, were 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.

FINANCIAL AND MONETARY AFFAIRS

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 currency 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 fund assets. These are held mainly in the form of bank deposits, equities and marketable interest-bearing instruments in certain foreign currencies and in Hong Kong dollars.

The HKMA adopts an ongoing programme, initiated on its formation in April 1993, 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 those 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.

. 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 it 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 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. 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 CIs 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 accrues the net profits of the note issue.

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 denominations until September 30, 1995, after which they were demonetised and 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 1996 was $87.1 billion.

91

92

FINANCIAL AND MONETARY AFFAIRS

  In 1997, the HKMA will issue a $1,000 gold coin and a set of seven circulation coins to commemorate the establishment of the Hong Kong Special Administrative Region. The set of seven coins, each with its own special design, will be in the same denominations as the seven currently circulating coins. The new set of coins is for general circulation and will be available during the first half of 1997.

  Banknotes issued by the three note-issuing banks are printed in Hong Kong by the Hong Kong Note Printing Ltd. The HKMA acquired this printing plant from De La Rue plc of the UK in 1996 on behalf of the government and is now responsible for the operation and management of the plant. The acquisition will let the government have closer involvement in the production of Hong Kong dollar currency notes, which is consistent with the responsibilities vested in it under the Legal Tender Notes Issue Ordinance and the Basic Law. The acquisition has no impact on the present note issue mechanism in Hong Kong.

  On December 31, 1995, the fund's total assets stood at $461 billion, of which foreign currency assets amounted to US$55 billion. Accumulated earnings amounted to $160 billion. The fund's financial position for the six years from 1990 to 1995, inclusive, is shown at Appendix 17. 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, foreign reserves figures are made available on a quarterly basis during the year and figures from January 1997 onwards will be released on a monthly basis. Based on unaudited figures, the fund's total assets stood at $485 billion and its accumulated earnings amounted to $162 billion as at June 30, 1996. Foreign currency assets, excluding forward transactions to be settled, amounted to US$63.8 billion at December 31.

7 TRADE AND INDUSTRY

      DURING 1996, Hong Kong's economy continued to restructure from a low cost assembly type manufacturing entity towards a regional service and commercial centre and a high value-added manufacturing base. The Hong Kong government embarked on a programme to promote service industries and upgrade technological infrastructure.

Hong Kong's external trade experienced a moderate growth in 1996, with total trade increasing by 3.5 per cent over the previous year. In particular, re-exports registered a 6.6 per cent increase, reflecting the continued important role of Hong Kong as an entrepôt. The gross total value of re-exports was $1,186 billion. Imports rose by 3 per cent to $1,536 billion.

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.

The government's industry policies aim to promote industrial development by creating a business-friendly environment and 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, funds facilities to enhance productivity and quality as well as 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. Members of these bodies include prominent industrialists and businessmen, representatives of major industrial and trade organisations and relevant government officials.

External Trade

Hong Kong is the world's eighth-largest trading entity in terms of value of merchandise trade; the fourth-largest if all Member States of the European Union are

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TRADE AND INDUSTRY

94

counted as a single entity. In 1996, it recorded a trade deficit of $138 billion with total exports at $1,398 billion and imports at $1,536 billion.

Its largest trading partner is China, followed by the USA and Japan. Appendices 18, 19 and 20 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 $573 billion in 1996, constituted the largest share of total imports. This was followed by raw materials and semi-manufactured goods ($541 billion) and capital goods, foodstuffs and fuels ($422 billion).

China, Japan and Taiwan remained the main suppliers of Hong Kong's imports in 1996, accounting for 37 per cent, 14 per cent and 8 per cent of the total, respectively.

Domestic Exports

 Clothing continued to be the largest component of domestic exports, valued at $69 billion or 33 per cent of the total in 1996. This percentage has remained stable over the past decade. At $30 billion, electrical machinery, apparatus and appliances came second. Other important exports included office machines and automatic data processing machines; photographic apparatus, equipment and supplies and optical goods; and textiles.

The pattern and volume of Hong Kong's export trade are closely related to the economic conditions and commercial policies of its major overseas markets. In 1996, China, the USA and Germay were Hong Kong's largest markets, absorbing 29 per cent, 25 per cent and 5.4 per cent of total domestic exports, respectively.

Re-exports

 Re-exports registered moderate growth in 1996. Re-exports made up 85 per cent of the value of total exports, reflecting the continued importance of Hong Kong as an entrepôt for China.

Principal commodities re-exported included electrical machinery, apparatus and appliances ($124 billion or 10 per cent of the total) and telecommunications and sound recording and reproducing apparatus and equipment ($116 billion or 9.8 per cent of the total). Other major 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, with China, the USA and Japan the major destinations.

The Manufacturing Sector

 Restructuring of the manufacturing sector reduced its contribution to GDP from 18 per cent in 1990 to about 9 per cent in 1995, but it continued to be an important sector of the economy. The sector was the territory's third-largest employer, employing 327 464 persons (12.9 per cent of the total employment) in 1996. Mechanisation, automation and relocation of assembly-type operations to China have accelerated the development of more knowledge-based and higher-value-added manufacturing.

TRADE AND INDUSTRY

       The clothing industry was the largest employer in the manufacturing sector in 1996, followed by the printing, publishing and allied industries. Chart 1 shows the breakdown of employment within the manufacturing sector in 1996.

Printing

13.6% (44 436)

Electronics

9.4% (30 944)

Textiles

7.8% (25 572)

Metal Products

5.6% (18 272)

Food & Beverage

6.5% (21 275)

Others 29.6% (97 039)

Clothing 27.5% (89 926)

Chart 1: Number of Persons Employed by the Manufacturing Sector in 1996

Manufacturing establishments in Hong Kong are generally small. Of the 27 316 manufacturing establishments in 1996, 26 205 employed fewer than 50 people. They accounted for about 50.8 per cent of Hong Kong's total manufacturing employment. Many small establishments are linked with larger factories through an efficient and flexible sub-contracting network. Such an arrangement has enabled the manu- facturing 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 $212 160 million in 1996. Major export items included clothing, electronics, textiles, watches and clocks, and chemical products. In 1994, Hong Kong was the world's third-largest clothing exporter. It was also the second-largest exporter of watches by quantity and the third-largest by value.

Major export markets in 1996 were China (29 per cent), the United States of America (25.4 per cent), Germany (5.4 per cent), Japan (5.3 per cent) and United Kingdom (5 per cent). The clothing industry was also the largest export-earner in the manufacturing sector in 1996, followed by the electronics industry. Chart 2 shows the value of domestic exports of the major industries in 1996.

95

96

Electronics

26.0%

(HK$55,067 million)

Textiles

6.5%

(HK$13,693 million)

Watches & Clocks

5.6%

TRADE AND INDUSTRY

(HK$11,987 million)

Chemical 4.1%

Jewellery 2.7%

Clothing 32.7%

(HK$69,447 million)

Others 22.4%

(HK$47,497 million)

(HK$8,691 million)

(HK$5,777 million)

Chart 2: Value of Domestic Exports of the Manufacturing Sector in 1996

External Investment

The Industry Department promotes and facilitates overseas investment in Hong Kong to diversify the local manufacturing and service industries, improve quality of products and services, and enhance productivity through introduction of advanced technology and management skills. It maintains a One-Stop Unit in Hong Kong which works closely with seven overseas Investment Promotion Units in Brussels, London, New York, San Francisco, Sydney, Tokyo and Toronto. Together, they provide advice and assistance to potential overseas investors in developing investment plans in Hong Kong.

According to the Industry Department's 1996 Survey of External Investment in Hong Kong's Manufacturing Industries, there were 430 foreign-owned manufac- turing companies in Hong Kong at the end of 1995, contributing a total inward investment of $48.28 billion at original cost. These companies employed 65 521 persons (i.e. 17 per cent of Hong Kong's total manufacturing employment) and accounted for 36 per cent of Hong Kong's total domestic exports. Charts 3 and 4 give further information on the sectors and source countries of these companies. Another Industry Department survey found that 2 307 overseas companies had established regional headquarters or regional offices in Hong Kong to co-ordinate their business activities in the region.

 To provide additional assurance to overseas investors, Hong Kong has concluded bilateral investment promotion and protection agreements with some of its major

TRADE AND INDUSTRY

investment partners, including the Netherlands, Australia, Denmark, Sweden, Switzerland, New Zealand, Italy, France, Germany, Belgium, Luxembourg and Austria.

Industry Breakdown

31.3%

9.3%

9.2%

31.1%

Electronics #

Textiles & clothing

Electrical products

Chemical products

Food and beverage

5.1%

Printing and publishing

5.5%

Others

8.5%

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

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

38.7%

15.8%

Japan

2.4%

U.S.A

3.7%

China

4.8%

U.K.

7.0%

Netherlands

Switzerland

Others

27.6%

Chart 4: Source of External Investment

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 textiles 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 included strategic commodities,

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98

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 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.

During the year, final testing of the Community Electronic Trading Service (CETS) was completed and the CETS became operational in September. The CETS is a joint venture involving the government and 10 leading trade-related organisations in Hong Kong. Its initial service covers applications for export licences for textiles and clothing shipped under quota and lodgements of trade declarations. Coupled with the private sector electronic data interchange services already on offer, 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 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 26 208 square metres of industrial land for sale by tender in 1996. Private developers provided an additional 26 800 square metres of flatted factory space in 1995. Construction of the second phase of the Tseung Kwan O

TRADE AND INDUSTRY

      Industrial Estate will be completed in 1997 and will provide 46.6 hectares of land. A fourth industrial estate is planned to meet future demands of industries that cannot be accommodated in multi-storey factory buildings.

Technical Education and Industrial Training

     The Vocational Training Council (VTC) provides technical education and industrial 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 a statutory body established in 1967 to promote improvement in productivity in industries. The Hong Kong Industrial Technology Centre Corporation (HKITCC) was established to facilitate the promotion of technological innovation and the application of technologies in Hong Kong industries.

Through the Industrial Support Fund scheme set up in 1994, the government provides financial support to projects that contribute to Hong Kong's industrial and technological development. By October 1996, it had committed $765 million for 211 projects undertaken 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 the manufacturing and service sectors and maintains important quality infrastructure services. The Hong Kong Government Standards and Calibration Laboratory is the official custodian of Hong Kong's measurement standards providing traceability for local measurements.

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 reference point for information 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, seeks to foster the technological capabilities and competitiveness of industry. Funding support can take the form of a loan or equity participation. At October 1, 1996, 18 applied research and product development projects had been approved for funding, with a commitment of $64 million, in areas such as software development, telecom- munications products, security systems and pharmaceutical products. In June 1995, a new scheme called Co-operative Applied Research and Development Scheme was launched to support product development projects undertaken in collaboration with China's research institutes. At October 1, 1996, four projects in the fields of

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 biotechnology, telecommunication and robotic engineering were approved with a commitment of $21 million.

Monitoring Technology and Market Trends

The department conducts periodic studies of the major sectors of the manufacturing industries to look at technology and market trends and identify constraints on industrial development. In 1996, the study on the textiles and clothing industries was completed and a consultancy study on the metals and light engineering industries was initiated. Following the completion of a consultancy study on Hong Kong's software industry in 1995, action such as the establishment of a Software Industry Information Centre and a Cyberspace Centre was taken to provide infrastructural support to encourage the development of the software industry. The proposed Hong Kong Science Park received strong public support and the Industry Department is working out the institutional arrangements for setting it up.

Environmental Controls

In 1996, the department commissioned the Hong Kong Productivity Council to operate a hotline, organise seminars and workshops and arrange factory visits to provide information and technical advice to help manufacturers comply with environmental controls. General information is disseminated through an annual guide on environmental legislation affecting manufacturers. There are also design manuals and eco-audit manuals for specific industries and a directory on environmental technology and services.

Hong Kong Awards for Industry

 These prestigious awards for excellence in industrial performance are co-ordinated by the department and are an important highlight in the industrial calendar for manufacturers. The awards cover six categories consumer product design, machinery and equipment design, productivity, quality, environmental performance and export marketing. Each category is organised by a leading organisation connected with the manufacturing sector.

Small and Medium Enterprises (SMEs)

A Small and Medium Enterprises (SMEs) Committee was established in July 1996. Its members comprise representatives of chambers of commerce, trade and industry support organisations as well as SME practitioners. The committee aims to identify issues affecting SMEs and suggest measures which would facilitate their development.

Symposium on Services Promotion

To stimulate ideas and discussion in the community - in particular the business sector on the way forward for services promotion, the government and seven major trade and industry support organisations jointly organised a symposium in March 1996. The event tied in with a wider government initiative to promote the service sector and was well attended by business leaders, academics and government officials.

TRADE AND INDUSTRY

Industrial Support Agencies

Hong Kong Productivity Council

The Hong Kong Productivity Council (HKPC) promotes productivity excellence through its diverse range of consultancy services to enhance the value-added content of products and services. The HKPC is the government's representative to the Asian Productivity Organisation on productivity issues.

During the year, the HKPC introduced new initiatives in promoting people, product and process development. Two major initiatives were the expansion of its portfolio to support service industries and the formulation of a strategy to promote R&D. Other examples included the Quality Performance Improvement Programme through the HKPC-Xerox Quality Institute, the ISO 14000 (Environmental Management System) Pilot Programme, and the establishment of the Electro- magnetic Compatibility Compliance Centre, the Radio Frequency Product Characterisation and Training Centre, the Quick Response Centre, the Jewellery Technology Centre and the Clock and Watch Technology Centre.

Hong Kong Industrial Technology Centre Corporation

Hong Kong Industrial Technology Centre Corporation (HKITCC) is a statutory body set up by the government in 1993. Its mission is to facilitate the promotion of technological innovation and application of new technologies in Hong Kong industry. To meet its objectives, HKITCC has developed three major programmes: the Technology-Based Business Incubation Programme to nurture technology start- ups; the Technology Transfer Programme; and R&D Support and Services Programme to support research and development activities. To extend HKITCC's services, the government has accepted the case for developing a second Tech Centre.

Hong Kong Industrial Estates Corporation

The Hong Kong Industrial Estates Corporation is responsible for developing and managing industrial estates in Hong Kong. It offers land at cost to manufacturing industries which cannot operate in multi-storey factory buildings. The corporation has three 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 international organisations.

Within the context of the government's free trade policy, the objectives of Hong Kong's commercial relations are 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.

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World Trade Organisation (WTO)

 The World Trade Organisation (WTO) oversees the implementation of the multilateral rules and disciplines agreed to at the Uruguay Round (UR) of negotiations for trade in goods, services and trade-related aspects of intellectual property rights. It also serves as a forum for multilateral trade negotiations. The multilateral trading system under the WTO is the cornerstone 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, under the name of 'Hong Kong, China', reflecting Hong Kong's autonomy in the conduct of its external commercial relations as guaranteed under the Sino-British Joint Declaration 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 UR outcome, and to safeguard Hong Kong's trading interests. Hong Kong played an active role in the preparatory process leading to, and at, the first WTO ministerial conference in Singapore on December 9-13, 1996. The conference reviewed progress on implementation of the UR agreement and adopted a future work programme for the WTO. Hong Kong will continue to participate actively in taking forward the agreed future WTO work programme to further global trade liberalisation.

Textiles

Hong Kong's textiles exports to the European Union (EU), Norway, Canada and the USA are subject to certain quantitative restrictions maintained under the WTO Agreement on Textiles and Clothing (ATC) which came into force on January 1, 1995. This provides for the phased removal of quantitative restrictions on these products in 10 years. Hong Kong monitors closely the implementation of the ATC and the functioning of its supervisory body, the Textiles Monitoring Body, to safeguard Hong Kong's rights under the ATC. Through the co-ordination of the International Textiles and Clothing Bureau, of which Hong Kong is a member, Hong Kong and a group of developing country exporters of textiles work together to ensure that the liberalisation process under the ATC is on course, and to explore possibilities for further liberalisation.

  Upon the formation of the EU/Turkey Customs Union in January 1996, Turkey imposed unilateral and discriminatory quantitative restrictions on Hong Kong's textiles exports. With a view to urging Turkey to rescind its action, Hong Kong initiated consultations with the country in April 1996. Since these did not resolve the matter, Hong Kong will continue to seek protection of its position in accordance with the WTO rules and procedures.

  During the year, the US imposed additional import measures on 10 categories of Hong Kong garments. Representatives of the governments of Hong Kong and the USA met to discuss ways to address the problem and bilateral co-operation to control and eliminate illegal transshipment of textiles and garments. Both governments are committed to continuing their mutual efforts to resolve the matter.

TRADE AND INDUSTRY

Non-textiles Issues

      The European Commission (EC) initiated anti-circumvention investigations into 3.5- inch microdisks originating from Hong Kong in October 1995. Hong Kong raised objections to the initiation and engaged the EC in consultations. The EC's investigation, conducted in Hong Kong in January 1996, could not establish evidence of circumvention. In July, the EC terminated the case.

With the coming into effect of the General Agreement on Trade in Services (GATS) when the WTO was established in January 1995, global trade in services is now governed by a legally enforceable multilateral agreement. Hong Kong plays an active role in the WTO forum to ensure the proper functioning of the GATS and progressive liberalisation of trade in services.

During the first half of the year, the Hong Kong Government and the private sector continued to emphasise to the administration and members of Congress the adverse effects on Hong Kong's economy if the USA were to withdraw China's Most Favoured Nation (MFN) trading status, or to impose conditions on the renewal of the status. On May 31, President Clinton announced his decision to renew China's MFN trading status unconditionally for another year. A joint resolution dis- approving the President's decision on MFN was introduced but was defeated by a floor vote in the House of Representatives on June 27.

The outcome removed uncertainty over Sino-USA trade relations, and allowed Hong Kong businessmen to plan and conduct their operations accordingly. China and the USA are Hong Kong's two largest trading partners and good relations between them are of vital importance to the territory 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 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 multilateral anti- dumping, origin certification and rules of origin matters.

       The fifth division is the Systems Division, which is responsible for the textiles export control system, the Textiles Trader Registration Scheme, non-restrained textile

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licensing, the computerisation of the department's licensing systems, the import 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. 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 Member of the WTO. It also represents Hong Kong as an observer on the Trade Committee 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 it, 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 investment from Europe.

The London Office promotes Hong Kong's economic and trade interests in the United Kingdom. It also promotes inward investment in Finland, Norway and Sweden, monitors parliamentary activities of interest to Hong Kong and houses the territory's representative to the International Maritime Organisation.

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.

Offices in Washington, DC, New York and San Francisco are responsible for looking after Hong Kong's economic, commercial and public relations interests in the USA, Hong Kong's largest market and a significant source of industrial and commercial investment in the territory.

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 be significant. In 1996, some 80.1 per cent of Hong Kong's total external trade was conducted with the other 17 member economies of APEC.

During the year, Hong Kong was active in the work of APEC. Policy secretaries of relevant branches attended APEC ministerial meetings on Human Resources Development, Finance, Sustainable Development, Trade, Energy, Small and Medium Enterprises, Telecommunications and Information Industry, and Regional Science and Technology Cooperation. The Financial Secretary represented Hong Kong at the APEC Economic Leaders, Meeting held in Subic, the Philippines, in November.

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◄A technician with Chen Hsong

Machinery Co. Ltd, checks over parts for a plastic injection- moulding machine. The company is a subsidiary of Chen Hsong Holdings Ltd, which sells more than 9 000 sets of such machines each year, or 10 per cent of the global market. It won an Industry Department Certificate of Merit for Quality in 1996. BELOW: Circuit boards are designed at Elec & Eltek Company Limited, a Quality Award winner during the year. It is a leading manufacturer of high-density, double-sided and multi-layered circuit boards.

     · More than 300 delegates of 140 member countries and territories of the World Customs Organisation and various international bodies gather in Hong Kong for its 1996 conference in June.

BOTTOM: Hong Kong's Secretary for Trade and Industry,

Ms Denise Yue, and China's Minister for Trade, Madame Wu Yi, pay close attention to a speaker at the Asia-Pacific Economic Co-operation forum in Manila in November.

V

WORLD CUSTOMS ORGANIZATION ORGANISATION MONDIALE DES DOUANE 35th Session of the Policy Commissio 35ème Session de la Commissior de

Politique Générale

1.96 - 14.6.96

Q

قصہ کچھ

A Korean dance troupe whirls into a traditional performance at the opening of the country's stand at the 1996 Hong Kong Food Fair.

KOREA

KOREA

Agricultural & Fishery Marketing Corporation

KORL

KP1-2

pathut Doosan Ford CO.

▼Models display the latest in high-fashion bridal ware at the Convention and

Exhibition Centre. Textiles remain Hong Kong's largest earner of foreign

exchange, and have for a decade made up about one-third of the territory's domestic exports by value.

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第八屆婚紗時裝及結婚用品

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TRADE AND INDUSTRY

Hong Kong is the Co-Vice Chair of the APEC Committee on Trade and Investment (CTI), and the Convener of the Government Procurement Experts Group under the CTI. The territory contributed constructively towards the implementation of the Osaka Action Agenda which was a road map adopted by Economic Leaders in 1995 to achieve the goal of free trade and investment in the Asia-Pacific region by 2020. The Hong Kong PECC Committee, 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 Trade Policy Forum, the Pacific Economic Outlook and the Financial Markets Development Project. In April 1996, Hong Kong hosted a series of PECC Meetings including the Co-ordinating Group and Standing Committee Meetings. It was the first time that major PECC meetings had been held in Hong Kong since it became a full member of PECC in May 1991.

      In September 1996, a Hong Kong delegation comprising representatives from the academic, business and government sectors participated in the Ninth Trade Policy Forum held in Seoul and another delegation participated in the PECC Co-ordinating Group and Standing Committee Meetings held in Cartagena, Colombia. Hong Kong also attended a symposium organised by the PECC Trade Policy Forum in Singapore in December. A senior directorate officer of the government was seconded to the PECC Secretariat in Singapore as its Director-General for three years from February 1996.

      Hong Kong is an observer on the Trade Committee of the Organisation for Economic Co-operation and Development (OECD) which is an important forum for debates and discussions on trade policy matters. 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. In March, Hong Kong hosted an OECD Workshop for Dynamic Non-Member Economies on foreign direct investment which focused on the development of multilateral rules aimed at liberalising and protecting international investment.

Hong Kong Trade Development Council

Established by statue in 1966, the Hong Kong Trade Development Council (TDC) is responsible for promoting and expanding Hong Kong's trade with the world. By April 1996 it had a network of 51 offices in 34 countries and regions, effectively serving as an international marketing arm for Hong Kong's manufacturers and service providers and, as an increasing priority, Hong Kong's service industries.

      The TDC marked its 30th anniversary in 1996 with a variety of activities. It also worked intensively on two major initiatives. In response to the government's call for the TDC to increase its emphasis on promoting Hong Kong's service industries, the council launched a 10-point plan in March 1996 to promote awareness of Hong Kong's role as a regional hub for services. Four advisory committees were set up in the areas of media and communications, finance, trade-related services and professional services to help the council to better understand the needs of Hong Kong's service sector, and to decide market priorities and promotional strategies.

      The message is clear - Hong Kong has a ready supply of services and international expertise which can assist trade expansion, infrastructure development and further economic growth in the rest of Asia and to contribute to the ongoing liberalisation and expansion of China's tertiary sector.

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  This message was taken overseas by an ambitious programme which started in May 1996 highlighting Hong Kong's service strengths and confidence in future as Asia's business hub far into the next century. Business seminars and roadshows visited places including South-East Asia, the USA, Australia, Europe and Japan.

  The second major initiative concerned the construction of the Hong Kong Convention and Exhibition Centre extension. Good progress was made on the $4.8 billion reclamation and extension project, which began in 1994 and is on schedule for completion in mid-1997. Apart from being a new architectural landmark for Hong Kong, the extension will more than double the Centre's exhibition and convention capacity, strengthening Hong Kong's lead as the trade fair capital of Asia.

  On the promotional front, the TDC was again very active in helping Hong Kong companies to penetrate world markets. In 1995-96, the council organised more than 300 promotional events world-wide, providing cost-effective channels for local manufacturers and traders to reach international buyers. These events attracted participation from a record 12 000 Hong Kong companies, generating business worth more than $35 billion. Of the 16 international trade fairs and exhibitions organised by TDC in Hong Kong, five are the largest in Asia. These fairs attracted 7 000 exhibitors and more than 1.1 million visitors, including some 63 000 overseas buyers.

  Two-thirds of the council's promotional events in 1995-96 were in new markets, where the focus was on introducing Hong Kong products, building sourcing relationships and creating awareness of Hong Kong's advantages as a trading partner to these markets, including mainland China, South-East Asia, India, the Middle East, South Africa, Russia, Eastern Europe and Central and South America. The newly established TDC offices in these markets served manufacturers and traders by providing much needed local market knowledge and business contacts.

  In the established markets of North America and Europe, TDC helped Hong Kong companies to meet the challenges of increasing competition by fostering a more favourable trading environment through expanding and upgrading their presence at established fairs, organising business seminars and developing more high-level business contacts.

  To ensure the TDC's trade and information services match Hong Kong's position as Asia's business hub, the council constantly upgrades its information resources and services, making it easier for traders to access its services. Recently introduced facilities included an Electronic Data Centre in the TDC Business Library and the use of cutting-edge computer technology to equip the TDC Fashion and Design Library. A TDC page was also available on the World Wide Web providing 35 million users of the Internet around the globe with easy access to handy information on Hong Kong's economy and the TDC's services.

  The council's Trade Enquiry Service matches thousands of companies across the world with Hong Kong buyers and suppliers. The service is particularly useful to Hong Kong's small- and medium-sized enterprises which lack the resources to build their own networks of overseas buyers. In 1995-96, 429 000 enquiries were handled, representing an increase of 21 per cent over the previous year. This computerised service helped users find the right supplier, buyer or agent among 73 000 Hong Kong companies, 346 000 overseas traders and 158 000 mainland firms listed in the TDC's databank.

TRADE AND INDUSTRY

Backed by nearly 30 years' experience, and as a pioneer in trade publishing in Hong Kong, the TDC continued its move into the era of multi-media publishing by producing a CD-ROM supplement to its Hong Kong Electronics magazine. The council's 17 product magazines had a combined global circulation of 2.2 million copies, providing sourcing information and contacts for overseas buyers and helping 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 promote the territory's design capabilities. Through its Design Gallery, the council continues to encourage and promote design excellence. The Design Gallery also helps the territory's manufacturers and designers to test-market their products. In 1995-96, 21 000 innovative products were featured and an average of 50 000 local and international visitors passed through 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, and large-scale catwalk shows both overseas and in the mainland to introduce Hong Kong designers and labels to international audiences. More than 200 individual designers and labels were featured in the TDC's 25 fashion shows around the world in 1995-96.

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. In 1995-96, the TDC received 402 business missions from 38 countries, involving more than 4 000 company executives. Targeted business appointments were arranged to help mission members buy, sell, and explore new partnerships and opportunities in the territory.

The Hong Kong Export Credit Insurance Corporation

Created by statute in 1966 to provide insurance protection for Hong Kong exporters against non-payment risks arising from commercial and political events, the Hong Kong Export Credit Insurance Corporation (ECIC) celebrated its 30th anniversary in 1996. Its capital is wholly-owned by the Hong Kong Government which also guarantees its contingent liability, currently standing at $7,500 million.

The ECIC's mission is to encourage and support export trade through the provision of professional and customer-oriented services. This is achieved through, firstly, the development of a positive corporate culture and an open participatory management devoted to excellence, quality and a continuous improvement process and, secondly, the delivery of prompt, effective and comprehensive services to meet the aspirations of Hong Kong exporters.

The corporation provides a wide range of insurance facilities to Hong Kong exporters of goods and services trading on credit terms with overseas buyers and clients for credit periods normally up to 180 days. Among them, the most popular facility is the Comprehensive Shipments Policy which covers export and re-export of goods from the date of shipment. Ranking second is the External Trade Shipments Policy, which covers the export of goods manufactured outside Hong Kong and delivered direct to the buyer whether it is in the buyer's country or a third country.

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The corporation also provides tailor-made facilities or variations of the standard cover to cater for the different needs of each export sector. For export of capital goods, it may also provide medium- and long-term cover for credit periods up to five years or more. Export of services is covered by the Comprehensive Services Policy, which provides the blue-print for tailor-made policies that meet the specific requirement of individual service sectors, such as freight forwarding and advertising. The ECIC's total insured business in 1995-96 reached $17,612 million, representing an increase of six per cent over that in 1994-95. Gross premium income remained stable at $99.56 million although an overall premium reduction of about 10 per cent was introduced in April 1995. Despite higher claims, the corporation achieved a surplus of $29.9 million for the year.

Internationally, the ECIC continued to maintain close co-operation with members of the International Union of Credit and Investment Insurers (the Berne Union) through visits, meetings and workshops. During 1995-96, the corporation streamlined its work procedures and structure to become a compact, leaner and less- compartmentalised organisation for the purpose of providing more efficient and effective services to Hong Kong's exporters.

Other Trade and Industrial Organisations

Various associations in Hong Kong 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 Manufacturers' Association of Hong Kong, the Hong Kong General Chamber of Commerce and the Chinese General Chamber of Commerce. Other organisations include the Hong Kong Management Association, the Hong Kong Exporters' Association, the various overseas chambers of commerce in Hong Kong such as the American, Australian, British, Indian and Japanese chambers.

The Federation of Hong Kong Industries is a statutory body, established in 1960 to promote and foster the interests of Hong Kong's industrial and business communities. It has more than 2 600 members. The wide range of federation services include the issue of certificates of origin, the Hong Kong Quality Mark Scheme, ISO 9000 quality management consultancy, intellectual property services, trade enquiries. and industry researches. Seven industrial councils come under its auspices. They cover the chemical and pharmaceutical, electronics, mould and die, plastics, toys, watch and clock, and transport services industries. The federation also runs the annual Young Industrialist Awards of Hong Kong and is responsible for organising the consumer product design 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 4 000. 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.

TRADE AND INDUSTRY

The Hong Kong General Chamber of Commerce is the oldest internationally- recognised trade association in Hong Kong. Founded in 1861, it has around 4 000 members. It 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 many official advisory committees and bodies. It founded and formed the Hong Kong Article Numbering 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 Chinese government officials since 1982.

The Hong Kong Management Association is a professional management organisation, incorporated in 1960, to improve the efficiency and effectiveness of management in Hong Kong. With a membership of around 11 000, it organises some 1 600 training programmes annually and provides various management services such as the organisation of seminars, award competitions and translation services.

The Hong Kong Exporters' Association was formed in 1955 and has a membership of 400 companies. It disseminates trade information, voices members' concerns and assists in solving 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 its subsidiary legislation relating to certification of origin, import and export controls on textiles and strategic commodities, and the import and export declaration system as well as legislation relating to consumer protection and reserved commodities control.

The branch is the authority responsible for verifying the origin of textiles and clothing products to combat fraudulent declaration of origin and illegal transhipment. It works closely with the Trade Department to safeguard the integrity of the certification of origin and textiles export control systems, which are of vital importance to Hong Kong's continued access to overseas markets.

The branch carries out a vigorous enforcement programme by way of factory and consignment inspections, investigations and prosecutions. In 1996, it carried out 118 409 factory and consignment inspections and 2 057 investigations. It also prosecuted 1 051 defendants, resulting in the imposition of court fines amounting to $10.9 million.

A high level of vigilance and enforcement is maintained against country of origin and transshipment fraud. Enforcement includes the operation of a reward scheme under which a monetary reward will be granted to persons who provide information which leads to successful prosecutions, and the deployment of a task force to target

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suspect shipments. The branch also maintains close contact and co-operates with enforcement authorities in Hong Kong's overseas markets.

  The branch plays a key role in the enforcement of consumer protection legislation and co-operates closely with the Consumer Council. Under the Weights and Measures Ordinance, the branch protects consumers against fraudulent or unfair business practices in connection with quantity, weights and measures. Through spot checks on gold and jewellery shops the branch ensures the content of gold and platinum is correctly marked in compliance with the Marking Orders. In the area of product safety, the branch enforces the Consumer Goods Safety Ordinance and the Toys and Children's Products Safety Ordinance by tracking down and identifying unsafe products on sale in Hong Kong and prosecuting offenders. In 1996, the branch carried out 568 spot checks and 307 investigations under the Weights and Measures Ordinance, the Trade Descriptions (Marking) (Gold and Platinum) Orders, the Consumer Goods Safety Ordinance and the Toys and Children's Products Safety Ordinance.

Trade in Endangered Species

The import, export and possession of endangered species are regulated by the Animals and Plants (Protection of Endangered Species) Ordinance, which gives effect to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Licensing policy follows the CITES principles closely. 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. All suspected offences are investigated and prosecutions are instituted if there is evidence of a breach of 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.

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 that date.

The Intellectual Property (World Trade Organisation Amendments) Ordinance was enacted in May 1996 to enable Hong Kong to fulfil its international obligations as a member of the WTO to enhance the protection of intellectual property rights. The Patents Bill which provides for the grant of independent patents based on the patents granted elsewhere and for the grant of short-term patents was introduced into the Legislative Council in July 1996. A draft Copyright Bill was put forward for public

TRADE AND INDUSTRY

consultation in November 1996 and a draft Registered Designs Bill in December 1996.

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 1996, 16 410 applications were received, 13 378 of which were in respect of goods and 3 032 in respect of services. In all, 11 720 marks were registered in 1996, an increase of 7 per cent compared with 10 940 in 1995. The applicants' principal places of origin were:

2 685

2651

Hong Kong

USA

Germany

Switzerland

536

422

Japan

1 221

France

UK

724

629

Italy

Taiwan

358

275

British Virgin Islands

242

      The register had a total of 88 428 marks at December 31, 1996. 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 2 205 patents during the year, an increase of 12.5 per cent compared with 1 960 in 1995.

Copyright

The criminal provisions of the Copyright Ordinance were amended in 1995 to increase substantially the penalties against copyright piracy and to provide a second tier of higher penalties against repeat offenders. The maximum penalties for the possession of infringing copies of copyright works for trade and business purposes are a fine of $25,000 per copy and two years' imprisonment. The penalties for possession of a plate for manufacturing infringing copies of copyright works are a fine of $250,000 and four years' imprisonment.

In May 1996, the criminal provisions were further extended to cover the making of infringing copies outside Hong Kong for export to Hong Kong. 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 penalties. The purpose is to deter criminal copyright infringement on a commercial scale. The provisions of the Copyright Ordinance were also amended in the areas of rental rights, performers' right and customs border measures. These amendments were in keeping with Hong Kong's obligations as a party to the Agreement on Trade Related Aspects of Intellectual Property Rights.

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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 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 114. It is divided into seven functional divisions: administration, complaints and advice, information. and publication, legal affairs, research and testing, survey and trade practices. The council is engaged in a wide spectrum of activities ranging from developing new consumer protection initiatives to conducting studies on the state of competition and trade practices of various business sectors, mediating in consumer disputes to disseminating information and advice and organising consumer education activities, conducting product testing, in-depth studies and surveys to studying and responding to consultation papers and reports on consumer-related issues.

During the year, a key activity of the council was to complete a series of sector- specific competition studies and, based on these findings, to draw up a final report with appropriate recommendations to ensure and promote competition in Hong Kong. Three study reports were released on the sectors of broadcasting in January, telecommunications in March and private residential property in July.

The report on broadcasting, entitled Ensuring Competition in the Dynamic Television Broadcasting Market, made recommendations for a licensing and regulatory regime to promote competition and cater for rapid changes in the television broadcasting sector. The council recommended a regulatory framework based on a conceptual division between carriers and programme or service providers with a streamlined regime. One key feature of the proposed regime was the creation of a new policy branch with integrated responsibilities for broadcasting, tele- communications and information technology to cope with coverage in these fields. The government responded in early July, agreeing to a number of the council's recommendations. It accepted that there was some merit in dealing separately with carriage and content, and pointed out that the two aspects would be regulated separately in the licensing scheme for video-on-demand programme services.

Pointing out that there was already close co-operation between the Broadcasting, Culture and Sport Branch, the Broadcasting Authority and the Office of the Telecommunications Authority, the government felt that there was no present need for a new branch, although it would consider the issue again in the broadcasting review in 1998. Other recommendations accepted by the government included the case for reducing the royalties paid by the two commercial television broadcasting licensees, the removal of restrictions on telecommunications licensees from bidding

TRADE AND INDUSTRY

      for licences under the Television Ordinance, and the extension of cross-media ownership restrictions to newspaper owners.

The report on telecommunications Achieving Competition in the Liberalised Telecommunications Market-examined competition issues arising from the liberalisation of the local Fixed Telecommunications Network Services (FTNS) market in July 1995, identified barriers to competition and made recommendations to promote effective competition and maximise benefits to consumers. The study focused on four major areas of the Hong Kong telecommunications industry: market structure, tariff structure, consumer welfare and the regulatory framework. The government responded in September, accepting most of the council's recommendations, many of which have been or are being implemented. For example, the existing FTNS licence contains provisions which take care of the majority of the council's concerns. The government also intended to introduce a bill to amend the Telecommunication Ordinance in the 1996/97 legislative year.

      The study on residential property market, entitled How Competitive is the Private Residential Property Market?, sought to assess the degree of competition in this market. Recommendations were drawn up to address the imperfect competition found in this market and to lower the barrier to entry by new entrants. Other recommendations included improving residential land and property supply, enhancing marketability of older properties and increasing consumer access to property information. The government will respond to this report within six months of its release.

In February, the government responded to the council's competition report on the domestic water heating and cooking fuel market, published in August 1995. The government agreed with the council that, if feasible, the common carrier system would inject competition, to consumers' benefit, into the domestic gas supply market. A study of the feasibility of introducing a common carrier system in Hong Kong would be commissioned. An Energy Advisory Committee would be set up to advise the government on energy policy and other related matters.

At the end of October, the council released a main study report on competition policy. The report emphasised that a comprehensive competition policy was essential to Hong Kong's economic future, and put forward a set of recommendations for the enactment of a competition law in Hong Kong. The government will respond to this report within six months of its release.

Since its establishment in November 1994, the Consumer Legal Action Fund (CLAF) has granted assistance to various groups of consumer seeking redress. During the year, the CLAF investigated 44 applications for assistance. Assistance was granted to two groups of consumers, involving modelling school and real property transactions, and action to assist these consumers is being pursued by the fund. The council is the trustee of the fund and is advised by a management committee and a board of administrators on the eligibility and merits of the cases seeking assistance. Vital consumer protection legislation has been enacted or amended in recent years, notably the Consumer Goods Safety Ordinance, the Sale of Goods (Amendment) Ordinance, the Supply of Services (Implied Terms) Ordinance and the Unconscionable Contracts Ordinance. To enhance public awareness of the legal rights afforded under the law, the council launched a publicity drive which was conducted mainly through Announcements of Public Interest broadcasts at regular

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intervals on the local TV channels. The council also continued to support the campaign to use fewer plastic bags in both the retail and supermarket sector and selected wet markets.

During the year, the council responded to more than 162 000 consumer enquiries and processed 8 778 consumer complaints including 740 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 its 16 consumer advice centres.

In 1996, CHOICE maintained an average monthly circulation of 28 000 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 30 product tests, 56 in-depth studies and 16 survey projects with a view to collecting independent and impartial information to assist consumers to make the right choice. Some tests were conducted specifically in response to the enactment of new legislation on product safety.

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 review on rice control scheme, and amendments to the Banking Ordinance. The council, as an executive and council member of the Consumers International, maintains regular contacts with its counterparts in China and overseas.

Metrication

The government's policy on metrication seeks to promote and facilitate the progressive adoption of the International Systems 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 departments 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 efforts towards the retail sector and young families. A territory-wide Billboard Design Competition was organised for secondary school students in order to increase their awareness of the adoption of metrication in their daily life. In August 1996, the committee took part in the 7th Food Expo which was one of the major events of the Hong Kong Trade Development Council. The metric conversion dials distributed and the educational games at the Metrication Committee counter in the Food Expo were well received by thousands of visitors. Fifteen boy scouts were appointed as Metrication Ambassadors during the year in appreciation of their contribution towards various promotional activities organised by the committee.

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 4 770 printing

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establishments employing 44 436 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 17.5 per cent of all manufacturing establishments and 13.6 per cent of employment in the manufacturing sector. A majority of the printing factories (71.4 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 36 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 data can be converted or interfaced with typesetting equipment at a realistic cost, to provide publishers with the additional benefits of fast and cost-efficient printing. Increasingly, Chinese language word-processors are being installed to meet demand.

Domestic exports of printed matter decreased in value terms by 3.1 per cent over the previous year. Material printed locally with a total value of $4.758 billion was exported, with the USA, China, the UK, Taiwan, and Australia being the main customers. Books, pamphlets, newspapers, journals and periodicals accounted for 70 per cent of exports of printed products. The biggest customers for this reading material were the USA, the UK and Taiwan. Overall, the printing and publishing industries contributed 8 per cent of the manufacturing sector's gross output.

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THE government's employment policy aims to make the best use of Hong Kong's manpower resources; to promote safety and health in the workplace; to maintain a well-trained workforce; to foster and maintain good labour relations; to improve the rights and benefits of the workforce in line with Hong Kong's social and economic developments; and to help job-seekers find employment.

  During 1996, the government expanded the job-matching and placement services to help local workers find jobs and stepped up enforcement action to tackle illegal employment. The Supplementary Labour Scheme was implemented to replace the General Labour Importation Scheme. The new scheme allows importation of workers, on a case-by-case basis, for vacancies which employers can prove are difficult to fill locally.

  To ensure that the workforce is equipped with the necessary skills to cope with the economy's dynamic and changing needs, the government initiated two comprehensive reviews, one on the directions and strategies of vocational training and the other on employee retraining. Legislative proposals were introduced to improve protection to employees' benefits, such as maternity protection, long-service payment and sickness allowances, some of which were enacted. A new Occupational Safety and Health Bill was introduced which sought to extend the protection of the safety and health of employees beyond the industrial sector to all work places.

Labour Market

 Employment in all major service sectors remained on an uptrend during the year but declined further in the manufacturing sector as the structural shift in manpower resources continued. In the third quarter of 1996, the labour force was 1.9 per cent larger than in the corresponding period of 1995. The territory's labour force stood at 3.1 million, of whom 61 per cent were male and 39 per cent were female. The seasonally adjusted unemployment rate for the third quarter of 1996 was 2.6 per cent while the underemployment rate was 1.4 per cent, compared with 3.5 per cent and 2.5 per cent respectively a year earlier.

Of the employed, the majority (78.7 per cent) were engaged in the service sectors - 34.7 per cent in wholesale, retail and import/export trades, restaurants and hotels; 11 per cent in transport, storage and communications; 11.6 per cent in financing, insurance, real estate and business services; and 21.4 per cent in community, social and personal services. About 11.4 per cent were working in the manufacturing sector. A structural shift in employment during the past decade has meant establishments in the service sectors now employ six times as many workers as the manufacturing

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sector. In September 1996, 1931 983 persons were engaged in establishments in the various service sectors (not including most of the self-employed and those engaged in the provision of personal services), an increase of 3.1 per cent over the corresponding figure in 1995. In contrast, only 327 464 persons were engaged in manufacturing sector establishments (excluding outworkers), a decrease of 15.2 per cent compared with a year earlier.

      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 154 608 workers through its retraining programmes by the end of the year.

      The import and export trade was the largest employer in the service sectors, with 535 553 workers in September 1996. Other major service industry groups include the retail trade, restaurants and business services, which had 207 169, 186 970 and 152 409 employees, respectively.

      Despite declining employment, the clothing industry remained the largest manufacturing industry, employing 89 632 persons in September 1996. Establishments in the printing and publishing industry and the electronics industry were the next two largest groups of employers in manufacturing, employing 44 436 and 30 944 persons, respectively. Details of the distribution of establishments and persons engaged by selected major industry group are shown at Appendices 21 and 22, 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 6.4 per cent in money terms between September 1995 and September 1996. After discounting for rises in consumer prices, the average wage rate increased by 1.2 per cent in real terms.

      In September 1996, 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 $10,804. This represented an increase of 5 per cent in money terms, or a decrease of 0.1 per cent in real terms, compared with the same period of 1995.

      Over the same period, the average wage rate in the manufacturing sector rose by 7.5 per cent in money terms, or 2.2 per cent in real terms. At the craftsman and operative levels in the manufacturing sector, 75 per cent of workers received a daily wage of $229 or more in September 1996; while 25 per cent received $361 or more. The overall average daily wage was $309, or $7,853 per month, for these craftsmen and operatives.

Employee Benefits

The Employment Ordinance stipulates employment-related benefits and entitlements which include rest days, statutory holidays, annual leave, maternity leave, sickness allowance, severance payment and long service payment. Many employers also provide additional fringe benefits and bonuses, such as a year-end bonus, to their employees.

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  The government will continue to regulate voluntarily established occupational retirement schemes under the Occupational Retirement Schemes Ordinance. By year's end, 14 923 schemes had been registered and 1 859 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 labour legislation for the promotion of harmonious labour relations and responsible trade unionism, the safeguard of employees' rights and benefits and the protection of the safety, health and welfare of the working community. It also provides free employment services to employers and job-seekers.

Labour Conditions

The employment of children under 15 years old is prohibited in industrial undertakings. Children aged 13 and 14 years may be employed 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 is responsible for monitoring employers' compliance 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 equally to local and foreign workers.

Labour Legislation

As the principal adviser to the government on labour affairs, the Commissioner for Labour initiates proposals to enact new labour laws and amend existing ones. Labour legislation has been enacted which, supplemented by administrative measures, enables Hong Kong to maintain internationally accepted standards.

  During 1996, 16 pieces of labour legislation were enacted. Among them, the Factories and Industrial Undertakings Ordinance was amended to empower the Commissioner for Labour to issue suspension or improvement notices to improve industrial safety.

  The Employment Ordinance was amended to increase the rate of sickness allowance from two-thirds to four-fifths of an employee's normal wages. The Protection of Wages on Insolvency Ordinance was also amended to extend the period of making application to the Protection of Wages on Insolvency Fund from four to six months from cessation of employment and to raise the maximum payment in respect of arrears of wages severance payment and wages in lieu of notice.

  The Employees' Compensation Ordinance was amended to increase the rate of periodical payment from two-thirds to four-fifths of an employee's normal earnings and to remove the waiting period of three days of temporary incapacity for entitlement to periodical payment. Another amendment was made to empower the Commissioner for Labour to assess compensation by issuing certificates of assessment for all cases involving permanent loss of earning capacity.

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Enforcement of Legislation

During 1996, there were 7 674 prosecutions for breaches of various ordinances and regulations administered by the Labour Department. Fines totalling $47,670,180 were imposed.

Labour Advisory Board

The Labour Advisory Board is a non-statutory body set up to provide a forum for consultation on labour policies and legislation. It also monitors the Supplementary Labour Scheme. Six of the 12 members represent employers and another six represent employees. The Commissioner for Labour, or her deputy, is the ex officio chairman.

Under the board, committees have been set up on special subjects including employment services, industrial safety and health, labour relations, employees' compensation and the implementation of international labour standards.

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 as models for the member states. These conventions have a significant influence on the formulation of labour legislation in the territory and 49 are currently applied in Hong Kong. This compared favourably with most members of the International Labour Organisation in the region.

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 body corporate and enjoys immunity from certain civil suits.

During the year, 22 new unions were registered. At the end of the year, there were 577 unions, comprising 535 employees' unions, 25 employers' associations and 17 mixed organisations of employees and employers.

About half of the employees' unions are affiliated to one of the five major labour organisations registered under the Societies Ordinance: the Hong Kong Federation of Trade Unions (113 affiliated unions with about 229 400 members), the Hong Kong and Kowloon Trades Union Council (65 unions, 27 600 members), the Hong Kong Confederation of Trade Unions (39 unions, 84 800 members), the Federation of Hong Kong and Kowloon Labour Unions (31 unions, 21 200 members) and the Federation of Civil Service Unions (29 unions, 12 400 members).

Labour Relations

In 1996, the Labour Relations Division of the Labour Department provided conciliation service in 226 trade disputes which involved 17 work stoppages resulting in a loss of 2 709 working days. The division also handled 22 840 claims for wages and other employment-related benefits or entitlements.

The Labour Relations Ordinance provides the machinery for special conciliation, voluntary arbitration and board of inquiry to settle trade disputes which cannot be resolved through ordinary conciliation.

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The Labour Department promotes harmonious labour-management relations through a variety of activities such as promotional visits and talks to individual establishments, employers' associations and employees' trade unions; training courses, workshops, seminars and exhibitions. It also publishes newsletters, information leaflets and pamphlets on a wide range of labour matters.

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 1996, it heard 7016 cases involving employees as claimants and a further 430 cases initiated by employers. The presiding officers awarded more than $129 million. Of these cases, 88.2 per cent were referred by the Labour Relations Division of the Labour Department after unsuccessful conciliation attempts.

Minor Employment Claims Adjudication Board

The Minor Employment Claims Adjudication Board adjudicates claims under the Employment Ordinance and in accordance with individual employment contracts. All employment claims involving not more than five claimants for a sum of money not exceeding $5,000 per claimant fall within the jurisdiction of the board.

  During the year, the board heard 1 172 cases. Of these, 1 019 cases were filed by employees and 153 by employers. The board awarded a total of about $2.53 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.

  During the year, the fund's coverage was substantially improved. Previously, it covered wages not exceeding $18,000 accrued during a period of four months preceding the date of application; wages in lieu of notice for termination of up to $6,000 or one month's wages, whichever was less; and severance payment up to $24,000, plus 50 per cent of any entitlement in excess of $24,000. In February, the respective payment limits were increased from $18,000 to $36,000, $6,000 to $22,500 and $24,000 to $36,000. In December, the Protection of Wages on Insolvency Ordinance was amended to extend the period for employees to apply for ex gratia payment from four to six months, and to count the four-month coverage period of arrears of wages from the last day of service instead of from the date of application. The fund received 8 372 applications and paid out a total of $180.9 million to 7 285 applicants in 1996.

Finding Employment

The Employment Services Division of the Labour Department provides free recruitment assistance to employers and placement service to job-seekers. In February 1996, the division strengthened its employment services through extending

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the Job Matching Programme, which aims to provide intensive job-matching and counselling services, to all unemployed job-seekers irrespective of age.

The division continued to operate the Outreaching Placement Service which offered immediate employment assistance to workers affected by major retrenchments. The division's Special Placement Team also provided assistance to local construction workers seeking work in contracts under the New Airport and Related Projects. All these programmes were well received by job-seekers and employers. In addition, two large-scale job bazaars were organised jointly with the Employees Retraining Board and major employers associations in April and October 1996 so that job-seekers can better understand the labour market and make job applications with employers on the spot. The events attracted 4 800 visitors.

During the year, 118 844 job-seekers registered with the division while employers reported 105 631 vacancies. The division made 189 618 job referrals and placed 26 896 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 has representatives from the government, employers, employees, training institutions and manpower planning practitioners.

Training is delivered through a 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 when it was set up. 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. In May 1996, the government injected another $300 million into the fund to ensure that it had the financial resources to expand its programmes.

      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. An important feature of the scheme is that employers, as end users, are encouraged to participate as much as possible in the design and delivery of the programmes. 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 1996, retraining had been provided to 154 608 persons under the scheme.

With the Employees Retraining Board entering its fourth year of operation, the government initiated a review of the role, operation and future direction of the scheme. The key findings and recommendations of the review were published in December for public consultation.

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.

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  During the year, the division launched a series of activities to promote the employment of the disabled. These included exhibitions; seminars; presentation of awards to outstanding employers and disabled employees; special campaigns to canvass vacancies; and publication of quarterly newsletters, pamphlets and guidebooks. With the assistance of Radio Television Hong Kong, a new series of television programmes was produced to promote the working abilities of the disabled and their integration into the community.

  In June, the Governor chaired the Third Summit Meeting on Open Employment of People with a Disability, 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. Many statutory bodies and major organisations also responded to the Governor's appeal to set voluntary targets on employment of the disabled.

Careers Guidance

 The Careers Advisory Service of the Labour Department, through the promotion of careers education, helps young people choose a career best suited to their talents, interests and abilities. It also provides careers guidance teachers with back-up information.

  The service operates two careers information centres disseminating careers information through written and audio-visual materials. A new Careers Info Express bulletin board system was set up in August. Through computers equipped with modems, the public can have easy access to the careers materials produced by the department as well as the full catalogue of careers information available at the

centres.

  The service also organises a wide range of activities to arouse the careers awareness of young people. The sixth Education and Careers Expo organised in February attracted nearly 180 000 visitors. More than 141 000 students took part in the 15th Careers Quiz, organised in November. Throughout the year, the service arranged student group visits to the careers information centres and various commercial and industrial establishments.

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, 14 384 professionals and persons with technical, administrative or managerial skills from more than 50 countries were admitted for employment.

The government's policy on importation of labour is that:

(a) Local workers must be given priority in filling job vacancies available in the job

market.

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(b) Employers who are genuinely unable to recruit local workers to fill their job

vacancies should be allowed to bring in imported workers.

Hong Kong has three labour importation schemes the Supplementary Labour Scheme, the Special Labour Importation Scheme for the New Airport and Related Projects and the Pilot Scheme for the entry of professionals from the People's Republic of China (PRC).

The Supplementary Labour Scheme commenced on February 1, 1996. All applications are considered on a case-by-case basis. To ensure priority of employment for local workers, each application for imported workers has to pass three tests before it is submitted to the Secretary for Education and Manpower for a decision- newspaper advertisements, job-matching by the Labour Department for two months (plus tailor-made retraining course for workers if possible) and consideration by the Labour Advisory Board. In 1996, a total of 281 visas were approved. The government will review the scheme when that figure reaches 2 000.

       The Special Importation of Labour Scheme for the New Airport and Related Projects was introduced in May 1990 to facilitate the timely completion of the new airport and related projects. It operates under a quota ceiling of 17 000. All contractors who have been awarded contracts for the new airport and related projects are eligible to apply for imported workers under the scheme. To safeguard the interests of local workers, each application has to comply with several basic requirements. These include: the number, type and duration of employment of imported workers must be compatible with the manpower requirements of the works contract in question; the wage offered to the imported worker must be no less than that offered to a local worker in a comparable position; the employer must go through a four-week local recruitment test for the job vacancy at both the Labour Department and the Airport Core Projects Job Centre to give priority of employment to local workers; and the imported worker is to remain only under the direct employment of the same employer under the specific works contract(s) up to the duration of the employment contract and to engage only in work stipulated in such a contract. By December 1996, 5 288 imported workers made up about 16 per cent of the total workforce for the projects.

The Pilot Scheme for the entry of PRC professionals was introduced in March 1994 with a quota ceiling of 1 000 for the entry of graduate professionals from any of the 36 key PRC tertiary institutions, who possess PRC-related knowledge, expertise and experience which are in demand but not readily available in Hong Kong. All Hong Kong companies can apply under the scheme. At the end of the year, 705 out of the total of 2 216 applications had been approved and 515 employment visas issued. The government is conducting a comprehensive review of the scheme.

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 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.

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In the past few years, the demand for foreign domestic helpers has increased steadily. In 1996, there were 164 299 such helpers in Hong Kong, representing an increase of 4.63 per cent compared with 157 026 in 1995. About 80 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 1062 licences in 1996.

Employment Outside Hong Kong

The External Employment Service of the Labour Department 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 1996.

Industrial Safety

The Factory Inspectorate 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 inspectorate also investigates industrial accidents and dangerous incidents.

Following a comprehensive review on industrial safety in Hong Kong, a new Occupational Safety and Health Branch was created in the Labour Department in 1996 with two distinct functions: occupational safety and occupational health. Besides strengthening its safety and health promotion and enforcement programme, the Factory Inspectorate responsible for occupational safety also assists in the formulation of safety management legislation and regulations.

The Factories and Industrial Undertakings Ordinance was amended in July to empower the Commissioner for Labour to issue improvement notice and suspension notice. The notices are issued to proprietors of industrial undertaking and contractors to rectify breaches of safety legislation within a specified period, or suspend immediately any hazardous process or use of dangerous equipment that may cause an imminent risk of serious bodily injury to workers.

A new Occupational Safety Charter was launched in September with active participation of worker unions, employer associations and professional bodies. It affirms the rights of employees to work in a safe and healthy environment and the employers' obligation to reduce the employees' exposure to risks of injury or ill health.

A new Occupational Safety and Health Bill was introduced into the Legislative Council in December. It aims to protect the safety and health of non-industrial sector employees at work.

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In conjunction with the Information Services Department, a major publicity campaign was launched to promote industrial safety and health. Television and radio announcements of public interest were produced. Symposia and seminars were held on safety and health management, lift and escalator safety, and safety and health education and training.

      To promote safety management and self-regulation, the Safety Promotion Section of the inspectorate helps major contractors to set up safety committees involving employers and employees. By year's end, the section had helped set up 352 safety committees. The section also assists management and workers to identify and assess hazards at work, and to devise safety and health programmes.

      The Operations Division emphasises regulatory activities in high-risk areas of factories, catering establishments and construction sites. Special enforcement campaigns were launched to monitor high-risk working conditions in workplaces. During these campaigns, 15 229 factories, 471 catering establishments and 817 construction sites were inspected.

Special teams were set up to inspect construction sites at the new airport projects. They helped company and site level safety committee meetings 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 the airport core programme project.

The Industrial Safety Training Centre of the Planning and Training Division conducts legislation-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 help the Hong Kong Polytechnic University and the City University of Hong Kong organise evening courses leading to the award of certificates in industrial safety. It also helped the Construction Industry Training Authority run certificate courses for construction safety officers.

Boilers and Pressure Vessels Safety

The Boilers and Pressure Vessels Division administers the Boilers and Pressure Vessels Ordinance to ensure the safe use and operation of such equipment. In November 1996, the enforcement of gasholder examination was transferred to the Gas Authority after enactment of the Gas Safety Ordinance.

      The division conducts regular spot checks to ensure pressure equipment in use meets the required safety standards; investigates accidents involving pressure equipment; conducts examinations for the issue of certificates of competency to boiler and steam receiver attendants and promotes equipment safety through literature and seminars. The division also gives the Fire Services Department technical advice on the approval and initial inspections of pressurised cylinders and storage installations for compressed gases.

      The division processed 2 601 equipment registration applications, inspected 5 759 factories and 4908 items of pressure equipment, and issued 417 certificates of competency 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. Two publicity safety seminars were held, attended by 294 persons, and one safety training course was conducted.

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Occupational Health and Hygiene

The Occupational Health Service of the Occupational Safety and Health Branch of the Labour Department provides an advisory service to the public and the Government on worker health and workplace hygiene, and complements the Factory Inspectorate in supervising health standards and practices in the industrial sector. The Occupational Hygiene Division's major responsibility is to investigate notified occupational diseases and potential health hazards reported by the Factory Inspectorate and to determine preventive action. Surveys and epidemiological studies on health and hygiene conditions were completed. The mercury hazard in school dental clinics, use of azo-dyes in the dyeing industry, solvents in toy factories and petrol filling stations, use of ethylene oxide gas in hospitals, microwaves in the catering industry and the handling of chemicals in water treatment plants were all surveyed.

An enquiry service is available to the public on occupational health and hygiene problems. Talks on health education were arranged on request. A series of booklets and codes of practice on occupational health and hygiene have been published for the promotion of occupational health and protection of people at work.

The Occupational Medicine Division undertakes medical examination on persons exposed to hazardous work such as ionising radiation and government employees engaged in diving, asbestos work and 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 decompression chamber. It also handles medical clearance for employees' compensation cases. Its occupational health officers are appointed to various medical assessment boards.

Occupational Safety and Health Council

The Occupational Safety and Health Council aims to promote a safer and healthier working environment through education and training; promotion on the use of modern technology; dissemination of technical knowledge; provision of consultancy services; and encouragement of co-operation and communication among government and non-government bodies with similar goals. The council, a statutory body, is financed by a levy on the premium of employees' compensation insurance policies in Hong Kong.

The council continued to inculcate the safety culture in various sectors of the community in line with the recommendations made in the Consultation Paper on the Review of Industrial Safety in Hong Kong. During 1996, it introduced initiatives in providing safety and health training for managers, supervisors and workers in establishing effective and efficient safety and health management programmes. These courses include safety auditing, safety and health for small business, ergonomics, occupational hygiene, and the inspection and examination of boilers and pressure equipment. The council also produced videos, CD-ROM and other teaching materials to help industries train their workers. Tailor-made courses were also offered to public utilities, building contractors, hotels, manufacturing firms, hospitals, building management companies, etc. A total of 10 000 persons attended the council's courses in 1996.

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In changing the safety attitude of the younger generation, the council developed an occupational safety and health training package with the Curriculum Development Institute of the Education Department for secondary school students.

During the year, the council organised 25 seminars, conferences and symposia on current topics of safety and health and undertook several research projects, such as manual lifting and hearing conservation in non-manufacturing sectors. It continued to provide consultancy services, in particular for small establishments on a cost- recovery basis. A safety auditing office was established to manage the Independent Safety Audit Scheme for government and Housing Authority construction projects. Campaigns to arouse public interest included 'Occupational Safety and Health Week' held in October and November. There was increased co-operation from district-based organisations in staging promotional activities.

The council produced safety and health literature, codes of practice and guidebooks, a bi-monthly journal Green Cross, safety advice pamphlets, posters and bulletins for individual industries. A comprehensive library with a collection of up-to- date videos, journals, microfilms, books and magazines on occupational safety and health is open for public use. The council's database can also be accessed via the fax- on-demand and Internet network. The fax-on-demand number is 2316 2576, and the council's home page is http://www.oshc.org.hk/.

The Occupational Safety and Health Employees' Participation Scheme continued to offer financial assistance to employees' organisations running safety and health activities. During 1996, 69 employees' organisations received subsidies under the scheme.

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 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 by Employees' Compensation Assessment Boards. The boards sit in 12 major hospitals throughout the territory.

During the year, 119 pneumoconiosis cases were awarded compensation from the Pneumoconiosis Compensation Fund for the first time. The Pneumoconiosis Compensation Fund Board, established to administer the fund, also financed rehabilitation programmes for pneumoconiosis sufferers, research, educational and publicity programmes to enhance awareness of pneumoconiosis and to promote prevention of the disease. Pneumoconiosis sufferers diagnosed before January 1, 1981, who are not covered by the Pneumoconiosis (Compensation) Ordinance, receive ex gratia payments on a quarterly basis from the government.

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 The Occupational Deafness Compensation Scheme compensates employees suffering from occupational noise-induced deafness. It is administered by the Occupational Deafness Compensation Board which was established in June 1995. During 1996, compensation payments totalling $36,840,000 were awarded to 268 occupational deafness cases.

 The Employees Compensation Assistance Scheme makes payments 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.

Telephone Enquiry Service

The Labour Department's General Enquiry Telephone Service handles enquiries on labour legislation and matters relating to the employment of local and imported. workers, and provides information on various services offered by the department. Callers are guided by the computer-operated answering facility to select pre-recorded messages from a wide range of topics. They can also obtain information 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 more complicated enquiries during office hours. The service handled 1 709 735 calls in 1996.

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9 PRIMARY PRODUCTION

AGRICULTURE is a comparatively small sector in Hong Kong. Farming is largely undertaken on the urban fringes and only about 3.1 per cent of the land area is under cultivation. In 1996, local production accounted for 17 per cent of vegetables, 22 per cent of live poultry, 8 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 900 tonnes of rice, I 420 tonnes of vegetables, 7 110 pigs, 300 head of cattle, 260 tonnes of poultry, 460 tonnes of fish and 1680 tonnes of fruit. About 45 per cent of Hong Kong's food requirements is 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.

      Being responsible for the implementation of government policies on agriculture and fisheries, the Agriculture and Fisheries Department provides infrastructural support services including wholesale marketing facilities, irrigation and drainage works, technical and development advice, administration 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 $475 million.

Pigs and poultry are the principal animals reared for food. Livestock production has declined 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 1996 amounted to $394 million and that of poultry, including chickens, ducks, pigeons and quails, amounted to $392 million.

Agricultural Development

Strong competition from imports, land and labour constraints, and progressive implementation of environmental pollution controls, have forced the agricultural 129

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sector to modernise its 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 1996, the department had issued 246 licences and a further 489 licence applications were in process. The department has developed a non-polluting, odourless and effluent-free pig-on-litter method 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 1996, loans issued since the inception of these funds reached $332 million.

The Fisheries Industry

Marine fish constitute one of Hong Kong's most important primary products. In 1996, total production from marine capture and culture fisheries was estimated at about 192 100 tonnes, with a wholesale value of $2.5 billion. This represented a decrease of 6 per cent in weight but an increase of 0.4 per cent in value compared with 1995. In weight terms, marine capture fisheries contributed 96 per cent towards total production while the remainder 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 53 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 75 per cent, or 138 000 tonnes, of marine fish landed in 1996.

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The total catch of live and fresh marine fish available for local consumption amounted to 84 180 tonnes, with an estimated wholesale value of $1.12 billion.

      Marine fish culture is practised within 26 designated fish culture zones, most of which are along 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 1 546 licensed mariculturists. They supplied 3 000 tonnes of live marine fish valued at $170 million during the year.

      Freshwater fish are also cultured. Fish ponds covering 1 130 hectares are mostly located 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 5 100 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. Besides deteriorating water quality, this also destroys extensive areas of seabed habitats that support the marine fauna and fisheries resources. To mitigate such damage, the Agriculture and Fisheries Department is implementing an artificial reefs project. The project aims at using artificial reefs to enhance the marine habitats favoured by commercial fish species. A variety of artificial habitats will be introduced at strategic areas to help rehabilitate damaged seabed, protect sensitive nursery areas and increase fish production.

      The department has commissioned a consultancy study to collect comprehensive information on fisheries resources and fishing operations in Hong Kong waters. Such information will enable the department to formulate fisheries management and conservation measures for the long-term sustainability of fisheries.

      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. Many mariculturists are now using environmentally friendly moist pellet feed and have reported improvements of the fish culture environment as well as faster and healthier fish growth.

      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 radio telephones and electronic navigation equipment such as radar and 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 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

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Everywhere Loan Fund. By December 31, loans issued since the inception of the four funds totalled $306 million.

Marketing

Much of the wholesale marketing of fresh foods is conducted in wholesale 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 market complex 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, scheduled for 2000, 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 284 680 tonnes of vegetables, 76 500 tonnes of poultry, 43 670 tonnes of freshwater fish and fisheries products, 189 800 tonnes of fruit and 63 830 tonnes of fresh and preserved eggs. The total value amounted to $6.17 billion.

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, 242 500 tonnes of vegetables valued at $926 million were sold through the organisation at its market 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. Revenue comes from 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 1996, 50 148 tonnes of marine fish valued at $496 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.

PRIMARY PRODUCTION

      Hong Kong used 26 million tonnes of aggregates and other rock products in 1996. About 7.3 per cent of the territory's demand for aggregates and rock products was met locally, with the balance imported from China.

      Three quarrying contracts and two quarry rehabilitation contracts were under way and one kaolin mine was operating under a mining lease in 1996. Negotiations for a third rehabilitation contract are progressing. The rehabilitation contracts require the operators to rehabilitate the quarries within a defined period, in return for the granting of rights 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.

      Over the past year, the division continued to manage two 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 and issues shot-firer certificates.

      The largest use of explosives during the year was for site formation works and tunnel construction for the airport core projects and for quarrying works. The overall consumption of explosives was 3 900 tonnes.

      The division is responsible for issuing storage licences and removal permits and provides technical support to the Broadcasting, Culture and Sport Branch in assessing the suitability of pyrotechnics and pyrotechnicians. In 1996, there were 41 applications for the use of pyrotechnics in the production of television programmes and theatrical performances.

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 DURING 1996, the government continued to accord high priority to education and to implement its targets for improving the quality of education. These efforts included providing additional support to schools with a high proportion of low achievers, helping immigrant children from China integrate into the mainstream schools, and taking measures to ensure that students and graduates are equipped with the knowledge and skills to meet Hong Kong's changing economic needs.

The government is continuing to implement the recommendations of the Education Commission Report No. 6 on language proficiency. These include the setting up of a Standing Committee on Language Education and Research (SCOLAR) and encouraging schools to employ more native qualified English language teachers to teach the subject.

  The reviews on the Kindergarten Subsidy Scheme, the Primary Graduate Teacher Posts Scheme and support measures for immigrant children from China were completed and improvements introduced in the 1996-97 school year. Proposals for improving the practical and technical curricula offered in prevocational and secondary technical schools are being finalised. The review on the compulsory education system is under way.

The Education System

About 1.2 million students, or 20 per cent of the total population, were in full-time education during the year. They attended 2 400 institutions and were taught by some 59 000 teachers assisted by a large number of support staff. There were some 143 500 candidates for the two local public examinations and 209 000 entries for overseas examinations.

  Educational opportunities in Hong Kong 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 for 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

EDUCATION

      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 who wish to continue their studies either 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.

Funding of Education

Approved public spending on education in the 1996-97 financial year amounted to $39.82 billion, representing 21 per cent of the government's total recurrent expenditure and eight per cent of capital expenditure. Public funds cover about 90 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 83 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 the Kindergarten Subsidy Scheme introduced in September 1995. Needy parents of kindergarten pupils may apply for fee remission.

Most primary and secondary schools are publicly-funded. The government directly manages some primary and secondary schools, but a great majority of schools in the public sector are operated by non-profit-making voluntary organisations which receive public funds under a code of aid. Tertiary institutions are autonomous statutory bodies. Eight of them, including the Hong Kong Institute of Education, receive public funds through the University Grants Committee. A comprehensive, publicly-funded system of technical education and vocational training is provided by the statutory Vocational Training Council.

      Private primary schools 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 the Direct Subsidy Scheme and Bought Place Scheme.

      The Direct Subsidy Scheme (DSS) was introduced in 1991 to enhance the quality of private secondary schools and to provide parents with a wider choice. 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, started in 1995 and completed in August 1996, indicates that the objective of the DSS is generally well accepted.

       Under the Bought Place Scheme (BPS), 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. As part of the DSS policy package, the BPS 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,

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 18 private schools with bought places operated under contracts with the government which specify improvements in areas such as whole-day operation, class structure, teacher 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.

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 institutions) are governed by the Education Ordinance (Chapter 279), 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 requirements, 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 and the Hong Kong Council for Academic Accreditation. 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) Ordinance was enacted on July 18, 1996. 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. Detailed operation of the regulatory regime and the appeal procedures will be provided in subsidiary legislation made under the ordinance, which will come into effect in 1997.

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; provision of facilities for children with special educational needs; developing school curricula; monitoring teaching standards; and administering the public funding to schools. The department also contributes to policy development and review.

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Students from Epworth Village Methodist Church Kindergarten have a cheery wave for the camera. Children aged three to five achieved a school attendance rate of 95 per cent in 1996; the six to 11 group rate was 100 per cent, with the 12-16 and 17-18 groups recording 96 and 64 per cent, respectively. At the latest by-census, in March 1996, Hong Kong had 1.15 million people aged under 15, or 18.5 per cent of the population. A further 869 511, or 14 per cent, were aged between 15 and 24. About 15 per cent of Hong Kong's population has completed a course of tertiary education, while 52.7 per cent completed secondary school.

L

Smiles all round greet the perfect score of Wah Yan College students Lam Cheung-chi (second from left) and Tin Chi-ho (right) as they display their examination results - 10 subjects, 10 'A's. RIGHT: Maryknoll Convent School, established in 1925, presents the appearance of a much earlier era. BELOW RIGHT: Polished boards and airy verandahs emphasise the history of St Stephen's Girls' College, Mid-Levels, which celebrated its 90th anniversary in 1996. Among other educational institutions marking anniversaries in 1996, St Joseph's College celebrated 140 years, St Paul's Boys School was 145 and Diocesan Boys' School 127.

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Athletes from La Salle College sprint away after a baton change during a relay race at the school's annual sports day. BELOW: Students at St Paul's College perform Andrew Lloyd Webber's Joseph and the Amazing Technicolor Dreamcoat under the sphinx-like gaze of a latter-day pharaoh.

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, executive bodies, management committees of schools and governing bodies of tertiary institutions. Public response is sought on major changes to existing policies and practices in education through extensive consultation exercises and regular public fora.

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 18 members, of whom 16, 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 Qualification (ACTEQ), the Board of Education (BoE), the University Grants Committee (UGC) and the Vocational Training Council (VTC). The two government members are the Secretary for Education and Manpower, who is the vice-chairman, and the Director of Education.

During the year, the commission published its Report No. 6 (ECR 6) on a com- prehensive strategy to enhance language proficiency. One of the recommendations is to set up a Standing Committee on Language Education and Research (SCOLAR) to provide a long-term institutional framework for the formulation, monitoring and evaluation of language in education policy. The report was accepted by the government in March 1996 and the SCOLAR was set up in October 1996.

The next phase of work of the commission is to produce a Report No. 7 on Quality School Education. It set up a Task Group on School Quality and School Funding in April 1996 to formulate the proposal and to draft a consultation document. In order to address the genuine need of the school community, the task group published a consultation pamphlet entitled 'Quality School Education: Ways to improve performance' in June 1996 for a six-week consultation. Comments were sought on broad principles governing quality school education, including the goals and targets of quality school education, ways to relate school funding to performance, the roles of key players in the school system and the relationships between them. The commission published a draft consultation document in November 1996 for public consultation which generated a great deal of public interest and discussion. It will submit its final recommendations to the government in early 1997. A working group set up under the Education Commission in 1995 continued its review of the case for the establishment of a General Teaching Council.

Board of Education

The Board of Education (BoE) 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 Curriculum

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 Development Council; 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 other 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's Sub-committee on Special Education completed its review on special education services and proposed comprehensive measures for improvement. The Sub-Committee on Review of School Education, set up in 1995, continued its review on the implementation of compulsory education.

Curriculum Development Council

 The Curriculum Development Council (CDC) 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, the Hong Kong Examinations Authority representatives, parents and employers.

  During the year, the CDC completed research on Chinese handwriting at kindergarten level and the teaching methods of Putonghua used in schools. It also developed new curriculum guides on special and pre-primary education, revised the guidelines on civic education and identified new curriculum needs to meet the changing needs of the community including the teaching of Putonghua as a core subject and civic education as an independent subject.

Standing Committee on Language Education and Research

The Standing Committee on Language Education and Research (SCOLAR) is a non- statutory body set up on October 1, 1996, upon the recommendation of the Education Commission Report No. 6, to advise the government on language education issues in general, and in particular, to set goals for language learning at different levels of education, to propose specific language attainment targets at each stage of education, and to identify research and development projects which are necessary for the enhancement of language proficiency and language in education. SCOLAR has 20 members, of whom 18 are appointed from outside the government. The two government members are the Deputy Secretary for Education and Manpower and the Deputy Director of Education. Other members include educators/administrators from the tertiary, secondary, primary and pre-primary education sectors, language experts, businessmen and employers, as well as professionals from other sectors.

  With the subsuming of the Language Fund Advisory Committee under SCOLAR in October 1996, SCOLAR oversees the management of the Language Fund for the enhancement of language education in Hong Kong. Projects to enhance language standards in Chinese (including Putonghua) and English in Hong Kong will continue to be funded under the auspices of the Language Fund which has hitherto committed over $140.19 million for 110 projects.

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Advisory Committee on Teacher Education and Qualifications

The Advisory Committee on Teacher Education and Qualifications (ACTEQ) 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 24 members, 18-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 the Civil Service, the Director of Education, the Secretary-General/University Grants Committee, the Director of the Hong Kong Institute of Education and the Executive Director of the Hong Kong Council for Academic Accreditation.

        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 recommendations are being implemented by stages. The working group under ACTEQ to develop a mechanism for ensuring that teacher education activities respond to the needs of schools and the community has finished the first phase of its deliberation. The Task Force on Benchmarking formed under ACTEQ in response to the recommendation of the Education Commission Report No. 6 has also completed the first phase of its work to develop benchmarks for English language teachers in lower secondary forms, and Putonghua teachers as well as teachers using Chinese as the medium of instruction in primary schools.

University Grants Committee

The University Grants Committee (UGC) is appointed by the Governor to advise on the development and funding of higher education, and administer public grants to eight publicly-funded institutions. It comprises 13 non-local academics, five local academics and four local professionals and businessmen. Its secretariat is staffed by civil servants.

       When the UGC was established in 1965 to administer grants to two publicly funded tertiary institutions, there were only 4 100 full-time equivalent students. By 1995-96, there were seven such institutions with 62 000 full-time equivalent students With the addition of the Hong Kong Institute of Education (HKIEd) in 1996-97, the number of UGC-funded institutions increased to eight and the full-time equivalent student number increased to 67 900 (see tertiary education).

       The UGC published a report on the review on the development of higher education in Hong Kong in November 1996. The UGC's recommendations include the overall student numbers at different levels during a period of consolidation in growth, the number of non-local students, the funding of continuing education, the provision of student hostels, the normative length of undergraduate study, language proficiency and the target of reducing unit costs by 10 per cent by the end of the triennium without detriment to quality, while further improving standards and meeting the changing needs of Hong Kong. In May 1996, the UGC published a report which described its work between July 1, 1991, and June 30, 1995.

       The UGC plays a major role in monitoring quality assurance in its institutions. In order to ensure that mechanisms for promoting and improving the quality of teaching

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and learning in the institutions are operating properly, the committee has undertaken a series of Teaching and Learning Quality Process Reviews of the institutions starting from January 1996.

The UGC conducted the second Research Assessment Exercise in November 1996, aimed at assessing the research output performance of the UGC-funded institutions (except HKIEd which joined the UGC in December 1996). The findings will be used as the basis for allocating some of the research portion of the institutional recurrent grant for the 1998-2001 triennium.

Research Grants Council

The Research Grants Council (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, nine overseas academics and three local professionals and industrialists.

  Grant applications are considered by four specialist panels composed mainly of local academics, covering physical sciences, engineering, biology and medicine, humanities, social sciences and business studies. An independent network of academic referees provides impartial advice. In 1996-97, the RGC received a record 1040 applications and disbursed $331 million in grants for academic research.

  During the year, the RGC and the British Council jointly sponsored the United Kingdom/Hong Kong Joint Research Scheme, which aimed at strengthening existing links between local and British tertiary institutions. The RGC also launched a similar scheme with the German Academic Exchange Service.

Vocational Training Council

The Vocational Training Council (VTC) advises the government on measures to ensure a comprehensive system of technical education and industrial training suited to Hong Kong's developing needs. It also administers technical colleges, technical institutes, industrial training centres, skills centres for the disabled and the statutory apprenticeship scheme. Its membership comprises industrialists, academics, employee representatives and government officials.

  Several training boards and committees which deal with areas of training in one or more economic sectors come under the VTC. Their main tasks include assessment of manpower needs and recommending measures to meet such needs, prescribing job specifications, training programmes and trade test guidelines, and overseeing the operation of training centres and trade testing.

  In March 1996, the Education and Manpower Branch commissioned a consultancy study on the VTC with the aim of mapping out its direction in the medium term. Views of the major stakeholders were sought when the study concluded at the end of August.

Hong Kong Examinations Authority

The Hong Kong Examinations Authority (HKEA) is an independent and 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

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aimed at adults. On behalf of overseas and local examining bodies, the authority conducts many examinations leading to academic, professional or practical qualifications.

During the year, 114 229 candidates sat for the HKCEE and 29 285 sat for the HKALE. A total of 42 subjects were offered in the HKCEE; 21 A-level subjects and 19 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 3.1 per cent increase in AS-level non-language entries compared with 1995 (a 23.7 per cent increase compared with 1994 when AS-level subjects were first examined).

       Starting from 1995, the HKCEE English Language (Syllabus B) listening test has been conducted using a radio broadcast. Nearly 100 000 candidates took the test at the same time in 1996, each bringing a portable radio. The HKALE results of the day school candidates were similar to those of 1995, with the percentage of awards at grade E and above for A-level subjects being 72.3 (72.2 in 1995). Percentages at grade E and above in the two AS-languages and non-languages AS-level subjects were 81.7 and 71.7 respectively (84.1 and 72.0 in 1995). The percentage of grade awards at grade E and above for school candidates in the HKCEE was 63.0 compared with 63.5 in 1995.

       Candidates sitting for overseas examinations totalled 209 000, of whom 64 700 sat for the London Chamber of Commerce and Industry examinations, 48 600 for the Associated Board of the Royal Schools of Music, and 18 700 for the Test of English as a Foreign Language.

Hong Kong Council for Academic Accreditation

The Hong Kong Council for Academic Accreditation (HKCAA) is an independent statutory body with 19 members, comprising senior academics from Hong Kong and overseas, and local industrialists and professionals. It is managed by a full-time staff with expertise and experience in quality assurance and 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 validates the individual programmes of those which have yet to acquire self-accreditation status to ensure that the degrees meet internationally-recognised standards. Reviews were conducted at the Open Learning Institute of Hong Kong, the Hong Kong Academy for Performing Arts, and the Hong Kong Institute of Education in 1996. The HKCAA also provided professional advice to a post- secondary institution, the Shue Yan College, in respect of its academic development. The HKCAA's advisory role has grown over the years. The HKCAA advised government branches/departments such as the Civil Service Branch, the Education Department, and the Social Welfare Department - and public bodies, such as the Hospital Authority, on the comparability of non-local with local qualifications for the purpose of appointment. It also disseminated information and provided professional advice to individuals on the standards of overseas educational programmes and on the comparability of qualifications.

The HKCAA will become advisor to the Registrar of Non-local Higher and Professional Education Courses when the newly enacted Non-local Higher and

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Professional Education (Regulation) Ordinance takes effect in 1997. It will help the Registrar to assess whether courses offered by non-local post-secondary institutions and professional bodies in Hong Kong are of a standard comparable to those offered by them in their home countries and thus meet the main criteria for registration to operate in Hong Kong.

  International and regional links with higher education and accreditation authorities have continued to develop, especially those with the People's Republic of China. During the year, the HKCAA co-organised an international conference on quality assurance in higher education held in Beijing.

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 roles are to handle all correspondence between the school and the Education Department, and to oversee the management of the school in accordance with the Education Ordinance on behalf of the management committee.

  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 manages the school through its management committee headed by a supervisor. In the 1996-97 school year, 1053 aided schools were in the care of 389 sponsoring bodies, the largest of which operated 123 schools.

  By September 1996, 290 government and aided primary, secondary and special schools had joined the School Management Initiative (SMI) Scheme. This was begun. 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.

  Training courses, seminars and workshops were organised to familiarise schools with the concepts and tasks related to SMI. Pamphlets, posters and videos on the implementation of SMI were made available to both SMI and non-SMI schools. Roving exhibitions and visits to exemplary schools were also arranged to help promote the scheme to school operators and members of the public. 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.

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Student Finance

The Student Financial Assistance Agency administers several publicly funded schemes which ensure that students are not denied access to education because of a lack of means. The agency also administers privately funded scholarships awarded on the basis of academic merit. These schemes are described below.

Student Travel Subsidy

Needy 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 1995-96 academic year, 179 763 students received assistance totalling $217.4 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 1995-96, 140 955 students received assistance totalling $80.6 million.

Fee Remission

The Senior Secondary Fee Remission Scheme aims to relieve needy students from Secondary 4 to 7 of half or all of the standard school fee. In 1995-96, 84 974 students were granted fee remissions amounting to $233.3 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 1995-96, $169.7 million was granted to 47 320 kindergarten pupils.

Local Student Finance Scheme

Full-time students studying eligible courses in the 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 the means-tested Local Student Finance Scheme (LSFS). It provides for loans to meet living expenses and grants to cover tuition fees, academic expenses and student union fees. With effect from 1995-96, an Extended Loan Scheme has been introduced as an additional component of the Local Student Finance Scheme with a slightly higher interest rate to benefit those marginally-failed applicants and those successful applicants with low assistance under the main scheme. In the 1995-96 academic year, $750 million in grants and $849 million in loans were provided to 36 345 needy students.

         A consultant was commissioned in November 1995 to conduct a review of the LSFS. The review was completed in early 1996, followed by an extensive public consultation between May and October. A few improvement measures were made, including launching targeted publicity at prospective students from poorer households to inform them of the scheme's availability, reacting quickly to provide assistance when the students' family situations change suddenly after application; and simplifying and speeding up the appeal process.

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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 1995-96, 824 students received loans totalling $5.8 million; of these, 805 also received grants totalling $5.1 million.

Joint Funding Scheme for Hong Kong Students in the United Kingdom

This is a means-tested scheme providing financial assistance in the form of grants and loans to eligible Hong Kong students studying first degree or Higher Diploma courses in the UK. The scheme is being phased out starting from 1994-95. In 1995-96, grants of £600,000 and loans of $1.4 million were made to 174 students.

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 jointly by the British Government and the Royal Hong Kong Jockey Club (on behalf of the Hong Kong Government). Two new scholarships were awarded in 1995-96. The scheme is being phased out starting from 1996-1997.

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 $11.3 million in 1995-96.

Fourteen students, including one disabled student, were awarded new fellowships for postgraduate or scholarships for undergraduate study overseas. Forty-four postgraduate students received fellowships while 82 undergraduate, diploma and certificate students received scholarships to study locally. Awards were also made to three students excelling in public examinations; 22 disabled students at secondary, post-secondary and tertiary levels; and 682 outstanding senior secondary students nominated by school heads.

Other Scholarship and Assistance Schemes

Other scholarship and assistance schemes for school students are endowed by private benefactors. Many scholarships are administered by the Student Financial Assistance Agency under the Education Scholarships Fund Ordinance.

Educational Institutions

Kindergartens

In September 1996, 180 800 children, most of them aged three to five, were enrolled in 734 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 has, since 1995, required kindergarten teachers to possess a minimum qualification of having

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completed Secondary 5 with at least two passes in the HKCEE, and kindergartens to maintain a minimum proportion of 40 per cent trained teachers in each session. The Kindergarten Subsidy Scheme (KSS) was introduced in 1995 to minimise the impact on parents of fee increases resulting from these regulatory requirements. A review of the KSS was conducted in early 1996, resulting in an increase of 14 per cent to the rate of subsidy per pupil to $790 per annum and an adjustment to the eligibility cut- off point by 41 per cent to $11,700 per pupil per annum for the 1996-97 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, 464 200 children were enrolled in 857 public sector 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 level each year. In schools adopting the activity approach - a more lively, pupil-oriented approach to teaching the original class size of 35 is being similarly reduced to 30. In September 1996, this was extended to Primary 4.

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. Some 210 schools have been provided with additional rooms and facilities under the first two phases of the School Improvement Programme which 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, 18 unisessional/ bisessional primary schools converted to whole day operation, bringing the total to 180.

The first phase of the policy to upgrade 35 per cent of primary school teachers to graduate status started in 1994. Up to the 1995-96 school year, a total of 365 graduate posts have been provided. Another 300 posts were made available for the 1996-97 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,

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General Studies (an integration of Social Studies, Science and Health Education), Music, and Physical Education as well as Art and Craft. Other learning programmes such as civic education, drug 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 Curriculum Development Council. The syllabuses for Physical Education and Art and Craft were recently revised and updated to meet changing educational and community needs. Awareness of the benefits of the activity approach is growing, and during the year it was adopted by 418 primary schools, or 50.5 per cent of the total.

Phase I of the full implementation of the Target Oriented Curriculum (TOC) initiative started at Primary 1, and 76 primary schools began to implement TOC in the three core subjects of Chinese, English and Mathematics in the 1995-96 school year. In the 1996-97 school year, over 520 primary schools (60 per cent) implemented TOC at primary 1.

Students ending the primary course 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 to be in line with the district administration boundaries. In 1996, 78 869 primary pupils took part, of whom 70 016 (88.8 per cent) were allocated places in government and aided grammar and technical secondary schools, 4 824 (6.1 per cent) in prevocational schools, and 4 029 (5.1 per cent) in private schools in the Bought Place Scheme.

Secondary Schools

Secondary education is divided into junior secondary and senior secondary levels. 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 a balanced 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 1996, there were subsidised Secondary 4 places for 84.5 per cent of the Secondary 3 students, with places for a further 5.6 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 1996, the 418 grammar schools had a total enrolment of 456 700. They offer a five-year secondary course in a broad range of academic, cultural and practical subjects leading to the Hong Kong Certificate of Education Examination (HKCEE). Most also offer a two-year sixth form course

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leading to the Hong Kong Advanced Level Examination (HKALE). The 20 technical schools, which prepare students for the HKCEE with an emphasis on technical and commercial subjects, had an enrolment of 20 515. Qualified candidates can continue their studies in the sixth form or in technical institutes.

The 27 prevocational schools, with an enrolment of 22 758, 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 930 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 700 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 1996, 80 470 students took part in the exercise, of whom 67 468 (84 per cent) secured Secondary 4 places in public sector schools, and 4 432 (5.5 per cent) were admitted to basic craft courses. Admission to Secondary 6 depends on results in the HKCEE. In 1996, all 23 887 places available were filled.

To meet provisional targets, 12 new secondary schools were built during the year. 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 104 primary and secondary schools. The second phase, which will include more than 120 primary and secondary schools, has already begun. 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 19.5: 1.

      Secondary schools are encouraged to adopt Chinese as the medium of instruction, rather than a mixture of English and Chinese. 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 1995. Primary 6 leavers were grouped into three categories: those able to learn effectively in either Chinese or English (about 33 per cent); those who would learn best through Chinese (about 60 per cent); and those who would learn better through Chinese but would probably also be able to learn in English (about 7 per cent).

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 To help them choose secondary schools most suited to their children's language ability, parents were informed of their children's grouping and the medium of instruction adopted by individual schools. Schools were advised to ensure a good match between their medium of instruction and the language proficiency of students they admitted. In September, 74 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 broadenal the existing secondary curriculum, Travel and Tourism was introduced as a new subject at Secondary 4 and 5. A total of 48 schools, including grammar, technical and prevocational schools offered the subject. At the sixth form level, Electronics, a new subject at the advanced supplementary level was being developed.

During the year, a working group was set up to review Hong Kong's prevocational and secondary technical education in response to economic, social and technological changes. The review is expected to be completed in early 1997.

Teaching guidelines and supporting materials are provided to schools for cross- curricular studies in such areas as civic education, moral education, drug education, sex/AIDS education and environmental education. Sex/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. During the year, a working party was set up to review the Guidelines on Sex Education in schools. Moreover, the Curriculum Development Institute has developed a set of Chinese teaching materials on 'Sex and the Mass Media'. The draft guidelines on sex education to cover kindergarten to senior secondary levels will be ready for public consultation in early 1997.

Teaching syllabuses are prepared by the Curriculum Development Council for all subjects offered at the secondary level and the syllabuses are reviewed and revised as necessary to meet the changing needs of society. In 1996, five syllabuses at secondary level were 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. Forty-six subjects are available at junior secondary and forty-two at senior secondary levels.

All sixth form courses last two years. Subjects available include 18 at the advanced supplementary level and 22 at the advanced level. A guide to sixth form curriculum was published and distributed to schools.

The Curriculum Development Institute offered short courses and seminars to help teachers implement and become familiar with the curricula at both secondary and sixth form levels.

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 1996 Reading Award Scheme for Primary 5 and 6 attracted 65 000 pupils from 356 schools while the 1996 Reading Award Scheme for Secondary 1 to 5 attracted 37 000 students from 209 schools. The School

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      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 and supplement the use of Chinese as the medium of instruction in secondary schools, the Chinese Textbooks Committee (CTC) was set up to ensure the availability of good quality Chinese textbooks. Under the three phases of an Incentive Award Scheme, 92 sets of textbooks for 32 subjects at S1-7 level were published.

      During the year, the CTC implemented another phase of the scheme to produce 43 sets of textbooks for 16 subjects at S1-7 level by the 1998-99 school year. Moreover, it conducted a questionnaire survey on the use of the Chinese textbooks produced in the first three phases of the scheme. Having accomplished its aims, the CTC was dissolved upon the expiry of its term of office on July 31, 1996.

Committee on 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 (PTA) chairpersons and officers of the Education Department. During the year, it followed up the recommendations made in the report of a large-scale survey conducted in 1994 on the perception of home-school relations among various people involved in education. These included a pilot programme to try out effective ways of improving home-school relations. It also organised promotion activities. which included seminars, a roving exhibition on drug education and a campaign calling upon parents to show appreciation of teachers' work. A pilot scheme to set up in schools a 24-hour enquiry line for parents was also launched. Furthermore, PTAs were encouraged to form networks in their own districts.

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 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 32nd Schools Dance Festival, the School Dance Exchange '96, the Schools Drama Festival, sports and recreational activities, as well as subject- 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.

      Early identification is an important prevention measure. Screening and assessment services identify special educational 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 One students are given hearing and eyesight tests. Checklists and guides help teachers to detect children with speech problems and learning difficulties. Children requiring further

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assessments are given audiological, speech, psychological or educational assessments at special education services centres or at schools. Some are referred for ophthalmic advice.

Children identified as having special educational 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. In June 1996, there were 71 sight-impaired, 724 hearing-impaired and 128 physically handicapped students integrated into normal schools, with the help of supportive services from Education Department.

In April 1996, there were 63 special schools, including a hospital school, schools for children who were blind, deaf, physically handicapped, mentally handicapped or with adjustment problems. Seventeen schools provided residential places. Besides being staffed by specially trained teachers, the special schools were supported by specialists such as educational psychologists, speech therapists, audiologists, physiotherapists, occupational therapists, school nurses and social workers.

Special education classes in ordinary schools cater for children with sight, hearing and 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 let children who were home-bound for health reasons continue their education. A school-based remedial support programme and a school-based psychological service were 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 provide remedial services for their students.

Special schools and classes generally 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 Curriculum Development Council's Special Education Co- ordinating Committee, with members from government departments and schools, advises on the curricular aspects based on pupils' special educational 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 project of the service for junior secondary students was launched in September 1994. It proved an effective support for these hearing-impaired students in mainstream secondary schools.

The three-year pilot project School-based Programme for Academically Gifted Children, which commenced in 1994 in 19 volunteer primary schools, will be evaluated in 1997, its final year of implementation. A report will be prepared to review the effectiveness of the project and to make recommendations regarding the future development of gifted education.

The Fung Hon Chu Gifted Education Centre was officially opened in December 1995. It provides the identified gifted primary and secondary students with suitable enrichment programmes and training courses. It also conducts various seminars and

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workshops to enhance understanding of the needs of gifted students among parents, teachers and other professionals.

International Schools

Several 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 those paid to local aided schools, and ESF schools charge fees to meet additional costs. After a review on ESF funding arrangements, completed in 1995, subsidies to ESF were brought into near-complete parity with local schools under new funding arrangements to be phased in over two years starting in September 1996.

Other international schools provide education based on the American, Australian, Canadian, French, Japanese, German-Swiss, Singaporean and Korean curricula and systems. In 1996, there were 18 such schools operating up to secondary level, 24 at primary level, and 24 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 school places was completed and a new package of assistance introduced in 1995. 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.

Support Services and Improvement Measures

A wide range of services, mostly provided or supported by the Education Department, reinforce teaching and learning in schools.

Educational Research

The 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.

Whole-School Approach to Guidance

The department encourages a whole-school approach to student guidance. The Student Guidance Section organises programmes, workshops and seminars in support of this approach and provides training to Student Guidance Officers/Teachers. It produces topical resource teaching kits to help teachers handle

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pupils with problems. It enforces compulsory education through identification of school dropouts and providing follow-up services, and ensures an adequate provision of study room facilities. Three studies were completed by the Student Guidance Section in 1996: understanding schools' needs; identifying the at-risk groups of pupils; and using peer support and life skill counsellors to tackle the drug problem.

Performance Pledge

The Board of Education monitors the department's performance against the targets and standards pledged through an Educational Services Liaison Sub-committee. The monitoring results show that the department fulfilled over 99 per cent of its pledges during the year. To explore the feasibility of extending the performance pledge programme to schools, a pilot scheme was initiated in April 1995. The programme was further extended to all government schools and four aided schools in May 1996.

Advisory Inspectorate

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.

Curriculum Development Institute

The Curriculum Development Institute (CDI) is staffed by both civil servants and contracted educators. It develops and reviews curricula, liaising with the HKEA and tertiary institutions; helps schools implement curriculum policies and innovations; provides a secretariat for the Curriculum Development Council; and conducts research, experimentation and evaluation in curriculum planning.

The CDI continued to develop the Target Oriented Curriculum (TOC) and prepare for its full implementation in schools by phases. Progress was also made in the TOC assessment mechanism and schools were sent relevant guidelines after consultation.

  Revision of the Guidelines on Civic Education in Schools was completed with emphasis on preparing students for the transition of Hong Kong to a Special Administrative Region. The new Guidelines were issued to all schools for implementation in September 1996. Work continued on projects including curriculum integration, curriculum modularisation and the development of curricula for the academically-gifted and the less able. The Fung Hon Chu Gifted Education Centre offered enhancement programmes for academically gifted pupils besides developing school-based projects and organising related training courses. A school-based curriculum tailoring scheme helped academic under-achievers. Facilitated by a Central Curriculum Development Support Team, the scheme was extended to a total of 80 schools in September 1996. Guides were produced on the curricula for students with various special education needs.

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Reading Scheme

The Hong Kong Extensive Reading Scheme was in its sixth year of operation at the secondary level benefiting 89 240 students from 2 231 Secondary 1 to 3 classes. It was extended to Primary 5 and 6, by phases, from September 1995. A total of 17 480 pupils from 437 classes took part in Phase 2 of the scheme.

Hong Kong Teachers' Centre

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. It is staffed by the Education Department. During the year, the centre organised, sponsored or hosted 700 activities for 50 000 participants. It maintained a professional library and published newsletters. Another centre was set up in Kowloon and began to provide services in October 1995.

Educational Television

This year marks the 25th Anniversary of Educational Television (ETV). The ETV programmes offer syllabus-based and enrichment programmes to support and supplement classroom teaching. Programmes on the subjects of Chinese language, English language, and Mathematics are offered to pupils from Primary 3 to Secondary 3. General Studies programmes are offered to pupils from Primary 3 to 6 while Science and Social Studies programmes are offered to pupils from Secondary 1 to 3. 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 two local television stations.

Information Systems Strategy

A five-year information systems strategy was launched in 1993 to extend the use of information technology for the administration and management of schools. Computer systems and networks are being developed to link public sector schools and various sections of the Education Department. Teachers and school heads are also involved in the system development.

District Education Offices

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 to discuss educational

matters.

Careers and Guidance Services

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 public and a free advisory service on overseas studies. During the year, 2 506 students left to study in the UK (up to November 9), 2 607 left for Canada, 4 782 for the USA and 4 200 for Australia.

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Non-graduate Teacher Qualifications Assessment

The Non-graduate Teacher Qualifications Assessment Scheme was introduced in the 1992-93 school year 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 non-graduate teachers. A total of 69 candidates passed the required examinations in the 1996 cycle.

Student Discipline

A Student Discipline Section was set up in September 1996. The section provided teacher staff and school heads with effective management consultant services on discipline matters. It also advised schools on preventive measures, the setting up of reward and sanction systems and the handling of difficulties faced by schools over discipline.

New Immigrant Children from Mainland China

The Education Department, with the assistance of voluntary agencies, operated an induction programme for new immigrant children from mainland China to help them adapt to the local social and school environment. A total of 33 agencies helped run the programme, benefiting 12 342 new immigrant children. Feedback from teachers, students and the community has been very positive. To help immigrant children from Mainland China obtain schooling, the age for admission to all adult education programmes and courses was lowered from 18 to 15 from September 1996.

  An extension programme on remedial English was operated to help new immigrant children from China catch up with schooling in Hong Kong. Advice was also given to teachers on tailoring the curricula in the subjects of Chinese language and English language for Primary 1 to Secondary 3 students.

Teacher Education and Quality

 Pre-service and in-service teacher education programmes, at sub-degree and degree levels, are provided by tertiary institutions funded through the University Grants Committee. In-service professional development courses for teachers are also provided by the Education Department and professional organisations.

  In the 1996-97 academic year, the Hong Kong Institute of Education (HKIED) offered 45 courses for more than 8 440 full-time and part-time students. These included pre-service Certificate in Education programmes; 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; advanced courses of teacher education for non-graduate secondary school teachers of cultural, practical and technical subjects and two new courses in Putonghua.

  The Hong Kong Council for Academic Accreditation conducted an institutional review of the HKIEd in February 1996 to assess the suitability of its academic environment and processes for the development, introduction, conduct and maintenance of degree and related programmes. The institute was found to be creating a suitable environment for the development and introduction of degree programmes, although some operations needed to be developed further before launching such programmes.

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       Piling for the institute's new campus in Tai Po was completed in February 1996. Superstructure works are in progress in four separate contract packages due for completion in July, August and October/November 1997.

       Estimated to cost $2.312 billion, the new campus will provide academic, administrative, amenities and indoor sports accommodation, plus outdoor sports facilities, student hostels and staff quarters on completion in the summer of 1997.

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. Teachers of SMI schools were offered additional training opportunities to update their knowledge in leadership and strategic planning.

Council on Professional Conduct in Education

The council, set up in 1994, is a non-statutory body promoting professional conduct in education. It draws up operational criteria defining the conduct expected of an educator and advises the Director of Education, where necessary, 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 into the teaching profession.

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 by the Vocational Training Council (VTC) at two technical colleges, seven technical institutes and 24 training centres. Separate levy-funded authorities provide industrial training for the clothing and construction industries.

Technical Education

Technical education at higher technician level is provided by the VTC's two technical colleges at Chai Wan and Tsing Yi. These offer higher diploma (normally three years full-time) and higher certificate (two or three years part-time) courses 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 July, 1 325 full-time, 668 part-time day and 1 554 part-time evening students graduated from the technical colleges. In November, enrolment totalled 5 141 full-time students on 34 courses, and 1 282 day release and 7 449 evening students on 45 part-time courses.

       The seven technical institutes provide technician and craft level courses in accounting, applied science, child care, clothing technology, commercial studies, computing, construction, design, electrical engineering, electronic engineering, hairdressing, hotel-keeping and tourism, manufacturing engineering, marine engineering and fabrication, mechanical engineering, motor vehicle engineering, printing and textiles. Technician level courses are offered for Secondary 5 leavers

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while craft level courses are for those who have completed at least Secondary 3. These courses are offered on either a full-time, part-time day release, or part-time evening basis.

  In July, 4949 full-time, 1822 mixed full-time, 4 121 part-time day and 7 890 evening students graduated from the technical institutes. In November, the total enrolment in technical institutes was of 10 157 full-time, 3 989 mixed full-time, 11 089 part-time day and 23 602 evening students on some 293 courses.

Industrial Training

 Besides offering pre-employment training to new entrants to the labour market, the VTC's 24 training centres also offer upgrading training for in-service personnel at all levels. This includes courses in precision tool and die design, application of CAD/CAM to die manufacture, electronic systems design, and object-oriented technology and open systems in information technology. Some 46 199 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, 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 21 167 training places for the 1996/97 training year. Full-time courses are offered to train craftsmen, operatives and supervisors in the construction field; and there are also various continuing education and training 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, certification tests for operators of construction plants, temporary suspended working platforms and builders' lifts are conducted. The authority also conducts trade tests for construction workers of 15 principal trades with a view to upgrading the quality of construction works.

  The Clothing Industry Training Authority was established in 1975 to provide training 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 1995-96 two training centres trained 5 950 people at technician, craftsman and operative levels on full-time and part-time courses.

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.

Training in New Technologies

The New Technology Training Scheme administered by the VTC aims to facilitate the adoption of new technologies beneficial to Hong Kong's industry and commerce. Grants are provided to help companies send their employees to acquire skills in new

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technologies. During the year, the VTC received 837 applications of which 701 were approved.

Apprenticeship Schemes

The Apprenticeship Ordinance promotes and regulates the employment and training of apprentices. Anyone aged between 14 and 18 working in any of the 42 designated trades who has not already completed an apprenticeship in the trade must enter into a contract of apprenticeship with the employer. The contract 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 of Apprentices advise and help employers and apprentices in training and employment matters. They visit workplaces to ensure that training schemes are properly implemented. A free placement service is offered to job-seekers interested in an apprenticeship. During the year, 3 500 contracts were registered (1 000 in non- designated trades), covering 2 700 craft and 800 technician apprentices. At the end of December, 7 900 apprentices were being trained.

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 845 full-time places, of which 318 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 a specific assessment programme in their final school year, while 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 provides guidance to disabled students on training courses. The unit works closely with the Labour Department's selective placement service to ensure that training matches the local employment market demand. About 78 per cent of disabled people completing full-time courses in technical institutes and skills centres entered 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. A further six per cent of the relevant age group now have access to first year sub-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 Hong Kong Council for Academic Accreditation validates courses and programmes offered by Hong Kong's non-university, degree-awarding institutions. There are eight

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 publicly-funded tertiary institutions under the aegis of the UGC, of which six are fully self-accrediting universities, one is a degree-awarding liberal arts college and one is the Hong Kong Institute of Education, a teacher-training institution.

The Tertiary Institutions

 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 10 800 full-time and 3 220 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.

  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 9 630 full-time and 630 part-time undergraduate students, and 1 080 full-time and 1 480 part-time postgraduate students in seven faculties: arts, business administration, education, engineering, medicine, science and social science.

  Lingnan College was founded in 1967 as a private college to continue the fine traditions of the former Lingnan University in Guangzhou (Canton), China. It became a publicly funded post-secondary college in 1979 and was upgraded to a degree-awarding institution in 1992. It offers four Bachelor's honours degree programmes in Business Administration, Chinese, Social Sciences and Translation. In December 1996, undergraduate enrolment was 2 120 full-time students. The college offers two Master of Philosophy degrees in Social Sciences and Translation. Another two Master of Philosophy degrees, one in Chinese and the other in Business will be introduced in 1997-98. The college moved to its new campus at Fu Tei, Tuen Mun, in 1995.

  The Hong Kong Polytechnic University, established in 1972 as the Hong Kong Polytechnic and upgraded to a fully self-accrediting university in 1994, 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. Concurrent work and study are encouraged through part-time and sandwich courses. Enrolment in December was 11 200 in full-time and sandwich courses, and 9 090 in part-time courses.

  The Hong Kong Baptist University was founded by the Baptist Convention of Hong Kong in 1956 as the Hong Kong Baptist College. 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. It was upgraded to a fully self-accrediting university in 1994. The University now offers first-degree courses, and taught and research postgraduate courses. It has 4 230 full-time and 520 part-time students in five faculties/schools: arts, business, communication, science and social sciences.

  The City University of Hong Kong, founded in 1984 as the City Polytechnic of Hong Kong and upgraded to a fully self-accrediting university in 1994, has 10 530 full-time, 6770 part-time and 420 sandwich course students. The four Faculties - Business; Humanities and Social Sciences; Law; and Science and Technology - offer first-degree courses, postgraduate diplomas and taught master's degree courses as

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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, Social Studies, Language Studies and Technology.

       The Hong Kong University of Science and Technology, which was opened in 1991, awards bachelor's, master's, and doctoral degrees in three schools: Science, Engineering, and Business and Management. A fourth school, Humanities and Social Science, offers graduate degrees and provides general education for all under- graduates. In December, the university had 5 610 undergraduates and 1 380 graduate students.

       The Hong Kong Institute of Education (HKIEd) was established in September 1994 by merging the four Colleges of Education and the Institute of Language in Education. Since its establishment, the HKIEd has provided pre-service sub-degree teacher education courses targeted for teaching from pre-primary to secondary levels. Enrolment in December was 3 080 full-time and 4 130 part-time students. It is planning to launch degree courses in Education. Since December 1996 the HKIEd has been under the aegis of the UGC. A new, permanent campus in Tai Po is scheduled for completion in phases from mid-1997.

       The Open Learning Institute of Hong Kong (OLI) was established in 1989 to provide working adults with more opportunities for higher education through open access and distance-learning courses. It has been required to be self-financing since 1993-94. In October, more than 20 400 students were enrolled in 155 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. By the end of the year, 3 277 students had graduated with a bachelor's degree. Two new degree programmes a Bachelor of Arts in Language and Translation and a Master of Education, introduced during the year, were well received by hundreds of applicants. The OLI has relocated its headquarters from Mong Kok to a permanent campus building in Ho Man Tin, which was completed in April. Financial support has been secured for a $40 million electronic library and it is expected to come into full operation by 1998. In October, the OLI was granted self-accrediting status, subject to periodic external institutional review by the HKCAA.

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Post-Secondary College

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 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 Francaise, Goethe Institute and Japanese Consulate offer language courses.

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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. The department also subvented adult education programmes organised by voluntary agencies.

The British Council

The British Council has been active in Hong Kong since 1948. It aims 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 1995-96. The council also arranged for 125 student teachers to visit the UK for courses jointly funded by the Hong Kong Institute of Education.

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. A programme of research jointly funded with the Research Grants Council supported some 15 joint projects in 1996. British Studies modules have been 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 has been established between 10 schools in the UK and 10 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 Study in Britain Centre (formerly known as the Education Counselling Service) provides free and impartial advice to students on educational opportunities available in Britain. In 1995-96, nearly 37 000 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.

  The council moved into new, purpose-built premises at No 3, Supreme Court Road in December 1996. An entire floor is devoted to information on and services for the UK education and training providers and two other floors will house some 23 classrooms, as well as registration and support services for language learners.

The Cultural Exchanges Unit works with local organisations to present the best of British culture and arts to Hong Kong audiences.

11 HEALTH

THE Government's health care policy is that no one should be denied adequate medical treatment through lack of means. To this end, it provides a range of services and facilities to complement those available in the private sector and to meet the needs of less-affluent patients.

The Organisational Framework

The Department of Health is the government's health adviser and regulatory authority. It safeguards community health through a range of promotional, preventive, curative and rehabilitative services. It also works with the private sector and teaching institutions to deliver primary health care.

The Hospital Authority is an independent body which was established in 1990 to improve the management of all public hospitals. It provides medical treatment and rehabilitation services to patients through hospitals, specialist clinics and outreaching services.

During the year, the number of hospital beds increased by to 29 856, representing 4.77 beds per thousand population. The total comprises 25 500 beds in hospitals run by the Authority, 3 515 in private hospitals, 769 in correctional institutions and 72 operated by the Department of Health. In December, 9 196 doctors were registered with the Medical Council and 36 395 nurses were registered with the Nursing Board.

Health of the Community

Hong Kong has worked to achieve health indices which compare favourably with those of developed countries. In 1995, the infant mortality rate was 4.4 per 1 000 live births and the average life expectancy at birth was 76 years for males and 81.5 years for females.

Health problems in Hong Kong are mostly due to lifestyle-related chronic degenerative diseases. The three leading causes of death in 1995 were cancers (31 per cent), heart diseases (16 per cent) and cerebrovascular disease (11 per cent). These diseases affect mainly elderly people and will continue to dominate the mortality statistics as the population ages.

Infectious diseases

There are 26 statutory notifiable diseases in Hong Kong, including three quarantinable diseases, namely cholera, plague and yellow fever. In 1996, about 8 700 cases of notifiable infectious diseases were reported, of which more than 75 per cent were due to tuberculosis.

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  Children in Hong Kong are immunised against tuberculosis, diphtheria, pertussis, poliomyelitis, tetanus, hepatitis B, measles, mumps and rubella. Due to high vaccine coverage, diseases such as diphtheria and poliomyelitis have been virtually been eradicated and the incidence of preventable infectious diseases among children is relatively low.

HIV Infection and AIDS

In 1996, about 100 cases of HIV (Human Immunodeficiency Virus) infection and 50 AIDS (Acquired Immunodeficiency Syndrome) patients were reported. The cumulative total was about 770 cases of HIV infection and 240 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 & Control in Hong Kong paper serves as the blueprint for Hong Kong's policy on all AIDS-related issues. In November 1996, the Advisory Council hosted the first Hong Kong AIDS Conference, with the theme Building New Hope Together. The conference was attended by more than 400 participants from medical, social and educational fields, as well as the general public.

  The AIDS Trust Fund 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 services to those with HIV/AIDS, increase AIDS awareness or remove discrimination against those infected with the virus. So far, a total of $32 million has been disbursed.

  The Department of Health's AIDS Unit 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 1996, five AIDS Awareness Ambassadors were appointed to help promote public awareness.

  The participation of non-governmental organisations (NGOs) is crucial in the fight against AIDS and eight NGOs are now involved. By the end of 1996, a total of 75 companies and organisations had joined the Community Charter on AIDS, pledging to adopt a positive and non-discriminatory policy towards people with HIV or AIDS.

Hospitals and Development Programmes

Demand for hospital services remained high. In 1996, there were 960 800 hospital discharges and deaths and 6 335 400 attendances at out-patient and specialist clinics. Accident and emergency departments of major public hospitals had 2 089 300 attendances or 5 720 per day.

  Projects in the hospital development programme progressed satisfactorily. The Pamela Youde Nethersole Eastern Hospital, which opened in 1993, had 1 500 beds available and will eventually have 1 620. Commissioning began in the year for the Tai Po Nethersole Hospital. New hospitals under development are Tai Po Infirmary and Convalescent Hospital, North District Hospital, Tseung Kwan O Hospital, and Kowloon Medical and Rehabilitation Centre. Several other hospitals and specialist clinics were undergoing redevelopment or major refurbishment.

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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.

District Health System

The District Health System is a co-ordinated approach to providing primary health care services. It allows for the delivery of services most relevant to the needs of the community through health care providers within the district working as a team. The setting up of district health committees, with members drawn from community service providers and the public, provides a forum for community participation in the identification of health care needs and implementation of programmes. The system was extended to other parts of Kowloon in 1996 after a successful trial in Kwun Tong.

Clinics

The Department of Health operates 60 general out-patient clinics, providing affordable primary 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 48 mother and child health centres, 13 student health centres, 16 tuberculosis and chest clinics, 13 social hygiene clinics, five dermatology clinics, five clinical genetic clinics, four child assessment centres and other clinic services. Total attendance in 1996 was more than 11 million.

Private-sector services are provided by medical practitioners under the Estate Doctor's Association, who run clinics in housing estates to offer a low-cost service for residents, medical practitioners in private practice and 198 clinics registered under the Medical Clinics Ordinance.

Health Education

The Central Health Education Unit plans, organises and promotes health education activities. With collaboration and support from other agencies, a Healthy Lifestyle Campaign was introduced in 1996 which provided health information for the public through a number of interesting and exciting programmes. The aim was to cultivate the concept of healthy living.

Two innovative health education facilities namely, the Interactive Learning Computer System and the Donormobile were realised in 1996 with sponsorship from the Hong Kong Jockey Club. The former is an advanced bilingual computer system which offers up-to-date information on 19 health topics. The latter is a truck which tours Hong Kong to spread the message of organ donation to the public.

The Health Ambassador Programme was expanded in 1996. Volunteers from four major groups senior citizens, teachers, women and students are recruited and trained to promote health education activities within their own community. The computerised 24-hour telephone health education service (2833 0111) was also expanded and reorganised to provide more than 220 messages on various health topics.

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Dental Services

 The Dental Service aims to improve the population's oral health through preventive and promotive oral health care services. Promotional activities are organised throughout the year to increase the level of oral health care awareness. The community has also benefited from the fluoridated water supply which results in a reduced rate of dental decay.

  All of Hong Kong's 212 000 pre-school children are covered by an oral health education programme delivered through maternal and child health centres, kindergartens and pre-school centres. A further 385 580 or 82.4 per cent of the primary school population received annual dental examinations and basic dental care through the School Dental Care Service.

  A 24-hour interactive voice response system (hotline number 2713 7028) provides voice and fax messages about the School Dental Care Service and oral health care information. An outreaching oral health education facility catering to a wide section of the community was launched in the latter part of the year through the oral health education bus.

Specialist dental services are provided to specific groups including hospital patients and special needs groups. An emergency dental service is provided to the general public at 11 designated dental clinics throughout the territory.

Family Health

 The Family Health Service offers a comprehensive health programme for women and children aged below six years through 48 maternal and child health centres and two woman health centres. Health advice, physical examination, immunisation and comprehensive observation services are provided. About 96 per cent of new-born babies attended such centres during the year. Antenatal, postnatal medical consultations and family planning services are also available for women of child- bearing age. After the first women's health centre opened at Lam Tin in 1994, a second began operating at Chai Wan in March 1996 to provide a health promotion and screening programme for women aged 45 to 64.

  The government-subvented Family Planning Association of Hong Kong runs eight birth control clinics and three youth health care centres, providing services in fertility regulation, contraception, male and female sterilisation, gynaecological check-ups, pre-marital check-ups and youth counselling. It also conducts programmes in family life education and sexuality education, and carries out motivational work through outreach activities and publicity campaigns.

Student Health Service

The Student Health Service, which emphasises health promotion, disease prevention and continuity of care, was extended to secondary schools in 1996. A total of 11 student health service centres and two special assessment centres have been opened to provide free health assessment, individual health counselling and health education to all primary and secondary school students.

  School health inspectors 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.

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Medical Care for the Elderly

The provision of medical services for elderly patients is a priority area. Geriatric services are now provided in all acute hospitals. Eight community geriatric assessment teams and eight psychogeriatic teams provide specialist support to elderly persons living in subvented residential homes, as well as to their carers. There are also 447 geriatric day places provided for elderly patients in public hospitals.

Nursing homes with medical and nursing facilities are being developed to bridge the gap between existing care-and-attention homes and infirmaries. Non-profit-making organisations are being invited to build and manage some of these homes with assistance from the government in the form of land, capital and recurrent subvention. There are six nursing homes under construction with a total provision of 1 400 beds. The first nursing home is expected to commence operation towards the end of 1997.

The Department of Health runs four elderly health centres to provide health screening, counselling and health promotion activities for elderly people. Health Ambassador training courses for the elderly, an innovation to promote elderly health through community participation, made its debut in 1996.

Services for the Mentally Ill and Mentally Handicapped

At the end of 1996, 4 075 beds were provided in psychiatric hospitals and 1 661 beds in public psychiatric units of general hospitals. The number of psychiatric day hospital places remained at 574. The redevelopment of Castle Peak Hospital, one of the territory's two main psychiatric hospitals, is under way. An additional 712 psychiatric beds are being planned by the year 2000.

Community work and aftercare units of psychiatric hospitals help discharged patients. The community psychiatric nursing service and domiciliary occupational therapy service, in particular, aim to provide continual care and treatment programmes for discharged mental patients in their home settings. This assists. patients' social readjustment while educating them and their families on mental health. Three community psychiatric teams and eight psychogeriatic teams have been set up to provide designated care and rehabilitation programmes to psychiatric and psychogeriatric patients. There are 12 community psychiatric nursing service centres. Other complementary rehabilitative services include day-centres, half-way house, 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) and Siu Lam Hospital (300 beds). Two outreach teams have been established to provide services for early intervention.

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 through a network of 37 CNS centres. During the year, 27 260 patients were served and 376 988 home visits were made.

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Port Health

The Port Health Office enforces measures in the Quarantine and Prevention of Disease Ordinance and the International Health Regulations to prevent the introduction of quarantinable diseases into Hong Kong by air, land and sea. The service regularly exchanges epidemiological information with neighbouring countries and the World Health Organisation.

Radiation Health

 Radiation Board inspectors carried out 700 on-site radiological safety inspections on medical, commercial and industrial premises in 1996. The Radiation Health Unit monitored the radiation exposure of 6 386 workers, detecting an average individual occupational dose of 0.2 millisievert against a regulatory limit of 20 millisievert. The Environmental Radiation Monitoring Programme detected no significant change in the background radiation level in Hong Kong during the year.

  The Department of Health is collaborating with the Environmental Protection Department in commissioning a consultancy to construct 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 1997.

Medical Charges

Fees in public hospitals and clinics are heavily subsidised. Patients in general wards of public hospitals are charged $68 a day. This covers food, accommodation, tests, medicine and surgery or other treatment. Some private beds are provided at major public hospitals with higher maintenance and treatment charges.

  A consultation at a general out-patient clinic costs $37, while a specialist consultation costs $44. Physiotherapy, occupational therapy and child assessment services are $44 per session. Attendance at geriatric or psychiatric day centres and home visits by community nurses cost $55 per session. Fees may be reduced or waived in cases of financial hardship.

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 of smoking and health. In 1996, the council organised the Hong Kong Conference on Smoking and Health. It attracted international and local speakers who discussed the issues of tobacco advertising, sponsorship, youth education and health. To counter the trend of tobacco advertisers to reduce the visibility of health warnings in printed and display advertisements, legislation came into effect to require warnings to appear in black lettering/characters on a white background.

Training of Medical and Health Personnel

The University of Hong Kong and The Chinese University of Hong Kong provide basic training of doctors. Their medical student intake in 1996 was 170 and 171, respectively. Under the Licentiate Scheme of the Hong Kong Medical Council, 34 externally-trained doctors passed the local licentiate examination in 1996.

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       The Hong Kong Academy of Medicine is an independent statutory body with the authority to approve, assess and accredit all post-internship medical training. Its 14 colleges conduct training and examinations to award specialist qualifications to qualifying candidates.

The School of Public Health Nursing in the Department of Health provides a full- time in-service training programme for registered nurses which leads to a diploma in public health nursing studies. It also runs various short courses for enhancing and updating professional knowledge of all grades of nurses.

Training in dentistry is available at the University of Hong Kong, which produced 38 dentists in 1996.

Government Laboratory

The Government Laboratory provides regulatory testing services in the areas of public health, environmental protection, consumer protection and commodities testing. Samples of fresh produce and cooked, processed and preserved food are regularly examined for composition, additives, toxic residues and contaminants. During the year, more than 52 000 laboratory tests were conducted to ensure the wholesomeness of food. Special investigations were also carried out to study phthalates in milk products and polynuclear hydrocarbons in heated edible oils used in food establishments.

Work has continued on the examination of monthly samples of cigarette brands on sale in Hong Kong in order to determine their tar and nicotine yields. The results from this testing programme are published annually to help implement the government's anti-smoking policy.

      Pharmaceutical products are tested regularly to check compliance with pharmacopoeia specifications and health standards, so as to protect the public from sub-standard or defective medicine. Interest in the safety of some common Chinese herbal preparations is increasing.

An important part of the laboratory's work concerns consumer goods safety, including toys and children's products. This activity has continued to grow steadily in recent years. Articles examined have ranged from aquatic toys to folding tables and strollers. Dangerous substances surveyed for occupational health and safety in factory premises as well as pesticide formulations certified for registration purposes continued to feature in the laboratory's work.

Traditional Chinese Medicine

The Preparatory Committee on Chinese Medicine (PCCM) was set up in April 1995 to advise on a statutory framework for the promotion, development and regulations of traditional Chinese medicine (TCM) in Hong Kong. In 1996, it completed a territory-wide enrolment exercise for TCM practitioners and was finalising its recommendations on the criteria for the proposed statutory registration of TCM practitioners. It had also revised the list of potent/toxic Chinese herbs and published a health education leaflet on the safe and proper use of traditional Chinese medicine.

Drug Abuse and Trafficking

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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 1996, based on 36 000 reports on 20 000 persons, indicated that 88 per cent of drug abusers were male and 12 per cent female, 54 per cent were aged over 30 years, 28 per cent were 21 to 30 years old and 18 per cent were aged under 21.

  Heroin is the predominant drug of abuse in Hong Kong, and was used by 87 per cent of the persons reported to the registry. Other common drugs of abuse included cannabis, cough medicine and various psychotropic substances.

A total of 4 500 drug abusers came to registry's notice for the first time in 1996. Of the new cases, 80 per cent were male, 20 per cent were female and 46 per cent were people below the age of 21.

Overall Strategy and Co-ordination

The government adopts a five-pronged approach in combating drug trafficking and abuse law enforcement, preventive education and publicity, treatment and rehabilitation, research and international co-operation.

Effective law enforcement curtails illicit drug supply and induces drug abusers to seek treatment voluntarily. It also brings compulsory treatment to many who cannot otherwise be persuaded to seek help. Comprehensive treatment services are provided to meet the different needs of drug abusers from varying backgrounds.

Preventive education and publicity are organised on a territory-wide basis and at the local level to heighten public awareness of the drug problem and to encourage people to adopt a drug-free lifestyle. Research studies are conducted on various aspects of the drug abuse problem and the findings facilitate the planning of suitable anti-drug strategies and programmes. Co-operation at the international level, through exchange of information and experience and joint action against illicit trafficking, enhances the effectiveness of efforts in all these areas.

These anti-drug efforts are co-ordinated by the Action Committee Against Narcotics (ACAN), a non-statutory body which has non-official and government members. It is the government's advisory body on all anti-drug policies and activities and is serviced by the Narcotics Division of the Government Secretariat, which is headed by the Commissioner for Narcotics.

Governor's Summit Meeting on Drugs

In May 1996, the Governor chaired the second Drugs Summit to review progress made on the Beat Drugs campaign launched in March 1995, and to explore what new initiatives were needed to further strengthen the campaign. It brought together 270 participants from a wide cross-section of the community who are concerned with anti-drug work. The Governor further boosted the Beat Drugs campaign and announced a new 32-point Forward Action Plan to tackle the drug problem. A special action group under ACAN considered proposals put forward and submitted its report to the Governor in September 1996. Its recommendations were subsequently followed up with progress reports published regularly.

'Student has a smile for a Red Cross worker during a blood donation session

at San Wui Commemorative Society Chan Pak Sha School in Wong Chuk Hang. The Red Cross visited 365 secondary schools during the year, collecting

35 763 units, about one-fifth of the total 190 298 units donated.

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A young patient has her eyes checked during a visit to a student health care centre at Lam Tin. The Student Health Service, which emphasises health promotion, disease prevention and continuity of care, was extended to secondary schools in 1996. BELOW: A paramedic from the Fire Services Department Ambulance Service answers an emergency call. The department conducted a pilot scheme in 1993 and now has more than 150 paramedics trained to give patients pre-hospital care such as cardiac monitoring, defibrillation and selective drug treatment, enhancing their chances of surviving. Non-emergency ambulance services are being transferred to the Hospital Authority in a move that should be completed in April 1997.

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▲ The newly opened extension to

Wong Chuk Hang Hospital is set against a lush green backdrop at Aberdeen, on the south side of Hong Kong island.

RIGHT: An elderly patient is helped along the path to recovery after treatment at the hospital.

PREVIOUS PAGE: Wisdom about teeth is imparted to young pupils during a dental hygiene session at a Kowloon dental clinic run by the Oral Health Education Unit of the Health Department. A total of 11 student health service centres and two special assessment centres were opened during the year to provide free health assessment, individual health counselling and health education to all primary and secondary school students.

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The Beat Drugs Fund

In March 1996, the Finance Committee of the Legislative Council approved a grant of $350 million for setting up the Beat Drugs Fund. It aims to promote worthwhile anti-drug activities which can help reduce the problem of drug abuse, particularly among the young, and to promote community-wide efforts and programmes in the campaign against drug abuse.

The fund is administered by the Beat Drugs Fund Association, on the advice of ACAN, and applications are invited twice each year. Results of the first tranche of applications were announced in September 1996. A total of $8.7 million was disbursed.

Legislation and Law Enforcement

Further 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. The Control of Chemicals Ordinance came into operation on January 1, 1996, giving effect to Article 12 of the convention by extending statutory licensing control to some chemicals which can be used to make dangerous drugs. 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 June 1996, legislative amendments were passed to tighten up record-keeping requirements on the acquisition and supply of dangerous drugs, and drastically increasing fines for offences in contravention of such requirements from $50,000 to $450,000. The amendments have helped to strengthen the law enforcement agencies' ability to tackle the problem of improper supply of dangerous drugs by unscrupulous authorised persons.

       During the year, vigorous law enforcement efforts have produced considerable success in terms of seizures and arrests, both at home and overseas. The Royal Hong Kong Police Force and the Customs and Excise Department seized some 221 kilograms of heroin, 8 822 kilograms of cannabis, 43 kilograms of methamphetamine, 16 kilograms of cocaine, and substantial quantities of various narcotics, analgesics and tranquillisers, while 15 028 persons were arrested for various drug offences. 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.

       Since the enactment of the Drug Trafficking (Recovery of Proceeds) Ordinance, assets valued at $123.4 million have been ordered confiscated and $208.9 million had been paid to the Hong Kong Government by the end of 1996. Further assets amounting to $143.6 million have been placed under restraint.

Treatment and Rehabilitation

The main types of treatment and rehabilitation programmes include a compulsory drug addiction treatment programme operated by the Correctional Services Department for convicted drug abusers; a voluntary out-patient methadone treatment programme provided by the Department of Health; voluntary in-patient programmes run by the Society for the Aid and Rehabilitation of Drug Abusers (SARDA) and other non-governmental organisations including several Christian

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therapeutic treatment agencies; counselling services for psychotropic substance abusers provided by PS33 of the Hong Kong Christian Service and SARDA, and six substance abuse clinics operated by the Hospital Authority.

  During the year, considerable success was achieved in fostering public acceptance of drug-treatment facilities. Local support had been secured for the establishment of two new residential treatment centres for young opiate abusers. SARDA's Sister Aquinas Memorial Women's Treatment Centre was relocated from Sha Tin to North District in December 1996, with its capacity increased from 39 to 57 beds. A new counselling centre for psychotropic substance abusers in the New Territories, operated by Caritas-Hong Kong, commenced operation in July 1996. A new team of specially trained social workers was also set up to help at-risk youths who occasionally abuse drugs.

Preventive Education and Publicity

 Anti-drug preventive education and publicity programmes in 1996 continued to focus on encouraging young people to develop healthy and positive attitudes and to say 'no' to all drugs; educating them on the building up of life skills; and helping young people to resist temptation from their peers. Programmes were also designed to foster a community-wide education and support effort to halt the growing trend in drug abuse by young people. During the year, 27 district campaigns were held, involving the community through visits, camps, seminars, carnivals, variety shows, competitions and exhibitions.

  The Narcotics Division's school talk team gave 534 drug education talks to 113 076 students in 428 primary and secondary schools and technical institutes. 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.

  A Drug Education Resource Centre was set up in March 1996 to support the implementation of drug education programmes in schools. A curriculum kit on drug education for primary schools was produced and distributed to schools at the end of the year.

  To strengthen parents' awareness of the drug problem and to encourage them to steer their children away from drugs, the Education Department organised a roving exhibition and two seminars for Parent-Teacher Association executives during the year. Model programmes assisting schools to run parent education workshops and seminars on drugs were also developed.

  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 them. A territory-wide seminar was also held for social workers.

A two-day exhibition disseminating anti-drug messages was held in June in support of the annual International Day Against Drug Abuse and Illicit Trafficking. Nine radio shows were held during the year, reaching out to about 800 000 young people. The anti-drug message 'Say NO to Drugs' was applied as a post mark on all mail for two weeks from late June to early July. The message was also publicised through the Mass Transit Railway stored-value student tickets.

The

ACAN Community Against Drugs Scheme continued to provide encouragement and grants of up to $6,000 to interest groups to plan and implement anti-drug education and publicity projects. It financed 21 projects. The ACAN Youth

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Volunteer Group took part in district campaigns and organised several community involvement projects, including a charity walk for the Community Chest in November. A new Anti-drug Abuse Line (Tel. 2366 8822) was launched in June 1996. Apart from providing information on the harmful effects of drugs, the new system also provides information on prevention of drug abuse, as well as treatment and rehabilitation services. Members of the public may also obtain information from the 24-hour automated telephone enquiry service through facsimile. A total of 58 612 calls were received during the year.

Research

Drug-related research is conducted to give a better portrait of the drug scene. It is 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. In 1996, three projects were identified for implementation.

The computerised Central Registry of Drug Abuse provides a useful means of monitoring changes in trends or characteristics of the local drug abuser population. It provides a database which facilitates the formulation and planning of effective and realistic anti-drug policies. Statistical analyses were published twice during the year.

International Action

     Hong Kong continued to support international action against drug abuse, drug trafficking and money laundering. Close links were maintained with the United Nations, the World Health Organisation, individual governments and inter- governmental agencies such as the Financial Action Task Force, Interpol and the World Customs Organisation. Joint operations resulted in significant seizures and confiscation of drug-related proceeds locally and overseas. The territory took part in 18 international meetings and seminars concerned with anti-drug policies, law enforcement, treatment and rehabilitation, and preventive education.

Hong Kong continued to support international co-operation in the provision of training for anti-drug personnel. During the year, anti-drug personnel from different countries and international bodies came to the territory on study visits and training courses. Co-operation also continued with foreign jurisdictions to provide mutual assistance in the fight against international drug trafficking and money laundering. In January 1996, the Hong Kong Government initialled a bilateral agreement with Thailand for mutual legal assistance in the investigation of drug trafficking and confiscation of proceeds of such crime. Bilateral agreements with the United States and Malaysia were also extended during the year.

Auxiliary Medical Services

The Auxiliary Medical Services (AMS), established in 1950, is a disciplined medical civil defence corps providing supplementary resources to augment regular medical and health services during natural disasters and emergencies. In recent years, the AMS has promoted public awareness of disaster medicine in Hong Kong.

It has 87 permanent staff and 5 258 volunteers from all walks of life, including senior professionals, physicians, nurses, paramedical personnel, civil servants and laymen in the private sector. The Director of Health is the Commissioner of AMS and is responsible to the Governor for its efficient operation.

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  Volunteer members receive comprehensive training in areas covering first-aid, life- saving, squad drill, ambulance aid, practical nursing, casualty evacuation, clinical and hospital care, paramedic, disaster medicine, leadership, supervision and management. AMS personnel visited overseas medical authorities and participated in international conferences, training courses and rescue exercises organised by other countries to enhance the service's professionalism.

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. 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 undertook the duty of non- emergency ambulance transfer service starting in April 1996. It also committed a total of 99 640 man-hours in 1996 to provide first aid coverage at country parks, cycle tracks, school activities and major public functions. Another 343 900 hours were involved in manning 21 methadone clinics and providing round-the-clock clinical services in five Vietnamese Migrant camps.

The AMS further provided 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. Members of the public were able to obtain information and materials concerning home safety and first-aid through the First Aid Education Workshop in the AMS Headquarters or a 24-hour enquiry hotline (2762 2033).

Environmental Health

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 health and hygiene in the territory. This includes cleaning streets and gullies; collection of night soil, refuse and junk; management of refuse collection points, public toilets and bathhouses; pest control; and services for the dead.

Discharging these responsibilities involves the deployment of 7 274 people and a fleet of 598 specialised vehicles such as refuse collection vehicles, street-washers, mechanical sweepers, night soil collectors, desludgers and gully-emptiers. The departments also mount regular joint operations with the Marine Department to clear marine and littoral refuse.

Streets and lanes are swept from four times a day for busy thoroughfares to once every two days for village lanes. Where conditions warrant, streets and lanes are also hosed down once or twice every fortnight. Refuse collection points and hawkers areas are washed more frequently. The USD has introduced contracting-out of street- cleaning services in Ma Tau Kok, Shek Tong Tsui, Tai Kok Tsui, Wan Chai West, Wong Chuk Hang and Kwun Tong East. The RSD contracts out its street-cleaning services in Kwai Tsing, Sai Kung, Sha Tin, Tai Po, Tsuen Wan, Tuen Mun and Yuen Long districts.

The USD collects 3 100 tonnes of refuse and junk each day, 1 200 tonnes in Hong Kong and 1 900 tonnes in Kowloon. There are some 200 refuse collection points in the urban area, most of them fitted with equipment to contain smells, with carbon filtration being replaced by the more effective water-scrubber system as the deodorising method.

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       The RSD manages 914 refuse collection points and 1 419 bin sites and collects about 2 444 tonnes of waste daily, including 94 tonnes removed by a contractual barging service from the outlying islands for disposal on the mainland. To further improve waste collection services, refuse compactors are used in 18 selected refuse collection points, bringing about noticeable improvement to the environment.

      To encourage dog-owners to properly dispose of dog droppings, the Urban Council has provided 260 dog excreta collection bins in the urban area. There are plans to refurbish and improve public toilets in phases. During the year, 36 public toilets were renovated in the urban area. Cleansing of 159 public toilets and 29 bathhouses has now been contracted-out. The councils provide a free desludging service to public aqua privies and septic tanks. The service is also provided on a charge basis for private facilities upon request.

The RSD has launched an improvement programme for over 600 public toilets at a total cost of HK$261 million. The project is expected to be completed by 1997-98. The department will also implement a phase II improvement scheme to upgrade the standard of another 55 flushed toilets in township area in the next few years. On waste collection, seven refuse collection points have been refurbished to modern standards at a total cost of HK$22 million. Further improvement works costing HK$36 million on village-type refuse collection points have just been launched.

Pending the commissioning of a centralised incineration facilities, the departments continue to provide separate clinical waste collection service for government clinics and hospitals. About 37.2 tonnes of waste are collected each week from 142 stops. The Keep Hong Kong Clean Campaign, organised by the Joint Urban Council/Regional Council Keep Hong Kong Clean Steering Committee, continued its effort to educate the public to keep the environment clean through the implementation of a series of educational and community involvement programmes. District-based clean-up activities were also organised

were also organised to encourage public participation. District bodies were encouraged to apply for subsidy under the Keep Hong Kong Clean Activities Funding Scheme to organise Keep Hong Kong Clean projects.

Law enforcement action was stepped up and 35 234 litterbugs were prosecuted during the year. They were fined a total of $12.97 million.

Pest Control

The USD and RSD carry out integrated pest control programmes to prevent vector- borne diseases. Measures include environmental improvement, eradication of breeding places, health education and law enforcement. Special surveillance is maintained to prevent outbreaks of malaria in Vietnamese detention centres. Technical support is provided by the Pest Control Advisory Section of the Department of Health.

Environmental Health Education

The Department of Health's Health Education Unit promotes environmental health and food hygiene through territory-wide education programmes. Working with the two municipal councils, the unit conducted several health education activities during the year, including the 1996 Food Safety Exhibition and the 1996 Food Hygiene Campaign for members of the food trade, school teachers and the general public.

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Other publicity campaigns on mosquito and rodent prevention, prevention of nuisance from dripping air-conditioners and practising good personal hygiene habits were also staged during the year. Health messages are disseminated through printed materials, mobile broadcasting, telephone hot-lines and the mass media. Health education materials are also available from the unit's resource centre.

The Urban Council also organises health education programmes to cater for the specific needs of the urban area. The Restaurant Hygiene Competition, and Healthy Menu and Healthy Cooking Competition were staged for the restaurant trade. An Ambassador of Hygiene Scheme and a Teaching Kit on Health Education were aimed at children. A Health Education Fair and Talks on Public Health were also organised for members of the public. A permanent Health Education Exhibition and Resources Centre providing interactive exhibits and information on various health-related disciplines is planned for commissioning in early 1997.

Food Hygiene

The Health Department's Hygiene Division monitors the safety of 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 February 1996 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 food authorities. As the bulk of the local food supply comes from China, the Division works closely with the Chinese authorities. Regular meetings are held with officials from the Guangdong and Shenzhen Commodities Inspection Bureaux to promote food safety and better food hygiene.

In 1996, there were more than 300 reported cases of food poisoning, involving 1 800 persons. To combat food poisoning due to contaminated vegetables, a food control office was opened at the Man Kam To Checkpoint in February. 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.

Food Premises

The USD and RSD grade licensed food premises according to their hygiene standards. This determines the frequency of inspections. To deter breaches of health regulations, both departments maintain a demerit points system, under which food licenses or permits can be suspended or cancelled. 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.

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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 the setting up of an inter-departmental application vetting panel to give initial comments on the suitability of the restaurant applicant's premises and to 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 have been issuing 'provisional licences' once major structural work and fitting-out have been completed and fundamental health, structural and fire safety requirements met. This allows an applicant to start operating his business without having to wait for a full licence.

Markets

The municipal councils manage public markets in their respective areas. The Urban Council operated 61 retail markets in the urban area in 1996. In these markets 10 188 stalls offered commodities ranging from fresh food to household items.

The RSD administered 45 markets in the New Territories and outlying islands, 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 department 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. Cleaning services for 19 markets were contracted out at year-end.

Old and outdated markets have gradually been replaced and the UC managed 20 multi-purpose complexes during the year. These complexes house on the lower floors new markets and cooked food centres which are built to meet not only hawker re- siting commitments, but consumer demand. Markets and cooked food centres will, as far as practicable, be air-conditioned to improve the trading environment.

Three new markets were opened during the year: Hung Hom Market in April, Smithfield Market in June and Wong Nai Chung Market in July. A scheme for contracting-out cleansing operations was implemented in 49 markets at the year-end: 24 on Hong Kong Island and 25 in Kowloon.

Hawkers

The two municipal councils maintain control over on-street hawkers. The licensing of street hawkers in the urban area is the responsibility of the Urban Council. At the end of the year, there were 9 200 licensed hawkers in the urban area 800 fewer than in 1995.

The decrease was mainly due to a policy of not issuing or allowing succession of itinerant hawker licences. In addition, the completion of the new Hung Hom Market, Smithfield Market, Wong Nai Chung Market and Hip Wo Street Temporary Market in 1996 made it possible to re-site 326 licensed hawkers formerly trading in the vicinity, which helped to achieve an overall improvement to the environment of the area surrounding the market.

During the year, the hawker control teams in the urban area, comprising 1 943 civilian staff trained in law enforcement, secured 90 030 court convictions for hawking offences by both licensed and unlicensed hawkers.

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 To tackle late night or early morning illegal hawking activities at major blackspots, the Regional Task Forces (formed by hawker control teams and directly under Regional command) of the USD also worked on a special overnight shift with satisfactory outcome.

 Through constant vigilance and action, the RSD's 82 Hawker Control Teams, reduced the number of illegal hawkers in the New Territories to 1 400 by the end of the year. About 1 480 hawkers held valid licences during the year to operate either fixed pitches or on an itinerant basis. The Regional Council has ceased issuing hawker licences except for purpose-built cooked food stalls.

 The RSD's Hawker Control Teams secured 44 000 court convictions for hawking offences during the year by both licensed and unlicensed hawkers. Hawker Handling Centres at Yuen Long and Tai Po police stations proved a success in dealing with hawking arrest and charging procedures and the RSD plans to extend this system.

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. In the long term, a new slaughterhouse will be built in the New Territories near Sheung Shui, to replace the existing urban abattoirs as well as the Yuen Long Slaughterhouse.

 During the year, these abattoirs and slaughterhouses handled 2 532 046 pigs, 80 042 cattle and 7080 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 1996, health inspectors carried out 79 raids on suspected illegal slaughterhouses. Staff also carried out spot checks on meat stalls and 20 persons were prosecuted for possessing 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, about 80 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. The Commonwealth War Graves Commission manages two war cemeteries.

 The RSD 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.

12 SOCIAL WELFARE

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 Social Welfare Department spent $6 billion five years ago; in 1996, it spent $16 billion.

       An inter-departmental working group established in March 1995 and chaired by the Director of Social Welfare completed a comprehensive review of the Comprehensive Social Security Assistance (CSSA) Scheme in February 1996. The findings and recommendations of the review were published in March, and a wide-ranging package of improvements to the scheme was brought into effect in April 1996.

The review also recommended that elderly CSSA recipients be allowed the option of retiring permanently to China while continuing to receive their monthly standard rates and annual long-term supplement under the scheme. The proposal is expected to be implemented in 1997, subject to detailed arrangements being worked out.

Following a review of the Emergency Relief Fund, a package of improvements to its payment schedule was implemented in June 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 on rehabilitation - entitled Equal Opportunities and Full Participation: A Better Tomorrow for All (1995).

The government is advised on social welfare policy by the Social Welfare Advisory Committee, covering the whole area of social welfare, and the Rehabilitation Advisory Committee (the former Rehabilitation Development Co-ordinating Committee), on matters of rehabilitation. Committee members are appointed by the Governor and their meetings are chaired by non-officials. The Social Welfare Department maintains a close

close working partnership with non-governmental organisations, most of which are subvented by the government and affiliated with the Hong Kong Council of Social Service.

Many services were expanded in 1996. They included the addition of 741 day nursery places, 144 occasional child care places, 13 small group homes, 10 home help teams, one urban hostel for single persons, 111 family caseworkers, 11 family aides, one clinical psychologist and five family life education workers. For young people, 22 additional school social workers and two outreaching social work teams were provided and seven combined children and youth centres and three integrated teams were established through the reprovisioning of existing centres. An additional team of specially trained social workers was set up to help occasional young substance-

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abusers. For the elderly, a further 120 places in homes for the aged, 785 care-and- attention home places, 24 social centres and two day-care centres were set up.

For people with a disability, the department established 380 places in sheltered workshops, 123 places in day activity centres, 706 hostel places, 50 care-and-attention home places for severely disabled persons and 252 care-and-attention home places for aged blind persons.

Co-ordinated by the department, the Working Group on Battered Spouses was set up in April 1995. During 1996, it produced and distributed to all concerned professionals a set of multi-disciplinary procedural guidelines on the handling of cases involving battered spouses and enhanced publicity on services available to victims of spouse battering.

During the year, the Working Group on Child Abuse co-ordinated multi- disciplinary efforts in implementing legislative measures in protecting child abuse victims giving evidence in court, revising procedural guidelines on handling child abuse cases, launching publicity and public education campaigns to prevent child abuse, setting up 13 District Committees on Child Abuse, and strengthening the joint training of professionals in handling child abuse cases.

The Working Group on Services for Youth at Risk completed its deliberations on teenage suicide, illicit use of drugs among young people, teenage sexuality, runaway youth and juvenile gangs. During the year, several recommendations made by the Working Group to address these issues were implemented, including the production of a videotape on helping parents to handle their children's drug problems. The major recommendations which are still being pursued by the Working Group include developing a screening tool to identify youth at risk, modernisation of children and youth centres, producing a sex education training kit for parents, conducting an in- depth research on juvenile gangs and runaway youth, and enhancing district collaboration efforts to tackle the issues concerned.

Social Security

Social security aims to help vulnerable groups in the community who require financial or material assistance. The Comprehensive Social Security Assistance (CSSA) Scheme and the Social Security Allowance (SSA) Scheme are the key elements in the non-contributory social security system 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 bring the income of needy individuals and families up to a level so that they can meet their basic and special needs. 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.

The scheme comprises a range of monthly standard rates to meet the basic and special needs of different categories of recipients. Rates range from $1,615 to $4,185 for a single person and from $1,440 to $3,865 for a family member. Special grants are available to meet the special needs of individual recipients and families, such as rent, education expenses, medically recommended diets, spectacles and dentures. A monthly supplement of $230 is paid to single parents to take account of the special difficulties which single parents face in bringing up their children. An annual long-

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term supplement, ranging from $1,435 to $4,305, 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 can be disregarded up to a maximum of $1,615 in the calculation of assistance payable. The first month's income of certain categories of recipients (the elderly, disabled and family carers) who manage to obtain full-time jobs can also be disregarded.

      Improvements have been implemented since April 1996 after a comprehensive review of the scheme. These include real increases in the standard rates for specific groups of customers, improvements to the provision of special grants for elderly persons and school children, revision of the levels of maximum rent allowance, revision of asset limits, and revision of the level of disregarded earnings. In addition, standard rates and other related payments were also increased by 7 per cent in April to take account of inflation.

At the end of the year, there were 159 100 CSSA cases, compared with 127 800 in 1995. The elderly, the sick and people with a disability made up the majority. The total expenditure during the year amounted to $6.45 billion, representing an increase of 52.4 per cent over the previous year.

      The SSA Scheme provides monthly disability and age allowances for severely disabled persons and elderly persons respectively who do not receive CSSA.

      A person who is severely disabled within the meaning of the scheme and has resided in Hong Kong for at least one year immediately before application is eligible for a disability allowance, which is non-means-tested. The normal rate is $1,125. A higher rate of $2,250 is payable to severely disabled persons who require constant attendance from others in their daily life but are not receiving such care in a government or subvented institution.

The age allowance is non-means-tested for those aged 70 and above, and they are entitled to $635 a month. For those aged 65 to 69, the monthly allowance is $560, subject to a declaration that their income and assets do not exceed the prescribed levels. To be eligible for an age allowance, a person must have resided in Hong Kong for at least five years since the age of 60. The disability and age allowances were raised by 7 per cent in April to take account of inflation.

      At the end of the year, 503 800 people were receiving social security allowances compared with 492 400 at the end of 1995. Total expenditure during the year was $3.9 billion, representing an increase of 10.8 per cent over the previous year.

      The Criminal and Law Enforcement Injuries Compensation Scheme, which is 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, 562 applications were approved, with payments amounting to $11.1 million, which was the same as in 1995.

      The non-means-tested Traffic Accident Victims Assistance Scheme provides cash payments to victims of traffic accidents, or their dependants in case of death, regardless of fault. Payments cover personal injury and death, but not damage to property.

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During the year, 5 760 applications were approved, with payments amounting to $125.5 million, compared with $110.4 million in 1995.

Emergency relief, in the form of hot meals, dry rations and other essential relief articles, is provided to victims of natural or other disasters. Cash grants from the Emergency Relief Fund are paid to these victims or their dependants to relieve hardship caused by disasters. Following a review of the Emergency Relief Fund, a package of improvements to its payment schedule was implemented in June. These include real increases in payment rates of some of its grants and a new grant to victims who suffer damage to their home appliances, furniture and other personal belongings due to natural disasters. Emergency relief was given to 1 364 victims on 56 occasions during the year.

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 made up of non-official members appointed by the Governor. It heard 110 appeals in the year. Of these, 35 related to CSSA, 74 to SSA and one to traffic accident victims assistance.

Services for Offenders

 The Social Welfare Department implements court orders to rehabilitate offenders through social work approaches, with the aim of reintegrating the offenders into the community. Probation service is available to offenders aged seven and above. Probation officers make recommendations to courts as to the offenders' suitability for probation supervision and assessment on prisoners under consideration for early release. They also supervise offenders' compliance to court orders.

The Community Service Orders Scheme is a community-based initiative with punitive and rehabilitative objectives. A Community Service Order requires an offender 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 guidance from a probation officer..

The Community Support Service Scheme runs community service projects, job training and counselling groups for young offenders, in order to enhance their interest in school or work and to develop their social skills.

A new probation home for girls began operation in March 1996, taking the total number of residential homes to eight. The homes, with a total capacity of 602 places, provide educational, pre-vocational and character training to juvenile offenders and youth at risk.

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 treatment for convicted young offenders aged 14 to 25.

The Post-Release Supervision of Prisoners Scheme, jointly operated by Correctional Services Department and Social Welfare Department, began operation

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in December 1996. The scheme assists discharged prisoners in their rehabilitation and reintegration into society.

      One subvented organisation also provides hostel, employment, casework and volunteer services to help ex-offenders reintegrate into the community.

Family and Child Welfare

     The Social Welfare Department and non-governmental 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 identify and prevent or solve their problems.

      About 3 864 programmes such as talks, small group activities and mass media programmes were conducted by 79 family life education workers of the department and non-governmental organisations.

      The territory has 65 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 698 family caseworkers at the end of 1996, the centres handled a total of 68 600 cases during the year.

      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.

      Clinical psychological service, with a staff of 40 clinical psychologists, provides in- depth assessment and treatment to people suffering from psychological and behavioural problems. They also provide support to caseworkers and residential homes.

      Three refuge homes provide 120 short-term residential places for women and their children who are victims of domestic violence and for girls at risk; also 117 home help teams provide meals, personal care and household services to those in need.

The department continues to tackle the problem of street-sleeping through its outreaching teams and family services centres, plus temporary shelters, urban hostels, and day relief centres operated by non-governmental organisations. A multi- disciplinary outreaching team, aiming at elderly street sleepers, was set up in March 1996 on an experimental basis for two years.

The department operates a telephone hotline service which provides information on welfare services to callers with pre-recorded messages or through facsimile transmission on a 24-hour basis. Social workers are on duty to provide immediate counselling and advice to customers in need, especially to those in crisis situations. A wide range of child welfare services is provided. An adoption service arranges permanent homes for children in need. Residential child care services are provided for children and young people who need care and protection because of family crises or their behavioural or emotional problems. 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. At the end

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 of 1996, there were 560 places in foster care service, 816 places in small group homes and 1 493 places in children's homes, boys' and girls' homes and hostels.

  Child care centres provide day-care facilities for children under the age of six. All child care centres were registered under the Child Care Centres Ordinance and Regulations. The ordinance will be amended to regulate childminders and mutual help child care groups in order to strengthen protection of young children. Occasional child care service was expanded to take care of children for short periods of time in order to free their parents or carers to attend to urgent matters. The Fee Assistance Scheme assists low-income families with a financial need to pay child care centre fees.

Medical Social Service

The department collaborates with the Hospital Authority in the provision of medical social services to help patients 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, the government continued to implement the recommendations of the Working Group on Care for the Elderly made in 1994.

Residential care is provided for old people who, for personal, social or health reasons, have to be looked after in a residential setting. At the end of 1996, there were 963 hostel places, 6 531 home for the aged places and 8 398 care-and-attention 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 184 social centres, 24 multi-service centres, 26 day care centres, 17 respite care places, two volunteer worker programmes, eight older volunteer programmes, two outreaching teams, one holiday centre, one pool bus service and a structured networking system for the elderly in need. About 450 000 senior citizen cards had been issued. Financial and housing assistance continue to be provided for those in need.

The Residential Care Homes (Elderly Persons) Ordinance came into full operation on June 1, 1996. It provides for the control of these homes through licences or certificates of exemption administered and enforced by the Licensing Office of Residential Care Homes for the Elderly.

Services for Young People

The overall objective of services for young people is to help those aged between six and 24 to develop themselves into mature, responsible and contributing members of society. 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.

  By year's end, the non-governmental organisations ran 215 children and youth centres. These centres provide a variety of programmes and activities for the personal and social development of young people.

Social workers are posted to secondary schools to identify and help students whose academic, social and emotional development is at risk. Twenty-two additional school social workers were provided in 1996. At the end of the year, 272 school social

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workers served a student population of 449 370 at an overall manning ratio of 1:1 650. At the same time, at more than one quarter (i.e. 107) of secondary schools with a more serious student problem, the manning ratio was enhanced to 1:1 000.

      The outreaching social work service provides counselling and guidance to young people who are vulnerable to undesirable influences. In December 1996, 32 teams served in areas with a high youth population and a high juvenile crime rate.

Integrated teams based on a new service model began operating in October 1994. The teams provide children and youth centre service, outreaching social work service, school social work service and where possible family life education under one management structure. Thirteen teams were set up at the end of 1996.

Uniformed organisations offer young people opportunities to join organised activities with progressive training programmes for the development of character and leadership and to help them become responsible members of the community. This year, 96 900 young people benefited from this service, provided by eight non- governmental organisations. The Duke of Edinburgh's Award Scheme has attracted a membership of 42 000 through its 18 operating authorities.

The Opportunities for Youth Scheme offers funding support to youth groups to plan and implement community service projects. In 1995-96, 2 057 young people took part in 131 projects which benefited 186 171 service customers.

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 363 000 individuals with a disability. Services provided by government departments and non-governmental organisations help such 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 Programme 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 1995, setting out the government's policy decisions on the further development of rehabilitation services for the next decade and beyond.

      The Disability Discrimination Ordinance was enacted in August 1995. 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. An aggrieved person may lodge a complaint with the Equal Opportunities Commission or bring civil proceedings in the District Court. Equally important is public education, which plays a vital role in changing people's perception of and attitude towards people with a disability. During the year, the government outlaid $8 million 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 prevent disabilities. It also provides screening services for the early detection and identification of disabilities in babies. The Hospital Authority is responsible for providing medical rehabilitation services for clients with chronic illnesses and

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disabilities, through in-patient, day hospital, out-patient and community settings. 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 an employment service 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 Queen Elizabeth Foundation for the Mentally Handicapped, set up in 1988, aims to further the welfare, education and training of people with a mental handicap 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 about $13 million in the form of grants or sponsorship to 69 non-governmental organisations and three government departments, enabling them to undertake projects for the benefit of such people. The fund stood at $142.5 million on March 31, 1996.

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At the end of the year, the department and non-governmental organisations provided a total of 1 030 integrated programme places, 1 101 special child care places (including 78 residential places), 1 375 early education and training centre places for pre-school disabled children and 72 small group home places for school-aged disabled children. In addition, an enhanced training programme with inputs from clinical psychologists was provided to autistic children in special child care centres. For adults with a disability, there were 2 898 day activity centre places providing day care, daily living skills and work training for mentally handicapped persons. Also there were 5 675 sheltered workshop places providing employment for those unable to compete in the open job market; 950 places in various supported employment schemes providing job opportunities for those who, given support, can manage in open work settings. With regard to residential services, there were 3 547 hostel places, 17 supported housing places and 154 supported hostel places for those who could neither live independently nor be adequately cared for by their families, or who lived in areas too remote from their places of training or employment. For aged blind people unable to look after themselves adequately, or who were in need of care and attention, 595 places were provided in homes and care-and-attention homes. In addition, 570 long-stay care home places, 977 halfway house places and 180 activity centre places were provided for recovered mental patients.

 Twenty-two social and recreational centres and six parents/relatives resource centres were provided for different categories of people with a disability.

 To improve service quality, professional backup from clinical psychologists, occupational therapists and physiotherapists is provided in rehabilitation day centres and hostels. Other support services include the respite service (which provides short- term relief to families with mentally handicapped persons); five home-based training teams (which help to train mentally handicapped persons while they are awaiting placement); and 40 places of occasional child-care service for children with a disability.

A visit by the VW Car Club of Hong Kong provides variety and an entertaining break for residents of the St Joseph's Home for the Aged, run by the Petites Soeurs des Pauvres, at Choi Hung.

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Young people experience some of the thrills and achievements of old-style sailing during a trip on board the 27.5-metre junk, Huan. More than 6 000 underprivileged or handicapped children benefit from programmes run by the Adventure Ship Project, which has operated in Hong Kong for 19 years. BELOW: Young fans show their delight at receiving autographed pictures from illusionist David Copperfield, who held a special session for handicapped children before his Hong Kong performances.

Photo courtesy of the Hongkong Standard

adidas

Fitness and charity work together during a session for the senior citizens at a Yan Oi Tong gathering near Tuen Mun, in the New Territories. BELOW: Veteran Red Cross helpers show they have lost none of their skills during a demonstration session at Edinburgh Place, Central.

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SOCIAL WELFARE

Staff Training and Development

Fifteen qualifying social work training courses at degree and sub-degree levels were provided by five local universities and one post-secondary college. Together they produced 872 graduates in 1996 to meet service needs.

The department's Lady Trench Training Centre provides in-service training programmes for various grades of social welfare personnel. During the year, 15 728 participants attended 448 seminars, workshops and courses.

Having built up a strong and all-embracing social service network and a large professional body of more than 5 500 social workers over the past few decades, in 1996 the government introduced into the Legislative Council a Bill to provide for statutory registration of social workers. This is to ensure a high professional standard of practice in the best interest of the public. When the legislation is enacted, a statutory Registration Board will be set up to register qualified social workers, set qualification standards and codes of practice, and exercise discipline over the professional conduct of social workers.

       The Advisory Committee on Social Work Training and Manpower Planning, which advises the government through the Social Welfare Advisory Committee on all matters relating to social work training and manpower planning, has initiated in the year a research project to obtain employers' feedback on the competence level of social work graduates.

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, development and review 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 174 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-governmental organisations will be given greater flexibility to provide their services cost-effectively and with better accountability through individual administrators of these non-governmental organisations and the Director of Social Welfare.

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The review results were to be delivered in three stages. The first stage provided a review of the current system and ended in July 1995. At the second phase, the consultant developed a proposal on performance measures and funding arrangements. This was completed in August 1996. The third stage is under way and will look at the detailed implementation plans.

Community Building

 Several government departments and non-governmental organisations (NGOs) contribute towards the community-building programme, which serves to foster among the people of Hong Kong a sense of belonging, mutual care and civic responsibility.

Community-building efforts involve providing purpose-built facilities for group and community activities, the formation of citizen's organisations, and encouraging community participation in the administration of public affairs, solving community problems and improving the quality of community life in general. While the Home Affairs Branch has policy responsibility for the programme, the Home Affairs Department and 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 associations, women's organisations, and so on.

The Social Welfare Department and the NGOs, through the provision of group and community work activities, promote social relationships and cohesion within the community and encourage individuals to solve community problems.

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 youth exchange programmes.

During the year, the commission focused on the implementation of the proposals raised at the Review of the Implementation of the Charter for Youth conducted in 1995. A major task was to develop a set of parameters to provide objective measurements of progress in youth development in Hong Kong. A working group was formed under the commission to do this.

The commission initiated studies on the supportive system for working youths, and on the knowledge of and attitude towards AIDS-related issues among marginal youths. The studies will be completed in early 1997, when recommendations will be presented to the government departments and youth organisations. To examine the fundamental issues involved in influencing young people's attitude and social values and to explore the means to convey positive and proper messages to them, the commission also conducted a study to examine the moral values of youths.

In June and July, two groups comprising 16 young people were sent for a three- week trip to Britain and Germany respectively under the International Youth Exchange Programme. The programme enables young people to share their

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experience and ideas with their counterparts abroad. The commission has also prepared to play host to young visitors from the two countries in 1997.

Committee on the Promotion of Civic Education

The Committee on the Promotion of Civic Education, set up in May 1986, marked its 10th year promoting civic awareness and civic responsibility in the community. In 1996-97, it carried on with its expanded educational programme on equal opportunities and human rights with the $20 million extra grant allocated to promote these themes over the period 1995-96 to 1997-98.

       Major activities in 1996 included: an annual civic education exhibition featuring the themes of the rights of the child, equal opportunities, elimination of discrimination, and the Basic Law; a series of human rights education publications including a teaching kit for children and a handbook for parents, story books, cassette tapes and music compact discs; seminars on human rights; cartoon booklets on civic education and children's rights for pre-school children; video and booklets on the Basic Law for children and youngsters; and a computer software design competition on civic education. The committee allocated some $2 million under the Community Participation Scheme to fund civic education activities run by non-government organisations.

      A media campaign was launched to promote human rights, with particular emphasis on the rights of the children and equal opportunities.

       To commemorate its 10th anniversary, the committee co-produced with Radio Television Hong Kong a TV programme on civic education. A conference will be organised in 1997.

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13 HOUSING

HOUSING in Hong Kong has undergone major redevelopment over the past two decades. More than 1.2 million public and private flats have been built. Today, public rental housing accommodates about 2.5 million people compared with 1.7 million in 1975. Some 38 per cent live in increasingly modern rental flats. Since 1978, the government has built more than 220 000 subsidised flats for sale under various home ownership schemes. As a result, 52 per cent of the people live in subsidised housing. The overall home ownership rate has risen to 52 per cent, compared with 38 per cent 10 years ago.

 In 1996, the public sector produced about 31 200 flats, of which about 12 800 were for sale, and the private sector produced 19 800 flats.

Housing Policy

The government's policy is to help all households to have access to adequate and affordable housing, and to encourage home ownership in the community. The overall strategy it adopts in seeking to achieve these goals is by:

providing a sufficient supply of land, together with supporting infrastructure, for public and private housing;

⚫ creating the conditions to enable the private sector to make the fullest possible

contribution towards meeting the demand for housing;

implementing subsidised housing schemes to enable those in the relevant income groups to buy their own homes;

providing quality public housing at reasonable rents for those who cannot afford any other type of housing; and

monitoring the private housing market and, where necessary, introducing measures to curb speculation.

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)

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195 000 private housing flats.

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Policy Review

The government embarked on a review of its Long Term Housing Strategy in November 1995. The objective of the review is to consider what changes in current policies and programmes are necessary to achieve its housing goals over the planning period to March 2006. The review's conclusions and recommendations will be released for public consultation in January 1997.

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 responsible for setting government policy on the provision of housing in the public and private sectors. It oversees the public housing programmes, facilitates and 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. Its prime objective is to provide affordable housing to the needy, which is in line with the government's Long Term Housing Strategy.

       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, interim housing, 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 Housing Department is its executive arm.

       The government provides land on concessionary terms and finances, 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 $30.8 billion. This comprised non-interest-bearing permanent capital of $13.5 billion, loan capital of $11.8 billion, contributions to domestic housing of $4.8 billion and non-domestic equity of $642.1 million. The historical market value of land provided on concessionary terms was $168.2 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 has 32 307 rental housing units and 8 791 flats for sale under the Urban Improvement Scheme and Flats for Sale Schemes. The Housing Society also administers a sandwich class housing scheme on behalf of the government. Its annual production for the past five years averaged about 1 663 units.

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Private Sector Housing

The total private housing stock amounts to about 911 100 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-speculative measures and subsequent technical adjustments have achieved the desired effects. In October 1995, prices of selected residential developments in the secondary market were 26 per cent below the April 1994 peak level. Owing to lower interest rates and aggressive bank lending policies, buying interest subsequently revived. In December 1996, prices in money terms were close to the April 1994 peak level. After adjusting for inflation, however, prices were about 16 per cent lower than the peak level.

Housing Supply

To enable the government's housing production target of producing 511 000 new flats in the six-year period from April 1995 to April 2001, sufficient sites for housing development have been identified. In the case of public housing, the development of individual housing sites has already been incorporated into the Housing Authority's Public Housing Development Programme. It is envisaged that the production can be met. For private housing, the government has no direct control over the actual production. However, the production from new development sites already identified so far should be sufficient to meet the production targets of 195 000 flats. To ensure that housing production is not unduly held up by the delay in land formation or the lack of infrastructure support, the government has set aside a sum for the purpose of facilitating the implementation of housing-related infrastructure projects, such as water supply, sewerage, land formation and transport links. In 1996-97, 60 public works projects have been identified for funding at a total estimated cost of $13 billion.

Consumer Protection

Regulation of Estate Agents

In November 1995, after public consultation in 1994, the government introduced proposed legislation (Estate Agents Bill) 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 agency agreement forms. A Bills Committee was set up by the Legislative Council to examine the legislation, which is scheduled for enactment in 1997.

Sales Descriptions on Uncompleted Flats

After public consultation in 1994, the Law Reform Commission reported in April, recommending the introduction of legislation to require developers to provide sales literature with clear and accurate descriptions about uncompleted properties put on

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      sale, and to impose penalties for non-compliance. The government has completed consultation with property developers and relevant professional bodies on these recommendations. In general, they supported the spirit of the recommendation, although there were comments on the proposed level of penalty for breaches. The administration will study these comments carefully and aims to introduce appropriate legislation in 1997.

Rent Control

The tenants of most domestic premises are afforded security of tenure under the Landlord and Tenant (Consolidation) Ordinance.

       Statutory controls date from 1921 and the following domestic tenancies also have their rent levels controlled:

• Tenancies in pre-war domestic premises; and

Tenancies in post-war domestic premises completed before June 19, 1981 (but not new lettings created on or after June 10, 1983, nor tenancies of premises with a rateable value of $30,000 or more as at June 10, 1983).

       Other domestic tenancies receive security of tenure, provided the tenant is prepared to pay the prevailing market rent.

       The legislation originally provided for controlled rents to be increased progressively up to market levels so that rent control could be removed by the end of 1996. However, the Legislative Council passed a resolution in December 1996 to extend rent control for two years, lower the permitted rent levels from 90 per cent of the prevailing market rent to 80 per cent, and lower the maximum rent increase from 30 per cent to 20 per cent. Based on the present legislation, rent control will phase out after December 31, 1998. The provision for security of tenure will, however, continue to apply after the expiry of rent control. 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. 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 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 answer enquiries on landlord and tenant matters in district offices.

       As part of the overall review of the Landlord and Tenant ordinance, it is intended to raise penalties against harassment and unlawful eviction to ensure sufficient deterrent.

Public Rental Housing

About 700 000 flats are available for public rental housing.

Rent Policy

      Rents for domestic units in the public sector are based on tenants' ability to pay. Tenants may choose to live in the minimum space standard of 5.5 square metres per 191

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person at a median rent-to-income ratio not exceeding 15 per cent, or 7 square metres per person at a median rent-to-income ratio not exceeding 18.5 per cent. With rents being charged at $60.40 per square metre for the newest urban estates, $37.70 for the newest New Territories estates, and $34.70 for the newest Island estates, domestic rents represent, on average, 8.6 per cent of the median household income of Housing Authority tenants. Rents are reviewed every two years, taking into account increases in rates, management and maintenance costs, 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 are required to declare household income at two-yearly intervals. Households with income exceeding two times the Waiting List Income Limit are required to pay 1.5 times rent plus rates. Those with income exceeding three times the Waiting List Income Limits or who choose not to declare income have to pay double rent plus rates. At present, some 46 500 households or 14 per cent of the 330 000 affected households are paying extra rent.

 In June 1996, a new policy on safeguarding rational allocation of public housing resources was introduced following deliberations by an ad hoc committee under the authority, and a three-month public consultation. With the introduction of the new policy, tenants paying double rent are required to declare their net household assets at two-yearly intervals. If such households' assets exceed 110 times the 1995 Waiting List Income Limits, they are required to pay market rent. The first batch of affected households will start to pay market rent in April 1997.

Rent Assistance

Public housing tenants facing temporary financial hardship can apply for rent reduction under the Rent Assistance Scheme. In September 1996, the eligibility criteria for rent assistance were relaxed to benefit more low-income households. A public housing household whose income is below 50 per cent of the Waiting List Income Limits; or whose income is between 50 and 60 per cent of the Waiting List Income Limits and whose rent-to income ratio exceeds 15 per cent; or whose rent-to- income ratio exceeds 25 per cent, is eligible for assistance. Up to December 1996, 2 252 families benefited from the Rent Assistance Scheme.

Allocation

In 1996, 15 747 new flats and 22 107 refurbished flats were let to the various categories of eligible applicants. Some 13 200 flats (35 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). At the end of the year, there were 149 340 applications on the general waiting list; including 22 216 applications single persons.

 Two other large groups of allocation were tenants affected by the comprehensive redevelopment programme (20 per cent), and families affected by development clearances (24 per cent). The remainder of the flats were allocated to junior civil

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servants, victims of fires and natural disasters, occupants of huts and other structures in dangerous locations, and compassionate cases recommended by the Social Welfare Department.

Housing the Elderly

      Under the Housing for Senior Citizens Scheme, introduced in 1987, more than 3 604 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 normally allocated public housing in approximately two years. In 1996, 1 340 people were rehoused under this scheme and 658 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, 2 174 families have benefited from this scheme. New housing for the elderly continues to be built on small urban sites over the next few years. In the period from 1996-7 to 2000-1, the Housing Authority will provide 52 000 flats suitable for small households, including flats designed for the elderly.

Community Liaison

The Housing Authority has established five Housing Information Centres. In addition to outreaching services such as organising visits, talks and exhibitions on housing for the elderly, these centres provide comprehensive advisory services to residents affected by redevelopment of private buildings or urban renewal projects, and to applicants for public 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.

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 230 000 flats have so far been sold to eligible families. These include 69 704 flats produced under the Private Sector Participation 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 prior to the submission of their applications and are subject to a household income limit of $26,000 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.

      To encourage upward mobility, 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 40 per cent of the families who bought property under the schemes were public housing tenants who surrendered their rental flats in return

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for allocation to those in greater need. Priority is also extended to prospective tenants so that they can bypass public rental housing.

During the year, some 10 987 flats and 2 340 flats were sold under the HOS and the PSPS scheme. The schemes were over-subscribed by 10 times.

In a bid to promote home ownership, the authority conducted a comprehensive review of the HOS in 1995. The review resulted in several recommendations, including a proposal to sell new rental flats to tenants affected by the Comprehensive Redevelopment Programme (CRP). The proposal provides a mortgage subsidy to CRP tenants and possibly certain other public rental housing tenants to purchase these transfer block flats. Also included are a new resale restriction regime and the introduction of a secondary market for the sale of HOS flats to public rental housing

tenants.

Sandwich Class Housing Scheme

The Sandwich Class Housing Scheme was introduced in 1993 to assist families with a monthly income of between $20,001 and $40,000 to buy their own homes. In 1996, the lower and upper limits were revised to $26,001 to $60,000 respectively. It comprises an Interim Loan Scheme and a Main Scheme, both of which are administered by the Housing Society.

The Loan Scheme, with a grant of $2 billion from public funds, will help 4 500 families buy their own homes in the private sector. Successful applicants can borrow up to 25 per cent of the flat price or $550,000, whichever is the 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 1996, 4 047 loans with a total value of $1.86 billion had been granted.

The Main Scheme involves the construction of flats which will be sold to eligible applicants at discounted prices but subject to a five-year resale restriction. The land is granted to the Housing Society on concessionary terms and this is reflected in the selling prices of the units. In all other aspects the flats are comparable to those built by the private sector.

Eleven sites producing 10 446 flats form the first batch and currently 1 024 flats in Tsing Yi have been completed. Another 2 578 flats in Ma On Shan, Ap Lei Chau and Tseung Kwan O have been pre-sold, and the remaining 6 844 units will be offered for pre-sale in 1997. To meet the balance of the total target of 30 000 units under the scheme by the year 2003, two sites have been granted which will produce approximately 1 612 units. Eleven sites have been identified which will produce some 12 000 units. We will continue to identify suitable sites for this purpose.

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 1996, 6 170 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.

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As an incentive to attract more 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 those for private sector applicants were $400,000 and $3,400 respectively. This offer remains effective for the financial year 1996-97. So far, 16 708 loans and 975 subsidies have been granted. As a result, 10 035 public housing rental units have been recovered.

Construction

The Housing Authority continued its building programme during the year with the completion of 17 118 new rental and 11 375 Home Ownership flats. At the end of the year, 167 791 flats were under construction. Harmony blocks, first introduced in 1992, are now a familiar sight throughout the territory.

        Construction was undertaken both for new estates in New Towns such as Tin Shui Wai, Tseung Kwan O and Tung Chung, and for the redevelopment of older estates within existing urban areas. Production targets are set to rise further in future. The authority is stepping up construction work. About 300 000 flats are programmed for completion between 1996/97 and 2000/01.

New Block Designs

In its continued quest for better flat designs and environment for the community, the authority introduced during the year a new range of standard blocks, Concord 1 and 2, for the Home Ownership Scheme. The Concord blocks incorporate and improve on the Harmony block and New Cruciform block designs to offer buyers a more spacious living area and a higher standard of choices of fitting-out and finishes. Concord 1 has 41 storeys with eight units per floor, and Concord 2, 31 storeys with six units per floor. The units will range from 46 square metre two-bedroom to 61 square metre three-bedroom flats. Standard features will include an en-suite shower- room and bathroom in larger flats and fully-fitted kitchens and bathroom.

The first building contract to include a Concord block commenced in Fanling in 1996. Completion is expected in early 1999. Parallel to the development of the Concord designs, the existing Harmony and New Cruciform Blocks were being upgraded to a similar standard, with improved finishes and fittings in kitchens, bathrooms, public areas and lifts.

Redevelopment

Redevelopment projects are in progress at Yau Tong, Kwun Tong (Lei Yue Mun Road), Lam Tin, Sau Mau Ping, Tsz Man, Upper Ngau Tau Kok, Valley Road, Pak Tin, Shek Lei, Kwai Fong, Kwai Chung, Chai Wan and Shek Pai Wan Estate. The old blocks evacuated in the year under the Comprehensive Redevelopment Programme include blocks at Chai Wan, Sau Mau Ping, Upper Wong Tai Sin, Tsz Oi, Tsz Ching, Shek Lei and Shek Yam Estate and the demolition works started in February. The development will improve the environment in these estates for 35 117 people.

Since the launching of the Comprehensive Redevelopment Programme in 1988, 321 housing blocks in older estates have been redeveloped, improving the living

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conditions for some 103 441 families. Over the next five years, another 246 older blocks will be redeveloped.

  An Advance Allocation System to offer more choices to the tenants affected by the Comprehensive Redevelopment Programme was piloted in the redevelopment of Chai Wan Estate Phase 2 in January 1996. Under the scheme, reception flats earmarked for the exercise were open for selection by tenants and the priority of flat selection was determined by a ballot. The scheme was well received by tenants.

Estate Management

The Housing Authority has gradually introduced private agents to enhance the quality of management service in public rental housing. A trial scheme to contract out estate management services in three new public rental estates Ming Tak, Hing Tung and Ping Tin - has been carried out in 1996.

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Following a successful trial in four estates in mid-1994, the Customer Service Assistant (CSA) Scheme has been extended to all public rental estates. The CSAS record requests and complaints from tenants and refer matters to appropriate estate officers for action. Tenants will be informed of the time for repairs.

The Estate Management Advisory Committee Scheme (EMAC) is being extended to other estates following its successful trial in eight pilot estates in 1995. It aims to increase tenants' participation in estate management, enhance communication between tenants and the management, and improve service standards. So far, 89 committees have been set up. The scheme will be fully implemented in all public housing estates by the end of 1997.

The Housing Department has launched a security upgrading programme to provide 24-hour security guard service and security installation to all existing rental blocks of Harmony and Trident series and new blocks under construction. It is anticipated that the whole improvement programme will be completed in 1997. The system will allow tenants to speak to and see visitors over their own telephone and television screens. At the same time, estate staff will also be able to monitor the estate through a comprehensive network of closed-circuit television (CCTV) connected to a central control room in each estate. In addition, night patrol guard and CCTV services are provided to housing blocks without entrance gates and blocks without lift service.

  A package of measures to enhance the management and living environment of interim housing areas have been implemented. These include more regular cleansing of open areas, surface channels and toilets; speeding up repair services and enhancing communication between the management and the residents.

Welfare Services

 Some 1 158 welfare premises in Housing Authority's estates and courts are let for welfare and community services at a concessionary rent of $33 per square metre a month. Non-domestic premises in less-popular locations are let at a fair market rate to community organisations. The authority also undertakes fitting-out works for welfare projects and 133 projects were fitted out in 1996.

  The Estate Liaison Officers 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

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activities. In September 1996, the Housing Authority approved financing the installation of an emergency alarm system for low-income elderly tenants living alone and who are not receiving Comprehensive Social Security Assistance. By the end of the year, 57 applications had been approved.

Commercial Properties

Retail facilities and car parks are provided as an integral part of public housing estates. Apart from providing convenience to tenants, they generate income which helps sustain the authority's building programme. Five new shopping centres were completed during the year. Total commercial stock at year's end stood at 1.3 million square metres, and 75 000 car parking spaces. Despite continued difficulties in the retail sector, vacancies remained low at around 2.3 per cent during the year. Total income grew by some 10 per cent to $3.9 billion.

The authority's portfolio includes 17 flatted factory estates and 2 500 shops in former resettlement estates. These shops and half of the factory units are let at low rents; other premises are let at market rents, primarily for three-year terms. Lettings are primarily by tender supplemented by negotiation, which provides flexibility and assists in attracting anchor tenants and large space users.

The authority continues to expand the role of the private sector in commercial properties management. The majority of car parking spaces and factory estates are now under agency management. A trial scheme for the privatised management of two shopping centres has produced good results and will be expanded over the next few years.

Maintenance Services

The introduction of additional estate facilities and rise in tenants' expectation have added to the Housing Authority's maintenance commitment. Total maintenance expenditure for the year amounted to $3 billion. The authority is expected to spend $22.7 billion within five years on maintenance and improvement works.

Since the introduction of the CARE (Condition, Appraisal, Repair and Examination) Programme in mid-1993, 111 estates have started their first CARE cycle. It is expected that all the estates except those due for redevelopment will have commenced the CARE cycle by 1997. The Enhanced CARE Programme, a more customer-oriented, planned-maintenance programme, was also implemented in March 1996. This programme focuses on tenants' communication and participation in maintenance, including tenants' survey, fitting out of sample rooms to demonstration quality, and provision of a 'hot-line' to handle more effectively complaints and enquiries.

      The first cycle of Special Repair Programme comprising condition survey and repair to about 205 domestic blocks (about 104 605 flats) in older estates was in steady progress. A total of 27 289 flats (52 per cent) have been repaired through overtime work in evenings and in public holidays to meet tenants' requirements. It is expected that the repair works will be completed by early 1997.

The refurbishment period for the authority's vacant flats was shortened. During the year, 14 944 flats were refurbished for reletting and over 73 per cent of them were finished within three months. At the same time, improvement to existing shopping

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centres continues with four projects completed during the year at a cost of $200 million.

To improve the water quality of potable water supply in estates, a master replumbing programme was developed, and 405 rental blocks have been scheduled for replumbing within the coming three years. So far 38 blocks in total were replumbed with non-ferrous materials. In addition, a total of 61 pump houses were renovated and replaced by stainless steel flush water pumps.

  With the successful implementation of the pilot scheme in 35 estates in April 1995, the MISIS front-line system, a fully computerised system for minor maintenance works, was extended to 110 estates. The authority is reviewing and re-engineering various processes relating to day-to-day minor maintenance with a view to providing better maintenance services for the tenants.

  Electrical rewiring and reinforcement programmes have progressed well. During the year, 71 rental blocks were rewired and/or reinforced at a total cost of $133 million. The programme will be completed in 2003/04.

  Conversion of the existing fire services dry riser system to a wet riser system in estates has been completed. A similar improvement programme for the provision of wet riser system to low-rise blocks, factory blocks and staff quarters is scheduled for completion by September 1997.

The security package for installing security gates and CCTV inside lifts in existing rental buildings was provided to 367 blocks. It is anticipated that the entire programme for more than 940 buildings would be completed by June 1997. Progress on modernisation of lifts in older buildings was in full swing. The Cable TV service has been activated in more than 238 existing estates/courts with scheduled completion to all estates by end-1997.

Squatter Control

The squatter population has been reduced to 21 800 in the urban area and to 215 300 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. During the year, a total of 3 700 illegal structures and extensions were demolished.

The Housing Authority repairs and maintains the facilities in the existing squatter areas. In the event of fire, landslips 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 1 010 people were given either permanent or interim housing in 1996 under this category.

Squatter Clearance

All squatters on government land in the urban area were offered rehousing by the end of March 1996. During the year, 194 hectares of land were cleared, with 9 200 and 2 800 affected people given permanent or interim housing. Some 1 020 industrial, commercial and agricultural undertakings affected by clearances were awarded ex- gratia allowances.

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A non-development clearance programme was devised on the advice of the Geotechnical Engineering Office of the Civil Engineering Department. Some 3 400 persons living in the squatter huts on slopes vulnerable to landslips were provided with either permanent or temporary housing elsewhere, according to their eligibilities.

The Advance Allocation System was tried out in some clearance operations. The scheme was successful and widely accepted by tenants. Its feasibility is under further study with a view to extending it to all clearance operations.

Temporary Housing

Temporary Housing provides accommodation for people who are rendered homeless by clearance, fires and natural disasters but are not eligible for permanent public housing. Since early 1996, this type of accommodation has been renamed Interim Housing (IH). The aim is to emphasise to the residents the transitional nature of the accommodation.

There are two types of IH: the traditional low-rise timber structures and the multi- storey concrete blocks (converted from the existing blocks in the older estates). At the end of the year, the territory had 21 interim housing areas housing 29 100 people.

An accelerated programme to clear all pre-1984 interim housing areas is in progress. During the year, 13 interim housing areas were cleared.

       The Housing Authority plans to retain old housing blocks to provide the bulk of IH in the long term. It is also experimenting with a new design of IH using prefabricated building systems.

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 six transit centres with a capacity of 930 people.

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 hillsides. During the year, the largest cottage area, Tiu Keng Leng Cottage Area, was cleared for permanent development. At the end of the year, there were five cottage areas in the territory, housing 3 420 people.

Community Activities

During the year, the Housing Authority actively involved the community as partners in promoting the concept of Care and Share among its tenants.

       Apart from the extension of the Estate Management Advisory Committee Scheme to all estates, the authority has launched a territory-wide campaign to increase civic- mindedness among primary and secondary students. The campaign featured competitions to create slogans, drawings and cartoon figures, and the nomination of student ambassadors. Other activities organised included mobile exhibitions and a

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fun bus visiting kindergartens and primary schools. A hygiene and health education programme was also tailor-made for interim housing tenants.

  To create an opportunity for international exchange on housing issues, the authority organised a Housing Conference with the theme of 'Housing for Millions ---- the Challenge Ahead' in May 1996. More than 500 delegates from Hong Kong, Asia, the Pacific Rim, North America, Europe and South Africa participated. A new exhibition centre at Ho Man Tin South was opened by the Chief Secretary in May 1996. The centre serves as a central resource and exhibition centre for public housing, and it will help both the local community and overseas visitors to understand the authority's work, policies and services.

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| PREVIOUS PAGE: High-rise apartments blaze into light and colour at night in the Kowloon foothills at Wong Tai Sin. Most of the buildings in the picture provide government-built public housing - where about 2.5 million people live and pay minimal rents. Hong Kong's housing sector has built more than 1.2 million private and public flats in the past 20 years.

Luxury town house-style development, Red Hill, on a promontory overlooking Tai Tam Bay on southern Hong Kong island.

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Prospective buyers look through a display flat and (bottom) study a model of Kings Park Villa, a top-end development in the heart of Kowloon.

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Enthusiastic bathers splash in a new swimming pool built by the

Urban Council near a public housing estate at Hammer Hill. Swimming is Hong Kong's most popular summer pastime, with about 7.7 million people using the 31 public pools managed by the Urban and Regional Councils, and 17.3 million going to the 41 gazetted bathing beaches in 1996.

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14 LAND, PUBLIC WORKS

AND ÚTILITIES

      EFFICIENT delivery of a wide range of public works is essential to sustaining Hong Kong's economic growth and improving its lifestyle. In the five years since 1992, the government has spent more than $72 billion on public works, other than works in connection with the new Airport Core Programme, to build the infrastructure necessary to cope with Hong Kong's rapid development. This constitutes an increase of 40 per cent in real terms by comparison with the previous five years.

The works group of departments managed more than 1 000 ongoing projects of all kinds in 1996. To help ensure that these projects are completed on time, a computerised public works management system was installed in 1994. The system was upgraded in 1996 and 155 terminals were installed in various government departments. Dedicated project management teams have also been set up in works departments to facilitate the execution and co-ordination of projects. Suitable training materials have been developed and training programmes implemented to improve professional skills in project management and co-ordination.

A regular Land Acquisition Co-ordination Meeting has been set up to identify and resolve major problems and streamline the land acquisition process and facilitate land resumption for public works. This is supported by district level committees which have been reorganised to deal more effectively with local issues.

The Architectural Services Department and the Medical Electronics Projects and Procurement Sub-divisions of the Electrical and Mechanical Services Department were certified to ISO 9000 quality standards in April and June 1995 respectively. To further promote quality management in public works construction, consultants for major consultancies and contractors for major contracts were required to be certified to ISO 9000 international quality standards by April 1 and October 1, 1996, respectively. The industry response was good. Meanwhile, the first phase of the Civil Engineering Department's quality management training programme started in mid- 1996 while the Department's Landslip Prevention Branch established a documented quality management system to ISO 9000 standard in October 1996. The Territory Development Department, Highways Department, Drainage Services Department and Water Supplies Department have also embarked on developing their own quality management systems.

The Port Projects Co-ordination Office was expanded in 1996 to facilitate the planning and implementation of the proposed port development. Key port projects that are in active planning include Container Terminals 9, 10 and 11. The office is co- ordinating the investigation and construction of various new port facilities such as typhoon shelters, sites for mid-stream operations and river trade terminals.

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During the year, the government announced additional safety initiatives to promote safety and health on public works construction sites. To this end, a Pay for Safety Scheme and an Independent Safety Audit Scheme, together with a system of sanctions, are being progressively introduced into capital works contracts to encourage contractors to give site safety a high priority. To help promote safety, basic safety training courses are being organised jointly by the government, the Hong Kong Construction Association and local institutes such as the Construction Industry Training Authority and the Occupational Safety and Health Council.

The government also took steps to improve building safety in the private sector through the setting up of a special task force to inspect construction/demolition sites; and through legislative amendments to improve the registration of building professionals and contractors and to enhance the safety of building and demolition works. The outcome of an on-going consultancy on older buildings will provide useful information for mapping out a strategy to ensure proper building repair and maintenance.

After conducting a comprehensive review on slope safety in 1995, the government increased manpower resources and funding for the Geotechnical Engineering Office (GEO) in order to accelerate the Landslip Preventive Measures (LPM) Programme. The GEO stepped up its publicity campaign on slope maintenance, published guides on the subject and set up a hotline. În 1996, a consultancy was commissioned to

In identify the maintenance responsibility of all man-made slopes throughout Hong Kong. A standing committee was set up in the Works Branch to take forward proposals on legislative control of private slopes and on maintenance of public slopes. The government has also made substantial progress in implementing all five of the recommendations made by the Canadian geotechnical expert, Professor N. R. Morgenstern, after his investigation of the Kwun Lung Lau landslide in late 1994.

The Electrical and Mechanical Services Trading Fund was set up in August 1996. With the exception of regulatory services, all major operations in the Electrical and Mechanical Services Department were put under the Trading Fund. The fund will enable the department to operate more flexibly, efficiently and responsively and hence provide better services to its clients.

Improvements were made to the Water Supplies Department's operations and efficiency after a management review was completed in October 1995, and other measures are being considered. Meanwhile, work has started on digitally mapping all of the department's underground assets, to assess their condition and to evaluate the capital and recurrent costs of operating and maintaining them in an efficient manner. The Sewage Services Trading Fund was set up in March 1994 to operate and maintain Hong Kong's sewage services and also to collect sewage charges in accordance with the 'polluter pays' principle. The sewage charging scheme started in April 1995. A proposal to increase sewage charges to meet the rising costs of the expanding sewage services was not approved by the Legislative Council in July 1996 and, as a result, the Trading Fund is projected to run into deficit beginning in 1997-98.

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

LAND, PUBLIC WORKS AND UTILITIES

      optimise the use of land within the framework of land-use zoning and development 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 endorsing 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 Department (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 Development Department and the Government Laboratory.

       The Secretary for Works oversees and has policy responsibility for the works agency activities of the Architectural Services Department, Civil Engineering Department, Drainage Services Department, Electrical and Mechanical Services Department, Highways Department, Territory Development Department and Water Supplies Department. He is responsible for the supply of drinking and flushing water in the Water Supplies Department, the Sewage Services Trading Fund in the Drainage Services Department and the Electrical and Mechanical Services Trading Fund in the Electrical and Mechanical 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). The Port Projects Co-ordination Office was set up under the Secretary for Works in 1995 to ensure efficient co-ordination of port projects.

Planning

Town planning is carried out by the Planning Department under policy directives from the Planning, Environment and Lands Branch and the Housing Branch. During the year, the department was involved in the drafting of an amendment bill to the existing Town Planning Ordinance and the Town Planning White Bill; reviewing the Territorial Development Strategy and the Metroplan; updating the Development Strategies for the North-West and the South-West New Territories; and the Hong Kong Planning Standards and Guidelines. It also identified housing sites, assessed housing demand and forecast of land supply for housing and other major land uses; plus following up on the Port and Airport Development Strategy, and the Rural Planning and Improvement Strategy.

The department was also engaged in forward planning, including efforts to co- ordinate the formulation of the urban renewal strategy and programme, and development control for the districts; and in undertaking enforcement action against unauthorised developments in designated rural areas.

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Review of the Town Planning Ordinance

The Town Planning Ordinance was enacted in 1939 and had remained largely in its original form. In 1987, the Governor in Council (G in C) 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.

A consultative document on the comprehensive review of the Town Planning Ordinance was published in 1991 to solicit public views. As part of the review, a special committee was set up to consider the complex and contentious issues of compensation and betterment arising from planning actions. The recommendations of the special committee were published in 1992. While the administration was taking stock of the situation in light of the submissions and views received from the public, some less-controversial but more urgent proposals were put forward in amendment bills which resulted in the enactment of amendments to the Town Planning Ordinance in 1994 and 1996.

Technical work on the review is now complete and the administration has consolidated the major proposed changes to the planning system in the Town Planning White Bill. The White Bill was published in July 1996 for public consultation until end of the year.

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 works undertaken during the year included the formulation and revision of planning standards and guidelines for community centres, recreation and open space, industry and retail facilities.

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 and promote its hub functions as a regional centre of business and finance, a high-capacity container port and an international focal point for aviation.

  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 catchment, and the second includes both Guangdong province and other inner provinces of China as Hong Kong's economic catchment.

  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

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      formulation and evaluation of TDS development options on the basis of the foundation studies; and the formulation of a recommended long-term development strategy for the territory and a medium-term strategy with an outline development programme. A public consultation exercise in 1993 sought public views on goals/objectives and strategic development options. The technical part of the review was completed and a Consultative Digest was produced in July to invite public comments until end of 1996.

Sub-regional Development Strategies

      These strategies serve as a bridge between the TDS and district plans. They translate 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 G in C 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, Tsuen Wan-Kwai Tsing were completed. The Hong Kong Island West and Central and East Kowloon Development Statements have recently been completed and released for public consultation. With the completion of the TDS Review, the Metroplan is now under review to produce an updated planning framework for the development and redevelopment of the Metro Area.

       Work on the review of the NWNT and SWNT sub-regional development strategies is in progress. These reviews aim at producing an appropriate land-use, transport and environmental framework to guide the planning and development of the sub-regions up to 2011. A Tuen Mun East Development Statement was completed in 1996.

       The NENT Development Strategy Review has been completed. A review for the SENT is not required 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 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 (TPO): 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.

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OZPs are intended to show the broad land-use framework of specific area, 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. In areas covered by DPA plans and their replacement ÖZPs, the Planning Authority can take enforcement actions against unauthorised development.

In 1996, four new OZPs to replace DPA plans were published, and 15 existing plans were amended by the TPB. At the end of the year, there were 89 OZPs (34 of them replacing DPA plans) and one DPA plan.

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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 1996, 476 objections to the draft plans were lodged, and 2 736 objections (including those brought forward from the previous year) were considered. Draft plans, together with amendments made to meet objections and unwithdrawn objections, will be submitted to the G in C for approval. In 1996, five OZPs, four DPA plans and two LDC Development Scheme Plans were approved.

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 1996, the TPB considered 870 applications for planning permission and 101 reviews of planning applications.

Guidelines are formulated by the TPB to help applicants submit planning applications. The TPB has promulgated 14 sets of such guidelines and has 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 nine cases in 1996, of which one case was allowed and eight cases 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 85 ODPs and 331 LPs.

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

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      demanding a reinstatement of the land. It is an offence in law if the requirements of the notices are not complied with.

       Most of the unauthorised developments detected in 1996 were related to site formation; earth-filling; the open storage of vehicles, containers, trailer/tractors and construction materials; and vehicle repair workshops. These caused the serving of 1061 enforcement notices for 200 cases, and 87 reinstatement notices for 13 cases. Positive attempts were made to reinstate those sites which had caused adverse environmental hazards or flooding hazards. In the Ping Che and Ta Kwu Ling area, the illegally filled rivers were reinstated successfully.

        Prosecutions were conducted in respect of 48 cases, and 87 defendants in 47 cases were convicted. As a result of increasing the maximum fine for unauthorised development offences under the Town Planning Ordinance with effect from June 1995, the average fine which had been imposed on the convicted defendants was about $40,512, with a range of $5,000 to $217,500.

       Special teams have also been set up to work in collaboration with the Task Force (Black Spots), Lands Department on the common objective of cleaning up the environmental black spots in rural New Territories. The special teams are to expedite enforcement and prosecution actions against unauthorised developments in the Pat Heung Pilot Action Area and the North District East Action Area.

Urban Renewal

To create a better urban environment through comprehensive redevelopment, urban renewal frameworks have been prepared for various urban districts in the old urban

areas.

       The Land Development Corporation (LDC) was established in 1988 to undertake, encourage, promote and facilitate urban renewal. Since its inception, 10 urban renewal projects have been completed and 16 projects are under way.

       During the year, the G in C approved two more LDC development scheme plans for comprehensive redevelopment in the older parts of Yau Ma Tei and Wan Chai. Six approved scheme plans are in different stages of implementation by the LDC in Hong Kong and Kowloon. Office and/or residential buildings, community facilities and public open spaces will be provided within these schemes. The LDC has also undertaken some smaller commercial and residential redevelopment projects to enhance the environmental conditions in the old urban areas. The Hong Kong Housing Society (HKHS) has also contributed to the urban renewal process by undertaking urban improvement schemes in the older areas.

       In June, after considering the public views on the consultation document on Urban Renewal, the G in C approved a package of immediate and long term measures to address urban renewal problems. Subsequently, a dedicated urban renewal team was set up in September 1996 to formulate strategies and to monitor the implementation of the proposed measures. Immediate measures include the initiatives to grant sites (at reduced premium) to the HKHS which will act as the rehousing agent for the LDC, to test the linked-site approach by carrying out a pilot project, to extend the priority period in allocating public housing for the households affected by the LDC's redevelopment. Longer-term proposals include further study on the setting up of a statutory Urban Renewal Authority, the introduction of measures to encourage

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proper building maintenance, the creation of a rehabilitation fund, and a recommendation to facilitate private land owners to redevelop their properties.

Planning Studies

During the year, the Planning Department worked on several major reclamation proposals and development projects, notably the Central and Wan Chai, West Kowloon, Kowloon Point and Green Island reclamations. Studies were completed on site design parameters for the West Kowloon Reclamation; visitors and tourism in Hong Kong; ecological value of fish ponds in Deep Bay area; case studies arising from the Study on Restructuring of Obsolete Industrial Areas; leisure habits/ recreation preferences; the provision of industrial premises and development of planning guidelines and design parameters for new industrial areas and business park; and future use of Tsing Yi Town Lot 46 R P and possible foreshore reclamation at Tsing Yi power station site.

Studies including assessment of redevelopment potential in the metro areas; office decentralisation and the formulation of an Office Land Development Strategy; military sites in Kowloon and the New Territories for residential development are still ongoing. New planning studies on the Metroplan Review, survey of housing aspirations of households have begun. Other planning studies relating to the Territorial Development Strategy and Sub-regional Development Strategies were also conducted during the year.

Urban Development Areas

Work on new urban development areas generally followed the broad pattern of land- use and guidelines in the Metroplan and integrated with the replanning and redevelopment of adjoining old areas in a planned and co-ordinated manner.

Hong Kong Island

The Central and Wan Chai Reclamation extends along the waterfront from Sheung Wan to Causeway Bay. The first phase of the Central Reclamation, involving some 20 hectares at the Central waterfront, has been completed. This provides land for expansion of the Central Business District and construction of the Airport Railway's Hong Kong Station, the latter being scheduled for completion by mid-1998.

The second phase of the Central Reclamation, involving about 5.3 hectares of land in the Tamar Basin area for commercial and open space development, was substantially completed. The infrastructure works are scheduled for completion in the first quarter of 1997.

 The detailed design for the third phase of the Central Reclamation, which will connect Phase I and Phase II with the Wan Chai Reclamation, commenced in February 1995 and was completed in late 1996.

Most of the civil engineering works for Phase I of the Wan Chai Reclamation was substantially completed. To tie in with the target opening date of the Hong Kong Convention and Exhibition Centre Extension in mid-1997, the remaining road works are scheduled for completion in February 1997. Phase II of the reclamation is under planning and together with other phases of Central and Wan Chai Reclamation, it will accommodate the strategic road links between Central and the eastern part of Hong Kong Island.

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On the western side, the Belcher Bay Reclamation will provide about 10 hectares of land, mainly for the construction of Belcher Bay Link, a dual carriageway connecting the existing upgraded Connaught Road West with Smithfield in Kennedy Town. Both the reclamation and the construction of the road link began in May 1993 and are targeted for completion in March 1997, to tie in with the opening of the Western Harbour Crossing.

       On the eastern side, the Aldrich Bay development would 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.

       The Siu Sai Wan development included site formation to prepare about 56 hectares of land for residential, government, institutional, community and other uses. Two secondary schools and two Private

                        Private Sector Participation Scheme housing developments were completed. Another Private Sector Participation Scheme housing development and an Urban Council sports ground are under construction.

Site formation and road works for public housing development at Woodside, Quarry Bay, will commence in August 1997 for the building works to start in May 1999 and be completed in May 2002.

Kowloon

Reclamation work at West Kowloon was substantially completed. Some 328 hectares of land have been formed, including reclamation at Stonecutters Island. The broad objectives of the project are to provide land for major transport links to the new airport at Chek Lap Kok, including Western Harbour Crossing, West Kowloon Expressway, a section of Route 3 and the Airport Railway. It also provides space to ease pressure on adjacent congested residential and industrial areas. The area will house about 91 000 persons. A large open space fronting the residential estate at Mei Foo Sun Chuen was formed, acting as a buffer zone between the residential area and the future West Kowloon Expressway. A similar open space fronting Nam Cheong Estate is being constructed and is scheduled for completion in mid-1997.

       Reclamation at Hung Hom Bay was completed, 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 community facilities, schools, open space and road works. 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 constructed and will be completed in mid-1999 to tie in with future development.

       The government is conducting a feasibility study on developing the existing Kai Tak Airport site area after Hong Kong International Airport is relocated to Chek Lap Kok. The preliminary concept is that about 270 hectares could be obtained from the existing airport site, some 300 hectares could be formed by reclamation in the longer term, and about 100 hectares will be reserved for the proposed typhoon shelter and cargo-working area at Cha Kwo Ling. The adjoining 270 hectares of existing urban areas at Hung Hom, To Kwa Wan, Ma Tau Kok and Kowloon City will offer opportunities for restructuring. A wide range of engineering works will be involved including the reprovisioning of marine and land-based facilities, reclamation, highway construction and the provision of drainage, sewerage, sewage treatment and

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 other public utilities, continuing into the next century. If implemented, it would accommodate about 285 000 people and provide about 110 000 jobs. The detailed development feasibility study is scheduled to be completed by mid-1997.

  Also in line with the Metroplan is the proposed Kowloon Point Development at the southern end of the West Kowloon Reclamation. A feasibility study started in August 1995 investigates 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.

New Towns and Rural Townships

The development of new towns in Hong Kong continued in 1996, with the production of more land, new and improved infrastructure and community facilities. The provision of new roads, drains, sewers, etc., services the new land for building development. Concurrent with the engineering works was the landscaping and greening of the new towns.

  At the end 1996, about 2.6 million people were housed in the new towns, provided with parks and open spaces, community and recreational facilities, schools, markets and shopping centres and convenient transport links.

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.

  Hong Kong's container terminals are mainly concentrated in the Kwai Chung area. The new Container Terminal 8 is now operational. Container Terminal 9 is planned for South-East Tsing Yi.

Major highway projects will further extend and reinforce the main road network. The duplicate Tsing Yi South Bridge is under construction. A flyover across Castle Peak Road connecting Tsuen King Circuit and Sha Tsui Road is planned for construction in early 1997.

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 already home for over half a million people. Developed in the early 1970s, it is well known for its planning and integrated development. About 73 per cent of the town's 545 000 people live in public housing developments, which comprise 15 public rental estates and 21 home ownership and private sector participation schemes. Together with some low-density private developments, the new town will provide houses for about 586 600 people by 2001.

Since 1981, development works have extended to Ma On Shan where reclamation was completed in 1994, with a total development area of about 2 000 hectares. Work on the last section of the primary road link to Ma On Shan Town Centre is scheduled for completion in 1998. The construction of Trunk Road T7, which will bypass the Town Centre, is under planning. Three additional public housing estates/Home

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      Ownership Schemes projects have been proposed for construction in 1996. Upon full development, Ma On Shan will house 200 000 people.

The programme to improve conditions in the old villages in and around Sha Tin continues. The village improvement schemes for Hin Tin, Sheung Keng Hau and Ha Keng Hau were completed in 1994. The extension of Sha Tin Tau Village started in 1995 and was completed in mid-1996. Servicing and minor formation works are being carried out for villages at Ngau Pei Sha, Chap Wai Kon and To Shek.

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 259 000 on about 1 270 hectares of land.

       This new town is well developed with the major infrastructure in place, including the Tai Po sewage treatment works, which will cater for the remaining development in the town area and the industrial estate.

       The Nethersole Hospital was completed in 1996 and the Tai Po Convalescent/ Infirmary Hospital will be completed in 1997. Phase 1 of the Waterfront Park near Fu Shin Estate was open to public in 1996 and Phase 2 will be completed in early 1997.

Fanling and Sheung Shui

Fanling and Sheung Shui, which are close to the Chinese border, sustain a population of around 195 000 people on about 773 hectares of land. Their combined population is expected to increase to 230 000 by the turn of the century.

      The construction of the North District Hospital is continuing. Planning and implementation of various flood control measures are under way in the upstream and downstream sections of River Indus to tie in with the Shenzhen River regulation project to provide significant flood relief by end 2001.

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 for development.

       About 73 per cent of the town's 432 000 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, four more home ownership and private sector participation schemes and one public rental estate will be developed to accommodate an additional 65 000 people. Together with some low-density private housing developments along the south-eastern coast, the new town will provide homes for about 490 000 people by 2001.

       A 125-hectare site in western Tuen Mun has been earmarked for special industries. A terminal for river trade with China is being developed by the private sector. Reclamation work for the special industry area began in September 1995. A new thermal power station, with a 5 000MW capacity, is being built at Black Point.

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Yuen Long, Tin Shui Wai and 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. The construction of new infrastructure at Hung Shui Kiu and Ping Shan areas will be implemented in different stages commencing in the end of 1997 for completion by 2002.

  Tin Shui Wai has become the focal point for development after Yuen Long in the NWNT. An initial Development Zone of 220 hectares has been developed into a new town for about 150 000 people, complete with major infrastructure and a full range of community facilities.

  With the increasing demand for land to meet future housing needs, engineering investigations for further expansion of Tin Shui Wai into the Reserve Zone were commissioned in November 1995. Upon full development, the population of Tin Shui Wai is expected to reach 315 000 before 2004.

  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 are being implemented to solve this problem. Apart from the flood control works for the Shan Pui River, the downstream and mid-stream sections of the Kam Tin River that are currently in progress, there are also two village flood protection projects at Sha Po Tsuen and San Tin villages due to start in early 1997.

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 568 hectares of land formed. Engineering infrastructure has been provided to cater for private and public housing and associated community facilities.

  Phase II includes the reclamation and engineering infrastructure for the town centre northern area, to be completed in early 2000. It will provide 96 hectares of land for commercial, residential, government, institutional and community uses.

  Phase III for the reclamation of Town Centre South and the provision of land and services for the Tseung Kwan O Industrial Estate is also in progress. An initial 30 hectares of land was 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, about 102 hectares of land south of Tseung Kwan O will be developed for deep waterfront industries and potentially hazardous installations. Reclamation is in progress. The population of the new town, which stood at 142 000 at the end of March 1996, will be more than 440 000 upon full development by 2010. The proposed extension of MTR to Tseung Kwan O and the Western Coastal Road, both intended to improve the traffic of the new town with the metro area, are now under study.

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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, with residential, industrial and commercial developments and all the necessary supporting infrastructure.

      The new town will comprise two 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 population of 60 000. The Tung Chung town centre will be the retail, commercial and cultural core of the new town. 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. The first phase is earmarked as one of the Airport Core Programme projects and will be substantially completed by 1997 accommodating about 20 000 residents at Tung Chung. Construction of the first stage of the North Lantau sewage collection, treatment and disposal system has been completed. Site formation and infrastructure works for the Phase II development are also in progress.

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 has recently been completed. Construction of sewers for Pun Lo Pang, Tai O and the road improvement works for Cheung Chau Old Town has just started.

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 requirements, and a review of the rural improvement concept.

At the district level, minor improvement projects are undertaken under the rural development programmes. The Home Affairs Department, 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 since late 1994.

       A streamlined two-tier administrative structure consisting of the RPIS Minor Works Steering Committee attended by representatives from Heung Yee Kuk and New Territories District Boards (NTDBs) and the District Working Groups attended by representatives of NTDBs and Rural Communities has been adopted. With this two-tier structure, there is a stronger local participation in the identification of local needs, prioritisation of project implementation and resolving of local objections.

Major improvement works, such as river-training works and village flood protection works, continued to be implemented by the Territory Development

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 Department through either agent departments or consultants. Construction of the downstream and mid-stream sections of the main drainage channel for Yuen Long and Kam Tin are progressing satisfactorily. Other drainage channel works in Yuen Long, Kam Tin and Ngau Tam Mei areas are under planning. The village flood protection works at Sha Po Tsuen, Pok Wai and San Tin Villages are also being planned.

Building Development

The Private Sector

Private building development underwent another year of consolidation in 1996. The number of building plan submissions decreased from 14 899 in 1995 to 13 340 in 1996, and 1 000 buildings with a total floor area of 3.2 million square metres were completed at a cost of $28.08 billion. This compared with 1 090 buildings with a total floor area of 3.8 million square metres built at a cost of $29.55 billion in 1995.

  Private sector activity continued to include redevelopment of existing sites, alterations and additions to existing buildings, and, to a lesser extent, new developments. Measures taken by the Buildings Department to encourage hotel development had a significant effect on an earlier trend towards replacing hotels with office buildings.

The department has been increasingly involved with the extensive building works associated with Chek Lap Kok New Airport, including the 490 000 square metre Passenger Terminal Building, the Ground Transportation Centre and the Air Cargo Terminal.

New legislation came into effect on February 1, 1996, empowering the Building Authority to ban hand-dug caisson operations for the protection of workers' health and safety. The authority would approve hand-dug caisson works only under special circumstances. In 1996, it approved three out of a total of 26 applications. A special site monitoring task force was set up to enhance the safety of construction and demolition sites in the private sector. Its regular inspections effectively enhanced site safety.

The Buildings Ordinance was amended in 1996, to improve the registration systems of authorised persons, registered structural engineers and contractors, and to require the preparation of a supervision plan for dangerous and potentially dangerous building works and sites. The plan sets out the supervision duties of different parties involved and the degree of supervision at different levels of responsibilities.

The Buildings Department completed the planned survey of 16 700 private buildings initiated in 1989 and 6 187 statutory orders were served, requiring certain buildings to be repaired or demolished. The consultancy study on the 1946-58 age group buildings was completed. The characteristics and trends of deterioration were assessed and recommendations on the future inspection strategy made. A programme of inspection to implement the recommendations started in July. A consultancy study on the 1959-80 age group buildings started in September, and is expected to take two years. It will provide useful information for mapping out a strategy to ensure proper building repair and maintenance.

After several landslide incidents in recent years, the Buildings Department set up a dedicated team to monitor private slope safety in tandem with the accelerated

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Landslip Preventive Measures Programme. This has produced a significant increase in the number of statutory orders served on building owners requiring them to carry out slope remedial works. Many air-conditioning cooling towers in industrial areas have been left unattended in recent years as factory operations moved across the border. To ensure public safety, an operation was launched to remove abandoned or dilapidated cooling towers in San Po Kong and Chai Wan. In all, 1043 cooling towers were removed.

The government has been pursuing initiatives to improve fire safety standards in commercial premises. Fire safety measures in other premises, such as banks, jewellers, betting centres, shopping arcades and supermarkets, are also required to be improved.

The Public Sector

The Architectural Services Department (Arch SD) provides planning and technical advice on building-related matters to all government departments and financial control and project management for both public building developments under the Public Works Programme and subvented building projects financed by the government. It is also responsible for professional design services for government departments, the Hospital Authority, the Urban Council, the Regional Council and the Military Forces in Hong Kong; and it provides maintenance services for buildings owned or occupied by these bodies.

The department celebrated its 10th anniversary in 1996 with a series of events. Roving exhibitions were displayed in public venues in Hong Kong Island, Kowloon and the New Territories to show recently completed projects. Seminars were conducted for different target groups including client departments, professional institutes and the general public. The discussions included topics such as design and build contracts, landscape design, value management and professional practices, some being held in conjunction with mainland Chinese counterparts to share professional expertise and experience.

During the year the department's Quality Assurance Certificate, ISO 9001, was extended to include its Advisory Services. In addition, the new ISO 14 000 on Environmental Management is now being pursued. Value management techniques have also been introduced and used on eight major projects during the year with encouraging results. A new Project Management Branch has been established to process new projects more effectively. The branch consists of three Project Directors and 18 Project Managers who are now able to work dedicatedly with clients on their projects. An 'access to information' service has also been set up, provided to the public through assigned officers and a resource centre.

       The Arch SD has also been active in the local professional scene. The Chan Nam Cheong, Special School project won the 1996 Hong Kong Institute of Architects President's Prize. Photographs of the Kun Ting Study Hall and the Restoration of the Tai Fu Tai Nobleman's House won a photographic competition on vernacular architecture held in the city of Tai Yuen in China. In the Urban Council Flower Show, the department won an award for design excellence in the Special Display Section (Local) for a Landscape Design.

      During 1996, the Arch SD designed or constructed 392 projects valued at $41.2 billion. It monitored a further 416 projects valued at $18.2 billion. Actual expenditure

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on building projects undertaken or monitored by the department totalled $9.23 billion, with a further $2.3 billion being spent on routine maintenance and minor alteration works.

Design and Build contracts

The centralised government godown at Chai Wan was completed in 1996. Construction of a new joint-user office building in North Point and the Public Records Office at Kwun Tong began in 1996. A further joint-user office building in Cheung Sha Wan is planned to be completed by 1999.

Education

 Eleven primary schools and 10 secondary schools were completed in 1996 under the School Building Programme. Three special schools, two prevocational schools and a field studies centre were also completed. Improvements to 70 schools were completed in 1996 under the School Improvement Programme. Construction work started on 11 primary schools, seven secondary schools, three special schools and a skills centre for the disabled. In addition improvement work on 77 schools was started under the School Improvement Programme.

Domestic

Projects completed for the disciplined services include the Fire Services married quarters in Ngau Chi Wan, junior disciplined services quarters at Wong Tai Sin and Correctional Services quarters at Pik Uk.

Disciplined Services

Fire Stations in Peng Chau and Causeway Bay were completed and Tung Chung Divisional Fire Station, Ambulance Depots in Lam Tin and Sham Tseng and Tung Chung District Police Station are under construction.

Infrastructure

Radar and telecommunication stations for the new Chek Lap Kok Airport have been completed. Construction work for the Air Traffic Control Complex and Tower, the Airport Police Station, the Sub-divisional Fire Station, the Government Flying Service and the Air Mail Centre are on track and the fitting-out work for the government facilities inside the Passenger Terminal Building started in the second half of 1996.

Military

Construction work is on schedule for various military reprovisioning projects: the Naval Base on Stonecutters Island, the Military Hospital in the Gun Club Hill Barracks, the Military Warehouse in Shek Kong and the Joint Movement Unit at the new airport at Chek Lap Kok. The fitting out of services and fittings for these projects, together with the supply and installation of mechanical and electrical equipment, will be completed in early 1997.

Medical and Health

During the year, medical projects completed include the construction of Queen Elizabeth Hospital Block B, air-conditioning to existing wards, refurbishment and

Piers for Hong Kong's Outlying Islands are nearing completion as work continues on the Central Station for the Airport Railway. This will be an express service stopping only at West Kowloon and Tsing Yi as it carries passengers between Central and the new

airport. Work should be completed by early 1998.

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      under construction curves away from Kwai Chung towards the entrance to a cross-harbour tunnel that will link the territory's new airport with Hong Kong Island.

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▲ Workers are silhouetted against the Kowloon skyline as they build the new railway terminal's Hong Kong Island end. RIGHT: Construction work nears completion on the Ting Kau Bridge, one of several major works on which $26 billion will be spent up to the year 2001.

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improvement to Blocks E, G and H at Queen Elizabeth Hospital; the Royal Hong Kong Jockey Club Institute of Radiology and Oncology; Castle Peak Hospital Redevelopment Phase 1, Stage 1; Ha Kwai Chung Polyclinic, Princess Margaret Hospital Improvements to Blocks C and D and Queen Mary Hospital Clinical Pathology Block. Construction works have started on Butterfly Beach Laundry, Queen Mary Hospital Radiotherapy Department Extension, Princess Margaret Hospital Geriatric Day Patient Centre and the Centre of Nephrology & Urology, Kowloon Medical Rehabilitation Centre and Phase 2 of the Redevelopment of Queen Elizabeth Hospital Operating Theatre & Rehabilitation Block.

Leisure and Recreation

Major Urban Council projects completed in 1996 include the Smithfield, Wong Nei Chung, Hung Hom, and Sham Shui Po Complexes, Un Chau Street Building, Ko Shan Theatre, the Museum of Teaware (extension), Siu Sai Wan Sports Ground, Hammer Hill Leisure Pool Complex, Jordan Valley Leisure Pool Complex, Cornwall Street Park and Squash and Table Tennis Complex, Po Kong Village Road Indoor Games Hall and Jordan Valley Playground. Projects under construction include Hong Kong Central Library, Ap Lei Chau and Tai Kok Tsui Complexes, Shek Kip Mei Indoor Games Hall, Shek O Recreational Development, Ma Chai Hang Recreation Ground and Lai Chi Kok Park Stage II.

      Regional Council projects completed during the year include the Swimming Pool Complex and Sports ground in Area 3, Tsing Yi; the Swimming Pool Complex at Area 100, Ma On Shan; the Swimming Pool Complex, Phase II at Area 26, Sha Tin; the Indoor Recreation Centre at Area 2, Tsuen Wan; Sha Tau Kok Market and Cooked Food Centre; the first phase of the provision of air-conditioning and improvement works to Indoor Recreation Centres; the first phase of improvement works to public toilets and markets; district open spaces at Tsing Yi, Tseung Kwan O and Tuen Mun. Construction works have started on a swimming pool, library, indoor recreation centre and district open space in Tseung Kwan O; a sports ground in Ma On Shan; the Regional Council Complex, Tsing Yi Town Centre; Peng Chau Market, Ma On Shan Park and the Heritage Museum in Sha Tin.

Landscape

The department is involved in landscape design and continuously contributes a major input towards the greening of Hong Kong. Besides the design and construction of parks, recreation areas, open spaces and sitting-out aras of various sizes, the ArchSD also co-sponsored two landscape seminars in 1996. The Eastern Regional Conference-Urban Explosion in Asia was held jointly with the International Federation of Landscape Architects and the Seminar on Classical Landscape of Chinese Imperial Gardens was undertaken jointly with the Chinese Landscape Association. The department's Property Services Branch continues to maintain and undertake minor works for about 7 000 public sector buildings and facilities. It also undertakes conservation and restoration works to listed buildings and gazetted monuments. The branch's specialist group is undertaking the conversion of the French Mission Building for use as Hong Kong's Court of Final Appeal and developing proposals for the restoration of Castle Peak farm buildings at Hung Lau as a memorial to Dr Sun Yat-sen, who once lived there.

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Energy conservation and environmental awareness is a global issue to which the department pays close attention. Energy efficient technologies and design techniques were adopted in new building designs for projects such as the Hospital Authority Building, North Point Government Offices, and Regional Council Heritage Museum. Solar energy has been adopted for use in Tsuen Wan Area 7 Swimming Pool and Sheung Shui Slaughter House. The Chinese version of the booklet, Energy Conservation in Buildings (aimed at promoting further energy conservation design and operation) was issued in March 1996.

Environmental impact assessments are carried out for all Arch SD projects that require them. Environmental audits were carried out for Arch SD offices and three selected major sites managed by the department. Noise abatement projects covering about 100 schools were completed in 1996. The department has appointed a Green Manager who is responsible for environmental issues.

  Indoor air quality and odour control are always important design considerations for government premises. Cleaning facilities in air ducts have now become standard for office buildings, hospitals and other premises where large numbers of people will be present. This allows the survey of air ducts by optical means, cleaning of air ducts by compressed air and sterilisation by chemicals.

  The department has taken the lead in the use of CFC-free chemicals for air- conditioning and fire services installations. For example, R-134a and ammonia have been used to replace conventional refrigerant; and HKC227ea has been used to replace halon fire-fighting agents. The department is continually searching for suitable new chemicals and techniques which do not have side effects such as global warming potential and are not hazardous to human beings or the environment.

Land Administration

 The main functions of the Lands Administration Office of the Lands Department, which consists of a headquarters and 14 District Lands Offices, are land acquisition, land disposal, management of unallocated government land, and lease enforcement. Land use statistics are at Appendix 38.

Land Acquisition

When private property is needed in the public interest, mostly for the implementation of public works projects, and cannot be acquired by negotiation, it may be acquired under ordinances which 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, there is a system of ex-gratia payments. During 1996, about 443 000 square metres of private land were acquired at a cost of about $1.82 billion in the New Territories for public works projects, such as a new development phase of Tung Chung on North Lantau, and village flood protection schemes in Yuen Long and North District.

  On Hong Kong Island and in Kowloon, about $128 million was paid in compensation for land and buildings acquired for public works projects, such as new open space developments at Lun Fat Street on Hong Kong Island, and Fung Tak Road extension in Kowloon, as well as road improvement schemes such as improvement work for Lung Cheung Road/Ching Cheung Road, Kowloon.

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       The Lands Administration Office was also 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. A special team has been set up to deal with the Land Development Corporation projects. 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. They are normally made for terms expiring not later than June 30, 2047. They are made at premium and nominal rental until June 30, 1997, after which an annual rent equivalent to three per cent of the property's rateable value will apply.

The amount of new land to be sold or granted each year, excluding land vested in the Hong Kong Housing Authority for public rental housing, is determined by the Sino-British Land Commission. The land disposal limit for 1996-97 is 310.17 hectares. Premium income obtained from land transactions is, after deduction of the average cost of land production, shared equally between the Hong Kong Government and the future Hong Kong Special Administrative Region Government. In 1995/96, revenue from land disposal amounted to $44.88 billion.

A land sales programme is issued at the beginning of each financial year and updated regularly, showing the details of public auctions and tenders throughout the year. 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 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. During the year, three sites with a total area of 6.73 hectares, were sold under the Private Sector Participation Scheme. Sites granted to the Housing Authority for the development of Home Ownership Scheme projects amounted to 22.01 hectares. They included three sites comprising 10.52 hectares in Tin Shui Wai and Yuen Long, four sites comprising 3.83 hectares in Kowloon East and a 2.08-hectare site in Tseung Kwan O.

Major land transactions included a five-hectare site in Hung Hom for a freight yard development for the Kowloon-Canton Railway Corporation; and a further five- hectare extension of the 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

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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 Services (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 computerisation project will be completed in mid-1997.

Copies of all registered land documents are kept in the Land Registry for public search. A Document Imaging System commenced operation in July 1996. Land documents are scanned and stored as electronic images on optical diskettes. The images can be retrieved and distributed at high speed. The existing land documents which are kept in either microfilm or paper form are also being converted into electronic images in phases. The conversion will be fully completed by the end of 1998.

The Land Registration Ordinance provides that all land documents registered under it shall have priority according to their respective dates of registration. If a 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 Bill has been revised and may be re-introduced. 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 transactions 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 premiums, 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 pre-sale consent applications which are governed by the rules of the Land Authority's Consent Scheme. During the year, nine

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      applications involving 3 001 residential units in the urban areas were approved and in the New Territories, 27 applications involving 15 322 residential units were approved.

Survey and Mapping

The Survey and Mapping Office of the Lands Department defines and records land boundaries of land developments, providing and maintaining territory-wide survey control networks, producing maps of the territory at various scales for land administration, engineering and legal purposes, and managing a computerised land information system.

The office supports government land transactions by defining and setting out the boundaries of land for sale, grant/regrant and so on., and maintains a comprehensive record of all leasehold and government land boundaries in digital form.

       The territory-wide survey control networks provide the necessary reference points for all types of land and engineering surveys. A Global Positioning System, which receives signals from satellites to fix positions based on a global co-ordinate system known as the World Geodetic System 84, is used for establishing reference points.

      Of the maps produced by the office, the 1: 1 000 scale basic topographic maps (3 000 sheets) serve as the foundation of all other mapping. Smaller-scale maps include the monochrome map series at 1: 5 000 and the coloured map series of scale ranging from 1: 20 000 to 1: 300 000. All topographic maps except the 1: 1 000 basic map series are bilingual. Guide books, tourist maps and leisure maps in the form of Countryside Series produced by the office are very popular.

      The office also 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. The office also prepares plans for land disposal, street and place naming, government gazette notices and legal purposes.

The computerised land information system allows the efficient maintenance and retrieval of the large-scale mapping and land boundary records, and the production of good quality plans. Digital maps at 1: 1 000 and 1: 20 000, which are on sale at the Land Information Centre, are widely used by government departments, public utility companies, engineering consultants and construction firms. Five more computerised mapping and survey projects were being implemented in the year to further improve the efficiency of the office in respect of map production, the setting up of the computerised mapping system, survey (mapping) intelligence system, cadastral survey plan index system and geodetic information system.

The Photogrammetric and Air Survey Section provides aerial photographs and photogrammetric mapping service for engineering design work, volumetric calculations for quarry and controlled tipping operations, environmental studies as well as town planning work. The section is also on call for record photography after storms, flooding, landslip and aircraft crashes. Photographs it takes are available for sale to the public.

The Land Survey Ordinance came into force in January 1996. Land subdivision for registration in the Land Registry has to be surveyed by Authorised Land Surveyors. The Survey and Mapping Office, being the Survey Authority, checks the quality of and keeps in custody the survey records for reference by other land surveyors.

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Drainage Services

The Drainage Services Department is responsible for planning, designing, constructing, operating and maintaining the sewerage, sewage treatment and stormwater drainage infrastructures. The Director of Drainage Services is also the general manager of the Sewage Services Trading Fund.

Treatment and Disposal of Waste Water

The treatment and disposal of waste 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.

Waste water disposal projects are broadly divided into three categories: 'existing' sewerage or sewage treatment projects which were in the public works programme before the development in 1989 of the new strategy to combat water pollution; 'sewerage masterplan schemes' which are 16 territory-wide sewerage rehabilitation and improvement schemes; and the 'Strategic Sewage Disposal Scheme' under the new strategy. The latter is a multi-billion-dollar project to collect and treat sewage discharges from Kowloon, Tsuen Wan, Kwai Chung, Tseung Kwan O and the northern side of Hong Kong Island.

Projects under these three categories, valued at some $14 billion, were under construction by the Drainage Services Department, and projects worth a further $6 billion were at various stages of planning and design in 1996.

 The largest 'existing' project completed in 1996 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. Stage II of the works between Tai Po and Sha Tin was completed and commissioned in March 1996 and included the construction of a one- metre diameter, six-kilometre long, steel rising main buried under the seabed of Tolo Harbour.

Under the sewerage masterplan schemes, planning and design work was in hand to improve the sewage collection, treatment and disposal facilities in North District; Wan Chai East and North Point; Tseung Kwan O; Aberdeen, Ap Lei Chau and Pok Fu Lam; and the outlying islands. Construction work was in progress in the remainder of the 16 sewerage masterplan schemes.

 In the Southern District of Hong Kong Island, the construction of drainage improvement works in Repulse Bay and Shek O were completed at the end of 1995 and 1996, respectively. This not only resulted in improved sewerage facilities, but also provided much-needed protection to the popular bathing beaches in this area of scenic natural beauty.

 In the North and South Kowloon sewerage masterplan area, inspection and cleaning of major existing sewers were completed. New sewers and pumping stations in Tsim Sha Tsui and Hung Hom were being built.

Laying of new sewers in the urban areas of West Kowloon continued. Detailed design for the remaining sewers and the first stage of the stormwater drainage improvements in the North-West Kowloon area was in progress.

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In the area covered by the Tsuen Wan, Kwai Chung and Tsing Yi sewerage masterplan, work on three sewer contracts continued and is expected to be completed in July 1997.

The consultancy for the Sham Tseng and Ting Kau Sewerage Scheme was awarded in May 1995 and a contract to reclaim three hectares of land at Sham Tseng for the construction of a sewage treatment plant commenced in February 1996. The laying of public sewers along Castle Peak Road at Sham Tseng and the construction of the sewage treatment works under this scheme will commence-in mid-1997.

The construction of new sewers in East Kowloon continued. A further contract to improve the sewerage system in San Po Kong and Kwun Tong industrial areas was awarded in 1996.

Sewer laying under the Port Shelter sewerage masterplan for the villages of Tan Cheung, Po Lo Che and Tui Min Hoi was completed in 1996. Construction of a sewage pumping station, rising mains and associated sewerage works under the Tuen Mun sewerage masterplan was in progress while other sewerage works were under planning and design.

       Under the Central, Western and Wan Chai West sewerage masterplan, construction work for laying 5.9 kilometres of trunk sewers started in 1996. To minimise inconvenience to the public, trenchless construction methods were adopted where appropriate. The construction works for building new pumping stations in the Central and Wan Chai East sewage screening plants and new screening facilities in the Wan Chai East sewage screening plant also commenced in 1996.

       Under the Yuen Long and Kam Tin sewerage masterplan, construction works continued for the laying of 2.8 kilometres of rising mains from Yuen Long to Ha Tsuen, mostly by trenchless methods, and is expected to be completed towards the end of 1997.

      Implementation of the $5.32 billion Strategic Sewage Disposal Scheme, Stage I, continued in full swing in 1996. All 15 works contracts had been awarded out of which three were completed. Construction of the world's largest chemically-enhanced primary sewage treatment works on Stonecutters Island, which will discharge the treated effluent into the western harbour, was progressing satisfactorily to meet the scheduled completion in mid-1997.

      The main objective in 1996 was to bring about early improvements to the water quality around Victoria Harbour through a high-priority implementation of some of the above-mentioned projects, with a $6.8 billion injection of government capital.

Sewage Charges

      Under the Sewage Services Ordinance passed in December 1994, a sewage charging scheme was introduced starting from April 1, 1995, to cover the cost of operating and maintaining the public sewerage systems. The scheme was established based on the 'polluter pays' principle: i.e. the higher the quantity and heavier the pollutant level of the wastewater one discharges, the more one has to pay for its treatment. All sewage charges collected were paid into the Sewage Services Trading Fund to pay for the operation and maintenance costs of sewage services. Every cent collected from the public went entirely towards the cost of providing the sewage services which they

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enjoy. Sewage charges amounting to $685 million were collected from the dischargers in the 1995-96 financial year.

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. 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 to prepare outline zoning plans and development permission area plans. Furthermore, proponents of infrastructure projects with significant drainage impacts are also required to carry out drainage impact assessments so that the effect of flooding can be limited to an acceptable level. As a follow-up to the basin management plans, seven drainage masterplan studies will be carried out to cover most areas in the territory. The first one began in January 1996 and the rest will follow in phases. All studies will be completed by late 1999. The drainage capacity and the structural condition of the drainage system will be scrutinised. Recommendations for improvement works will be made so that flooding can be controlled and computerised asset management will be developed to facilitate the operation and maintenance of the drainage systems.

The government continued to implement schemes aimed at alleviating flooding in the North and North-West New Territories. Projects valued at some $6 billion were at various stages of planning, design and construction in 1996.

 In the North-West New Territories, construction work on the improvement of the Kam Tin River and the Shan Pui River in Yuen Long progressed satisfactorily. 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 floodwater pumping systems have been built and were in operation to mitigate the impact of flooding in low-lying villages in the New Territories. Another 12 schemes were at various stages of planning, design and construction.

In the Northern New Territories, the construction of Stage I of the three-stage Shenzhen River Regulation Project was progressing satisfactorily and is scheduled to complete in May 1997. Working jointly with the Shenzhen Municipal Government, preparation for Stage II of the project was actively under way. The Stage II works were expected to start between late 1996 and the first half of 1997. 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 became effective in the Yuen Long, Kam Tin, Ngau Tau Mei, Indus, San Tin, Ganges and Tin Shui Wai drainage basins in 1996.

LAND, PUBLIC WORKS AND UTILITIES

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 750 million cubic metres in 1996, of which 150 million cubic metres received full biological treatment. This was handled by 105 sewage pumping stations and 70 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 waste and storm water, and to prevent blockages and leaks which cause bad odours, flooding and other nuisances to the public.

The department maintained more than 3 000 kilometres of watercourses, drains and sewers in 1996. Some 50 000 clearance exercises were carried out to remove more than 250 000 cubic metres of silt from drains and watercourses, to keep them free-flowing and their pollution level low. A 24-hour hotline service operated to receive complaints on blocked drains and sewers.

The department also operated an Emergency and Storm Damage Organisation. It was run by staff on a rotational basis and was supported by the department's own labour force and contractors. Its operation ensured that emergency situations were dealt with efficiently. Recurrent expenditure on operations and maintenance in 1996 was $900 million. This sum is increasing steadily.

Geotechnical Engineering

The Geotechnical Engineering Office (GEO) was established after the landslip disasters of the 1970s. The control of geotechnical aspects of construction works to reduce landslip risk continues to be its foremost duty in terms of staff deployed. Geotechnical checks were made on 10 625 design proposals during the year.

The Slope Safety Review Report prepared in 1994 has been implemented in various aspects of GEO's work. These include accelerating the Landslip Preventive Measures (LPM) Programme to increase the annual output of upgrading works for 1996. During 1996, a total of $330 million was spent on the LPM programme. LPM works were completed on 60 government slopes and statutory notices were recommended for 250 private slopes. This represents a five-fold increase over 1995. Preliminary studies were carried out on 3 500 slopes and detailed geotechnical investigations were completed on 480 slopes.

During the year work continued on the 'Systematic Identification and Registration of Slopes in the Territory' (SIRST) project. A new computerised Slope Information System is being compiled. It contains important information on all sizeable man- made slopes and retaining walls in the territory.

      The GEO strives for continuous improvement. A new mission statement for the office was drafted, and improvements were made to provide a better service to the community. These include the automation of the GEO Slope Maintenance Hotline in October 1995 to give a 24-hour service to members of the public seeking information on slope maintenance. An educational video on Slope Maintenance has been produced and distributed to organisations concerned with slope maintenance. The

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emergency system for providing professional assistance in landslip incidents has been upgraded through improvements in communications and transport.

In August the GEO began a new publicity campaign to reduce landslip risk by reducing public vulnerability. The landslip warning messages broadcast by radio and television were revised to give specific advice to the public to take personal precautionary actions. Warning signs are being erected along busy roads with histories of landslips and at slopes scheduled for upgrading. The message is amplified in an explanatory pamphlet advertised by television and radio announcements.

The GEO's squatter village inspection programme aims to identify dwellings which are especially vulnerable to landslips during heavy rainfall. During 1996, inspections were made on 16 squatter villages in the New Territories. Recommendations were made for the clearance and rehousing of the occupants of more than 62 squatter huts. The GEO recommended rehousing the occupants of 470 structures after inspections at Lei Yue Mun and other villages.

In 1996, the Hong Kong Geological Survey published the 1: 20 000 scale geological maps for Shek Pik and a memoir on the geology of Lantau District. A 1: 5 000 geological map of the Ma On Shan area was published and sheet reports detailing the geology of the Ma On Shan area and North Lantau Island were also completed. The survey responded to 1525 requests for advice. During the year, geological engineering studies were completed for an area near Tung Chung new town, which is being built in North Lantau.

The GEO's Geotechnical Information Unit (GIU) in the Civil Engineering Library houses the largest collection of geotechnical data in Hong Kong. It is open to the public and served more than 10 000 users during 1996.

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 440 000 tests were carried out in 1996. A new section of the laboratory was set up to extend the services to cover rock mechanics testing.

The GEO provides ground investigation services for government projects. In 1996, major ground investigations were carried out for the proposed South-East Kowloon Development, the Wan Chai Bypass and the Eastern Corridor Link, the widening of Tolo Highway, further reclamation at Sham Tseng, Stubbs Road widening, Public Housing Development at Woodside and a number of sewerage projects on Hong Kong Island and in the New Territories. Also, a large number of ground investigations were completed for the accelerated LPM Programme. In 1996, the GEO provided geotechnical advisory services to government departments on a wide range of projects including road improvement works, such as the Lung Cheung Road widening project, the construction of embankments on soft clay for the Shenzhen River Regulatory Works, drainage improvement work in Yuen Long and the geotechnical aspects of landfills and numerous other projects.

Fill Supply and Mud Disposal

The territory's fill resources are managed by the Fill Management Committee, whose secretariat is a division of the Geotechnical Engineering Office (GEO). The

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      committee was set up in 1989 to make decisions on the reservation, allocation and efficient utilisation of fill resources for government and major private sector 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 1996, about 260 million cubic metres of marine fill (about 10 per cent from China) and 152 million cubic metres of land- based fill had been used for reclamation projects. A further 310 million cubic metres of fill are likely to be required for reclamations over the next 10 years. Most of this is expected to come from Chinese waters where, with the agreement of Chinese authorities, GEO ground investigations have now identified considerable reserves of sand.

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 disposal grounds. During the year under review, approximately 16 million cubic metres of uncontaminated 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 disposed of in sea bed pits at East Sha Chau which were planned, designed and managed by the Fill Management Division and Port Works Division of the Civil Engineering Department. In 1996, additional work was undertaken to increase the disposal capacity of these pits from 3 million cubic metres to 10 million cubic metres. Another pit with a capacity of 30 million cubic metres was being planned.

Under the Fill Management Committee, the Public Dumping Sub-Committee was established to co-ordinate the public dumping activities which achieved the dual functions of recycled use of inert construction waste and supply of fill materials for reclamations. In 1996, the quantity of recycled inert construction waste used in reclamations reached a record figure of 5.0 million cubic metres.

In connection with the management of the territory's fill resources and mud disposal capacity, the GEO, on behalf of the Fill Management Committee, continued to undertake a series of environmental and ecological studies to examine the effects of the dredging and disposal activities, and to investigate possible ways to avoid or minimise adverse effects on the marine environment.

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. In order to have a more comprehensive assessment of the hydraulic impact, the Civil Engineering Department is enhancing its physical and mathematical hydraulic models. The enhancement of the physical

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 model commenced in October 1995 and was completed at the end of 1996. The upgrading of the mathematical models began at the end of 1996 and will be completed by the end of 1997.

Due to the increase in marine traffic through Victoria Harbour and the reflection of ship waves from solid vertical seawalls, ship berthing and cargo handling have become more difficult and riding on small ships in the harbour has become less comfortable. To investigate the wave agitation problem in the harbour and recommend short- and long-term engineering solutions to ease the problem, the Civil Engineering Department has commissioned a study of inner harbour waves and their reduction. This began in February 1996 and will take about 12 months.

Water Supplies

Water from Guangdong

Rivers in Guangdong are the major 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 first formulated for receiving a piped supply of 22.7 million cubic metres a year. The supply from Guangdong stipulated under the agreements was increased to 720 million cubic metres a year in 1996. This will continue to increase in stages to 840 million cubic metres per annum by the year 2000 and to 1.1 billion cubic metres per annum by the year 2010. Extra purchases may be made in years of low rainfall in Hong Kong. A major project for the necessary works to receive and distribute the additional supply is being implemented in stages, with the first stage being completed and commissioned in 1995.

Water Storage and Consumption

Full supply was maintained throughout the year. At the end of 1996, 477 million cubic metres of water were in storage, compared with 497 million cubic metres at the end of 1995. Hong Kong's two largest reservoirs, High Island and Plover Cove held 430 million cubic metres. Rainfall for the year was 2 249 millimetres, compared with the average of 2 214 millimetres.

 A peak daily consumption of 2.82 million cubic metres was recorded on September 3, compared with the 1995 peak of 2.78 million cubic metres. The average daily consumption throughout the year was 2.54 million cubic metres, an increase of 0.7 per cent compared with the 1995 average of 2.52 million cubic metres. The consumption of potable water totalled 928 million cubic metres, compared with 919 million cubic metres in 1995. In addition, 185 million cubic metres of sea water were supplied for flushing, compared with 159 million cubic metres in 1995.

Water Works

Major construction work completed during the year included the Ma On Shan Treatment Works and Sai O Pumping Station. Construction work for the major renovation of the sea water supply system for Central Kowloon, Central and Western areas on Hong Kong Island was in progress. Planning work continued for increased capacity to meet the demand from new developments in Central and Western areas on Hong Kong Island, Kwun Tong, Yau Tong, Tsing Yi, Yuen Long, Tin Shui Wai and the north-western New Territories.

LAND, PUBLIC WORKS AND UTILITIES

Detailed design for the two new major treatment works at Tai Po and Ngau Tam Mei was completed and construction work commenced. Detailed design of Sham Tseng Treatment Works Stage II was in progress. Other major design work was concentrated on the provision of additional service reservoirs, pumping stations and water supply networks in Tai Po, Tseung Kwan O, Tsing Yi, Tuen Mun, Yuen Long, Western District, the Mid-Levels and the Central and West Kowloon Reclamations. 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. The Stage I works, which included submarine and land mains, a water treatment works, three pumping stations, a service reservoir and an aqueduct between Siu Ho Wan and Silver Mine Bay, were completed and commissioned. Other Stage I works to supply the Port Development will be implemented in stages before 2003.

      To eliminate the risks associated with chlorine storage, the replacement of gas chlorination plants by on-site hypochlorite generation plants at sea water pumping stations continued. Reprovisioning of Tai Lam Chung Prechlorination House was completed.

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 2.14 million accounts at the end of 1996. 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.

Efforts to promote the autopay service continued, and the number of consumer accounts using autopay for payment of water charges reached 290 500 or about 13.6 per cent of all consumers. The Payment-by-Phone service was also well received and the number of consumer accounts using this service totalled 234 900 at the end of 1996, or about 11 per cent of all consumers.

The Mong Kok Customer Enquiry Centre was relocated to a new, larger office within the same depot compound. An electronic display queuing system was installed. to improve the customer service provided in the new centre. In June, the department announced its vision and mission together with its achievements against performance targets for the past year which showed improvement 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 Kowloon and the New Territories, including Lantau and several outlying islands. The supply to consumers is at 50Hz alternating current while

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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 1995, total installed capacity at the Lamma Power Station was 2 955MW including a 350MW unit 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 underground 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 4 910MW. 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 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 196 primary and 9 041 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 11 extra-high-voltage sub-stations. Construction and planning work 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

LAND, PUBLIC WORKS AND UTILITIES

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 20 years 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 undertook 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 1200MW. 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.

The Electricity Ordinance, and its subsidiary regulations, set out the standards to be adhered by registered electrical contractors and workers while undertaking electrical wiring work. To be eligible for registration under the ordinance, applicants must possess the necessary experience and qualifications. The government regularly organises examinations for applicants to acquire the necessary qualifications for registration. At the end of December 1996, more than 7 800 electrical contractors and 52 000 workers held valid registration. In 1996, the government conducted 3 580 site inspections to check the safety standards of electrical installations and electrical product supply outlets, and 41 people were prosecuted for contravention of the ordinance.

Legislation to ensure the sale of safe plugs and adaptors came into effect in March 1995. More comprehensive legislation, which provides statutory control over the safety of all household electrical products will come into effect in 1997.

Hong Kong's electricity supply is being upgraded in two phases. Phase 1, covering existing installations inside government buildings, started in August 1990 and was completed in November 1992. Phase 2, covering existing installations in buildings managed by the Housing Authority and those in the private sector, began in January 1993 and will be completed in 1997.

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Gas

 Gas is widely used throughout the territory for domestic, commercial and industrial purposes. Two main types of fuel gas are available for general use: Towngas and Liquefied Petroleum Gas (LPG).

  Hong Kong has about 1.96 million gas customers. In 1996, Towngas accounted for 70 per cent of the total fuel gas sold in energy terms, and LPG for 30 per cent.

  Towngas is manufactured in two plants, one at Tai Po and the other at Ma Tau Kok, both using naphtha as a feedstock. They currently have output capacities of 8.4 and 2.2 million cubic metres per day respectively. The gas is supplied through an integrated distribution system to about 1.16 million customers.

  The mains network extends throughout the territory via an 84-kilometre high- pressure pipeline and some 1941-kilometre distribution mains. A further 27 kilometres of high-pressure pipeline is at its final stage of construction for supplying Towngas to Chek Lap Kok and Tung Chung on Lantau Island.

  LPG is imported into Hong Kong by sea and stored at five terminals on Tsing Yi before being distributed to approximately 847 000 customers. About 61 per cent of total sales is supplied in cylinders and by 524 distributors operating 765 cylinder wagons.

The government aims to provide designated overnight parking sites for these cylinder wagons. The first one at Tuen Mun was opened in November 1995 and three more sites are being constructed. LPG is also supplied by road tanker to 170 bulk storage installations providing centralised piped gas supplies.

Since 1982, the government has encouraged the installation of a piped gas supply in new buildings to discourage further growth in the use of LPG 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 31 per cent in 1996; and some 86 041 gas water heaters have been upgraded.

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 cover all aspects of fuel gas importation, manufacture, storage, transport, supply and use of gas. The legislation was amended in 1996 to encompass periodic examination of gasholders, deter damaging of underground gas pipes, improve safety requirements for the maintenance of gas installations and prohibit the importation and sale of certain types of disposable LPG containers.

Since April 1, 1992, all gas supply companies, gas installers and contractors must be registered with the Gas Authority (the Director of Electrical and Mechanical Services) in order to carry out their operations. In 1996, eight gas supply companies, 3 397 gas installers and 437 gas contractors were registered under the scheme.

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. It is imported from the Yacheng 13-1 gas field off Hainan Island in southern China via a 780- kilometre, high-pressure submarine pipeline.

       Expressways, fast trains, local railways and major roads cross paths amid the bustle of container terminals at Kwai Chung. The work forms part of the massive projects associated with access to Hong Kong's new international airport at Chek Lap Kok.

SEPANJA JAKOBE RECTES KERESNÉ POCHA (HERE NANES WIZZY RA

5M

    · Tung Chung new town is rapidly taking shape on North Lantau, transforming a small village into a residence for 15 000 people in 1997 and 200 000 by 2011. Most of them will be associated with the new airport at Chek Lap Kok, which can be seen at the top of the picture. BELOW: The Kap Shui Mun bridge and its big brother, the Tsing Ma Bridge, are ahead of schedule for beginning their crucial role of taking passengers and cargo to the new airport.

Ж

Photo courtesy of the Mass Transit Railway Corporation

▲ TOP: The Kap Shui Mun Bridge cables form an elegant pattern against the sun. BOTTOM: The Airport Railway being put together by the Mass Transit Railway Corporation will start operations with an Express fleet of 11 trains, each with seven cars, taking people to Central. A separate service, the Lantau line, will use the same tracks but have different platforms for its initial fleet of 12 trains. A German-Spanish joint venture is building the trains.

▲ This massive hole forms the

ventilation shaft for the Central Terminal of the Airport Railway, which will whisk travellers from the new airport at Chek Lap Kok along 34 kilometres to Tsing Yi, West Kowloon and the Central

District in a little over 20 minutes.

RIGHT: Workers manoeuvre steel rods into place on the ventilator project.

15 TRANSPORT

DENSE urban development, the growth of new towns and sustained activity continue to place heavy demands on Hong Kong's transport system. Careful co-ordination and management are needed to ensure the smooth and efficient movement of people and goods. This involves a programme to improve the road network, expansion of public transport and measures to achieve more economic use of the limited road capacity. Against this background, the Railway Development Strategy was announced in December 1994.

The government is pressing ahead with the planning of railway projects the strategy recommends for priority implementation. It is examining a proposal from Kowloon- Canton Railway Corporation to build the Western Corridor Railway from the border to West Kowloon, and one from the Mass Transit Railway Corporation to extend its line to Tseung Kwan O New Town. It is also studying a third priority railway project extending the Kowloon-Canton Railway from Hung Hom to Tsim Sha Tsui and building a new line from Ma On Shan to Tai Wai.

A total of $26 billion will be spent on new roads up to the year 2001. These projects include improvements to Castle Peak Road, Sha Tau Kok Road and Hiram's Highway, the Ting Kau Bridge, the Hung Hom Bypass and Princess Margaret Road Link, the Duplicate Tsing Yi South Bridge and road projects under the Airport Core Programme.

a

      Good progress has been made on building major transport links between the new airport at Chek Lap Kok and the urban area. The Tsing Ma Control Area 17-kilometre highway system with four bridges, a tunnel and expressways linking the urban area and the new airport will go into operation by mid-1997. The area will be covered by a single traffic control and surveillance system and an operator has been appointed to manage, operate and maintain the area.

      To ease traffic congestion and to give priority to public transport on roads, the government commissioned a consultancy study in 1996 to explore the feasibility of introducing bus-only lanes on a territory-wide basis. The government is mindful of the need to improve safety on the roads and will implement new measures in 1997 to require the installation of additional safety devices on buses and light buses, the provision of escorts on school buses, and a new colour scheme for private light buses for carrying school children to enhance their conspicuousness.

      The effectiveness of the drink-driving legislation introduced in 1995 continues to be monitored. The government reviewed the statutory limits allowed for alcohol concentration in December 1996. Seat belt legislation was revised to require the wearing of rear seat belts, if fitted.

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 The expansion of public transport services has continued. The franchise for Citybus Limited was renewed for 10 years, and came into effect on September 1, 1996. New franchises to operate public bus services for North Lantau and the New Airport were also granted.

 As a means of generating funds to improve ferry services, to cover ferry operating losses and to keep ferry fare increases in line with inflation, the Governor in Council has approved in principle a pier-development package that allows Hongkong & Yaumati Ferry Company Limited to undertake commercial development above four new piers in Central District.

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 14 appointed members, including the chairman and three government officials, and is supported by a Transport Complaints Unit, which received 13 887 complaint cases on traffic and transport matters in 1996. 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. Her responsibilities cover strategic 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 Section 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 1996, the section prosecuted 44 cases in respect of buses, 4912 cases for which disqualification was sought under the Driving Offence Points System, and 1 299 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 provides liaison with public transport operators on traffic and transport arrangements during serious traffic and transport disruptions, rainstorms and typhoons. The centre undertook nine operations in 1996.

 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.

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Planning

The Third Comprehensive Transport Study will commence in March 1997 for completion in about 18 months. The study will provide updated traffic forecasts and recommend a transport infrastructure development programme up to 2011.

On completion of the Parking Demand Study in December 1995, a Working Group on Parking considered its recommendations and formulated a parking action plan. The Freight Transport Study, which was completed in 1994, put forward recommendations to improve the efficiency and operation of the freight transport industry. After public consultation, a Working Group on freight transport considered the recommendations and formulated an action plan.

In June 1995, the Transport Department commissioned consultants to carry out a Transport Study for the New Airport (TRANSNA). The primary objective is to develop a strategy for the provision of public transport services to the new airport and Lantau for the period from 1997 to 2006. TRANSNA's final report was completed in December 1996. A Comprehensive Traffic Review for East Kowloon is being carried out to identify and recommend solutions to traffic problems in the area.

Cross-Border Traffic

Sha Tau Kok, Man Kam To and Lok Ma Chau are the three road crossing points between Hong Kong and China and 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 5 per cent during the year, compared with 1995. The increase was registered mainly at Lok Ma Chau. The average daily traffic figures at the three crossing points in 1996 were about 1 900, 8 900 and 13 500 at Sha Tau Kok, Man Kam To and Lok Ma Chau, respectively. Goods vehicles accounted for 91 per cent of the traffic, reflecting the rapid growth in trade and industrial links with China. At the end of the year, 41 companies operated 81 tourist coach services across the border. Plans are being made to increase the number of channels 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. There were some 1.2 million and 800 000 tonnes of inbound and outbound goods respectively in 1996 compared with 1.8 million and 900 000 tonnes in 1995. There are six freight yards, at Kowloon, Ho Man Tin, Mong Kok, Sha Tin, Fo Tan and Lo Wu. Freight trains are hauled by a fleet of 12 diesel locomotives. Some 48 million passengers crossed the border by rail at Lo Wu in 1996 compared with 43 million the previous year.

Ferry services between Hong Kong and China carried 7 million passengers in 1996, the same as in 1995. At year's end, nine 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 between the airport and Hong Kong. The completion of Phase I of the Guangzhou-Shenzhen-Zhuhai Superhighway linking Guangzhou to Shenzhen in 1994 led to a further increase in cross-border traffic, particularly through Lok Ma Chau.

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Road Network

Hong Kong's roads have one of the highest vehicle densities in the world. At the end of 1996, there were 467 833 licensed vehicles and about 1 743 kilometres of roads - 420 on Hong Kong Island, 400 in Kowloon and 923 in the New Territories representing 268 vehicles per kilometre of road. This high vehicle density, 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, 490 footbridges and 300 subways to assist the mobility of vehicles and people.

 To cope with increasing transport demands, the Highways Department runs an extensive road construction programme. About 70 road projects are under construction and another 40 are being planned.

 The department's budget for the financial year ending March 1997 totals $7,041 million $6,328 million for major highway construction, and $713 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, through the Aberdeen Tunnel, Cross-Harbour Tunnel, Kowloon peninsula, Lion Rock Tunnel, Tolo Highway, Fanling Highway and San Tin Highway to the Lok Ma Chau border crossing in the northern part of the New Territories.

 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 Highway, to the junction of San Tin Highway and San Shum Road.

 Route 4 runs from Ching Cheung Road, Lung Cheung Road and Kwun Tong to Tseung Kwan O through the Tseung Kwan O Tunnel.

 Route 5, another strategic road, is a seven-kilometre two-way trunk road connecting Sha Tin with Tsuen Wan, via Cheung Pei Shan Road and the Shing Mun Tunnels. 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 Belcher Bay Link started in May 1993 for completion in January 1998. It will be a dual carriageway on the new reclamation at Belcher Bay.

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To provide a direct access between Kennedy Town and Pok Fu Lam Road, the construction of Smithfield Extension started in February 1995 for completion in June 1997.

       Construction of the Yau Ma Tei Section of the West Kowloon Corridor commenced in phases from mid-1992 to improve traffic in Mong Kok and Yau Ma Tei districts. The first phase, which included an extension along Ferry Street and a 700-metre flyover along Ferry Street and Tong Mi Road,- was completed in January 1995. The second phase, construction of an associated footbridge and subway system, was completed in September 1996.

The Lung Cheung Road and Ching Cheung Road Improvements started in July 1994 for completion in October 1997. 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, it will improve the Route 4 link between East Kowloon and the new airport.

The construction of Hung Hom Bypass and the Princess Margaret Road Link started in March 1996 for completion in early 1999. It will be an elevated highway built on Hung Hom Bay Reclamation, including a 1.3-kilometre Hung Hom Bypass from Salisbury Road to Hung Hom Road and a 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 for completion in mid-1998. It will be a dual three-lane carriageway connecting Ting Kau in Tsuen Wan with Au Tau in Yuen Long.

To improve traffic flow, construction of additional climbing lanes on the Kowloon- bound carriageway of Tuen Mun Road started in May 1994. These climbing lanes, with a total length of 8.5 kilometres at Sam Shing Hui, So Kwun Wat, Tai Lam and Ting Kau, were completed in stages in July and August 1996 except for a section at Tai Lam between Brother's Point and Ka Loon Tsuen. A consultancy study is being done on the feasibility of completing the remaining works.

New Airport Access

Work is progressing well on all major highway projects related to the new airport at Chek Lap Kok and developments along the north-western shore of Lantau. They include the Western Harbour Crossing, the West Kowloon Expressway, the Kwai Chung and Tsing Yi sections of Route 3, the Lantau Link 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 on the Nathan Road Corridor of the Mass Transit Railway. The rail link will also serve new developments on West Kowloon Reclamation and in Tung Chung new

town.

Environmental Impact of Road Construction

At the planning stage, the Highways Department carefully appraises the environmental impact of new road projects. Where practical, measures such as 237

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landscaping works, artificial contouring of surrounding hillsides and installation of noise barriers are considered.

 Where necessary, consideration is also given to providing air-conditioning units and double-glazing in domestic premises where noise levels cannot be brought within the required standard by other means.

Road Opening Works

Besides serving as carriageways for vehicles and pedestrians, the roads also accommodate various 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 162 new road openings each day in 1996. 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 the utility companies, the police and the Transport Department. A computerised utility management system is being developed to improve co-ordination and minimise disturbance to road users. The system is expected to be operable by the end of 1997.

Tunnels

The five government-owned tunnels, namely, the Lion Rock, Aberdeen, Airport, Tseung Kwan O and Shing Mun, are managed and operated by private companies under management contracts. The tolls are controlled by the government.

 The Lion Rock Tunnel, linking Kowloon and Sha Tin, began single-tube operation in 1967, with a second tube added in 1978. The 1.4-kilometre tunnel is the most heavily used government tunnel, with 93 000 vehicles daily. The toll was $6 in 1996.

 The Aberdeen Tunnel, opened in 1982, links the north and south sides of Hong Kong Island. It measures 1.9 kilometres and was used by 60 000 vehicles daily in 1996. The toll was $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, the 1.3-kilometre tunnel was used by 54 000 vehicles daily in 1996.

 The Shing Mun Tunnels between Sha Tin and Tsuen Wan were opened in 1990 and measure 2.6 kilometres. An average of 52 000 vehicles a day paid $5 each to use it in 1996.

The 900-metre Tseung Kwan O Tunnel, opened in 1990, links Kowloon and Tseung Kwan O New Town. It was used by 41 000 vehicles daily in 1996. The toll was $3.

The Cross-Harbour Tunnel, the Eastern Harbour Crossing and the Tate's Cairn Tunnel were built, and the Western Harbour Crossing is being built, by the private sector under 'Build, Operate and Transfer' franchises.

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The 1.9-kilometre Cross-Harbour Tunnel connects Causeway Bay on Hong Kong Island and Hung Hom in Kowloon. It was opened in 1972. Used by a daily average of 124 000 vehicles in 1996, it is one of the world's busiest four-lane road tunnels. The tolls, which included a government passage tax, varied from $4 to $30 per vehicle.

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. A daily average of 88 000 vehicles used the 2-kilometre tunnel in 1996. The tolls ranged from $5 to $30. On the Kowloon side, the Eastern Harbour Crossing is connected by elevated roads to the Kowloon portal of the Tate's Cairn Tunnel.

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. About four kilometres long, it is the longest road tunnel in the territory. It was used by an average of 74 000 vehicles daily in 1996, paying $6 to $15 each.

The Western Harbour Crossing, when it opens in April 1997, will be the first six- lane road tunnel in Hong Kong. It will link Sai Ying Pun on Hong Kong Island and the West Kowloon Reclamation near Yau Ma Tei. The construction of the two- kilometre tunnel and the interchanges at both ends, which commenced in August 1993, is costing about $7.5 billion. Its capacity of 180 000 vehicles per day is about 50 per cent higher than that of either of the existing cross-harbour road tunnels.

An automatic toll collection system was installed at the Cross-Harbour and Aberdeen tunnels in August 1993, the Lion Rock Tunnel in August 1994, the Eastern Harbour Crossing in September 1995 and the Tate's Cairn Tunnel in May 1996, enabling motorists to drive through designated toll booths without stopping.

Traffic Control and Surveillance

A continuing programme of traffic control measures is being implemented to improve traffic flows. At the end of the year, the territory had 1 300 signalised junctions, 329 on Hong Kong Island, 481 in Kowloon and 490 in the New Territories.

       On Hong Kong Island, the signalised junctions along the northern shore are under the control of the Hong Kong Area Traffic Control (ATC) system, which is being expanded to Southern District. By the end of 1996, 299 junctions on the island were under ATC and 39 closed circuit television (CCTV) cameras were in use for traffic surveillance.

Renewal of the Kowloon ATC system, which covered 481 signalised junctions, was completed. Work for the expansion of the CCTV system is in progress. By early 1997, there will be 62 cameras monitoring the traffic conditions in the peninsula.

In the New Territories, the ATC and CCTV systems for Tsuen Wan and Kwai Tsing were completed in 1996. The new ATC system controls 118 signalised junctions and monitors the traffic condition there through 22 CCTV cameras. Work on the ATC system in Sha Tin, covering 90 junctions, will commence in early 1997 for completion in early 1998. Detailed design for 19 cameras in the Sha Tin CCTV system was completed and work will start in mid-1997. Planning for the expansion of ATC and CCTV systems to other new towns is continuing.

The CCTV system of 19 cameras on Tuen Mun Road has proved very effective in monitoring traffic flow and identifying incidents. Similar CCTV systems are being

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planned for the West Kowloon Expressway, North Lantau Expressway and part of the Tolo Highway.

 The Tsing Ma Control Area, an expressway network comprising some 17 kilometres of bridges, tunnels and expressways providing the only road access to Chek Lap Kok Airport, will be equipped with the most extensive traffic control and surveillance (TCS) system ever introduced in Hong Kong. Scheduled for completion in May 1997, the TCS system will provide a high degree of automation to regulate traffic flow and to provide useful information to motorists under numerous operating scenarios.

 These include accidents, vehicle breakdowns, roadworks, and adverse weather conditions. Elaborate surveillance and control gear is available for the system's disposal, including CCTV, automatic incident detectors, environmental sensors, emergency telephones, changeable regulatory and advisory signs, variable message signs, lane control signals and radio links.

Parking

The management and operation of on-street metered parking spaces is performed by a private operator under a management contract. On-street parking is provided where traffic conditions permit. At the end of the year, there were 13 900 parking spaces in the territory, with meter charging mainly between 8 am and midnight from Mondays to Saturdays.

Meter charging 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.

The government owns 14 multi-storey carparks which provide a total of 8 050 parking spaces. They are operated and managed by two private operators.

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 145 000 parking spaces.

Central-Mid-Levels Escalator and Walkway System

This covered system was opened in October 1993. Starting from two footbridges over Des Voeux Road, Central, it passes through Central Market and over the narrow streets in Central and ends at Conduit Road. Managed by a private operator under a management contract, the system was used by an average of 34 000 people daily in 1996.

Licensing

By the end of the year, Hong Kong had 467 833 licensed vehicles in all classes, representing an increase of 1.97 per cent over 1995.

New private car registrations fell 4.53 per cent, from 23 257 in 1995 to 22 203 in 1996. This brought the number of licensed private cars to 293 381 in December, an increase of 2.77 per cent over the past year.

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Under the Old Cars Scrapping Incentive Scheme which was implemented in June 1996, the owner of a private vehicle 10 or more years old can enjoy a concession on first registration tax if he scraps his old car and replaces it with a new one. The scheme aims to help improve air quality by reducing the number of old vehicles on the road.

Registered goods vehicles numbered 134 419 in December, which was 1.39 per cent less than the 136 316 in 1995. Of these, 92 900 were light goods vehicles, a decrease of 3.3 per cent from 1995.

      Vehicle examination aims to upgrade the safety of vehicles through improved design requirements and correct maintenance. The private car inspection scheme is carried out at 24 designated car testing centres. Compulsory annual inspection applies to all public service vehicles and goods vehicles. The coverage of vehicle examination of trailers was expanded on April 1, 1996, to require trailers manufactured in 1986 and earlier to be inspected before annual licence renewal and again on December 1, 1996, in respect of trailers made in 1989 or earlier.

       There were 1 095 639 licensed drivers at the end of 1996, an increase of 2.2 per cent over 1995. The average number of new learner-drivers fell from 4 865 per month in 1995 to 4 501 per month in 1996.

Since the introduction of the Driving Offence Points System in August 1984, 36 582 drivers have been disqualified, 376 649 notices have been served and 452 588 drivers have incurred penalty points for committing offences under the Road Traffic (Driving Offence Points) Ordinance. The figures for 1996 were 4912, 52 309 and 28 461 respectively. New scheduled offences relating to drink-driving were introduced in December 1995.

A performance pledge scheme for licensing services has been in effect since December 1992. It covers most licensing and vehicle examination services. With effect from December 1996, the scheme was further extended to cover government tunnel services. Two active customer liaison groups, with a total of 36 members, enabled direct public participation in advising the Transport Department of customers' requirements and in gauging public opinions on services provided.

Road Safety

Injuries resulted from 14 345 traffic accidents in 1996, of which 252 were fatal and 3 066 serious. This was a decrease of 3 per cent compared with the 14 812 accidents in 1995, of which 247 were fatal and 3 243 serious. In-depth investigations were carried out at 194 traffic accident blackspots to identify accident causes. Remedial accident prevention measures were recommended at 148 of these locations.

      Accident records are regularly updated, using the microcomputer-based traffic accident data system installed in 1991. The updated accident database provides a basis for traffic accident blackspot analysis and road safety strategy formulation. (Accident statistics are at Appendix 42.)

Thirteen red-light camera systems were installed at signalised Light Rail Transit road junctions in Tuen Mun, Yuen Long and Tin Shui Wai in September 1996 to deter motorists from disobeying traffic signals. For years, driving too close to the vehicle in front has been the dominant contributory factor towards traffic accidents.

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To help drivers judge a safe driving distance, a chevron scheme was put on trial in July 1996 for one year. It will be assessed in 1997.

 The seat belt legislation has been revised. From June 1, 1996, rear seat passengers in private cars are required to wear seat belts if fitted. New legislation was also passed in the same month requiring seat belts to be fitted to the driver's seat of all buses.

 The Transport Department conducted a comprehensive review with a public opinion survey on school bus safety. A set of improvement measures were formulated. It included the provision of an escort on school buses carrying primary and kindergarten pupils, tightening of licensing conditions for nanny vans, installation of warning devices at doors and a public announcement system, a new colour scheme for nanny vans to make them more conspicuous, and additional warning signs at the rear of buses. In addition, the department will encourage the setting up of School Bus Service Committees in schools and establishing designated school bus stops in public housing estates.

 Road safety campaigns continue to play an important role in reducing traffic accidents. The major theme in 1996 was 'pedestrian safety'. Posters and radio and television announcements were produced to advise the public to fit and wear rear seat belts in private cars. The folly of drink-driving was continuously publicised throughout the year.

 At year's end, 246 student road safety patrol teams of the Road Safety Association and 316 school staff crossing patrols served in 553 schools to ensure children's safety on their way to and from school. The Road Safety Council, an advisory body, continues 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 five rail systems include a heavily-utilised mass transit system, a busy suburban railway, a modern light railway, a traditional street tramway and the Peak funicular railway. The first three rail systems are operated by public corporations, wholly- owned by the government. Private operators own the others.

Mass Transit Railway

The Mass Transit Railway Corporation operates a three-line metro system comprising 43.2 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 2.4 million passengers a day. It is one of the busiest underground railways in the world. Adult fares ranged from $4 to $12.50 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

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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 Mass Transit Railway Nathan Road Corridor.

Kowloon-Canton Railway

The Kowloon-Canton Railway started operation in 1910 and was double-tracked and electrified 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 suburban service to the new towns in the north-eastern New Territories, a freight service to and from China, and passenger services to and from Changping/Guangzhou and Foshan/Zhaoqing. The suburban service has grown substantially since electrification, and in 1996, the railway, with 13 stations, handled 675 000 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 $3.50 to $8.50.

      In 1996, the KCRC continued its effort to improve its facilities by upgrading signal systems, renovating the Kowloon Station at Hung Hom, redeveloping workshops and depots and building noise barriers at selected locations along the railway.

Light Rail Transit

The KCRC also operates the Light Rail Transit (LRT) system in the north-western New Territories in Tuen Mun, Yuen Long and Tin Shui Wai. The system began operation in 1988. With the commissioning of its Tin Shui Wai Phase III extension in March 1995, the system route length is now 32 kilometres with eight routes, 57 stops and a fleet of 99 cars, either operating singly or in pairs.

      The LRT operates zonal fare and provides free transfer from one route to another within zones and to and from stations by feeder buses. Ordinary adult fares range from $3.50 to $5.20. At the end of the year, the LRT and its feeder and auxiliary buses carried about 379 000 passengers per day.

Trams

Electric trams have operated on Hong Kong Island since 1904. The 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. The trams carried an average of 294 552 boardings daily in 1996. Fares were $1.20 for adults and 60 cents for children and senior citizens aged 65 or above.

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 operation in 1888 and was modernised in 1989. It climbs 373 metres on gradients as steep as one-in-two. The line serves an average of 12 058 passengers a 243

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day, mostly sightseers and some residents in The Peak. One-way fares for adults and children were $15 and $4 respectively.

Ferries

Ferries are essential for travelling to Hong Kong's outlying islands and provide an important link 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. Existing 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 carried 96 500 passengers on its three routes daily during the year. Fares ranged from $1.70 to $2.50. Passengers aged 65 and above can enjoy free travel on all Star Ferry services.

 HYF owns 83 vessels and operates 24 ferry routes, including passenger and vehicular services and chartered services. In 1996, the company carried 90 000 passengers and 1700 vehicles daily. Fares ranged from $4.40 to $30. Elderly 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 19 other ferry services were operated by eight 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, 88 kaitos were in operation.

Road Passenger Transport

Road passenger transport accounted for two-thirds of all public transport journeys. Of the public transport journeys made by road, over half were on franchised buses, and the remainder on green minibuses, public 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. In 1996, the four franchised companies carried 3.66 million passengers daily on a network of 464 routes. To meet the demand of the new town at Tung Chung and new airport at Chek Lap Kok, franchises to operate a total of 25 new routes were awarded in 1996 to Long Win Holdings Ltd and Citybus Ltd. The first batch of these new routes will come into operation by June 1997.

 The largest operator is the Kowloon Motor Bus Company (1933) Limited (KMB). It runs 300 bus routes in Kowloon and the New Territories; 37 cross-harbour routes jointly with the China Motor Bus Company (CMB); 10 cross-harbour routes with Citybus Limited and seven cross-harbour routes of its own. KMB also provides 'Airbus' services to and from the airport, operating three routes to Hong Kong Island and two within Kowloon.

 The KMB fleet at the end of the year comprised 3 597 registered vehicles, with 2 363 double-decker conventional buses, and 949 air-conditioned double-decker and 285 single-decker buses. Of these, two were 'super' single-deck low-floor buses with provision for wheelchair passengers.

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      KMB made 1032 million passenger trips and covered 285 million kilometres in 1996. Its current franchise extends until August 31, 1997. Fares ranged from $1.10 to $23.60 for non air-conditioned services, and from $2.50 to $32 for air-conditioned services. Passengers aged 65 and over are entitled to concessionary fares on every KMB route, except for the Airbus services.

      To relieve peak-hour congestion on the MTR along Nathan Road Corridor, KMB during the year operated a total of 27 air-conditioned bus routes providing services mainly in the morning peak hours on weekdays from the New Territories and North Kowloon to South Kowloon and Hong Kong Island. 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 CMB and Citybus. CMB operates 85 routes, 38 of which cross the harbour to Kowloon and the New Territories. It was granted a new three-year franchise from September 1, 1995.

      In April 1996, CMB began its first all-night service on Hong Kong Island, Route N8, plying between Siu Sai Wan and Wan Chai Ferry Pier. At the end of 1996, CMB's registered fleet comprised 825 double-deckers and 28 single-deckers, of which 141 double-deckers and 28 single-deckers were air-conditioned. They made 179.2 million passenger trips and travelled 44.5 million kilometres during the year. Fares ranged from $2.20 to $32. Concessionary fares are offered to passengers aged 65 and over on all CMB routes, except for airport services.

Citybus started its first franchised service, Route 12A, in September 1991. It took over from CMB the operation of 26 routes and 14 routes on Hong Kong Island in September 1993 and September 1995 respectively. The company now operates 58 routes on Hong Kong Island. Of these, 10 are cross-harbour routes jointly operated with KMB. Citybus was granted a 10-year franchise from September 1, 1996.

At the end of the year, Citybus had a registered fleet of 375 double-deckers, 30 single-deckers and two single-deck low-floor buses, which were all air-conditioned. Fares ranged from $2.20 to $32. Concessionary fares were offered to passengers aged 60 and over on Hong Kong Island routes, except night bus and recreation routes; and to passengers aged 65 or over for cross-harbour routes. The company's bus services made 120 million passenger trips and travelled 25 million kilometres during the year.

The fourth franchised bus operator is the New Lantao Bus Co (1973) Ltd (NLB) which provides bus services on Lantau Island. At the end of 1996, NLB operated nine routes with a registered fleet of 69 vehicles. During the year, it made 5.23 million passenger trips and travelled 2.75 million kilometres.

Bus-only Lanes

     Existing bus-only lanes are mostly localised, and do not facilitate the movement of buses between districts and/or regions. As a result, buses still suffer significant delays due to traffic congestion in major inter-district traffic corridors.

      The Transport Department commissioned a 17-month consultancy study in August 1996 to investigate and design inter-district bus-only lanes for six corridors covering major commuter traffic between homes and work/school places, and to implement one of them as focus scheme in mid-1997. These inter-district bus-only lanes are

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expected to shorten bus journey times, rendering their services more reliable and attracting more commuters to use buses instead of private cars, which will in turn alleviate traffic congestion.

Minibuses

Hong Kong's minibuses are licensed to carry a maximum of 16 seated passengers. There were 6 831 minibuses in 1996. Of these, 4 350 were public light buses (PLB), and 2 481 private light buses. Private light buses are authorised only to carry group passengers and may not collect separate fares.

 There are two types of PLBs: 'green' and 'red' minibuses whose roofs are coloured accordingly. Their operation is regulated by a passenger service licence.

 Green minibuses provide services according to specified schedules of service which define the routes, fares, vehicle allocation and timetables. There were 1 951 of these operating 274 routes and carrying 88 000 passengers a day in 1996.

 Red minibuses operate without specified schedules. They are not required to operate on fixed routes or timetables and are free to set fares. In 1996, 2 399 red minibuses carried about 87 000 passengers daily.

 In line with government policy to convert red minibuses to green, more new scheduled routes will be identified. During the year, a green minibus selection exercise was conducted and minibus operators were selected to operate a total of 17 routes.

 In September 1995, the Transport Advisory Committee formed a working group to carry out a review on PLB policy with particular regard to the role, regulation and control of green and red minibuses. The review will be completed in early 1997.

Taxis

At the end of 1996, there were 15 249 urban taxis (coloured red), 2 837 New Territories taxis (green) and 40 Lantau taxis (blue), carrying a daily average of 1.1 million, 192 000 and 1 090 passengers respectively.

 In April 1994, the Executive Council accepted the Transport Advisory Committee's recommendations to improve the taxi licensing system, fare structure and quality of service. These recommendations were implemented in stages from 1994 to 1996.

 To improve taxi services, the government is amending the regulation to require taxi drivers to issue fare receipts to passengers on demand. It is hoped that the requirement can come into effect in 1997.

Non-Franchised Buses

Residents' bus services were introduced in 1982 to give commuters an additional choice of transport modes. Residents' organisations may invite non-franchised bus operators to operate such services under passenger service licences issued by the Transport Department. These services operate in accordance with approved routing, timetable and stopping places; and operate mainly to and from housing estates primarily during peak hours, supplementing services provided by the franchised bus operators. At the end of the year, there were 184 residents' bus services undertaking 94 000 passenger-trips a day and 51 new services were introduced during the year.

Non-franchised bus operators also serve the needs of factory employees, tourists and students on a group-hire basis. At the end of 1996, the licensed fleet of non-

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      franchised buses totalled 5 407 vehicles, of which 306 were double-deckers. An increasing proportion of these vehicles were air-conditioned.

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 1996, the Port Works Division of the Civil Engineering Department started the construction of the Hei Ling Chau typhoon shelter, the Sok Kwu Wan pier, Gemini Point pier and three public piers at Sai Kung. It also made plans for two typhoon shelters at Siu Lam and Peng Chau.

The Port

The port handles about 90 per cent, by weight, of Hong Kong's trade. In 1996, it remained the world's busiest container port, handling some 13.2 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 437 000 ocean-going and river-trade vessels arrived in Hong Kong during the year. These vessels handled more than 156 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 1996 of 5.6 per cent, 1.6 per cent, 0.1 per cent and 1.0 per cent, respectively, compared with 1995. Details of international movements of vessels, passengers and cargo are given at Appendix 40.

Port Administration

The Marine Department administers the port. Its principal function is to ensure safety of navigation and efficiency of shipping activities in the waters of Hong Kong. This is achieved by comprehensive traffic management, harbour patrol, vessel traffic services, provision of mooring buoys and rigorous enforcement of major international maritime conventions.

Advice from users and operators of port facilities is an important element in port administration. The department maintains close liaison with shipping and commercial organisations through a number of advisory committees. These include the Port Development Board, which advises the government on port planning and development; the Shipping Consultative Committee, which advises on the efficient operation of the Hong Kong Shipping Register and Hong Kong's effective participation in the International Maritime Organisation; the Port Operations Committee, which is concerned with the operational needs of the port; the Pilotage Advisory Committee which advises on all matters relating to marine pilotage services; and the Provisional Local Vessel Advisory Committee, which advises on local craft matters.

      The Marine Department launched its home page on the Internet in January 1996 to facilitate the flow of information to its clients both in Hong Kong and overseas.

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Apart from information on the port and the Hong Kong Shipping Register, the home page offers information about services and facilities provided by the department, port statistics and Marine Department notices. A Hong Kong Shipping Directory giving information on maritime services companies based in Hong Kong and real-time shipping movements in the port of Hong Kong are also available on the home page.

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. All ocean-going vessels of 300 gross registered tonnes (GRT) and above must follow VTC directions.

 The movements of ocean-going vessels are directly regulated from the VTC through a computer-assisted radar network, a database on ships and VHF (very high frequency) radio telephone communications. The system was enhanced in 1996 to increase the number of targets assigned for collision and navigation channel surveillance. To further improve radar coverage, a new radar station in Mirs Bay is scheduled to open in mid-1998. Such improvement will accommodate anticipated growth in ship movements into the next century.

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. In addition to the special team which monitors marine traffic in the central harbour, there is a local traffic control station at Ma Wan dedicated to tightening the surveillance and control of traffic using the Ma Wan Channel. It is envisaged that additional local traffic control stations will be established at Green Island and Kwai Chung in the near future.

Educational Seminars and Marine Safety Campaign

To enhance safety of navigation in Hong Kong waters, educational seminars on marine safety were held in 1996. Shipowners, agents, shipmasters, coxswains and persons-in-charge of vessels were among the many people attracted to the seminars.

 Marine Safety Campaigns were conducted to increase public awareness of the importance of safe navigation. Mariners were reminded to strictly follow the International Regulations for Preventing Collisions at Sea while transiting Victoria Harbour.

Pilotage Service

Pilots play an important role in navigation safety by assisting shipmasters who may not be familiar with the port of Hong Kong. Ships of 3 000 GRT or over and gas carriers of any tonnage must engage pilots when moving within the port and its approaches.

The Director of Marine regulates and monitors the pilotage service which is operated by the pilots themselves as a private company. Pilot numbers 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.

One of the 2.6-km Shing Mun Tunnels receives its nightly cleaning by workers in specialised vehicles. Hong Kong's major road tunnels are partially closed at night for cleaning, a task made necessary by the 580 000-odd vehicles passing through them each day. The scheduled opening of the Western Harbour Crossing in April 1997, will increase the territory's tunnel traffic capacity by 180 000 vehicles daily.

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X

Hong Kong's fleet of passenger ferries is among the world's largest, most expensive and most diverse as can be seen in this collection.

A catamaran (left) bound for Macau and a triple-deck ferry serving Hong Kong's outlying islands pass each other off Kennedy Town, while a small, older ferry crosses the harbour between them. About 100 large and 90 small ferries made some 70 million passenger journeys during the year.

JABLK

A boon to residents and tourists

alike, the 800-metre Central-Mid- Levels Escalators take the strain out of ascending 135 metres from the harbourside to the popular residential district. About 33 000 commuters use the system each day, which operates downhill in the morning rush and up after 10 am.

That is the equivalent of more than

*** 200 double-decker busloads of

commuters each day.

LEFT: Cyclists breeze along a path

beside Tolo Harbour between

Sha Tin and Tai Po, enjoying the territory's best separate route for pedal-powered traffic.

DB153

DB 277

Golf carts are the only private vehicles permitted on the roads at the Discovery Bay residential housing development on Lantau Island. BELOW: A Kowloon-Canton Railway train nears Fanling station. The 34-kilometre railway provides a suburban service to the new towns in the north-eastern New Territories, a freight service to and from China, and passenger services to and from Changping/Guangzhou and Foshan/Zhaoqing. It has 13 stations and handled 675 000 passenger journeys daily in 1996.

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Plans are afoot to relocate the pilot boarding station seawards from Green Island to the outer entrance of the East Lamma Channel in the near future. This relocation, together with certain administrative changes to the institutional arrangements of the service, will help enhance safety of navigation in the busy channel and enable marine pilotage service 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 land reclamation in the port areas have demanded accurate nautical charts and more frequent depth surveys. The Hydrographic Office became fully established in late 1996 with the delivery of its second 20-metre survey boat which is equipped with the world's latest hydrographic surveying instrumentation. This is complemented by the comprehensive office-based, fully digital chart production system. Major re-surveys of the port areas continue and the first charts produced and printed in Hong Kong will be available in early 1997.

      A continuous radio broadcasting service for the Navstar satellite navigation system (GPS) commenced to provide sub-metre positioning accuracy of the survey launches. To enhance safety of navigation, the government provides this signal to all maritime users wishing to avail themselves of the service, free of charge. The Hydrographic Office is well positioned to fully take over by mid-1997 the nautical services currently provided to the shipping community by the British Admiralty.

Dangerous Goods

The establishment of the Dangerous Goods Information System in early 1997 will provide information for checking and verifying that packaged dangerous goods meet the requirements of the International Maritime Dangerous Goods Code. It also provides information which enables a correct and immediate response in the event of fire or spillage so as to minimise the hazards to the people and environment.

Public Cargo Working Areas

Public cargo working areas on the waterfronts are managed by the Marine Department. In order to maximise the usage of this facility and enhance the efficiency of cargo operations, the department commissioned a financial viability study. In the light of its recommendations and in consultation with the cargo operators, the department is devising a new management system.

Participation in International Shipping Organisations International Maritime Organisation

      Hong Kong is an associate member of the International Maritime Organisation and this status will continue after 1997 in accordance with the Sino-British Joint Declaration. The territory has participated in the proceedings of the organisation in developing measures to improve shipping safety and prevent pollution of the sea. In 1996, Hong Kong representatives attended 16 meetings on various subjects.

      The Hong Kong administration was particularly active in several current issues, including measures to control air pollution from ships, contamination by transport of aquatic organisms in ballast water, fire protection measures, safety measures for high- speed passenger craft and safety management systems for ships.

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Maritime Search and Rescue

By international agreement, Hong Kong is responsible for co-ordinating all maritime search and rescue operations within Hong Kong waters and the area of the South China Sea north of latitude 10°N and west of longitude 120°E, excluding the immediate coastal waters of neighbouring states.

 This is done by the Marine Department, whose Maritime Rescue Co-ordination Centre is manned 24 hours a day by professionally-trained staff. The centre is also the shore-based radio station of the Global Maritime Distress and Safety System. It calls upon fully-equipped vessels and aircraft operated by other government departments to carry out rescue operations. Assistance can also be obtained from nearby ships and other rescue co-ordination centres in the region.

 During 1996 the centre responded to 291 incident calls and co-ordinated 98 search and rescue missions concerning ship emergencies 35 of which were 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 resources. Also, there would be a significant burden on ship operators if their vessels were subject to port state control at all the ports they visit. 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 1996, 475 port state control inspections were conducted on the ocean-going ships visiting Hong Kong to check their compliance with international safety and environmental protection conventions. This represented about 8.8 per cent of the ships visiting Hong Kong. About 96 per cent had deficiencies which had to be made good before they could proceed.

Services in the Port

Container Handling

About 6.6 per cent (or 8.7 million TEUs) of the 13.2 million containers loaded and discharged in 1996 were handled at the Kwai Chung/Stonecutters Island Container Port. Ships at mid-stream mooring buoys and anchorages handled 23 per cent (or 3 million TEUs). This represented a growth rate of 4.8 per cent at the container terminals and 3.4 per cent at the mid-stream facilities, compared with 1995. The eight container terminals at Kwai Chung and on Stonecutters Island are privately owned and operated, with a total of 19 berths for ocean-going vessels.

International Ferry Services

The number of international passengers using the two ferry terminals managed by the Marine Department remained steady over the year, with 7.4 million passengers using the China Ferry Terminal in Tsim Sha Tsui, and 13.3 million using the Macau Ferry Terminal in Sheung Wan. Most of these passengers travelled on the world's largest

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fleet of modern, high-speed passenger ferries, comprising jetfoils and catamarans operating from Hong Kong to Macau and various Chinese ports.

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 around 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 midnight and 1 pm is a particularly convenient facility for river-trade vessels not intending to enter the central harbour.

Mooring Buoys

The department provides and maintains 62 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.

      Sheltered spaces for laying mooring buoys have decreased since the commencement of the new airport and related reclamations, resulting in many mooring buoys being displaced. Sites for replacement buoys have been identified and will be dredged from 1997 to accommodate ocean-going vessels using the buoys. The reprovisioning and expansion of harbour moorings can be fully implemented with the completion of the current reclamation projects. The total number of mooring buoys will then be brought up to 70.

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. Smaller shipyards are able to build and maintain workboats and pleasure vessels. The Marine 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. On average, 4 800 tonnes of refuse are collected annually. Floating refuse remains a nuisance to the general public. Inter- departmental effort has been made to tackle the problem. Refuse collection and scavenging services are being expanded. When the expansion is completed by early 1999, the department will provide much improved territory-wide floating refuse scavenging and ship refuse collection services.

      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.

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Combating Oil Pollution in the Harbour

The Pollution Control Unit of the Marine Department formulates the government's Oil Pollution Contingency Plan and cleans up oil spills. For clean-up jobs, the unit is equipped with a dedicated oil pollution control launch, five tugs capable of dispersing oil spills with chemicals and two oil recovery vessels.

 Each year the unit co-ordinates a major oil pollution exercise involving oil companies and government departments such as the Government Flying Service and Civil Aid Services. The latest exercise was held near East Sha Chau, on Hong Kong's western border, in September. The Shenzhen Harbour Superintendency Ad- ministration participated in the exercise.

 To ensure proper safety precautions are observed during bunkering operations in the port and to prevent oil spills or fire hazards, the unit conducted 75 inspections of these operations in 1996. The unit also inspected each oil storage installation in the territory about four times in the year. In 1996, there was only one serious oil spill and some minor spills involving less than one cubic metre of oil. The serious oil spill was caused in July by a ship under repair in a dockyard near Lantau Island. With help from the dockyard and other government departments, the unit successfully minimised damage to the environment.

Local Craft

Harbour workboats are essential to the efficient running of the port, and Hong Kong has many of them. More than 1 300 lighters and nearly 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 15 000 local craft, including ferries, barges, cargo boats, workboats, fishing boats and pleasure vessels. The Marine Department sets and enforces safety standards for local craft. The Local Craft Review programme is in progress. It is aimed at improving safety of local craft by rationalising the certification, safety and control requirements and clearly redefining the duties and responsibilities of owners, operators and the government. Reclamation projects, such as those at Central and Wan Chai, have increased pressures on local craft navigating in 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 354 powered vessels is highly visible in the port. Besides harbour patrol launches, fire boats and police launches, the government has launches 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 Marine Department designs, procures and maintains all government vessels. It has a rolling 10-year development plan to replace old vessels with new ones as they are needed. In 1996, 18 vessels costing a total of $100 million were delivered to the department and construction contracts for 35 vessels, worth $230 million, were awarded to shipbuilders in Hong Kong and overseas.

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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 1996, their fleet stood at 1006 ocean-going vessels, totalling 32 million GRT. These ships are registered under many flags, but principally with the Hong Kong, Panamanian and Liberian shipping registers.

      Besides shipowners, the association's members include banks, classification societies, maritime lawyers, average adjusters, shipbrokers, shipbuilders, insurers and surveyors. This broad-based membership provides an effective forum for liaison on current shipping issues with the government and international organisations.

The Hong Kong 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 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 world-wide surveys of Hong Kong-registered vessels to ensure that these standards are met. The register had a total fleet of 543 vessels, amounting to 7.9 million GRT, at the end of 1996.

Seafarers

Hong Kong is a centre for employing well-trained seafarers. Some 1 300 Hong Kong officers and ratings serve on foreign-going ships flying flags of more than 18 different maritime administrations. The Marine Department's Mercantile Marine Office registers Hong Kong seafarers and regulates and supervises their engagement on board ships.

The new Merchant Shipping (Seafarers) Ordinance and its 28 sets of Regulations have been enacted to consolidate and amend the extant laws relating to the registration, employment, discipline, health, safety and welfare of Hong Kong seafarers. The new legislation caters to changing needs, particularly in view of the forthcoming change of sovereignty in 1997.

The Marine Department's Examination Section monitors training provided to seafarers and examines candidates for certificates of competency. Measures have been taken to give full effect to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978 and its amendment made in 1995. 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.

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Civil Aviation

 Passenger traffic and cargo throughput at Hong Kong International Airport continued to grow during the year. A total of 29.6 million passengers passed through the terminal, which was 7.8 per cent more than the 27.4 million in 1995.

Some 1.56 million tonnes of cargo, valued at 593.8 billion, were handled, representing an increase of 2.3 per cent when compared with 1.45 million tonnes, valued at $563.8 billion, in 1995. 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 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 5.8 per cent in aircraft movements was recorded in 1996, bringing the annual total to 158 797, of which 80 per cent were wide-bodied aircraft. The first Boeing B777 aircraft was entered into the Hong Kong register in May and at the end of the year the total number of these aircraft had risen to four.

Throughout the year, the Civil Aviation Department of Hong Kong maintained a close liaison with the Civil Aviation Administration of China and the Civil Aviation Authority of Macau to ensure a safe and efficient air traffic management in the Pearl River Delta. The air traffic control arrangements among Hong Kong, Macau, Shenzhen and Zhuhai Airports were well co-ordinated.

Preparation for the opening of the new airport at Chek Lap Kok gathered momentum in 1996. The super-structure of the Air Traffic Control Complex building was completed in May. Some 20 new items of air traffic control equipment were being installed and tested. After equipment testing and acceptance, conversion training for air traffic control staff will start in mid-1997.

Improvements to the Airport

Strong growth in air traffic put the airport at Kai Tak under tremendous pressure. Several improvement works were completed and new ones commenced in 1996 with a view to enabling the airport to handle the anticipated traffic growth during Kai Tak's remaining life.

Measures to improve the air traffic control system at Kai Tak were instituted to cope with the increase in air traffic at Kai Tak as well as overflying Hong Kong. During the year, 50 additional air traffic control staff were recruited and trained. A new roster system for controllers was implemented in January. The computers of the radar data processing and flight data processing systems were upgraded in June to increase their capacities. With these enhancements, the runway capacity was increased from 29 to 30 per hour from mid-July.

A computerised check-in counter allocation system was developed and commissioned in October to help airport management staff plan and allocate the limited number of check-in counters more efficiently.

The outsize baggage facilities were modified and expanded to provide four additional check-in counters. The arrival greeting hall was also expanded in July to relieve congestion during peak periods. The departure Immigration Hall was expanded in October to provide a more spacious environment for departing passengers.

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      An up-graded information display system was installed in August to provide general airport information as well as flight information. The VIP Suite is being expanded to meet increasing demand and work should be completed in May 1997.

Air Services

Hong Kong is home to three international airlines. Cathay Pacific Airways (CPA), the largest of the three, commenced scheduled passenger services to New York in July. To cope with the increasing scale of its operations, CPA has acquired three A330-300s, five A340-300s and four B777-200s, while all of its L1011s were phased out during the year. At the end of 1996, its fleet comprised seven B747-200s, six B747- 300s, 19 B747-400s, five A340-300s, 10 A330-300s, two A340-200s, four B777-200s, four B747-200Fs and two B747-400Fs - a total of 59 aircraft.

Hong Kong Dragon Airlines (Dragonair) began scheduled passenger services to Kaohsiung and Qingdao in July and August, respectively, and converted its regular passenger charter services to Xian and Chengdu into scheduled services in August. With these additions, the airline now operates scheduled services to 10 cities in China and eight other destinations in Asia, together with non-scheduled passenger services to other cities in the region, mostly in China and Japan.

      Dragonair continued to participate in the joint services between Bandar Seri Begawan and Hong Kong operated by Royal Brunei Airlines. With the introduction of an additional A330-300 aircraft, the airline now operates seven A320-200 and four A330-300 aircraft.

AHK Air Hong Kong (AHK) continued to operate scheduled all-cargo services to Manchester, Brussels and Dubai, and non-scheduled cargo services to various destinations in Asia. The airline commenced scheduled all-cargo service to Osaka in March, replacing its Nagoya service, and to Chicago in August. To cope with the increasing scale of its operations, AHK has acquired three B747-200 freighters to replace its original B747-100 and B747-200 freighters.

Seven foreign carriers introduced new scheduled services to Hong Kong during the year Cargolux in January (by converting its cargo charters into scheduled services), Grand International Airways in April, EL AL Israel Airlines (by converting its passenger charters into scheduled services) and Eva Airways in August, China Northwest Airlines in September, and China Northern Airlines and China Southwest Airlines in October. These additions boosted the number of scheduled airlines serving Hong Kong to 66. At the end of the year, these airlines together operated about 1 500 direct round trip services weekly between Hong Kong and over 100 other cities. Besides the scheduled services, an average of 210 non-scheduled flights were operated each week.

Under specific authorisation from the British Government, the Hong Kong Government continues to negotiate air services agreements (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 1996, 33 rounds of air services consultations were held with 21 countries. Four more ASAS were signed with the Republic of Korea, Singapore, Italy and India -- bringing the total of such agreements to 15.

In 1996, the Air Transport Licensing Authority granted three licences to Hong Kong airlines: one each to CPA, Dragonair and AHK. At the end of the year, CPA

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held licences to operate scheduled services to 76 cities, Dragonair to 79 cities and AHK to 38 cities.

Aviation Security

The Aviation Security Ordinance, which came into effect in August 1996, provides comprehensive local legislation to implement aviation security-related conventions and agreements promulgated by the International Civil Aviation Organisation. It forms the basis for implementing effective aviation security measures in Hong Kong through the establishment of formal security programmes by government, airport operators, airlines and other concerned parties. These measures establish a clear framework for maintaining Hong Kong's reputation for implementation of aviation security practices to the highest international standard.

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5.2.102

16 THE AIRPORT CORE PROGRAMME

     CONSTRUCTION of the 10 Airport Core Programme (ACP) projects one of the world's largest infrastructure programmes is well advanced. The ACP 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 expansion well into the next century.

      Apart from the new airport, the ACP projects comprise the Airport Railway; 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 new airport); and a new town at Tung Chung, North Lantau.

Excellent progress was made in 1996 on all the 10 ACP projects with 75 per cent of work completed. By the end of the year, 170 major contracts valued at about $95.8 billion had been awarded by the government, the Airport Authority (AA), the Mass Transit Railway Corporation (MTRC) and the Western Harbour Crossing (WHC) franchisee the Western Harbour Tunnel Company Limited (WHTC).

The new airport and the Airport Railway remain on target for opening in April and June 1998 respectively. By June 1997, the five highways projects linking Central District to Tung Chung and the new airport, including the Lantau Link and the WHC, will be open for public use; the two reclamations in West Kowloon and Central District will be ready for development; and population intake at Tung Chung will start.

       On May 30, 1996, the British and Chinese sides of the Airport Committee agreed that the AA could immediately proceed with the design and construction of the second runway and associated facilities at the new airport. This makes possible the early commissioning of the second, or northern, runway and will help the new airport cope with the fast-growing air traffic demand. The target commissioning date of the northern runway is late 1998. The AA will finance this non-ACP second runway project by borrowings and there is no need for additional equity from the government.

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 and cargo throughput. In 1996, more than 29.6 million passengers passed through Kai Tak, an increase of 8 per cent compared with 1995. Tourism receipts amounted to over $87 billion, contributing per cent to Hong Kong's GDP. Kai Tak handled more than 1.56 million tonnes of

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international air cargo, a 7.6 per cent increase over 1995. Moreover, about 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 growth in air traffic and that Kai Tak will be unable to accommodate the forecast air traffic demand. Hong Kong will stand to suffer serious economic losses if Kai Tak has to operate 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.

An Airport Committee was set up in accordance with the MOU under the auspices of the Sino-British Joint Liaison Group for consultations on important matters relating to the airport project that straddle June 30, 1997. In the past few years, consultations within the Airport Committee have resulted in Sino-British agreement over several important issues including the financing arrangements for the new airport and Airport Railway, the Airport Authority Bill and some major franchises at the new airport.

An Agreed Minute was signed in May 1996 allowing the AA to proceed immediately with the construction of the second runway and associated facilities at the new airport. In the same month, the Sino-British Joint Liaison Group reached agreement on the award of three ramp-handling and three aircraft maintenance franchises at the new airport.

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 providing, developing, operating and maintaining the new airport. The MTRC is responsible for building, financing and operating the Airport Railway. The WHC is being built, and will be operated, by the Western Harbour Tunnel Company Limited under a 30-year franchise.

The 10 ACP projects are projected to cost $156.36 billion in money of the day (MOD) values (sometimes known as out-turn prices), a reduction of $1.8 billion on the previous budget. The use of MOD values takes into account the impact of inflation on the value of the dollar while projects are being designed and built. This is particularly relevant to the ACP because most contracts have been let on a fixed-price lump-sum basis, which means that contract prices have been adjusted to cover inflation over the contract period.

In accordance with the Agreed Minute on financing arrangements for the new airport and the Airport Railway signed by the British and Chinese Governments in November 1994, the Hong Kong Government will inject equity totalling $36.6 billion and $23.7 billion into the new airport and the Airport Railway respectively. It will therefore meet a total of $111 billion, or more than 70 per cent of the total ACP cost,

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in the form of direct funding of government works projects ($50.7 billion) and through equity injection ($60.3 billion) into the AA and the MTRC.

The British and Chinese sides of the Airport Committee agreed on June 30, 1995, 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 MTRC. 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 projects. The agreements with the MTRC and the AA were then signed on July 5 and December 1, 1995, respectively.

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 380 000 residents living under its flight path, who will escape the noise of aircraft, and make available additional land for residential and commercial developments in Kowloon.

The projects will also provide further local job and business opportunities. The projects have already generated more than 28 000 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 around 15 000 new jobs.

The New Airport at Chek Lap Kok

Good progress continued to be made on all fronts

construction, commercial, retail

and real estate developments, and planning arrangements for the airport's opening in April 1998.

Construction

The bulk of the civil works, and the construction of the first, or southern runway, taxiways and aprons were substantially completed over the past year. In March, British Prime Minister John Major visited the airport island to start the permanent asphalting works for the 3 800-metre southern runway.

The contractors for the passenger terminal building also made good progress. By the end of 1996 the concrete structure and the roof's steelwork were completed. Fit- out works within the building were under way.

Good progress was also made with the terminal's electrical and mechanical services. In the baggage handling hall alone, more than 22 kilometres of conveyors had been installed. The contractors for the terminal's automated people mover also completed the preliminary installation work for the driverless shuttle-train system that will be capable of transporting some 5 200 passengers an hour to the aircraft gates.

       On the southern side of the airport island, construction of essential private sector works for major airport support services moved ahead rapidly. These include the terminals of the two air cargo operators, the aviation fuel supply system, and three aircraft catering facilities.

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  Following the agreement between the British and Chinese sides of the Airport Committee in May, work on tendering processes for the northern runway and associated facilities has started. The AA aims to have these operational in late 1998. The northern runway will increase the overall runway capacity to 50 aircraft movements per hour initially, compared with 37/38 movements with single-runway operation.

Finance

In January, the AA signed a credit agreement for an HK$8.2 billion syndicated loan facility with 48 local and international banks to meet part of the cost of the first phase of the new airport. Separate borrowings will be arranged to meet the costs to be incurred by the AA in respect of the northern runway project.

Commercial Franchises and Real Estate Development

 All franchise agreements for air cargo, aviation fuel supply services and aircraft catering were executed in the first half of 1996. In May, agreement was reached with the Chinese side on the award of franchises for two more airport support services, comprising three franchises for aircraft maintenance and another three for aircraft ramp handling. All these franchises were awarded later in the year.

  Three significant agreements on real estate development sub-leases were concluded during the year for an air freight forwarding centre, an airline headquarters building and a hotel with up to 1 200 rooms and the provision of a 1 750-space multi-storey car park.

Retailing-Hong Kong Sky Mall

The AA in July unveiled its 'Hong Kong Sky Mall' retail concept that will provide the new airport with one of Hong Kong's largest shopping malls. There will be about 120 outlets covering a total gross floor area of 30 000 square metres within five major retail zones in the terminal.

Planning for Airport Opening

The AA in 1996 continued to develop plans and policies required to ensure both a smooth transition of operations from Kai Tak to the new airport and a successful opening. Apart from maintaining progress on construction works, an important task is the drawing up of an Airport Operational Readiness (AOR) programme by the AA together with more than 60 business partners of the AA and some 30 government departments.

  In February, the Finance Committee of the Legislative Council approved funds in the amount of $19.2 million for payment of ex-gratia allowances to some 150 Airport Management Division staff of Civil Aviation Department (CAD) upon Kai Tak's closure in 1998. This paved the way for the AA to make offers of employment to these CAD staff.

Government Facilities

Work on the government facilities at the new airport including the air traffic control complex and tower, the Government Flying Service Building, an Airmail Centre, a police station and a fire station, was progressing well. Additional government facilities were being designed to support the operation of the northern runway.

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Formation of Land

In all, 1 669 hectares of new land will be created the 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 reclamation at the Central waterfront.

       Tung Chung new town will ultimately occupy two valleys at Tung Chung and Tai Ho on northern Lantau, plus a coastal strip of reclamation in between. It is planned to house 15 000 people by the end of 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. Work on Phase I of the new town started in April 1992, with completion scheduled for the second quarter of 1997. The reclamation work has been completed and infrastructure works are well under way. At the year's end, 87 per cent of the project was finished. Population intake is expected to commence in mid-1997. The West Kowloon Reclamation will provide housing for 91 000 people, commercial space and vital road and rail arteries linking Kowloon with the new airport and the north-western New Territories. The target completion date is mid- 1997 and the project was 97 per cent complete at the end of 1996.

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 (excluding works entrusted to the Airport Railway Hong Kong Station Contract) was substantially completed in 1996, ahead of the target completion date of mid-1997.

New Transport Facilities

The five major highway projects in the ACP are designed to cater for traffic to the new airport and to relieve congestion on existing roads. They are the Western Harbour Crossing, the West Kowloon Expressway, the Kwai Chung and Tsing Yi sections of Route 3, the Lantau Link (formerly known as the Lantau Fixed Crossing), and the North Lantau Expressway. Together with the Airport Railway, these highways will provide a high-speed transport link between the new airport, Tung Chung new town and Central District, and will 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 route, it will relieve congestion at the two existing cross-harbour tunnels. Construction work started in September 1993. The last of the 12 tunnel units was sunk into position in Victoria Harbour in April 1996. The project was 97 per cent complete at the end of 1996 and is targeted for opening 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

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Kowloon Reclamation and help relieve pressure on existing local and distributor roads. Physical work on the expressway started in August 1993 and is scheduled for opening in February 1997. At the year's end, 95 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 to the Lantau Link. It comprises the Cheung Ching Tunnel, the Kwai Chung Viaduct and the Rambler Channel Bridge. The Rambler Channel Bridge was structurally completed in June 1996. Work on the remaining two contracts continued, with completion scheduled for early 1997. Significant milestones were reached during the year with the completion of the major tunnel works for the Cheung Ching Tunnel and completion of viaduct construction above the busy Kwai Chung Road. The Kwai Chung viaduct is scheduled for opening in February and the Tsing Yi section of Route 3 is expected to open in May 1997. Overall, 98 per cent of the project was complete.

The two-deck Lantau Link, 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 has already become a major Hong Kong landmark. Its main span of almost 1.4 kilometres will make it the world's longest suspension bridge carrying both road and rail traffic. Work on the Lantau Link began in May 1992 and it is scheduled to open in May 1997. Deck section erection for the Tsing Ma and Kap Shui Mun Bridges was completed in March. Overall, 95 per cent of the project was complete. The North Lantau Expressway will be a 12.5-kilometre, dual three-lane highway along the northern coast of Lantau, joining the Lantau Link to Tung Chung new town and the new airport. Work started in 1992 and is scheduled for completion in February 1997. The project was 99 per cent complete.

Airport Railway

The 34-kilometre Airport Railway will provide two separate services, operating mainly on the same tracks but with separate platforms. There will be a fast passenger link to the new airport, called the Airport Express, and a domestic service called the Lantau Line.

During the year, key milestones of the civil construction works were achieved generally on time. In January, the final section of seawall enclosing the Central Reclamation was closed. Track-laying began in March, marking the start of system- wide installations and other electrical and mechanical works. Topping-out of the Tai Kok Tsui Station (renamed Olympic Station in December) and the breakthrough of the Lai King Tunnels were achieved in August. The Airport Railway cross-harbour tunnel was structurally completed in October after the immersion of the last of the 10 tunnel units in May. Structural work for the Tung Chung Station was completed in December. Good progress was made on the manufacture of the rolling stock, as well as the detailed design and manufacturing of other electrical and mechanical equipment. By the end of 1996, 65 per cent of the Airport Railway project was complete.

Contracts and Tenders

Up to the end of 1996, a total of 170 major contracts, worth about $95.8 billion, had been awarded. They included 90 contracts worth about $38.4 billion awarded by the

THE AIRPORT CORE PROGRAMME

government; 48 contracts worth about $33.9 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 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 as part of joint ventures. By the end of 1996, Japan had won the largest share by value with 26 per cent of the total, followed by Hong Kong (23 per cent), the United Kingdom (16 per cent), the People's Republic of China (8 per cent), the Netherlands (6 per cent), France (5 per cent), Belgium (3 per cent), New Zealand (3 per cent), Spain, Australia, the United States of America and Germany (each about 2 per cent). The remaining 2 per cent was shared by Italy, South Africa, Austria, Norway, Portugal and Denmark.

Management and Cost Control

     After the establishment of an overall strategy on the scope, programme and budget for the ACP, regular reviews continued in 1996. 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 warning of possible cost increases are reported to the New Airport Projects Co-ordination Office (NAPCO) and relevant department heads. Trends which could lead to cost increases are identified at an early stage. If cost increases are accepted, off-setting savings are sought in the same or other ACP projects. In addition, the government's competitive tendering system has enabled it to obtain value for money on the ACP contracts.

Government works departments, 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 task 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; window insulation to mitigate noise exposure; plus general construction site housekeeping. Extensive environmental monitoring and audit programmes were conducted by the project offices and reported to the Environmental Protection Department (EPD) to ensure the acceptable performance of individual projects. In

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addition, environmental project offices have been established by the EPD 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.

Safety at Work

In 1996, the government strengthened safety measures to further encourage proactive safety management on site and to spread a safety culture among all the personnel involved in the ACP projects.

  Management and working committee meetings involving senior officials and site staff were held frequently to address construction safety issues. Contracts with high accident rates were brought to the ACP Construction Safety Steering Committee chaired by the Secretary for Works for review on specific safety actions taken. Lessons learnt from accidents were circulated to the ACP participants.

  The ACP Construction Safety Award Scheme is organised annually to commend ACP contractors, workers and safety personnel in sites which diligently executed their safety management and promotion programmes, and achieved good safety records. Various accident prevention and safety management training courses were provided for supervisory staff at ACP sites by the Labour Department, Fire Services Department and Marine Department. The Labour Department also restructured and strengthened its inspection team to improve compliance with safety requirements on ACP sites. In 1996, the industrial accident rate for ACP contracts was 60 reportable accidents per thousand workers per year, compared with the corresponding rate of 233 for the construction industry as a whole in 1995.

Community and Public Relations

The ACP Exhibition Centre at Ting Kau was well received, with more than 480 000 members of the public visiting it since the opening in January 1996. Seminars and briefings on the ACP projects were conducted for schools. Tours of the ACP Exhibition Centre were organised for schools and community organisations.

  Briefings on the ACP were also given to a wide range of audiences, both locally and overseas. An ACP presentation was given at the 'World Congress on Project Management' in June 1996 organised by the International Project Management Association in Paris. Visits to ACP sites were arranged for members of the Executive Council, the Legislative Council, the Airport Consultative Committee, the two Municipal Councils, and the 18 District Boards; overseas government officials and members of parliaments; major business, educational, professional and financial groups; and members of the consular corps.

  The Airport Authority provided a wide range of programmes throughout the year to cater for the high local and international interest in the new airport and about 13 000 people visited Chek Lap Kok. Press releases and photographs were issued throughout the year to publicise works progress or to highlight project milestones. Press conferences, briefings and site visits were arranged for the media. Promotional publications distributed included a brochure, a bilingual leaflet, regular issues of a newsletter and a fact sheet on works progress as well as the creation of an ACP home Page on the Internet. Updated videos on the ACP and on the construction of the Tsing Ma Bridge were produced.

'A traditional junk under full sail draws near the Tsing Ma Bridge,

       one of 10 major construction works forming the Airport Core Programme. At 1 377 metres, it is the world's longest suspension bridge carrying both road and rail traffic. The pylons are 206 metres high.

TRAFALGAR HOUSE.

MITSUI COSTAIN

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DALLA BRIDA

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Larger than San Francisco's Golden Gate Bridge, the Tsing Ma Bridge looms over a junk and a freighter in the Ma Wan Channel, which runs between Tsing Yi and Ma Wan Islands. It links the new airport at Chek Lap Kok with the Kowloon peninsula and is due for completion in May 1997. FAR RIGHT: Workers apply final touches to the bridge's massive cables, each composed of 33 000 wires as thick as a thumb.

The terminal for Hong Kong's new international airport begins to give observers a good idea of its final form. The 750-metre central concourse will have a driverless train system and two kilometres of moving footway to get passengers to and from their aircraft. The vaulted and cantilevered design of the passenger terminal's roof acts as an energy efficient insulator.

' Aircraft will get most of their landing instructions from air traffic controllers

in this tower set between the north and south runways at Chek Lap Kok. Information gathering bases on islands in Chinese waters east and west of Hong Kong will augment the system being designed to take the airport into the 21st century. The new passenger terminal stretches away to the east at the top of the picture.

17 PORT DEVELOPMENT

      HONG KONG, one of the world's busiest container ports, handled nearly 13.4 million twenty-foot equivalent units (TEUs) of containers in 1996. This represents an increase of some 7 per cent over 1995.

      Handling this container cargo and many other cargoes which come and go by means other than containers - 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 contribute some 20 per cent towards Hong Kong's GDP and provided employment for 600 000 of its workforce. Matching supply of port facilities with demand will, hence, ensure economic growth and optimise employment opportunities for the community. Forecasts of future growth are, therefore, important.

The Port Cargo Forecasts published during 1996 predicted that by the year 2016 there would be a demand for Hong Kong to handle 39 million TEUS a year. This is equivalent to handling five TEUS every four seconds, every minute of every hour of every day.

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 fastest industrialising areas in the world. Some 70 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.

      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.

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A decade ago, it became apparent that future growth would be of an order not previously appreciated. The demand for future facilities would be on a scale for which careful co-ordination would be needed so that the development would integrate into overall plans for developing the territory.

From recognition of this need came the Port Development Board (PDB), established in April 1990. The board is not a port authority. However, it advises the government on all aspects of port development and is responsible for:

identifying strategic port needs

monitoring plans to meet these needs

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listening to and gathering the views of the port industries and services following up on those views as necessary

maintaining the port's competitiveness in the region and

linking government and private sector involvement in port planning and development.

To do this, the board brings together key players from the private sector and the government to determine and promote recommended solutions to problems. It acts as a focal point for ideas and opinions expressed by port operators and for anyone affected by port expansion.

The board assesses development needs in the light of changing demand, port capacity, productivity and performance and competition from regional ports. One of its main tasks is to determine what port facilities will be needed and to advise on the best means of ensuring that those facilities are in place, on time.

Current Strategic Planning

Significant investments in upgraded equipment and systems in the existing terminals enabled Hong Kong to handle the growth in container terminal throughput in 1996. 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 first quarter of 1999. In September, the way was cleared for Container Terminal Nine (CT9) on Tsing Yi Island to be taken forward so that it might come into operation in line with current demand forecasts in January 1999. Rationalisation by operators of Container Terminals One to Nine means that CT9 will include feeder berth capacity in addition to its previously planned four berths for main line ships.

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Detailed planning and design, and work on lease conditions for the first phases of Lantau Port, was completed in 1996. Barge berth facilities have been included in the designs for CT10 and CT11 in Lantau Port. Under the continuing government plan and programme for port development, feasibility studies for CT12 and CT13 in Lantau Port are expected to start in early 1997.

In planning Lantau Port, environmental considerations have played an important role. The orientation of terminals is such that visual and noise impact is minimised, 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.

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       The PDB has forecast that by 2006 some 93 million tonnes of freight will be carried by river and this will rise to some 139 million tonnes in 2016. In 1994 some 24 per cent of river cargoes was containerised. By 1995 this had reached 32 per cent and forecasts predict that it will reach 40 per cent by 2016.

Work on the construction of Hong Kong's first River Trade Terminal (RTT), specifically designed to handle river cargoes, got under way near Tuen Mun in the north-west New Territories. This location means that many river vessels will be able to avoid the busy Ma Wan Channel. The first phase of the RTT is planned to begin operation in 1998.

Port Cargo Forecasts

According to the latest Port Cargo Forecasts, container throughput is expected to reach 39 million TEUS by 2016. This reflects an average growth rate of 5.9 per cent annually. Total cargo to be put through the port in 2016 would be in the order of 453 million tonnes, growing by 5.4 per cent each year.

       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 next forecasts will be published in early 1998.

In compiling the forecasts, the PDB takes into account trends in Hong Kong as well as 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 PDB reviews its forecasts frequently and regularly. It is clear that cargo demand in this part of the world continues to grow. And, even as new ports spring up in other parts of southern China, it is apparent that Hong Kong's share in meeting that demand will continue to be substantial.

Indeed, 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.

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 (ships 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 container handling.

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  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. With the construction of CT12, with six berths on a central island facing south whose access will be by road bridges at the eastern end of the development, the dredging of the West Lamma Channel will be required. CT13 would 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, (CT14).

Lantau Port Ancillary Works

Within the Lantau Port, RTTs 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.

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, which 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.

18 PUBLIC ORDER

        HONG KONG is one of the safest cities in the world. The overall crime rate of 1 253 crimes per 100 000 people and the violent rate of 241: 100 000 have fallen to their lowest in the past 15 years and 10 years, respectively.

       The Organised and Serious Crimes Ordinance has enhanced the Police ability to investigate organised and serious crimes. In order to assure witnesses in triad cases of their safety, effective witness protection arrangements have been put in place. The establishment of the Police Central Witness Protection Unit in April 1995 further enhanced the witness protection capability. The Witness Protection Bill introduced into the Legislative Council in July 1996 will establish a system for the change of identity of high-risk witnesses.

Fight Crime Committee

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.

       In 1996, the committee continued to provide advice on measures to combat crime. Specific subjects considered included the police response to 999 calls, the improvement in report rooms and interview facilities in police stations, the personal encounter with prisoners' programme, and the role played by Education Department in the prevention of rape/child sexual abuse. The committee monitored the progress of the action plan to tackle juvenile crime, and the work of the Security and Guarding Services Industry Authority established on June 1, 1995, to consider and determine applications for licences by security companies. It also commissioned the City University of Hong Kong's research team to conduct a research on the effectiveness of the rehabilitation programmes for young offenders, launched a publicity campaign to fight youth crime, and held a Fight Crime Conference in December 1996 to foster community interest in the fight against crime.

       To ensure that 999 calls were promptly answered, the committee considered the plans and strategies of the overall operation of the 999 call-answering system. Members were concerned that the police should be able to provide the optimum levels of service to the public.

       As part of the government's drive to improve services to the community, the Police Force is committed to providing a more welcoming and user-friendly environment in police report rooms so as to encourage the public to come forward to report crime and to seek police assistance. The committee had provided valuable advice on improvements, especially on reporting procedures.

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It also considered the Personal Encounter with Prisoners Programme, which provided opportunities for young people to acquaint themselves with the harmful effects of delinquency or criminal behaviour through personal interviews with serving prisoners. The committee felt that preventive education was important to young people, that the programme was useful, and should continue to be run by the Correctional Services Department.

  With the mounting concern of the public towards the increase of rape/child sexual abuse cases in 1996, the committee considered that the Education Department should play an active role in sex education. This was achieved through four channels: curriculum, school activities, guidance and counselling, and home school liaison.

In 1996, the committee continued to devote much of its attention to the problem of juvenile crime. Its sub-committee, the Standing Committee on Young Offenders, commissioned the City University's research team to conduct a study in 1996-97 on the effectiveness of rehabilitation programmes for young offenders. In June 1996, the committee also considered the progress of the Action Plan drawn up to implement the recommendations of the research report on the Social Causes of Juvenile Crime, a study commissioned by the Standing Committee on Young Offenders and completed by the Social Sciences Research Centre of the University of Hong Kong in 1995.

  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 December 1996, the Governor officiated at the Fight Crime Conference 1996 at the Hong Kong Convention and Exhibition Centre in which all District Fight Crime Committee members participated.

Police Force

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.

  In 1996, the crime situation in Hong Kong remained stable with a drop of 14 per cent, or 12 836 crimes, in the total number of crimes recorded. There was also a reduction in violent crime. The number of vehicles reported missing fell 40 per cent compared with 1995. As a result of better intelligence and improved co-operation with China, a total of 24 criminal fugitives and nine stolen luxury vehicles were returned to Hong Kong by the Chinese authorities.

  The commander-designate of the Hong Kong SAR Chinese Garrison, Lieutenant- General Liu Zhenwu, paid a two-day visit to the Force in August as part of a familiarisation visit to the territory. Lieutenant-General Liu and his party were briefed on the Force's structure and operations. They also visited the Hong Kong Island Regional Command and Control Centre, Police Tactical Unit, Special Duties Unit, and Police Driving School.

  Results of the first public opinion survey on the quality of police services were released on April 2. Force performance was rated as good in regards to maintaining public order at demonstrations and public events, traffic control, illegal immigration, narcotics crimes, non-firearm violent crimes, vice activities, organised and triad crimes, and firearms crimes. The survey conducted between December 1995 and

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January 1996 had provided valuable information on how to improve the Force's service and performance.

The Road Traffic (Safety Equipment) (Amendment) Regulations 1995, which came into operation in June 1996, introduced legislation covering the wearing of seat belts by middle front-seat passengers in private cars, taxis, light buses and goods vehicles, and rear-seat passengers in private cars when such seat belts have been fitted. The new regulations should assist in reducing passenger casualties in traffic accidents.

       On June 1, 1996, the Watchmen Ordinance was repealed and replaced by the Security and Guarding Services Ordinance. In all, 116 698 watchmen are issued with Watchmen's Permits under the Watchmen Ordinance. These will be transferred to the new Security Personnel Permits in a phased programme over the next five years.

       Marine Region was restructured in April, as a result of New Territories South Region taking over responsibility for the policing of Lantau Island. Marine Outer Waters District now includes North, East and West Divisions, with Marine Port District having South, Harbour and an enlarged Cheung Chau Division. The Marine Regional Headquarters moved to new premises at Sai Wan Ho on Hong Kong Island at the end of the year. A parade was held in November to mark the occasion as the previous Headquarters had been occupied for 112 years, and in 1994 had been declared a historical building.

       A new Finance Department was set up on April 15 with a view to strengthening financial controls and planning. Headed by a Financial Controller pegged at the civilian equivalent of Assistant Commissioner rank, the department will develop a range of financial systems to give Force managers a clearer picture of where and how resources are spent. It is also responsible for the Force's Budget planning as well as Stores and Internal Audit.

Owing to the shrinking population of Vietnamese Migrants in Hong Kong, Tai A Chau Detention Centre, which opened in February 1991 and housed some 9 600 Vietnamese at full capacity, was closed in September. Some 5 600 people were transferred to the Whitehead Detention Centre pending repatriation to Vietnam. Tai A Chau was the last detention centre under police management.

Crime

      Reported crimes in 1996 totalled 79 050, a decrease of 14 per cent compared with the 91 886 crimes recorded in 1995. The crime rate stood at 1 253 cases per 100 000 of the population, a decrease of 16 per cent, compared with 1995.

Violent crime, which includes murder, wounding, serious assault, rape, indecent assault, kidnapping, blackmail, criminal intimidation, robbery and arson, declined to 15 191 cases, compared with 17 087 in 1995. Robbery, wounding and serious assault accounted for some 72 per cent of the total number of violent crimes in 1996.

The situation regarding vehicle theft continued to improve. Overall, 2 561 motor vehicles were reported missing in 1996, a drop of 40 per cent compared with 1995. The number of robberies involving the use of firearms- both genuine and pistol-like objects - was 83, a decrease of 49 per cent compared with 1995.

In all, 40 741 crimes or 52 per cent of the total were detected, with 47 157 people arrested for various criminal offences. Of those arrested, 6 479 were juvenile offenders (aged between seven and 15 years) and 7 941 were young persons (16 to 20).

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Violent Crime (Firearms Only)

The number of robberies involving genuine firearms continued to drop. The reasons for this included successful police action against firearms suppliers, both within Hong Kong and in China, and better liaison with the Chinese law enforcement agencies to stop illegal import of firearms.

Vehicle Theft

The patterns of vehicle theft did not change significantly. Joint efforts in border control by the Hong Kong and Chinese authorities slowed down thefts of articulated tractor units, which had been prevalent in the previous year. However, it remained a major concern.

  Unmanifested left-hand-drive vehicles continued to be seized in transit through Hong Kong to China. Some of the vehicles were stolen in other jurisdictions and sent to China through Hong Kong.

The number of luxury cars reported missing continued to drop. Again, China provided the marketplace for such vehicles, and enforcement action by the Chinese authorities has had significant impact.

Organised Crime and Triads

Action against organised crime continued to be a high priority. Long-term, intelligence-led, and complex investigations continued to yield results.

Proactive operations involving undercover operations produced notable successes. In particular, senior members of the Fuk Yee Hing and Wo Shing Wo societies were convicted of serious criminal offences under the provisions of the Organised and Serious Crimes Ordinance.

Action against loansharks continued to be a high priority and several syndicates were neutralised during the year.

Action against triads and organised crime has been substantially enhanced since the full implementation of the Organised and Serious Crimes Ordinance on April 28, 1995. In 1996, police successfully applied to the courts to invoke the special investigative powers under the ordinance to compel witnesses to attend interviews and to demand the production of documents, to assist with inquiries into two major triad or organised crime investigations. Criminal assets valued at more than $5.8 million have been confiscated and $5 million are being restrained pending court proceedings.

In addition, six money laundering prosecutions have been launched. Following conviction in nine cases of a triad-related or serious nature, enhanced sentencing of the defendants was applied for. Some defendants received sentence increases ranging from 25 per cent to 66 per cent.

Witness Protection Unit

This unit administers the Witness Protection Programme which co-ordinates the Police Force's overall response to the treatment of endangered witnesses. It comprises 34 specially-selected and trained officers who are capable of providing a variety of protection measures including relocation, the provision of protective security, or furnishing round-the-clock protection in Police-operated safe houses.

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Vulnerable Witnesses and Child Protection

After the commencement of the Criminal Procedure (Amendment) Ordinance in February 1996, the Regional Child Abuse Investigation Units, charged with the investigation of cases involving children who are sexually or physically abused, commenced making applications to courts to adduce video taped testimony and to utilise the Court Closed Circuit Television Link System. During the year, 37 applications were made and approved in respect of 41 child abuse cases taken before the courts.

        Two additional video interview and medical examination suites were established - one each in the New Territories and Kowloon West - thus bringing the number available to five. The suites are used to video tape interviews with vulnerable victims and witnesses and conduct forensic medical examinations in a friendly and non- threatening environment.

      Throughout the year, a series of awareness training programmes was conducted for Police and attended by other concerned departments and agencies. The programmes covered child development, paedophilia, child pornography and child sexual abuse and were attended by more than 1 000 police officers of the rank of Inspector and above. Further multi-disciplinary intensive training programmes in video recorded interviews of vulnerable witnesses were conducted in July and October. This intensive training covered: understanding of child development; the problems related to child sexual and physical abuse; investigative processes and procedures; and advanced skills for interviewing children and the mentally handicapped on video tape specifically for the purposes of investigation and prosecution. In all, 20 officers successfully completed the course.

Commercial Crime

The Commercial Crime Bureau investigated several local and overseas complaints relating to sophisticated Advance Fee Fraud perpetrated by persons claiming to be officials of the Central Bank of a West African country. Three people were arrested and convicted. The convictions are believed to be the first of their kind in the world in combating this particular kind of international fraud.

      The Computer Crime Section was established in 1993 to enforce the Computer Crimes Ordinance. With the rapid increase in both the use of computers and the public awareness of the section's functions, the number of computer crime reports has risen. The section has so far secured 11 successful prosecutions against persons who had made unauthorised access to computer systems.

The Counterfeit and Forgery Division also enjoyed another successful year in combating currency counterfeiting; credit card fraud; and travel and identity document fraud.

Narcotics

The retail price of No. 4 heroin fluctuated throughout 1996. By the end of 1996, the average purity was 44.97 per cent at the average price of $390.65 per gram compared with a purity of 23.34 per cent and a price of $380 at the end of 1995.

      During 1996, 297 kilograms of opiate drugs, comprising opium and No. 4 heroin, were seized, compared with 379.9 kilograms in 1995. Police and the Customs and

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Excise Department made 14 827 arrests for narcotics offences, compared with 16 143 in 1995.

 Narcotics enforcement resulted in 19 heroin manufacturing or cutting centres being neutralised. The territory's demand for methylamphetamine or 'ice' continued. A total of 46.8 kilograms was seized in 1996.

 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 $208,950,265 has been confiscated from drug traffickers in Hong Kong. As a result of international co-operation, a total of $19,219,380.17 has been seized from local drug traffickers overseas.

 The involvement of young persons in drugs continued to be a major target of the narcotics enforcement strategy. During 1996, amendments to the Dangerous Drugs Ordinance were drafted to provide for heavier sentencess for adults who exploit young persons in the illegal drug trade.

Crime Prevention

The Crime Prevention Bureau maintained its initiative in public education programmes within the community. Particular emphasis was placed on advice regarding domestic security and the security of computers and computer data. The new Crime Prevention Bus, fitted with the latest security equipment, continued to promote security in domestic premises at many venues throughout the territory.

 The Security and Guarding Services Ordinance, which was introduced in 1995, was aimed at improving the quality of security and guarding services. The bureau has embarked on a programme through which advice is offered to planners at the design. stage for building projects. Its capability to liaise directly with architects on secure environmental design has achieved considerable improvements in the security of vulnerable sites.

 The new model 'Robotcop' proved extremely popular and there have been increased demands for its appearance at fight crime campaigns, public exhibitions and junior schools. Its anti-crime messages, aimed at the young, promote civic awareness and the danger of shop theft.

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 police 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

The number of weapons seized for the year remained stable when compared with 1995, reflecting the continued effectiveness of cross-border co-operation. However,

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the number of cases showed a marked increase when compared with last year, mainly due to an increase in the number of air- and gas-powered weapons seized.

       The bureau plans to purchase sophisticated pieces of equipment, including a computer-assisted comparison microscope, a very sensitive velocity measuring chronograph and another optical comparison microscope. The computer-assisted comparison microscope will greatly enhance the bureau's capabilities.

      Continued development of the tests to show that a person has held and fired a gun, have resulted in a significant increase in the sensitivity of these highly scientific techniques.

Identification

The Identification Bureau continued to play an important role in crime detection and investigation, providing an efficient service to all units in the Force in fingerprint technology and forensic photography.

In fingerprint identifications, the bureau achieved high levels of efficiency and service in 1996 with the use of the Computer Assisted Fingerprint Identification System. Altogether, 976 persons were identified in connection with 959 cases. Implementation of Phase II of the system, which entails full computerisation of the bureau's fingerprint records, has been progressing smoothly. The system will become fully operational in April 1997.

During the year, officers from the Scenes of Crime Section attended 22 254 crime scenes. They have endeavoured to improve their service by attending all crime scenes with minimum delay.

      The Main Fingerprint Collection Section is principally responsible for confirming people's previous criminal convictions. In 1996, the section processed the fingerprints of 202 315 persons and led to the identification of 91 052 persons with criminal records.

      In 1996, the Photographic Section produced 65 500 monochrome photographs and 896 188 colour prints and slides. It was also responsible for making videos of crime re-enactments, video-taped statements from suspects and preparation of photographic exhibits for presentation in court.

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 1996, ICPO had a membership of 177 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 work in one of its specialised groups.

      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 in different ICPO member countries.

      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 United Kingdom. It also maintains close liaison with local consulate officials.

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There has been enhanced liaison and co-operation between Hong Kong and China. Two liaison officers of Interpol China have been attached to Hong Kong since 1993 and their presence in the territory has proved to be most constructive. Apart from this, contacts with Chinese law enforcement organisations have been established at the National Central Bureau in Beijing, the Guangdong Liaison Office, Shenzhen and Zhuhai Liaison Sub-Offices in Guangdong Province.

As a result of the expanded liaison with China, co-operation between both sides has continued to develop. The Chinese police have returned a total of 90 criminal fugitives to Hong Kong since 1992 and 57 stolen luxury vehicles have been returned to the territory in the same period.

Public Order

No major incidents affected Hong Kong's internal security in 1996. The Police Tactical Unit (PTU) provided much support to the Correctional Services Department in Vietnamese Migrants (VM) Centres with regard to the Orderly Repatriation Programme. Two serious riots in VM Centres required PTU personnel to restore law and order. The PTU was also committed to anti-crime patrols, illegal immigration operations and crowd management during festive occasions. It played an important role in maintaining law and order at demonstrations and public gatherings.

The structure of PTU companies underwent two major changes during the year. The first was the revision of the platoon structure, with the addition of a sergeant post in each column. This has brought about a better command structure and more flexibility in the deployment of manpower. The second was the introduction of female police officers into regular PTU companies. Female police inspectors commenced training as platoon commanders alongside their male counterparts in August.

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. This training. focused on crowd management and the companies' support role in the overall internal security structure of the Force.

 The Special Duties Unit, the Force's counter-terrorist response unit which is also based at PTU Headquarters, was used on several occasions to assist crime units against armed gangs.

Illegal Immigration

Despite the downward trend of illegal immigrants entering Hong Kong in recent years, enforcement action against illegal immigrants remained one of the Force's top priorities. In 1996, 23 180 illegal immigrants were arrested, representing a decrease of 13.6 per cent from 1995. Most of the illegal immigrants originated from Guangdong Province, but there was an increasing trend of illegal immigrants coming from the northern provinces of China. Among those arrested, 50.8 per cent entered Hong Kong by sea and the remainder by land. Hiding underneath the chassis of containers or goods vehicles was a popular method of entry at border control points while climbing over the border fence became less popular.

 The Force is responsible for the security of both the land and sea border. In 1996, a daily average of 1058 officers and 59 vessels were deployed to counter illegal immigrants. Most of the illegal immigrants arrested were repatriated to China but a

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     small portion that fell within the prosecution policy were prosecuted for landing or remaining in Hong Kong without permission. About 63.5 per cent of the arrested illegal immigrants had previously entered the territory.

      Most of the illegal immigrants came to seek employment, mainly as construction site workers or casual labour. However, an increasing number came as mendicants, prostitutes or to give birth. While the involvement of illegal immigrants in crimes showed a decrease, those from the northern provinces of China appeared to be more prone to committing crimes; had a lesser chance in finding work due to language differences; and lacked family support in the territory.

Vietnamese Migrants

During the year, the government objective to repatriate all Vietnamese Migrants (VM) as soon as possible required regular Police operations to assist Correctional Services Department (CSD) in camp movements and to escort VMs on repatriation flights. Although there have not been any prolonged demonstrations against the repatriation programme, several incidents caused some concern to the security forces. In April, a CSD officer was taken hostage by a group of Vietnamese at the High Island Detention Centre and, in May, rioting broke out at the Whitehead Detention Centre. Both incidents occurred before scheduled movements of VMs. Police escorted 6963 VMs on board 60 flights back to Vietnam in the Orderly Repatriation Programme.

Bomb Disposal

The Explosive Ordnance Disposal (EOD) Bureau rendered safe more than 9 462 explosive devices during the year. These items included home-made bombs, pyrotechnics and unexploded items of ordnance. The ordnance items were recovered mainly from excavations on building sites.

      Bureau members gave presentations to the Canadian Explosives Technicians conference in Canada and the International Association of Bomb Technicians and Investigators in the USA. The bureau has been re-equipped with specialised EOD vehicles and additional equipment to maintain its readiness for full operational deployment.

Police Dog Unit

The purpose-built facilities of the Police Dog Unit's training centre and headquarters provide a comprehensive training programme for different dog-handling disciplines and veterinary services for its some 100 dogs.

      The unit's primary commitment to watch and ward duties is largely dependent on the German Shepherd and Rottweiler breeds, supplemented by the odd Doberman and one exceptional Bull Mastiff. Daily deployment of these general purpose patrol dogs has been rationalised during the year to provide each police district with a team of four and ensure a more equitable distribution of resources amongst urban commands. The anti-crime role of police dogs has been further enhanced by the introduction of mobile, emergency response capabilities in Kowloon West and New Territories North Regions.

Labrador Retrievers and Springer Spaniels are trained in different aspects of search work and are always available on demand from the unit's operational base at Kai

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Tak International Airport. Bred as gun dogs, they have traditionally proved their worth in support of searches for dangerous drugs, explosives and firearms and 1996 was no exception.

In January, the unit conducted its first annual police dog trials in novice and open categories. The event was well-attended and had raised awareness of individual skills through healthy competition amongst all handlers.

Traffic

The government amended regulations to extend the requirement for the compulsory fitting and wearing of seat belts to include the rear seats of private cars, and any middle front seats in private cars, taxis, light buses and goods vehicles. The new requirements took effect on June 1, 1996.

Since the enactment of the Road Traffic (Amendment) Bill 1995, which empowered the Police to demand breath, blood or urine samples from motor vehicle drivers for analysis of alcohol level, the number of persons identified to have been driving under the influence of alcohol saw a dramatic upward trend and a tenfold increase in prosecutions. Stringent enforcement action and increased public awareness should help reduce accidents associated with drink driving.

Red Light Cameras, which aim to secure a reduction in accidents caused by offenders at red traffic lights, were introduced in 1993 as a joint project between the Police and Transport Department. In 1996, additional sites were identified along the Light Rail Transit corridor, which were considered accident black spots. Plans for further expansion of the use of red light cameras in the urban areas, along with an automated prosecution system, are also under active development.

Vehicular traffic to and from China, mainly heavy goods vehicles, continued to rise during 1996. The proliferating cross-border traffic, coupled with increasing traffic population, posed serious congestion problems in the northern and western parts of the New Territories. With a view to maintaining traffic flow in an emergency situation, Police in the New Territories, in conjunction with Transport Department, have developed contingency plans and procedures to tackle congestion at various locations, particularly along Tuen Mun Road.

The Traffic Surveillance and Information System (TSIS) is an inter-departmental project involving the Police, Highways and Transport Departments. The system is being designed to provide close circuit television (CCTV), variable message and overhead gantry signs as well as an automatic incident detection system for both Tuen Mun Highway and the Tsing Ma Control Area which covers the access roads and bridges to the new airport. The system is expected to be fully operational in 1998. A feasibility study is currently under way to install a TSIS for Tolo Highway.

The radio system for traffic police, which had been in service since 1982, was replaced by a new system in 1996. The new radio system provided an improved infrastructure, with new hilltop/tunnel repeaters as well as motorcycle and portable radios. Radio coverage for traffic police including short-range, point-to-point, expressways and tunnels have all been enhanced to meet increasing operational requirements. The system cost $98.4 million.

During 1996, there were 14 390 traffic accidents involving casualties, representing a decrease of 2.8 per cent against the previous year. The number of fixed penalty tickets

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for moving offences increased by 4.4 per cent compared with 1995. Police and traffic wardens issued 1.7 million tickets for parking offences during the year, representing a decrease of 11.5 per cent when compared with the 1.92 million tickets issued in 1995. These decreases can be attributed to increasing congestion which caused the diversion of more police resources to traffic control rather than enforcement.

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.

On June 1, 1996, the Watchmen Ordinance was repealed and replaced by the Security and Guarding Services Ordinance, aimed at improving the security and guarding services. In all, 56 663 applications for the Security Personnel Permit were received.

During the year, a total of 1 052 notifications of public meetings and processions and 1 089 applications for lion dance permits were received. The revised procedures and higher threshold for notification that came into effect with the commencement of the Public Order (Amendment) Ordinance in late 1995 worked smoothly and there was only one appeal against conditions set by Police to ensure public safety and public order. The office also processed 11 applications for pawnbroker licences, 43 for massage establishment licences and 48 for temporary liquor licences.

A total of 174 persons applied to possess firearms for competition or target shooting and a total of 1 843 firearms licences were granted in 1996. During the year, a review of the Firearms and Ammunition Ordinance (Chapter 238) was completed. The Firearms and Ammunition (Amendment) Bill 1996 was introduced into the Legislative Council. It aims to improve the existing licensing framework to ensure that licensed firearms are used safely.

       In 1996, 1 052 societies notified their establishment and none was dissolved. A total of 7 597 have provided notification of their establishment.

Marine Police

The Marine Region was reorganised into two new districts - Marine Outer Waters District and Marine Port District - in 1996.

Major construction programmes on Chek Lap Kok, Lantau and the North-West New Territories during the year, coupled with the increasing number of river traders from China, contributed to the continuous growth of sea traffic and consequent policing commitment in the harbour and the western waters of the territory. Traffic flow in the harbour improved as a result of combined 'Rule of the road' operations with Marine Department designed to make correct use of fairways.

Shark prevention measures were installed at all gazetted beaches in Sai Kung to protect swimmers. Environmental concerns, particularly on the use of explosives or toxic substances to capture fish, were accorded a high priority. This led to stepped-up checks on vessels carrying live fish and the seizure of 388 kg of explosives.

As a result of stringent enforcement action and close liaison between Marine Police and their counterparts in the adjacent provinces of China, smuggling activities involving speedboats, particularly dai feis and chung feis, continued to drop during

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the year. Smuggling of vehicles and other contraband into China remains a problem and containers are now the favourite transportation method. Five new craft specially built to replace the ASTF dai feis are expected to go into service in late 1997 or early 1998.

The Marine Police continued to play an important role in combating illegal immigration from China. During the year, 1 554 people were apprehended when trying to sneak in by sea, compared with 2 410 in 1995.

 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 popular crossing points because of the short distance to the Hong Kong coastline. To evade interception, some chose to come by motorised sampans from the Chinese islands of Wailingding and Guishan just south of Hong Kong.

During 1996, a total of 576 Vietnamese migrants arrived in the territory by sea on 50 vessels. Of these, 495 elected to have their vessels refuelled and reprovisioned and to continue their voyage.

Public Relations

The Good Citizen Award Scheme and the Good Citizen of the Year Award Scheme remained effective vehicles for gaining public support in the ongoing fight against crime. The schemes have run 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 2 616 public-spirited citizens.

The police telephone hotlines, as in previous years, were productive throughout the year. The general hotline 2527 7177 and the Organised Crime and Triad Hotline 2527 7887 registered 7 995 and 526 calls respectively in 1996, which led to positive results and arrests.

Another favourite avenue for crime reporting, the Crime Information Form, continued to provide useful information. Altogether, 2 189 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 1996, the JPC had 750 946 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, JPC members are provided with a wide range of sports, recreational and educational programmes, organised to foster a positive attitude towards a healthy life. In 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 produces, jointly with RTHK, three television programmes, namely, Police Magazine, Crime Watch and Police Report. These programmes, broadcast in Cantonese and English, appeal to the public for information on undetected crimes, issue advice on crime prevention, road safety and special traffic arrangements. Special features highlight current crime trends, topical issues of social and legislative concern

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▲ Officers from the Correctional

Services Department practise moves during training.

RIGHT: New Immigration

Department officers march past the saluting base during their annual passing out parade.

| PREVIOUS PAGE: The first female cadet in the Government Flying Service, Miss Yan Suk-yin, 25, stands proudly in front of a helicopter after joining up in July 1996. In September, she began a one-year helicopter training course in Bristol, UK.

BY 8882

An auxiliary police woman directs

traffic in Gloucester Road, Admiralty. The Royal Hong Kong Auxiliary Police Force was established in 1914 and mustered about 5 300 volunteers from all walks in 1996, 580 of them female. An average of 644 officers turned out each day. Their duties included crime prevention, crowd control, traffic control, operation duties, communications and community relations. LEFT: A Special Duties Unit officer from the Royal Hong Kong Police Force water assault team makes a most unusual sight as he bursts out of the water ready for action.

Firemen confront the 'enemy' as they extinguish a blaze in training. RIGHT: Real-life disaster, as a fireman helps an injured person out of an office building on Nathan Road, where 40 people died in November during Hong Kong's worst fire in commercial premises for half a century.

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to the general public, and various facets of police work. The programmes score a consistently high audience rating.

      The Radio Traffic Studio set up in the Police Public Relations Branch (PPRB) came into operation in May, delivering radio traffic bulletins to the public through RTHK during morning rush hours. The service has been extended to cover the evening peak hours in July. People are thus informed of the latest traffic conditions and other special traffic arrangements at peak times.

      Visits to the Force are also encouraged. During the year, the PPRB handled a total of 73 local and overseas visits involving 969 visitors to the Force. The Police Museum, police stations and training establishments 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 222 press conferences and briefings, attended 135 incidents, and issued 3 449 press releases. The PPRB also produces a fortnightly newspaper, OffBeat; monitors media coverage of police and criminal activities; and promotes various campaigns.

Planning and Development

The target completion date of the new airport Police station at Chek Lap Kok is March 1997. The new Tung Chung Police Station will also be completed around mid- 1997 to serve some 150 000 residents of the new town.

      Work on upgrading accommodation at Police Headquarters continued. The 32- storey Arsenal House, West Wing, was completed in October. Plans are being drawn up for a total refurbishment of the 20-storey May House.

Planning has been completed for a new in-service training complex at Aberdeen, which will house the Detective Training School and other in-service training facilities. The new Marine Police Regional Headquarters at Sai Wan Ho officially opened in November. A new Police post opened at Kat O (Crooked Island) at the end of the year, replacing the rented village house which had been used for more than 30 years. The new three-storey building is the highest on the island.

During the year, work began to link thermal imagers mounted at strategic locations along the Hong Kong-China land border to Police operations rooms by means of fibre-optic cables. This will enable movement along the border at night to be monitored from these operations rooms, thereby improving the effectiveness of the Field Patrol Detachment in detecting and preventing illegal immigration.

The year also saw the completion of a $55-million project to enhance the 35- kilometre border fence, which now presents a formidable obstacle to would-be illegal immigrants.

      The need to upgrade Police facilities in the New Territories to match the pace of development over recent years has been recognised. Planning began during the year for a new district headquarters and divisional Police station at Tin Shui Wai, while major refurbishment works are being carried out at nine Police stations in the New Territories. A new regional headquarters for the New Territories South Region is also planned.

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Planning is also well advanced for a new vehicle pound and vehicle examination facility to be built near Tai Po. This facility will enhance the ability of the Traffic Police to enforce legislation regarding the construction and use of vehicles, and will also enable obstructions to be more rapidly removed from major roads in the area. It will be the precursor of similar facilities elsewhere in the New Territories and Kowloon.

The arming of woman police has also had an impact on the Force's building programme. The decision to attach woman officers to the PTU for the first time in its history necessitated a programme to provide suitable accommodation for these officers.

The disposal of former military sites in consequence of the Defence Lands Agreement, concluded in 1994, has also created a need for new facilities for the Force. Planning for a new depot for the Field Patrol Detachment to replace its existing accommodation at the former Burma Lines began during the year, and planning continues for an urban close-quarters battle range at Man Kam To to replace the former military facility at Nim Wan. The acquisition of military ranges for use by the Force is also being pursued.

A comprehensive reappraisal of the report room complex in Police stations is being undertaken in conjunction with an existing project to upgrade all report rooms, both technologically and physically, making them more user-friendly to the public. Micro- computers are replacing the old books and ledgers that used to crowd the report room counter. Interview rooms are being specially designed, furnished and equipped for the purpose. Bright lights, bright colours, comfortable furniture and suitable amenities are being provided.

With a view to putting more officers on the beat rather than guarding Police stations and watching detainees in cells, two projects are being developed: the automation of station security in the use of smart-card access, automatic barriers and CCTV monitoring; and the installation of an intercom and buzzer system in every Police cell, linked to a console beside the duty officer's desk.

The Auxiliary Police Force has temporary headquarters at the former military establishment of Blackdown Barracks. New, purpose-built premises in Kowloon Bay are scheduled for completion in June 1997.

Planning went ahead for several facilities to cater for the rapid infrastructural development in the territory. These included a new Kowloon West Regional Headquarters complex and a new Mong Kok District Headquarters and Tai Kok Tsui Divisional Police Station on the Kowloon West Reclamation.

A Police Property Steering Group, comprising representatives from all relevant government branches and departments, was formed to monitor the Police building projects. One of its major tasks is to formulate a comprehensive property strategy for the Force for the next 10 to 15 years.

Communications

Interactive voice-response systems are being installed in 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 hotline service, a bilingual recorded message has been installed. When all operators are busy,

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it will assure users of the 999 hotline that they have reached the correct number and their call will be answered as soon as an operator is available.

      A program to replace all the police analogue cellular phones by digital phones has been completed. A sophisticated service centre for the repair of thermal imaging night observation equipment was set up in the third quarter of 1996. A quality management system is being planned with reference to the International Standard (ISO 9000) to ensure that the best service can be delivered. A new digital radio network has been implemented for the Traffic Police. This will provide secure communications with better and wider radio coverage and less interference.

The planning and development of communication needs for other major projects is 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 secure communications system for VIP Protection Unit and Witness Protection Unit, 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.

Information Technology

Development and implementation of the systems under the Force's Information Technology (IT) Strategy was in full swing in 1996. Three more systems under the IT Strategy the Personnel Information Communal System, the Computer Assisted Fingerprint Identification System and the Police Email Network - went live in 1996. These systems have greatly improved the efficiency of personnel administration, the effectiveness in the fight against crime and the timeliness in dissemination of information within the Force.

The development of the Formation Information Communal System (FICS), which automates day-to-day operations including case processing at District and Divisional levels, has been completed. Rolling out of FICS started in November and will be completed by November 1997.

Site preparation work for the installation of networks, servers and workstations has been completed in most Police Stations. These form part of the Police Data Communication Network which will interconnect all information systems within the Force as well as some external systems from other government departments such as driving and vehicle licence records, identification cards and court cases documentation. In addition, the development of the Regional Information Communal System, the Traffic Operations Management System, the Leave Recording System and the Reference Material System are in progress.

Transport

The Police fleet comprises 2 400 vehicles ranging from 250 c.c. motorcycles to large vans and lorries, plus a range of specialist vehicles such as mobile command units, exhibition buses and Saxon armoured personnel carriers. A programme to improve the working environment for patrol officers has commenced with a view to replacing the majority of front-line vehicles over the next five years with vehicles incorporating up-to-date features. The emphasis is on technical improvements in order to reduce driver fatigue and improve safety. These features will include air-conditioning, power

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steering, anti-lock braking, better seats and seat belts. More conspicuous markings and up-to-date warning systems will also be fitted.

Service Quality Wing

The Service Quality Wing, established in May 1994, has three branches: Performance Review, Research and Inspections and Complaints and Internal Investigations.

The Performance Review Branch develops service quality and promotes efficiency in all areas of the police service. As part of the Force's service quality initiative, an independent public opinion survey was commissioned to examine the quality of Police services. The results released in April were very encouraging: more than 2 000 respondents were interviewed and 78 per cent thought the Force's overall performance worthy of praise. Only 3 per cent thought poorly of it. Throughout the year, top management was engaged in a structured process of consultation with all members of the Force, including civilian and Auxiliary officers, in the development of the Force Vision and Statement of Common Purpose & Values which will focus on the Force's service quality commitment.

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 that may have an impact on strategic planning and on Force policy.

The Complaints and Internal Investigations Branch comprises the Complaints Against Police Office and the Internal Investigations Office. The branch investigates complaints against police officers, including civilian staff and auxiliary police officers, investigates serious disciplinary cases and conducts supervisory accountability studies.

Complaints Against Police

The Complaints Against Police Office (CAPO) investigates all complaints from the public concerning the conduct and behaviour of members of the Force. The results are monitored and reviewed by the Independent Police Complaints Council (IPCC), which is an independent body comprising non-official members appointed by the Governor.

In 1996, 3 315 complaints were received. This represented a decrease of 133 cases, or 3.9 per cent compared with 1995. Over 94.1 per cent of complaints in 1996 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 77.1 per cent of total complaints. Investigations into 3 419 cases were completed and endorsed by the IPCC. The substantiation rate for complaints fully investigated was 13.6 per cent. The number of cases classified as Withdrawn or Not Pursuable was 2 092, representing 61.2 per cent of the total. Altogether, 744 cases or 21.8 per cent of all complaints were dealt with through an Informal Resolution Scheme. A total of 23 police officers were disciplined and 14 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

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aim of improving public relations and reducing conflict situations. A Complaints Prevention Committee, made up of various ranks in the Force, was formed in 1992 to recommend on how complaints may be prevented and how its recommendations may best be implemented. The first Courteous Police Officers Selection Scheme was introduced to foster a culture of courtesy and tactfulness. It was completed in February 1996 and the results were encouraging.

In close consultation with IPCC, the CAPO introduced a range of measures to further enhance the transparency and fairness of the existing complaints system. These included the installation of closed circuit televisions, video or tape-recording facilities in CAPO report rooms, as well as interview rooms; a scheme for IPCC members to interview witnesses; a scheme for IPCC members to observe CAPO investigations and enhanced publicity on the monitoring role of IPCC. In addition, a comparative study of complaints systems in other jurisdictions and an independent review of CAPO investigation procedures, IPCC's monitoring mechanisms and interface with CAPO were carried out. This produced some 50 recommendations for improving the complaints system. By the end of 1996, 22 recommendations had been implemented and the implementation of other recommendations was under way.

Civilian Staff

Civilians play a vital role in the Force and have a wide variety of functional duties to complement the work of the disciplined staff. Regular reviews are conducted to identify posts currently occupied by disciplined officers for civilianisation in order to release the disciplined staff for constabulary duties. The civilian establishment in the Force consists of 58 different grades, 30 of which are General Grades providing executive, accounting, clerical, secretarial and other general support for the administrative functions of all formations. The rest includes professionals, supplies staff, interpreters, communications and computer specialists, armourers, traffic wardens, cooks and workmen.

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 trainees are instructed in foot drill, firearms, physical fitness, swimming and lifesaving, self defence and first aid, and are required to reach similar standards regardless of rank. They also receive training for tactics in potentially dangerous situations, which includes instruction in various strategies and the use of physical and firearms defensive skills. They must also study criminal law, police and court procedures as well as social matters. Inspectors are required to demonstrate wider knowledge on these subjects. They also study management topics and their leadership and supervisory skills are developed throughout the initial training course.

After initial training, constables carry out duties under a tutor and attend a day of instruction per month during the first two years of their service, 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

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roles and where inspectors' leadership and management skills are further developed. Promotion and refresher training are given later.

  A revised continuation training course for experienced Station Sergeants was introduced in October 1996. The three-week course replaces two existing courses and brings together officers from all units to consider current developments and problems within and outside the Force.

  In-service management training is provided at three levels of command courses run by the Higher Training Bureau. All inspectors attend the Junior Command Course when they have served five years in the rank. Chief inspectors and superintendents attend the Intermediate and Senior Command Courses, respectively, within a year after promotion to each rank. Further training is given to officers who undertake specialist duties.

  Legal and social changes in the territory, the Commissioner's policy of service quality and a commitment to provide as much accreditation of police training as possible led to reviews of training for Detectives, Constables, Inspectors, and the Junior, Intermediate and Senior Command Courses. The revised training courses are being implemented.

In conjunction with the Civil Service Training and Development Institute, 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 for studies and examinations. Opportunities are also available for officers to receive development and vocational training courses overseas and $7 million was set aside for this purpose in 1996.

  Two new training activities introduced in 1994 were further developed in 1996: revolver training for woman police officers and refresher training in cardiac pulmonary resuscitation (CPR) for most uniform branch officers. Woman police recruited since January 1995 have received the same revolver training as their male colleagues during initial training at the Police Training School. At December 31, 1996, 149 woman recruits and 41 woman probationary Inspectors had successfully trained on revolver shooting. 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. Tactics training was further developed in 1996 and a long-term firearms and tactics training strategy has been initiated.

Recruitment

The number of applications for Inspectorate posts continued to rise from 3 045 in 1995 to 3 268 in 1996, representing an increase of 7.3 per cent. Of these applicants, 155 were appointed as Inspectors. Another 58 in-serving officers were promoted from the ranks.

  Recruitment at Constable rank remained satisfactory with 868 recruits taken on strength out of a total of 10 396 applicants. Satisfactory recruitment saw the strength

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of the Force grow by 126 or 0.46 per cent disciplined officers and 105 or 1.8 per cent civilian staff, as against the strength of 27 533 and 5 873 respectively in 1995.

Promotions

Promotion prospects in the Force remained good at most levels. In 1996, 46 officers were promoted to the rank of Senior Superintendent and above. Sixty-four Chief Inspectors and 78 Senior Inspectors were promoted to Superintendent and Chief Inspector respectively, 14 Station Sergeants were promoted to Inspector, 50 Sergeants were promoted to Station Sergeant and 336 Police Constables to Sergeant.

       Within the civilian grades, 57 general grade and 41 departmental grade officers were promoted.

       In 1996, some 310 disciplinary officers retired from the Force, 35 were invalided out, 287 resigned, 55 were transferred to other departments, and 39 were either dismissed or had their services terminated. Likewise, 455 general grade, and 221 departmental grade civilian staff left the Force for retirement, transfer to other departments or termination of service by completion of contract or dismissal.

Awards

The Colonial Police Long Service Medal was awarded to 1 035 officers after 18 years of continuous police service; 318 officers were awarded the 1st Clasp to the Medal after 25 years' service and another 355 officers were awarded the 2nd Clasp after 30 years' service. In addition, five 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 five officers, the Queen's Commendation for Brave Conduct to three officers and 19 officers were awarded the Governor's Commendation. Another seven officers received awards from the Royal Humane Society. Among the civilian officers, one officer was awarded the Imperial Service Medal, three were awarded the Most Excellent Order of the British Empire, 95 the Long and Meritorious Service Certificate and 24 officers received the Long Service Travel Award.

Welfare

The Personnel Services Branch provides a wide range of support services to Force members and their families, in the areas of personal and family welfare, sickness, psychological consultation, assistance on retirement, sports and recreation, catering, collective bargain purchases and the allocation and up-keep of departmental quarters for police officers.

       During the year, staff of the Personnel Services Branch conducted 6 012 casework interviews and made 7 380 visits to sick and injured officers in hospital or at their homes. Family life education continued to play an important part in the welfare programme, with emphasis on good parental guidance to the children.

       Psychological counselling service was provided to all members of the Force and their families to help reduce their stress arising from work and /or personal affairs. Stress management training was also offered to new recruits.

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

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catering support at emergency turn-outs, such as disturbances at Vietnamese Migrant camps/detention centres, and for major operations and crowd control duties.

  The Police Welfare Fund has been the major source of finance for all welfare activities within the Force. Its income mainly comes from donations of the general public and hire of police service. In all, 1 737 children of regular and auxiliary police officers were awarded bursaries from the two police education trusts to pursue further education.

Force Housing

The Force manages a total of 11 875 quarters, of which 10 905 are for Junior Police Officers and 970 are for Inspectorate officers. These include 429 newly-built quarters at Wong Tai Sin. As a result of redevelopment of sites in Hollywood and Canton Roads, 808 new quarters at Chai Wan and Ngau Chi Wan will be provided to the Force as replacements. Construction is under way and scheduled for completion by early 1997. In 1995-96, the Force was again allocated 458 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, Home Ownership Scheme and Home Purchase Loan Scheme.

  The policy to provide housing for all eligible married police officers, including those in the Inspectorate and Superintendent cadres, has continued to be progressively implemented. Every effort is being made to acquire more quarters of higher grading, rather than opting for sheer numbers.

  The refurbishment programme aims at improving the overall living condition of police officers. Since the introduction of the scheme in 1987, 1 874 quarters have been refurbished, resulting in a marked improvement in the structural condition and standard of these old residences.

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 1996, the average daily turnout was 644 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 5 373, of whom 10.8 per cent were female officers.

Independent Police Complaints Council

The Independent Police Complaints Council's main function is to monitor and review investigations by CAPO of the Royal Hong Kong Police of public complaints made against the police.

  The council is an independent committee whose members are appointed by the Governor. Other than the Chairman, the council comprises two Vice-Chairmen and

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      no fewer than eight non-official Members, with the Ombudsman, or his representative, serving as an ex officio member.

       During the year, the council endorsed 3 419 complaint investigations and interviewed 11 witnesses in seven selected cases. Members participated in 26 scheduled and surprise visits to observe CAPO investigations under a trial IPCC Observers Scheme introduced in April 1996.

A review of CAPO's procedures and a comparative study of the police complaints systems in selected overseas jurisdictions were completed during the year. The associated recommendations to improve the police complaints system in Hong Kong will be implemented in phases.

Customs and Excise

The Customs and Excise Department is primarily responsible for the collection of revenue and the prevention of revenue evasion on dutiable goods, the suppression of illicit trafficking in narcotics, the prevention and detection of smuggling, and the protection of intellectual property rights. It has an establishment of 4 273.

The department is also responsible for enforcing legislation to safeguard the integrity of Hong Kong's trade (see also Chapter 7).

Revenue Collection

The department collects revenue from four categories of dutiable commodities: alcoholic beverages, tobacco, hydrocarbon oil and methyl alcohol. In 1996, the department collected $8.15 billion in revenue from dutiable commodities, compared with $7,788 million in 1995, an increase of $362 million.

The department also assesses the taxable values of motor vehicles under the Motor Vehicles (First Registration Tax) Ordinance for the purpose of levying first registration tax. In 1996, the Motor Vehicles Valuation Group registered a total of 65 motor traders and assessed the provisional taxable value on 40 498 vehicles.

Prevention of Revenue Evasion

      Cigarette smuggling continued to be a major target of the department's enforcement action. In 1996, the department processed a total of 19 676 cases and seized 406 million cigarettes with a duty potential of $272 million.

      The Anti-Cigarette Smuggling Task Force established in 1994 continued to take effective action against cigarette smuggling. Seizures made by the Task Force accounted for 77 per cent of the total cigarette seizure in 1996. In August, the Task Force detected Hong Kong's second-largest cigarette smuggling case and seized 97 million cigarettes with a retail value of $126 million. The department also maintained close liaison with the tobacco industry and launched a reward scheme to encourage information from the public about cigarette smuggling. Close contacts were maintained with local and overseas enforcement agencies for the exchange of intelligence on cigarette smuggling activities.

       The illegal use of industrial diesel oil by road vehicles and the unauthorised removal of markers and colouring substances from industrial diesel oil are also major targets of the department's enforcement action. A Diesel Oil Enforcement Division was set up in May 1996. Its main task is to investigate syndicates involved in illegal activities

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concerning diesel oil. Five major oil companies co-operated with the department to sponsor the Oil Industry Reward Scheme. The scheme, introduced on April 1, 1996, offers monetary awards to members of the public who provide information concerning illegal imports and distribution of diesel oil. In 1996, the department took action against six plants used for removing the markers and colouring substances from industrial diesel oil and against 302 illegal diesel oil outlets. It also detected six smuggling cases. A total of 1.47 million litres of diesel oil with a duty potential of $4.2 million was seized and 1 942 people were arrested.

Anti-narcotics Operations

The department continued to take vigorous enforcement action to prevent and suppress unlawful trafficking in dangerous drugs. It maintained a high level of vigilance against the illegal import and export of drugs, and continued its war against the illegal manufacture, distribution and street-peddling of drugs. The Customs Drug Investigation Bureau is the department's major investigative arm. Its main functions are to conduct investigations and surveillance on cases involving illegal trafficking or use of drugs. The department co-operates closely with the Hong Kong Police and overseas drug enforcement agencies in the exchange of intelligence and in the arrest and extradition of fugitive drug criminals.

In 1996, the department cracked 51 major trafficking cases, with the neutralisation of 12 heroin attenuating and 12 packing centres. The department seized 81.04 kilograms of heroin, 5.82 kilograms of raw opium, 6.68 kilograms of prepared opium, 7 796.12 kilograms of herbal cannabis, 27.01 kilograms of cannabis resin, 4.74 kilograms of cocaine and 4.58 kilograms plus 12 110 tablets of Ecstasy. In addition, 11 569 tablets of psychotropic drugs were seized. A total of 1045 people were arrested 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 trace and seize assets derived from drug trafficking and to conduct investigations into money laundering.

In 1996, it obtained two court orders and restrained assets worth $2.3 million. Assets valued at $170,000 were confiscated.

Control of Chemical Precursors

On January 1, 1996, the department extended its licensing control from three to 24 chemicals which may be used in the illegal manufacture of narcotic drugs and psychotropic substances.

At international level, the department had several successes in preventing the diversion of controlled chemicals for the manufacture of narcotic drugs and psychotropic substances. These successes were largely the result of co-operation with overseas law enforcement agencies.

Border Control

Cross-border vehicular traffic passing through the control points at Lok Ma Chau, Man Kam To and Sha Tau Kok reached record levels with a daily average of 24 324

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vehicles compared with 23 202 in 1995. An average of 74 831 passengers arrived by land each day, including those by train, 27 409 arrived by sea and 31 903 by air.

To cope with the ever-growing number of passengers and increasing traffic, the capacity of customs facilities is being expanded at entry and exit points. The completion during the year of Stage III of the Lo Wu Rail Terminal has eased congestion caused by the large numbers of people travelling between Hong Kong and China. Handling capacity at Lo Wu is now 8 188 passengers an hour. Planned customs facilities at the new terminal at Kowloon Railway Station will more than double the department's capacity to handle through-train passengers. Planning for additional processing facilities at Lok Ma Chau was also completed during the year.

Smuggling

In 1996, the department detected 285 smuggling cases under the Import and Export Ordinance, arrested 273 persons and seized goods worth $373 million. Smuggling between Hong Kong and China remained rampant. In 1996, 59 smuggling cases were detected at the land border, and goods valued at $51,505,892 were seized.

       Contraband commonly smuggled to China ranged from electronic products such as mobile phones, computer hardware and laser disc players to left-hand drive vehicles and vehicle spare parts. The most common method of smuggling was by container. The most popular items for inbound smuggling were antiques, cigarettes and diesel fuel.

       Smuggling by high-powered speedboats remained at a low level. The department's strategies to control smuggling were reviewed during the year. Success remained largely dependent on good intelligence, modern technology and co-operation with other law enforcement agencies.

Strategic Commodities

In order to prevent Hong Kong from being used as a conduit for the proliferation of weapons of mass destruction and to ensure its continued access to the high- technology products of advanced countries, the department works closely with the Trade Department and other agencies to control the trade in strategic goods. In 1996, the department investigated 343 cases and prosecuted 250 defendants, resulting in the imposition by court fines amounting to $3.6 million. Strategic goods valued at $18.9 million including inert bombs, rocket fuel, telecommunication equipment and chemical weapon precursors were seized, of which $7.5 million-worth was confiscated.

Intellectual Property

The department is responsible for enforcing laws to protect copyright and trade marks. Protection is provided through the Copyright Ordinance and the Trade Descriptions Ordinance which extends to trade marks registered under the Trade Marks Ordinance.

To enforce these laws, the department investigates complaints about infringement and takes action against piracy and counterfeiting. Close liaison is maintained with copyright and trade mark owners, their legal representatives and intellectual property rights organisations. The department continued to strengthen contacts with overseas agencies in its fight against international trade in pirated and counterfeit goods. Joint

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operations with the Chinese Customs took place to prevent the smuggling of pirated and counterfeit goods across the border.

  The department continued to take vigorous action against the sale of pirated music CD, video CD and CD-ROM, and counterfeit watches, leather goods and clothing. Operations were conducted at hawker stalls, retail shops, storage places, distribution centres and the border control points. In 1996, the department seized pirated goods worth $48.6 million and prosecuted 1 432 persons under the Copyright Ordinance. It also seized counterfeit and falsely labelled goods valued at $151.6 million and prosecuted 794 people under the Trade Descriptions Ordinance. Prosecution results in 1996 indicate that the courts are treating copyright and trade mark offences more seriously than in previous years.

  In collaboration with other government agencies, the department sought stronger and more comprehensive legislation. The Intellectual Property (World Trade Organisation Amendments) Ordinance was enacted in May 1996 to enable Hong Kong to fulfil its international obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights of the World Trade Organisation to protect intellectual property rights. The new legislation empowers the department to investigate local people and organisations engaged in copyright piracy outside Hong Kong and to detain imported pirated and counterfeit goods so as to enable the rights holders to take civil proceedings against the importers.

World Customs Organisation

Hong Kong is a member of the World Customs Organisation (WCO) (established as the Customs Co-operation Council). The WCO aims to facilitate international trade by securing harmony and uniformity in customs systems world wide, through inter- governmental co-operation.

  The department is active in WCO meetings and seminars, particularly t