Hong Kong Yearbook - Annual Report for the Year 1997









 MMIS 在線閱讀



Lung Kwi




DEEP BAY (Shenzhen Wan)




Tap Shek






Peaked Hill



Chek Lap Kok

International Airport: (open in mid-1998)



Mong Tseng




Tsin Bei




Pearl Island

The Brothers





o Cha Kwo


Siu A Chau




Series HM 200CL Edition 22 1998

Tai A

























Shing y










Sunshine Island

Hei Ling






Scale 1

km 0

















Peng Chau

Siu Kau

Yi Chau

Kau Yi






'Shek Kw










Ma Shi







Plover Cove Reservor












Round Island















Crescent Island



(Dapeng Wan)

Port Island







High Island Reservoir




Ping Chau






Railway Tunnel

Light Railway

Main Road Tunnel

Secondary Road

Built-up Area

Country/Marine Park Marine/Nature Reserve


Contour (vertical

interval 100 metres with supplementary contour at 50 metres)




Sharp Island




Town Island

Hole Island


Shelter Island

Bluff Island






Tung Lung


Ninepin Group





Po Toi

* Islands



0 000




14 km


Basalt Island









Sea depth in metres























km 2000


Sung Waglan











Cartography by Survey and Mapping Office, Lands Department Convright reserved ---- reproduction by permission only












市政局公共圖書館 UCPL

3 3288 04605180 3






Hong Kong: The Facts

Population: 6.617 million (estimate at end-1997)

Hong Kong Island

1.38 million


Age structure


2.05 million


Median age: 34.9

Under 15: 18.1%

Over 64: 10.4%

New Territories

3.05 million


Sex ratio


0.02 million


Overall: 1 013 males per 1 000 females

(As at July 1, 1997)

Under 15: 1 075

Overall density

Birth rate

Over 64: 816

Death rate


New Territories

80 square km 47 square km 794 square km

6 160 people per square kilometre.

Kwun Tong District has 54 030 people

per square kilometre.


3.3 million people live in public housing, which includes 934 800 flats. In 1997,

Hong Kong had 1.92 million domestic households, 45.7% occupied by the owner, 49.6% by tenants, and 4.8% either rent-free or employer-provided.

Area: 1 095 square km

Hong Kong Island

9.1 per 1 000 popn

Life expectancy Male 76.4


Predominantly of Chinese descent

Largest foreign

passport-holder groups

4.8 per 1 000 popn

Female 81.9


34 300


33 600



31 400


25 500


24 900


24 600



23 300

Philippines USA

146 400

41 000


15 000

Religion and custom

Outlying Islands

174 square km

Buddhists and Taoists make Christians 592 500; Muslims

up the vast majority. 80 000;

Hindus 12000;

Reclamation since 1851

60 square km

Sikhs 1 200; Jews 1 000.


Average annual rainfall

2 124.3 mm

109.9 mm (May 8, 1992)

534.1 mm (July 19, 1926)

Highest temperature

36.1°C (August 19, 1900 and August 18, 1990)

Lowest temperature

0.0°C (January 16, 1893)

Highest wind speed

259 km/h at HK Observatory, 284 km/h at Tate's Cairn (Typhoon Wanda, September 1, 1962)

Wettest period





1 241.1 mm (May 1889)

10% humidity (January 16, 1959)



The 1 831 km of roads carry 500 228 licensed vehicles, or about 273 vehicles per kilometre.


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.

Air movements

 1997-165 154 flights; 28.3 million passengers; 1.79 million tonnes of freight

Shipping movements

1997-43 557 ocean vessel arrivals; 43 620 departures; total cargo 134.46 million tonnes

Container throughput

14.5 million TEUS.


Total number employed: 3.12 million in third quarter of 1997

Major Employment 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

34% of workforce

386 940

13% of workforce

310 099

21% of workforce

183 110

5.8% of workforce

176 319

5.5% of workforce


$11,113 per month



Cover Illustration

A year of historic change generated many symbols for the Hong Kong

Special Administrative Region, as shown in the cover montage.

End-paper Maps Front

The Hong Kong

Special Administrative Region Back

Hong Kong in its Regional Setting


A floating parade of brightly illuminated barges and a stunning fireworks display light up Hong Kong harbour on July 1 during festivities to mark the Handover.



Bob Howlett

Information Services Department


Au Yeung Yiu-man, David Ho, Tsui Chee-kwong, John Choy, Albert Yu, Kris Chan, Andrew Ho, Daniel Wong, Jacob Ho, Andy Mou, Stephen Wong, Rydstik Chu, K W Ng, Samuel Pang, Augustine Chu, Carlos Yung, L P Wong


John Chiang

Information Services Department

Special Contributor

The Chief Executive, the Honourable Tung Chee Hwa (Chapter 1)

Statistical Sources Census and Statistics Department

The editor acknowledges

and thanks all contributors and sources.


Ace No.







(c) Copyright reserved

Code No. F30019800E0

(ISBN 962-02-0248-1)

Price HK$88


Published by the Information Services Department Printed by the Printing Department, Hong Kong

(Printed on paper made from woodpulp derived from renewable forests)



1 2 3



A NEW ERA Begins












































































When dollars are quoted in this report

they are Hong Kong dollars, unless otherwise stated. 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


Information Services Department Publishing Sub-division

(bulk sales and editorial enquiries) 28th Floor, Siu On Centre, 188 Lockhart Road, Wan Chai, Hong Kong















The Governor, the Right Honourable Christopher Patten, visits London. He discusses Hong Kong's transition with the Prime Minister, Mr John Major, ministers and parliamentary leaders.

The Airport Committee of the Sino-British Joint Liaison Group meets on the comprehensive review of progress in 10 Airport Core Programme projects.

A memorandum of understanding concerning the boundary of administration between Hong Kong and Guangdong is initialled. It sets out a clear land boundary between the northern New Territories and Shenzhen; the boundary in Deep Bay and Mirs Bay; and the sea boundary to the west, south and east of Hong Kong. It is signed on June 19.

The Chief Secretary, Mrs Anson Chan, leaves for Monterey, San Francisco, Dallas and Houston for a round of meetings to strengthen ties with the USA.

The 14-member line-up of the Executive Council of the Hong Kong Special Administrative Region (HKSAR) is announced.

Seventeen people die and 13 others are injured in a fire in a Tsim Sha Tsui karaoke bar.

The Secretary for Trade and Industry, Miss Denise Yue, leaves for Davos in Switzerland to attend the World Economic Forum annual meeting.

The eighth plenary session of the Preparatory Committee of the HKSAR approves three documents relating to Hong Kong's transition: the decision giving a mandate to the first Chief Executive and the provisional legislature to start their work before June 30; the decision on the formation of provisional regional organisations after July 1; and a suggestion on how to handle the original laws of Hong Kong. One woman dies and 31 other people are injured in a traffic accident during a Lunar New Year parade in Tsim Sha Tsui East.

All serving policy secretaries are appointed principal officials of the HKSAR.





















The West Kowloon Expressway and the Kwai Chung Viaduct, the first two of the seven government projects under the Airport Core Programme, are opened to traffic.

The Solicitor General, Mr Daniel Fung, leads a delegation to Beijing, Dalian and Kunming under a programme promoting contacts between local legal officials and their Mainland counterparts.

Hong Kong and Japan seal an air services agreement that ensures the smooth continuation of air services beyond June 30. Similar agreements are subsequently signed with Myanmar, Thailand, the USA, the Philippines and Indonesia. These conclude years of negotiation and agreement with all Hong Kong's major air destinations.

A government team led by the Deputy Solicitor General, Mr Stephen Wong, attends a hearing of the United Nations Committee on the Elimination of Racial Discrimination in Geneva.

Experts on the Sino-British Joint Liaison Group reach a consensus on the 1997/98 Budget at the 19th round of talks.

The United Nations High Commissioner for Refugees, Mrs Sadako Ogata, visits Hong Kong to review the progress of solutions for Vietnamese migrants stranded in the territory.

The Financial Secretary presents the 1997/98 Budget in the Legislative Council.

The Sino-British Joint Liaison Group's 39th meeting is held in London. Canada announces visa-free access for holders of the Hong Kong Special Administrative Region passports. Similar favourable agreements are subsequently signed with the Philippines, Japan, Australia, Thailand, Turkey, Ghana, the Republic of Korea, New Zealand, India, Kiribati, Pakistan, Tanzania, Uganda, Jordan, Mauritius, Bangladesh, Malaysia, Germany, Italy, Cape Verde Islands, Poland, Egypt and South Africa. They join a long list of countries which had signed such agreements in earlier years.

A residential and commercial site of 25 592 square metres at Siu Sai Wan is sold for a record $11.82 billion at a land auction.

The Chief Executive, the Honourable Tung Chee Hwa, and the Chief Secretary meet the Chinese Premier, Mr Li Peng, in Beijing.

The Chief Secretary visits Vancouver at the invitation of the Vancouver Board of Trade and the Hong Kong-Canada Business Association. Nine people die and 36 others are injured in an apartment fire in Mei Foo Sun Chuen.

Hong Kong and the United States sign two agreements on mutual legal assistance in criminal matters and on the transfer of sentenced people. At its 34th meeting, the Sino-British Land Commission agrees on the land disposal programme for the period April to June 1997.















A 40-strong advance party of the People's Liberation Army (PLA) arrives at Hong Kong to prepare for the transfer of defence responsibility for the territory on July 1.

Hong Kong is elevated to the seventh-largest trading entity in merchandise trade in 1996, according to figures published by the World Trade Organisation.

Hong Kong's towering new landmark, the Lantau Link, is officially opened by the former British Prime Minister, Baroness Thatcher.

The Chief Executive uses a satellite link to address some 300 journalists from more than 70 countries at the 1997 CNN World Report Contributors' Conference in Atlanta, USA.

Translation of 514 ordinances of the Laws of Hong Kong is completed after eight and a half years.

Two new political parties, the Citizens Party and the Social Democratic Front, are formed.

The Chief Executive visits Beijing to discuss transitional issues with the Vice Premier, Mr Qian Qichen.

A Census and Statistics Department report projects Hong Kong's population will increase to 8.21 million by mid-2016.

The Entry and Exit Administration Bureau under the Chinese Ministry of Public Security announces a computerised points system to vet applicants for one-way permits to Hong Kong.

The Governor and the Chief Executive meet the German Chancellor, Mr Helmut Kohl, at separate events.

The Provisional Legislature completes its first legislative procedure with the third reading of the Holiday Bill for 1997 and 1998 tabled by the SARCE's Office.

The British and the Chinese teams of the Sino-British Joint Liaison Group reach agreement on the phased arrival of a further 156 PLA Garrison advance personnel in Hong Kong. They arrive on May 19 and 30.

The SARCE's Office announces that the Land Fund will be managed by the HKMA under the direction of the Financial Secretary as a portfolio separate from the Exchange Fund after July 1.

The Financial Secretary, Mr Donald Tsang, signs an Investment Promotion and Protection Agreement in Tokyo with the Japanese Foreign Minister, Mr Yukihiko Ikeda.

The SARCE's Office releases the final version of the amendments to the Societies and Public Order ordinances.

The Hong Kong Marine Police and Guangdong Public Security officers for the first time jointly stage an anti-illegal immigrant exercise off Mirs Bay, Shenzhen.

China announces that foreign nationals with existing visa-free entry to Hong Kong will continue to enjoy the same after July 1.



















Mr Patten pays his last duty visit to London as Governor of Hong Kong.

A Chinese Vice-Premier, Mr Wu Banguo, officiates at the inauguration of the through-train service between Kowloon and Beijing. The first through train arrives in Hong Kong the following day.

Hong Kong formally signs the World Trade Organisation Agreement on Government Procurement.

The Chief Executive accepts the recommendation that Mr Andrew Li, QC, be appointed as the Chief Justice of the HKSAR Court of Final Appeal.

Secretary for Policy Co-ordination, Mr Michael Suen, and Director of Immigration, Mrs Regina Ip, talk to Chinese Foreign Ministry officials in Beijing on visa arrangements for foreigners after July 1. The Lantau Link and North Lantau Highway open to traffic. Cathay Pacific and Dragonair ground all 15 of their Airbus A330 aircraft amid mounting concern on the reliability of their Rolls-Royce 700 engines. After modifications, all return to service.

The Chief Executive decides to continue living in his residence. Government House will be used as a guest house for VIPs visiting the territory and for official functions.

The Sino-British Joint Liaison Group holds the last meeting before the Handover.

The Secretary for Planning, Environment and Lands, Mr Bowen Leung, leaves for Canada to represent Hong Kong at the Asia Pacific Economic Co-operation Ministerial Meeting on Sustainable Development, to be held in Toronto, Canada, between June 9 and 11.

Mr Justice Litton, Mr Justice Ching and Mr Justice Bokhary are appointed permanent judges of the Court of Final Appeal. Mr Justice Chan is appointed Chief Judge of the High Court.

The Chief Executive announces that all existing members of the Urban Council, the Regional Council and 18 District Boards will continue their service after July 1. An additional 20 members are appointed to the provisional municipal councils and 96 to the provisional district boards. The Whitehead Detention Centre for Vietnamese migrants closes after eight-and-a-half years' operation.

The Sino-British Joint Liaison Group agrees on the mechanism for the continued application of some 200 multilateral treaties to Hong Kong after June 30, 1997.

The Immigration Department announces that, from June 23, all Chinese diplomatic and consular missions will accept visa applications for entry into the HKSAR.

The Sino-British Joint Liaison Group agrees on the entry of advance troops of the PLA in Hong Kong before zero hour on July 1.








The Hang Seng Index reaches a record high, closing at 15 196 points on the last trading day before Hong Kong returns to Chinese sovereignty. The Standing Committee of the National People's Congress endorses the appointment of a 12-member Basic Law Committee, which advises on amendments and interpretation of the mini-constitution. The committee will convene its first meeting in Beijing on July 1. His Royal Highness, the Prince of Wales, arrives in Hong Kong to represent Her Majesty the Queen at the Handover Ceremony and associated events. He is accompanied by the British Secretary of State for Foreign and Commonwealth Affairs, the Right Honourable Robin Cook, MP. US Secretary of State Madeleine Albright arrives the same day. The British Prime Minister, the Right Honourable Tony Blair, MP, arrives two days later. The Sino-British Joint Liaison Group appoints KPMG Peat Marwick to audit the assets and liabilities of the Exchange Fund of Hong Kong up to March 31, 1997. The appointment is made in accordance with the agreed minute on the question of the arrangements for the transfer of the Exchange Fund of Hong Kong.

The Legislative Council concludes its last sitting before the Handover. Hong Kong celebrates the Queen's Birthday for the last time with a Beating Retreat Ceremony and a reception hosted by the Governor. The Chinese Vice Premier and Foreign Minister, Mr Qian Qichen, arrives in Hong Kong to make final preparations for the arrival the following day of President Jiang Zemin and Premier Li Peng.

The Prince of Wales presents insignia and commendations to 116 Hong Kong residents at Government House.

The Governor's standard is lowered for the last time at a ceremony for the departure of Mr Patten and his family from Government House attended by Government House staff and their families.

A Farewell Ceremony to mark the end of British administration takes place in the evening at East Tamar in the presence of the Prince of Wales, the Governor, the British Prime Minister and the Secretary of State for Foreign and Commonwealth Affairs.

The British Government hosts a Handover banquet at the new extension to the Hong Kong Convention and Exhibition Centre after the Farewell Ceremony.

A ceremony marking the resumption of sovereignty over Hong Kong by the People's Republic of China is held at the Grand Hall of the Hong Kong Convention and Exhibition Centre on the night of June 30 and the early hours of July 1. President Jiang Zemin and the Prince of Wales officiate at the ceremony attended by some 4 000 foreign ministers and dignitaries from more than 40 countries. It is followed by the swearing- in of the Chief Executive, and the HKSAR Executive Council, officials, judiciary and legislature. (See Chapter 2).

The PLA Garrison, comprising 4 000 troops, arrives in Hong Kong early in the morning.










The Office of the Commissioner of the Ministry of Foreign Affairs of China in the HKSAR is opened.

The Chairman of the Standing Committee of the NPC, Mr Qiao Shi, announces the formation of the Basic Law Committee in Beijing and presents appointment certificates to the 12 members at the Great Hall of the People.

The Chief Executive presents Grand Bauhinia Medals to 12 recipients at Government House.

A ceremony in Beijing presided over by the Vice Premier and Foreign Minister, Mr Qian Qichen, concludes the work of 186 HK Affairs Advisers whose terms ended on June 30.

The Observatory says the rainfall of more than 350 mm recorded from June 30 to July 3 is the highest in the past 100 years.

About 500 people, including 200 children illegal immigrants, demonstrate at the Immigration Department headquarters in Wan Chai seeking an amnesty and right of abode in HK. More than 700 illegal immigrants give themselves up the following day in the belief that there will be an amnesty.

The Commander of the People's Liberation Army Hong Kong Garrison, Major-General Liu Zhenwu, and his senior officers pay a courtesy call on the Chief Executive.

The Commissioner of the Foreign Ministry in the HKSAR, Mr Ma Yuzhen, makes an official call on the Chief Executive and presents a letter from Foreign Minister Qian Qichen, authorising the HKSAR Government to negotiate bilateral agreements with other countries on air service transit, the promotion and protection of investment, the return of fugitive offenders, the transfer of sentenced people and judicial assistance in criminal matters.

The Executive Council decides to adopt proportional representation to return the 20 directly elected seats in geographical elections for the Legislative Council, to be held in 1998.

The Provisional Legislative Council passes the Immigration (Amendment) (No. 5) Bill 1997, which provides that children who claim the right of abode in the HKSAR under Article 24(2) (3) of the Basic Law must produce proof of their rights by way of a Certificate of Entitlement or other acceptable proof of identity. The Bill has retrospective effect dating from July 1.

The Chief Executive visits the Stonecutters Naval Base of the Hong Kong Garrison. He is greeted by the garrison's Commander, Major General Liu Zhenwu, and Political Commissar Major General Xiong Ziren.

The Chief Executive issues the Public Service (Administration) Order 1997, an executive order that replaces and localises provisions in the Letters Patent and Colonial Regulations relating to the administration of the civil service.

The last meeting of the SAR Preparatory Committee is held in Beijing.















Sixty-eight people, most of them children in a school bus, are injured in a traffic accident in Tuen Mun Road.

The Executive Council approves the manner in which the SAR Government should deal with land leases according to the Basic Law and the Joint Declaration. New leases will be granted at a term of 50 years and subjected to an annual rent equivalent to three per cent of the rateable value of the property.

The government announces a five-year land disposal programme, which gives detailed plans for the first two years and a forecast for the following three years.

The Provisional Legislative Council passes a Bill to suspend four ordinances three on labour and one on the Bill of Rights - passed by the pre-Handover Legislative Council at its last sitting of the 1996/97 session.

The HKSAR's Economic and Trade Office in London is opened. The Chief Executive receives formal authorisation from the Central Government for the SAR Government to negotiate visa abolition agreements with other countries.

The government signs an air services agreement with the United Kingdom. It is Hong Kong's 22nd air services agreement and the first signed by the SAR Government.

Hong Kong's last evening paper, the New Evening Post, established in 1950, publishes its final issue.

The Court of Appeal rules that the Provisional Legislative Council is a legal body and laws it has passed have legal status.

The government announces the establishment of the Elderly Commission. It is to advise on the formulation of a comprehensive policy for the elderly and co-ordinate the planning and development of various elderly programmes and services.

The new Director of the Xinhua News Agency HK Branch, Mr Jiang Enzhu, arrives to replace Mr Zhou Nan. He calls on the Chief Executive on August 14.

The Financial Secretary announces that Hong Kong will contribute US$1 billion towards a financing package organised by the IMF to assist Thailand in making economic adjustments. The amount will be taken from the foreign exchange fund.

A downpour in the north-east New Territories floods low-lying areas around Tai Po, affecting more than 1 000 homes and ruining crops. The State Council announces that the head of the Overseas Chinese Affairs Office, Mr Liao Hui, will take over from Mr Lu Ping as Director of the Hong Kong and Macau Affairs Office.

The first batch of 164 mainland children migrants issued with the newly introduced Certificate of Entitlement by the SAR Government arrives in Hong Kong.


















A pleasure boat with 43 Hong Kong people on board capsizes in Manila Bay. Seven Hong Kong people are killed.

The Provisional Legislature votes to scrap the port of first asylum policy in Hong Kong introduced by Britain in 1979.

A record high of 160 mm rainfall was recorded during a four-hour downpour brought by the outer rainband of Tropical Storm Zita.

The first land sales since the Handover generate $5.67 billion as three government lots in Repulse Bay, Sha Tin and Lamma Island are bought at public auction.

A car driven by a police officer goes out of control and crashes into a lunch-time crowd at the junction of Wyndham Street and Queen's Road, Central. Three people are killed.

The Secretary for Justice, Miss Elsie Leung, and the Solicitor General, Mr Daniel Fung, attend the 15th LawAsia Biennial Conference in Manila, the Philippines.

The Chief Executive meets the new Hong Kong and Macau Affairs Office Director, Mr Liao Hui, in Shenzhen. It is their first official meeting.

The Chief Executive leaves for a four-day visit to Singapore and Malaysia, his first official overseas visit since the Handover. On September 8 he leaves for the USA and his first meeting with President Bill Clinton as the HKSAR leader.

The Financial Secretary leaves for a five-day visit to Shanghai, Suzhou and Chengdu to strengthen ties with senior mainland officials. This is his first official visit to the mainland since becoming Financial Secretary in 1995.

The Chief Justice of the Court of Final Appeal, Mr Andrew Li, meets Britain's Lord Chancellor, Lord Irvine of Lairg, who pledges that Britain will provide the CFA with two serving law lords.

The Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, is named Central Banker of the Year by the London-based Euromoney magazine.

The Census and Statistics Department estimates the mid-1997 population figure to be 6 502 100, an increase of 191 100 over the mid- 1996 figure.

The Chief Executive meets the President of the World Bank Group, Mr James Wolfensohn, the Australian Treasurer, Mr Peter Costello, and the German Federal Minister of Finance, Dr Theodor Waigel, who arrive in Hong Kong for the 1997 annual meetings of the Boards of Governors of the World Bank Group and International Monetary Fund.

Premier Li Peng arrives in Hong Kong for a four-day visit to take part in the World Bank/IMF meetings.

Vice Premier Zhu Rongji arrives for the World Bank/IMF meetings.















The three-day World Bank/IMF meetings open.

The Education Department announces plans to implement mother- tongue teaching in public secondary schools from the 1998 academic year.

The Provisional Legislative Council passes the Legislative Council Bill, an important step in the elections of the first SAR legislature.

The government announces the establishment of the Electoral Affairs Commission, a three-member independent body to oversee the practical arrangements for the elections.

The Land Fund Trust is dissolved after operating for 11 years and accumulating $197 billion. Control of the fund is handed over to the HKMA the next day.

The HKSAR celebrates its first Chinese National Day.

The Chief Secretary for Administration, Mrs Anson Chan, presents the first Progress Report of the SARG, showing that the government scores a 94 per cent success rate in implementing 830 service pledges.

The Chief Executive delivers his maiden policy address of the HKSAR, setting out goals for the next five years.

The Chief Executive pays his first official visit to Japan and holds a series of high-level meetings with Japan's political leaders.

The Deputy Secretary for Security, Miss Sally Wong, attends the United Nations High Commissioner for Refugees Executive Committee meeting in Geneva as a member of China's delegation.

Hong Kong cyclist Wong Kam-po wins a gold medal in the 180- kilometre flat race in cycling in the 8th All China Games in Shanghai. He returns to a hero's welcome.

The Chief Executive leaves HK for Brussels to hold a series of top-level meetings with the European Union's political and business leaders. The Chief Executive pays his first official visit to the UK after the Handover and holds talks with the British Prime Minister.

Three elder statesmen arrive from the mainland for a five-day visit to Hong Kong. They are the first batch of elder statesmen to visit the SAR.

The SARG announces a US$1.25 million ($9.75 million) donation to the World Trade Organisation Trust Fund to extend trade-related technical assistance to less advanced economies.

The Hang Seng Index takes its biggest-ever plunge of 1 438 points to close at 9 059.

Hong Kong hosts the two-day Third Asia-Pacific Economic Co- operation Investment Symposium for more than 100 senior business men and government officials.

King Harald V and Queen Sonja of Norway, lead a Norwegian delegation to Hong Kong after visiting the Mainland.

















Beijing names a 424-strong election committee to elect the HK National Peoples Congress deputies and appoints NPC Secretary-General Cao Zhi to take charge of the election works in HK.

ICAC commissioner, Mrs Lily Yam, leads a delegation to Beijing and Guangdong for a six-day visit to strengthen ties and co-operation with the mainland's anti-graft agencies.

The Chief Executive of the Consumer Council, Mrs Pamela Chan, is elected President of the Consumers International at the 15th World Congress held in Santiago, Chile.

The Deputy Secretary for Health and Welfare, Mr Robin Gill, and the Commissioner for Rehabilitation, Mr Augustine Choi, leave to attend a four-day conference on employment opportunities for the disabled in Tokyo, Japan.

The International Monetary Fund issues a statement supporting the SARG's handling of the current financial turmoil and backing the maintenance of the peg to the US dollar as a way to stabilise the economy.

The International Bank of Asia experiences a two-day minor run following rumours that it was having financial difficulties. A total of $1.6 billion was withdrawn from the bank during this period.

The Chief Executive is elected chairman of an NPC presidium to oversee the election of the HK deputies to the NPC.

The 20-member Estate Agents Authority is established to regulate the conduct of estate agents and to devise a licensing system for estate agents.

The President of Poland, Mr Aleksander Kwasniewski, arrives for a two-day visit as part of his state visit to China, the first by a Polish head of state since 1959.

The Financial Secretary departs for the UK to represent the Chief Executive at the Confederation of British Industry seminar between November 24 and 28.

The Chief Executive leaves for the APEC summit in Vancouver.

The Ministry of Foreign Affairs announces that the PRC Government will continue to provide the United Nations with information on the implementation of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights in the HKSAR.

A mini cake run on nearly all 43 branches of the Saint Honore cake shops follows rumours that the shops were closing.

Sir Andrew Burns takes up post as new British Consul-General in the HKSAR to replace Mr Francis Cornish.

The Financial Secretary departs for Kuala Lumpur where a two-day meeting of finance ministers discusses the new co-operative framework in the region to stabilise the financial market.










The 1998 Index of Economic Freedom compiled by the American Heritage Foundation and the Wall Street Journal rates Hong Kong's economy the freest in the world for the fourth consecutive year. The presidium of the NPC Election Conference announces the 72 candidates nominated for election as HK deputies to the national body. The government says most secondary schools shall adopt Chinese as the teaching medium for all academic subjects from the 1998-99 Secondary 1 intake. The Director of Education has been advised that 100 of the 124 applications to use English as the medium of instruction meet the requirements.

The first meeting of the Joint Liaison Group since the Handover is held in Beijing to discuss issues including the Vietnamese boat people in HK and the human rights report to be submitted to the United Nations. The Fire Services Department and other government agencies clean up after drums of sodium cyanide fall off a truck on Tai Po Road, posing potentially a major health hazard. The cleanup is resumed on subsequent days and legislation concerning carriage of dangerous goods is reviewed.

The Chief Executive takes part in the kick-off ceremony for the voter registration drive week during which over 30 000 'ambassadors' will visit two million households to call on people to register as voters. Thirty-six local National People's Congress deputies, including the Xinhua News Agency HK director, Mr Jiang Enzhu, are elected following a pre-selection on December 6.

The Housing Authority announces details of the sale of public housing under the Tenant Purchase Scheme. The prices vary from around $150,000 to $250,000 for a unit of some 400 square feet.

The Chief Executive leaves for Beijing for a three-day duty visit, his first since the establishment of the HKSAR. During the visit, Mr Tung meets President Jiang Zemin, and Vice-Premiers Qian Qichen and Zhu Rongji, to report developments in HK.

The SARG announces that Government House will be opened to the public four times a year. The first open day will be held in spring for the public to admire the azalea plants.

The Executive Council agrees in principle to the construction of the alignment for the Ma On Shan to Tai Wai rail link and extension of the Kowloon-Canton Railway from Hung Hom to Tsim Sha Tsui. They will form one of the three high priority projects recommended in the Railway Development Strategy.

The Chief Executive announces that the HKSAR will set up an office in Beijing in the first quarter of 1998.


Hong Kong is chosen as one of 31 sites around the world to host global celebrations ringing in the last year of the millennium as the year 2000 dawns across the globe's time zones.












The government sets up an inter-departmental working group to co- ordinate efforts made by various departments on the prevention and control of Influenza A H5N1, commonly known as 'avian flu'.

The government reveals results of the Supplementary Labour Scheme and announces a package of labour importation for the construction industry to meet the substantial labour requirements in infrastructural projects in the next five years.

The Chief Executive-in-Council approves the Tenant Purchase Scheme under which the Housing Authority will sell public rental flats to


The Housing Department announces the first batch of six public housing estates comprising 27 000 flats to be offered for sale to tenants in January 1998 under the Tenant Purchase Scheme.

The Hong Kong Monetary Authority reveals that Hong Kong's foreign exchange reserves have increased by 5.6 per cent to US$96.5 billion at the end of November, putting the SAR third among the world's largest foreign reserves holder after Japan and China.

Exportation of live chickens from the Mainland is suspended to allow for appropriate controls to be introduced to fight avian flu.

A Central Military Commission working group led by the General Chief of Staff of the People's Liberation Army, General Fu Quanyou, arrives for a week-long visit to inspect the HK Garrison. General Fu, the most senior army officer to visit the territory since the Handover, calls on the Chief Executive.

The government decides all chickens in local chicken farms and all poultry at wholesale markets and retail outlets must be slaughtered in an attempt to rid the territory of the avian flu virus. The killing of more than 1 million chickens starts the following day. Specialists later state that this action probably prevented a severe global flu epidemic.

The SARG announces that the ballroom at Government House will be open for application by charitable, non-profit making and public organisations to hold community events.

The government announces that an annual SARG honours list will be released on July 1 every year in place of the British honours list to include the Grand Bauhinia medal as the highest honour. A new category of awards will be instituted for people contributing to HK and another for disciplined services for outstanding or long service.

Mainland officials announce that the State Council has given the green light to the Lingdingyang Bridge project linking Zhuhai and Tuen Mun.

The SARG releases a special report explaining the key issues which have dominated the first six months of the HKSAR. It is to be circulated in the USA, Europe and the Asia-Pacific region.


Above: The Chief Executive, Mr Tung Chee Hwa, sits for the cameras during a meeting with US President Bill Clinton at the White House in September. It was the first time Mr Tung had met the President as leader of the Hong Kong Special Administrative Region. Right: The Financial Secretary, Mr Donald Tsang, makes a point in an address to business people in Sydney during a visit to Australia shortly after the Handover.

State Chamber 1


The Chief Executive, Mr Tung Chee Hwa,

sometimes accompanied by his wife, Mrs Betty Tung, undertook a series of visits to meet foreign leaders as the leader of the Hong Kong Special Administrative Region. Clockwise from above: Japan's Prime Minister, Mr Ryutaro Hashimoto, welcomes Mr Tung to Tokyo; European Commission President Mr Jacques Santer greets Mr Tung on his arrival in Brussels; Mr Tung chats with China's Ambassador to the USA, Mr Li Daoyu, outside the Hong Kong Government's new offices in Washington; China's President Jiang Zemin (centre) and Mr Tung join other leaders from the Asia-Pacific region in Vancouver for the annual Asia Pacific Economic Co-operation forum; Mrs Tung helps kick off the Hong Kong Tourist Association winter promotion in Tokyo and accepts a bouquet from a member of the Takarazuka Revue.



        Three women entertainers from the People's Liberation Army (right) welcome visitors to Open Day activities

at Stonecutters Island. Bands, precision marching and Chinese chess were among other features organised to give visitors the chance to view the PLA's Hong Kong Garrison in a relaxed setting.





By the Chief Executive, the Honourable Tung Chee Hwa

JULY 1, 1997, was a day of paramount importance in the history of Hong Kong and a cause for celebration for all Chinese people. After 156 years of separation, Hong Kong was eventually reunited with China to become part of one nation. The destiny of Hong Kong people is now in their own hands. With dignity and pride, we chart our own future.

      The return of Hong Kong to China marks a positive step towards the ultimate objective of reunification of the entire Chinese nation. Over the past century and a half, many compatriots have devoted themselves to the advancement of China and to safeguarding the territorial integrity of our nation. Thanks to their wisdom and enlightenment, new opportunities have been opened for us to shape our own destiny and work towards a brighter future. It is a proud moment, but we must also accept the heavy responsibility that has been placed on our shoulders. We must uphold our beliefs and face the challenges that history has brought us. We can do this by virtue of our wisdom, industry and versatility - a legacy from our heritage and culture. With an indomitable spirit, we must ensure that Hong Kong remains prosperous and stable, and continues to enjoy a high reputation on the international scene.

      With the resumption of the exercise of sovereignty over Hong Kong, China has implemented the principle of 'one country, two systems' and fulfilled the promises of 'a high degree of autonomy' and 'Hong Kong people administering Hong Kong'. With great vision, China's leaders have formulated the unique 'one country, two systems' concept and honoured a solemn commitment to set a clear example for the future reunification of our entire nation. We can advance into the 21st Century with conviction, prudence and determination, and with the ultimate goal of achieving even greater success.

      Under the Basic Law of the Hong Kong Special Administrative Region, our new and important constitutional document, the Central People's Government has granted us a high degree of autonomy - a situation that is unparalleled anywhere in the world. We value this decision, and will exercise our power prudently and responsibly as we embark on a new era carrying with us the respect, trust and attention of the entire nation; and helping to play our part in the overall advancement of China.

      In addition to institutionalising the 'high degree of autonomy', the Basic Law delineates the obligations of the residents of Hong Kong and clearly prescribes our social, economic and political systems which are different from those of the Mainland of China. It preserves our usual way of life; we continue to enjoy all our rights as before; our free and open economic system is maintained; a smooth democratic




development is assured; and we continue to build a stable and peaceful society. This is the hallmark of our ability and determination to chart our own destiny.

   Hong Kong is one of the freest and most vibrant economies in the world. Such remarkable achievements are not made overnight. Free enterprise and free trade; prudent financial management and low taxation; the rule of law; an executive-led government and efficient civil service have been part of our tradition. All these factors underlie our success and have been guaranteed in the Basic Law. Under the umbrella of the Basic Law, we exercise our rights, apply our wisdom, further develop our advantages and carry out our obligations for the well-being of all Chinese people.

   The interests of Hong Kong and our motherland are intricately linked and intertwined. Due to our long separation, we need to acquire a new understanding of the Mainland. Only by doing this can our roots again grow in the soil of our nation and strengthen our relationship through mutual trust, mutual economic benefits, common cultural interaction, and mutual respect for each other's way of life. The principle of 'one country, two systems' provides us with unique opportunities and advantages to consolidate our foundation and to work in harmony with the Mainland for the development of Hong Kong and the motherland. Moving ahead together.

   Every society must have its own values to provide a common purpose and a sense of unity. While the majority of people in Hong Kong are Chinese, we are home to people from other nationalities, and for a long time, we have embraced the cultures of east and west. We continue to encourage diversity in our society, but we must also reaffirm and respect the fine traditional Chinese values, including filial piety, love for the family, modesty and integrity, and the desire for continuous improvement. We value plurality, but discourage open confrontation; we strive for liberty, but not at the expense of the rule of law; we respect minority views, but are mindful of wider interests; we protect individual rights, but also shoulder collective responsibilities. I hope these values will provide the foundation for unity in our society.

   Maintaining and developing the legal system and the rule of law in Hong Kong is immensely important. We will continue to ensure that the executive, legislative and judicial branches of the government will operate independently. We will intensify our efforts against corruption and maintain a clean society. We will ensure equality before the law and provide an attractive environment for investors and the people of Hong Kong.

We will preserve the existing freedoms and life style, and ensure that the people of Hong Kong will continue to enjoy the freedom of speech, of assembly, of association, of the press and other freedoms guaranteed by the International Covenant on Civil and Political Rights.

   Democracy is the hallmark of a new era for Hong Kong. The Government of the Special Administrative Region is moving positively towards a more democratic form of government in accordance with the provisions laid down in the Basic Law. We are providing opportunities for all sections of our society, covering legitimate political organisations to people with different shades of opinion, to participate in the political process. The Special Administrative Region Government will adopt an open attitude and be accountable to the public.


      Hong Kong has an outstanding and honest civil service. They have a crucial role to play under the concept of 'Hong Kong people administering Hong Kong'. Together, we serve the community and work for a better Hong Kong.

      The hard work and achievements of our predecessors have provided us with a solid foundation on which to build. But we cannot be complacent and need to continue our self-enhancement to build an even brighter future for the younger generation. With the turning of history's wheel, we must pace ourselves well. I have experienced the frustration of setting up a business and the hardship of maintaining what has been achieved by others. In this time of change, I fully understand the needs and aspirations of the people of Hong Kong. In the days ahead, I wish to move forward hand in hand with the six-and-a-half million people of Hong Kong in the direction of 'one country, two systems'. Together we shall overcome obstacles on the road ahead and score greater achievements.

      The Hong Kong Special Administrative Region Government pledges that it will always put the people's livelihood first and attach the greatest importance to their interests. It will strive to better the well-being of the public and to enable the community at large to lead a peaceful and stable life. It will also make every effort to ensure that Hong Kong continues to enjoy existing advantages in the international arena, which is characterised by more open and keener competition, and to maintain our leading position in the Asia-Pacific Region.

      With the concerted effort and whole-hearted devotion of every person in Hong Kong, the future will certainly be brighter. Our future prosperity and stability depend on the hard work of each of us. We have a part to play in the further success of the modernisation of our nation. We all have a mission to accomplish and obligations to fulfil. We must try with all our might and spare no effort to serve Hong Kong, to serve our motherland.





The Handover and Related Ceremonies

JULY 1, 1997, marked the beginning of Hong Kong's new era as a Special Administrative Region (SAR) of the People's Republic of China (PRC) and the end of 156 years of British administration. The people of Hong Kong witnessed this historic moment with immense pride. This new chapter in history was marked by a solemn and dignified Handover Ceremony which began shortly before midnight on June 30.

   The Handover Ceremony was held in the Grand Foyer of the Hong Kong Convention and Exhibition Centre (HKCEC) Extension and began at 11.30 pm. It included military guards of honour and military bands from China and Britain, plus speeches by President Jiang Zemin and the Prince of Wales. Just before midnight, the British and Hong Kong flags were lowered. At the stroke of midnight, the Chinese national and HKSAR regional flags were raised. The ceremony was witnessed by 4 000 invited guests, including senior representatives from China and Britain, ministers from more than 40 countries and representatives from more than 40 international organisations. Leaders of government in Hong Kong, as well as a wide cross-section of leading local and overseas business and community leaders also attended. Some 6 500 local and overseas media representatives covered the event, which was beamed to a world-wide television audience in the hundreds of millions.

About 1.30 am on July 1, the Vice Premier and Foreign Minister, Mr Qian Qichen, officiated at the Inauguration Ceremony during which President Jiang formally declared the establishment of the Hong Kong Special Administrative Region of the People's Republic of China in front of more than 4 000 invited guests. The Chief Executive, Principal Officials, Members of the Executive Council and Provisional Legislative Council and the Judges of the Court of Final Appeal and the High Court were sworn in. Premier Li Peng delivered a speech, followed by a speech from the Chief Executive, Mr Tung Chee Hwa. Immediately after this ceremony, the Provisional Legislative Council held its first session in the HKSAR, at which the Reunification Ordinance was enacted.

At 10 am on July 1, the SARG Celebration Event was held at the HKCEC Extension with more than 4 600 invited guests. President Jiang delivered an important speech at this ceremony reaffirming that 'one country, two systems', 'Hong Kong people administering Hong Kong' and 'a high degree of autonomy' would remain unchanged for 50 years. This was followed by the Chief Executive's Inauguration Speech. The assets of the Land Fund were handed over to the HKSAR Government and gifts were presented to the HKSAR by the Central People's


     Government and 31 provinces, autonomous regions and municipalities. This was followed by a spectacular cultural programme including the world premiere of Symphony 1997: Heaven, Earth, Mankind.

At 4 pm on July 1, the HKCEC Extension was again filled with VIPs, international and local guests for the SARG Cocktail Reception, which was attended by about 5 000 people.

      Apart from the official ceremonies, celebration events were held by many local organisations and district communities throughout the territory. These included a fireworks display, TV variety shows, lighting up of the harbour, cultural performances, receptions, and banquets, to celebrate the historic occasion.

Ceremonies were also held on June 30 to mark the end of 156 years of British administration. A brief ceremony to mark the departure of the last Governor, Mr Christopher Patten, was held at Government House at 4.30 pm.

      The Farewell Ceremony was held in a purpose-built arena at the Tamar site and included speeches by Prince Charles and Mr Patten. The British and Hong Kong flags were lowered at sunset.

      The State Banquet hosted by Britain's Secretary of State for Foreign and Commonwealth Affairs, Mr Robin Cook, was held in the evening. It was attended by 4 000 dignitaries, VIPs and guests. Toasts were proposed to the future of Hong Kong by Mr Cook, and, in response, by Mr Qian.

      At 9 pm on June 30, an advance element of 509 soldiers led by Major-General Xiong Ziren entered Hong Kong. The Chinese and the British Forces held a ceremony to hand over defence responsibilities at the Prince of Wales barracks. At zero hour on July 1, all barracks held flag-raising ceremonies to signify the official transfer of defence responsibilities to the Hong Kong Garrison. On July 1, at 6 am, the garrison's main body, comprising army, navy and air force units, moved into the 14 barracks in Hong Kong.

'One Country Two Systems'

The ingenious and novel concept of 'one country two systems', which was first put forward by Mr Deng Xiaoping in the late 1970s, laid the solid foundation for the eventual reunification of the country. Upholding national unity and territorial integrity, maintaining the prosperity and stability of Hong Kong, and taking account of its history and realities, it was decided that upon China's resumption of the exercise of sovereignty over Hong Kong, a Hong Kong Special Administrative Region would be established in accordance with the provisions of Article 31 of the Constitution of the People's Republic of China, and that under the principle of 'one country, two systems', the socialist system and policies would not be practised in Hong Kong. The policies of the People's Republic of China regarding Hong Kong have been enshrined in the Basic Law, which further elaborated the basic policies set out by the Chinese Government in the Annex to the Sino-British Joint Declaration (JD).

Joint Declaration

The Sino-British Joint Declaration on the Question of Hong Kong was signed in Beijing on December 19, 1984. 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 Basic Law

The Basic Law provides a constitutional framework for the Hong Kong Special Administrative Region. It institutionalises the concept of 'one country two systems'.

The Basic Law Drafting Committee and Basic Law Consultative Committee were established in 1985 to undertake the drafting of the document 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 National People's Congress (NPC) for further consultation, reflected many of the views expressed during the first round of consultation. The second consultation exercise ended in October 1989. The second draft of the Basic Law was further reviewed in the light of the outcome of that exercise and formally adopted in April 1990 by the NPC, together with the designs for the flag and emblem of the SAR. The Basic Law came into effect on July 1, 1997.

The Basic Law clearly prescribes that the social, economic and political systems in Hong Kong will be different from those in the mainland of China. It protects the rights, freedoms and life-style of Hong Kong people. The Basic Law guarantees the independence of Hong Kong's judiciary and, apart from foreign affairs and defence, gives Hong Kong people full responsibility to manage their own affairs. It allows the HKSAR complete financial autonomy, and the independence of its monetary system. It establishes Hong Kong as a separate customs territory, and enables it to work directly with the international community to control trade in strategic commodities, drugs, illegal transshipments, and to protect intellectual property rights.

Preparation for the Establishment of the HKSAR

Preparatory Committee

The Preparatory Committee was formally set up on January 26, 1996, in accordance with a decision of the NPC on April 4, 1990. It comprised 150 members - 94 from Hong Kong and 56 from the Mainland who were appointed by the Standing Committee of the NPC.

The establishment of the Preparatory Committee was preceded by the setting up of the Preliminary Working Committee (PWC) on July 16, 1993. The PWC was an advisory body with its 69 Members drawn from Hong Kong and the Mainland. Five sub-groups were set up under the PWC - the Political, Economic, Legal, Social and Security and Cultural Sub-groups. The PWC held six plenary sessions and a number of meetings and seminars were also conducted by the sub-groups. The last plenary session was held in December 1995. The PWC had successfully completed a huge amount of ground work which contributed significantly to the smooth operation of the Preparatory Committee.

The Preparatory Committee was responsible for preparing for the establishment of the HKSAR, including the prescription of the method for the formation of the first government and the first Legislative Council of the HKSAR. It was also responsible


for preparing the establishment of a 400-member Selection Committee, which in turn was responsible for the selection of the first Chief Executive of the HKSAR.

      The Preparatory Committee was chaired by Vice Premier Qian, who was assisted by nine vice-chairmen. It had seven sub-groups dealing with the Selection Committee; the first Chief Executive; the Provisional Legislative Council; legal matters; economic affairs; celebration activities; and the first HKSAR Legislative Council.

      At the Fifth Session of the Eighth NPC, held on March 10, 1997, Mr Qian presented a report on the committee's work. On March 14, 1997, the NPC passed a resolution approving the report. Having served its function, the Preparatory Committee was disbanded on July 11, 1997.

Selection Committee

In accordance with the NPC decision on April 4, 1990, the Selection Committee was responsible for recommending the candidate for the first Chief Executive through local consultations or through nomination and election after consultations. Its ambit was later expanded by the Preparatory Committee to include responsibility for the selection of the 60 members of the Provisional Legislative Council.

      The Selection Committee was composed of 400 members, with 100 from each of four sectors: industrial, commercial and financial; the professions; labour, grass-root, religious and other; and former political figures, Hong Kong deputies to the NPC and representatives of the Chinese People's Political Consultative Conference (CPPCC). On November 2, 1996, the 400 members, all permanent residents of Hong Kong aged 18 or older, were elected by members of the Preparatory Committee from 5 789 applicants in the four sectors.

Election of the Chief Executive

As provided for in the Basic Law, the Chief Executive was elected by the Selection Committee and had to meet certain requirements. These included being a Chinese citizen aged not less than 40 with no right of abode in any foreign country and having lived in Hong Kong continuously for at least 20 years. Candidates were asked to submit their names to the Preparatory Committee before November 1, 1996. Each candidate had to be nominated by no fewer than 50 Selection Committee members, each of whom could nominate one candidate, therefore allowing for a maximum of eight candidates. Final selection was by secret ballot, with the successful candidate having to receive more than half the votes. Five of the original eight eligible candidates were eliminated in the nomination process on November 1, 1996. In the election on December 11, 1996, Mr Tung Chee Hwa was elected with an overwhelming majority of votes. Mr Tung was appointed Chief Executive under State Council Decree No 207, signed by Premier Li Peng on December 16, 1996, to assume office on July 1, 1997. Under the Basic Law, the term of office for the Chief Executive is five years.

Work of the Chief Executive's Office

From January 1997, Mr Tung was provided with offices and staff to help him prepare for the formation of the first Government of the HKSAR, to prepare for the Handover and to work on the policies and draft bills he planned to implement during the immediate months after the handover. About 70 civil servants were seconded or on loan from the Hong Kong Government to work in the Chief Executive's Office.



They included a policy secretary, senior administrative and executive staff, information officers and ancillary staff.

Among major decisions during that period were: the appointment on January 24, 1997, of the 11 non-official members of the SAR Executive Council; the appointment by the Central People's Government on February 20, 1997, of the 23 Principal Officials of the HKSAR Government as nominated by the Chief Executive; the announcement on May 20, 1997, of the appointment of the Chief Justice of the Court of Final Appeal (CFA). The announcement of Principal Officials, in particular, was welcomed because it allowed 21 of the 23 serving incumbents to continue to serve in their posts beyond the transition. The other two were due to retire and, by July 1, two new principal officials were also named.

In his Inauguration Speech on July 1, and in his inaugural Annual Policy Address on October 8, Mr Tung outlined his vision for the future of the HKSAR. His main objectives include: upholding the Basic Law and the concept of 'one country, two systems'; maintaining and upholding the rule of law; enhancing Hong Kong's economic vitality and competitiveness; raising the quality of education; increasing the home ownership rate; formulating a comprehensive policy on care for the elderly; and strengthening communication between the HKSAR and the Mainland.

Executive Council

As laid down in the Basic Law, the Chief Executive selects a group of people to form the Executive Council, which he must consult before making important policy decisions, introducing bills into the Legislative Council, making subordinate legislation, or dissolving the Legislative Council. The Executive Council also takes decisions on appeals, petitions and objections under those ordinances which confer a statutory right of appeal. If the Chief Executive does not accept a majority opinion of the Executive Council, he shall put the specific reasons on record. (See Chapter 3). On January 24, 1997, Mr Tung announced the 14 members of his Executive Council three official and 11 non-official. The SAR Executive Council held its first meeting on February 18, 1997, with weekly meetings until July 1, 1997, since when meetings have been held on Tuesdays. Before the Handover, the Executive Council held more than 18 meetings and advised the Chief Executive on many important issues, including legislation to be introduced into the Provisional Legislative Council.

Provisional Legislative Council

The NPC decided on August 31, 1994, that the term of Hong Kong's last legislature under British rule would cease on June 30, 1997. This was because the 1995 electoral arrangements for that legislature were not compatible with the Basic Law and the NPC's decision on the formation of the first legislature of the HKSAR, passed by the NPC on April 4, 1990.

On March 24, 1996, the Preparatory Committee for the HKSAR resolved to establish the Provisional Legislative Council with the following tasks:

• To enact laws needed to ensure the proper functioning of the HKSAR in accordance with the Basic Law and to amend and repeal laws where necessary;

• To examine and approve budgets introduced by the Government;


• To approve taxation and public expenditure;

A range of special events marked the start of Hong Kong's new era as a Special Administrative Region. Above: The colourful Farewell Ceremony for the British was held in an arena built at East Tamar, Central District, on a site formerly occupied by the Royal Navy. It was watched by 10 000 people and included a speech by the Prince of Wales, representing the British Queen (top). Umbrellas made necessary by a steady deluge added

an unscripted backdrop to performances by Western and Chinese orchestras, children's choirs and dancers. A military pageant involving the Massed Bands and a Guard of Honour with representatives from the Royal Navy, Army and Royal Air Force took place before the British and Hong Kong flags were lowered at sunset.



1 1

Above: Representatives of the Chinese and British delegations, led by President Jiang Zemin and the Prince of Wales, stand for the replacement of flags which formed the focal point of a solemn and dignified Handover Ceremony beginning just before midnight on June 30. Hong Kong policemen were chosen to accompany both parties as flag-bearers to symbolise continuity in the community. This event ended just after midnight, and thousands of the invited guests moved into an adjoining hall to witness the Inauguration of the Hong Kong Special Administrative Region.






Top: The British Royal Yacht Britannia sails into the harbour on the start of its voyage taking the Prince of Wales and the British administration away from Hong Kong. Above and right: Workers remove the insignia of the British administration and install China's national emblem and the Hong Kong SAR's emblem at the Central Government Offices.


To receive and debate the policy address of the Chief Executive;

To endorse the appointment of the judges of the Court of Final Appeal and the Chief Judge of the High Court of the HKSAR;

Participation of the President of the PLC in the nomination of the six Hong Kong members of the Committee for the Basic Law of the Hong Kong Special Administrative Region Under the Standing Committee of the National People's Congress; and

• To deal with other matters having to be dealt with by the PLC before the formation of the first Legislative Council of the HKSAR.

      The same resolution also provided that the PLC should start operation after the first Chief Executive of the HKSAR was elected and should cease operation after the first Legislative Council of the HKSAR was formed, that its term should not extend beyond June 30, 1998, and that any legislation passed by the PLC before July 1, 1997, should commence operation upon the establishment of the HKSAR. On March 14, 1997, the NPC endorsed a report on the work of the Preparatory Committee in which the establishment and election of the PLC were fully covered.

      The 60 Provisional Legislative Councillors were elected by the Selection Committee on December 21, 1996. On January 25, 1997, the PLC held its first meeting in Shenzhen, where all of its meetings and those of its committees were held up to June 30. During this period the PLC examined and passed 13 pieces of legislation deemed necessary to come into effect immediately on July 1, 1997, endorsed the 1997/98 Budget, and passed the motions required to effect the appointment of judges, including the Chief Justice of the CFA, the Permanent and Non-Permanent Judges of the Court of Final Appeal and the Chief Judge of the High Court, and adopted its own Rules of Procedure. The bills and motions passed were all confirmed and put into effect by the Reunification Ordinance, which was itself passed on July 1, 1997, as soon as the HKSAR was established.

      Since July 1, the PLC's meetings have been held on Wednesday afternoons in the Legislative Council Chamber. Business includes scrutiny of bills, motion debates and questions, and tabling of reports, subsidiary legislation and other papers.

Provisional Municipal Councils and District Boards

      The Chief Executive announced on June 16, 1997, that all existing members of the Urban Council and the Regional Council the two municipal organisations providing health, cultural and recreational services would continue to serve on the provisional bodies that would take over from July 1, 1997. The membership would be increased so that each council would have a total of 50 members. As a result, nine new members were appointed to the Provisional Urban Council and 11 new members appointed to the Provisional Regional Council. The terms of office of the two municipal councils will end not later than December 31, 1999.

      At the district level, the Chief Executive appointed 468 members to the 18 Provisional District Boards which replaced the former District Boards with effect from July 1, 1997. The boards' main function is to advise the government on matters affecting the interests and well-being of the people living and working in the districts. (See Chapter 3)




Joint Liaison Group

  The functions and roles of the Joint Liaison Group (JLG) have been set out clearly in the JD. According to the JD, the JLG shall continue to exist and meet until January 1, 2000.

The JLG held 40 plenary meetings before the transition: 16 in Hong Kong, 13 in London and 11 in Beijing. Regular meetings between expert groups and an extensive range of less-formal contacts were also held. The JLG's first meeting after the Handover was held in Beijing on December 2 and 3, 1997.

Land Commission

The Sino-British Land Commission was established in 1985 in accordance with Annex III to the Joint Declaration and was 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.

The Land Commission held 35 formal meetings in Hong Kong before its dissolution on June 30, 1997. The Land Commission fulfilled the responsibilities conferred on it. In particular, it agreed to the disposal of almost 3 000 hectares of land after its establishment in 1985. It reached agreement on the legal documents to be used in land transactions falling within the provisions of Annex III to the Joint Declaration, on the legislation necessary to extend New Territories leases and on arrangements for special purpose leases. Notably, in 1994 agreement was reached on the granting of land for the new airport at Chek Lap Kok and the Airport Railway. With the establishment of the HKSAR, matters relating to land leases are, in accordance with the Basic Law, dealt with by the HKSAR Government.

Land Fund

After the establishment of the Land Fund in 1985, premium income obtained from land transactions concluded before July 1, 1997, was, after deduction of the cost of land production, shared equally between the then-Hong Kong Government and the HKSAR Government. The Hong Kong Government's share was credited to the Capital Works Reserve Fund to finance public works and land development.

   The share allocated to the HKSAR Government was placed in a trust fund called the Hong Kong Special Administrative Region Government Land Fund, which was managed by an investment committee. Up to June 30, 1997, $150 billion had been transferred to the fund since its inception on May 27, 1985. On July 1, 1997, all the assets of the fund were handed over by its Trustees to the Financial Secretary and became part of the fiscal reserves of the HKSAR Government. Since then, the investment of the assets has been managed by the Hong Kong Monetary Authority under the Financial Secretary's direction with the assistance of an advisory committee.

The Office of the Commissioner of the Ministry of Foreign Affairs

The Basic Law provides that the Central People's Government (CPG) shall be responsible for foreign affairs relating to the HKSAR; that the Ministry of Foreign Affairs of the People's Republic of China shall establish an office in Hong Kong to deal with foreign affairs; and that the CPG authorises the HKSAR to conduct relevant external affairs on its own in accordance with the Basic Law.


      As a result, the Office of the Commissioner of the Ministry of Foreign Affairs (MFA Office) was established on July 1, 1997, and works in close co-operation with the Government of the HKSAR. The MFA Office discharges its responsibilities in accordance with the Basic Law and the 'One Country, Two Systems' principle. It does not interfere with matters which are within the scope of the HKSAR's high degree of autonomy.

      The HKSARG's interface with the MFA Office relates mainly to Hong Kong's participation in international organisations and conferences, negotiation and conclusion of agreements, and management of foreign consular and other official and semi-official missions. For instance, the HKSAR may participate in international organisations and conferences not limited to states on its own using the name 'Hong Kong, China'. The CPG's approval will be obtained through the MFA Office if the HKSAR joins an international organisation limited to states either as part of the PRC delegation or in any other capacity permitted by the CPG and the international organisation or conference concerned. The HKSAR may on its own, using the name 'Hong Kong, China', maintain and develop relations and conclude and implement agreements with foreign states and regions and relevant international organisations in the appropriate fields, including economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports.

      However, the CPG's specific authorisation will be required for the negotiation and conclusion of Air Services Agreements, Reciprocal Juridical Assistance Agreements and Visa Abolition Agreements with foreign states. The MFA Office and the HKSARG also co-operate in handling matters relating to the establishment of consular missions in the HKSAR. Foreign affairs issues (such as the establishment and abolition of consular representation, consular appointments, granting of privileges and immunities) are handled by the MFA Office. The HKSARG is responsible for the day-to-day management of the consular corps (such as the issue of consular identity cards, actual provision of privileges and immunities, and the security of consular premises).

The Garrison

The Basic Law provides that the CPG shall be responsible for the defence of the HKSAR and shall bear the expenditure for the garrison. Military forces stationed in the HKSAR shall not interfere in the local affairs of the Region and the HKSAR Government shall be responsible for the maintenance of public order in the Region. The People's Liberation Army (PLA) Forces Hong Kong (Hong Kong Garrison) formally stationed in the HKSAR assumed defence responsibility for Hong Kong with effect from zero hour on July 1, 1997.

      The PLA Forces Hong Kong comprise army, navy and air force units so as to reflect the PRC's sovereignty over HKSAR's territorial land, waters and airspace, and it is subject to the direction of the Central Military Commission. The Hong Kong Garrison is deployed at 14 military sites in the HKSAR with some of the army, navy and air force units stationed in the mainland of China.

      The 'Law of the People's Republic of China on the Garrisoning of the Hong Kong Special Administrative Region' (the Garrison Law), which was added to Annex III of the Basic Law, ensures the lawful performance of functions and responsibilities by the PLA Forces Hong Kong to maintain the sovereignty, unity and territorial integrity of the State and the security of Hong Kong.





HONG Kong underwent a constitutional change on July 1, 1997, when it became a Special Administrative Region of the People's Republic of China. Following the end of British administration at midnight on June 30, 1997, the Basic Law-which is the constitutional document of the Hong Kong Special Administrative Region (HKSAR) - came into effect. The Basic Law sets out, in a legal document, the Chinese Government's basic policies towards Hong Kong and the way in which the HKSAR is to be administered for 50 years beyond 1997.

Under the Basic Law, the HKSAR shall enjoy a high degree of autonomy except in defence and foreign affairs. The HKSAR shall exercise executive, legislative and independent judicial power, including that of final adjudication. The HKSAR's executive authorities and legislature shall be composed of permanent residents of Hong Kong. The HKSAR shall remain a free port, a separate customs territory and an international financial centre and may, on its own, using the name 'Hong Kong, China', maintain and develop relations and conclude and implement agreements with foreign states and regions and international organisations in appropriate fields, such as economic, trade, financial and monetary, shipping, communications, tourism, cultural and sports areas.

Role of the Chief Executive

  The Chief Executive is the head of the HKSAR. He is responsible for implementing the Basic Law, signing bills and budgets passed by the Legislative Council, promulgating laws, making decisions on government policies and issuing executive orders. He is assisted by the Executive Council in policy-making.

The Basic Law provides that the Chief Executive of the HKSAR is to be selected by election or through consultations held locally and be appointed by the Central People's Government. The method for selecting the Chief Executive is to be specified in the light of the actual situation in the HKSAR and in accordance with the principle of gradual and orderly progress. For the second term, the Chief Executive will be elected by an Election Committee composed of 800 members from four different sectors of the community. The Basic Law provides that the ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.

The first Chief Executive of the HKSAR, Mr Tung Chee Hwa, was elected by a Selection Committee comprising 400 members from various sectors in the community set up in accordance with the Basic Law. Mr Tung assumed office on July 1, 1997, for a five-year term.


The System of Government

Executive Council

The Executive Council is an organ for assisting the Chief Executive in policy making. Under Article 56 of the Basic Law, except for the appointment, removal and disciplining of officials and the adoption of measures in emergencies, the Chief Executive shall consult the Executive Council before making important policy decisions, introducing bills into the Legislative Council, making subordinate legislation, or dissolving the Legislative Council. The Chief Executive in Council also determines appeals, petitions and objections under those ordinances which confer a statutory right of appeal. If the Chief Executive does not accept a majority opinion of the Executive Council, he shall put the specific reasons on record.

As provided for in Article 55 of the Basic Law, Members of the Executive Council are appointed by the Chief Executive from among the principal officials of the executive authorities, Members of the Legislative Council and public figures. They are Chinese citizens who are permanent residents of the Hong Kong Special Administrative Region with no right of abode in any foreign country. Their appointment or removal is decided by the Chief Executive. The term of office of Members of the Executive Council may not extend beyond the expiry of the term of office of the Chief Executive who appoints them.

The Executive Council normally meets once a week, and its proceedings are confidential, although many of its decisions are made public. It is presided over by the Chief Executive.

Provisional Legislative Council

The Provisional Legislative Council (PLC) is an interim legislature to enable the smooth functioning of the HKSAR until its first Legislative Council can be formed. The main functions of the PLC are to enact laws, approve public expenditure, monitor the performance of the government and endorse the appointment of judges. (More details in Chapter 2).

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 PLC becomes law after it is signed and promulgated by the Chief Executive.

Members of the council may raise questions on the work of the government. The council meets in public, normally on Wednesdays, to transact council business. All PLC meetings and almost all meetings of its committees and subcommittees are open to the public with simultaneous interpretation in Cantonese and English.

Up to December 31, 1997, the PLC held a total of 32 meetings 11 in Shenzhen and 21 in Hong Kong. It enacted 30 bills, while 319 questions and 512 supplementary questions were asked. During the year, 86 motions were debated at these meetings, with 56 motions raised by members including 18 on council procedural and administrative matters, nine on government legislative proposals and 29 relating to government policies which had no legislative effect. The Chief Executive, after delivering his first policy address in the council on October 8, 1997, attended a briefing session of the council, during which he took 29 questions from members.




   Under the terms of its establishment, the PLC shall cease to operate after the first Legislative Council of the HKSAR is formed but, in any case, its term shall not extend beyond June 30, 1998. The election for the first Legislative Council of the HKSAR will be held on May 24 and its term of office shall commence on July 1, 1998. It will have 60 members: 30 from functional constituencies, each representing an economic, social, professional or other sector of the community; 20 returned by geographical constituencies which cover the whole SAR; and 10 elected by the Election Committee comprising 800 elected representatives of the community. Legislative Councillors shall elect one of their fellow members as President.

Committee System

Through a system of committees, PLC members perform the important roles of scrutinising bills, controlling public expenditure, and monitoring the government's performance. The PLC has three standing committees: the Finance Committee, Public Accounts Committee, and Committee on Members' Interests. The PLC also has a House Committee and 18 panels.

Finance Committee

The Finance Committee is composed of all PLC members, except the President. The Chairman and the Deputy Chairman are elected from among its members. It scrutinises and approves public expenditure proposals presented by the Administration.

There are two subcommittees under the Finance Committee: the Establishment Subcommittee and the Public Works Subcommittee. The Establishment Subcommittee examines and makes recommendations to the Finance Committee on the government's proposals for the creation, redeployment, and deletion of directorate posts, the creation of directorate-level consultancy positions for periods lasting more than 12 months, and for changes to the structure of civil service grades and ranks. The Public Works Subcommittee examines and makes recommendations to the Finance Committee on the government's expenditure proposals under the Capital Works Reserve Fund for projects in the public works programme and building projects carried out by or on behalf of subvented organisations.

Public Accounts Committee

  The Public Accounts Committee (PAC) considers reports of the Director of Audit on the accounts and the results of value-for-money audits of government and other organisations which are within the purview of public audit. It may invite government officials or members or employees of public organisations to attend public hearings to give explanations and information, or any other person to assist it in relation to such explanation or information if deemed necessary. The PAC's seven members are appointed by the PLC President.

Committee on Members' Interests

The Committee on Members' Interests considers matters pertaining to members' declaration of interests and matters of ethics in relation to their conduct, investigates complaints regarding members' registration and declaration of interests, and makes recommendations relating to members' interests. Furthermore, it examines arrangements for the compilation, maintenance and accessibility of the Register of


      Members' Interests. The Committee on Members' Interests has seven members, who are appointed by the PLC President.

Committee on Rules of Procedure

The Committee on Rules of Procedure reviews the Rules of Procedure of the council and its committees and proposes amendments or changes as considered necessary. The committee comprises 12 members appointed by the PLC President.

House Committee

The House Committee consists of all members except the President. Its Chairman and Deputy Chairman are elected by the members. It is responsible for dealing with matters relevant to the work of the PLC and prepares members for the full council meetings. It also decides whether bills committees or subcommittees should be formed as appropriate to study bills and subsidiary legislation which have been introduced into the PLC.

Bills Committee

      Any member, other than the President, may join a bills committee to 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 tables a report in council after it has completed its task. It is dissolved as soon as the bill it has considered passes through the PLC or when the House Committee so decides.


The PLC has 18 panels which deliberate on issues relating to specific policy areas raised in the Chief Executive's Policy Address. These panels also give views on major legislative or financial proposals before their formal introduction into the Council or Finance Committee, as well as examine important issues of wide public concern as referred by the Council, House Committee or as raised by the panels themselves.

Select Committee

The PLC 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.

Redress System

PLC members operate a redress system for members of the public who may have been aggrieved by government actions or policies. Under the system, members of the public may lodge complaints against government departments and request members' assistance in their dealings with the government.

Members of the PLC, in groups of five or six, take turns to be on duty weekly to oversee the system and to receive petitions and representations. They also 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






Provisional Legislative Council Commission and Secretariat

An independent Provisional Legislative Council Commission, with financial and administrative autonomy, is chaired by the President of the PLC and consists of 12 members. It is empowered to employ staff of the PLC Secretariat and oversee its work, determine the organisation and administration of support services and facilities, formulate and execute policies on their effective operation and expend funds in ways it sees fit to support these activities.

The PLC Secretariat provides supporting services to the PLC, including:

servicing of meetings of the PLC and its committees,

facilitating communication with and among members in relation to the business of the PLC;

collating public views on the business of the PLC; and

• promoting public understanding of the work of the PLC.

Work of the former Legislative Council

During the first half of 1997, when Hong Kong was still under British administration, legislative work was carried out by the Legislative Council elected in September 1995. The former 60-member council conducted its business in accordance with the procedures laid down in its Standing Orders, which derived their authority from the Hong Kong Royal Instructions, and the Legislative Council (Powers and Privileges) Ordinance. During these six months, the Legislative Council passed 108 bills, including the Appropriation Bill on the 1997/98 Budget.

  In monitoring the government's performance in the same period, members of the former Legislative Council debated 81 motions with 49 motions raised by members including two on council procedural and administrative matters, nine on government legislative proposals and 38 relating to government policies with no legislative effect. In all, 401 questions and 491 supplementary questions were asked on a wide range of topics.

Municipal Councils and District Boards

From July 1, 1997, the two municipal councils and 18 district boards elected during British administration were replaced by provisional bodies. Like the Provisional Legislative Council, this is an interim arrangement until elections can be held, and in any case, their terms will not extend beyond December 31, 1999. These provisional municipal councils and district boards include all those members serving before July 1, 1997, as well as additional appointees. The government is currently reviewing the roles and functions of municipal councils and district boards.

Provisional Urban Council

The Provisional Urban Council is responsible for providing municipal services to about 3.4 million people in the urban areas, representing 53 per cent of the population. The council plays a key role in safeguarding environmental hygiene and public health as well as providing cultural services and venues and recreational facilities and programmes.


The council comprises 50 appointed councillors. It holds formal public meetings 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, generally meet at least once a month. There are also more than 30 subcommittees and working groups which handle specific issues. All council meetings are open to the public, except for sensitive items which must be discussed in private.

The Director of Urban Services is the council's chief executive, as well as the head of the Urban Services Department. The department is the largest civilian department within the Hong Kong Special Administrative Region Government structure with a staff of about 17 000. The responsibilities of the director include directing and forward planning for all aspects of the department's work, as well as formulating policy proposals for consideration by the Provisional Urban Council. The agreed policies are then implemented by the department as the executive arm of the council. The council is financially autonomous and spent $6.785 billion on recurrent activities and capital works projects in 1996-97. A share of the rates forms about 80 per cent of the council's 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.

Provisional Regional Council

The Provisional Regional Council is responsible for environmental hygiene, public health, sanitation, liquor licensing and the provision of recreational, sports and cultural facilities and services for about 3.05 million people in the New Territories.

        The council consists of 50 members. 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 has a staff of about 11 000 headed by the Director of Regional Services. The council is financially autonomous, with its main source of revenue being rates collected in the council area. In 1996-97, this provided about 85 per cent of total revenue. The rest comes from fees and charges, and rental income (mostly from market stalls). In 1996-97, total revenue was $4.37 billion, while total expenditure stood at $4.86 billion.

The council discharges its responsibilities through five functional select committees and a Liquor Licensing Board. The five select committees are responsible for finance and administration, capital works, environmental hygiene, recreation and sports, and arts 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 Provisional Regional Council members and other members co-opted from provisional 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 commercial arrangements concerning financial details are discussed.

The Provisional Urban and Provisional Regional councils are represented on several organisations, including the Hong Kong Sports Development Board and the Hong Kong Arts Development Council, the work of which is closely related to the councils' responsibilities.

District Administration

The District Administration Scheme commenced in 1982 with the establishment of a District Board and a District Management Committee in each district. The aim of the scheme is to achieve a more effective co-ordination of the provision of services and facilities at the district level, ensure the government is responsive to district needs and problems and promote public participation in district affairs. From July 1, 1997, 18 Provisional District Boards with 468 members appointed by the Chief Executive replaced the former District Boards.

The main function of the Provisional District Boards 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. The boards are also consulted on a wide range of territory-wide issues.

   In 1997-98, $113 million has been made available to the Provisional District Boards for the implementation of minor environmental improvement and community involvement projects in the districts.

As an important service for residents, each Provisional 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 since it provides 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. 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 Provisional District Board and, as far as possible, follows the advice given by the board. To improve communication between the District Management Committee and the Provisional District Board, the chairman of the Provisional District Board is invited to attend District Management Committee meetings as an observer.

Area Committees and Mutual Aid Committees were set up in the early 1970s, to support 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 network of communication between the government and the people at 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 Provisional 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 2.78 million clients in 1997.

The Electoral System

An important task of the HKSAR Government is to ensure that the first HKSAR Legislative Council is put in place as soon as possible. Elections for the first HKSAR Legislative Council will be held on May 24, 1998. The government is committed to ensuring that the arrangements for the election are fair, open, honest and acceptable to the Hong Kong people.

The election will be conducted in accordance with the legal framework set out in the election law enacted in October 1997. The electoral process will be supervised by an independent Electoral Affairs Commission.

      The Basic Law provides that the HKSAR Legislative Council shall be constituted by election. The method for its formation is to be specified in the light of the actual situation in the HKSAR and in accordance with the principle of gradual and orderly progress. The composition of the first three terms of the Legislative Council as set out in the Basic Law will be as follows:


First term (2 years)

Second term (4 years)

Third term

(4 years)







(a) elected by geographical

constituencies through

direct elections

(b) elected by functional


(c) elected by an election committee






      The Basic Law provides that changes to the formation of the Legislative Council after 2007 may be made by a two-thirds majority of all members of the Legislative Council and with the consent of the Chief Executive. Any such changes are to be reported to the Standing Committee of the National People's Congress for the record. The Basic Law also provides that the ultimate aim is the election of all the members of the Legislative Council by universal suffrage.




   Elections to the district organisations will be held before the term of office of the Provisional Urban Council, the Provisional Regional Council and the Provisional District Boards expires by December 31, 1999. The method for the formation of the district organisations will be prescribed by law to be enacted by the HKSAR in accordance with the Basic Law.

Electoral System for the Legislative Council

(a) Geographical Constituency

The 20 members of the first term of the Legislative Council to be returned from geographical constituencies will be elected by universal suffrage. The HKSAR will be divided into five geographical constituencies, each having three to five seats. The List Voting System operating under the Largest Remainder formula, which is a form of the proportional representation voting system, will be adopted. Candidates will contest the election in the form of lists, and each list of candidates may consist of any number of candidates up to the number of seats in the relevant constituency. Any permanent resident of the HKSAR who is a Chinese citizen with no right of abode in any foreign country may stand for election in any geographical constituency, provided that he is a registered elector on the General Electoral Roll, has attained the age of 21, and has ordinarily resided in Hong Kong for the preceding three years. Electors may vote only in the constituency in which they are registered. (b) Functional Constituency

  Each functional constituency represents an economic, social, or professional group which is of substantial size and importance in the HKSAR. These are: (1) Urban Council; (2) Regional Council; (3) Heung Yee Kuk; (4) agriculture and fisheries; (5) insurance; (6) transport; (7) education; (8) legal; (9) accountancy; (10) medical; (11) health services; (12) engineering; (13) architectural, surveying and planning; (14) labour; (15) social welfare; (16) real estate and construction; (17) tourism; (18) commercial (first); (19) commercial (second); (20) industrial (first); (21) industrial (second); (22) finance; (23) financial services; (24) sports, performing arts, culture and publication; (25) import and export; (26) textiles and garment; (27) wholesale and retail; and (28) information technology. The labour functional constituency returns three Legislative Council members and the other 27 functional constituencies return one member each.

   For functional constituency elections, a candidate must, besides satisfying the usual age and residential requirements, be a registered elector on the General Electoral Roll and also a registered elector of, or have a substantial connection with, the relevant functional constituency. To give due recognition to the significant contribution made by foreign nationals and to enable them to be represented in the Legislative Council, permanent residents of the HKSAR who are not of Chinese nationality or who have the right of abode in foreign countries may also stand for election in 12 designated functional constituencies (i.e. functional constituencies No. 5, 8, 9, 12, 13, 16, 17, 18, 20, 22, 23, 25 in the preceding paragraph). Elections for functional constituencies will be determined by simple majority, except for the six small functional constituencies (i.e. functional constituencies No. 1 to 6 in the preceding paragraph) which will be determined by preferential elimination system.

Functional constituencies which represent professional groups have electorates based on membership of those professions with well-established and recognised


qualifications, including statutory qualifications. Each individual member will have one vote. The electorates of functional constituencies representing economic or social groups are generally made up of corporate members of major organisations representative of the relevant sectors. Each corporate member will appoint an authorised representative to cast the vote on its behalf in an election.

(c) Election Committee

The Election Committee will return 10 members of the first-term Legislative Council. The qualifications for candidature are the same as those for geographical constituency elections. The Election Committee will be composed of 800 members who are HKSAR permanent residents from four sectors: industrial, commercial and financial; the professions; labour, social services and religious; and members of the Provisional Legislative Council, Hong Kong deputies to the National People's Congress, representatives of Hong Kong members of the National Committee of the Chinese People's Political Consultative Conference, and representatives of district- based organisations. Each sector will return 200 members of the Election Committee. The method for returning the 10 Legislative Council members by the Election Committee will be by the block vote system, under which each member of the Election Committee will be required to cast 10 votes and the result will be determined by first-past-the-post.

Electoral Affairs Commission

An independent statutory body, the Electoral Affairs Commission, was set up in September 1997, to ensure that the elections are conducted openly, honestly and fairly. It comprises three politically neutral persons appointed by the Chief Executive and is headed by a High Court judge. It is responsible for making recommendations to the Chief Executive on the delineation of geographical constituencies, making regulations on practical arrangements for the elections, and to handle complaints relating to elections. The commission's executive arm is the Registration and Electoral Office, a government department headed by the Chief Electoral Officer. The department works under the commission's direction and carries out its decisions.

Voter Registration

Elections to the Legislative Council geographical constituencies are by universal suffrage. Every permanent resident of the HKSAR who is 18 years of age or above and not otherwise disqualified is eligible to apply for registration as an elector in the constituency in which he lives. The 1997 General Electoral Roll contains 2.53 million registered electors. To enable eligible electors to take part in the first HKSAR Legislative Council election, an intensive voter registration exercise started in December 1997 to carry into January 1998.

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 policy 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, others advise on a particular area of government policy or public interest. Some of these bodies also carry out 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. Almost 4 000 members of the public have been appointed to serve on a total of about 350 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. The government constantly keeps in view the composition and operation of the advisory bodies to ensure that they meet the needs of the community. Appropriate measures have been introduced to enhance their transparency and representativness.

The Administration

Role of the Chief Secretary for Administration

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

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

Role of Financial Secretary

The Financial Secretary, who reports directly to the Chief Executive, is responsible for the government's fiscal and economic policies and regularly attends meetings of the Executive and Legislative Councils. 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 Bureaux 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.

The Structure of the Administration

The HKSAR Government is organised into bureaux and departments. The bureaux, each headed by a policy secretary, collectively form the Government Secretariat.


There are 15 policy bureaux, and two resource bureaux concerned with finance and the Public Service.

      There are 71 departments and agencies whose heads are, with some exceptions, responsible to the bureaux secretaries for the direction of their departments and the efficient implementation of approved policy. The exceptions are the Audit Commission, 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 Ombudsman, whose independence is safeguarded by having the Commissioner and the Ombudsman report directly to the Chief Executive; and the Department of Justice, which is the responsibility of the Secretary for Justice.

Office of The Ombudsman

The Ombudsman is an independent authority operating in accordance with The Ombudsman Ordinance. The office was set up to provide citizens 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 is directly responsible to the Chief Executive of the HKSAR and performs important roles in redressing individual grievances against maladministration in the public sector; making bureaucracy more humane; lessening the gap between the government and the public; preventing abuses; acting as the people's watchdog; righting individual wrongs; indicating the facts when public officers are unjustly accused; improving the efficiency and quality of service in the public sector; and protecting human rights. The Ombudsman has jurisdiction over practically all government departments, except the Hong Kong Police Force and the Independent Commission Against Corruption, which have their own separate bodies to deal with complaints from the public.

      The Ombudsman can initiate investigations 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, applications for housing transfer on social grounds, general outpatient services, government telephone enquiry hotline services, a student's application to attend a hearing-impaired class, the Fisheries Development Loan Fund, arrangements for the closure of schools due to heavy persistent rain, the issue and sale of special stamps and philatelic products, and the taxi licensing system.

The Ombudsman Ordinance also empowers The Ombudsman to investigate complaints of non-compliance with the Code on Access to Information against departments/organisations in the government. The code was introduced in March 1995 and gradually extended to all government departments/organisations by December 1996 with The Ombudsman as the common independent review body for alleged breaches.

The office received 6 887 enquiries and 2 729 complaints in 1997, compared with 6 129 enquiries and 2 870 complaints in 1996. The areas which attracted substantial numbers of complaints were related to errors or wrong advice/decisions; disparity in treatment or unfairness; delays; abuse of power; staff attitude; lack of response to




complaints; ineffective control; negligence or omissions; faulty procedure; failure to follow procedures and selective enforcement.

The organisations receiving most complaints were the Housing Department, Correctional Services Department, Lands Department, Hospital Authority, Urban Services Department, Legal Aid Department, Post Office, Immigration Department, all registries and administrative offices of courts and tribunals for which the Judiciary Administrator has responsibility and the Social Welfare Department. Most of these organisations have frequent contact with members of the public and are more vulnerable to complaints than others.

Office of the Director of Audit

The Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China provides that an Audit Commission shall be established in the HKSAR, and this Commission shall function independently and be accountable to the Chief Executive of the HKSAR. This law took effect on July 1, 1997, upon the transfer of sovereignty from the United Kingdom to China. Accordingly, the former Audit Department has been renamed as the Audit Commission. The Audit Commission 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 audit of the government's accounts by the Director of Audit and for the submission of his report to the President of the Legislative Council. The Director 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. Furthermore, the Director reviews the financial aspects of the operations of the multifarious government-subvented organisations.

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 bureau 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 a set of 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 1997, the Director submitted three reports: one on the audit certification of the government's accounts for the preceding financial year and two on the results of value-for-money audits.

The Hong Kong Special Administrative Region of the People's Republic of China was formally established with an Inauguration Ceremony in the Hong Kong Convention and Exhibition Centre early on July 1. Watched by the State Council of the PRC (top), Mr Tung Chee Hwa is sworn in as Chief Executive of the HKSAR by the Premier of the State Council, Mr Li Peng (above). Mrs Betty Tung (right) watched

the proceedings with Madam Zhuo Lin, the widow of the late senior Chinese leader, Mr Deng Xiaoping.







Hong Kong Convention and Exhibition Centre



Hong Kong






Clockwise from top left: The Chief Executive, Mr Tung Chee Hwa, and the Chief Secretary for Administration, Mrs Anson Chan, greet the US Secretary for State, Mrs Madeleine Albright, who joined 4 000 guests witnessing the Handover events; the President of the PRC, Mr Jiang Zemin (centre), presents his hand-written scroll - 'Hong Kong Faces A Better Future'. to Mr Tung; Mr Tung shares a toast with the Vice-Premier of the State Council and Minister of Foreign Affairs, Mr Qian Qichen; the British Prime Minister, Mr Tony Blair, shakes hands with Mr Jiang as Mr Li looks on; Mr Tung - joined by the Representative-Chairman of the HKSAR's 22 International Chambers of Commerce and Business Associations, Mr Bert Kimman - proposes a toast

at the 'International Hong Kong Celebrates Gala Dinner'.

Among the variety of events on July 1 that ushered

in Hong Kong's new era as a Special Administrative Region of the People's Republic

of China, the Chief Executive, Mr Tung Chee Hwa, (right) held a press conference, made two speeches and hosted a reception, as well as attending a celebration of Canada's National Day. Gaily decorated trams carried a message of celebration around Hong Kong Island and costumed musicians from Shanxi Province also provided a bright splash of colour. Floats especially designed for the Parade

in Celebration of the Return

of Hong Kong were put

on display in Victoria Park.







      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.

The Civil Service

The Civil Service employs about 6 per cent of Hong Kong's workforce. It provides staff for all government departments and other units of the administration. At October 1, 1997, the total strength of the Civil Service was 184 600, with staff distributed among some 430 grades and 1 256 ranks.

      Overall responsibility for the management of the Civil Service lies with the Civil Service Bureau of the Government Secretariat. The bureau deals with 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 and 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.

      In accordance with the Basic Law, all new appointees to the Civil Service on or after July 1, 1997, must be permanent residents of the Hong Kong Special Administrative Region, save for those who fall within the exceptions pursuant to Articles 99 and 101 of the Basic Law.

      It is also a Basic Law requirement that the specified Principal Official posts must be filled by Chinese citizens who are permanent residents of the HKSAR with no right of abode in any foreign country.

      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).

      It is government policy to provide a long-term career for civil servants and thus civil servants are employed on permanent and pensionable (P&P) terms whenever possible. P&P officers may normally aspire to serve up to the normal retirement age with pension benefits prescribed by statute.

Agreement terms (appointment for a fixed term with end of contract gratuity) are used to employ staff only when there are circumstances that justify doing so, as when P&P terms fail to attract and retain sufficient qualified and suitable candidates, or when the appointment is required only for a specific period. As a result, officers on agreement terms comprise less than 2 per cent of the Civil Service. Renewal of agreement depends, inter alia, on service need, satisfactory conduct and performance, and physical fitness.




Turnover in the Civil Service has always been low compared with the private sector and the wastage rate of the overall Civil Service in 1996/97 was 4.3 per cent - its lowest in nine 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.

Historically, the terms of appointment and conditions of service for overseas officers and local officers have been different. The 'overseas' or 'local' status of an officer is determined with reference to habitual residency, general background and social ties and potential dislocation or up-rooting when appointed. It is not based on race or nationality. Over the years, the government has narrowed the gap and now local and overseas conditions of service are close.

   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 qualified and suitable local candidates available and the qualification for appointment cannot be modified to enable a local candidate to be appointed. In addition, renewal of an overseas agreement is subject to the lack of a suitable local replacement.

As a long-term measure, the government would like to introduce a uniform set of terms of appointment and conditions of service for all new appointments to replace the existing differential between local and overseas terms and conditions. Detailed proposals are being worked out.

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.

   Some 17 per cent of the civil service workforce, comprising 28 000 officers, are clerical and secretarial grades staff. They play a very important role in providing office support to government departments and in delivering front-line services to the public. Hitherto, the duties of these grades have been distinctly demarcated and, as such, inhibit the effective deployment of human resources. The administration has initiated changes to streamline the structures of the clerical and secretarial grades to remove restrictive practices and enhance the word processing and computing skills of these staff to provide a more versatile general support service in government departments. It is hoped that implementation of these measures will lead to a leaner and more effective workforce in the long run.

The government respects personal data and is committed to fully implementing and complying with the Data Protection Principles and all relevant provisions of the


Personal Data (Privacy) Ordinance which came into force in late December 1996. A procedural guide on the processing of employment-related personal data has been issued to data users in the civil service advising them that the interests of data subjects should be a primary concern when collecting, using, handling, storing and transmitting personal data. Seminars, workshops and training courses have also been conducted to enhance civil servants' awareness of their legal rights and obligations under the ordinance.

Civil Service Training and Development

Preparing civil servants to provide quality service to the public and to meet new challenges is the primary goal of training and development in the Civil Service. To achieve this goal, the Civil Service Training and Development Institute, the government's central training agency, offers a wide range of management, language, China studies and information technology courses for civil servants ranging from the directorate to the junior ranks. Training courses are supplemented and reinforced by developmental tools such as self-learning packages. The institute also provides training services to support management activities launched by the government and offers a full range of training services to departments.

Management training programmes, in which senior staff may enrol, include overseas executive development programmes, local directorate seminars and the Senior Staff Development Programme (SSDP). The SSDP is a seven-week, intensive programme with emphasis on policy analysis and the leadership role of senior civil servants. Visits to overseas civil service counterparts form an important component of the course.

      The emphasis on China Studies is to increase civil servants' knowledge of the social, economic and administrative systems in the Mainland through lectures and visits. The programmes include:

Tsinghua Course:

Familiarisation Visits:

China Seminars:

Each course consists of four weeks of classroom lectures at Tsinghua University in Beijing. Lectures are supplemented by visits to government departments and other organisations.

Familiarisation visits are organised to give 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.

      Putonghua and Chinese writing courses are offered to a large number of officers. Tailor-made courses on Putonghua and on Chinese writing are also offered to departments and grades. Training on Chinese word processing is offered to secretarial, clerical and executive grade officers to meet soaring demands for the skill. Cantonese courses are provided for expatriate officers to help them work effectively in the Chinese community.




Courses are organised to provide support to the Human Resource Management initiative launched by the Civil Service Bureau. Consultancy services are offered to departments to promote the practice of a co-ordinated and systematic approach to Human Resource Development. Best human resource development practices are also introduced to departments to strengthen organisational competence.

Serving the Community

  'Serving the Community' is the government's single most important aim to which all civil servants should be committed. 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 customers and treats them accordingly.

   The Efficiency Unit serves as the focal point to oversee and co-ordinate efforts towards achieving this aim. Key initiatives have included:

 Performance Pledges - All departments directly serving the public now publish each year performance pledges, informing their customers what services are available, the standards set and how these standards are monitored. All departments with a substantial interface with the public have also set up Advisory Groups or Customer Liaison Groups.

 Performance Measurement - A structured performance measurement framework is being developed for the government to help improve quality, efficiency and effectiveness of service delivery.

 Management Process - An improved management process is being developed for the government to support delivery of strategic policy objectives and to focus more on outputs and outcomes.

 Trading Funds - A financial and accounting arrangement which enables 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.

 Customer Service - A service-wide programme is being developed to improve government services to the community and enhance quality and responsiveness of customer service.

 Efficiency Improvement - An on-going programme aimed at supporting departments to improve efficiency and effectiveness and to address specific organisational and operational needs.

The government has embarked on a new approach to personnel management to ensure the delivery of quality service to the public. 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.

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 as well as inactive records; and the Public Records Office for an archives administration programme to look after the preservation and use of permanent records.

       Proper management of records enhances the efficiency of business in government. The Records Management Office develops and oversees the implementation of a comprehensive system to manage records effectively and efficiently. Since November 1994, a Records Management Strategy has been implemented by phases to help the civil service improve the quality of records services, reduce records stock, control the growth of records and enhance cost-effectiveness in records management. Good progress was made during 1997 in the implementation of the second phase of the strategy, in helping departments institute proper records management systems; in training government staff in records management; in enhancing the management and disposal of inactive records; and in developing a vital records management programme in the civil service. A microfilming services centre was also set up during the year to meet service-wide demand for the microfilming of records with retention value.

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.

       The Hong Kong Public Records Building in Kwun Tong, Kowloon, was opened during the year. It is Hong Kong's first purpose-built archives centre, and has been designed to the latest international standards required for the permanent preservation of various types of records. A new automation system also went live in September to enhance services to the public in searching, identifying and accessing records held by the Public Records Office.


The official languages of Hong Kong are Chinese and English. Reports and publications of public interest issued by the government are available in both languages. Simultaneous interpretation is provided at official meetings where necessary and appropriate. Correspondence from the public in Chinese is replied to in Chinese.

       The government continues to step up efforts to promote wider use of Chinese in the civil service. The ultimate objective is to develop a civil service which is able to operate efficiently in Chinese and English and is generally conversant in spoken Cantonese, Putonghua and English. The Official Languages Agency has initiated an out-reach programme of visits to heads of departments and grades to discuss with them their progress on the use of Chinese. In addition to guidebooks and reference materials on Chinese writing, the agency has developed electronic glossaries of terms commonly used in the government and templates of Chinese documents to facilitate drafting in Chinese. In 1997, $60.3 million was spent on equipping civil servants with computers and training in Chinese word processing.

In May 1997, the Bilingual Laws Advisory Committee finished its work and declared completion of the law translation programme which provides a basis for a bilingual judicial system. The complete set of the Laws of Hong Kong now has an authentic Chinese version.





  THE legal system of the Hong Kong Special Administrative Region (HKSAR) is firmly based on the rule of law and the independence of the judiciary. Under the principle of 'one country, two systems', the HKSAR legal system is different from that of the Mainland, and is based on the common law.

The constitutional framework for the legal system is provided for, at the international level, by the Sino-British Joint Declaration, which was signed in December 1984. It is provided for at the domestic level by the Basic Law - a law enacted by the National People's Congress of the People's Republic of China under Article 31 of the Chinese Constitution. Both documents guarantee the continuance of the legal system that was in place before the resumption of sovereignty on July 1, 1997.

Article 8 of the Basic Law provides that:

'The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law shall be maintained, except for any that contravene this Law, and subject to any amendment by the legislature of the Hong Kong Special Administrative Region.'

There are also specific guarantees in the Joint Declaration and Basic Law relating to the legal system, including:

⚫ an independent judiciary with security of tenure,

the use of the English language, in addition to Chinese, in the Courts,

reliance on precedents from other common law jurisdictions,

• an independent public prosecution service,


the continuing ability of overseas lawyers and law firms to practise in Hong Kong,

• a Hong Kong-based Court of Final Appeal,

• a requirement that the International Covenant on Civil and Political Rights as applied to Hong Kong shall remain in force and shall be implemented through the laws of the HKSAR.

The resumption of sovereignty

  The resumption of sovereignty was achieved on July 1, 1997, without any prejudice to the continuity of the legal or judicial systems.


In February 1997, the Standing Committee of the National People's Congress, acting under Article 160 of the Basic Law, adopted all the laws previously in force, save for 24 Ordinances which were found (in whole or in part) to contravene the Basic Law. This means that the common law principles, and nearly all the 600-odd Ordinances, that were previously in force, continue to apply in the HKSAR.

The continuity of the judicial system was achieved by the establishment on July 1, 1997, of the Hong Kong Court of Final Appeal - which replaced the Judicial Committee of the Privy Council (an English court) as the highest court of appeal and by the re-establishment of other courts and tribunals that were previously in existence. All judges who were in service immediately before the resumption of sovereignty were re-appointed by the Chief Executive. These re-appointments were made in accordance with the recommendations of an independent commission -- the Judicial Officers Recommendation Commission.

The continuity of the legal and judicial systems was further underpinned by the Hong Kong Reunification Ordinance, which provided for:

(1) the continuance of laws previously in force which have been adopted as laws of the HKSAR and their interpretation in a manner that does not contravene the Basic Law and is in conformity with the status of Hong Kong as a Special Administrative Region of the People's Republic of China;

(2) the continuance of legal proceedings, the criminal justice system and the

administration of justice; and

(3) the continuing validity of official acts and documents.

Law in the HKSAR

The laws in force in the HKSAR are:

(1) the Basic Law,

(2) national laws listed in, or added to, Annex III to the Basic Law,

(3) the laws previously in force (i.e. before the resumption of sovereignty) that were adopted as laws of the HKSAR by the Standing Committee of the National People's Congress, and

(4) laws enacted by the legislature of the HKSAR (known as Ordinances). National laws relating to defence and foreign affairs as well as other matters outside the limits of the autonomy of the HKSAR may be applied locally by way of promulgation or legislation by the Special Administrative Region. At December 31, 1997, 10 national laws had been promulgated by the Chief Executive.

Legislative power is vested in the HKSAR and the power to enact, amend or repeal laws shall be exercised by the Legislative Council. The first Legislative Council of the HKSAR will be elected in May 1998. Meanwhile, the Provisional Legislative Council was established by the Preparatory Committee for the HKSAR of the People's Republic of China to make legislation essential for the normal operation of the HKSAR.

All ordinances in force in the HKSAR are bilingual, and their Chinese and English texts are equally authentic. Those ordinances, and the subsidiary legislation made under them, are published in the loose-leaf edition of the Laws of Hong Kong, which




is updated continuously. In addition, all new legislation is published in the Government Gazette.

  The Department of Justice is responsible for drafting new bilingual legislation. The Law Drafting Division of that department keeps a bilingual legal glossary in a database which has about 23 400 entries and is growing at a rate of about 110 entries per week. An English-Chinese glossary of legal and relevant terms appearing in legislation is published from time to time in booklet form. The second edition, containing about 15 000 entries, was published in June 1996. The next edition will be published in 1998.

Rights of the Individual

As provided under 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, provisions of the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) as applied to Hong Kong continue to remain in force after June 30, 1997.

  The HKSAR continues to abide by the following major international conventions on human rights: the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, the Convention on the Rights of the Child and the Convention on the Elimination of All Forms of Discrimination Against Women.

  The Hong Kong Bill of Rights Ordinance (Cap. 383), which was enacted in 1991 to give effect in the local law to the provisions of the ICCPR, continues in force.

  On June 26, 1997, the Family Status Discrimination Ordinance was enacted to outlaw discrimination against a person on the ground that the person has the responsibility for the care of an immediate family member. This Ordinance, together with the Sex Discrimination Ordinance (Cap. 480) and the Disability Discrimination Ordinance (Cap. 487), are overseen by the Equal Opportunities Commission.

  The Personal Data (Privacy) Ordinance (Cap. 486), enacted in August 1995 to protect an individual's right to privacy with respect to personal data, continues to give statutory effect to internationally recognised data protection principles. In 1997, the Privacy Commissioner for Personal Data undertook a variety of activities to promote compliance, awareness and understanding of the ordinance, including the approval of codes of practice, the issue of fact sheets and guidance materials on its application. The commissioner also handled complaints lodged under the Ordinance.

Arbitration and Alternative Dispute Resolution

Arbitration has been a popular method of dispute resolution in the HKSAR for some time. It is governed by the Arbitration Ordinance, which has two distinct regimes a domestic regime derived from 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. Recent amendments to the Arbitration Ordinance give additional powers to arbitrators to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense. They also transfer the power to appoint arbitrators from the courts to the Hong Kong International Arbitration Centre.


       Awards made in the HKSAR 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 HKSAR's membership has since July 1, 1997, been by virtue of the fact that the People's Republic of China is a signatory to the New York Convention.

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 the HKSAR and Asia-Pacific. The HKIAC provides information on dispute resolution and arbitrations both in the HKSAR and overseas. It operates panels of international and local arbitrators, and maintains lists of mediators. The 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 expected that there will be a further increase in such cases not only because of the increased popularity of arbitration and mediation as a means of dispute. resolution but also because of the growth of the HKSAR as a regional dispute resolution centre.

The Secretary for Justice

The Secretary for Justice is the Chief Executive's legal adviser and an ex officio member of the Executive Council. She chairs the Law Reform Commission of Hong Kong, and is a member of the Judicial Officers Recommendation Commission and of the Operations Review Committee of the Independent Commission Against Corruption.

All government departments requiring legal advice receive it from the Secretary for Justice. She is the representative of the government of the HKSAR in all actions brought by, or against, it. She is also responsible for the drafting of all legislation.

      The Secretary for Justice is responsible for all prosecutions in the HKSAR. It is her responsibility to decide whether a prosecution should be instituted in any particular case, and, if so, to institute and conduct the prosecution.

The Secretary for Justice chairs the Legal Affairs Policy Group, one of several policy bodies established under the umbrella of the Chief Secretary for Administration's Committee, to bring together bureau 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 Secretary for Justice to take responsibility, as sponsor and spokeswoman, for legislative proposals to be submitted to the Executive and Legislative Councils.

      The Department of Justice consists of the Secretary for Justice's Office and six divisions, five of which are headed by a Law Officer to whom the Secretary for Justice delegates certain of her powers and responsibilities. The remaining division, headed by the Director of Administration and Development, covers departmental administration and media and public relations. The Secretary for Justice's Office provides legal and administrative support to the Secretary for Justice in respect of her many functions.




   The Civil Division, headed by the Law Officer (Civil Law), 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), advises on the legal implications of the Sino-British Joint Declaration and other international agreements applicable to the HKSAR and provides advice on all aspects of public 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 provides legal input on a wide variety of topics being considered by the government, and also advises on issues affecting the administration of justice, human rights, constitutional law, China law and the Basic Law.

   The Prosecutions Division is headed by the Director of Public Prosecutions. Counsel from this division conduct prosecutions in the majority of trials in the Court of First Instance and the District Court, 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.

   The Basic Law of the HKSAR came into effect on July 1, 1997. In order to enhance civil servants' understanding in the Basic Law, the Civil Service Training and Development Institute has been organising regular seminars on the subject since 1995. The Department of Justice has contributed to these seminars by supplying both training materials and speakers. Specific training courses for particular bureaux and departments are arranged as and when needed. The Basic Law is also covered in the curriculum of China studies courses organised by the institute, such as one at the Tsinghua University of Beijing. The department has also helped the institute prepare a self-training booklet and computer disk on the Basic Law for civil servants, and more than 130 000 of these have been distributed.

Law Reform Commission

The Law Reform Commission was appointed in January 1980. It considers and reports on such topics as may be referred to it by the Secretary for Justice or Chief Justice of the Court of Final Appeal of the HKSAR. Its membership includes academic and practising lawyers, and prominent members of the community.

Since its establishment, the commission has published 34 reports covering subjects as diverse as commercial arbitration, homosexuality, bail, sale of goods and supply of services, bankruptcy, fraud, illegitimacy, hearsay evidence in civil actions, and statutory interpretation. The recommendations in 21 of its reports have been implemented, either in whole or in part. It is currently considering references on privacy, guardianship and custody, insolvency, description of flats on sale, and product liability.



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 operates the Trade Marks, Patents and Designs Registries. The department is also responsible for the policy and legislation for other forms of intellectual property protection such as copyright and layout-design (topography) of integrated circuits, and for further developments of Hong Kong's intellectual property regime and promotion of public awareness and respect of intellectual property rights.

The Legal Profession

The HKSAR has 4 114 solicitors and 556 local law firms, plus 53 registered foreign law firms, 397 registered foreign lawyers and eight registered associations between foreign law firms and local law firms in the HKSAR which advise on foreign law.

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

      Hong Kong has 660 practising barristers, whose governing body is the Bar Association. Their conduct and etiquette are governed by the Code of Conduct for the Bar of the HKSAR.

The Judiciary

      A key element in the past success and continuing attraction of the HKSAR 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 judgments, whether disputes before them involve private citizens, corporate bodies or the government itself. The independence of the Judiciary is provided for by the Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law.

      The Court of Final Appeal is the highest appellate court in the HKSAR. It replaces the Judicial Committee of the Privy Council in London upon the change of sovereignty. It is constituted by the Chief Justice, three permanent judges and one non-permanent Hong Kong Judge or one judge from another common law jurisdiction. The Chief Justice is the head of the Judiciary. He is assisted in the overall administration by the Judiciary Administrator and her supporting team.

The High Court, comprising the Court of Appeal and the Court of First Instance, is headed by the Chief Judge of the High Court. Sitting in the High Court, in addition to the Chief Judge himself are nine Justices of Appeal and 25 Judges of the Court of First Instance. The court's Registrar and Deputy Registrars serve as Masters of the High Court in civil trials in the Court of First Instance.

      The Court of Appeal hears civil and criminal appeals from the Court of First Instance and the District Court. The Court of First Instance's jurisdiction is unlimited in both civil and criminal matters. Civil matters are usually tried by Court of First Instance 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 Court of First Instance. It has a Chief District Judge and 33 Judges, who sit without a jury. The District Court's civil jurisdiction is 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. Besides one Chief and 10 Principal Magistrates, there are 53 professional magistrates sitting in 10 magistracies. 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 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.

   The Use of Chinese in Courts programme, drawn up by the Steering Committee appointed by the Chief Justice to further the use of Chinese in the higher courts, has been implemented. A bilingual court system in which either or both of the official languages can be used was put in place before June 30, 1997, in accordance with the requirement in Article 9 of the Basic Law.

Legal Aid, Advice and Assistance

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

Legal Aid

Legal aid services provided by the Legal Aid Department are 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 the granting 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

Legal aid is available for representation in proceedings for most types of civil cases heard in District Court, the Court of First Instance of the High Court, the Court of Appeal of the High Court and the Hong Kong Court of Final Appeal. It is also available for applications to the Mental Health Review Tribunal and in certain

landlord and tenant matters in the Lands Tribunal.

Apart from financial eligibility, an applicant must satisfy the Director of Legal Aid that he has reasonable grounds for pursuing or defending a civil 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 are related to employees' wages and severance pay.

An applicant who is refused legal aid may appeal to the Registrar of the High Court; or in Court of Final Appeal cases, to a committee of review. The department's total expenditure for 1997 was $297 million in civil cases. During the year, 27 440 applications were received, and 15 072 were granted legal aid. Altogether, $845 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 personal injuries and professional negligence claims in the High Court, the Court of Appeal and certain claims in the District Court for employees' compensation. Total expenditure on the scheme in 1997 was $10 million, 260 applications were received, and 179 were granted legal aid.

Legal Aid in Criminal Cases

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

       For appeals against conviction for cases involving murder, treason or piracy with violence, subject to financial eligibility, the granting 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 may exercise his discretion to grant legal aid to an applicant who is charged with a criminal offence even if he fails the means test. Applicants in cases involving murder, treason or piracy with violence may apply to a judge for granting of legal aid, exemption of the means test and of payment of contribution. Most people charged with criminal offences have therefore been granted legal aid.

   Total expenditure on legal costs on criminal cases for 1997 was $98 million. During the year, 4 503 applications were received, 3 133 applicants were granted legal aid.

Legal Aid Services Council

The Legal Aid Services Council was established on September 1, 1996. The council is charged with overseeing the administration of the services provided by the Legal Aid Department and to advise the Chief Executive 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 Chief Executive. A copy of the annual report will also be laid before the Legislative Council.

The Official Solicitor

The Director of Legal Aid was appointed the first Official Solicitor when the Official Solicitor Ordinance Cap. 416 came into force on August 1, 1991.

   The Official Solicitor's Office was established to perform the duties of the Official Solicitor which mainly include acting as guardian ad litem or next friend for persons under disability of age or mental capacity in legal proceedings, as representative of deceased persons' estates for the purpose of legal proceedings, as Official Trustee and Judicial Trustee, representing patients in proceedings under the Mental Health Ordinance, representing children in matrimonial proceedings and in the Juvenile Court. At July 1997, the Official Solicitor had received 456 requests for his representation in such cases. 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 operates the Legal Advice Scheme, the Duty Lawyer Scheme and the Tel Law Scheme. It is subvented by the government of the HKSAR 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. Two lay members have also been invited to sit on the council.

The Legal Advice Scheme provides free advice to members of the public without means testing, at six advice centres located in the District Offices. Members of the public can make appointments to see volunteer lawyers through one of the 120 referral agencies, which include all District Offices, Caritas Services Centres and the Social Welfare Department. Approximately 570 volunteer lawyers participate in the scheme. A total of 5 004 people were given legal advice during the year.

   The Duty Lawyer Scheme provides legal representation to virtually all defendants who are charged in the magistracies. To be eligible for legal representation under the scheme, an applicant has to pass a means test: if his gross annual income does not


exceed $127,330, he is eligible for assistance under the scheme. However, the Administrator of the Duty Lawyer Service has a discretion to grant legal representation to defendants whose gross annual income exceeds this limit, if she considers that it is in the interests of justice to do so. An applicant is also subject to a merit test. The prime consideration is whether the defendant is in jeopardy of losing his liberty or whether a substantial question of law is involved.

      The scheme also assigns barristers and solicitors to advise defendants facing extradition, to monitor the one-way viewer identification parades conducted by the Police, and to represent hawkers upon their appeals to the Chief Executive in Council.

In 1997, there were approximately 920 barristers and solicitors on the duty lawyer roster. A total of 35 041 defendants were represented under the Duty Lawyer Scheme. The Tel Law Scheme offers free taped legal information to the public. The tapes cover various aspects of law including matrimonial, landlord and tenant, criminal, financial, employment, environmental and administrative law. They are constantly updated and new tapes are added when new subjects are identified as being of interest to the public. During the year, 69 topics were available and 115 967 calls were received.





THE Hong Kong economy went through an eventful year in 1997. First and foremost was the historic reunification of Hong Kong with the mainland of China (the Mainland) in July. Growing confidence in the run-up to the reunification provided a significant boost to economic activity. The Gross Domestic Product (GDP) registered accelerated growth, to 6 per cent in the first quarter and further to 6.8 per cent in the second quarter. The growth momentum was sustained into the third quarter, albeit at a somewhat slower rate of 5.7 per cent.

Domestic demand was highly intensive up to the early part of October. Overall investment spending on machinery and equipment grew strongly, as did building and construction by the private sector. Consumer spending also thrived, amid sustained growth in population, a steady rise in household income, and buoyancy in both the stock and property markets.

Sentiment then began to turn, as the regional financial turmoil that first broke out in Thailand in July swept through the economies of the Association of South-East Asian Nations. The turmoil intensified and then extended to economies in North- East Asia. Hong Kong as a global financial centre could not remain immune. The contagion induced a major speculative attack on the Hong Kong dollar in late October. Local interest rates came under much upward pressure. Marked corrections occurred in both the stock and property markets, giving rise to severe knock-on effect on domestic demand.

A crude initial estimate suggests an abrupt setback in economic growth to around 2 per cent in the fourth quarter. Yet given the strong performance in the first three quarters, GDP for 1997 as a whole still grew by about 5.2 per cent, slightly higher than the 5 per cent growth in 1996. Consumption demand grew by about 7 per cent, and investment demand as represented by gross domestic fixed capital formation was almost 13 per cent higher. Both were private sector-driven, and provided the major impetus to economic growth in 1997.

In the external sector, total exports of goods grew by 6 per cent in 1997, slightly faster than the 5 per cent increase in 1996. Performance was better in the second half of 1997 than in the first half. This was particularly so for domestic exports. Notwithstanding a relatively strong Hong Kong dollar in line with the US dollar, the real effective exchange rate (reckoned against export prices which were on a decline in Hong Kong dollar terms) remained generally stable. This was mainly due to increased investment in machinery and equipment, thereby raising productivity, as well as streamlining of production processes and relocation to lower-cost production centres. Thus Hong Kong was able to maintain growth in exports against reduced price






The National and Hong Kong SAR flags flutter over the former French Mission Building, recently renovated and refurbished as the HKSAR Court of Final Appeal. The site, on a rise which once looked directly over the sea, had been home to bureaucrats, bankers and businessmen before being sold to the Mission d'Etrangeres of Paris in 1915. It now houses the Chief Justice of the Court of Final Appeal, Mr Justice Andrew Li, (second from right) and his court: Mr Justice Kemal Bokhary (left), Mr Justice Henry Litton (second from left) and Mr Justice Charles Ching (right).




חן דין:
















心 人大使出訪好認真



Balloons, buses, and rallies carried the messages, while thousands

of students knocked on most doors in Hong Kong in a major bid

to enrol voters for the first Legislative Council election of the HKSAR. It will be held on May 24, 1998, and its term of office will begin on July 1. It will have 60 members: 30 from functional constituencies, each representing an economic, social, professional or other sector of the community; 20 returned by geographical constituencies which cover the whole SAR; and 10 returned by the Election Committee comprising 800 elected representatives of the community.


Top left: Interested members of the public visit a stand set up especially for the purpose in Queensway to collect copies of the policy address delivered in October by the Chief Executive, Mr Tung Chee Hwa. Top right: Mr Tung, discusses his policy address with young members of the audience at televised forum after delivering the speech. Above: Mr Tung addresses the opening session of the Provisional Legislative Council, with the Council's President, Mrs Rita Fan, alongside.



competitiveness vis-à-vis the neighbouring economies and slackened import demand in some of the major markets abroad.

      The substantial currency depreciation in East Asia from the middle of the year did not materially affect Hong Kong's overall export performance in the latter part, as the combined share of the economies concerned in Hong Kong's overall exports was not particularly large. Moreover, the product mix of Hong Kong's exports was more diversified and was not entirely comparable to those of the East Asian economies concerned. The austerity programmes being implemented in most of these economies also constrained their output capacity.

Exports of services however slackened to virtually zero growth, having risen by 6 per cent in 1996. This was mainly attributable to the poor performance of inbound tourism. Affected at least in part by the regional financial turmoil, there were considerably fewer visitors from Japan and other parts of East Asia in the second half of the year. Nevertheless, exports of various professional services such as legal, accounting and advertising services continued to increase. Exports of trade-related services such as transportation services also rose further, as reflected by the strong growth in air cargo flows and the faster increase in seaborne cargo flows, including transshipment flows.

Imports of goods grew by 7 per cent in 1997, faster than the 4 per cent increase in 1996. This was mainly due to a marked revival in retained imports, which was broad- based for both production and consumption purposes. Imports of services also showed accelerated growth, by about 5 per cent in 1997 following a 2 per cent growth in 1996.

      Putting the exports and imports together, the visible trade account recorded a deficit of $159 billion in 1997, equivalent to 9.9 per cent of the value of imports. This was nevertheless on a narrowing trend over the course of the year, falling from a peak of 13.3 per cent against the value of imports in the first quarter to 7.5 per cent in the fourth quarter. On the other hand, the invisible trade account continued to register a substantial surplus of around $113 billion in 1997, thereby offsetting a large part of the deficit on the visible trade account.

      The labour market was relatively tight during most of 1997. Reflecting this, the unemployment rate fell steadily to a low of 2.2 per cent in the third quarter, before rising to 2.5 per cent in the fourth quarter, as it was at the beginning of the year. The easing in employment conditions towards the end of the year was concentrated mainly in the manufacturing, transport, construction, and consumption and tourist- related sectors. Nevertheless, in the first three quarters of 1997 taken together, earnings in all of the major sectors surveyed showed considerable increases in money terms, and in some sectors, also notably in real terms over a year earlier, reflecting the tighter labour market conditions for most of the year. Wages in most major sectors surveyed also accelerated in growth. However, the increases in earnings and wages could have turned more moderate towards the year end as the labour market tended to ease.

      The residential property market consolidated in the second half of 1997, following buoyant trading and sharp escalation in flat prices in the first half. In the third quarter, market activity began to taper, in face of the government's policy commitment to stabilise the market and to increase flat supply substantially in the longer term. The market underwent a distinct downturn from late October as the




effect of the regional financial turmoil spread to the local economy. This notwithstanding, flat prices at end-1997 were still higher than a year earlier. The markets for office space and shopping premises also went from buoyancy to consolidation in the latter part of 1997. The markets for conventional flatted factory space and multi-purpose industrial premises remained generally slack during the year. Consumer price inflation moderated further in 1997. The Composite Consumer Price Index rose by 5.8 per cent and the Consumer Price Index (A) by 5.7 per cent in 1997, the lowest for 10 years. There was little price pressure from imported sources, owing to the sustained strength of the US dollar, generally soft world commodity prices and low inflation in the major supplier economies. Domestically generated inflationary pressures were largely contained even amid the buoyancy in the early part of the year. In general, the increases in labour wages and property rentals were not particularly rapid. In the latter part of the year, the economic slow-down further relieved inflationary pressures. Meanwhile, the GDP deflator, as a broad measure of overall inflation in the economy, rose by 5.9 per cent in 1997, somewhat faster than the 5.4 per cent increase in 1996.

Structure and Development of the Economy

The Hong Kong Special Administrative Region is strategically located at the doorway to the Mainland. It is also in the international time zone that bridges the time gap between Asia and Europe. Both attributes have reinforced Hong Kong's position as a global centre for finance, business and communications. Hong Kong is ranked the seventh-largest trading entity in the world. It operates the busiest container port in the world in terms of throughput, and the busiest airport in the volume of international cargo handled. It is the world's fourth-largest banking centre in terms of external banking transactions, and the fifth-largest foreign exchange market by turnover. Its stock market has Asia's second-largest market capitalisation. Hong Kong owes its strength to sound economic fundamentals, a large fiscal surplus and strong foreign exchange reserves, business-friendly government policies, a competent workforce complemented by a pool of efficient and enterprising entrepreneurs, a superb network of transport and communications infrastructure, a high degree of internationalisation, and open financial markets. Adding to these are a low taxation system, free and fair market competition, a fully convertible and stable currency, tight fiscal discipline, a well-supervised banking sector, sound monetary system and a comprehensive legal framework. The World Economic Forum ranks Hong Kong as the world's second most-competitive economy, while the US Heritage Foundation and Fraser Institute of Canada rank it the freest economy in the world.

   Hong Kong once again showed its resilience amid the financial turmoil that swept though the region in the latter part of 1997. The Hong Kong dollar has remained remarkably stable under the anchor of the linked exchange rate, while many other currencies in the region have all suffered sharp depreciation. Local interest rates have risen as the financial situation in the region remains unsettled, but those in the affected economies elsewhere in the region have risen higher with greater volatility. Stock markets in the region have all registered heavy declines, but the fall in the Hong Kong stock market was still smaller than in most of the region's other stock markets. Over the past 15 years, Hong Kong has weathered a number of shocks including the 1987 world stock market crash, the June 1989 incident in the Mainland, the Gulf War in 1990 and the Mexican currency crisis in 1994.


Over the past two decades, the Hong Kong economy has more than tripled. GDP in Hong Kong has been growing at an average annual rate of about 7 per cent in real terms, twice as fast as the world economy and outperformed the Organisation for Economic Co-operation and Development (OECD) economies. Per capita GDP in Hong Kong has more than doubled in real terms, equivalent to an average annual real growth rate of about 5 per cent. In 1997, it reached US$26,400. The latest comparison showed that per capita GDP in Hong Kong was next only to those of Japan and Singapore in Asia. It has also surpassed some of the OECD economies, such as Canada, the United Kingdom, and Australia. Benefiting from this remarkable economic performance, the local workforce has enjoyed a continued rise in income both in money terms and in real terms.

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

Chart 1

Per cent










Per capita GDP




1976 1978 1980

1982 1984 1986


1990 1992 1994 1996

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.

Trade in goods and services expanded by about 13 times and four times respectively over the past two decades. Reflecting the highly externally-oriented nature of the Hong Kong economy, the total value of visible trade (comprising re-exports, domestic exports and imports) amounted to $3,075 billion in 1997, representing 232 per cent of the GDP. This compared with corresponding ratios of 143 per cent in 1970, 148 per cent in 1980, and 221 per cent in 1990. Taking into account the value of exports and imports of services, the ratio increased even further, to 267 per cent in 1997. The respective 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 1995, the total stock of inward direct investment in Hong Kong rose by 6.6 per cent over a year earlier to reach $532.6 billion, of which 91 per cent went to the non-manufacturing sectors. The UK remained the largest major source, with a share of 27 per cent in the total stock of inward direct investment in the manufacturing and non-manufacturing sectors combined. This was followed by the Mainland (20 per cent), Japan (16 per cent) and the United States (13 per cent).



In 1995, the Gross National Product (GNP), comprising GDP and net_external factor income flows, amounted to $1,092 billion at current prices. This was 1.3 per cent higher than Hong Kong's GDP in the same year. Both the inflows and outflows of external factor income were very substantial, estimated to be $387 billion and $373 billion respectively, amounting to over two-thirds of GNP. This reflects the significant role of Hong Kong as an international financial centre.

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. In the absence of natural resources, the contribution of primary production (agriculture and fisheries, mining and quarrying) to GDP and employment is negligible in Hong Kong.

Chart 2

Gross Domestic Product by broad economic sector



Secondary production 31.6%

Secondary production 15.5%

Primary production 1.0%

Primary production 0.2%

Tertiary production 67.5%

Tertiary production 84.4%

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 contribution of the manufacturing sector to GDP declined steadily along with the continued expansion of the service sectors and the on-going relocation of manufacturing processes to the Mainland since the mid- 1980s, from 24 per cent in 1980 to 18 per cent in 1990, and further to 7 per cent in 1996. 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 1996, was broadly similar to the average level of 3 per cent recorded over the past 10 years.

The open-door policy and economic reforms in the Mainland have not only provided a huge production hinterland for local manufacturers, but have also created an abundance of business opportunities for a wide range of service activities in Hong Kong. These include freight transport, telecommunications, banking, real estate


development, and professional services such as legal, accounting and insurance services. Hence, since the mid-1980s, the Hong Kong economy has become increasingly oriented towards services.

Reflecting this, the significance of the tertiary service 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 1996.

Chart 3

Employment by broad economic sector



Secondary production 50.1%

Secondary production 20.4%

Primary production 1.5%

Primary production 0.5%

Tertiary production 48.4%

Tertiary production 79.1%

With the on-going relocation of lower value-added and less skill-intensive manufacturing processes to the Mainland and steady expansion of service sector activities in Hong Kong, the tertiary services sector has overtaken the secondary production section to become the largest employer in the economy. *Average of Q1 to Q3 1997.

Employment in the economy also shifted towards services over time. The tertiary service sector's share as a whole in total employment rose from 48 per cent in 1980 to 54 per cent in 1985, and further to about 79 per cent in 1997. On the other hand, the manufacturing sector's share in total employment was on a distinct downtrend, dropping from 42 per cent in 1980 to 36 per cent in 1985, and further to about 10 per cent in 1997.

The Service Sectors

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

      Between 1987 and 1997, exports of services in real terms grew by an average of 6 per cent per annum, while that of imports of services increased by 8 per cent. The major components of Hong Kong's trade in services are civil aviation, shipping, travel and tourism, trade-related services, and various financial and banking services. The shares of transportation services in total exports and total imports of services were 35 per cent and 23 per cent respectively in 1996. The corresponding shares for travel and tourism were 29 per cent and 53 per cent. Trade-related services including



offshore trading and purchasing/merchandising services took up 19 per cent of the total value of exports of services and 6 per cent of the total value of imports of services. The respective shares for financial and banking services were 7 per cent and 4 per cent.

  Analysed by sector, the wholesale, retail and import/export trades, restaurants and hotels was the largest contributor to the GDP, with its share rising to slightly more than 25 per cent in 1996, from 21 per cent in 1980 and 25 per cent in 1990. The second-largest contributor was financing, insurance, real estate and business services, contributing another 25 per cent in 1996. The corresponding shares in 1980 and 1990 were 23 per cent and 20 per cent. The share of community, social and personal services in the GDP was 18 per cent in 1996, rising from 12 per cent in 1980 and 15 per cent in 1990. The share of transport, storage and communications in the GDP also increased, to 10 per cent in 1996 from 7 per cent in 1980 and 9 per cent in 1990.

Chart 4

Gross Domestic Product by major service sector


Wholesale, retail,

import/export trades,

Transport, storage and

restaurants and hotels 21.4%




insurance, real

estate and

business services



Financing, insurance, real

estate and

Transport, storage and


business services 24.9%


Community, social

Others 36.1%

Community, social and personal services

and personal services 12.1%


Others 21.6%


retail, import/export trades,

restaurants and hotels 25.4%


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

  Between 1986 and 1996, the net output or valued-added component of the financing, insurance, real estate and business services sector recorded the fastest increase (by 19 per cent); followed by transport, storage and communications (by 17 per cent), the wholesale, retail and import/export trades, restaurants and hotels (by 16 per cent); and community, social and personal services (by 15 per cent). The value added of the service sectors as a whole rose markedly, by an average of 16 per cent per annum over this period.

  As regards the contribution to total employment, the service sector as a whole accounted for about 79 per cent in 1997. Within this total, the wholesale, retail and import/export trades, restaurants and hotels was the largest employer in the service sectors, accounting for about 34 per cent of the total employment in 1997. This was followed by community, social and personal services (21 per cent); financing, insurance, real estate and business services (13 per cent); and transport, storage and communications (11 per cent).

Chart 5

Wholesale, retail,

import/export trades,

restaurants and




Employment by major service sector


Others 51.6%

Wholesale, retail, import/export trades,

restaurants and hotels.



Others 20.9%


Transport, storage and


nications 7.3%

Financing, insurance,

Transport, storage and



real estate and

Community, social


and personal services


business services


Financing, insurance,

real estate and business services 12.7%

Community, social and personal services 21.3%

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


*Average of Q1 to Q3 1997.

The Manufacturing Sector

Manufacturing firms in Hong Kong are well known for their versatility. The existence of many small establishments, connected under an extensive local sub-contracting network, has greatly aided producers to cope with frequent changes in demand in the overseas markets. Furthermore, the increasing use of outward-processing facilities in the Mainland has enhanced the flexibility of productive capacity and helped to maintain the price competitiveness of Hong Kong's products. A predominant proportion of Hong Kong's manufacturing output is destined for exports.

Over the years, 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 efforts. To maintain competitiveness, there has also been continuous upgrading of product quality.

In consequence, the local manufacturing sector has become more diversified. In addition to the toys and electronics industries, the textiles and clothing industries remain prominent, notwithstanding their declines in relative importance. Other important industries include printing and publishing, machinery and equipment, fabricated metal products, plastic products, watches and clocks and jewellery. In a nutshell, those manufacturing operations staying in Hong Kong are generally of higher value-added or higher-technology nature, along with continued mechanisation and wider application of computer-aided technologies in the production process.

Partly due to growing capital intensity in production, labour productivity in the manufacturing sector improved significantly over the years. During the period 1986 to 1996, the value of net output by the manufacturing sector grew by an average of 2 per cent per annum, notwithstanding that manufacturing employment declined at an average annual rate of 10 per cent. Even after taking into account the effect of price



increases on the output value, the improvement in labour productivity was still remarkable.

Chart 6

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









1986 1987 1988


1989 1990 1991 1992 1993 1994 1995 1996 1997*

Output per employee in the manufacturing sector has been on a general uptrend over the years. *Average of QI to Q3 1997.

  The Mainland was the largest market for Hong Kong's domestic exports, accounting for about 30 per cent of domestic exports in 1997. This was followed by the USA (26 per cent). The shares of the UK, Japan and Germany were all at 5 per cent. Hong Kong's exports have also diversified into new markets in recent years, including countries in the Middle East, Eastern Europe, Latin America and Africa.

Increasing Economic Links between the HKSAR and the Mainland

Economic links between the HKSAR and the Mainland have grown from strength to strength, since the Mainland 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 the Mainland has grown at an average annual rate of 28 per cent since 1978. In 1997, the two-way trade continued to grow, albeit only moderately, by 6 per cent. Re-exports and domestic exports to the Mainland were up by 6 per cent and 4 per cent respectively in 1997, while imports from the Mainland rose by 7 per cent. The Mainland remained Hong Kong's largest trading partner in 1997, accounting for 36 per cent of Hong Kong's total trade. The share of the Mainland in Hong Kong's re-export trade was even higher, at 90 per cent, making it both the largest market for and source of Hong Kong's re-exports. Reciprocally, Hong Kong was the Mainland's second-largest trading partner in 1997 (after Japan), accounting for 16 per cent of the Mainland's total trade.

Over the past two decades, there has also been a substantial increase in invisible trade and investment flows between Hong Kong and the Mainland. Hong Kong is a major service centre for the Mainland 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 also a principal gateway to the Mainland for business and tourism. In 1997, Hong Kong residents


made 34 million trips to the Mainland, and foreign visitors to the Mainland made another two million trips through Hong Kong. These represented increases of 17 per cent and 2 per cent respectively over 1996.

       Moreover, Hong Kong is the largest source of external direct investment in the Mainland. At end-1997, the cumulative value of Hong Kong's realised direct investment in the Mainland was estimated at US$121 billion, accounting for about 55 per cent of the total value. There has also been a notable shift in the composition of Hong Kong's direct investment in the Mainland 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 much more intimate than with other places in the Mainland. At end-1997, the cumulative value of Hong Kong's realised direct investment in Guangdong was estimated at US$48 billion, accounting for almost four-fifths of the total foreign direct investment there. More than five million Mainland workers are regularly employed in the Province by Hong Kong industrial ventures. This is about 16 times the size of Hong Kong's own manufacturing workforce.

In the opposite direction, there has been a sizeable flow of investment capital from the Mainland to Hong Kong. By end-1995, the Mainland invested a total of US$14 billion in the territory, making it the second-largest external investor, just behind the UK. About 1 800 Mainland enterprises operate in Hong Kong. They maintain high investment stakes in such traditional lines of business as import/export trades, wholesale/retail trades, banking, transport and warehousing, and 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 the Mainland have also been increasing rapidly. By end-November 1997, external liabilities of Hong Kong authorised institutions to entities in the Mainland reached $300 billion, while their external claims on entities in the Mainland were even larger, at $412 billion. These represented increases of 2 per cent and 17 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 Hongkong Bank Group. It started issuing Hong Kong dollar banknotes in May 1994. The other three state specialised banks 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 Hongkong Bank group, together with the Bank of East Asia and the Standard Chartered Bank, are among the best- represented foreign banks in the Mainland.

Hong Kong has played an important role as the major funding centre for the Mainland. As well as a direct source of funds, Hong Kong often serves as a window through which foreign funds can be channelled efficiently into the Mainland for financing the various development projects there. So far, most of the Mainland's fund-raising activities in the territory have taken the form of syndicated loans, but more recently an increasing number of the Mainland-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 the Mainland. At end-1997, 39 such enterprises were listed on the Hong Kong Stock Exchange, raising a total equity capital of $59 billion.

The Economy in 1997

External Trade

Total exports grew by 6 per cent in real terms in 1997, slightly better than the 5 per cent growth in 1996. Growth in the second half of the year was faster than in the first half. In particular, there was a notable recovery in domestic exports.

  Within total exports, re-exports rose by 7 per cent in 1997, slightly slower than the 8


    cent increase in 1996. This was nevertheless compensated by a marked recovery in domestic exports, reversing an 8 per cent decline in 1996 to an increase of 2 per cent in 1997. Given the heavier weighting of re-exports in total exports, the share of re-exports in this total remained virtually unchanged, at 85 per cent in both 1996 and 1997, notwithstanding the pick-up in domestic exports between these two years.

  Exports to the two largest markets the USA and the Mainland - showed notable growth of 8 per cent and 9 per cent respectively in 1997, underpinned by the generally robust demand in these two economies. On the other hand, exports to Japan and the UK slackened considerably from the preceding year. Their respective growth rates were minus 1 per cent and 5 per cent. Exports to Germany also weakened further, declining 2 per cent. The substantial currency depreciation in the East Asian economies since mid-1997 have not materially affected Hong Kong's overall export performance so far.

Chart 7

Per cent



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







Total exports

Domestic exports



1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Export performance was slightly better in 1997, with re-exports growing moderately and domestic exports recovering markedly.

  Consumer goods, and raw materials and semi-manufactures remained the two largest end-use categories of Hong Kong's exports, accounting for 48 per cent and 29 per cent respectively of the total value in exports in 1997. This was followed by capital goods (20 per cent).


      In the first three quarters of 1997, seaborne outward transshipment rebounded strongly by 9 per cent in tonnage terms over a year earlier, in contrast to a 3 per cent decline in 1996. This reflected the accelerated development of offshore trading in Hong Kong's external trade. Analysed by market, transshipment to the USA and Taiwan rose substantially, both by 16 per cent. This was followed by the Mainland, with an increase of 14 per cent. On the other hand, transshipment to Japan showed only modest growth of 2 per cent, while transshipment to Singapore, Germany and the UK fell by 8 per cent, 19 per cent and 21 per cent respectively. Analysed by major commodity group, manufactured goods continued to account for the largest share of seaborne outward transhipment, at 44 per cent in tonnage terms in the first three quarters of 1997. This was followed by chemicals and related products (18 per cent), crude materials (13 per cent), machinery and transport equipment (12 per cent), and foodstuffs (11 per cent).

      Imports rose by 7 per cent in real terms in 1997, faster than the corresponding increase of 4 per cent in 1996. This was mainly attributable to a strong revival in retained imports by 9 per cent in real terms in the first three quarters of 1997 for both consumption and production purposes. However, retained imports underwent a significant deceleration in growth to only 3 per cent in the fourth quarter, as domestic demand slackened against the adverse effect of the regional financial turmoil. The Mainland remained the largest source of Hong Kong's imports, accounting for 38 per cent of the total value in 1997. This was followed by Japan (14 per cent), the USA (8 per cent), and Taiwan (8 per cent).

      Due in part to a larger intake of raw materials and semi-manufactures and of capital goods for production and business expansion in the early part of 1997, the visible trade deficit widened to $159 billion or 9.9 per cent of the total value of imports in 1997. The corresponding figures in 1996 were $138 billion or 9 per cent. The visible trade deficit nevertheless narrowed in the latter part of the year, falling from a peak of 13.3 per cent against the value of imports in the first quarter to 7.5 per cent in the fourth quarter.

      As to invisible trade, mainly affected by the setback in inbound tourism since the middle of 1997, the value of exports of services weakened considerably to virtually zero growth in 1997. On the other hand, the value of imports of services increased by about 6 per cent in 1997. Yet with the former still much larger than the latter, a substantial invisible trade surplus of around $113 billion was still attained in 1997, which helped offset a large part of the deficit on the visible trade account.

Domestic Demand

Retail business was underpinned by a strong local consumer sentiment for most of the year, but offset to a considerable extent by the setback in inbound tourism. After late October, local consumer sentiment was also dampened by the marked correction in the stock and property markets and the rise in interest rates. The volume of retail sales, year-on-year, fell by 4.8 per cent in the fourth quarter, in contrast to an average increase of 3.1 per cent in the first three quarters. For 1997 as a whole, retail sales rose by only 1.1 per cent in volume, down from a 1.6 per cent increase in 1996. Of the total retail business, sales of motor vehicles rose most rapidly, by 26 per cent in volume in 1997. This was followed by sales of jewellery and watches and of other consumer durables, by 6 per cent and 5 per cent respectively. However, spending on



these high-value items shrank sharply towards the end of the year. Growth in private consumption expenditure averaged 7 per cent in real terms in 1997, compared with a 5 per cent rise in 1996.

Gross domestic fixed capital formation, as an overall measure of investment demand, grew strongly by 13 per cent in 1997. This was even faster than the 12 per cent increase in 1996. Among the major components, investment spending on machinery equipment surged ahead, along with continued mechanisation and office automation in the economy, and the substantial intake of equipment for the new airport and the airport railway. Overall building and construction expenditure registered further growth, notwithstanding the gradual completion of projects under the Airport Core Programme, as there was a marked pick-up in building activity at private-sector sites. However, in parallel with the consolidation in the property market, private-sector building activity slackened towards the end of the year.

Chart 8


Per cent

Main components of domestic demand (year-on-year growth rate in real terms)











Private consumption expenditure

Investment expenditure

in terms of GDFCF

Government consumption expenditure






1992 1993 1994 1995 1996 1997 In 1997, domestic demand was underpinned by continued strong growth in investment demand and a steady pick-up in consumer demand.

The Labour Market

For most of 1997, labour market conditions tightened along with a further pick-up in economic activity. There was however an easing in the fourth quarter, following the correction in the asset markets and slackening in local demand as the effect of the regional financial turmoil spread. The seasonally adjusted unemployment rate fell steadily from 2.6 per cent in the fourth quarter of 1996 to a low of 2.2 per cent in the third quarter of 1997, before rebounding to 2.5 per cent in the fourth quarter. The underemployment rate exhibited a broadly similar trend. It fell from 1.6 per cent in the fourth quarter of 1996 to a low of 1 per cent in the third quarter of 1997, before edging up to 1.3 per cent in the fourth quarter.

There was a further notable growth in total labour supply, due to a substantial inflow of returning emigrants and of immigrants from the Mainland. But this was

Chart 9



Per cent

Unemployment and underemployment rates




Seasonally adjusted unemployment rate




Underemployment rate


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






The labour market tightened in 1997, having improved steadily in 1996.


matched by an even faster growth in total employment. Overall vacancies thus recorded a marked increase in the first three quarters of 1997. However, towards the end of the year, there was some easing in employment conditions.

      Employment conditions for most of the semi-skilled and unskilled occupations tightened earlier in the year, before easing in the latter period. For 1997 as a whole, the unemployment rates for craft and related workers, plant and machine operators and assemblers, service workers and shop sales workers, clerks, and workers in elementary occupations were all lower than in 1996, some by a considerable margin. Employment conditions for occupations at the higher end remained tight throughout the year, and with a lower unemployment rate than in the preceding year.

Employment in the service sectors as a whole reached 1 933 900 in September 1997, little change from a year earlier. Among the service sectors, employment in financing, insurance, real estate and business services recorded an increase of 6 per cent, while employment in community, social and personal services showed virtually no change. Employment in the wholesale, retail, import/export trades and restaurants and hotels as well as transport, storage and communications declined, by 2 per cent and 1 per cent respectively. Employment at building and construction sites grew by only 2 per cent to 78 100 in September 1997. The large decline in employment at public-sector sites due to the completion of most of the projects under the Airport Core Programme was more than offset by the pick-up in private-sector building activity. Employment in the manufacturing sector remained on a down-trend with a decline of 6 per cent over a year earlier to 309 200 in September 1997. These were nevertheless more moderate than the double-digit declines in earlier periods. Relocation of production processes outside Hong Kong, while still continuing, thus appeared to have slowed somewhat.




Chart 10

Employment by broad economic sector

Number ('000)

Number ('000)








Service sectors as a whole (left scale)





Building and construction sites (right scale)


Manufacturing sector (left scale)

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







The structural shift in employment from manufacturing to services continued in 1997. Employment at construction sites rose sharply, along with hectic building activity at private sector sites.





In the first three quarters of 1997 taken together, earnings in all of the major sectors surveyed showed considerable increases in money terms, and in some sectors, also notably in real terms over a year earlier, reflecting the tighter labour market conditions for most of the year. Wages in most major sectors surveyed also accelerated in growth. However, the increases in earnings and wages could have turned more moderate towards the year's end as the labour market tended to ease.

Chart 11


Per cent

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


Service sectors


as a whole


Manufacturing sector


Mar Jun Sep DecMar Jun Sep DecMar Jun SepDec Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3







Earnings in both the manufacturing and the services sector continued to rise in real terms in 1997.


The Property Market

The residential property market went from buoyancy to consolidation over the course of 1997. Flat prices escalated amid hectic trading in the first half of the year, backed by strong end-user and investment demand along with much speculation, and against a tight supply. In the third quarter, market activity began to ease, in face of the government's commitment to stabilise the market and to increase flat supply substantially in the longer term. In the fourth quarter, the market came under substantial downward pressure, as the contagion of the regional currency turmoil spread and as local interest rates were driven higher. Mortgage lending by the banks tightened, trading in the secondary market shrank sharply and cases involving forfeiture of deposits reportedly increased. Nevertheless, response to the primary sales of some new developments with substantial price cuts and more flexible financing packages from the developers were better received. Flat prices surged by 34 per cent during the first 10 months of 1997 to peak in October, before falling 13 per cent from the peak by December. Flat rentals for new leases edged down by about 1 per cent in the fourth quarter of 1997 over the preceding quarter.

On commercial property, the sales market for office space was active in the first half of 1997, before softening in the second half as economic growth tapered and as an abundant supply of new office space was anticipated to come on stream in the near term. The negative turn in sentiment brought about by the regional events further dampened acquisition interest. The sales market for shopping space was also active during most of 1997. After a short spell of particularly hectic activity in the third quarter, trading quickly quietened in the ensuing months. The rental market for commercial property held steady during most of the year, before easing towards the year end. The market for industrial property remained generally slack throughout 1997, in line with the continued relocation of production processes away from Hong Kong. Within this, the market for industrial-cum-office premises nevertheless fared better.

      Government land sales in 1997 were generally met with an enthusiastic response. This was largely so even towards the year-end when the property market was already consolidating. In overall terms, prices fetched for the 18 sites in the eight land auctions held during the year were above market expectations. In particular, the sale of a residential site in Siu Sai Wan in March fetched the highest land premium ever achieved for a single site at government land auctions.


Consumer price inflation moderated further in 1997. There was little price pressure from imported sources, owing to the sustained strength of the US dollar, generally soft world commodity prices, and low inflation in the major supplier economies such as the Mainland, Japan and the USA. Domestically generated inflationary pressures were largely contained, even amid the buoyancy in the early part of the year. The increases in wages and rentals were not particularly rapid. Sustained productivity improvement helped keep local prices in check. During the latter part of the year, inflationary pressures eased as the economy slackened upon the impact of the regional financial turmoil.

The Composite Consumer Price Index rose by an average of 5.8 per cent in 1997, representing a continued easing from the 6.3 per cent increase in 1996. The year-on- year rate of increase in the Composite CPI largely followed a softening trend during




  1997, save for a mild pick-up in the third quarter due to a temporary upsurge in vegetable prices caused by wet weather. The CPI(A), CPI(B) and Hang Seng CPI showed broadly similar movements. The GDP deflator, as a broad measure of overall inflation in the economy, rose by 5.9 per cent in 1997, faster than the 5.4 per cent increase in 1996.

Chart 12

Main inflation indicators

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


Per cent






Composite CPI

Consumer Price Index (A)

GDP deflator


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




I 1993 Consumer price inflation moderated further in 1997.

Economic Policy and Public Finance

Economic Policy



In July 1997, the reunification of Hong Kong with China took place smoothly under the 'One Country, Two Systems' concept. The Basic Law, which is the constitutional law of the HKSAR, gives solemn and inviolable legal protection for this concept. The Basic Law also stipulates that Hong Kong has the right to exercise a high degree of autonomy, and that Hong Kong shall adopt social, economic and political systems different from those in the Mainland. Hence, under the auspices of the 'One Country, Two Systems' concept and the Basic Law, the HKSAR shall continue to practise free enterprise and free trade, follow prudent financial management policies, keep a low and predictable tax system, uphold the rule of law, and maintain an efficient, executive-led government and a quality oriented civil service.

Hong Kong has long been renowned for its market-oriented economic policy. The law of the market is simple and clear: the fittest survives. Economic vitality is the key to maintaining competitiveness and creating rising prosperity. The invisible hand of market forces will drive the economy towards lower cost, higher efficiency, better quality, and therefore adding higher value to products and services. It is through the creation of more new jobs and new business opportunities that Hong Kong's people can continue to enjoy higher incomes and better standard of living.

The HKSAR Government will continue to play an important enabling role in providing a better environment for business in Hong Kong. This prime objective will work through: first, a business-friendly environment that encourages enterprises to

      Hong Kong's world-renowned hotels maintain the standards that have brought them praise from travellers on all budgets. They form one of the industries based on service that constitute an increasing proportion of Hong Kong's economic make-up. To encourage the development of Hong Kong's services sectors, the government has established a Services Support Fund. By December 1997, it had committed $49.5 million to 27 projects undertaken by specialist bodies, higher education institutions, trade and industry associations and professional bodies.


GR 1360








Speed Post Pack




Speed Post Pack


Speed Post



Hong Kong Post Office is one of several government units operating as a trading fund, reporting in a similar way as a private company reports to its shareholders. This gives it greater flexibility in handling its resources and responding more effectively to changes in the market and operating environment. It maintains the traditional postal services, and during the year handled 1.28 billion items of mail. Some 10 275 tonnes of letter mail and 3 787 tonnes of parcels were despatched overseas by air. Outward surface mail comprised 5 424 tonnes of letter mail and 2 621 tonnes of parcels. Here, Post Office staff are shown in a range of activities, including sorting mail, delivering it, showing visitors around the operations and handling Speed Post.

     At $5.5 billion, this bidder wins the right to build on a 10 570 square metre lot in Repulse Bay. Held in the Concert Hall of the

Hong Kong Cultural Centre, Tsim Sha Tsui, on August 27, it was the first land auction after the Handover, and the three lots offered were sold for a total of $5.67 billion. The second lot was on Lamma Island and the other

      at Sha Tin. All were earmarked for low-density housing. The land sale was taken as a strong show

of confidence in the new era.

Robert Ng / South China Morning Post


develop into higher value-added activities; secondly, quality education, training and retraining that enable the people in Hong Kong to acquire the ability to enter into new and expanding fields; and thirdly, a quality living environment that helps retain local professionals as well as attract overseas talents to build their home and career in Hong Kong, and to create wealth both for themselves and for the economy. The essential ingredients for fulfilling this objective comprise the provision of good and affordable housing, better education, ample cultural and sporting facilities, efficient transport and up-to-date technology.

The Basic Law further stipulates the need to maintain the status of Hong Kong as an international financial centre. The last decade saw remarkable growth in Hong Kong's financial services in banking, securities trading, insurance and fund management. The government will strive to continuously improve Hong Kong's position as a premier financial centre by maintaining a world-class supervisory regime without over-regulation, by providing state-of-the-art financial infrastructure and a well-trained and adaptable workforce, and by sustaining an open market and a level playing field. Underlying this, a sound monetary regime and currency stability are key to investment confidence in Hong Kong as a competitive centre for global finance and business operations.

The government will not seek to influence the economic structure through regulations, tax policies or subsidies. Business decisions are best left to the private sector, except where social considerations are over-riding. Private enterprise will continue to have the maximum freedom to set its own direction, and to explore and seize opportunities in the light of ever-changing market conditions.


Moreover, the government will continue to adhere to prudent fiscal policies, while maintaining a simple tax structure and low tax rate that sustain workers' incentive to work and entrepreneurs' incentive to invest. The 1997 corporate tax rate and standard tax rate 16.5 per cent and 15 per cent, respectively were low by international standards. The public sector in the economy will remain small and efficient. In the fiscal year 1997-98, public sector expenditure accounted for only around 18 per cent of the GDP. The underlying principle of a small government is to ensure that it 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.

Business and Services Promotion

To render the best possible support to the business community, the government has recently embarked on the Helping Business Programme and the Services Promotion Programme. The Business and Services Promotion Unit was set up in the Financial Secretary's Office in May to co-ordinate and support the work of various parts of the government on these two programmes. Its vision is to maintain Hong Kong as the best place in the world for business and the region's premier services centre.

The Helping Business Programme was launched in March 1995 under the aegis of a Task Force chaired by the Secretary for the Treasury with the aim of making the government more business-friendly. The Task Force successfully completed seven pilot studies in 1996-97. Action is in hand to implement the recommendations. In December 1996, a Business Advisory Group chaired by the Financial Secretary was formed to provide a vital link between the business sector and the government. Its membership comprises 11 top business executives and six senior officials. For




 1997-98, 28 study areas have been identified for cutting red tape, assessing and reducing costs of compliance, transferring services to the business sector where appropriate market conditions prevail, and improving services to support the business sector. These studies will be completed within the next financial year.

  The Services Promotion Programme was launched in August 1995 also under the aegis of a Task Force chaired by the Financial Secretary. In March 1997 it produced its final report, covering the progress of various action items and setting out initiatives. Following that report, the Services Promotion Strategy Group, comprising prominent business figures, academics and senior officials was formed in April 1997 to advise the Financial Secretary on matters relating to the development of Hong Kong as a service economy and as the pre-eminent services centre in Asia. For 1997-98, the group has endorsed a 10-point publicity programme and a 12-point Action Agenda which includes monitoring the 125 initiatives outlined in the Final Report.

Structure of Government Accounts

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 hold investment or to finance capital 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 Land Fund.

  The Capital Works Reserve Fund finances the public works programme, land acquisitions, capital subventions, major systems and equipment items, and computerisation and the payment of redemption money in respect of land exchange entitlements. Its income 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, the Kowloon-Canton Railway Corporation and the Mass Transit Railway Corporation, and capital investments in the 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 investment.

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

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

  The Land Fund, established on July 1, 1997, receives and holds all of the assets, including all accounts receivable, net of expenses, transferred from the HKSAR Government Land Fund. Its investment is managed by the Hong Kong Monetary Authority in accordance with the directions of the Financial Secretary.


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 government's overall consolidated financial position.

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 legislature 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

In accounting terms, public expenditure is taken to include expenditure by the Housing Authority, the two Municipal Councils, the Lotteries Fund and government trading funds, all expenditure charged to the General Revenue Account and expenditure financed by the government's statutory funds other than the Capital Investment Fund. 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). Similarly, debt repayments and equity payments are excluded as they do not reflect the actual consumption of resources by the government.

Public expenditure in 1996-97 totalled $211.2 billion. The government itself accounted for $173.6 billion. The growth rate over the preceding year was 10.4 per cent in nominal terms or 3.1 per cent in real terms. Some $55.1 billion, or 26.1 per cent of the public expenditure in 1996-97, was of a capital nature. An analysis of expenditure by function is at Appendix 10.

Public expenditure has remained 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 12.

      Total government revenue in 1996-97 amounted to $208.4 billion. The consolidated cash surplus for the year was $25.7 billion. Details of revenue by source and of expenditure by component for 1996-97 and 1997-98 (Revised Estimate) are at Appendix 13.

      The draft estimates of expenditure on the General Revenue Account are presented by the Financial Secretary to the legislature when he delivers his annual Budget speech. In the Appropriation Bill introduced to the legislature 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 surplus of $25.7 billion in 1996-97. The accumulated surpluses at the end of 1996-97 stood at $173.6 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 two Municipal Councils, which operate through the Urban Services Department and Regional Services Department, 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 their respective areas. Additional income is derived from fees and charges for the services the councils provide.

The 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 particular source of supply, to ensure that users' needs are met at the best possible prices, 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 purchasing strategy for each type of item based on market conditions, focusing on meeting requirements for high-value and critical items by cost-effective and reliable means.

In general, the department adopts open tender procedures in its purchases, particularly for general and common items. Selective tender procedures are used only for complex and critical purchases for which suppliers are required to undergo a qualification exercise before tendering. Restricted or single tender procedures are used where open competitive tendering would not be an effective means such as in cases involving compatibility with existing equipment, or patented/proprietary items, or unforeseen urgency. Restricted tender procedures may also be adopted for low- value purchases to save administrative costs.

Where open tender procedures are adopted, tender invitations are published in the Government Gazette and four local newspapers and are mailed to suppliers registered with the department. Consulates and overseas trade commissions are also informed. To allow easy access by overseas suppliers, the department has, since November 1995, included its tender invitations and related information on the Internet.

In 1996-97, the department placed orders of a total value of $4.03 billion, purchasing from 36 different countries. The major sources of supply were the USA, the UK, China, Germany and Hong Kong. Major items of purchase included


computer systems, medical supplies and equipment, waterworks items, electrical appliances, telecommunication equipment and services, and food provisions.

Supplies of goods to meet general needs are held in the purpose-built Government Logistics Centre in Chai Wan which was put into operation in late 1996. In 1996-97, the department acquired stock items with a total value of $382 million and issued items worth $437 million to its customers. The department also seconds 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 opportunities for tax avoidance. The major sources of revenue are profits tax, salaries tax and revenue from land transactions. Other significant sources include stamp duty on property and stock transactions, betting duty, fees and charges for services provided by the government, returns on properties and investments and duties on certain specified commodities. (For major sources of revenue, see Appendix 15).

The Inland Revenue Department collects about 50 per cent of total revenue, including profits and salaries taxes, stamp duty, betting duty, estate duty and hotel accommodation tax. Profits and salaries taxes, which alone accounted for about 40 per cent of total revenue in 1996-97, are levied under the Inland Revenue Ordinance. Persons liable to these taxes 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. In 1997, profits of unincorporated businesses were taxed at 15 per cent and profits of corporations 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 1996-97, the government received about $50 billion in profits tax, or about 24 per cent of total


Salaries tax is charged on emoluments arising in, or derived from, Hong Kong. The basis of assessment and method of payment (including provisional payments) are similar to the system for profits tax. Tax payable is calculated on a sliding scale which progressed from 2 per cent, 8 per cent and 14 per cent on the first, second and third segments of net income (that is, income after deduction of allowances) of $30,000 each, respectively, and then to 20 per cent on the remaining net income. No one, however, needs to pay more than 15 per cent of his or her 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 $28.7 billion, or about 14 per cent of total revenue, in 1996-97. 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 1996-97.

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 10 per cent of total revenue, or about $20.5 billion, in 1996-97.

  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 1996-97 totalled some $12.2 billion, and accounted for about 6 per cent of total revenue.

Estate duty is imposed on estates valued at over $7 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.

Under the Dutiable Commodities Ordinance, duties are levied on only four types of commodities - hydrocarbon oil, alcoholic beverages, methyl alcohol and tobacco. The Customs and Excise Department collects duties on these products irrespective of their geographical origin. In 1996-97, the department collected duties worth $8.5 billion or about 4 per cent of total revenue.

  The Rating and Valuation Department is responsible for the billing and collection of rates, which are levied on landed properties at a fixed percentage of their rateable value. The prevailing overall rates percentage charge is 5 per cent. The revenue raised helps to finance the various public services provided by the Municipal Councils, and provides a stable and reliable revenue stream for the government.

  The Rating and Valuation Department is also responsible for the assessment of rateable value which 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 regular intervals to keep rateable values of properties up-to-date. The current Valuation Lists took effect on April 1, 1997, and the rateable values reflect rental values at July 1, 1996.

The number of assessments in the Valuation Lists as at March 31, 1996, stood at about 1 563 000. In 1996-97, the total revenue from rates was $15.6 billion. Of this amount, $5.5 billion, collected from Hong Kong Island and Kowloon, was credited to the Urban Council and $3.8 billion, collected from the New Territories, went to the Regional Council. The remaining $6.3 billion, was credited to the government's General Revenue Account.

  Government rent is payable from July 1, 1997, for all land leases granted on or after May 27, 1985, and on the extension of non-renewable leases. The latter comprise all land leases in the New Territories and New Kowloon north of Boundary Street which


were renewed on June 28, 1997. The rent is equivalent to 3 per cent of the rateable value of the lot and is adjusted in step with changes in the rateable value. The Rating and Valuation Department is also responsible for the billing and collection of government rent.

The government derives significant amounts of revenue from other sources. Fees and charges for services provided by government departments generated about $10.8 billion, or about 5 per cent of total revenue, in 1996-97. It is government policy that fees should in general be set at levels sufficient to recover the full cost of providing the services. Certain essential services are, however, subsidised by the government or provided free.

      Also, in 1996-97, the government collected $9.3 billion, amounting to about 5 per cent of the total revenue, from investments and rents from government properties. A further $6.6 billion was generated by government-operated public utilities, accounting for about 3 per cent of the total revenue. The most important of these, in revenue terms, are waterworks and the airport.

Lastly, some $27 billion, or about 13 per cent of the total revenue in 1996-97, was generated from land transactions. In accordance with Annex III to the Sino-British Joint Declaration, revenue from land transactions decided upon before the coming into force of the Joint Declaration, and from those conferring a benefit that expired on or before June 30, 1997, was credited to the General Revenue Account. This amounted to $451 million in 1996-97. All revenue from other land transactions was credited to the Suspense Account of the Capital Works Reserve Fund for sharing with the HKSAR Government Land Fund. The sharing arrangements in 1996-97 and in the first quarter of 1997-98, i.e. up to June 30, 1997, resulted in the transfer of $71 billion to the Works Account of the Capital Works Reserve Fund and a total of $65 billion to the HKSAR Government's Land Fund. Since July 1, 1997, the government receives revenue from land transactions in full.





 HONG KONG is an international financial centre which comprises an integrated network of financial institutions and markets. The government's objective is to further the development of the financial markets by providing an appropriate legal, regulatory, infrastructural and administrative framework to, inter alia, provide a level playing field for all market participants, maintain the stability of the financial and monetary systems and enable Hong Kong to compete effectively with other major financial centres.

  Some 520 authorised institutions and local representative offices of banks from more than 40 countries conduct business in Hong Kong. The banking sector's external assets are among the highest in the world. Hong Kong was the fifth-largest centre for foreign exchange trading according to the 1995 triennial global survey conducted by the Bank for International Settlements (BIS), up from sixth in 1992.

  Hong Kong's stock market is one of the world's largest in terms of market capitalisation. The market was buoyed by continued economic growth in Hong Kong and China but was hit by the Asian currency turmoil in the second half of the year. The Hang Seng Index closed at 10 723 points, or about 20 per cent lower than in 1996, which is moderate as compared to neighbouring markets.

  On the monetary front, the Hong Kong dollar remained very stable despite the turmoil in the Asian currency markets in the second half of the year, moving within a narrow range of $7.725-7.751 to US$1. However, reflecting the Asian risk premium due to the uncertainties in the external environment, the Hong Kong dollar interest rates firmed to levels considerably higher than their US dollar counterparts in the last quarter of the year.

The World Bank/International Monetary Fund Annual Meetings were held from September 23 to 25. With a record 19 500 participants, they provided a valuable opportunity for Hong Kong to showcase its continued prosperity and stability under the 'One Country, Two Systems' principle.

Hong Kong as an International Financial Centre

Hong Kong's favourable geographical position, bridging the time gap between North America and Europe, its strong links with China and other economies in South-East Asia and excellent communications with the rest of the world have helped Hong Kong to develop into an important international financial centre. The absence of any restrictions on capital flows into and out of Hong Kong is another 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 164 foreign-owned banks. Of the world's top 100 banks in terms of monetary assets, 81 have operations in Hong Kong. In addition, 164 subsidiaries or related companies of foreign banks operate as restricted licence banks and deposit-taking companies, and 159 banks have representative offices.

The interbank money market is equally well established. Wholesale deposits are traded actively among local authorised institutions, and between local and overseas institutions, with an average daily turnover of $183 billion in 1997. 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 18 per cent of the Hong Kong dollar liabilities of the banking sector. Hong Kong 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. The latest survey co-ordinated by the BIS shows the daily average foreign exchange turnover in Hong Kong in April 1995 was US$91 billion, which represented 6 per cent of the world total and 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 outstanding contracts US$666 billion. Derivatives on stocks and commodities are less frequently used, with the outstanding amount at US$8 billion.

The local stock market was on a generally upward trend in the beginning of the year but was hard hit by the Asian currency crisis from August. For the first seven months of the year, the bullish Hang Seng Index rose gradually from 13 451 to its record intraday high of 16 820 on August 7. However, as the regional economies deteriorated and the Hong Kong-US dollar peg was under attack, the Hang Seng Index plunged to 10 723 at the end of the year. Despite severe volatility and uncertainty, Hong Kong's market has weathered the financial turmoil strongly and confidently. During the period, the operation of both the local stock futures markets has remained orderly and efficient. It is also fair to say that it fares strongly vis-a-vis other regional markets in terms of the impact of the challenge on the market taking into account the fact that the peg with US dollars has basically remained intact. Average daily turnover in the local stock market was $15.5 billion in 1997, which was a remarkable growth compared with the $5.67 billion seen in 1996.

       At the end of the year, 658 public companies were listed on the Stock Exchange of Hong Kong Ltd. (SEHK). With a total market capitalisation of $3,202.6 billion, the




  Hong Kong stock market ranked eighth in the world and second in Asia. The 82 newly-listed companies raised a total of $81.7 billion. Besides new share issues, funds were tapped through rights issues ($16.5 billion) and private placements ($78.2 billion).

   As regards stock options, contracts in respect of 15 other stocks had been launched by the end of the year. During the year, the futures exchange also traded in three currency futures and 15 stock futures contracts.

   Hang Seng Index Options and Hang Seng Index Futures remained actively traded. Average daily turnover for index options increased from 4 393 contracts in 1996 to 4 683 in 1997. Index futures trading averaged 26 313 contracts a day in 1997, compared with 18 699 a day in 1996.

   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$283 and US$362 in 1997. The price of gold dropped from US$367.30 per troy ounce at the end of 1996 to US$288.60 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 $2,670 per tael compared with $3,409 at the end of 1996. Turnover on the exchange totalled 16.4 million taels in 1997.

The number of authorised unit trusts and mutual funds increased to 1 473 at the year's end, from 1 311 a year earlier.

   The Hong Kong insurance industry also has a strong international presence. Among the 215 authorised insurers at the end of 1997, 114 were overseas insurers from 27 countries or the Mainland, while 13 of the world's top 20 insurers are authorised to carry on insurance business in Hong Kong either directly or through a group company. Professional reinsurers number 22, which includes most of the top reinsurers in the world. Latest statistics show that gross premium income in 1996 reached $46.4 billion, representing about 3.8 per cent of Hong Kong's GDP.

Financial Institutions


Hong Kong maintains a three-tier system of deposit-taking institutions banks, restricted licence banks and deposit-taking companies - which are collectively called authorised institutions under the Banking Ordinance. The Hong Kong Monetary Authority (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 Hong Kong, the minimum requirement 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 Hong Kong, 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 may open one regional office and a 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 operations to areas with lower rentals. The relaxation also applies to foreign restricted licence banks.

       Hong Kong had 180 licensed banks at the end of December 1997, of which 31 were locally incorporated. They maintained a total of 1 691 offices in Hong Kong and there were 159 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of December 1997 were $2,599 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 with 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. There were 66 restricted licence banks at the end of December 1997 with total deposit liabilities to customers of $51.9 billion.

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, there were 115 deposit-taking companies, with total deposit liabilities to customers of $14.5 billion.

Only members of the SEHK and the Hong Kong Futures Exchange Ltd (HKFE) may trade on the stock and futures exchanges respectively. At year's end, the SEHK had 555 corporate and individual members while the HKFE had 137 members.

   Securities transactions on the stock exchange are executed by the Automatic Order Matching and Execution System. SEHK members began trading via a second terminal located in their own offices in January 1996. The system has not only supplemented those terminals already available on the trading floor, but also greatly enhanced order entry and trade confirmation efficiency and further expanded the availability of audit trails. In 1997, almost 63.2 per cent of transactions on SEHK were done by the second terminal.

The SEHK launched two new products for trading in 1997 regional derivative warrants and convertible bonds to further enhance Hong Kong's status as the regional capital raising centre. The government has exempted the transactions on these products from stamp duty with a view to facilitating their development in Hong Kong. By end-1997, 21 regional derivative warrants were listed on the SEHK.

The HKFE linked up with the Philadelphia Stock Exchange in April 1997 to allow the latter's currency options contracts to be traded in Hong Kong during Asian business hours and with the New York Mercantile Exchange in June on the trading of futures contracts of petroleum and other commodities locally. The trading of Hong Kong Inter-bank Offer Rate futures contracts was also changed from the outcry system to the Automated Trading System in September.

The Hong Kong Securities Clearing Company (HKSCC) 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. It is an automated book-entry system that handles the settlement of securities. To further enhance its services, the HKSCC was working on the implementation details to gradually extend CCASS to retail level investors in the second quarter of 1998.

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.

The Hong Kong Monetary Authority (HKMA)

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 HKMA's policy objectives 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 Special Administrative Region (HKSAR) 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


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.

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

      The HKMA's supervisory approach is based on a policy of 'continuous supervision'. This involves monitoring authorised institutions using a wide variety of techniques 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 their business, prospects and potential areas of concern 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 most recent major supervisory framework introduced by the Basle Committee is its proposal on incorporating market risks into the capital adequacy regime, which was finalised in early 1996. 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 implemented a market risk supervisory framework in Hong Kong with effect from December 31, 1997, which is essentially an extension to the capital




  adequacy regime, and is based on the Basle Committee's recommendation but simplified where appropriate to take into account the generally low level of market risk exposures of the local authorised institutions. The latter has been confirmed by the various market risk surveys conducted since 1993 as well as statistics collected from a quarterly prudential return on market risk exposures with effect from December 1996. To reduce the regulatory burden, the HKMA has also set out exemption criteria so that institutions with minimal market risk exposures are exempted from the new framework. An amendment to the Banking Ordinance was approved in August 1997 to give statutory backing to the new requirement. A guideline was subsequently issued to explain in detail how the adequacy of capital to support market risk will be assessed under the new requirement.

   The HKMA has strengthened its supervisory efforts in the fast-growing derivatives market. In 1995, it established a specialist team with expertise on derivatives products and financial models to conduct treasury visits/examinations on authorised institutions' derivatives/treasury activities. Two guidelines have been issued by the HKMA - one on high-level risk management for derivatives and one on the operational aspects of risk management for derivatives and other traded instruments.

   The HKMA is committed to improving the transparency in financial disclosure by authorised institutions. As a result of these efforts, Hong Kong banks are considered to have the highest standards of disclosure in Asia. The 1997 financial disclosure package covers areas such as the maturity profile of institutions' major assets and liabilities, a more detailed and standardised disclosure of institutions' loan books, institutions' progress in relation to addressing the 'Year 2000 problem' of their computer systems and the capital adequacy ratio adjusted for market risk.

With the joint effort of the HKMA and the industry associations, a Code of Banking Practice was formally issued by the industry associations in July 1997. It is intended 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. The code is non-statutory but the HKMA will monitor authorised institutions' compliance with it as part of its regular supervision.

   Pursuant to the Memorandum of Understanding signed between the HKMA and the Securities and Futures Commission (SFC) in October 1995, the two authorities continued in 1997 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.

   The HKMA has formed a study group which comprises representatives from the banking industry and other relevant experts and professionals. It will review the current state of electronic banking in HK, assess the capabilities, potential and impact of such developments and advise on specific aspects of electronic banking. The ultimate objective is to develop a policy and regulatory framework which could provide a sound and secure basis for the development of electronic banking in Hong Kong.

   The HKMA became a member of the BIS in November 1996 in recognition of the size of Hong Kong's financial markets and its contribution to international monetary


co-operation. As a member of the BIS, the HKMA participates more fully in BIS activities and policy discussions. The People's Bank of China is also a member, which clearly shows that the international financial community is supportive of the 'One Country, Two Systems' principle enshrined in the Joint Declaration and the Basic Law.

The HKMA promotes co-operation among central banks in the region, principally through the Executives' Meeting of East Asia and Pacific Central Banks (EMEAP), whose activities cover supervisory liaison and co-operation, development of financial markets and infrastructure, and various areas of central bank operations. The HKMA has chaired a study group on banking supervision since its establishment in August 1996 under the direction of the EMEAP. This comprises experts in banking supervision from EMEAP members and meets on a half-yearly basis to hold discussions in areas of mutual interest. It also conducts research and analysis on banking supervisory issues with a view to improving the understanding of such issues in the region.

The HKMA will participate in the 1998 BIS triennial global survey on foreign exchange and derivative activity.

Hong Kong is a member of the Financial Action Task Force (FATF), an international organisation of 26 governments and two international organisations with a mandate to encourage international efforts in the fight against money laundering. To help combat money laundering, a revised Guideline on Prevention of Money Laundering was issued by the HKMA under section 7(3) of the Banking Ordinance on October 17, 1997. It replaced the previous guideline on this subject issued in July 1993. It has taken into account the latest legislative changes on money laundering in Hong Kong as well as the stocktaking review of the 40 recommendations by the FATF. In particular, the customer identification requirements have been significantly strengthened with new provisions incorporated in relation to shell companies, trust and nominee accounts and other types of intermediaries.

The Banking (Amendment) Ordinance 1997 was enacted by the Legislative Council on January 8, 1997. Provisions relating to the regulation of the issue of multi-purpose stored value cards (MPCs) and the approval and regulation of money brokers commenced operation on May 15, 1997. Concurrent with the commencement of these provisions, the HKMA has published detailed guidelines to explain the authorisation criteria and detailed supervisory requirements for stored value cards (SVCs) and money brokers.

     The legal framework for SVCs generally provides that the issue of general purpose MPCs is confined to licensed banks (which are the only entities having access to the payment system). A special purpose vehicle whose principal business is to issue MPCs may be authorised as a deposit-taking company under the Ordinance for the principal purpose of issuing, or facilitating the issue of SVCs. Flexibility is available also for the Monetary Authority to exempt an SVC not to be an MPC where the usage of the card is very limited and the risk to the payment system and cardholders is slight.

The legal framework prohibits any person to act as a money broker unless approved by the Monetary Authority under the Banking Ordinance and empowers the Monetary Authority to revoke the approval of a broker on the basis of a set of prescribed criteria. The main approval criteria include a company's fitness and




properness of management; financial soundness; adequate accounting systems and systems of control; and prudence and competence in business conduct.

The Securities and Futures Commission (SFC)

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

The SFCO transfers to the SFC the functions of the former Securities Commission, the Commodities Trading Commission and the Office of the Commissioner for Securities and Commodities Trading. It provides a general regulatory framework for the securities and futures industries, leaving certain elements to be covered by regulations, administrative procedures and guidelines developed by the commission. The SFC exercises prudential supervision over the securities, financial investment and commodities futures industry in Hong Kong. It administers the Securities and Futures Commission Ordinance, the Securities Ordinance, the Protection of Investors Ordinance, the Commodities Trading Ordinance, the Stock Exchange Unification Ordinance, the Commodities Exchanges (Prohibition) Ordinance, the Securities (Clearing Houses) Ordinance, the Securities (Disclosure of Interests) Ordinance, the Securities (Insider Dealing) Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and part of the Companies Ordinance in so far as it relates to prospectuses and purchases by a company of its own shares. These ordinances provide a regulatory framework within which the securities, futures and investment industries operate. Checks and balances are also in place in these ordinances providing for the investigation of malpractices as well as compensation arrangements for investors.

   The SFC, established as an autonomous statutory body outside the civil service, has 10 directors (half of them executive) appointed by the Chief Executive of the HKSAR. It must present the Financial Secretary with an annual report and an audited statement of its accounts, which are laid before the legislature.

The SFC seeks advice on policy matters from its advisory committee, the 12 independent members of which are appointed by the HKSAR Chief Executive and are broadly representative of market participants and relevant professions. 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 also independently appointed by the Chief Executive.

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 five 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 1997-98 was $296 million and it had an establishment of 289 at year's end.

The SFC has developed a framework of securities and futures regulation that brings Hong Kong in line with internationally-accepted standards. In addition, it has published various codes of conduct and guidelines regulating market conduct and criteria for approval of investment products and licensing of market intermediaries.





Henk Bathr

Internallary Fund


བ་ན ི་





Visitors pass through security

checks at the 1997 World Bank/International Monetary

Fund Annual Meetings, which were held in the Hong Kong Convention and Exhibition Centre from September 23 to 25. A record 19 500 participants declared the Meetings a great success. Hong Kong's hi-tech image was demonstrated through the provision of video walls, bar-coded access badges

to improve security control and an electronic message

system to facilitate communication among


About 300 Finance Ministers and Central Bank Governors from some 180 member countries attended the World Bank/International Monetary Fund Annual Meetings, together with many of the world's other influential opinion-formers. Clockwise, from above: Visitors delivered or listened to key

      speeches in the Hong Kong Convention and Exhibition Centre's Grand Hall; the Deputy Premier of China's State Council, Mr Zhu Rongji, addresses the Meetings; the Premier of China's State Council, Mr Li Peng, shows great interest on a visit to Chek Lap Kok, where Hong Kong's new international airport was nearing completion; Mr Li chats with the President of the World Bank, Mr James Wolfensohn; the HKSAR Chief Executive, Mr Tung Chee Hwa, greets the former President of the USA, Mr George Bush.






Hosted By Mrs.C.H.Tung, Betty



Away from the World Bank/International Monetary Fund Annual Meetings core events, participants and their spouses had a wide choice of activities,

including musical performances, cooking displays and a fashion lunch hosted by the Chief Executive's wife, Mrs Betty Tung. These occasions provided some relief from the event's main programme, in which more than 200 formal sessions were held, setting a record for the coverage of topics discussed at meetings or seminars.


      Dealers in securities, investment advisers, commodity dealers and commodity- trading advisers, leveraged foreign exchange traders and their representatives have to register with the SFC. Criteria for registration are stipulated in the Securities Ordinance, the Commodities Trading Ordinance, the Leveraged Foreign Exchange Trading Ordinance, and the Securities and Futures Commission Ordinance. In 1997, the SFC registered 20 167 persons, of whom 568 were corporate securities dealers and 162 were commodities dealers. Among them, 338 were from overseas.

      As regards the regulation of Leveraged Foreign Exchange Trading, the SFC had issued 21 foreign exchange trade licences and 1 323 licences for their representatives by the end of 1997. The SFC reviewed the Leveraged Foreign Exchange Trading Ordinance in September 1996 to consult the public on several proposed changes. In response to public comments, the SFC is considering certain legislative amendments including insurance of traders and compensation to investors.

      In 1996, the SFC consulted on the draft composite Securities and Futures Bill which aims to consolidate and streamline the existing regulatory regime for the securities and futures markets. Since the draft touched on some issues relating to fundamental policy issues, and some diverse public views were received, the government and the SFC are conducting a clause-by-clause examination with a view to sorting out the controversial items in 1998.

Insider Dealing Tribunal

The Insider Dealing Tribunal is an important feature of the regulatory framework in Hong Kong. Established under the Securities (Insider Dealing) Ordinance, the tribunal looks into cases involving suspected insider dealing referred to it by the Financial Secretary. Since it commenced operation in 1994, the tribunal has successfully concluded six cases, three of them in 1997.

Office of the Commissioner of Insurance

The Commissioner of Insurance, appointed as the Insurance Authority (IA), administers the Insurance Companies Ordinance (ICO) and exercises prudential supervision over the insurance industry in Hong Kong. The ICO prescribes a comprehensive regulatory framework for all classes of insurance business.

The ICO has two main objectives for the protection of policy holders. Firstly, it aims at ensuring the financial stability of all insurers authorised in Hong Kong. Secondly, it aims at ensuring the fitness and propriety of the management of an insurer. These objectives are achieved through the prescription of, inter alia, the minimum share capital and solvency margin requirements, and the requirement for all persons acquiring a position of influence in relation to an insurer, e.g. directors and shareholders, to be fit and proper.

Prudential supervision is carried out mainly through examination of the annual financial statements and other periodic returns submitted by the insurers. The ICO empowers the IA to take precautionary or remedial measures against an insurer, if considered appropriate, to safeguard the interests of policy holders. These measures may include limitation of premium income, placing of assets in the IA's custody, assumption of control by the IA or petitioning for the winding-up of the insurer concerned.




A general business insurer is required to value its assets and liabilities in accordance with a prescribed basis. It is also required to maintain assets in Hong Kong to meet the claims of Hong Kong policy holders in the event of its insolvency, which is particularly important when the insurer is involved in cross-border insolvency proceedings.

  A life insurer is required to maintain a solvency margin which relates to the risk base of its business. Apart from the annual audit of its financial statements, a life insurer is, in addition, subject to an annual actuarial review of its operations by an appointed actuary.

  During 1997, legislative amendments were made to the ICO, inter alia, to promote the development of captive insurance business in Hong Kong by offering various regulatory concessions to captive insurers. The IA was also empowered to make regulations specifying the standards to be observed by the appointed actuary of a life insurer in carrying out his duties under the ICO.

  Self-regulatory measures to strengthen professional discipline in the insurance market have been formulated by the insurance industry, after consultation with the IA. These measures include the adoption by the industry of two Statements of Insurance Practice governing the writing of insurance contracts of life and general insurance business, and the establishment of an Insurance Claims Complaints Bureau to provide an independent avenue for resolving claims disputes arising from personal insurance policies. More recent developments include the introduction of a cooling- off period for life insurance policies and a disclosure standard for investment-linked life insurance policies.

Insurance intermediaries, i.e. insurance agents and brokers, were brought under the regulation of the ICO in 1995. No person may act as an insurance intermediary unless he is an appointed insurance agent or an authorised insurance broker. An insurance agent must be properly appointed by an insurer and an insurer is required to comply with the Code of Practice for the Administration of Insurance Agents in appointing and controlling its agents. An insurance broker must meet certain minimum requirements before he can be authorised. Regulation of insurance intermediaries enhances the professionalism of this part of the industry and, in turn, the protection of policy holders.

  The government is committed to promoting reinsurance and captive insurance business in Hong Kong. A working group has been set up to assess market potential and identify promotional measures. The promotional measures identified are to enhance tertiary insurance education, to co-ordinate overseas publicity efforts, and to introduce tax incentives. The IA is working closely with relevant government departments, tertiary institutions and industry bodies in implementing the promotional measures.

Hong Kong is a charter member of the International Association of Insurance Supervisors, which is a forum for insuçance supervisors from all territories to develop supervisory standards, share experiences and exchange information on insurance supervision. It has 86 members from countries around the world.

  The Commissioner of Insurance, as the Registrar of Occupational Retirement Schemes, is also responsible for the regulation of private sector retirement schemes. The governing legislation is the Occupational Retirement Schemes Ordinance (ORSO) which provides a registration system for voluntarily established occupational


     retirement schemes. Its objective is to provide greater certainty that retirement scheme benefits promised to employees will be paid when they fall due. It 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 annual submission of audited financial statements to the Registrar. There are also requirements for disclosure of information regarding the operation of the scheme to its members.

      As at December 31, 1997, there were 16 324 registered schemes which covered an aggregate of 861 576 employees, and 1 935 exempted schemes.

Mandatory Provident Fund Schemes

The Mandatory Provident Fund Schemes Ordinance (MPFO), enacted in August 1995, provides the framework for a privately managed mandatory system of provident fund schemes that will cover members of the workforce aged 18 or above. The Mandatory Provident Fund (MPF) System 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 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 or her income. Benefits must be preserved until retirement.

      During 1997, the Mandatory Provident Fund Office completed the development of the MPF System and draft subsidiary legislation necessary for the implementation of the MPFO. Draft legislation, covering the regulatory and operational aspects of the MPF System, was completed after extensive consultation with interested parties, including the Legislative Council, labour unions, employer groups, professional and other relevant organisations.

      Some contentious issues arose during the consultation process, such as interface arrangements for existing retirement schemes voluntarily established by employers, fees to be borne by MPF scheme members and requirements on the minimum level of Hong Kong Dollar denominated assets. The government aims to achieve a high degree of security of retirement protection through an effective system of prudential regulation and supervision. Proposals for the MPF System are developed to protect scheme member interests and to give service providers sufficient flexibility to manage the schemes for best results. Requirements in respect of scheme registration, transfer of accrued benefits, scheme accounting and auditing and other aspects have been streamlined in order to minimise the cost burden on MPF scheme members. Draconian rules are avoided. The proposed MPF system represents a good balance




between the security of scheme assets and efficiency in scheme operations. It is to serve the best interests of the community.

  The draft legislation on MPF has been submitted to the Provisional Legislative Council for enactment. The government's target is to put the MPF System in place by 1998. An MPF Schemes Authority will be established to supervise the operation of the system.

Increasing Financial Links Between Hong Kong and the Mainland

Hong Kong has been serving as the Mainland's primary channel for international fund-raising but 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 the Mainland.

  Hong Kong has facilitated the Mainland's overseas fund-raising activities via our equity and debt markets. At the end of 1997, 39 Chinese state-owned enterprises were listed in Hong Kong through the issuance of H-shares, raising a total of more than $58.9 billion.

Cross-border fund flows among financial institutions have also grown rapidly. Over the years, the Mainland 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 the Mainland and subsequently channelled back to Hong Kong through the inter-bank market.

Since 1980, external liabilities of authorised institutions in Hong Kong to financial institutions in the Mainland have grown at an average rate of over 37 per cent per annum to $290 billion by December 1997. Over the same period, claims on financial institutions in the Mainland by authorised institutions in Hong Kong registered an annual growth of about 24.5 per cent to $338 billion.

  Many banks from Hong Kong have expanded their businesses in the Mainland. A total of 18 locally incorporated banks had established 34 branches and 31 representative offices there at the end of 1997.

Portfolio investment in the form of 'China funds' has also become increasingly popular. By the end of 1997, 28 such funds, amounting to some US$1.3 billion, 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

The government is committed to improving Hong Kong's position as a premier financial centre by, inter alia, providing state-of-the-art financial infrastructure. Consultants will be engaged to examine how to set up a secure intranet linking regulators and regulated institutions as a first step towards straight through processing across the financial system, how to link the securities clearing system to the banking clearing system, and explore the feasibility of setting up a single clearing corporation for both stocks and futures to reduce risks and increase efficiency. Subject to funding approval, consultancy studies will commence in 1998.

The HKMA has also worked closely with the banking community to enhance the robustness of Hong Kong's interbank payment system. With the effort of the HKMA and the banking industry in the past few years, Hong Kong's interbank payment


system successfully changed to the new Real Time Gross Settlement (RTGS) system in 1996.

The operator of the new payment system is the Hong Kong Interbank Clearing Limited (HKICL), a company jointly owned by the HKMA and the HKAB. The HKICL was set up in May 1995 to take over in phases the clearing functions. provided by the former Management Bank of the Clearing House, the Hongkong and Shanghai Banking Corporation Limited. This process was completed in April 1997. The 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. 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 repurchase (repo) agreements with the HKMA.

The RTGS system has operated smoothly since its introduction. After a few initial teething problems, the banks have been able to comply with the Clearing House Automatic Transfer System (CHATS) throughput guidelines issued by the HKMA, which requires the settlement of not less than 35 per cent of the daily CHATS throughput by noon and 65 per cent by 2.30 pm each day. In order to further enhance the capacity, response time and resilience of the RTGS system, HKICL has upgraded its mainframe computer to a more powerful and faster model. The HKMA has also worked closely with the HKICL to set up off-site, 'hot' back-up facilities for HKICL's operating system to further enhance its robustness and resilience. Hot back-up facilities mean that data are transferred to the facilities in parallel to the main operating system. It is a real time full back-up that can immediately assume all functions when the main operating system breaks down. This back-up computer centre will start operation in 1998.

The RTGS system has provided the building block for Payment versus Payment (PvP) for foreign-exchange transactions upon establishment of linkages of payment systems between Hong Kong and other economies. The HKMĀ has reached agreement in principle with the People's Bank of China to establish a PvP link between the Hong Kong dollar payment system and the Renminbi payment system when China's National Automated Payment System (CNAPS) goes live on RTGS. A PvP link will reduce the settlement risk in foreign exchange transactions arising from the difference in timing in the final settlement of the two currencies involved. Initial discussions have also been held between Hong Kong, Australia and New Zealand on similar PvP linkages.

       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 260 CMU members, which are mostly financial institutions in Hong Kong, participate in the system. In 1997, there were 554 issues with a total value of $199 billion lodged with the CMU. In addition to Hong Kong dollar denominated debt instruments, the system started to accept foreign currency denominated debt instruments in 1996. In December 1997, a Securities Lending and Borrowing Programme for CMU private sector debt securities was introduced to all CMU members. It enhances the liquidity of private sector debt




securities in the secondary market through the market making process and improves settlement efficiency by reducing settlement failures.

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 (DvP), 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 'repo' in a safe and efficient manner. Further software changes were introduced to the CMU system in November 1997 to improve it.

   The CMU was 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. In December 1997, bilateral linkages between the CMU and the central securities depositories in Australia were established. These linkages facilitate cross-border holding and trading of debt securities and reduce settlement risk of cross-border securities transactions by facilitating DvP settlement.

   While the interface between the interbank payment system and CMU has enabled real time and end-of-day DvP for CMU securities to take place, the HKMA has held talks with the Hong Kong Stock Exchange and the Hong Kong Securities Clearing Company on establishing a link between the interbank payment system running on RTGS and the CCASS (clearing system for Hong Kong shares) to introduce real time and end-of-period DvP for share transactions. Implementation of the new facility is expected to take place in mid-1998.

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 $345.5 billion at end-1997, representing a 24 per cent increase over 1996 and equivalent to 26 per cent of the GDP. Exchange Fund Bills and Notes accounted for 29 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.

The total outstanding amount of Exchange Fund Bills and Notes increased to $102 billion at the end of 1997, compared with $92 billion at end-1996. Reflecting the favourable reception to the Exchange Fund paper, the average oversubscription rate for the Note issues was about 3.5 times in 1997. At end-1997, the yield of the 10-year Exchange Fund Notes stood at 6.76 per cent, only about 70 basis points above that of the 10-year US Treasury Notes. The daily turnover of the Exchange Fund paper in 1997 was $14 billion, equivalent to 14 per cent of the amount of paper outstanding. In 1997, multilateral financial organisations including the European Investment Bank, the International Finance Corporation and the World Bank launched a total of 12 Hong Kong dollar debt issues, involving a total issue size of $8.45 billion. After a period of subdued activity in 1996, the mortgage-backed securities market picked up in 1997. There were three issues, involving a total of $4.2 billion.

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 182-day and 364-day bills and two-, three-, five-, seven- and 10- year Exchange Fund Notes. Three tap issues of 28-day Exchange Fund Bills were launched in 1996 to facilitate the liquidity management of banks under the RTGS system. They continued to be rolled over in 1997 in view of the continuing market demand.

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 10 multilateral financial organisations, such as the World Bank and the Asian Development Bank. To facilitate further the development of the local debt market, in May 1996 the government introduced 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 1997, 52 private debt issues totalling $99.5 billion qualified as LAF-eligible securities.

Development of a Secondary Mortgage Market

      There are fertile grounds for the development of a secondary mortgage market in Hong Kong as evidenced by the strong increase in outstanding residential mortgage loans from 8 per cent of GDP in 1980 to 32 per cent in 1997. A properly developed secondary mortgage market can play a useful role in channelling long-term funds, such as insurance and pension funds, to meet the rising demand for long-term home financing.

Since 1994, there have been several issues of residential mortgage-backed securities (MBS) in Hong Kong. However, the market has been slow to evolve because of technical issues such as the heterogeneity and complexity of the MBS product, the prepayment risk and the mismatch between the floating rate issues, limited liquidity in the secondary market and the preference of institutional investors for fixed rate paper.

In April 1996, the HKMA conducted a two-month public consultation on the proposal to set up a mortgage corporation in Hong Kong. A wide spectrum of the community including the banking sector, capital market participants and academics have expressed support for the proposal. There is general agreement that the successful operation of a Mortgage Corporation will entail significant benefits to Hong Kong in terms of promoting banking and monetary stability, debt market development and home ownership. There is also broad support for initial government ownership of the corporation in securing its acceptance by the market.

Having received the approval from the Exchange Fund Advisory Committee in July 1996, the Hong Kong Mortgage Corporation (HKMC) was incorporated in March 1997. The HKMC is a public limited company incorporated under the Companies Ordinance. It is 100 per cent owned by the government through the Exchange Fund with a capital base of $1 billion and is recognised as a 'public sector entity' under the




Banking Ordinance. Its business will be developed in two phases. Initially the corporation will purchase mortgage loans for its own portfolio and fund the purchases largely through the issuance of unsecured debt securities. In the second phase, the HKMC will securitise the mortgages into mortgage-backed securities and offer them for sale to investors.

The HKMC commenced business in October 1997. The first block of mortgage purchase, involving a total of $650 million, was purchased in November.

Monetary Policy

Hong Kong's monetary policy objective is currency stability. Given the highly externally oriented nature of the Hong Kong economy, this objective is further defined as a stable external value for the currency in terms of a fixed exchange rate against the US dollar at the rate of $7.80 to US$1.

This clear monetary policy objective is achieved through what has been referred to as the linked exchange rate system. This system was introduced in October 1983 after a nine-year period in which the Hong Kong dollar floated and the exchange rate was volatile. Without an effective monetary anchor or any mechanism for monetary control, due to the absence of any institutional arrangement that enabled the authorities to influence the supply or price of money, there was sharp depreciation in the exchange rate towards the end of the nine-year period when uncertainties about the political future of Hong Kong affected confidence in the currency. The linked exchange rate system introduced an external anchor for the currency and restored confidence in it.

The linked exchange rate system, as structured in 1983, required the issue and redemption of bank notes, through the note-issuing banks, to be made against US dollars at the fixed exchange rate of $7.80 to US$1. Certificates of Indebtedness, which authorise the note-issuing banks to issue bank notes, are issued and redeemed against the US dollar at that fixed rate and for the account of the Exchange Fund. Under this influence, and the fact that deposit money is convertible to bank notes, the exchange rate for the Hong Kong dollar in the foreign exchange market stays close to the level of the fixed rate.

The linked exchange rate system is what is known academically as a currency board system which theoretically requires the monetary base to be backed by a foreign currency at a fixed exchange rate. The monetary base is normally defined as the sum of the amount of bank notes issued and the balance of the banking system (the reserve balance or the clearing balance) held with the currency board for the purpose of effecting the clearing and settlement of transactions between the banks themselves, and also between the currency board and the banks. The monetary base increases when the foreign currency (in Hong Kong's case, US dollars), to which the domestic currency is linked, is sold to the currency board for the domestic currency (capital inflow). It contracts when the foreign currency is bought from the currency board (capital outflow). The expansion or contraction in the monetary base leads interest rates for the domestic currency to fall or rise, respectively, creating the monetary conditions that automatically counteract the original capital movement, ensuring stability of the exchange rate throughout the process.

  In October 1983, when the linked exchange rate system was introduced, there was no institutional arrangement whereby banks in Hong Kong maintained clearing


accounts with the currency board. Thus that part of the monetary base represented by the clearing balance of the banking system was initially not subject to the discipline imposed by a currency board system. Action was taken to correct this in 1988 through arrangements which required the Management Bank of the Clearing House of the Hong Kong Association of Banks to maintain a clearing account with the government's then Monetary Affairs Branch for the account of the Exchange Fund. This was replaced by another arrangement, when the RTGS system was introduced for interbank transactions in Hong Kong towards the end of 1996. These reform measures subjected the whole of the monetary base to the discipline of the currency board arrangement and strengthened the linked exchange rate system of Hong Kong in ensuring exchange rate stability.

      By assuming responsibility over the clearing system for money, the HKMA also became responsible for the provision of last-resort lending for banks with day-to-day shortage of liquidity. A mechanism to facilitate the performance of this important role was instituted through the Exchange Fund Bills and Notes Programme, which started in 1990, and the introduction of LAF in 1992. The former served, among other things, to provide a money market instrument which banks could use to obtain liquidity by selling them in an active secondary market or pledge them for liquidity from the HKMA at the end of the day through the latter.

      The HKMA maintains the strict discipline of the currency board system when engaging in any activity that has the effect of altering that part of the monetary base represented by the clearing balance of the banking system, and when issuing and redeeming Certificates of Indebtedness that give authority to the note-issuing banks to issue currency notes.

Monetary Situation

Monetary conditions were generally stable in the first half of 1997. The foreign exchange market reacted calmly to the death of Mr Deng Xiaoping on February 20. The exchange rate stayed around the $7.740 level in the latter part of February before easing to $7.750 in late March along with the correction in the stock market. The Hong Kong dollar strengthened to $7.736 in mid-May, in part reflecting an inflow of funds into the local stock market.

Money market conditions were also steady in the first half of the year, except on a few occasions when share subscription activities and month-end settlement caused a temporary tightening in the market. For most of the time, Hong Kong dollar interest rates followed closely those of the US dollar. On March 25, the Fed Funds Target Rate was raised 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 upwards by the same magnitude, to 4.25 per cent and 6.25 per cent respectively. The savings deposit rate and the Best Lending Rate of major banks were also raised by 25 bps. During most of the first half of 1997, the overnight Hong Kong Interbank Offered Rate (HIBOR) remained steady and largely moved within the corridor set by the LAF bid and offer rates. Likewise, the three-month HIBOR moved closely in line with the three-month Euro dollar deposit rate. The average differential between the two rates was only 23 bps. As regards longer term interest rates, yields of the seven-year and 10-year Exchange Fund Notes tracked closely the corresponding US Treasuries. The average spreads above the US Treasuries were 39 bps and 63 bps respectively.




The foreign exchange and money markets stayed calm when China resumed sovereignty over Hong Kong on July 1, but financial turmoil sparked off by the floating of the Thai Baht in early July swept across the East Asian economies in the second half of 1997. Affected by the contagion effect of the regional financial turbulence, the Hong Kong dollar came under selling pressure on a few occasions between July and October, and money market conditions tightened. On August 19, money market rates firmed up on rumours of a possible hike in the Best Lending Rate, with the overnight HIBOR briefly touching a high of 18 per cent. There was another brief tightening on August 28 due to renewed fears of a possible contagion effect from the sharp falls in the region's currency and stock markets. The overnight HIBOR then stabilised and hovered within a range of 4.8 per cent to 7.9 per cent until mid-October.

Selling pressure on the Hong Kong dollar intensified in the week preceding October 20 after the Taiwanese government decided not to defend the New Taiwan Dollar. In response, the HKMA bought a substantial amount of Hong Kong dollars on October 21 and 22. These foreign exchange transactions were due to settle on October 23 and 24. The settlement would involve the HKMA debiting the clearing accounts of the banks which had sold the Hong Kong dollars to the HKMA. On October 23, the HKMA issued a circular to all licensed banks reminding them of the need to organise their Hong Kong dollar funding prudently and not be overly dependent upon the LAF for last-resort liquidity support. The circular also warned them that the HKMA might impose penal LAF rates for repeated borrowers to discourage the use of the facility to fund a short Hong Kong dollar position.

As the banks collectively had sold more Hong Kong dollars to the HKMA than they could settle by using their credit balances in their clearing accounts with the HKMA, there was a shortage of interbank liquidity when these foreign exchange transactions were settled on October 23. As a result, short-term interest rates were driven up and the overnight interbank interest rate briefly touched 280 per cent. The high interest rate reversed the capital outflow and effectively fended off speculators.

When speculators began to unwind their short positions in Hong Kong dollar by selling US dollar, and some investors and corporates with US dollar funding switched into HK dollar to benefit from the high deposit rates, the HKMA picked up the US dollar and recycled the Hong Kong dollar into the banking system in the afternoon of October 23. Short-term interbank interest rates began to ease. By the close of day, the overnight interbank interest rate came down to 100 per cent and towards the end of the month, it eased further to around 7 per cent. On October 24, the savings deposit rate and Best Lending Rate of major banks were raised by 75 bps.

As the overnight HIBOR exhibited a higher degree of volatility during this episode, a wider LAF corridor was considered appropriate to give the overnight interbank interest rate more room to move and to reflect conditions in the interbank market. On October 25, the HKMA widened the band of the LAF corridor from 200 bps to 300 bps and adjusted the LAF bid and offer rates to 4 per cent and 7 per cent respectively.

While short-term interest rates came down quickly, term rates remained high in late October and early November as banks conserved liquidity for fear of another liquidity squeeze as a result of another currency attack. The Hong Kong dollar yield curve thus assumed an unusual inverted 'U-shape', with a very steep portion running


from the overnight to the one-month area. To restore market order, on November 12 the HKMA issued a circular to banks clarifying the definition of 'repeated borrowers'. Helped by this measure, the term rates in the interbank market started to come down in the third week of November.

      Nevertheless, reflecting the risk premium arising from the uncertainties in the region, the Hong Kong dollar interest rates remained at levels considerably higher than their US dollar counterparts. The three-month interbank interest rate fluctuated between 8.5 per cent and 12 per cent in November and December, compared with the prevailing level of 6 to 8 per cent before the October event. As a result, the average daily differential between the three-month Hong Kong dollar interest rate and its US dollar counterpart widened from 61 bps in the first nine months of the year to 408 bps in the last quarter.

      The yields of seven-year and 10-year Exchange Fund Notes reached a high of 8.91 per cent and 9 per cent respectively on October 23, along with the hike in short-term interest rates. The yields eased gradually after the October incident but were still at levels considerably higher than at the beginning of the year. At the end of 1997, the yields of the seven-year and 10-year Exchange Fund Notes stood at 9.23 per cent and 9.22 per cent respectively, 209 bps and 181 bps above the yields at the beginning of 1997. The average spread between 10-year Exchange Fund Notes and 10-year US Treasuries in the last quarter of 1997 also widened to 225 bps as compared with an average of 63 bps in the first nine months of the year.

      Following the successful defence of the Hong Kong dollar in October 1997, the Hong Kong dollar exchange rate remained very stable, trading within the narrow range of $7.725 to $7.750 against the US dollar, notwithstanding the sharp depreciation of Korean Won in November.

      The overall exchange value of the Hong Kong dollar, as measured by the trade- weighted Effective Exchange Rate Index (EERI), is predominantly affected by the exchange rate of the US dollar vis-a-vis other major currencies. During 1997, the US dollar strengthened against the Deutschmark and Japanese Yen. Coupled with a stable Renminbi, the EERI of the Hong Kong dollar rose to 137.9 at the end of the year, from 125.3 as at end-1996.

      With market corrections in the asset markets, due to the firming up of the Hong Kong dollar interest rates, credit expansion slowed down in the last quarter of 1997. For the year as a whole, the Hong Kong dollar M1 fell by 5.1 per cent. The growth rate of Hong Kong dollar M3, the broad money supply, decelerated to 9.9 per cent.

Land Fund

The HKSAR Government Land Fund Trust was established on August 13, 1986. The Land Fund Trust was set up to facilitate the management of the HKSAR's share of revenue obtained from land sales during the period commencing from the entry into force of the Joint Declaration (i.e. May 27, 1985) until China's resumption of exercise of sovereignty.

      Upon the establishment of the Special Administrative Region on July 1, the assets of the Land Fund Trust were vested in the HKSAR Government. The Chief Executive of the HKSAR has appointed the Financial Secretary as the public officer to receive, hold and manage the fund, as part of the HKSÅR Government




reserves. Subsequently, the Land Fund was established by resolution made and passed by the Provisional Legislative Council on July 23 under section 29 of the Public Finance Ordinance. The fund is now managed by the HKMA under the direction of the Financial Secretary as a separate portfolio from the Exchange Fund. A Land Fund Advisory Committee, chaired by the Financial Secretary, was set up on July 1 to advise the Financial Secretary on the management and investment strategy of the fund. At December 31, the total assets of the Land Fund stood at $195.6 billion.

Exchange Fund

The HKSAR 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, the fund's 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, placed with the fund.

   The Exchange Fund's statutory role, as defined in the Exchange Fund Ordinance, is primarily to affect the exchange value of the currency of Hong Kong. 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 Exchange Fund. Apart from ensuring that the fund meets its statutory roles, the HKMA's principal activity on a day-to-day basis is the active management of the fund's assets. These are held mainly in the form of bank deposits, equities and marketable interest-bearing instruments in certain foreign currencies and in Hong Kong dollars.

The HKMA adopts a 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 for public use. Banknotes 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. The note-issuing banks may issue currency notes only against non-interest-bearing Certificates of Indebtedness issued by the Fund. The Fund bears the paper and printing costs relating to the note issue.

      The government issues coins of $10, $5, $2, $1, 50 cents, 20 cents and 10 cents denominations. Administration of the coin circulation is the responsibility of the HKMA. Exceptional public demand caused the total number of new coins placed into circulation in 1997 to reach a record 1.2 billion pieces, compared with the normal order volume per year of about 300 to 400 million coins. The total notes and coins in circulation at the end of 1997 was $92.2 billion.

      During the year, three commemorative coin products were issued to mark the establishment of the HKSAR. They included a $1,000 gold coin and two commemorative coin sets (available in both proof and brilliant uncirculated versions). Both coin sets were of seven coins with their own special design and in the same denominations as the seven currently circulating coins. A philatelic-numismatic cover incorporating a $10 coin with special design and a $5 stamp were also issued during the year to commemorate the opening of the Lantau Link.

      In March, the government sold 15 per cent of the shareholding of the Hong Kong Note Printing Limited to the China Banknote Printing and Minting Corporation, a PRC state-owned enterprise. In October, the HKSARG sold a further 10 per cent of the company's issued shares to each of the three note-issuing banks. The HKSARG will continue to maintain a majority stake in the note-printing company. The sale of shares will widen and strengthen the shareholder base of the company and contribute to the future success and development of the company.

      On December 31, 1997, the Exchange Fund's total assets stood at $535 billion, of which foreign currency assets amounted to US$64 billion. Accumulated earnings amounted to $172 billion. The fund's financial position for the six years from 1991 to 1996 inclusive, is shown at Appendix 19. 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 were made available on a monthly basis from January 1997. Based on unaudited figures, the fund's total assets stood at $569 billion and its accumulated earnings amounted to $182 billion at June 30, 1997. Foreign currency assets, excluding forward transactions to be settled, amounted to US$75.3 billion at December 31.




The World Bank/International Monetary Fund Annual Meetings 1997

The 1997 World Bank Group/International Monetary Fund Annual Meetings (the Meetings) were held in the Hong Kong Convention and Exhibition Centre from September 23 to 25.

The Meetings were generally regarded as a great success, as reported widely in both overseas and local media and as evident from views expressed by the participants. They demonstrated Hong Kong's ability to organise a very complex event while meeting all the requirements of the two organisations. Hong Kong's hi-tech image was demonstrated through the provision of video walls, bar-coded access badges to improve security control and an electronic message system to facilitate communication among delegates. The World Bank Group and the International Monetary Fund were very satisfied with the arrangements. The 1997 Meetings set records for the number of participants registered and the coverage of topics discussed at meetings or seminars. A total of 19 500 participants registered and more than 200 formal meetings were held.

With the presence of about 300 Finance Ministers and Central Bank Governors from some 180 member countries as well as other influential opinion-formers of the world in town, the Meetings provided a valuable opportunity for Hong Kong to showcase its continued prosperity and stability under the 'One Country, Two Systems' principle.

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, in so far as it relates to trust companies, the Registered Trustees Incorporation Ordinance and the Limited Partnerships Ordinance.

Since 1993, the Companies Registry has operated as a trading fund department. As a trading fund, 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. The 1996/97 financial year was the first year that the registry was able to meet its target rate of return, set at 10 per cent. The surplus reached a record high of $67 million, largely due to the significant increase in the number of company incorporations.

During the year, the registry continued to improve the quality of services delivered. In February 1997, public search services were improved by merging the ordinary search (searching the records of two to 10 companies) and the bulk search (searching the records of more than 10 companies) services to achieve a more effective and satisfactory service. At the same time, restrictions on the number of companies whose records could be searched on each occasion for ordinary search were removed. Several multi-purpose counters were set up to provide a one-stop shop for customers applying for and collecting microfilm. The registry launched its home page on the Internet in July 1997 and was designing an Interactive Voice Response System, scheduled to be introduced in 1998, to handle general telephone inquiries.


      One of the registry's long-term objectives is to provide direct on-line access to the records it maintains. A project to expand the database to include key data on more than 479 000 registered companies, which began in the middle of 1996 with a view to making relevant information available for on-line search by customers through terminals in their offices, is well under way. It is scheduled for completion in 1998. A smaller scale on-line service providing the company name and document indices was launched by the registry's agent through the Internet in July 1997. The registry is also considering changing the medium of document storage to optical disk from microfiche, which is a labour-intensive mode of technology.

      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, commenced by a specially appointed consultant in January 1995, was completed. The Consultant's Report was launched for public consultation in May 1997.

      In the course of the year, major amendments were made to the Companies. Ordinance regarding the filing of information with the registry. The Companies (Amendment) Ordinance 1997, which was implemented on February 10, 1997, de- regulated the statutory forms under the Companies Ordinance and, at the same time, the most commonly used forms were replaced with new bilingual and more user- friendly specified forms. The ordinance also abolished the ultra vires rule, thereby relieving companies of the need to state lengthy objects clauses in their memorandum and articles. On the same date, the new Chinese-language provisions in the Companies (Amendment) Ordinance 1995 were also implemented, and information may now be filed with the registry in Chinese or English or both. In parallel with the filing of information in Chinese, the registry's computer system for search services was also enhanced during the year in order to provide search functions in Chinese.

      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 1997, a total of 484 163 companies had been so examined, 101 248 had been identified for action under section 290A and 82 366 had been de-registered.

      In 1997, 49 275 new companies were incorporated. On incorporation under the Companies Ordinance, a local company pays a registration fee of $1,425 and a lodgement fee of $295 plus $3 for every $1,000 of nominal capital. During the year the nominal capital of new companies registered totalled $6.91 billion and 6953 companies had increased their nominal capital by amounts totalling $72.51 billion. At the end of the year, 474 517 local companies were on the register, compared with 483 181 in 1996.

      Companies incorporated overseas must register certain documents with the registry within one month of establishing a place of business in Hong Kong. A registration fee of $1,425, a lodgement fee of $295 and some incidental filing fees are payable in such cases. During 1997, 713 of these were registered. At the end of the year, 5 067




companies were registered from 76 countries, including 1 359 from the British Virgin Islands, 822 from the USA, 478 from Bermuda, 414 from the UK, and 368 from Japan.

Money Lenders

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

   Licence applications are, initially, submitted to the Registrar of Companies as Registrar of Money Lenders. A copy is also sent to the Commissioner of Police who may object to the application. The application is advertised and any member of the public who has an interest in the matter also has the right to object. During the year, 1 179 applications were received and 1 250 licences were granted. At the end of 1997, there were 1 138 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 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 Court of First Instance of the High Court.

The Official Receiver becomes the interim receiver of an individual debtor or provisional liquidator of a company when a receiving order against the property of the debtor or a winding-up order against the company is made by the Court of First Instance of the High Court. Where the assets of an estate do not exceed $200,000, the Official Receiver is appointed trustee or liquidator by a summary procedure order. In other cases, a meeting of creditors in bankruptcy or meetings of creditors and contributories in compulsory liquidation will be convened to decide whether the Official Receiver or some other fit persons from the private sector should be appointed trustee or liquidator.

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 Ordinance and the Companies Ordinance, applies for disqualification of unfit company directors, supervises the work of outside liquidators and trustees, and monitors funds held by liquidators in compulsory and voluntary liquidations.

   The Bankruptcy (Amendment) Ordinance 1996 was enacted on December 27, 1996, to come into operation as and when the related amendments to the bankruptcy subsidiary legislation were finalised. It abolishes the outdated concept of 'acts of bankruptcy', provides 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 simplifies procedures under the ordinance.

      During the year, the Court of First Instance of the High Court made 639 receiving orders and 503 winding-up orders. Assets realised by the Official Receiver during 1997 amounted to $79.37 million, while creditors in 210 insolvency cases received $99.51 million in dividends.

Professional Accountancy

Hong Kong had 13 695 registered professional accountants at the end of 1997. Of these, 2 409 were certified public accountants (CPAs) or public accountants (PAs) who are in public practice and entitled to perform statutory audits. There were 920 CPA firms and 31 corporate practices in Hong Kong 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 Hong Kong Society of Accountants is developing its own independent professional examinations and aims to hold its first examination in 1999 to establish its own benchmarks for competency standards for professional accountants. The existing Joint Examination Scheme held by the Hong Kong Society of Accountants and the Association of Chartered Certified Accountants (UK) will continue until 2002.






  HONG KONG'S economy continued to restructure during the year from a low-cost, assembly-type manufacturing entity towards a regional service and commercial centre and a high-value-added manufacturing base. The government continued to promote service industries and upgrade technological infrastructure.

   Hong Kong's external trade experienced a moderate growth in 1997, with total trade increasing by 4.7 per cent over the previous year. In particular, re-exports registered a 5.0 per cent increase, reflecting the continued important role of Hong Kong as an entrepot. The gross total value of re-exports was $1,244.5 billion. Imports rose by 5.2 per cent to $1,615.1 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, an excellent infrastructure, free flow of capital and information 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 HKSAR maintains no tariffs and no regulatory trade and investment measures other than those required to discharge its international obligations or to protect health, the environment and access to high technology.

   The government's industrial policies aim to promote industrial development by creating a business-friendly environment and providing adequate 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 any specific industries.

Trade and industrial policies are kept under review by the Trade and Industry Bureau 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's external trade experienced a moderate growth in 1997, with total trade increasing by 4.7 per cent over the previous year. In particular, re-exports registered a 5.0 per cent increase, reflecting the continued important role of Hong Kong as an entrepot. The gross total value of re-exports was $1,244.5 billion. Imports also rose by 5.2 per cent to $1,615.1 billion.

      In 1996, Hong Kong was the world's seventh-largest trading entity in terms of value of merchandise trade; the fourth-largest if all Member States of the European Union are counted as a single entity. In 1997, it recorded a trade deficit of $159 billion with total exports at $1,455.9 billion and imports at $1,615.1 billion.

      Its largest trading partner is the Mainland of China, followed by the USA and Japan. Appendices 20, 21 and 22 provide summary statistics of external trade.


Hong Kong is almost entirely dependent on imported resources to meet the needs of its more than six million people and its diverse industries. Consumer goods, at $587 billion in 1997, constituted the largest share of total imports. This was followed by raw materials and semi-manufactured goods ($562.4 billion) and capital goods, foodstuffs and fuels ($465.7 billion)

      The Mainland of China, Japan and the USA were the main suppliers of Hong Kong's imports in 1997, accounting for 37.7 per cent, 13.7 per cent and 7.8 per cent of the total, respectively.

Domestic Exports

Clothing continued to be the largest component of domestic exports, valued at $72.2 billion or 34.2 per cent of the total in 1997. This percentage has remained stable over the past decade. At $33 billion, electrical machinery, apparatus and appliances came second. Other exports included photographic apparatus, equipment and supplies and optical goods; watches and clocks; textiles; and office machines and automatic data processing machines.

      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 1997, the Mainland of China, the USA and the United Kingdom were Hong Kong's largest markets, absorbing 30.2 per cent, 26.1 per cent and 5.1 per cent of total domestic exports, respectively.


Re-exports sustained moderate growth in 1997, reflecting the continued importance of Hong Kong as an entrepot for the Mainland of China. Re-exports made up 85.5 per cent of the value of total exports.

      Principal commodities re-exported included electrical machinery, apparatus and appliances ($136.8 billion or 11 per cent of the total) and telecommunications and sound recording and reproducing apparatus and equipment ($116.8 billion or 9.4 per cent of the total). Other major re-exports included clothing; textiles; and baby carriages, toys games and sporting goods. The Mainland of China, Japan and Taiwan were the main origins of the re-exports; the Mainland of China, the USA and Japan were the main destinations.




The Manufacturing Sector

Restructuring of the manufacturing sector reduced its contribution to GDP from 18 per cent in 1990 to about 7 per cent in 1996, but it continued to be an important sector of the economy. It was Hong Kong's fourth-largest employer, employing 309 160 persons (12 per cent of the total employment) in 1997. Mechanisation, automation and relocation of assembly-type operations to the Mainland of China have accelerated the development of more knowledge-based and higher-value-added manufacturing.

   The clothing industry was the largest employer in the manufacturing sector in 1997, followed by the printing, publishing and allied industries. Chart 1 shows the breakdown of employment within the manufacturing sector in 1997.

Printing 14.8% (45 844)


10.9% (33 699)


7.3% (22 671)

Food & Beverages 6.8% (21 073)

Metal Products

Clothing 24.8% (76 785)

5.5% (16 933)


29.8% (92 155)

Chart 1: Number of Persons Employed by the Manufacturing Sector in 1997

   Manufacturing establishments in Hong Kong are generally small. Of the 26 397 manufacturing establishments in 1997, 25 398 employed fewer than 50 people. They however accounted for 51 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. This arrangement has enabled the manufacturing sector to respond swiftly to changes in demand.

   The manufacturing sector remains export-oriented. About 80 per cent of the products manufactured were exported. Domestic exports amounted to $211.41 billion million in 1997. Major export items included clothing, electronics, textiles, watches and clocks, and chemical products. In 1995, Hong Kong was the world's leading exporter of clothing, watches and clocks.

Major export markets in 1997 were the Mainland of China (30.2 per cent), the USA (26.1 per cent), the United Kingdom (5.1 per cent), Japan (5 per cent) and Germany (4.9 per cent). The clothing industry was also the largest export-earner in the manufacturing sector, followed by the electronics industry. Chart 2 shows the value of domestic exports of the major industries in 1997.



26.7% ($56.466 billion)



34.2% ($72.228 billion)


6% ($12.655 billion)

Watches & Clocks

5.1% ($10.798 billion)


3.8% ($8.077 billion)



21.7% ($45.853 billion)

2.5% ($5.333 billion)

Chart 2: Value of Domestic Exports of the Manufacturing Sector in 1997

External Investment

The Industry Department promotes and facilitates overseas investment in the industries of Hong Kong. It maintains a One Stop Unit in Hong Kong which works closely with seven overseas Investment Promotion Units in North America, Europe, Japan and Australia. Together, they provide advice and assistance to potential overseas investors in developing and implementing their investment plans in Hong Kong.

Surveys conducted by the Industry Department and Census & Statistics Department show there were 403 foreign-owned manufacturing companies and 4 477 foreign-owned non-manufacturing companies in Hong Kong at the end of 1996. Total stock of direct investment amounted to $532.6 billion at original cost. Charts 3 and 4 give further information on the industries and source countries of the external investment. These foreign-owned companies together employed 326 921 people (i.e. 13 per cent of Hong Kong's total employment). Foreign-owned manufacturing companies accounted for 36 per cent of Hong Kong's total domestic exports.

Another Industry Department survey identified 2 307 overseas companies which had established regional headquarters or regional offices in Hong Kong by mid-1996, to co-ordinate their business activities in the region.

       To provide additional assurance to overseas investors, Hong Kong has concluded 13 bilateral investment promotion and protection agreements with its major investment partners, including Australia, Austria, Belgium/Luxembourg, Denmark, France, Germany, Italy, Japan, Korea, the Netherlands, New Zealand, Sweden and Switzerland.







Banks and deposit-taking companies Holding companies

Wholesale, retail, import/export


Other financial institutions





Real estate and other business services







Chart 3: Stock of Inward Direct Investment in Hong Kong

(Distribution by Business Sector)









The Mainland of China








Chart 4: Stock of Inward Direct Investment in Hong Kong

(Distribution by Major Investor Country)


Documentation of Imports and Exports

As a free port, the HKSAR keeps its import and export licensing requirements to a minimum. Most products do not need licences to enter or leave Hong Kong. Where licences or notifications are required, they are intended to achieve two main objectives. First, they help the HKSAR 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 grounds of health, safety, environmental protection, anti-smuggling or unrestricted access to high technology products. Items covered include strategic commodities, reserved commodities, pharmaceutical products and medicines, pesticides, radioactive substances and irradiating apparatus, left-hand-drive vehicles and ozone-depleting substances.

The HKSAR maintains a certification of origin system that, apart from certifying the origin of Hong Kong exports, also supports claims for preferential tariff treatment from donor countries. The Trade Department administers this system and issues certificates of origin. 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, the Community Electronic Trading Service (CETS) became available fully to the business community for applications of textile export licences and lodgements of trade declarations. The CETS is a joint venture involving the government and 10 leading trade-related organisations in Hong Kong. The number of companies using the CĒTS will increase quickly because it will become the only means of applying for textiles export licences by January 1999 and lodging trade declarations by April 2000.

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 Industry Department's mission is to facilitate the development of manufacturing and manufacturing-related service industries within the framework of a free market. It works closely with its partners in government, business, tertiary education institutions and industrial support organisations to provide the necessary physical, technological and human infrastructure, promote quality and productivity improvement, encourage applied research and development, monitor developments in markets and technologies, attract inward investment in Hong Kong industries, and support the development of small and medium enterprises.


The government put up 14 467 square metres of industrial land for sale by tender in 1997. Private developers provided an additional 197 809 square metres of flatted factory space in 1996. Construction of the second phase of the Tseung Kwan O 95



Industrial Estate was completed, providing 46.6 hectares of land. A fourth industrial estate is being planned to meet the demand in the early 21st century.

Technical Education and Industrial Training

The Vocational Training Council (VTC) provides technical education and industrial training space. In addition, it administers a New Technology Training Scheme which provides financial assistance to employers for training their staff in new technologies useful to their business. 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.


The Hong Kong Productivity Council (HKPC) is a statutory body established in 1967 to promote productivity improvement in industries. The Hong Kong Industrial Technology Centre Corporation (HKITCC) was established in 1993 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 August 1997, it had committed $917.90 million for 262 projects undertaken by industry associations, higher-education institutes and industrial support organisations.

Quality Services

The department's Quality Services Division provides a range of quality support services for Hong Kong industries. The Standards and Calibration Laboratory is the official custodian of Hong Kong's measurement standards. The Hong Kong Laboratory Accreditation Scheme gives formal recognition to competent laboratories, thereby facilitating the acceptance of local test certificates overseas. The Product Standards Information Bureau provides 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 Research and Development Scheme (ARDS) and the Co- operative Applied Research and Development Scheme (CARDS) were set up in February 1993 and June 1995 respectively to encourage technology ventures in the private sector. The latter scheme specifically supports technology projects undertaken in collaboration with research institutes in the Mainland. Funding support can take the form of a loan or equity participation. As at August 1997, funding support had been given to 19 ARDS projects and six CARDS projects in various high technology fields, including biotechnology, electronics, environmental technology, information technology, robotic engineering and telecommunication. The funding commitments made under the two schemes were $56 million and $32 million respectively.


Science Park

The government plans to establish a Science Park in Hong Kong. It will establish linkages with the industrial, financial and business communities, the higher education institutions, other relevant research institutions and overseas science parks. Its objectives are to help the local industry move up the technological ladder, stimulate the growth of locally-owned technologically advanced businesses, promote new technology-based activities, foster technology transfer and facilitate regional co- operation in technology development. A 22 hectare site has been identified at Pak Shek Kok, Tai Po, for development of the park. It would be developed in three phases over 15 years.

Monitoring Technology and Market Trends

The department conducts periodic studies of the major manufacturing industries to monitor technology and market trends and identify constraints on their future. development. In 1995, a study on Hong Kong's software industry was completed. Follow-up actions arising from the study, such as the establishment of a Software Industry Information Centre and a Cyberspace Centre, are progressing well and have received encouraging response from the software industry. In April 1997, the 1996/97 Techno-economic and Market Research Study on Hong Kong's Metals and Light Engineering Industries was completed and the consultants' recommendations were being considered.

Environmental Controls

The department disseminates environmental information to manufacturers. An annual guide was published to advise manufacturers on the environmental legislation that affect them and where to get technical advice. A guide on environmental technology and services available in Hong Kong and design manuals and eco-audit manual with support video for specific industries were available for sale at the Government Publications Centre.

Hong Kong Awards for Industry

These prestigious awards for excellence in industrial performance are co-ordinated by the department, and the annual award presentation ceremony is an important highlight in the industrial calendar for manufacturers. The awards cover seven categories consumer product design, machinery and equipment design, productivity, quality, environmental performance, export marketing and technological achievement.

Small and Medium Enterprises (SMEs)

The Small and Medium Enterprises (SMEs) Committee was set up in 1996 to identify issues affecting SMEs and suggest measures to support and facilitate their development. Its members include representatives from major chambers of commerce, trade and industry support organisations and SME practitioners. In 1997, it published a directory on the major services and facilities available to SMEs, and organised a conference to exchange views on the issues affecting them.




Services Support Fund

  The Services Support Fund scheme was set up in July 1996. It aims to provide financial support for projects that will contribute to the development of Hong Kong's services sectors. By December 1997, it had committed $49.5 million for 27 projects undertaken by services-support bodies, trade and industry associations, higher education institutions and professional bodies.

Industrial Support Agencies

Hong Kong Productivity Council

The Hong Kong Productivity Council (HKPC) promotes productivity excellence through the provision of professional services to enhance the value-added content of products and services.

In 1997, the HKPC continued to provide the manufacturing industries with professional services. It also implemented initiatives to enhance the productivity of the services industries focusing on service quality, productivity measurement and benchmarking, information technology, applied business management and support for the SMEs. In research and development, the HKPC provided practical and commercially viable solutions to help industries move upmarket and diversify. Its other major initiatives in the year included the alliance with Tradelink to promote electronic data interchange, the establishment of the Hong Kong Software Industry Information Centre, and a study on IT collaboration with the Mainland.

Hong Kong Industrial Technology Centre Corporation

The Hong Kong Industrial Technology Centre Corporation (HKITCC) is a statutory body set up by the government in 1993. It aims to promote technological innovation and the application of new technologies in Hong Kong industry. It 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 the HKITCC's services, the government has accepted the case for developing a second Technology Centre. A site in Kowloon Tong has been identified for work to start in 1998.

Hong Kong Industrial Estates Corporation

The Hong Kong Industrial Estates Corporation develops and manages industrial estates in Hong Kong. It manages three estates in Tai Po, Yuen Long and Tseung Kwan O, providing a total of 214 hectares of land. It is planning for a fourth estate. Sites in the estates are offered at cost to industries which cannot operate in multi- storey factory buildings.

External Commercial Relations

The HKSAR has full autonomy in the conduct of its external commercial relations. The Basic Law of the HKSAR provides that the HKSAR shall be a separate customs territory and may, using the name 'Hong Kong, China', participate in relevant international organisations and international trade agreements, such as the General Agreement on Tariffs and Trade (now the World Trade Organisation - WTO) and arrangements regarding international trade in textiles.


      Within the context of the government's free trade policy, the objectives of the HKSAR's commercial relations are to ensure that its trading rights in overseas markets are protected and its international obligations are fulfilled. Hong Kong's success is reflected in the steady rise in the value and sophistication of its exports in recent years.


The HKSAR textile exports to the European Union (EU), Norway, Canada and the USA are subject to quantitative restrictions maintained under the WTO Agreement on Textiles and Clothing (ATC) which came into force on January 1, 1995. These quantitative restrictions will be removed by 2005 under a 10-year phase-out programme. The HKSAR participated actively in the review of the implementation of the quota phase-out programme and continued to monitor closely the functioning of the ATC's supervisory body, the Textiles Monitoring Body. Through the co- ordination of the International Textiles and Clothing Bureau (of which the HKSAR is a member), the HKSAR 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.

      In May 1997, the US rescinded the single entry bond which, among other additional documentation requirements, was imposed by the US Customs in June 1996 on imports of 10 categories of the HKSAR garments. The revocation decision signalled the USA's recognition of Hong Kong's determination and efforts in tackling illegal textile transshipment.

Non-textiles Issues

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. The HKSAR 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 year, the HKSAR provided constructive input to the multilateral negotiations on basic telecommunications and financial services. The negotiations on basic telecommunications were successfully concluded on February

           on February 15, 1997. The agreement will open up a huge telecommunications market globally, estimated at US$760 billion per annum. The commitments will come into effect on February 5, 1998. The financial services negotiations were successfully concluded on December 13, 1997. The agreement comprises a broad range of commitments to open up financial markets which account for over 95 per cent of the world trade in financial services. These commitments are scheduled to come into effect on March 1, 1999.

      Hong Kong joined the Information Technology Agreement concluded in March 1997 under which participating economies undertook to eliminate tariffs on information technology products, components and sub-assemblies by January 2000. It is estimated that more than $170 billion of Hong Kong's domestic exports and re- exports will benefit.

In May 1997, Hong Kong acceded to the WTO Agreement on Government Procurement under which each party is required to provide non-discriminatory treatment to the products, services and suppliers of other parties. Hong Kong's accession to the agreement re-affirms the continuity of its open, transparent and non-




  discriminatory procurement system, and improves access of HKSAR goods and services to the government procurement markets of other parties.

   During the first half of the year, the HKSAR Government and the private sector continued to emphasise to the USA administration and members of Congress the adverse effects on Hong Kong's economy if 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 30, President Clinton announced his decision to renew China's MFN trading status unconditionally for another year. A joint resolution disapproving the President's decision on MFN was introduced but was defeated by a floor vote in the House of Representatives on June 24.

   The outcome removed for the time being uncertainty over Sino-USA trade relations, and allowed Hong Kong business people to plan and conduct their operations accordingly. The Mainland of China and the USA are Hong Kong's two largest trading partners and good relations between them are of vital importance to the HKSAR maintaining its status as a trading, financial and investment centre.

Trade Department

The Trade Department is responsible for Hong Kong's commercial relations with trading partners. It implements trade policies 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 the HKSAR's external commercial relations, such as its participation in the WTO and the Organisation of Economic Co-operation and Development (OECD). The Regional Co-operation Division takes care of activities related to the Asia-Pacific Economic Co-operation forum (APEC) and the Pacific Economic Co-operation Council (PECC). In addition, the Regional Co-operation Division is responsible for multilateral matters relating to market access and government procurement.

   The Asia and Americas Division and the Europe Division deal with bilateral commercial relations with the HKSAR'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 the HKSAR's external trade, especially those relating to trade policies and measures adopted in its major markets. The Europe Division also has responsibility for multilateral matters relating to anti- dumping, rules of origin, competition and investment.

   The Systems Division is responsible for the textiles export control system, the computerisation of the department's licensing systems, origin certification, 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 Bureau.


Hong Kong Economic and Trade Offices

These offices seek to promote Hong Kong's economic and trade interests by enhancing understanding of the Special Administrative Region among opinion- formers; closely monitoring developments that might affect the Special Administrative Region'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, China, 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 the commission) the majority of the Member States of the EU. It also monitors Hong Kong's economic and trade relations with a number of European Countries.

      The London Office promotes Hong Kong's economic and trade interests in the United Kingdom. It also looks after inward investment promotion in Finland, Norway and Sweden, and houses Hong Kong'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 look after Hong Kong's economic, commercial and public relations interests in the USA.

Participation in International Organisations

World Trade Organisation

The WTO oversees the implementation of the multilateral rules and disciplines agreed to at the Uruguay Round 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 the HKSAR's external trade policy. The HKSAR supports a strong and credible multilateral trading system to sustain global trade liberalisation and economic growth.

      The HKSAR is a founding member of the WTO. Its separate membership status reflects the autonomy in the conduct of its external commercial relations which is guaranteed under the Basic Law of the HKSAR.

      The first WTO ministerial conference, held in Singapore in December 1996, underscored the credibility and pre-eminent role of the rule-based multilateral trading system in fostering progressive global trade liberalisation. The HKSAR participates actively in the work of the WTO to ensure the faithful implementation of the WTO work programme which covers, among other things, reviews of the various WTO agreements, preparation for the overall negotiations on services, and studies on the new issues identified in the Singapore ministerial conference including the inter- relationship between trade and investment, the interaction between trade and




competition policy and transparency in government procurement. The HKSAR also plays a leading role in a number of the WTO committees.

Regional Economic Co-operation

As an integral part of the Asia-Pacific economy and an important services, financial and trading centre, the HKSAR has a role to play and contribution to make in regional economic co-operation. Hong Kong's economic links with the region continued to be strong. In 1997, some 80.3 per cent of the HKSAR's total external trade was conducted with the other 17 member economies of the APEC.

   The HKSAR participates as a full and separate member in APEC and PECC using the name 'Hong Kong, China'. Heads of the relevant bureaux attended APEC ministerial meetings on Human Resources Development, Finance, Sustainable Development, Trade, Energy, Small and Medium Enterprises and Transportation. The Chief Executive represented Hong Kong, China at the APEC Economic Leaders Meeting in Vancouver, Canada in November.

    The HKSAR was a Vice-Chair of the APEC Committee on Trade and Investment (CTI), and the Convenor of the Government Procurement Experts Group under the CTI. Hong Kong contributed constructively to APEC's work in 1997 towards achieving the goal of free trade and investment in the Asia-Pacific region by 2020.

The Hong Kong Committee for Pacific Economic Co-operation, set up in March 1990 to advise on and co-ordinate Hong Kong'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. A senior directorate officer of the government was seconded to the PECC International Secretariat in Singapore as its Director General for three years from February 1996.

   In September 1997, an HKSAR delegation comprising representatives from the academic, business and government sectors took part in the Twelfth International General Meeting of PECC held in Santiago, Chile. The delegates also participated actively in the Academic Consortium, Trade Policy Forum Experts Roundtable, Co- ordinating Group meeting and Standing Committee meeting held around the same time in Santiago.

Organisation of Economic Co-operation and Development

The HKSAR is an observer on the Trade Committee and the Committee on Financial Markets of OECD which are important forums for debates and discussions on trade and financial service policy matters. Ideas which are introduced in these committees are often followed up in other international organisations such as the WTO and translated into binding multilateral agreements or codes.

The HKSAR participated in the Negotiating Group on the Multilateral Agreement on Investment (MAI) as an observer from September. The MAI, which is being negotiated among OECD members, aims to set high standards for treatment and protection of international investment. The observership would enable the HKSAR to have a better understanding of the on-going negotiations before deciding whether or not to sign onto the MAI.


Hong Kong Trade Development Council

Established in 1966, the Hong Kong Trade Development Council (TDC) is the SAR's statutory body responsible for promoting and expanding Hong Kong's trade with the world, as well as promoting Hong Kong's image as a business partner.

The TDC has a world-wide network of 51 offices in 34 countries and regions, effectively serving as the international marketing arm for the SAR's manufacturers and service providers.

During 1997, the TDC supervised for the government the on-time completion of the Extension to the Hong Kong Convention and Exhibition Centre, which became the site for the handover ceremonies. It was also the venue for the 1997 annual meetings of the World Bank Group and the International Monetary Fund. The Extension has more than doubled the space available at the Convention Centre for fairs and trade events and helped consolidate the HKSAR's position as the trade fair capital of Asia.

The TDC organises some 300 promotional events world wide each year, providing cost-effective channels for local manufacturers and traders to reach international buyers.

In 1996-97, these events attracted participation from 12 000 Hong Kong companies. Of the 20 international trade fairs and exhibitions organised by the TDC in Hong Kong, six were the largest in Asia. These fairs attracted more than 7 800 exhibitors and 1.2 million visitors to Hong Kong.

In 1997, the TDC launched three new fairs in Hong Kong: FILMART, electronicAsia, and the Hong Kong International Hardware Show.

During 1996-97, many of the 300 promotional events were in new markets. South America, Eastern Europe and Southeast Asia, were designated as target areas for promotional efforts, identifying new business opportunities and promoting Hong Kong as a reliable source of quality products and sophisticated services. One of the biggest efforts was a promotion at the Galerias Pacifico Mall in Buenos Aires, Argentina.

In the established markets of North America and Europe, the TDC continued to help Hong Kong companies meet the challenges of increasing competition by expanding and upgrading their presence at the world's largest fairs.

      The TDC also continued to promote Hong Kong's economic image by arranging incoming and outgoing business missions and through their network of high-level business and media contacts.

In 1997, the Hong Kong/Europe and Europe/Hong Kong Economic Co-operation Committees were formed with the assistance of the TDC. These committees joined existing ones involving the United States and Japan in fostering and supporting business ties between Hong Kong and these important trading partners.

During 1996-97, the TDC continued to upgrade its information resources, making it easier for traders to access its services, and its databank of business contacts was expanded to over 624 000 entries. Its trade enquiry service went on-line globally in January 1997 with the launch of TDC-LINK Internet.

The TDC also expanded its trade publications, launching Hong Kong Construction, Hong Kong Footwear, Hong Kong Financial Services, Hong Kong Printing and




Supertrader Hong Kong. Plans were under way to start three new service sector directories dealing with infrastructure, telecommunications and transportation.

Finally, at the heart of the TDC's operations is its commitment to small and medium sized enterprises (SMEs), which account for 98 per cent of Hong Kong's trading companies. In 1997, the TDC expanded its efforts to help SMEs with initiatives such as strengthening the TDC Business InfoCentre (formerly TDC Business Library), refurbishing a virtual SME centre on the TDC website, converting TDC datashops located throughout Hong Kong into SME 'service stations' of information, publishing trade manuals and holding seminars.

The Hong Kong Export Credit Insurance Corporation

The Hong Kong Export Credit Insurance Corporation (ECIC) was created by statute in 1966 to provide insurance protection for Hong Kong exporters against non- payment risks arising from commercial and political events. Its capital is wholly- owned by the HKSARG, which also guarantees its maximum contingent liability, currently standing at $10 billion.

The corporation's mission is to encourage and support export trade through the provision of professional and customer-oriented services. It 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. The most popular facility is the Comprehensive Shipments Policy which covers export and re-export of goods from the date of shipment. The External Trade Shipments Policy, which covers the export of goods manufactured outside Hong Kong and delivered direct to the buyer, ranks second.

To improve on its existing services, the ECIC developed and launched in 1997 a new Comprehensive Cover Policy and a new Small and Medium Enterprises Policy which represent a more convenient package with simplified documentation and procedures. Medium- and long-term cover for credit periods up to five years or beyond for export of capital goods is also available.

To support the development of the service industry which has become predominant due to the structural change of the Hong Kong economy, the ECIC has developed various policies to meet the specific needs of different service sectors. The Freight Forwarding Services Policy and Advertising Services Policy are two such examples. The ECIC's total insured business in 1996-97 amounted to $20.11 billion, representing an increase of 14 per cent over that in 1995-96. Gross premium income grew 9 per cent to reach $108.39 million. Despite higher claims, the ECIC was able to achieve a surplus of $17.25 million for the year.

Internationally, the corporation 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. The ECIC was honoured to be the first credit insurer in the world awarded the ISO 9002 certification during 1996-97.

Other Trade and Industrial Organisations

Various associations in Hong Kong represent the interests of industry and commerce. Among the larger and well established associations are the Federation of Hong Kong Industries, the Chinese Manufacturers' Association of Hong Kong, the Hong Kong

Tradition is the key in formal functions around the world, especially at weddings.

Classic Western and Chinese styles were paraded (left and below), during the annual display of bridal fashion held in the Hong Kong Convention and Exhibition Centre. Bottom (left): A gleaming new automobile catches the eyes at a Hong Kong motor show; (below) a range of timepieces attracts interest at the Clock and Watch Fair, which showcases one of Hong Kong's most important industries.


The Hong Kong Convention and Exhibition Centre's Phase II extension forms a remarkable addition to the city's skyline on the harbourfront at Wan Chai. It has been likened to a bird about to take flight. Inside, a variety of halls and spaces can handle a wide range of activities, and in 1997 it was the venue for the Handover Ceremony and the World Bank/International Monetary Fund Annual Meetings. Changing displays of art and sculpture add interest to walls and ceilings, while excellent cafes and restaurants cater to all tastes.






Above: The computer controlled, steel bar rolling mill at Shiu Wing Steel Ltd,

in Tuen Mun. Hong Kong has advanced far from its early manufacturing days and much time and effort is now being put into advanced technology and techniques. Right: Dressed as carefully as a surgeon, a skilled technician checks the output at the Tsuen Wan plant of QPL International Holdings, the world's largest etched lead-frame supplier outside Japan.


       General Chamber of Commerce and the Chinese General Chamber of Commerce. Other organisations include the Hong Kong Management Association, the Hong Kong Chinese Enterprises Association, the Hong Kong Exporters' Association, the various overseas chambers of commerce in Hong Kong such as the American, Australian, British, Canadian, 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 2 700 member companies. Its services include the issuance of certificates of origin, the operation and award of the Hong Kong Quality Mark and the provision of ISO 9000 quality management consultancy and intellectual property services. It has seven industry councils with respective focus on the chemical and pharmaceutical, electronics, mould and die, plastics, toys, watches and clocks, and transport services industries. The federation organises the annual Young Industrialist Awards of Hong Kong and 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 4000. Services rendered include the issuance of certificates of origin, handling trade enquiries, organising trade promotion activities, seminars and training courses, and the running of two pre-vocational schools. It encourages product development and quality improvement. Through the CMA Testing and Certification Laboratories, it provides technical backup services, including materials and product testing, pre-shipment inspection and technical consultancy services. Since 1989, the CMA has organised the machinery and equipment design award category of the Hong Kong Awards for Industry.

The Hong Kong General Chamber of Commerce is the oldest business association in Hong Kong. Founded in 1861, it has over 4 000 corporate members. It organises and receives trade/goodwill missions to and from overseas, provides informational programmes and handles trade enquiries. It issues 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/bodies. It founded and formed the Hong Kong Article Numbering Association, the Hong Kong Coalition of Service Industries and the Hong Kong Franchise Association. It also 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 issuance 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 world wide. Since 1957, it has issued invitations on behalf of the Chinese Export Commodities Fair authorities to local Chinese firms. The chamber also runs regular familiarisation courses on Hong Kong's economy for senior Mainland officials.

      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 14 000, it conducts some 1 700 training programmes each year, provides various management services, and organises seminars and award competitions.




  The Hong Kong Chinese Enterprises Association was established in 1991. It is the major organisation representing the interests of Mainland enterprises operating in Hong Kong. Its objective is to enhance the industrial, commercial, financial, investment and technological ties between Hong Kong, the Mainland and overseas countries. The association organises seminars, training courses and overseas trade missions for its 1 100 members.

  The Hong Kong Exporters' Association was established in 1955. Since then, it has been an active promoter of Hong Kong's export trade. At mid-1997, it had 400 members.

Customs and Excise

Trade Controls

The Trade Controls Branch of the Customs and Excise Department is responsible for enforcing legislation relating to certification of origin, textiles import and export control, strategic commodities control and trade declarations.

  Maintaining the integrity of these systems is vital to the well-being of Hong Kong's export business. The branch works closely with the Trade Department to combat false declarations of origin and values of goods, illegal transshipment of textiles and illicit trade in strategic commodities. This is done through factory and consignment inspections, investigations and prosecutions. In 1997, the branch carried out 94 767 factory and consignment inspections and 3 352 investigations. It successfully prosecuted 1 791 offenders, resulting in the imposition of fines amounting to $50.38 million.

  To enhance enforcement, the branch deploys a task force to target suspect shipments and operates a monetary reward scheme to encourage members of the public to give information about textiles origin fraud.

  The branch is also responsible for monitoring the stock of reserved commodities and for enforcing consumer protection legislation relating to weights and measures and the safety of toys, children's products and consumer goods. The stock of reserved commodities is monitored to ensure that there is always an adequate supply of essential foodstuffs such as rice in Hong Kong. The branch's functions in consumer protection, apart from carrying spot checks and investigations to ensure the safety of toys, children's products and consumer goods on sale in Hong Kong, are to protect consumers from fraudulent or unfair trading practices in connection with quantities, weights and measures, and to regulate the correct marking of gold and platinum. In 1997, it carried out 6 126 spot checks and 1 308 investigations.

Strategic Commodities

To ensure the SAR's continued access to high-technology products which are essential for maintaining the SAR's status as a regional centre of finance, trade, banking and telecommunications, the department works closely with the Trade Department and other agencies to monitor and control the flow of strategic goods. In 1997, the department investigated 220 cases and prosecuted 175 offenders, resulting in the imposition of fines amounting to $4.6 million. Strategic goods valued at $15 million including such items as glass-lined reactors, encryption devices, telecommunication equipment and integrated circuits were seized and $18.22 million-worth was confiscated.



Intellectual Property

The department is responsible for enforcing the protection of intellectual property rights including copyright and trademarks. It investigates complaints and takes action against the manufacture and sale of counterfeit products. Close contact is maintained with the owners of intellectual property rights whose products are commonly pirated.

The new Copyright Ordinance came into force on June 27, 1997. It gives Customs officers additional powers to seize and declare forfeit suspected pirated articles. The ordinance makes it easier than in the past to prosecute offenders and to enlist the co- operation of overseas enforcement agencies and the intellectual property rights holders.

      With an increase in manpower during the year and additional powers under the new ordinance, the department was able to develop more intelligence on the import and distribution of pirated goods. Large-scale operations were carried out on shops and on-street hawkers selling pirated CD products. As a result of stepped up enforcement, pirated goods valued at $185.46 million were seized and 1 564 people arrested for intellectual property offences. Counterfeit and falsely labelled goods valued at $195.2 million were seized and 1 114 people prosecuted under the Trade Descriptions Ordinance. Stiffer penalties were imposed by the courts and 329 persons were jailed for copyright and trademark offences.

World Customs Organisation

Hong Kong remains a separate Customs territory and an active member of the World Customs Organisation (WCO) under the name of 'Hong Kong, China'. The WCO aims to facilitate international trade by achieving harmony and uniformity in customs systems and procedures world-wide, through inter-governmental co-operation.

      The department continues to host the WCO's Regional Intelligence Liaison Office for the Economic and Social Commission for Asia and the Pacific region.

Trade in Endangered Species

Imports, exports 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 imports and exports 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. The ordinance provides for penalties ranging up to a maximum fine of $5 million and imprisonment for two years.

Intellectual Property

The Intellectual Property Department consists of the Trade Marks, Patents and Designs Registries and a legislation policy division. The department is responsible for legislation to protect intellectual property in Hong Kong. During the year, the



department continued its review of the law on trade marks and a draft Trade Marks Bill was put forward for consultation. The new Patents and Registered Designs Ordinances came into force on June 27, 1997, to localise registration systems which were previously dependant on United Kingdom legislation. Independent registration systems for patents and designs have been established in Hong Kong for the first time. A new Copyright Ordinance was also enacted and came into effect on June 27, 1997.

Trade Marks

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 1997, 18 529 applications were received, 14 830 of which were in respect of goods and 3 699 in respect of services. In all, 12 680 marks were registered in 1997, an increase of 8 per cent compared with 11.720 in 1996. The principal places of applicants' origin were:

Hong Kong


2 514







1 225







British Virgin Islands





The register had a total of 99 112 marks as at December 31, 1997.


The new Patents Ordinance provides for the grant of standard patents based on patents granted in the Chinese Patent Office, the UK Patent Office or the European Patent Office designating the UK. It also provides for the grant of short-term patents. In all, 1340 patents were registered during the year under the later-repealed Registration of Patents Ordinance. The Patents Registry received 842 requests for registration and grant of standard patents under the new Patents Ordinance and 147 were granted. There were also 30 applications for grant of short-term patents, none of which had been granted by December 31.

Registered Designs

The new registered designs law enables designs to be registered independently in Hong Kong. The Designs Registry has received 683 applications for registration of 960 designs, comprising 590 single-design applications and 93 multiple-design applications. During the period, 170 designs were registered.


The copyright regime in the Hong Kong Special Administrative Region is in line with prevailing international standards and norms. Hong Kong protects literary, dramatic, musical and artistic works, published editions, sound recordings, films, broadcasts, cable programmes, and performers' performances. Under the new Copyright Ordinance, the economic right of copyright owners and performers has been


enhanced to cover copyright works and performances made available to the public through the Internet or similar digital environments. Parallel imported articles attract criminal and civil liabilities under certain conditions. Extra-copyright technological provision have been introduced, imposing civil liabilities on commercial dealings with devices designed to circumvent copy-protection and any tampering with electronic rights-management information. Special copyright exceptions are permitted only to the extent that they do not conflict with a normal exploitation of the work or performances nor do they unreasonably prejudiced the legitimate interests of rights owners. The moral rights of paternity and integrity for authors of works are also protected.

On civil and criminal remedies, Hong Kong has reinforced its proof facilitation provisions to make them more user-friendly. Border measures continue to be available in the case of civil suits. Criminal penalties have been doubled: the selling of infringing copies attracts a maximum fine of $50,000 (per copy) and up to four years' imprisonment. Customs Officers have also been given extra powers to seize suspected infringing copies. Separately, a consultation paper on the 'Prevention of Copyright Piracy Bill' has been issued. It seeks to introduce a mandatory registration system of businesses manufacturing optical discs and to require such optical discs to be permanently embossed with the manufacturer's code.

Public Education

Recognising the importance of long-term educational efforts to raise public awareness of and respect for intellectual property rights, the Intellectual Property Department works with the Hong Kong Intellectual Property Society and other private intellectual property institutions. Activities such as seminars and school visits were launched during the year.

Participation in International Organisations

Staff from the Intellectual Property Department regularly participate in international and regional intellectual property symposiums and conferences to keep abreast of international developments in intellectual property standards and norms.

Consumer Council

Established in 1974, the Consumer Council is a statutory body charged with the responsibility for protecting and promoting the interests of consumers of goods, services and immovable property. Its chairman, vice-chairman and 20 members are appointed by the government from a wide cross-section of the community. The council forms committees and working groups to deal with specific consumer- protection tasks.

       The council's office is headed by a chief executive with a staff of 114. It has seven functional divisions: administration, complaints and advice, information and publication, legal affairs, research and testing, survey and trade practices. The council's activities range from developing new consumer protection initiatives to conducting studies on the state of competition and trade practices of various business sectors. It mediates in consumer disputes, disseminates information and advice and organises consumer education activities. It also tests products, conducts in-depth studies and surveys and studies and responds to consultation papers and reports on consumer-related issues.




Following the publication at the end of 1996 of its report, Competition Policy: the Key to Hong Kong's Future Economic Success, the council carried out an extensive programme of meetings with trade associations and other representative bodies, to brief them on the findings of the report and its recommendations. The report concluded that Hong Kong needed a comprehensive policy and related legislation to promote fair competition. The council recommended enacting a competition law to tackle horizontal and vertical collusive agreements and abuse of a dominant position. It proposed establishing a Competition Authority to investigate possible breaches of the Law and an Appeal Body to hear appeals against decisions by the Competition Authority. The report also recommended action to promote an understanding of the aims of competition policy within government and among the business community and the general public.

The government responded in November 1997 and accepted the council's recommendation to adopt a comprehensive competition policy. It will issue a clear policy statement on competition and require all bureaux to give due regard to the competition angle in setting new policies or reviewing existing ones. It will also request all bureaux and departments to submit new initiatives for promoting competition. The Consumer Council will continue to monitor and review trade practices in the private sector and direct more efforts to help businesses draw up codes of pro-competition practices. The Financial Secretary will chair a Competition Policy Advisory Group to co-ordinate the government's policy in this area. However, the government does not believe an all-encompassing competition law is appropriate at this stage of Hong Kong's economic development.

The council also continued to follow up its report, How Competitive is the Private Residential Property Market?, published in July 1996, and published a supplementary report in January 1997 addressing concerns that developed in late-1996 over a spate of property speculative activities through shell companies and 'chip trading'. It recommended that developers should require applications from companies to specify the name of the beneficial owners and directors and that developers should not allow any owner more than one application. It also recommended prohibiting changes in the beneficial ownership of companies that were successful in a ballot.

The government's response to the council's reports on property was released in May 1997. It accepted 18 of the council's 21 recommendations, including: supplying lots of appropriate size in land auctions, improving efficiency of the development mechanism, publishing medium-term land disposal programmes, rezoning more industrial areas for residential purposes, improving accuracy of estimates of housing supply, requiring developers to sell flats within a specified period to facilitate housing supply, devising a recognised building-certification programme and facilitating the release of developer's land banks for housing. The three recommendations rejected were: the setting up of a framework for specialised mortgage agencies, extending anti- speculation measures to non-consent scheme developments and opening more opportunities for and favouring small developers in housing developments.

  The council also published a report, Car Parking in Private Residential Developments, in August. This report was concerned with trade practices arising from complaints on the sale of blocks of car parking spaces to non-residents without residents being given sufficient opportunities to buy and on alleged changes in rental arrangements without adequate notice. The council recommended that land grants should include a requirement that only owners might buy spaces and only owners or


occupiers might rent spaces if they were not for sale. It also recommended that managers and incorporated owners should be empowered to enforce conditions in land grants relating to use. Some of the provisions in the Landlord and Tenant (Consolidation) Ordinance should also apply when use was granted by way of a separate tenancy agreement or a licence.

To address the problem of limited disclosure, the council recommended that land grants, building covenants and pre-sale consent conditions should include a requirement for disclosure of the location, size and price of the carparks. Adequate notice should be given for disposal of carparks previously leased out. The council also called on the Real Estate Developers Association to devise a code of practice in respect of both sale and management of car parking spaces.

      In response, the Lands Department undertook a review of the standard lease conditions covering parking and, by the end of the year, had agreed to incorporate suitable amendments in all future residential grants which would restrict the alienation of carparking spaces. With respect to improving the problem of limited disclosure, the Housing Bureau was considering the introduction of legislation requiring the disclosure in the sales brochure of the number of car parking spaces for sale and for rent.

During the year, the Consumer Legal Action Fund, established in November 1994, initiated its first litigation action for the recovery of payments made by a group of eight complainants to a modelling agency. The fund is part of the council's dispute resolution mechanism. It aims to offer assistance to aggrieved consumers whose complaints cannot be amicably resolved, to seek redress in court. The fund has satisfactorily resolved most cases without having to go to court. Since its establishment, the fund has considered 14 groups of cases; the number of complainants involved in each group varied from one to over 30. Five groups of cases have been assisted, of which three were successfully settled out of court and two were being pursued in court. One of the remaining nine groups was settled by the complainants while under consideration; two were denied assistance; four could not be processed as the matters did not develop further and two were being processed by the fund.

       The council continues to organise educational activities to enhance public awareness of the legal rights afforded under a growing body of consumer protection legislation. Additional legal protection is in the pipeline. Two sub-committees of the Law Reform Commission, on which the council is represented, have issued consultation papers dealing with civil liability for unsafe products and sales description of overseas uncompleted residential properties.

During the year, the council responded to more than 245 000 consumer enquiries and processed 11 500 consumer complaints including 796 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 280 consumer educational activities at district level through its 16 consumer advice centres as well as publicity campaigns on such consumer concerns as sustainable consumption and reduction in the use of plastic shopping bags, etc.

In 1997, CHOICE maintained an average monthly circulation of 25 000 copies. It was a regular source of consumer information to the public and provided a stimulus for media coverage on a wide range of consumer issues and concerns. The council




conducted 34 product tests, 55 in-depth studies and 15 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 Bureau, and trade and professional bodies and was increasingly consulted on major policies affecting the interests of consumers such as the abolition of scale fees for conveyancing and copyright issues. The council, as an executive and council member of the Consumers International (CI), maintains regular contacts with its counterparts in the Mainland of China and overseas. At the 15th World Congress of CI held in Santiago, Chile, in November, the chief executive of the Hong Kong Consumer Council was elected CI's president for a three-year term. This reflects the world-wide recognition of the council's work in the protection and promotion of consumer interests.


The government 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 HKSAR. 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 Best Metrication Ambassador Team Competition was organised for scouts and students in order to increase their awareness of the adoption of metrication in their daily life. In August 1997, the committee took part in the 8th Food Expo. Metric conversion dials distributed and educational games at the Metrication Committee counter in the Food Expo were well received by thousands of visitors. Forty-eight scouts and students were appointed Metrication Ambassadors during the year in appreciation of their contribution towards various promotional activities organised by the committee.


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. Hong Kong is a leading centre for printing and publishing, with 4 873 printing establishments employing 45 844 people, and more than 200 publishing houses, including many from overseas which have set up offices or regional headquarters in Hong Kong.

  The industry constitutes 18.5 per cent of all manufacturing establishments and 14.8 per cent of employment in the manufacturing sector. Most of the printing factories (68.7 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 31 newspaper printers.


Hong Kong printers are investing substantially in advanced machinery and equipment and are shifting in recent years the labour-intensive production processes to the Mainland of China. The use of state-of-the-art equipment, especially those employing digital technology, has enabled the industry to raise quality and productivity to new levels. Some of the more sophisticated printing companies and publishers have already started using such equipment as digital colour pre-press and printing systems.

Domestic exports of printed matter decreased in value terms by 0.4 per cent over the previous year. Material printed locally with a total value of $4.8 billion was exported, with the USA, the Mainland of China, the UK, Taiwan and Australia being the major export markets. Books, pamphlets, newspapers, journals and periodicals accounted for 68 per cent of exports of printed products. Overall, the printing and publishing industries contributed 9 per cent of the manufacturing sector's gross output.





THE government aims to enhance the competitiveness of the workforce so that it is well-equipped to meet the demands of a dynamic economy. To this end, the government seeks to provide suitable training and retraining to improve workers' skills; maintain and foster harmonious labour relations; progressively improve the rights and benefits of the workforce; and promote safety and health in the workplace. In 1997, the government completed a comprehensive review of both the Vocational Training Council and the Employees Retraining Scheme (ERS). The object was to improve the effectiveness of both the system of technical education and vocational training, as well as the ERS, keeping abreast of the changing needs of the economy and meeting the requirements of employers and employees' retraining.

In January 1997, the ambit of the ERS was extended to cover new arrivals. In September 1997, the Labour Department set up its first Employment and Guidance Centre for New Arrivals to provide a comprehensive range of employment services and guidance tailor-made for new arrivals.

  In 1997, the government made substantial improvements to employees' rights, benefits, safety and health through a series of labour laws:

• The Occupational Safety and Health Ordinance was enacted to extend for the first time safety and health protection to some 1.8 million employees in the non- industrial sectors. This was milestone legislation.

• The Employment Ordinance was amended to strengthen protection for employees against unreasonable dismissal and unreasonable variation of contract terms, and unlawful dismissals on grounds of pregnancy, sick leave, work-related injury, participation in union activities and giving evidence in legal proceedings regarding labour legislation. Amendments were enacted to improve the provisions on maternity protection, definition of wages, protection of wage payment and end-of-year payment.

The Labour Relations Ordinance was amended to establish a mediation procedure.

The Trade Unions Ordinance was amended to let employers, employees and officers and members of trade unions have immunity from civil proceedings in respect of any act done in contemplation or furtherance of a trade dispute.

Labour Market

Employment in all major service sectors grew steadily during the year but declined further in the manufacturing sector as the structural shift in manpower resources


continued. In the third quarter of 1997, the labour force grew by 3.8 per cent over the corresponding period of 1996. Hong Kong's labour force stood at 3.2 million, of whom 61 per cent were male and 39 per cent were female. The seasonally adjusted unemployment rate for the third quarter of 1997 was 2.2 per cent while the underemployment rate was 1 per cent, compared with 2.6 per cent and 1.4 per cent respectively a year earlier.

Of those employed, the majority (79.1 per cent) were engaged in the service sectors 33.9 per cent in wholesale, retail and import/export trades, restaurants and hotels; 11.2 per cent in transport, storage and communications; 12.7 per cent in financing, insurance, real estate and business services; and 21.3 per cent in community, social and personal services. About 10.1 per cent worked in the manufacturing sector.

      A structural shift during the past decade has meant establishments in the service sectors now employ six times as many workers as the manufacturing sector. In September 1997, 1 933 932 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 0.1 per cent over the corresponding figure in 1996. Only 309 160 persons were engaged in manufacturing sector establishments (excluding outworkers), a decrease of 5.6 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 help workers displaced from the manufacturing sector to rejoin the workforce by providing suitable retraining, provided 209 731 training places through its various retraining programmes by the end of the year.

      The import and export trade was the largest employer in the service sectors, with 510 185 workers in September 1997. Other major service industry groups include the retail trade, restaurants and business services, which had 213 769, 184 930 and 165 416 employees respectively.

      Despite declining employment, the clothing industry remained the largest manufacturing industry, employing 76 697 persons in September 1997. Establishments in the printing and publishing industry and the electronics industry were the next two largest groups of employers in manufacturing, employing 45 844 and 33 699 persons, respectively. Details of the distribution of establishments and persons engaged by selected major industry group are shown at Appendices 23 and 24 respectively.


Wage rates are calculated on a time basis, either daily or monthly, or on an incentive basis according to the volume of work performed. The average wage rate for employees up to the supervisory level, including daily-rated and monthly-rated employees, increased by 7.1 per cent in money terms between September 1996 and September 1997. After discounting for rises in consumer prices, the average wage rate increased by 1.7 per cent in real terms.

      In September 1997, the average monthly wage rate for the supervisory, technical, clerical and miscellaneous non-production workers in the wholesale, retail and import/export trades, restaurants and hotels sector was $11,696. This represented an




increase of 7.7 per cent in money terms, or an increase of 2.3 per cent in real terms, compared with the same period of 1996.

Over the same period, the average wage rate in the manufacturing sector rose by 5.3 per cent in money terms, and was steady in real terms. At the craftsman and operative levels in the manufacturing sector, 75 per cent of workers received a daily wage of $225 or more in September 1997; while 25 per cent received $406 or more. The overall average daily wage was $329, or $8,325 per month, for these craftsmen and operatives.

Employee Benefits

The Employment Ordinance stipulates employment-related benefits and entitlements' for employees which include rest days, statutory holidays, annual leave, maternity leave, sickness allowance, employment protection, severance payment and long service payment. Many employers pay a year-end bonus and some provide other additional fringe benefits to their employees.

The government will continue to regulate voluntarily established occupational retirement schemes under the Occupational Retirement Schemes Ordinance. By year's end, 16 324 schemes had been registered and 1935 schemes were exempted. All registered schemes must comply with the various monitoring requirements stipulated by 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 plus other provisions aimed at protecting their safety, health and welfare.

The Labour Inspectorate of the Labour Department is responsible for monitoring employers' compliance with various provisions of the Employment Ordinance relating to the employment of young persons and children, payment of wages, annual leave and holidays, sickness allowance and maternity protection. It applies equally to local and imported workers.

Labour Legislation

The Labour Department administers labour laws in force in Hong Kong. Labour legislation has been enacted which, supplemented by administrative measures, enables Hong Kong to maintain internationally accepted standards.

During the year, 21 items of labour-related legislation were enacted. Most were to give effect to certain reviews then conducted on the relevant areas of employee rights and benefits. In improving employees' rights and benefits, the government adheres


firmly to the system of tripartite co-operation amongst employers, employees and the government mainly through the role of the Labour Advisory Board.

      The Employment Ordinance was amended to give effect to improvements to maternity protection, provisions on definition of wages, protection of wage payment, end-of-year payment provisions and long service payment for employees younger than 45 (removal of reduction percentage). They also served to strengthen protection on employees against unreasonable termination of employment and variation of employment contracts.

      The Trade Unions Ordinance was amended to extend to employers, employees and officers and members of registered trade unions protection (previously available only to registered trade unions) from any suit or legal proceeding in any civil court against them in respect of any act done in contemplation or furtherance of a trade dispute. This Ordinance was also amended to relax restrictions on certain aspects of trade unions' activities, including affiliation with organisations of workers, employers and relevant professional organisations in foreign countries, and formation of cross- industry trade union federations.

      The Labour Relations Ordinance was amended to streamline and improve the flexibility of trade dispute settlement procedures by establishing a mediation procedure.

       The Occupational Safety and Health Ordinance was enacted to extend for the first time the protection of safety and health at work to employees in the non-industrial


Enforcement of Legislation

During 1997, there were 5 369 prosecutions for breaches of various ordinances and regulations administered by the Labour Department. Fines totalling $30,028,000 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. The board has set up five committees on special subjects including employees' compensation, employment services, occupational safety and health, labour relations and the implementation of international labour standards.

International Labour Standards

The International Labour Conventions of the International Labour Organisation (ILO) prescribe standards on matters such as labour administration, employment rights, and occupational safety and health as models for member states. These conventions have a significant influence on the formulation of labour legislation in Hong Kong and 46 are currently applied here. This compared favourably with most members of the International Labour Organisation in the region. From July 1, 1997, onwards, the Hong Kong Special Administrative Region (HKSAR) has continued to participate in the activities of the ILO such as its Twelfth Asian Regional Meeting held in Bangkok during December 1997. The HKSAR is taking part in ILO activities




either as part of the delegation of the People's Republic of China or using the name 'Hong Kong, China', in consultation with the Chinese Government.

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, 14 new unions were registered. At the end of the year, there were 580 unions, comprising 538 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 245 700 members), the Hong Kong and Kowloon Trades Union Council (66 unions, 28 200 members), the Hong Kong Confederation of Trade Unions (39 unions, 88 300 members), the Federation of Hong Kong and Kowloon Labour Unions (31 unions, 21 700 members) and the Federation of Civil Service Unions (29 unions, 12 000 members).

Labour Relations

In 1997, the Labour Relations Division of the Labour Department provided conciliation service in 161 trade disputes which involved seven work stoppages, resulting in a loss of 790.5 working days. The division also handled 20 404 claims for wages and other employment-related benefits or entitlements.

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

The Labour Department promotes harmonious labour-management relations through a variety of activities such as conducting promotional visits and talks to individual establishments, employers' associations and trade unions; organising training courses, workshops, seminars and exhibitions; and publishing 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 1997, the tribunal heard 4 196 cases involving employees as claimants and a further 2 072 cases initiated by employers. The presiding officers awarded more than $134 million. Of these cases, 91.75 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. Its jurisdiction has been expanded and, since June 25, 1997, the board has been


      empowered to hear and determine all employment claims involving not more than 10 claimants for a sum of money not exceeding $8,000 per claimant.

During the year, the board heard 1 535 cases and made awards amounting to $3.94 million.

Protection of Wages on Insolvency Fund

The Protection of Wages on Insolvency Fund is financed by an annual levy of $250 on each business registration certificate. Employees who are owed wages and other employment termination benefits by their insolvent employers may apply to the fund for ex gratia payment.

The fund covers arrears of wages not exceeding $36,000 accrued during a period of four months preceding the applicant's last day of service; wages in lieu of notice for termination of up to $22,500 or one month's wages, whichever is less; and severance payment up to $36,000, plus 50 per cent of any entitlement in excess of $36,000. The fund received 10 550 applications and paid out a total of $236.5 million to 9 003 applicants in 1997.

Finding Employment

The Employment Services Division of the Labour Department provides free recruitment assistance to employers and placement service to job-seekers.

       Through the Job Matching Programme, the division provided intensive job- matching and counselling services to unemployed job-seekers. The division continued to operate the Outreaching Placement Service which offered immediate employment assistance to workers affected by major retrenchments. Its 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 order to publicise its employment services, the division organised a series of promotional activities including job bazaars, exhibitions and recruitment seminars.

In September 1997, the Labour Department set up its first Employment and Guidance Centre for New Arrivals to provide a comprehensive range of employment and guidance services tailor-made for new arrivals.

During the year, 117 424 job-seekers registered with the division while employers reported 128 981 vacancies. The division made 173 259 job referrals and placed 26 162 persons in employment.

Employees Retraining Scheme

The Employees Retraining Board was set up in 1992 to provide retraining for local employees to cope with structural changes in the economy. Since January 1997, the ambit of the scheme has been extended to include new arrivals. The board comprises 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 government injected $300 million when the fund was set up. Its regular income comes from a levy charged on employers employing imported workers under the labour importation




schemes at the rate of $400 per worker per month. In May 1996 and February 1997, the government injected another $300 million and $500 million respectively into the fund to ensure that it had adequate financial resources to expand and revamp its programmes.

The Employees Retraining Scheme offers a wide variety of day and evening courses mainly for employees aged 30 and over. Broadly speaking, these courses cover training on job search skills, job specific skills, general skills and tailor-made programmes for the disabled and the elderly. 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. While all full-time courses are free of charge, retrainees attending full-time courses lasting for more than one week are eligible to receive retraining allowances.

From June 1, 1997, onwards, retrainees attending part-time and evening courses, except those who are unemployed or are employed at a monthly income of less than two-thirds of the overall monthly median wage of local workers, are required to pay course fees amounting to some 20 per cent of the training costs. By the end of 1997, retraining had been provided to 114 140 persons under the scheme.

  To improve the effectiveness of the ERS in meeting the requirements of employers and the retraining needs of the local workforce, the government completed a comprehensive review of the ERS in December 1996 and announced the results in June 1997. The main thrust of the proposals was that the ERS should primarily focus on providing retraining for the unemployed with no more than lower secondary education and aged 30 or above; it should provide retraining for the employed who need to receive basic skills training to sustain them in employment; and its ambit be extended to cover new arrivals. The ERB is implementing the review's results by phases.

Employing the Disabled

The Selective Placement Division of the Labour Department helps disabled persons integrate into the community through open employment. It provides a free employment counselling and placement service for the hearing impaired, sight impaired, physically disabled, chronically ill, mentally retarded and mentally restored persons.

During the year, the division launched a series of activities to promote the employment of the disabled. These included exhibitions, seminars, and presentation of awards to enlightened employers and disabled employees. Special campaigns and regular promotional visits were made to canvass vacancies and widen the employment opportunities of disabled job-seekers.

Some typical cases concerning the working abilities of disabled persons were published in various magazines to enhance employers' acceptance of people with a disability. Pamphlets and guidebooks concerning employment of people with various disability types were also issued to members of the public. 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.


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 teachers with back-up information.

The service operates two careers information centres disseminating careers information through written and audio-visual materials. The public can also access careers information published by the service through the Careers Info Express, a bulletin board system accessible by computers equipped with modem.

The service also organises a wide range of careers guidance activities for young people. The seventh Education and Careers Expo organised in February attracted more than 185 000 visitors. A total of 159 713 students took part in the 16th Careers Quiz organised in October. Throughout the year, the service arranged student group visits to careers information centres and various commercial and industrial establishments.

Imported Workers

The Immigration Department controls the entry of imported 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, 16 561 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 based on two cardinal principles:

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

job market,

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

vacancies should be allowed to import workers.

The government operates two labour importation schemes - the Supplementary Labour Scheme and the Special Labour Importation Scheme for the New Airport and Related Projects.

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 1997, a total of 2 893 visas was approved and a cumulative total of 3 174 visa applications had been approved up to the end of December 1997 since the implementation of the scheme. The government is reviewing it.




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; wages offered must be no less than those 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 the Labour Department 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 1997, 3 990 imported workers were employed in Hong Kong, comprising about 14 per cent of the total workforce for the projects.

Entry of Mainland Professionals for employment

The Pilot Scheme for the entry of mainland professionals was introduced in March 1994 with a quota ceiling of 1 000 to allow the entry of graduate professionals from any of the 36 key mainland tertiary institutions, for employment in Hong Kong. All Hong Kong companies can apply under the scheme. At the end of the year, 604 out of the total of 2 216 applications had been approved and 599 employment visas issued. The government is reviewing the scheme with a view to devising appropriate measures to meet the needs of employers in certain trades for professionals from Mainland China who possess skills, knowledge and experience of value to Hong Kong but not readily available here.

Foreign Domestic Helpers

Foreign domestic helpers enter 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.

Demand for foreign domestic helpers has increased steadily. In December 1997, there were 170 971 such helpers in Hong Kong, representing an increase of 4 per cent compared with 164 299 in 1996. About 81 per cent were from the Philippines.

Employment Agencies

The Labour Department's Employment Agencies Administration enforces Part XII of the Employment Ordinance and the Employment Agency Regulations. It monitors the operation of employment agencies through licensing. In 1997, it issued 1 134 licences.

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 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 four contracts in 1997.

Occupational Safety

The Factory Inspectorate of the Labour Department has expanded its service from promoting and protecting the safety and health of employees only in the industrial sector to those in the non-industrial sector as well upon enactment of the Occupational Safety and Health Ordinance in May 1997. To reduce accidents and guard against ill-health to employees, efforts are focused on legislative control, safety training, education and promotion.

Under the Occupational Safety and Health Ordinance and the Factories and Industrial Undertakings Ordinance administered by the inspectorate, there are 28 sets of subsidiary regulations covering various aspects of hazardous work activities in factories, building and engineering construction sites, catering establishments, service and other workplaces.

To undertake its task more efficiently, the Factory Inspectorate was restructured in 1997 with additional manpower resources and new responsibilities. Apart from strengthening its safety and health promotion and enforcement programme, the inspectorate also focuses on accident prevention and information, safety management legislation and policy formulation and implementation.

       To foster a safety culture at work, the inspectorate continues to actively promote the Occupational Safety Charter setting out the rights of employees to enjoy a safe working environment and the employers' obligation to reduce the risk of accidents. By year's end, 67 employer associations, employee unions, safety practitioner bodies, contractors, enterprises and utility companies had subscribed voluntarily to the charter.

A publicity campaign was launched to promote occupational safety and health through the mass media. Symposia and seminars were held on safety and health management, construction site safety, and safety and health education and training. Site safety award schemes were launched for the construction industry and Housing Authority projects jointly with Radio Television Hong Kong and the Housing Authority, respectively.

The Operations Division emphasises regulatory activities in the hazardous areas of factories, catering establishments and construction sites. Special enforcement campaigns were launched to monitor high-risk working conditions in workplaces. During these campaigns, 18 717 factories, 3 693 catering establishments and 7 716 construction sites were inspected. The special teams set up to inspect construction sites at the new airport projects helped company and site-based safety committee meetings formulate safety policies, review safety standard and procedures, and monitor safety performance on site.

The Occupational Safety and Health Training Centre conducts legislation-related safety training courses for employees, supervisors and managers. It gives safety talks to university and post-secondary students and other organisations. The centre continued to assist the Hong Kong Polytechnic University and the City University of Hong Kong in organising 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. 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. It also gives the Fire Services Department technical advice on the approval and initial inspection of pressurised cylinders and storage installations for compressed gases.

The division processed 2 390 equipment registration applications, inspected 6 154 factories and 4 332 items of pressure equipment, and issued 488 certificates of competency and endorsements during the year. It also continued to assist the Haking Wong Technical Institute, Tsing Yi Technical College 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 270 people, and one safety training course was conducted.

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 workers' health and workplace hygiene, and supervise health standards and practices in workplaces. The service's major responsibility is to investigate complaints, occupational diseases notified and potential health hazards reported and to determine preventive action.

The service also undertakes medical examination of 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 for the recompression chamber. It also handles medical clearance for employees' compensation cases.

An enquiry service is available to the public on occupational health and hygiene problems. Talks on health education were provided on request. To supplement the recently enacted Occupational Safety and Health Ordinance and Regulation, a series of publicity booklets, guidelines, and codes of practice on occupational health and hygiene were published during the year.

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.


It 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. The Catering Trade Safety and Health Do-It-Yourself Kit was produced and distributed to local eating establishments to assist employers and employees in improving safety and health at their workplace. The passing of the new Occupational Safety and Health Ordinance in May 1997 expanded new areas of work for the council in the promotion of safety and health at workplace. During 1997, 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 ergonomics, safety and health for small business, fire prevention, electrical safety, safety at lift and escalator works, fork lift truck instructor and operator courses, safety auditing, occupational hygiene, and the inspection and examination of boilers and pressure equipment.

      The council also produced videos, CD-ROM and other training 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, and government departments. In all, 9 800 persons attended the council's courses in 1997.

      In changing the safety attitude of the younger generation, the council developed a second occupational safety and health training kit on Chemical Safety 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. In April 1997, it played host to the 13th Asia Pacific Occupational Safety and Health Conferencel Exhibition and Annual Meeting with more than 1 000 participants from 24 countries and local communities.

       The council was active in initiating and undertaking several research projects, such as manual lifting, office ergonomics, catering safety and health, and hearing conservation in non-manufacturing sectors. It continued to provide consultancy services, in particular for small establishments on a cost-recovery basis, with high priority being given to establishments in the non-industrial sector. 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 the 'Occupational Safety and Health Week' held in October and November. There was increased co-operation from district-based organisations in staging promotional activities. Promotional campaigns on different themes in support of the newly enacted Occupational Safety and Health Ordinance such as construction safety, office safety, manual handling and so on - were launched throughout the year. Campaigns were also launched especially for civil servants to increase their awareness of office safety and health.

      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.




Employees' Compensation

The Employees' Compensation Division of the Labour Department administers the Employees' Compensation Ordinance, ensuring that injured employees and dependants of deceased employees 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 administers a scheme to provide interest-free loans to injured employees or dependants of deceased employees who need financial assistance as a result of a work-related accident.

The Employees' Compensation Assessment Boards, which sit in 13 major hospitals throughout the territory, are responsible for assessing the loss of earning capacity of employees injured at work.

The division also assists persons suffering from pneumoconiosis to obtain compensation under the

the Pneumoconiosis (Compensation) Ordinance. The Pneumoconiosis Compensation Fund Board, established under the Ordinance, administers the Pneumoconiosis Compensation Fund from which compensation for pneumoconiosis is paid. The board also finances research, educational and publicity activities and rehabilitation programmes for pneumoconiosis sufferers. Pneumoconiosis sufferers diagnosed before 1981 are not covered by the Ordinance. They receive ex gratia payments on a quarterly basis from the government.

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.

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 round-the-clock. Staff operators deal with more complicated enquiries during office hours. The service handled 2 134 864 calls in 1997.



AGRICULTURE is a comparatively small sector in Hong Kong. Farming is largely undertaken on the urban fringes and just 2.9 per cent of the land area is under cultivation. In 1997, local production accounted for 13 per cent of vegetables, 19 per cent of live poultry, 19 per cent of live pigs, 12 per cent of freshwater fish and 69 per cent of all live and fresh marine fish consumed.

Each day, Hong Kong people consume about 950 tonnes of rice, 1 330 tonnes of vegetables, 6 700 pigs, 170 head of cattle, 240 tonnes of poultry, 470 tonnes of fish and 1900 tonnes of fruit. About 35 per cent of Hong Kong's food requirements is imported from the mainland of China.

      The Hong Kong Special Administrative Region Government does not give direct subsidies to the local agricultural and fisheries industries or attempt to protect them from the free operation of market forces. It does, however, provide a variety of infrastructural and technical support services to facilitate local production.

      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 26.

The Agricultural Industry

Local agriculture is directed towards the production of high quality fresh food through intensive land use. The most common crops cultivated are leafy vegetables and high-value cut flowers. Production was valued at about $427 million. Pigs and poultry are the principal animals reared for food. The value of locally-produced pigs in 1997 amounted to $656 million and that of poultry, including chickens, ducks, pigeons and quail, amounted to $293 million.

Agricultural Development

Strong competition from imports, land and labour constraints, and progressive implementation of environmental pollution controls, have forced the agricultural 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.

The department has implemented an Agricultural Land Rehabilitation Scheme since 1988 to encourage utilisation of otherwise fallow agricultural land for productive farming. The scheme effects improvements in irrigation, drainage and farm road access. Assistance including tenure arrangements, soil improvement and marketing facilities is also available to interested farmers.

To better protect the environment and consumers against pesticide residues, the department implements the Accredited Farm Scheme together with the Vegetable Marketing Organisation, a self-financing quasi-government body. Vegetable farms which adopt good agricultural practices and use pesticides in accordance with a properly designed pest-control programme are granted accreditation. They are subject to regular inspection and their produce is closely monitored for pesticide residues in the wholesale market by the organisation. Produce is distributed from such accredited farms to designated retail outlets in specially marked vegetable baskets. Since 1995, the scheme has been extended to farms in the mainland supplying vegetables to Hong Kong.

  Livestock farmers are required to install and operate waste treatment systems to prevent pollution under the Livestock Keeping Licensing Scheme. At the end of 1997, the department had issued 353 licences and a further 397 licence applications were being processed. The department has been promoting the 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.

Poultry farming received a setback in the second quarter of 1997 when three Hong Kong chicken farms were found to be infected with avian influenza. In August, the disease affecting the farms was typed as H5N1 avian influenza. At about the same time, the H5N1 virus was isolated from a young boy who had died in May 1997. Other human cases of avian influenza were subsequently confirmed. In December, H5 avian influenza was detected in another local chicken farm and in wholesale and retail poultry markets in Hong Kong. In view of the confirmed presence of the H5N1 avian influenza virus among poultry in Hong Kong and evidence that the disease can be contracted by people, it was decided in December that all chickens in local farms and all poultry at government wholesale markets and retail outlets-some 1.5 million birds in all - should be slaughtered to protect public health. The slaughtering operation started on December 29 and was largely completed at the end of the year.

  The Plant Varieties Protection Ordinance was brought into effect in 1997 to fulfil the obligations of the Agreement on Trade-related Aspects of Intellectual Property Rights under the World Trade Organisation to protect the rights of plant breeders. Varieties of different types of plants, including fruit crops, vegetables and ornamentals as well as edible fungi and algae, are all eligible for protection. It is envisaged that more new varieties of crops with improved yields and qualities will be introduced to farmers.

Besides technical support, the department administers three 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 1997, loans issued since the inception of these funds reached $387 million.

The Fisheries Industry

Marine fish constitute one of Hong Kong's most important primary products. In 1997, total production from marine capture and culture fisheries was estimated at about 194 030 tonnes, with a wholesale value of $2.5 billion. This represented an increase of 1 per cent in weight compared with 1996. 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 19 200 fishermen, comprises some 4 460 vessels of which 3 820 are mechanised. Major fishing methods include trawling, lining, gill-netting and purse-seining. Trawling accounted for 79 per cent, or 146 940 tonnes of the fishermen's catch. The fishermen's total catch is equivalent to 75 per cent of the local seafood consumption and amounted to 186 000 tonnes, with an estimated wholesale value of $2.2 billion.

      Under licence from the department, marine fish culture is practised within 26 designated zones. At the year's end, there were 1 526 licensed mariculturists. They supplied 2 960 tonnes of live marine fish valued at $178 million during the year.

      Freshwater fish are also cultured. Fish ponds covering 1 125 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 5 000 tonnes, or 12 per cent, of freshwater fish for local consumption.

Fisheries Development

The inshore marine environment has been under pressure from large-scale dredging for marine fill, dumping of mud and reclamation. Besides affecting water quality, this also destroys extensive areas of seabed habitats that support the marine fauna and fisheries resources. To mitigate such damage and to enhance marine resources, the 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 first phase involves the deployment of artificial reef structures in the existing marine parks at Yan Chau Tong and Hoi Ha Wan. A 12-month study is being conducted to formulate a suitable strategy for wider deployment of artificial reefs and their subsequent management. A public consultation exercise will be conducted by the consultants.

Another study, to collect comprehensive information on fisheries resources and fishing operations in Hong Kong waters, has been completed and its findings are being examined. 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 has stepped up effort to stimulate the modernisation trend by maintaining development input and providing free advisory services on fishing vessel hull design (in particular 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 Everywhere Loan Fund. By December 31, loans issued since the inception of the four funds totalled $316 million.


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 is in fact an integration of several markets. The Western Complex, for example, accommodates markets for freshwater fish, vegetables, fruit, poultry and eggs. This allows buyers to purchase a variety of fresh foods under one roof.

Apart from these market complexes, the department also operates temporary wholesale markets at North District in the New Territories for agricultural products, and at Cheung Sha Wan in Kowloon for poultry. Plans are under way for the development of Phase II of the Cheung Sha Wan Wholesale Food Market. On completion, it will reprovision the dilapidated Yau Ma Tei Fruit Market and the temporary poultry market at Cheung Sha Wan.

  During the year, the government wholesale markets handled 272 140 tonnes of vegetables, 69 810 tonnes of poultry, 44 370 tonnes of freshwater fish and fisheries products, 171 780 tonnes of fruit and 60 250 tonnes of fresh and preserved eggs. The total value amounted to $5.54 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 vegetable farmers and wholesalers. Revenue comes from a commission on the proceeds of sales, and surpluses are ploughed back into the development of the farming industries, and scholarships for farmers' children. During the year, 239 000 tonnes of vegetables valued at $948 million were sold through the organisation at its market in 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. It 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 1997, 47 800 tonnes of marine fish valued at $464 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.

Hong Kong used 25 million tonnes of aggregates and other rock products in 1997. About 74 per cent of Hong Kong's demand for aggregates and rock products was met locally, with the balance imported from the Mainland.

One quarrying contract and three quarry rehabilitation contracts were under way in 1997. 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 one on Stonecutters Island and one in Piper's Hill, Sha Tin - which provided bulk storage facilities for imported explosives. In June, the Stonecutters Island depot was replaced by a new government explosives depot in Kau Shat Wan on Lantau Island. The division also 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 and quarrying works. The overall consumption of explosives was 4 284 tonnes.

The division is responsible for issuing storage licenses and removal permits and provides technical support to the Broadcasting, Culture and Sport Bureau in assessing applications for the use of pyrotechnics. In 1997, there were 42 applications for the use of pyrotechnics in the production of television programmes and theatrical performances, and one application for the use of devices containing explosives in film production.





DURING 1997, the government continued to accord high priority to maintaining and upgrading the quality of education at all levels. A $5 billion Quality Education Fund was set up to promote quality and innovations in the school sector. Other efforts to improve the quality of education included the promotion of Information Technology applications in schools, upgrading the teaching and learning environment, and enhancing the professional quality of principals and teachers.

An Overview

About 1.2 million students, or 19 per cent of the total population, were in full-time education during the year. Approved public recurrent and capital spending on education in the 1997-98 financial year amounted to $38.12 billion and $45.52 billion respectively, representing 21 per cent of the government's total recurrent expenditure and 18 per cent of the total public expenditure. Tertiary education accounts for about one-third of the education budget.

  The majority of places from primary school upwards were provided either free of charge or at highly subsidised rates. Since the early 1960s, the government has bought places from private secondary schools under the Bought Place Scheme (BPS) to make up the shortfall in government and aided school places. To enhance the quality of private secondary schools and to provide parents with a wider choice, since 1991 private secondary schools meeting specified standards can apply for admission to the Direct Subsidy Scheme (DSS) and receive a government subsidy. DSS schools are free to decide their own curriculum and set entrance requirements and fee levels. In the 1997-98 school year, 18 BPS schools had contracts with the government, and 13 schools were on the DSS. As the BPS will be phased out in 2001, schools on the scheme are being helped to raise their standards so that they can become eligible for joining the DSS before their contracts expire.

Regulatory Legislation

Any institution which provides education for 20 or more persons during any one day or eight or more persons at any one time; any nursery, kindergarten, primary, secondary or post-secondary education or any other educational courses must be registered as a school under the Education Ordinance (Chapter 279). It must comply with the provisions under the ordinance and the Education Regulations such as the registration of teachers and managers, 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. 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 and its subsidiary legislation took effect from June 20, 1997, to provide greater consumer protection. A registration system was introduced to regulate the quality of courses conducted in Hong Kong which would lead to the award of non-local higher academic or professional qualifications. Advertisements, refund and premises in respect of such courses are subject to regulation.

The Government's Role

The Secretary for Education and Manpower, who heads the Education and Manpower Bureau of the Government Secretariat, formulates and reviews education policy, secures funds in the government budget, 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. The Education Department's main responsibilities include the provision and allocation of public sector school places; provision of educational opportunities for children with special educational needs; developing school curricula; monitoring teaching standards; and administering public funding to schools. The department also contributes to policy development and review.

Education-related Executive and Advisory Bodies

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 views are sought on major changes to existing policies/practices and new policies in education through extensive consultation exercises and regular policy fora.

Education Commission

The commission advises the government on the development of education as a whole in the light of community needs. Its terms of reference are to define overall educational objectives, formulate education policy, and recommend priorities for implementation, having regard to resources available; co-ordinate and monitor the planning and development of education at all levels; and initiate educational research.

      It has 21 members, of whom 19, including the chairman, are appointed from outside the government to bring a wide range of personal and professional experience to its deliberations. They include the chairmen of the Advisory Committee on Teacher Education and Qualifications, the Board of Education, the University Grants Committee and the Vocational Training Council. Others include educators and administrators from the tertiary, secondary, primary and pre-primary sectors, a member of the Provisional Legislative Council, and representatives from the business




sector. 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. on 'Quality School Education', which is a comprehensive strategy to promote a quality culture in the school system; provide a practical framework for schools to achieve the aims of education in an efficient, cost-effective and accountable manner; facilitate quality assurance and development; provide incentives for quality performance; and enhance the professional standards of front-line education workers. The government accepted the report in October 1997.

  In May 1997, the commission accepted a proposal by its Working Group on the General Teaching Council to set up such a council to enhance the standard of teaching and professional development of teachers, to maintain the integrity of the profession and to raise the professional esteem of teachers. A Preparatory Committee was set up under the commission in September 1997 to work out the detailed arrangements for establishing the council.

Board of Education

The Board of Education is a statutory body appointed to advise the government, through the Director of Education, on matters relating to school education. Its members include the chairmen of advisory and executive bodies concerned with the school system - the Curriculum Development Council; the Private Schools Review Committee; and advisory committees on home-school co-operation, school administration and finance, school guidance, discipline 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 as Member.

  During the year, the board's Sub-Committee on Review of School Education completed its review on the implementation of nine-year compulsory education and proposed measures for improvement. The government is currently studying the recommendations.

Curriculum Development Council

The Curriculum Development Council (CDC), advises 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. Membership of the CDC and its co-ordinating and subject committees includes heads of schools, teachers, tertiary academics, representatives from the Hong Kong Examinations Authority and the Vocational Training Council, parents and employers.

  During the year, the CDC introduced a strategy to help enhance the transparency of the syllabus development process and to facilitate curriculum continuity across different levels. It revised the syllabuses for seven subjects in the primary and secondary curriculum, in particular the humanities subjects, to reflect the social and political changes arising from the resumption of the exercise of sovereignty of China over Hong Kong.



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 a non-official chairman plus 20 members from the education, business and industrial and the professional sectors. The Deputy Secretary for Education and Manpower and the Deputy Director of Education are ex-officio members.

      Through the Language Fund (with an uncommitted balance of more than $200 million), SCOLAR continues to support innovative and worthwhile projects to enhance language proficiency, this year with priority in the primary sector. SCOLAR also initiated research projects to examine the language competence of students on completion of primary schooling and the process whereby such competence is developed; the relationship between Putonghua and the Chinese Language teaching; the use of multi-media technology in enhancing language education and the ability of students to study in English at the tertiary level. Findings of these projects will contribute to the development of appropriate language education policies.

As its first public education initiative, SCOLAR staged an exhibition on May 31 and June 1, 1997, to disseminate the results of the Language Fund Projects. Further seminars and workshops will be organised to foster the sharing of information and experience by educators. The Hong Kong Language Education Research DataBase, collating research in both English and Chinese (including Putonghua) languages in Hong Kong, is being set up. It will ensure coherence in future research efforts and be accessible by members of the public who are interested in language education in Hong Kong.

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 23 members, 17- including the chairman -- fare appointed from outside the government. They include school heads, teachers, academics and businessmen. The six ex-officio members are the Deputy Secretaries of Education and Manpower and the Civil Service, the Director of Education, the Secretary-General of the University Grants Committee, the Director of the Hong Kong Institute of Education and the Executive Director of the Hong Kong Council for Academic Accreditation.

The working group under ACTEQ to develop a mechanism for ensuring that teacher education activities respond to the needs of schools and the community finished the first phase of its work in 1996. For the second phase, it has commissioned a consultancy study on establishing an assessment and reporting framework to enhance the professional relevance of teachers' performance.




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 tentative 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. A pilot exercise involving the assessment of 1 150 teachers in language examinations and classroom observations will be conducted in 1997-98 to finalise the benchmarks and establish suitable exemption criteria. Plans are being made to implement the language benchmarks for new teachers starting the year 2000. Serving teachers will be offered ample retraining opportunities so they can reach the benchmarks within a prescribed period.

University Grants Committee

The University Grants Committee (UGC) is appointed by the HKSAR Chief Executive to advise on the development and funding of higher education and administer public grants to eight publicly-funded institutions. It comprises 11 non- local academics, four 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. 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 number of full-time equivalent students increased to 69 516 (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 student unit costs by 10 per cent by the end of the 1998-2001 triennium without detriment to quality, while further improving standards and meeting the changing needs of Hong Kong. The government accepted most of the recommendations in the review, except on the number of taught post-graduate places. To reduce student unit costs, the government agreed that half of the annual savings should be ploughed back into tertiary education for meeting new expenditure requirements and to encourage special developments, including areas of excellence.

  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 and learning in the institutions are operating properly, the committee has undertaken a first series of Teaching and Learning Quality Process Reviews (TLQPR) of its institutions between January 1996 and April 1997, and is planning to undertake Management Reviews of the institutions starting in early 1998.

   The UGC also conducted a second Research Assessment Exercise in November 1996, which aimed at assessing the research output performance of the UGC-funded institutions (except the 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.

Enthusiastic crew members

of the Hong Kong Outward Bound School's sail-training vessel Ji Fung space themselves out along the bowsprit (left) and tidy the deck (below). The 132-foot brigantine returned to Hong Kong in May after achieving distinction in the first sail training tall ships' race in the Northern Pacific: Sail Osaka '97. Among other honours, Ji Fung - which means 'Spirit of Resolution' was the fastest tall ship to finish the month- long, 2 600-kilometre race from Hong Kong to Osaka via Okinawa and Kagoshima, and the Overall Winner

in its class.





Besides the opportunities at Hong Kong's 2 600 educational institutions, many young people go abroad to further their studies. Top left: Some of the 14 000 Hong Kong tertiary students studying abroad pose with international friends in a park in Adelaide, South Australia. Centre left: A proud Hong Kong mother adjusts her son's gown outside the Royal Albert Hall at his graduation ceremony from Imperial College, London University. Bottom left and left centre: Hong Kong students get to grips with their subjects at the University of British Columbia, Vancouver. At home (above and left): Students in 'cat mode' for Halloween at the Hong Kong International School, and celebrate their graduation at the Polytechnic University of Hong Kong.


     Banners reading 'Hong Kong Is Our Home' and 'I Am Chinese', greet the Chief Executive, Mr Tung Chee Hwa, on a visit to Tak Sun School in Tsim Sha Tsui. Right: Students make

an early start on computer competence at the Buddhist Wong Cho Sum School at Tseung Kwan O.



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 four 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 1997-98, the RGC received a record number of 1 368 applications and disbursed $423 million in grants for academic research.

To stimulate and encourage industrial participation in and support for applied research at tertiary institutions, the RGC allocated $12 million to five Co-operative Research Centres, each of which had one or more industrial/business partners.

During the year, the RGC and the British Council jointly sponsored the United Kingdom/Hong Kong Joint Research Scheme, which has operated since 1991, aiming at strengthening existing links between local and British tertiary institutions. The RGC also operated a similar scheme with the German Academic Exchange Service. The latter scheme ran for a second year after a very successful trial in 1996.

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 Apprenticeship Ordinance. Its membership comprises leading figures in industry, commerce and service sectors, educators, representatives of workers and government officials.

Twenty training boards and eight general committees have been set up to help the VTC implement its technical and industrial training programmes. Their main tasks include assessing 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.

The Education and Manpower Bureau has completed a consultancy study on the VTC with the aim of mapping out its future direction and enhancing its effectiveness and flexibility in meeting the changing needs of the Hong Kong economy. The VTC has devised some measures to implement those recommendations arising from the review which have been accepted by the government.

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 HKCEE and the Hong Kong Advanced Level Examination (HKALE). It also offers proficiency tests in Putonghua aimed at adults. On behalf of overseas and local examining bodies, it conducts many examinations leading to academic, professional or practical qualifications.




During the year, 122 703 candidates sat for the HKCEE and 30 052 sat for the HKALE. In all, 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 0.3 per cent increase in AS-level non-language entries compared with 1996 (a 24 per cent increase compared with 1994 when AS-level subjects were first examined).

The HKALE results of day school candidates were slightly better than those of 1996, with the percentage of awards at grade E and above for A-level subjects being 73.7 (72.3 in 1996). Percentages at grade E and above in the two AS-languages and non-languages AS-level subjects were 82.2 and 73.5 respectively (81.7 and 71.7 in 1996). The percentage of grade awards at grade E and above for school candidates in the HKCEE was 65.4 compared with 63.0 in 1996. The percentage of grade awards at grade E and above for school candidates in the subjects of Chinese Language and English Language (syllabus B) were 63.7 and 59.2 respectively, compared with 60.9 and 57.2 in 1996..

In all, 197 299 candidates sat for overseas examinations, of whom 63 420 sat for the London Chamber of Commerce and Industry examinations, 50 142 for the Associated Board of the Royal Schools of Music, and 15 850 for the Test of English as a Foreign Language.

Hong Kong Council for Academic Accreditation

Established by the Hong Kong Council for Academic Accreditation (HKCAA) Ordinance, the HKCAA is an independent statutory body with 21 members, comprising senior academics from Hong Kong, the Mainland and overseas countries, as well as local industrialists and professionals. It is supported by a secretariat of full- time staff with expertise and experience in quality assurance and higher education, plus more than 1 000 local and overseas expert consultants.

The HKCAA's independence is guaranteed by Article 136 of the Basic Law, which stipulates that the HKSAR Government shall, on its own, formulate policies on the development and improvement of education, including policies regarding the system of academic awards and the recognition of educational qualifications. With this safeguard under the Basic Law, the HKCAA is able to establish and maintain its own independent authority with international links, provide independent authoritative advice on matters related to the standard of academic awards and recognition of educational qualifications obtained in Hong Kong and other parts of the world.

One of the HKCAA's major roles is to review the non-university degree-awarding institutions of Hong Kong and validate the individual programmes of those which have not acquired self-accreditation status to ensure that the degrees offered meet internationally-recognised standards. In 1997, programme validations were conducted at the Hong Kong Academy for Performing Arts, the HKIEd and Lingnan College.

Over the years, the HKCAA's advisory role has become increasingly important. As Hong Kong develops its external links, particularly those with the Mainland and Taiwan, there has been a growing demand for advice on the comparability of non- local qualifications. The HKCAA advises government entities such as the Civil


Service Bureau, the Education Department, and the Social Welfare Department, and public bodies such as the Housing Authority, on the comparability of non-local qualifications with local standards for the purpose of staff appointments.

      With the commencement of the Non-local Higher and Professional Education (Regulation) Ordinance in June 1997, the HKCAA became the named adviser to the Registrar of the Non-local Courses Registry who is the Director of Education. The HKCAA provides independent and authoritative advice on the accreditation/ recognition status of non-local institutions or professional bodies, and the comparability of standards of non-local courses conducted in Hong Kong as against those conducted in their home countries. The advice of HKCAA enables the Registrar to determine whether a non-local course meets the criteria for registration and helps in monitoring these courses.

      To keep itself abreast of the latest development in accreditation practices and academic standards around the world, the HKCAA maintains strong international and regional links with higher education and accreditation authorities outside Hong Kong, especially those with the Mainland. The HKCAA is an active member in the International Network for Quality Assurance Agencies in Higher Education, and other international bodies.

Management of Schools and Tertiary Institutions

School Management Committees

      Each school registered under the Education Ordinance has a management committee which is responsible for the education of the pupils and proper operation of the school.

      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 1997-98 school year, 1 042 aided schools were in the care of 448 sponsoring bodies, the largest of which operated 112 schools.

School Management Initiative

By September 1997, more than 360 government and aided primary, secondary and special schools had joined the School Management Initiative (SMI) Scheme. The scheme was introduced in 1991 to give government and aided schools more decision- making power and more flexibility in the use of resources, while putting in place more formal procedures for planning, implementing and evaluating their activities.

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 Chief Executive of HKSAR 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.




Student Finance

The Student Financial Assistance Agency administers several publicly funded schemes which ensure that students are not denied access to education due to a lack of means. It 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 who have not yet completed their full-time study up to first degree level may apply for a travel subsidy to cover part of their study-related expenses. In the 1996-97 academic year, $244.2 million was disbursed to 186 898 eligible students.

Textbook Assistance

 Needy students attending public sector schools from Primary 1 to Secondary 3 may apply for a grant to buy essential textbooks and stationery. In the 1996-97 academic year, $101.4 million was disbursed to 157 240 students.

Fee Remission

 Needy Secondary 4 to 7 students in public sector schools may apply for remission of half or all of their standard school fees under the Senior Secondary Fee Remission Scheme. In the 1996-97 academic year, 90 037 students were granted fee remissions amounting to $272.5 million.

  The Kindergarten Fee Remission Scheme provides assistance to eligible kindergarten pupils, in the form of 50 or 100 per cent of the average of fees charged by non-profit-making kindergartens. In the 1996-97 academic year, $243.8 million was granted to 60 217 kindergarten pupils.

Local Student Finance Scheme

Full-time students studying eligible courses in all UGC-funded institutions, the two technical colleges of the VTC and the Prince Philip Dental Hospital may apply for assistance under the means-tested Local Student Finance Scheme which provides loans to meet living expenses and grants to cover tuition fees, academic expenses and student union fees. In the 1996-97 academic year, $968 million in grants and $945 million in loans (including $65 million in extended loans) were provided to 37 502 needy students.

To review the cost-effectiveness and efficiency of the Local Student Finance Scheme, the Student Financial Assistance Agency commissioned a consultancy study on the scheme which completed in May 1996. The Joint Committee on Student Finance studied the consultants' proposals and recommended a package for improving the efficiency, fairness, transparency and integrity of the scheme, including the introduction of a non-means tested loan scheme to be implemented in the 1998-99 academic year.

Student Finance Assistance Scheme

The Hong Kong Shue Yan College is a privately-funded institution and does not receive any direct government subsidy, but financial assistance is available to eligible full-time students of the college in the form of grants and loans. In the 1996-97


academic year, 872 students received loans totalling $7.6 million; of these, 826 also received grants totalling $5.6 million.

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 $12.2 million in the 1996-97 academic year.

Eleven students were awarded new fellowships for postgraduate or scholarships for undergraduate study overseas and 35 postgraduate students received fellowships while 89 undergraduate, diploma and certificate students received scholarships to study locally. Awards were also made to four students excelling in public examinations; 17 disabled students at secondary, post-secondary and tertiary levels; and 691 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 are administered by the Student Financial Assistance Agency under the Education Scholarships Fund Ordinance.


In September 1997, 177 175 children, most of them aged three to five, were enrolled in 731 kindergartens. Most kindergartens operate two half-day sessions, but the number offering whole-day places is increasing.

To further improve the quality of kindergarten education, kindergarten teachers will, from September 1998, be required to possess a minimum qualification of having completed Secondary 5 with at least two passes in the HKCEE, one of which must be Chinese Language or Chinese Literature. The minimum proportion of Qualified Kindergarten Teachers in each session of a kindergarten will be 40 per cent, 50 per cent and 60 per cent by September 1998, 1999 and 2000, respectively. Such teachers have received at least 360 hours of in-service training administered by the HKIEd.

       The KSS was introduced in 1995 to assist eligible kindergartens to minimise the impact on parents of fee increases resulting from the above regulatory requirements. The KSS was reviewed in early 1996 and enhancements to the scheme were introduced in the 1996-97 school year, resulting in an increase of 14 per cent to the rate of subsidy per pupil per annum and a 41 per cent adjustment to the eligibility cut-off point. For the 1997-98 school year, the rate of subsidy per pupil per annum is $880 and the eligibility cut-off point is $13,200 per pupil. To enhance the quality of kindergarten education by encouraging kindergartens to employ more trained teachers, a review of the scheme scheduled for the 1998-99 school year was advanced to the 1997-98 school year.

Primary Schools

Schooling in government and aided primary schools is free. However, about 10 per cent of parents prefer to send their children to private primary schools. Admission to Primary 1 in aided and government schools is processed through a centralised system, which was established to eliminate pressure on children caused by intense competition




for entry to popular schools. In September 1997, 416 402 children were enrolled in 748 government and aided primary schools. Most primary schools operate bi- sessionally but the government aims to implement whole-day primary schooling progressively. Where possible, primary schools are encouraged to convert to whole- day operation. Since 1993, all new primary schools are operated on a whole-day basis where the demand and supply of school places permit. The government's interim target is to enable, in the 2002-03 school year, 60 per cent of places in government and aided primary schools to be provided on a whole-day basis.

  Since the 1993-94 school year, the normal class size in government and aided primary schools has been reduced from 40 to 35 progressively, starting with Primary 1 and extending upwards by one level each year. For classes adopting the activity approach a more lively, pupil-oriented approach to teaching the class size has been reduced from 35 to 30. The reduction of class size has been extended to Primary 5 in the 1997-98 school year. In order to speed up the implementation of whole-day primary schooling, the government will slightly adjust the class size to 37 (32 for an activity-approach class).

  The government makes constant efforts to improve designs for primary schools. In parallel, improvement works to existing schools have been carried out under the School Improvement Programme since 1994. By January 1998, 70 schools had been provided with additional rooms and facilities under this programme.

  The teacher-to-class ratio is 1.4:1 for whole-day classes and 1.3:1 for bi-sessional classes. The student/teacher ratio is about 23:1. To upgrade the professional and managerial skills of teachers in government and aided primary schools, since 1994 the government has been upgrading teacher posts to graduate level with a view to achieving 35 per cent graduate teachers by 2001. Up to the 1997-98 school year, 1 015 graduate posts had been provided.

  To support learning and encourage good reading habits among primary school pupils, besides class libraries, the government has been providing a central library in each primary school by phases. The 1997 Reading Award Scheme for Primary 5 and 6 attracted 57 000 pupils from 422 primary schools.

  At the end of Primary 6, all pupils in schools participating in the Secondary School Places Allocation System are allocated free Secondary 1 places. The allocation is based on parental choices and internal school assessments scaled by a centrally- administered Academic Aptitude Test. In 1997, 77 624 pupils took part in the allocation and 55 635 (71.7 per cent) were allocated one of their first three school place choices of whom 38 745 (49.9 per cent) were allocated their first choice.

Secondary Schools

There are five types of secondary schools by curriculum: grammar, technical, prevocational, practical and skills opportunity schools. The first three types of schools offer five-year secondary courses leading to the HKCEE but with different emphases to cater for the different needs of students. Most of them also offer a two- year sixth-form course leading to the HKALE.

  In September 1997, the 422 grammar schools had a total enrolment of 410 081. The 19 technical schools, which put an emphasis on technical and commercial subjects, had an enrolment of 19 496. The 27 prevocational schools, which provide a secondary


curriculum with a larger proportion of technical and practical content for students with aptitudes or inclinations for these subjects, had 22 988 enrolled.

      The government recently completed a review of prevocational and secondary technical education and will implement the recommendations by phases to keep the education provided in these schools in step with the changing needs of the community. Qualified students who complete Secondary 5 in these schools can continue their studies in the sixth-form or in courses offered by technical colleges or technical institutes.

      The three practical schools, which offer a curriculum with a practical orientation and strong guidance support, had an enrolment of 847 in September 1997. They offer a three-year junior secondary education to help students develop their interest in and motivation towards studies, and prepare them for further studies in vocational training, senior secondary education or employment. The four skills opportunity schools, which offer a three-year tailor-made and skills-orientated curriculum to help students with learning difficulties to acquire basic social and vocational skills, had an enrolment of 762 in September 1997.

      Secondary 3 leavers are selected for subsidised places in Secondary 4 or basic craft courses, according to internal school assessments and parental preference. In 1997, 80 268 students took part in the selection exercise, of whom 68 570 (85.4 per cent) secured Secondary 4 places in public sector schools, and 4 006 (5 per cent) were admitted to basic craft courses. Admission to subsidised places in Secondary 6 depends on results in the HKCEE. The 1997-98 school year had 24 140 subsidised. Secondary 6 places.

      As with the primary level, the government makes constant efforts to improve designs for secondary schools and has been carrying out improvement works to existing secondary schools under the School Improvement Programme since 1994. By September 1997, 59 secondary schools had been provided with additional rooms and facilities under the programme.

      The teacher-to-class ratio in government and aided secondary schools is 1.3:1 in Secondary 1 to 5, and 2:1 in the sixth-form. Additional teachers are supplied to strengthen language teaching; to 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.

      Each public sector secondary school has a library staffed by a teacher-librarian responsible for managing the school library and organising library activities for students. The 1997 Reading Award Scheme for Secondary 1 to 5 attracted 38 000 students from 200 secondary schools.


The primary school curriculum aims to provide a coherent and well-balanced programme to promote all-round development. All government and aided primary schools adopt a core curriculum including Chinese, English, Mathematics, General Studies, Music, and Physical Education as well as Art and Craft. From the 1998-99 school year, Putonghua will be scheduled in the core curriculum. A syllabus for each core subject is prepared by the CDC. The syllabuses are regularly reviewed to meet




changing educational and community needs. Recently, the General Studies syllabus has been revised and updated following Hong Kong's reunification with China. Other learning programmes such as civic education, drug education, environmental education and sex education are offered on a cross-curricular basis or as separate optional subjects. Awareness of the benefits of the activity approach is growing, and in the 1997-98 school year, it is adopted by 464 primary schools, or 56 per cent of the total.

  Since 1994, the government has promoted the Target Oriented Curriculum (TOC) which aims to make teaching and learning more lively and effective by developing clear targets and stimulating approaches. During the year, the Curriculum Development Institute (CDI) continued to develop the TOC and to prepare for its full implementation in schools by providing necessary resource and support services. Suggested TOC assessment mechanism has been developed and incorporated into the Assessment Guidelines for schools' reference and adoption. The conceptual framework of TOC will be incorporated into the future revision or updating of other subject syllabuses. In the 1997-98 school year, over 680 primary schools (about 80 per cent) implemented TOC in the core subjects of Chinese, English and Mathematics in Primary 1 to 3, 1 to 2, or 1.

  The junior secondary curriculum is intended to be well-balanced and suitable for all students, whether or not they continue formal education beyond Secondary 3. The senior secondary curriculum aims to prepare students for education beyond Secondary 5 as well as for work. It offers a diverse range of subjects. Teaching syllabuses are prepared by the CDC for 46 subjects at junior secondary and 42 at senior secondary levels. These syllabuses are reviewed and revised as necessary to meet the changing needs of the community. In 1997, six syllabuses at secondary level were revised. To prepare students for future challenges, elements of information technology and its applications were incorporated into relevant syllabuses. A new syllabus for Putonghua has also been developed and will be implemented from the 1998-99 school year starting with Secondary 1 and 4. At sixth-form level, there are 20 subjects at the AS-level and 22 at the A-level. A new AS-level subject, Electronics, was implemented in the 1997-98 school year. The CDI also offers short courses and seminars to help teachers implement and become familiar with the curricula at both secondary and sixth-form levels.

  For cross-curricular studies in such areas as civic education, moral education, drug education, environmental education, sex education and AIDS education, the CDI has provided teaching guidelines and support materials to schools. These areas are integrated into various subjects in the secondary curricula. Revision of the Guidelines on Sex Education was completed with emphasis on equipping students at all levels, from pre-primary, with the attitudes, values, skills and knowledge for resolving sex tensions and making decisions based on informed choices.

  Civic education also has an important place in the school curriculum. The new Guidelines on Civic Education have been implemented in schools from September 1996 to enhance students' understanding of the Basic Law, the 'One Country, Two Systems' principle, knowledge of China and the Chinese culture. Emphasis was also laid on promoting students' critical thinking. To ensure the effective implementation of the guidelines, seminars were organised and teaching kits produced. A new syllabus is being developed for civic education at Secondary 1 to 3 to be introduced to schools from the 1998-99 school year.


Medium of Instruction

The government's language policy is to enable students to be biliterate (to master written Chinese and English) and trilingual (to speak fluent Cantonese, Putonghua and English). To achieve this, the government has for many years been promoting mother-tongue teaching in schools, since this is recognised world-wide as the most effective medium of instruction. Chinese is the medium of instruction in most primary schools, with English taught as a subject from Primary 1. A few primary schools use English as the language of instruction. Many schools teach Putonghua as a separate subject or during after-school activities.

      In September 1997, the government encouraged all local public sector secondary schools to adopt Chinese as the medium of instruction, starting with their Secondary 1 intake in the 1998-99 school year and progressing each year to a higher level of secondary education. Only schools satisfying certain criteria regarding students' language ability, teacher capability and support services will be allowed to use, or continue to use, English as the medium of instruction. To help them choose secondary schools most suited to their children's language ability, parents will be informed of their children's grouping and the medium of instruction adopted by individual schools.

      In the 1997-98 school year, 77 secondary schools used Chinese for all subjects except English language. This figure will increase to about 300 in the 1998-99 school year. Measures are being taken to raise students' English standard. A new programme is launched to recruit native-speaking English teachers for secondary schools. Secondary schools using Chinese as the medium of instruction will also be given additional English teachers.

Education for Newly Arrived Children and Youngsters

The Education Department, with the assistance of non-governmental organisations (NGOs), operates an induction programme for newly arrived children and youngsters aged six to 15 to help them adapt to the local social and school environment. NGOs also run programmes to help newly arrived children and youngsters aged nine to 15 improve their English standard. Feedback from teachers, students and the community to these programmes has been very positive.

      A set of self-learning packages on the English Language and a multi-media CD- ROM named 'From Simplified to Traditional Chinese Characters' (with guidelines) were produced and distributed to schools and NGOs for use by the newly arrived children and youngsters. Tests on the Chinese Language, English Language and Mathematics were constructed to help schools assess the standard of newly arrived children and youngsters for admission to Primary 2 to Secondary 4 levels. 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.

      To help newly arrived children or youngsters already admitted to schools overcome learning and other adaptation problems, a school-based support programme was introduced in September 1997. A block grant is given to public sector schools which admit such students, at the rate of $2,000 per pupil at primary level and $3,330 at secondary level. A pilot scheme on short-term preparatory courses for newly arrived children and youngsters is being introduced in five primary and two secondary schools. To increase educational opportunities for newly arrived children and




youngsters aged 15 or above, from September 1996 the age for admission to all adult education programmes and courses was lowered from 18 to 15.

Home-School Co-operation

The government encourages home-school co-operation in educating children and young people. The number of Parent-Teacher Associations (PTAs) is increasing and reached 461 in the 1997-98 school year. PTAs are encouraged to form networks in their own districts. The Committee on Home-School Co-operation, which aims to improve communication between schools and parents, was established in February 1993. Its members include educators, parents, PTA chairpersons and officers of the Education Department. In 1997, it organised a family sports programme, a family sex-education campaign, and promotion activities for parents and PTAs. It also published a PTA manual and launched a campaign calling upon parents to show appreciation for teachers' work.

Extra-curricular Activities

Extra-curricular activities are an integral part of school life. The Education Department provides guidance and advice to teachers, subsidises some activities, and co-ordinates many inter-school programmes and activities. In 1997, these included the Community Youth Club, the Hong Kong Award for Young People, the Lions' Sister Schools Scheme, the Schools Dance Festival, celebrations related to the 1997 Handover Ceremony, the Schools Drama Festival, sports and recreational activities, plus subject- and interest-based activities.

Information Technology in School Education

Computer subjects have been offered to secondary students since the early 1980s. They cover three major areas: computer systems, information processing and programming. They help students develop the necessary information technology (IT) skills required for more advanced studies and for the workplace. The School Administration and Management System (SAMS) was developed in 1994 to support schools in planning, management and administration and to facilitate electronic transmission of information between schools and the ED.

  With the rapid development and extensive applications of IT, the government has attached more importance to IT in school education, especially as a teaching and learning tool across the curricula. In 1997, the government introduced new measures to provide 15 multi-media computers for every public sector primary school to support a Computer Awareness Programme and a Computer Assisted Learning Programme, and to set up Information Technology Learning Centres (ITLCs) in prevocational and secondary technical schools to support learning of technical and practical curricula through up-to-date technology. Additional equipment will be provided to schools from the 1998-99 school year. More than 400 secondary schools (or 88 per cent) now have access to the Internet. Primary schools will do the same. Apart from hardware, teacher training has also been provided. In parallel, the department has reviewed curriculum design and school facilities to complement the implementation of IT in education.

  To further strengthen IT in primary and secondary education, the Chief Executive's 1997 Policy Address mentioned that a long-term strategy for IT in education would be formulated to promote the use of IT to enhance teaching and learning. The main



tasks are to equip teachers with the necessary IT skills; to apply computer-assisted teaching and learning across the curriculum; and to place students in an environment where they can use this technology as part of their daily activities and grow up to use it creatively. The aim is to have teaching and learning in at least 25 per cent of the curriculum supported through IT and to see it applied comprehensively in school life within five years and for all teachers and Secondary 5 graduates to achieve competence with IT tools within 10 years.

       The 1997 Policy Address announced a series of measures, to be introduced in 1998, to effect immediate enhancement in IT in education. These include:

enhancing provision of computer facilities in primary and secondary schools to 40 and 82 on average, respectively;

procuring and developing new software to support teaching and learning; enhancing IT training for teachers, and providing professional and technical support to schools;

introducing pilot schemes in 20 schools to establish best practices for IT applications in teaching and learning; and

preparing for an education-specific

intranet for


communication and sharing of information within the school sector.

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 1 students are given hearing and eyesight tests. Checklists and guides help teachers to detect children with speech problems and learning difficulties. Children requiring further assessments are given audiological, speech, psychological or educational assessments at special education services centres or at schools. Some are referred for ophthalmic advice.

      Children with 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 1997, there were 67 visually-impaired, 647 hearing-impaired, 136 physically handicapped and 333 mentally handicapped students integrated into normal schools, with the help of supportive services from the Education Department.

      Special education classes in ordinary schools cater for partially sighted, partially hearing children and children with learning difficulties. Services for children integrated into ordinary classes include school-based or centre-based intensive remedial support in the basic subjects, behavioural guidance to children and advice to teachers on how to help children with special needs.

      A 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.

The operation of the Supportive Remedial Service for hearing-impaired primary school students who attend mainstream schools is very effective and a pilot project of the service for junior secondary students was launched in September 1994. It proved to be an effective support for these hearing-impaired students in mainstream secondary schools.

In December 1997, there were 62 special schools, including a hospital school, schools for children who were blind, deaf, physically handicapped, mentally handicapped or with adjustment problems. Of these, 18 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 schools and special education 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 life experiences of day and residential students. The CDC's Special Education Co-ordinating Committee, with members from government departments and schools, advises on the curricular aspects based on pupils' special educational needs. A home-based teaching programme let children who were home-bound for health reasons continue their education. A three-year pilot project, School-based Programme for Academically Gifted Children, in 19 volunteer primary schools was completed in August 1997. During the year, preparation was under way to review the project. A report on the project is expected to be completed in mid-1998, with recommendations regarding further development of gifted education services.

  The Fung Hon Chu Gifted Education Centre was officially opened in December 1995. It provides gifted primary and secondary students with suitable enrichment programmes and training courses. It also holds various seminars and workshops to enhance parents', teachers' and other professionals' understanding of gifted students' needs.

International Schools

International schools form an important social infrastructure of Hong Kong to maintain our status as an international business centre and a vibrant and cosmopolitan community. In September 1997, 23 769 students were enrolled in more than 40 international schools offering more than 10 curricula including American, Australian, British, Canadian, French, German-Swiss, Indonesian, Japanese, Korean and Singaporean. In the 1997-98 school year, 24 of Hong Kong's international schools operated up to secondary level, and 35 at primary school level. There were 30 kindergartens and a special school.

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 UGC. In-service



professional development courses for teachers are provided by the Education Department and professional organisations.

      In the 1997-98 academic year, the HKIEd offered 45 courses for more than 8 840 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 course in Putonghua.

       The HKIEd moved into its new, $2.55 billion campus in Tai Po in November 1997. It provides academic, administrative, amenities and indoor sports accommodation. Student hostels, staff quarters and outdoor sports facilities are scheduled for completion between July 1998 and September 1999.

Review of Teacher Education

In July 1997, the Chief Executive announced a new policy objective that all new teachers of primary and secondary schools should have university degrees and professional training in teacher education in the foreseeable future. The primary aim is to upgrade the quality and professional qualification of teachers so that the quality of primary and secondary education will in general be improved.

The government invited the UGC to conduct a review particularly of pre-service teacher education, to advise how best to plan the development of the tertiary sector to meet the challenge, and to say how quickly this objective can be achieved. The UGC expected to submit its advice in early 1998. In addition, the government asked the ACTEQ to undertake a parallel review of in-service teacher education and training, within approximately the same time-frame as the UGC's review.

Management Courses

The Education Department provides basic training in educational management and administration for primary/secondary school heads and senior teachers. School-based staff development workshops were organised by the Training Unit to promote the importance of teamwork among teachers. Additional training opportunities were offered to teachers of SMI schools to equip them with knowledge in leadership and strategic planning.

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 a widely represented advisory management committee. It is staffed by the Education Department. During the year, the centre published newsletters and hosted 700 activities for 50 000 participants. Another centre was set up in Kowloon and began to provide services in October 1995.

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 23 elected members from schools and




educational organisations, and three members nominated 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 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 (three years full-time or two years part-time), higher certificate (two or three years part-time) and associateship (two years part-time) courses in applied science, business administration, computing, statistics and mathematics, construction, design, electrical and communications engineering, electronic engineering, hotel, catering and tourism management, information systems and technology, manufacturing engineering/ engineering management and mechanical engineering.

Short courses are also offered to people in employment. In July, 1 512 full-time, 555 part-time day and 1 826 part-time evening students graduated from the technical colleges. In November, enrolment totalled 5 269 full-time students on 35 courses, and 1 294 day release and 7 891 evening students on 62 part-time courses.

The seven technical institutes provide technician- and craft-level courses in accounting, applied science, child care, China business studies, clothing technology, commercial studies, computing, construction, design, electrical engineering, electronic engineering, hairdressing, hotel-keeping and tourism, manufacturing engineering, marine engineering, mechanical engineering, motor vehicle engineering, printing and textiles. Technician-level courses are offered for Secondary 5 leavers 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, 4933 full-time, 1940 mixed full-time, 3 757 part-time day and 7 848 evening students graduated from the technical institutes. In November, the total enrolment in technical institutes was of 10 067 full-time, 3 734 mixed full-time, 11 217 part-time day and 23 601 evening students on some 297 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. Some 48 968 full-time and part-time places were available during the year for school leavers and people in employment. Trade tests were offered to workers in automobile, building and civil engineering, electrical, jewellery, machine shop and metal working, plastics, printing and precision tooling trades.

The Construction Industry Training Authority, established in 1975, operates three training centres plus a management training and trade testing centre offering a total of 4 878 full-time and 52 240 part-time training places for the 1997-98 training year.


     Full-time courses are offered to train up 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 are conducted for operators of construction plants, temporary suspended working platforms and builders' lifts. The authority also conducts trade tests for construction workers with a view to upgrading the quality of construction works.

      The Clothing Industry Training Authority was established in 1975 to provide training for the clothing and footwear industries. It is financed by a levy of 0.03 per cent on the Free on Board value of clothing and footwear produced and 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 industry and commerce. Grants are provided to help companies send their employees to acquire skills in new technologies. The training grant can be up to 75 per cent of the training cost. Eligible training programmes consist of local training courses, overseas training courses, work attachments and tailor-made training courses for individual companies. During the year, the VTC received 3 317 applications and approved 2 318.

Apprenticeship Schemes

The Apprenticeship Ordinance promotes and regulates the employment and training of apprentices. Young persons aged between 15 and 18 who work in any of the 42 designated trades and have not already completed an apprenticeship in the trade must enter into a contract of apprenticeship with their employers. Such contracts 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, 3 580 contracts were registered (1 021 in non- designated trades), covering 2 809 craft and 771 technician apprentices. At the end of December, 7 938 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 953 full-time places, of which 414 are residential.




Support services provided by the VTC include a vocational assessment service, using internationally-recognised tests and work samples designed to evaluate a person's vocational strength and potential. Most special school students attend a specific assessment programme in their final school year. A comprehensive programme is used in assessing the more complex cases.

The VTC's Technical Aids and Resource Centre designs and makes aids for disabled people to enhance their training and employment prospects, and provides information and resource materials on vocational rehabilitation.

An inspectorate unit advises skills centres on administration, curriculum, training methods and standards, and 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. Some 80 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 increased to about 18 per cent, with 14 500 places available for first-year, first-degree courses. A further six per cent of the relevant age group 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 HKCAA validates courses and programmes offered by Hong Kong's non-university, degree- awarding institutions. There are eight 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, the HKIEd, is a teacher-training institution.

The Tertiary Institutions

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 10 680 full-time, 6 629 part-time and 436 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 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, Building Science & Technology and Computer Studies.

   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 through legislation as a tertiary institution capable of offering degree courses, and became 100 per cent funded by the government. In 1989, it became the third tertiary institution in Hong Kong to operate fully at the degree level. It was accorded formal university title and status through legislation in 1994. The university now offers 39 undergraduate programmes, 10 taught postgraduate programmes, and research programmes through its five faculties/schools of Arts, Business, Communication, Science and Social Sciences; and has 4 307 full-time and 565 part-time students. Its


School of Continuing Education offers short courses and, in collaboration with overseas/local institutions, degree programmes.

      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 Chinese, Translation, Business Administration and Social Sciences. In December 1997, undergraduate enrolment was 2 106 full-time students. It has offered two Master of Philosophy degrees in Translation and Social Sciences since 1995-96. From 1997-98, these programmes have been expanded to the discipline areas of Chinese and Business. The college moved to its new campus at Fu Tei, Tuen Mun, in 1995.

       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 institution, Shaw College, was founded in 1986. The university has 9 151 full-time and 487 part-time undergraduate students, and 1 114 full-time and 1 542 part-time postgraduate students in seven faculties: Arts, Business Administration, Education, Engineering, Medicine, Science and Social Science.

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 1997 was 3 133 full-time and 5 712 part-time students. It is planning to launch degree courses in Education. Since 1996, the HKIEd has been under the aegis of the UGC.

      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. The university has 11 443 students in its full-time and sandwich courses, and 8 119 students in its part-time courses.

      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 undergraduates. In December 1997, the university had 5 649 undergraduates and 1 527 graduate students.

      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 established in 1887. Its 10 739 full-time and 2 759 part-time students are enrolled in nine faculties: Architecture, Arts, Dentistry, Education, Engineering, Law, Medicine, Science and Social Sciences; and the School of Business. Courses and programmes are at first degree, taught master's and postgraduate research levels.

      The Open University of Hong Kong (OUHK), established in 1989 as the Open Learning Institute of Hong Kong, has provided working adults with more 153



opportunities for higher education through open access and distance learning courses. It was granted self-accrediting status in October 1996 and awarded university title in May 1997. Since 1993-94, the OUHK has been self-financing. In 1997, about 23 000 students were enrolled in 111 courses leading to sub-degree, degree and post-graduate qualifications in four schools, the School of Arts and Social Sciences, School of Business and Administration, School of Education, and School of Science and Technology, and a Centre for Continuing and Community Education. About 6 141 students have graduated from OUHK with a bachelor's degree.

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 offer day and evening courses to 2 383 students. The college is a privately-funded institution and does not receive any direct subsidy but government financial assistance is available to its students in the form of 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-Institut, Dante Alighieri and the Japanese Consulate offer language courses.

During the year, the Education Department provided courses from primary to senior secondary levels to adult learners at 42 centres. It also subvented adult education programmes operated by non-governmental organisations.

Committee on the Promotion of Civic Education

The Committee on the Promotion of Civic Education was set up by the government in May 1986 to promote civic awareness and responsibility in the community.

  In 1997-98, it continued with the expanded educational programmes on equal opportunities and human rights. It also stepped up efforts in its educational programmes on promoting the Basic Law.

Major activities in 1997 included: an annual civic education roving exhibition featuring the Basic Law and human rights; media campaigns including radio and television announcements in the public interest, radio programmes, newspaper and other forms of advertisement, and free teleline stories to enhance public awareness of civic responsibilities, human rights and the Basic Law; a series of civic education reference materials including a human rights teaching kit for pre-school children, videos on human rights for children and adolescents, cartoon booklets on civic education and children's rights for pre-school children, videos, booklets and a CD- ROM on the Basic Law for youngsters and a civic education package for youth; and seminars on human rights.

The committee has allocated resources under the Community Participation Scheme to fund civic education projects organised by non-government organisations. It plans to launch a programme to strengthen civic education over the coming year, under the theme 'Hong Kong, Our Home', to help nurture the growth of a stronger understanding of the community and culture.



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.

       In December 1997, 9 496 doctors were registered with the Medical Council and 37 880 nurses were registered with the Nursing Board. During the year, the number of hospital beds increased to 30 799, representing 4.65 beds per thousand population. The total comprises 26 403 beds in hospitals run by the authority, 3 570 in private hospitals, 754 in correctional institutions and 72 operated by the Department of Health.

Health of the Community

Hong Kong's health indices compare favourably with those of most developed countries. In 1997 the infant mortality rate was four per 1 000 live births and the average life expectancy at birth was 76 years for males and 82 years for females.

      Health problems in Hong Kong are mostly due to lifestyle-related chronic degenerative diseases. The four leading causes of death in 1997 were cancers (32 per cent), heart diseases (15 per cent), pneumonia (12 per cent) and cerebrovascular disease (10 per cent). These diseases affect mainly elderly people and will continue to dominate the mortality statistics as the population ages.

      A new strain of influenza A virus (H5N1), which was previously known to infect only birds, was detected in man for the first time in Hong Kong in 1997. In all, 18 confirmed cases were reported with six deaths. Investigation showed that the virus was transmitted mainly from bird to man. Various control measures were implemented by the Department of Health to combat the new disease, including




stepping up of surveillance, screening programme for poultry workers, strengthening of laboratory support and widespread publicity and health education.

An Interdepartmental Co-ordinating Committee chaired by the Deputy Director of Health was set up to co-ordinate efforts of the various departments in the control of the disease. The Department of Health also works closely with the World Health Organisation and the Centres for Disease Control and Prevention, Atlanta, USA, on matters related to case investigation, field study, development of laboratory tests and the making of a vaccine.

   The government decided to slaughter all chickens in Hong Kong and the two municipal services departments supported the operation by supervising the slaughter of all poultry in market stalls and fresh provision shops. The departments also stepped up market cleansing and had all poultry stalls and fresh provision shops cleaned and disinfected thoroughly.

Infectious diseases

There are 26 statutory notifiable diseases in Hong Kong, including three quarantinable diseases, namely cholera, plague and yellow fever. In 1997, about 14 300 cases of notifiable infectious diseases were reported, of which nearly 50 per cent were due to tuberculosis.

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 eradicated and the incidence of preventable infectious diseases among children is relatively low. In 1997, about 200 cases of HIV (human immunodeficiency virus) and 70 AIDS (Acquired Immune Deficiency Syndrome) patients were reported. The cumulative total was about 1 000 cases of HIV infection and 300 AIDS patients. A recent study, estimated the actual number of HIV-infected individuals was 1 500 to 2 000.

Hospital and Development Programmes

  Demand for hospital services remained high. In 1997, there were 961 500 hospital discharges and deaths and 7 053 000 attendances at out-patient and specialist clinics. Accident and emergency departments of major public hospitals had 2 117 000 attendances or 5 800 per day.

Projects in the hospital development programme progressed satisfactorily. The Alice Ho Miu Ling Nethersole Hospital with a bed complement of 642 came into operation in January 1997. Commissioning for the Tai Po Hospital and North District Hospital was in progress. The Tseung Kwan O Hospital and Kowloon Medical Rehabilitation Centre were under development. Several other hospitals and specialist clinics were undergoing redevelopment or major refurbishment.

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. After successful implementation in Kowloon, the system will be extended to Hong Kong Island in early 1998.


The Department of Health operates 63 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 50 maternal and child health centres, 13 student health centres, 17 tuberculosis and chest clinics, 13 social hygiene clinics, five dermatology clinics, five clinical genetic clinics, five child assessment centres and other clinic services. Total attendance in 1997 was more than 11 million.

Private-sector services are provided by members of the Estate Doctors' Association, who run clinics in housing estates to offer a low-cost service for residents, by medical practitioners in private practice and by 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, the Healthy Lifestyle Campaign provided health information to the public through a number of interesting and exciting programmes. The aim was to cultivate the concept of healthy living in the community.


The Health Ambassador Programme continued to win acclaim in 1997. 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 unit's computerised 24-hour pre-recorded telephone health education service (2833 0111) was also expanded and reorganised to provide more than 220 messages on various health topics.

Dental Services

The Department's Dental Service aims at promoting oral health in the community through promotive and preventive oral health services.

Oral health education and promotion activities are organised throughout the year to increase the level of oral health awareness among the people. These activities include outreaching programmes delivered through an Oral Health Education Bus and target-specific programmes delivered through maternal and child health centres, kindergartens and pre-school centres to more than 180 000 pre-schoolers every year. Preventive services are delivered through the School Dental Care Service which provides annual dental examination and basic dental care to about 390 000 children




  annually. The domestic water supply is also fluoridated to reduce dental decay. A 24- hour interactive voice response system (hotline number 2713 7028) is available to provide voice and fax information about the School Dental Care Service and oral health.

Specialist oral health services are provided to hospital patients and those with special oral health needs. An emergency dental service is provided to the general public at 11 designated dental clinics.

Family Health Service

The Family Health Service offers comprehensive primary health care for women and children below six years through 50 Maternal and Child Health Centres and for women aged 45 to 64 at three Women Health Centres. Antenatal and postnatal care are provided to mothers and family planning service is available for women of child- bearing age. Health education and counselling, physical examination, immunisation and comprehensive observation service are provided to those below six. About 42 per cent and 96 per cent respectively of expectant mothers and new-borns attended Maternal and Child Health Centres in the last year.

The government-subvented Family Planning Association of Hong Kong runs eight birth control clinics and three youth health care centres which provide 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 sex education, in addition to outreaching programmes and publicity campaigns.

Student Health Service

The Student Health Service emphasises health promotion, disease prevention and continuity of care. 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 on environmental hygiene and sanitation. School health officers and nurses advise on the control of communicable diseases, and organise health education activities and immunisation campaigns.

Medical Care for the Elderly

The provision of medical services for elderly patients is a priority area. Geriatric services are provided in all acute hospitals. Nine community geriatric assessment teams and eight psychogeriatric teams provide specialist support to elderly persons living in subvented residential homes and those applying for residential care, as well as to their carers. There are also 415 geriatric day places provided for elderly patients in public hospitals.

The Department of Health runs seven elderly health centres to provide health screening, counselling and health promotion activities for elderly people. A wide range of publicity programmes, including Health Ambassador training courses for the elderly, have been conducted to promote elderly health through community participation.


Services for the Mentally Ill and Mentally Handicapped

At the end of 1997, 3 775 beds were provided in psychiatric hospitals and 1 227 beds in public psychiatric units of general hospitals. The number of psychiatric day hospital places remained at 575. The redevelopment of Castle Peak Hospital, one of the territory's two main psychiatric hospitals, is under way. An additional 442 psychiatric beds are scheduled to be provided 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 psychogeriatric teams have been set up to provide designated care and rehabilitation programmes to psychiatric and psychogeriatric patients. Other complementary rehabilitative services run by government departments and non-government organisations include day-centres, half-way houses, long-stay care homes, vocational training, selective placement and social clubs.

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 Based Nursing Service

The Hospital Authority's Community Based Nursing Service provides post-discharge rehabilitative nursing care and treatment to the sick, the elderly infirm, the disabled, and the mentally ill through a network of 49 centres. During the year, 35 200 patients were served and 453 400 home visits were made.

Port Health

The Port Health Office enforces measures in the Quarantine and Prevention of Disease Ordinance and the International Health Regulation 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. No cases of plague and yellow fever were reported in 1997.

Radiation Health

The Radiation Health Unit is the government's adviser on radiation health matters and the licensing arm of the Radiation Board for the enforcement of the Radiation Ordinance (Cap 303). In 1997 the unit issued 3 300 Irradiating Apparatus Licenses, 600 Radioactive Substance Licenses and 400 permits for transportation of radioactive substances. It monitored the radiation exposure of 7 000 workers and organised 1 000 health surveillance examination for these workers. In addition, the unit provided 3 200 individual radiation monitoring service to emergency response personnel. For these monitoring activities, the unit processed and analysed a total of 90 000 dosimeters. Its inspectors carried out more than 700 on-site radiological safety




 inspections. No worker exceeded the statutory annual dose limit of 20 millisievert. The average individual occupational dose was 0.17 millisievert.

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 cost $44 per session. Attendance at geriatric or psychiatric day centres and home visits by community nurses are $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. The Smoking (Public Health) Ordinance was further amended in June 1997. Among other measures, the amendment provides for tobacco advertisements in printed publications and on display to be banned by 1999, and for the introduction of more no-smoking areas in public places. More prominent health warnings will also be introduced on packages of tobacco products, along with a requirement to display tar and nicotine yields.

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 1997 was 170 and 163, respectively. Under the Licentiate Scheme of the Hong Kong Medical Council, nine externally-trained doctors passed the local licentiate examination in 1997.

  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 15 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 36 dentists in 1997.

Government Laboratory

The Government Laboratory supported government initiatives in safeguarding public health and safety through the regular testing of foods, pharmaceuticals and household goods. In all, 54 212 tests were conducted in 1997 to ensure regulatory compliance of food products in respect of labelling, additives and toxic residues.


      Some 20 972 tests were performed on pharmaceutical products to specifications of official pharmacopoeia, with increasing emphasis on registered drugs. Safety concern over Chinese medicines has led to advances in the pace of analysis and the search for quality information on herbal drugs.

      Year-round surveillance of tar and nicotine in cigarettes continued, with results published for public information and affirmation of the yields declared by tobacco manufacturers.

      Globalisation of trade has exposed individuals to more new products with undefined safety information. The scope of testing for consumer goods has continued to grow. Articles ranging from children's toys to textiles containing azo-dyes called for some 34 385 tests in 1997. Wide-ranging products required a multi-disciplinary testing approach and the need for collaboration. The laboratory achieved ground- breaking results in 1997 in co-organising exercises with laboratories in the Mainland.

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. It 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.

      The committee finalised its recommendations on the regulation and development of TCM and submitted its report to the government in March 1997.

Drug Abuse and Trafficking

The government aims at effectively enforcing the law, especially against those involved in the supply and trafficking of illegal drugs; developing a comprehensive treatment and rehabilitation programme for drug abusers; discouraging people, in particular the young, from taking or experimenting with drugs; and eradicating drug abuse in the community.

      Data collected by the government's Central Registry of Drug Abuse, which were based on 30 000 reports on 17 500 persons, indicated that in 1997, 88 per cent of drug abusers were male and 12 per cent female, 53 per cent were aged over 30 years, 29 per cent were 21 to 30 years old and 18 per cent were aged under 21.

      The number of young drug abusers reported to the registry continued to drop in 1997. However, youngsters are still making up a high proportion of the newly reported cases. Of a total of 3 500 drug abusers who came to the registry's notice for the first time in 1997, 79 per cent were male, 21 per cent were female and 44 per cent were under the age of 21.

Heroin remained the predominant drug of abuse in Hong Kong, and was used by 87 per cent of those persons reported to the registry. Other common drugs of abuse included cannabis, cough medicine, methylamphetamine ('ice') and various psychotropic substances.

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 161



  rehabilitation, research and international co-operation. While fully maintaining the emphasis on law enforcement and reducing supply, the government recognises the need for stronger action on reducing the demand for illegal drugs.

   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. A comprehensive range of treatment and rehabilitation services are provided to meet the different needs of drug abusers from varying backgrounds.

   Preventive education and publicity programmes are organised on a territory-wide basis and at the local level to increase 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-drugs strategies and programmes. Co-operation at the international level, through exchange of information and experience as well as joint action against illicit trafficking, enhances the effectiveness of efforts in all these areas.

These anti-drugs efforts are co-ordinated by the Action Committee Against Narcotics (ACAÑ), a non-statutory body which comprises both non-official and government members. It advises the government on anti-drugs policies and activities and is serviced by the Narcotics Division of the Government Secretariat, which is headed by the Commissioner for Narcotics.

Legislation and Law Enforcement

In March 1997, the Dangerous Drugs Ordinance was amended to provide for heavier sentences for adults who exploit young persons in the illegal drug trade. The amendment sends a strong and clear message, to drug traffickers and the public at large, that such exploitation of young persons is a serious crime.

   The 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988 UN Convention) was extended to Hong Kong in May 1997. Parties to the 1988 UN Convention have been designated under the Drug Trafficking (Recovery of Proceeds) Ordinance in June 1997 so that confiscation. orders relating to the proceeds of drug trafficking made by those jurisdictions can be enforced in Hong Kong. To comply with the requirements of the 1988 UN Convention, the Control of Chemicals Ordinance was also amended in June 1997 by extending licensing control to the shipment of salts of 17 chemicals specified in its Schedules 1 and 2. In July 1997, the Dangerous Drugs (Amendment) (No. 2) Ordinance 1994 was brought into operation to implement provisions of the 1988 UN Convention by dealing with narcotic offences at sea.

During the year, a review of the Drug Addicts Treatment and Rehabilitation Ordinance was undertaken, with a view to modernising its provisions taking into account the drug treatment and rehabilitation services provided by non-governmental organisations.

In 1997, vigorous law enforcement efforts produced considerable success in terms of seizures and arrests, both at home and overseas. The Hong Kong Police Force and the Customs and Excise Department seized some 170 kilograms of heroin, 1 133 kilograms of cannabis, 72 kilograms of methylamphetamine, 32 kilograms of cocaine, and substantial quantities of various narcotics, analgesics and tranquillisers. In all, 12 483 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 both locally and abroad.

Since the enactment of the Drug Trafficking (Recovery of Proceeds) Ordinance, assets valued at $323 million have been ordered confiscated and $216 million paid to the government by the end of 1997 and further assets amounting to $169 million were under restraint.

Treatment and Rehabilitation

Hong Kong adopts a multi-modality approach in providing treatment and rehabilitation services to cater for the different needs of drug abusers from varying backgrounds. 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 programme provided by the Department of Health; voluntary residential treatment programmes run by the Society for the Aid and Rehabilitation of Drug Abusers (SARDA) and other non-governmental organisations including a number of Christian therapeutic treatment agencies; counselling services for psychotropic substances abusers provided by PS33 of the Hong Kong Christian Service, Caritas HUGS Centre and Direction of SARDA; and medical services for substance abusers provided by the Hospital Authority's six substance abuse clinics. Two teams of specially trained social workers under the Against Substance Abuse Scheme of the Social Welfare Department are available to help the youth at risk who occasionally abuse drugs.

In April 1997, SARDA's Sister Aquinas Memorial Women's Treatment Centre was relocated from Sha Tin to North District, with its capacity increased from 39 to 57 beds. A permanent site for an existing counselling centre for psychotropic substance abusers in the New Territories was identified and local consultation started. Renovation works for a new residential treatment centre for opiate abusers were in full swing and will commence operation in the first half of 1998.

During the year, a study commissioned by the Social Welfare Department was conducted to evaluate the effectiveness of the treatment and rehabilitation services provided by non-subvented drug agencies, with a view to including them in the subvention system. The study was completed in December 1997.

Preventive Education and Publicity

Anti-drugs preventive education and publicity programmes in 1997 continued to educate young people that there is no difference between 'hard' and 'soft' drugs in terms of harmful effects; to help them in developing the life skills to resist drugs; to point out that there are alternatives to drugs to cope with problems; and to encourage them to lead a drug-free life. Preventive education and publicity programmes were also targeted at parents, alerting them to their important role in steering children away from drugs.

     Two new programmes were carried out during the year the Narcotics Division's Home Page on the Internet and anti-drugs projects by the District School Liaison Committees.




   The Narcotics Division's Home Page, launched on the World Wide Web in June 1997 in commemoration of the annual International Day against Drug Abuse and Illicit Trafficking, brings anti-drugs information right into the homes and schools of young people, locally and overseas.

   The schools' anti-drugs programmes, together with central publicity efforts, represent a community-wide education and support effort to convey anti-drugs messages to young people.

   During the year, the Narcotics Division's school talk team gave 458 drug education talks to 81 909 students in 387 primary and secondary schools and technical institutes. Talks were also organised for parents, members of youth organisations, and juvenile offenders at the boys' and girls' homes operated by the Social Welfare Department.

   To better equip prospective teachers, in-service teachers and social workers with the issue of drug abuse, drug education training courses and seminars were organised for them. The target of training at least one teacher to handle the drug abuse problem for each secondary school for local students was achieved. The Education Department held an international conference in February on drug education in schools.

   To strengthen parents' awareness of the drug problem and to encourage them to steer their children away from drugs, the Education Department encouraged and subsidised schools and Parent-Teacher Associations to organise drug education seminars and set up 24-hour hotlines for parents. The hotlines provided parents with information including advice on how to handle drug abuse.

   The Social Welfare Department organised a roving drama with anti-drugs themes, with a total of 41 shows attended by 16 000 young people. The message 'Drug Abuse Ruins Life' was also applied as a post mark on all mail in the second half of May 1997 and 19 radio shows were held during the year, reaching out to about 660 000 young people.

   The District Fight Crime Committees organised 18 district campaigns involving the community through activities such as visits, camps, seminars, carnivals, variety shows, competitions and exhibitions. For the first time, 48 school-based anti-drugs activities were organised by four District School Liaison Committees with ACAN funds.

The ACAN Community Against Drugs Scheme continued to provide encouragement and grants of up to $6,000 to youth groups to plan and implement anti-drugs education and publicity projects. It financed 14 projects. The ACAN Youth Volunteer Group took part in district campaigns and organised several community involvement projects, including an anti-drug abuse hotline card design competition and an anti-drugs charity walk for the Community Chest in November. ACAN's Anti-drug Abuse Hotline (2366 8822) continued to provide information on law enforcement, prevention of drug abuse, treatment and rehabilitation services and eight types of commonly abused substances.

   Members of the public can also obtain information from the 24-hour automated hotline through facsimile service. It received 54 360 calls during the year.


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, monitors drug-related studies and proposes action in the light of research findings. In 1997, four projects were identified by the Sub-committee for implementation.

The computerised Central Registry of Drug Abuse provides a useful means of monitoring changes in trends and characteristics of the local drug abuser population. It provides a database which facilitates the formulation and planning of effective and realistic anti-drugs 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, inter-governmental agencies such as the Financial Action Task Force on Money Laundering, Interpol and the World Customs Organisation, as well as with individual governments. Joint operations resulted in significant seizures and confiscation of drug-related proceeds locally and overseas. Since July 1997, Hong Kong's participation in the Financial Action Task Force on Money Laundering has been in the name of 'Hong Kong, China'.

      Hong Kong continued to support international co-operation in the provision of training for anti-drugs personnel. Anti-drugs personnel from different countries and international bodies came to the region on study visits and training courses during the year. The region also took part in 20 international meetings and seminars concerned with anti-drugs policies, law enforcement, treatment and rehabilitation, and preventive education.

The Beat Drugs Fund

With a capital sum of $350 million as seed money, the Beat Drugs Fund continued to finance and promote worthwhile anti-drugs activities which could help reduce the problem of drug abuse, particularly among the young, and to support community- wide efforts and programmes in the campaign against drug abuse. During the year, $11.7 million was allocated to the second tranche of successful applications including $9 million on treatment and rehabilitation projects and $2.7 million on preventive education programmes. A review of the Beat Drugs Fund was conducted with focus on the funding criteria and the monitoring mechanism of the anti-drugs projects supported by the fund. A third tranche of applications was invited in October.

Auxiliary Medical Service

The Auxiliary Medical Service (AMS) is established under the Auxiliary Medical Service Ordinance. It was formerly a unit of the Essential Services Corps established in 1950 under the Essential Services Corps Ordinance. The main role of the AMS is to augment regular medical and health services in times of natural disasters and emergencies, as well as to supplement regular medical services in times other than emergencies.

       The AMS is a volunteer service with an establishment of 5 258 members and 99 permanent staff. Operational staff and members receive training in different areas, including disaster management, paramedic, casualty evacuation, life saving and home nursing. Senior AMS staff often attend emergency/disaster medicine conferences overseas or within the territory so as to maintain and update the service's standards.




In 1996, two staff attended paramedical training in the Justice Institute of British Columbia, Canada.

The AMS is the government organisation responsible for qualifying first aiders. In 1997, 3 250 people were awarded first aid certificates by the AMS. In addition to providing the basic training programmes, the AMS also assists government departments to design tailor-made modules to suit the needs of individual departments. Upon request, the AMS will also give advice on safety management within working premises to provide a safer and healthier working environment.

   With the commencement of the Occupational Safety and Health Regulation in June 1997, the AMS, together with the Occupational Safety and Health Council, have jointly organised first aid courses starting from August 1997 for the targeted population affected by the regulation.

   In the summer of 1997, the AMS launched a Youth Ambassador Scheme to encourage youths to adopt a healthy life style, as well as to develop their sense of citizenship through participation in various programmes, such as life skills training, recreational activities and community services. A total of 250 youths aged from 11 to 16 residing in the New Territories West joined this meaningful scheme and attended a series of training programmes conducted by the AMS.

   Other services provided by the AMS included: first aid coverage at country parks, cycle tracks, school activities and major public functions such as the 1997 Annual Meetings of the World Bank Group and the International Monetary Fund; paramedical assistance at accident scenes by the AMS Emergency Response Task Force; non-emergency ambulance transfer service for patients requiring transfer services; daily manning of 21 methadone clinics; and round-the-clock clinical services at sick bays of Vietnamese migrant detention centres.

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 Hong Kong. This includes cleaning streets and gullies; collection of nightsoil, refuse and junk; management of refuse collection points, public toilets and bathhouses; pest control; and services for the dead.

The Keep Hong Kong Clean Campaign, organised by the Joint Provisional Urban Council/Provisional 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 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 the USD and RSD between them prosecuted 33 223 litterbugs during the year. They were fined a total of $14.27 million during the year.

Pest Control

The USD and RSD carry out integrated pest control programmes to prevent vector- borne diseases. Measures included environmental improvement, eradication of


breeding places, health education and law enforcement. 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 1997 Hygiene and Health Expo and the 1997 Food Hygiene Campaign for members of the food trade, school teachers and the general public.

Other publicity campaigns on mosquito and rodent prevention and prevention of nuisance from dripping air-conditioners were also staged during the year. Health messages are disseminated through printed materials, mobile broadcasting, telephone hot-lines and the mass media. Health education materials are also available from the unit's resource centre.

      The Provisional Urban Council also organises health education programmes to cater for the specific needs of the urban area. The Restaurant Hygiene Competition, and the Healthy Menu and Healthy Cooking Competition were staged for the restaurant trade. An Ambassador of Hygiene Scheme and a Health Education Activities in Schools Funding Scheme were aimed at school children. A Health Education Fair and Talks on Public Health were also organised for members of the public. The Health Education Exhibition and Resource Centre at Kowloon Park was open to members of the public in May 1997. Visitors can enrich their health knowledge through the permanent interactive exhibits, temporary exhibitions as well as the reference library. Various seminars and activities are also organised to arouse public interest in good hygiene practice and behaviour conducive to health.

Food Hygiene

     The Health Department's Hygiene Division monitors the safety of imported and locally-produced foods.

In March 1997, the Institute of Pathology confirmed the presence of E.Coli 0157:H7 in a raw beef sample taken by the Department of Health. It was the first time this pathogen had been detected in food in Hong Kong. The two municipal services departments and the Department of Health took immediate action to seize the contaminated meat. Preventive measures were implemented at the critical points of sanitary control in the distribution chain of beef- the abattoirs, transportation process and the retail outlets to reduce the risk of further contamination.


      In May 1997, 13 local cases of cholera were notified. Prompt control measures, including step-up of inspection and enforcement action on all food premises, hawker control and pest control, were implemented. Publicity and health education on cholera prevention were also intensified and the outbreak was quickly brought to a halt.

      The Food and Drugs (Composition and Labelling) Regulations amended in February 1996 have largely come into effect. This has strengthened consumer protection and made local regulations more consistent with international


      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 the Mainland, the Division works closely with Chinese authorities. Regular meetings are held with officials from the Guangdong and Shenzhen Commodities Inspection Bureau to promote food safety and better food hygiene.

   To protect the public from poisoning due to consumption of pesticide-tainted vegetables, around 90 per cent of the vehicles importing vegetables from the Mainland through the Man Kam To border control point were inspected. Samples were taken for screening tests and chemical analysis for detection of pesticides.


The municipal councils manage public markets in their respective areas. The Provisional Urban Council operated 61 retail markets in the urban area in 1997. In these markets, 10 154 stalls offered commodities ranging from fresh food to household items.

   Old and temporary markets have gradually been replaced and the Provisional Urban Council 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 resiting commitments, but consumer demand. Markets and cooked food centres will, as far as practicable, be air-conditioned to improve the trading environment.

   The new Tai Shing Street Market was opened in November. A scheme for contracting out cleansing operations was implemented in 47 markets at the year-end: 22 on Hong Kong Island and 25 in Kowloon.

   The RSD administered 45 markets in the Provisional Regional Council area, 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.


The two municipal councils maintain control over on-street hawkers. The licensing of street hawkers in the urban area is the responsibility of the Provisional Urban Council. At the end of the year, there were 8 892 licensed hawkers in the urban area 308 fewer than in 1996. The decrease was mainly due to the implementation of the Itinerant Hawker Licence Compulsory Deletion Policy.

   During the year, the hawker control teams in the urban area, comprising 1 958 civilian staff trained in law enforcement, secured 80 550 court convictions for hawking offences by both licensed and unlicensed hawkers. Due to stringent enforcement action, the number of unlicensed hawkers reduced to about 3 740.

   To better control the hawker problems in urban area during early morning or late night hours, a special overnight shift for the Regional Task Forces (formed by hawker control teams and directly under Regional command) of the USD was made permanent in March 1997 after a review conducted by USD and endorsed by the council.



Umbrellas (left and below) form the Chinese characters 'Lo yau soh wai' - old people have value - in a rally marking Elderly Day. A commission was established in July 1997 under the auspices of the Health and Welfare Bureau to advise on and co-ordinate services for the elderly, including health, medical, welfare, education, housing and employment. Hong Kong people are living longer · males born in 1997 can expect to live to 76 and females to 82. A two-year experimental project on social networking for the elderly is due to end in 1998. It aims to establish a network and provide support for vulnerable elderly persons. The government aims to create conditions that will allow elderly people to remain in their community for as long as possible.



Above: A dragon 2 466 metres long (8 088 feet) dances its way into Guinness Book of Records contention at Happy Valley race course. The record attempt was part of festivities to mark the Social Welfare Department's 50th anniversary. Top right and far right: Thousands of people turned out on May 11 for the Community Chest Lantau Link Walk across the new Tsing Ma Bridge - and many others enjoyed the light-hearted spectacle of the annual Matilda Hospital sedan chair races at the hospital on the Peak.

      Right: The Chief Executive, Mr Tung Chee Hwa, and Mrs Betty Tung welcomed handicapped children and their families to a Christmas party at Government House.



Above: The Chief Executive, Mr Tung Chee Hwa, | is greeted by a wheelchair-bound resident and some of his friends and helpers during a visit to Wah Kwai Estate on southern Hong Kong Island in July. Right: Children dress up as flowers and trees during an early lesson in environmental awareness at the Ching Lok

Nursery, operated at Sai Wan Ho under

the aegis of the Hong Kong Federation of Youth Groups.

香港特別 政長官董 港



      Through constant vigilance and action, the RSD's 87 Hawker Control Teams reduced the number of illegal hawkers in the Provisional Regional Council area to 1 045 by the end of the year. About 1 388 hawkers held valid licences during the year to operate either fixed pitches or on an itinerant basis. The Provisional Regional Council has ceased issuing hawker licences except for purpose-built cooked food stalls.

      The RSD's Hawker Control Teams secured 36 457 court convictions for hawking offences during the year by both licensed and unlicensed hawkers. Hawker Handling Centres at Yuen Long, Tai Po and Sheung Shui police stations proved a success in dealing with hawking arrest and charging procedures and the RSD plans to extend this system to other districts.


There are two abattoirs in the urban area and three slaughterhouses in the New Territories. In the long term, the two urban abattoirs and Yuen Long Slaughterhouse will be replaced by a new Sheung Shui Slaughterhouse which is scheduled for completion in 1999.

      During the year, these abattoirs/slaughterhouses handled 2 429 032 pigs, 58 922 cattle and 6 531 goats, which accounted for virtually all the local fresh meat supply. All slaughtered animals were inspected by qualified health inspectors of the USD and RSD.

The USD and RSD also maintain vigilance against illegal slaughtering activities. In 1997, health inspectors of the two municipal services departments carried out 190 raids on suspected illegal slaughterhouses and made regular/surprise checks on meat stalls, resulting in 12 prosecutions against the possession of unstamped carcasses for sale.

Cemeteries and Crematoria

In land-short Hong Kong, the government encourages cremation rather than burial of the dead. During the year, over 80 per cent (from RSD's contribution) 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 Provisional 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 10 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.






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 (SWD) spent $7 billion five years ago; in 1997, it spent $20.6 billion.

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 all areas of social welfare development, and the Rehabilitation Advisory Committee (the former Rehabilitation Development Co-ordinating Committee), on matters of rehabilitation. An Elderly Commission under the auspices of the Health and Welfare Bureau was set up in July 1997 to advise on and co- ordinate services for the elderly including health, medical, welfare, education, housing, and employment. Committee/Commission members are appointed by the Chief Executive and their meetings are chaired by non-officials. The SWD maintains a close working partnership with non-governmental organisations (NGOs), most of which are subvented by the government and affiliated with the Hong Kong Council of Social Service. The Co-ordinating Committee for the Welfare of Children and Youth at Risk chaired by the Secretary for Health and Welfare examines the various issues relating to youth at risk and child abuses.

Since April 1, 1997, elderly recipients who meet the prescribed criteria and choose to retire permanently to Guangdong have been able to continue receiving their monthly standard rate and annual long-term supplement payable under the Comprehensive Social Security Assistance (CSSA) Scheme. This represents a significant step forward in the operation of the social security system in Hong Kong. Previously, as in most other places in the world, social security benefits were payable only to persons residing permanently in Hong Kong.

More services were provided in 1997 to meet the arising needs. They included the addition of 1 356 day nursery places, 72 day crèche places, 90 occasional child care places, six small group homes, eight home help teams, one clinical psychology unit, eight clinical psychologists and 10 child protection workers. For young people, 14 additional school social workers and one outreaching social work team were provided, four combined children and youth centres and six integrated teams were established, and two pilot projects to help youth at risk were launched. For the elderly, a further 63 places in homes for the aged, 439 care-and-attention home


places, 19 independent social centres, four multi-service centres and one day-care centre were set up. A two-year experimental project on Social Networking for the Elderly was launched in October 1996 to establish a network and provide support to vulnerable elderly persons.

For people with a disability, the department further established 540 places in sheltered workshops, 528 places in day activity centres, and 1 132 places in hostels and care-and-attention homes, plus 530 additional places in homes and care-and- attention homes for aged blind persons. As recommended by the Working Party on Training and Employment for People with Disabilities, the Marketing Consultancy Office was set up in January 1997 to enhance the productivity of sheltered workshops and the income of people with a disability.

      The Working Group on Battered Spouses, convened by the SWD, launched a series of publicity measures in 1997 with a view to enhancing the public's awareness of the adverse effects of spouse-battering on the family and to encourage the victims of domestic violence to seek help as early as possible.

During the year, the Working Group on Child Abuse continued to co-ordinate multi-disciplinary efforts in strengthening support to 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, combating child abuse at district level through the 13 District Committees on Child Abuse, and strengthening the joint training of professionals in handling child abuse


Having completed the deliberations on the major youth issues identified according to its terms of reference, the Working Group on Services for Youth at Risk continued its work in the year on the implementation of its recommendations. These included the development of a screening tool for early identification of youth-at-risk, examining ways to improve services for juvenile gangs and runaway youth, strengthening inter-departmental efforts in tackling the issue and promoting greater co-ordination and collaboration at the district level. Programmes of Family Life Education and other related services units were mobilised to relate positive message and to educate parents in offering support to young people. Training for related helping professionals was also organised to strengthen the quality of supportive services.

       The Subvention Consultancy Review was at an advanced stage in 1997. Its major recommendation was to shift the focus of service monitoring from 'input' to 'output' to ensure delivery of quality services, while providing subvented non-governmental organisations greater flexibility to make best use of the available resources. The SWD is examining the way forward in enhancing the system.

       The Social Workers Registration Ordinance came into operation on June 6, 1997, to provide for the registration of social workers and disciplinary control of their professional activities. The objective is to ensure a high professional standard of practice in the best interest of the public. At the end of 1997, 3 658 social workers had been registered.

Social Security

Social security aims at meeting the basic and special needs of the people in Hong Kong Special Administrative Region who are in need of financial or material




assistance. This is achieved through a non-contributory social security system administered by the SWD. The mainstay of the system is the CSSA Scheme and the Social Security Allowance (SSA) Scheme, 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 where basic and special needs can be met. It comprises a range of monthly standard rates to meet the basic needs of different categories of eligible people. Rates range from $1,720 to $4,455 for a single person and from $1,535 to $4,115 for a family member. A wide range of special grants caters for recipients' special needs, such as rent, educational expenses, medically recommended diets, glasses, dentures and burials. An annual long-term supplement, ranging from $1,530 to $4,305 depending on the size of the household, is paid to those who have received assistance continuously for 12 months to help replace household and durable goods, and a monthly supplement of $245 is paid to single parents to counter the difficulties they face in bringing up a family. To encourage self-help, an individual's monthly earnings can be disregarded up to a maximum of $1,720 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. The standard rates and other related payments were increased by 6.5 per cent in April 1997 to take account of inflation. At the end of the year, there were 188 800 CSSA cases, compared with 159 100 in 1996. The elderly and the sick made up the majority. Total expenditure during the year amounted to $8.73 billion, representing an increase of 35.3 per cent over the previous year.

The SSA Scheme comprises Disability Allowance and Old Age Allowance Schemes. It provides flat-rate allowances to meet the special needs of the severely disabled and the elderly persons who are not eligible for comprehensive social security assistance.

  A person who suffers a severe disability broadly equivalent to a total loss of earning capacity and has resided in Hong Kong for at least one year immediately before application is eligible for a disability allowance, which is not means-tested. The normal rate is $1,200. A higher rate of $2,400 is payable to severely disabled persons requiring constant attendance from others but are not receiving such care in a government or subvented institution or a medical institution under the Hospital Authority.

The old age allowance is non-means-tested for those aged 70 and above, who are entitled to $675 a month. For those aged 65 to 69, the monthly allowance is $595, subject to a declaration that their income and assets do not exceed the prescribed levels. To be eligible for an old age allowance, a person must have resided in Hong Kong for at least five years since the age of 60. The levels of allowance were raised by 6.5 per cent in April 1997 to take account of inflation.

  At the end of the year, 520 600 people were receiving social security allowances, compared with 503 800 at the end of 1996. Total expenditure during the year was $4.26 billion, representing an increase of 9.2 per cent over the previous year.

  The non-means-tested Criminal and Law Enforcement Injuries Compensation Scheme provides cash assistance to victims, or their dependants in cases of death,


who are injured or killed in crimes of violence or by law enforcement officers using weapons in the execution of their duties.

Under the scheme, an applicant retains his right to claim damages or compensation from other sources in respect of the same incident. Successful claimants are required to refund the payment received from the scheme or the amount of damages or compensation, whichever is the less.

During the year, 608 applications were approved for assistance amounting to $14.7 million, compared with $11.1 million in the preceding year.

The non-means-tested Traffic Accident Victims Assistance Scheme provides cash payments to victims of traffic accidents, or their dependants in cases of death. It is administered by the Director of Social Welfare in consultation with an advisory committee. Payments cover personal injury and death, but not damage to property. Under the scheme, an applicant retains the right to claim damages or compensation from other sources in respect of the same accident. Successful claimants are required to refund the payment received from the scheme or the amount of damages or compensation, whichever is the less.

During the year, payments totalling $130 million were approved, compared with $125.5 million in 1996.

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 in cases of death, to relieve hardship caused by disasters. Emergency relief was given to 1 251 victims on 70 occasions during the year.

The rates of grants payable under the Criminal and Law Enforcement Injuries Compensation Scheme, the Traffic Accident Victim Assistance Scheme and the Emergency Relief Fund were increased in September to cover the rise in living costs.

Social Security Appeal Board

The Social Security Appeal Board is an independent body which considers appeals against SWD decisions concerning comprehensive social security assistance, social security allowance and traffic accident victims assistance. It heard 113 appeals in the year. Of these, 23 related to comprehensive social security assistance, 88 to social security allowance and two to traffic accident victims' assistance.

Services for Offenders

The SWD implements court orders to rehabilitate offenders through social work approaches, with the aim of reintegrating the offenders into the community. The 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. In 1997, 7049 people were placed on probation.

      The Community Service Orders Scheme is a community-based initiative, which requires an offender aged 14 and above 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. In 1997, 1 562 were put under the supervision of




the scheme. Eight residential homes with a total capacity of 612 places provide educational, pre-vocational and character training to juvenile offenders and youth at risk.

  The Young Offender Assessment Panel, jointly operated by the SWD and the Correctional Services Department, provides magistrates with a co-ordinated view on the most appropriate treatment for convicted young offenders aged 14 to under 25.

The Post-Release Supervision of Prisoners Scheme, also jointly operated by the SWD and the Correctional Services Department, assists discharged prisoners in their rehabilitation. In 1997, 513 ex-prisoners were placed under supervision. One subvented organisation also provides hostel, employment, casework and volunteer services to ex-offenders.

Family and Child Welfare

The SWD 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.

  Hong Kong 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 706 family caseworkers at the end of 1997, the centres handled a total of 75 500 cases during the year.

To help strengthen the families, about 4 814 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.

Support to families in need of assistance in home management, child care, and care for the elderly and disabled, is provided by 52 family aide workers and 124 home help teams. 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. The 19 family activity and resource centres set up in government-run community centres provide a drop-in service, mutual support and early identification and referral of cases in need of intensive casework service.

The clinical psychological service, with a staff of 49 clinical psychologists, provides in-depth assessment and treatment to people suffering from psychological and behavioural problems. It also provides support to caseworkers and residential homes. Three refuges for women provide 120 short-term residential places for women and their children who are victims of domestic violence and for girls at risk.

The problem of street-sleeping is tackled through the department's outreaching teams and family services centres, plus temporary shelters, urban hostels, and day relief centres operated by non-governmental organisations. There is also a multi- disciplinary outreaching team specifically serving elderly street sleepers on experimental basis.

The department operates a telephone hotline service which provides information on welfare services to callers with pre-recorded messages or through facsimile transmission 24 hours a day. 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. The Child Protective Service provides early intervention and intensive casework service for the protection of children whose safety is endangered by the action or neglect of their parents, care-givers, causing physical or psychological harm, gross neglect and sexual exploitation of the children. Residential child care services are provided for children and young people who need care or protection because of family crises or their behavioural or emotional problems. At the end of 1997, there were 600 foster care places, 904 places in small group homes and 1 473 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 Fee Assistance Scheme helps low-income families in financial need to pay child care centre fees. New legislative provisions to regulate childminders and mutual help child care groups in order to strengthen protection of young children and to facilitate occasional child care arrangements were implemented in September 1997.

Medical Social Services

Medical social workers in hospitals and clinics render counselling and assistance to patients and their families with social and emotional problems/needs arising from their illnesses or disability.

Care for the Elderly

The government's policy is that elderly people should be able to grow old in the community for as long as possible. The family remains the primary provider in meeting the needs of the elderly. Elderly people should be provided with a sense of security, a sense of belonging and a sense of worth. To achieve this, the government provides a wide range of community services to help the elderly remain at home.

       At the end of the year, there were 203 independent social centres, 28 multi-service centres, 27 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. The Senior Citizen Card Scheme, which aims to inculcate respect and concern in the community for our elderly citizens, was launched in April 1994. About 510 000 senior citizen cards have been issued. Financial and housing assistance continue to be provided for those in need. At the same time, residential care services are provided for those elderly people who, due to health reasons or family circumstances, can no longer be cared for at home. At the end of 1997, there were 965 hostel places, 6 682 home for the aged places and 8 837 care-and-attention places.

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.

  At the year's end, non-governmental organisations ran 207 children and youth centres providing a variety of programmes and activities for young people's personal and social development. To meet new operational requirements and young people's changing needs, a Task Group on Modernisation of Children and Youth Centres was set up. It recommended improvements to the fitting out standard and the provision of furniture and equipment to make the centres more attractive.

  Social workers are provided for all secondary schools to identify and help students whose academic, social and emotional development is at risk. Fourteen additional school social workers were provided in 1997. At the end of the year, 286 school social workers served a student population of 449 127 at an overall manning ratio of 1:1 570. At the same time, the manning ratio for 132 secondary schools with a more serious student problem was lowered to 1:1 000.

  The outreaching social work service provides counselling and guidance to young people who do not normally participate in conventional social or youth activities and who are vulnerable to undesirable influences. In December 1997, there were 33 teams serving priority areas which had a high juvenile crime rate and a high youth population.

  A Community Support Service Scheme, comprising two projects operated by non- governmental organisations and one project by the SWD, was introduced in 1994-95 on an experimental basis to provide structured programmes and supervised activities for children and youths who have broken the law or are at risk. At the end of the year, the two NGO projects served a total of 1 682 cases and the SWD project a total of 954.

  In August 1995, the SWD began to subvent a youth hotline operated by an NGO to help young people at risk by offering timely intervention through counselling. The hotline workers handled a total of 29 543 calls in 1997.

  The Against Substance Abuse Scheme provides secondary prevention to experimental or occasional substance abusers under the age of 21, with the ultimate goal of helping them develop healthy lifestyles. Services cover counselling groups, supportive activities, drug awareness programmes and drug education talks. By year's end, I 139 young people had benefited from the scheme.

  On the recommendation of the Working Group on Services for Youth at Risk (Working Group), a pilot project was introduced in 1997 to help identify young students with special developmental needs by way of a screening tool. Appropriate preventive programmes will be arranged for these students. A three-year evaluation study is being conducted in parallel to test the administrative process and evaluate the effectiveness of the preventive programmes.

  To identify and provide assistance for young night-drifters, two youth mobile teams, as recommended by the Working Group, were set up in October 1997 for two years on a pilot basis. The teams aim to provide on-the-spot crisis intervention, short- term follow-up services and to help young night-drifters to participate in mainstream youth services.


      Integrated teams based on a new service model began operating in October 1994. They provide children and youth centre service, outreaching social work service, school social work service and, where possible, family life education under one management structure. Nineteen teams operated at the end of 1997.

      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, 92 000 young people benefited from this service, provided by eight NGOs. The Hong Kong Award for Young People Scheme has attracted 42 400 members through its 18 operating authorities.

The Opportunities for Youth Scheme offers funding support to youth groups to plan and implement community service projects. In 1997, 9 500 young people took part in 149 projects which benefited 60 000 service customers.

Rehabilitation of People with a Disability

The rehabilitation services aim to integrate people with a disability into the community. Hong Kong has about 370 000 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.

Services for pre-school disabled children

At the end of the year, the department and NGOs altogether provided 1 174 integrated programme places, 1 149 special child care places (including 78 residential places), 1435 early education and training centre places for pre-school disabled children and 96 small group home places for school-aged disabled children. An enhanced training programme with inputs from clinical psychologists was also provided to autistic children in special child care centres.

Services for adults with a disability

     For adults with a disability, there were 3 426 day activity centre places providing day care, daily living skills and work training. Furthermore, 6 215 sheltered workshop places provided employment for those unable to compete in the open job market. In January 1997, the Marketing Consultancy Office was set up to enhance productivity of sheltered workshops with the expertise of marketing personnel. There were 1 010 places in various supported employment schemes providing job opportunities for those who could manage in open work settings with support. In residential services, there were 4 383 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, 1 125 places were provided in homes and care-and-attention homes. For the residence and training of chronic and discharged mental patients, there were 570 long-stay care home places, 1 177 halfway house places and 180 activity centre places.




For people with different categories of disability and their family members, 22 social and recreational centres and six parents/relatives resource centres were provided.

Professional backup and support services

Professional backup from clinical psychologists, occupational therapists and physiotherapists was provided in rehabilitation day centres and hostels. Support services such as the respite service (short-term relief to families with mentally handicapped persons), occasional child-care service for children with a disability, home-based training (for mentally handicapped persons awaiting placement), after- care service for dischargees of half-way houses, domiciliary occupational therapy service, and community rehabilitation network service for persons with visceral disability or chronic illness were also provided.

Staff Training and Development

The department's Training Section at the Lady Trench Training Centre organises about 500 in-service training programmes for 17 000 social welfare personnel working in the department and in non-governmental sectors. Special emphasis was put on advanced management development for senior officers of the department in 1997.

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 entrusted the Hong Kong Council of Social Service to conduct a survey to obtain employers' feedback on the performance of social work graduates. A report on the survey's findings was completed in December.

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

Recurrent subvention and capital grants were given to 175 non-governmental organisations for the provision of social welfare services in accordance with government policies. Funding allocation was administered by the department on the advice of the Subventions and Lotteries Fund Advisory Committee.

Based on the statistics supplied by service units on a quarterly basis, the department's Evaluation Unit monitored the effectiveness of services delivered by subvented non-governmental organisations. District staff also made regular liaison visits to the subvented service units for assessment of their operation on the ground.

In March 1995, the government commissioned consultants to conduct a review of the existing subvention system with a view to improving the administration of social welfare subventions so that subvented non-governmental organisations will be given


greater flexibility, and accountability, in the administration of resources. The SWD set up working groups with non-governmental organisations to develop the service performance monitoring system, to examine the training needs and to devise a new subvention funding formula. The major tasks achieved in 1997 include formulation of service quality standards, performance assessment procedures, funding and service agreements for various services and a new fixed funding approach.

Information Technology

In line with government policy on information technology, the SWD has commissioned a departmental Information Systems Strategic Study (ISSD) and a feasibility study to examine the development of a new Computerised Social Security System (CSSS). The ISSS identified seven potential applications. Priority has been accorded to the CSSS and thereafter the Client Information System (CIS) and Technical Infrastructure (TI). Subject to funding approval, the department will proceed with the implementation stage of the CSSS and the feasibility study of the CIS and TI. Feasibility studies for the other application systems will be considered later.

Community Building

Several government departments and 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 citizens' organisations, and encouraging community participation in the administration of public affairs, solving community problems and improving the quality of community life in general. The Home Affairs Bureau has policy responsibility for the programme and the Home Affairs Department and SWD 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 and women's organisations.

The SWD 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. Its main objectives are to advise on matters pertaining to youth, initiate research, promote co-operation and improvement 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 co-ordination of the second biennial review of the implementation of the Charter for Youth. One major area of work was the development of a set of parameters as social indicators to provide objective measurements of progress in youth development in Hong Kong. The social indicators were also discussed by participants at the Review Conference on the Implementation of the Charter for Youth held in December 1997.




During the year, the commission completed a study on moral values of youth. It also launched a study on the supportive system for young new arrivals, and another on the influence of the media on young people. Two working groups have been set up to steer the studies, which are expected to be completed in mid-1998 with a view to drawing up recommendations for consideration of the parties concerned.

In July and September, two groups comprising 18 young people from Germany and Britain visited Hong Kong for a three-week trip under the International Youth Exchange Programme. It enables young people to share their experiences and ideas with their counterparts overseas.



HOUSING in Hong Kong has undergone major changes over the past two decades. More than 1.3 million public and private flats have been built. Today, public rental housing accommodates about 2.5 million people (39 per cent of the population) compared with 1.7 million in 1975. Since 1978, the government has built more than 240 000 subsidised flats for sale under various home ownership schemes. The joint efforts of the government and the private sector have lifted the overall home ownership rate to 52 per cent, compared with 42 per cent 10 years ago.

      In 1997, the public sector produced about 46 200 flats, of which about 22 300 were for sale, and the private sector produced 18 200 flats.

Housing Policy

The government's objectives are to help all households gain access to adequate and affordable housing and to encourage home ownership in the community. It seeks to achieve these goals by:

assessing housing demand regularly and accurately;

providing a sufficient supply of land, together with supporting infrastructure, shortening development procedures and relieving constraints on the construction industry;

• drawing up a long-term flat production programme and putting in place an efficient mechanism for monitoring progress and problem solving;

• creating the conditions to enable the private sector to make the fullest possible contribution towards meeting the demand for housing, while at the same time monitoring the private property market and, if necessary, taking measures to discourage property speculation;

implementing subsidised housing schemes to enable those in the relevant income groups to buy their own homes;

providing public housing at reasonable rents to those who cannot afford any other type of housing; and

implementing initiatives to address the housing needs of groups in special need.

Policy Review

In January 1997, the government published for public consultation a review of its Long Term Housing Strategy. This document contained 41 specific recommendations designed to meet the above housing objectives. Public consultation ended on May 31.




Taking into consideration the original recommendations, public views and new housing initiatives announced by the Chief Executive in October, the government will promulgate a revised housing strategy in early 1998, with emphasis on three major targets:

increasing the supply of flats to meet forecast demand for housing, in particular by providing a steady and sufficient supply of serviced land. At least 85 000 flats will be built each year starting from 1999-2000;

encouraging wider home ownership, especially among public housing tenants. The government aims to achieve a home ownership rate of 70 per cent by 2007; and

ensuring that public rental housing is provided to those in genuine need. The government has vowed to cut the average waiting time for allocation of public rental housing to three years by 2005.

Organisational Framework

Housing Bureau

The Secretary for Housing has overall responsibility for public and private housing matters in Hong Kong. Set up in November 1994, the Housing Bureau 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 (HA) is a statutory body and the government's agent responsible for implementing the majority of Hong Kong's public housing programmes. Established in 1973, the authority plans and builds public sector housing, either for rent or sale. It manages public rental housing estates, Home Ownership Scheme (HOS) courts, interim housing, cottage areas, transit centres, flatted factories, commercial facilities and other community and ancillary facilities. 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, where necessary, finances the authority to meet the government's public housing targets. At the end of March 1997, the government's capital investment and contribution stood at about $30.1 billion. This comprised non-interest-bearing permanent capital of $13.5 billion, loan capital of $11.1 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 $192.5 billion.

Housing Society

The Housing Society is a non-profit making organisation established in 1948. It provides housing for specific income groups in Hong Kong. At the end of 1997, it had about 33 500 rental housing units and about 14 800 flats for sale under the Sandwich


Class Housing Scheme, Flat-for-Sale Scheme and Urban Improvement Scheme. Its annual production for the past five years averaged some 3 100 units.

Housing Supply

In 1997, the Steering Committee on Land Supply for Housing (HOUSCOM), led by the Financial Secretary, completed a review of the organisation of and work procedures involved in housing production, and continues to work towards facilitating the production target of at least 85 000 flats every year.

On July 15, 1997, the government announced a five-year Land Sales Programme. From now on, it will announce a similar programme each year on a rolling basis to enhance transparency and to provide a clearer picture of land supply for housing.

The programme covers two parts land disposal between July 1997 and end- March 1999 and the projected land supply for 1999/2000 to 2001/02. The first part includes 120 hectares and the second part includes 260 hectares for private sector housing development.

Private Sector Housing

The total private housing stock amounts to about 940 000 units.

Property Prices

In early 1997, the property market began to revive, with property prices rising steadily to the 1994 level, primarily due to growing desire among the general public to buy flats to live in and for investment. In response to a spate of speculative activities in the property market, especially at the upper end of the market and particularly through the use of shell companies, prompt measures were taken in January to restrict the proportion of company purchasers and prohibit the change of directorship before assignment. Further measures were taken in March to increase the flat supply by extending the pre-sale period of private and subsidised flats. These measures have been effective: speculation through shell companies has disappeared; sale of flats were conducted in an orderly manner and the property market has become more stable. In December 1997, prices in money terms were 17.1 per cent higher than at the peak in 1994.

Regulation of Estate Agents

In May 1997, the Estate Agents Ordinance was passed to regulate the operation of estate agents in Hong Kong. The Estate Agents Ordinance makes provisions to establish a statutory Estate Agents Authority responsible for licensing estate agents and regulating their activities, to enshrine the obligations or estate agents in law and to prescribe penalties for offences. The Estate Agents Authority was established in November 1997. A two-year transitional period will be provided to enable the trade to meet the full licensing requirements by 2000/01.

Sales Descriptions of Uncompleted Flats

After public consultation in 1994, the Law Reform Commission reported in April 1995, recommending the introduction of legislation to require developers to provide sales literature with clear and accurate descriptions about uncompleted properties put on sale, and to impose penalties for non-compliance. The government completed





extensive consultation with property developers and relevant professional bodies these recommendations. In general, they supported the spirit of the recommendations, although there were comments on the proposed level of penalty for breaches. The government has studied these comments carefully and aims to introduce appropriate legislation in 1998.

Rent Control

Statutory controls date from 1921 and the tenants of most domestic premises are afforded security of tenure under the Landlord and Tenant (Consolidation) Ordinance. Rent levels are also controlled in tenancies in pre-war domestic premises and 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. Rent control is due to be phased 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 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 an overall review of the ordinance, it is intended to raise penalties against harassment and unlawful eviction to ensure sufficient deterrent.

Public Rental Housing

About 704 300 flats are available for public rental housing. It is the government's policy to ensure that these flats are allocated only to families in genuine need. The average waiting time for a public rental flat is six and a half years. The government has pledged to reduce this to under five years by 2001 (almost a 50 per cent improvement on 1990 where the waiting time was nine years), to four years by 2003 and to three years by 2005.

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 person internal floor area (IFA) at a median rent-to-income ratio not exceeding 15 per cent, or seven square metres per person IFA at a median rent-to-income ratio not

Tung Chung new town is rapidly taking shape

on the northern coast of Lantau Island,

opposite Hong Kong's new international airport.

The 760-hectare site is planned to hold

150 000 residents by the year 2011, and its neighbouring urban development at Tai Ho will have another 50 000.

Top left: Amah Rock looks down over Sha Tin in the New Territories, a thriving community living where there were only rice fields four decades ago. With country park all around, relatively low property prices and easy access to the business centres, Sha Tin residents can claim to have the best of both worlds. Top right: About half of Hong Kong's 6.6 million people live in subsidised public housing, such as these blocks at Tseung Kwan O in eastern Kowloon. Above: King Lam Estate at Tseung Kwan O is one of Hong Kong's newest developments, built on reclaimed land in what was formerly Junk Bay. Left: Bold shapes frame the gardens outside Yan Ming Court and children enjoy play equipment newly installed at Tseung Kwan O.

་ ་ ་ ་ ་ ་ ་ ་ ་ ་ ་ ་ ་

Potential tenants check the latest designs for flats being built by the Housing Authority. Greater variety in decoration and furnishing form attractive features of the authority's newest apartments. Hong Kong has more than 700 000 public housing flats. Plans are being made for an extra 85 000 flats, public and private, to be built each year.


exceeding 18.5 per cent. With rents being charged at $63.40 per square metre for the newest urban estates, $39.60 for the newest New Territories estates, and $36.40 for the newest Island estates, domestic rents represent, on average, 9.1 per cent of the median household income of Housing Authority tenants. Rents are reviewed every two years,periodically taking into account increases in rates, management and maintenance costs, location, facilities, and tenants' ability to pay.

      The Housing (Amendment) Ordinance 1997 provides that at least three years must elapse after a rent determination before rent increases for public rental housing estates managed by the Housing Authority can take effect; and that the level of rent increase cannot be such as to cause the overall median-rent-to-income ratio to exceed 10 per cent.

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 twice 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 Limit or who choose not to declare income have to pay double rent plus rates. Since 1987, 379 228 households have been affected and some 24 500 households are paying extra rent.

      The Policy on Safeguarding Rational Allocation of Public Housing Resources was introduced in June 1996. It requires tenants paying double rent to declare the net value of their household assets at two-yearly intervals. In April 1997, some 1 300 households were invited to declare their household assets. Households whose assets exceed the prevailing Net Asset Limit - which is 104 times the 1997 Waiting List Income Limit - will have to pay market rent from April 1998.

      In 1996, asset assessments on 16 000 households were completed. Among them, about 4 000 households had to pay market rent with effect from April 1997. Another 2 400 households either voluntarily surrendered their public rental housing flats to the Housing Authority or bought Home Ownership Scheme flats under a priority arrangement approved under the policy. Public rental housing flats recovered from these households are re-allocated to those in genuine need.

      Although income limits are one of the eligibility criteria for public rental housing applicants on the waiting list, hitherto there have been no limits on assets, other than the restriction on ownership of private domestic property. To ensure that housing resources are allocated to people more in need, that is, to those who really cannot afford adequate housing in the private or subsidised home ownership sectors, limits on both income and assets will be set for all public housing applicants. Prospective tenants will be required in 1998, before entry, to undergo comprehensive means tests, covering both income and net assets. In addition, the government will not permit public rental tenancies to be passed on automatically from one generation to the next. Adult members of a family where the principal tenant and the spouse are both deceased will be required in 1998 to undergo comprehensive means tests, covering both income and net assets, before the grant of a new tenancy.




Rent Assistance

Public housing tenants facing temporary financial hardship can apply for rent reduction under the Rent Assistance Scheme operated by the HA. The scheme was first introduced in September 1992 and was last revised in September 1996. In September 1996, the eligibility criteria for rent assistance were relaxed to benefit more low-income households. A public rental housing household whose income is below 50 per cent of the Waiting List Income Limit, or whose income is between 50 and 60 per cent of the Waiting List Income Limit and whose rent-to-income ratio exceeds 15 per cent, or whose rent-to-income ratio exceeds 25 per cent, is eligible for assistance. If eligible, the rent payable is reduced by half for a maximum of two years. Up to November 1997, 2 981 families benefited from the Rent Assistance Scheme.


In 1997, 19 900 new flats and 18 110 refurbished flats were let to the various categories of eligible applicants. Some 12 300 flats (34 per cent) went to waiting list applicants. Applications are considered in the order of their registration and in accordance with their choice of district. Public rental flats are allocated to those who meet eligibility criteria including Waiting List Income Limits, a no domestic property rule and a residency requirement. At the end of the year, there were 149 672 applications on the General Waiting List, including 21 744 applications from single persons.

  Large proportions of flats were also allocated to tenants affected by the Comprehensive Redevelopment Programme (33 per cent), and families affected by development clearances (16 per cent). The remainder of the flats were allocated to junior civil 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 for the Elderly

 Elderly persons are accorded priority in the allocation of public rental flats under various priority schemes. Elderly persons can join their younger generation to apply for public rental flats under the Families with Elderly Persons Priority Scheme (allocation will normally be advanced by three years). Those who prefer to live by themselves can apply for public rental housing flats under the Single Elderly Persons Priority Scheme (allocation will normally be made within two years for elderly people applying for Housing for Senior Citizen units) or the Elderly Persons Priority Scheme (allocation will normally be made within two years). Young families who wish to apply together with elderly dependants for two separate flats in the same block in new towns may join the Special Scheme for Families with Elderly Persons (allocation will normally be advanced by one year). So far, over 34 500 elderly people have benefited from these schemes. New housing for the elderly will continue to be built on small urban sites over the next few years. The government has also invited the Housing Society to undertake a pilot 'Senior Citizen Residence Scheme' comprising 500 flats to be completed by 2001. The flats will be leased to elderly people in the middle income group to give them access to affordable, purpose-built accommodation with integrated care services.

  The Housing Authority has established five Housing Information Centres, namely in Yau Ma Tei, Tsuen Wan, Wan Chai, Hung Hom and Sham Shui Po. 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 rental and Home Ownership Scheme flats. The authority also plans to set up Housing Information Centres in other districts that have a concentration of elderly residents in old private tenements to provide easy access to information on public housing.

Subsidised Home Ownership

Home Ownership Scheme and Private Sector Participation Scheme

The Home Ownership Scheme (HOS) and the supplementary Private Sector Participation Scheme (PSPS) were introduced in 1978 and 1979 respectively to provide flats for sale to lower and middle-income families and public rental tenants at prices well below market value. About 260 000 flats have so far been sold to eligible families. These include 84 404 flats produced under the 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 $30,000 a month. These restrictions, however, do not apply to public rental tenants, residents of temporary housing areas and cottage areas managed by the HA, households displaced by the clearance of squatter areas for development, natural disaster victims and junior civil servants.

      About 41 per cent of the families who bought property under the schemes were public rental tenants. They have surrendered their rental flats in return 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, 6 174 flats and 14 700 flats were sold under the HOS and the PSPS schemes. The schemes were over-subscribed by nine times.

Resale restrictions on HOS and PSPS flats

Revised resale restrictions for HOS and PSPS flats came into effect in June 1997. Since then, 737 transactions have been completed and 2 211 applications for sale and 1 265 applications for purchase have been received. A flat owner can resell the flat:

• in the first three years from first assignment, to the HA at the original purchase price;

• after the first three years from first assignment, to the HA at prevailing HOS or PSPS prices;


after 10 years from first assignment, in the open market, subject to the payment of a premium; or

⚫ from the fourth year onwards from first assignment, to a current or prospective

public rental tenant, at a negotiated price.

      Allowing HOS and PSPS flat owners to sell the flats to a current or prospective public rental tenant will create a limited form of secondary market for HOS and PSPS flats. After resale, the new owner will be required to surrender his existing public rental flat (if he is a public rental tenant), or to forego the right to be allocated a public rental flat (if he is a prospective public rental flat tenant). The seller will not




be required to pay a premium. The new owner will take over the premium liability from the seller, but will not be required to pay a premium unless and until he wishes to sell the flat in the open market 10 years or more after the first assignment by the HA to the initial purchaser.

   The revised resale restrictions for HOS and PSPS flats will enable a more rational use of housing resources, help to increase the turnover of HOS and PSPS flats to meet demand for subsidised home ownership and free public rental flats for reallocation to people in genuine need.

Sandwich Class Housing Scheme

The Sandwich Class Housing Scheme was introduced in 1993 to help families with a monthly income of between $20,001 and $40,000 buy their own homes. In 1997, the lower and upper limits were revised to $30,001 and $60,000 respectively. It comprises a Loan Scheme and a Main Scheme, both of which are administered by the Housing Society.

The Loan Scheme, with a grant of $3.38 billion from the public funds, will help 7 500 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 no more than 20 years old 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 1997, 4 500 loans worth $2.1 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. The scheme is on target to produce 50 000 flats by 2005.

Currently, 1024 flats on Tsing Yi have been completed, and another 4 930 flats have been sold to eligible families. Suitable sites for this purpose will continue to be indentified.

Home Purchase Loan Scheme

The Home Purchase Loan Scheme was introduced in 1988 to help lower- and middle- income families buy flats in the private sector. In 1997, 3 647 families benefited from the scheme. About 52 per cent of these families were public housing tenants who surrendered their rental flats for reallocation.

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.

  The loan and monthly subsidy given to public rental tenants were $600,000 and $5,100 respectively, while those for private sector applicants were $400,000 and $3,400 respectively. So far, 20 048 loans and 1 282 subsidies have been granted. As a result, 11 914 public rental flats have been recovered.

Home Starter Loan Scheme

The government announced in October that a new scheme would be launched to help low and middle income families purchase their own homes. Eligible applicants of the


      Home Starter Loan Scheme would receive low interest loans of up to $600,000 or 30 per cent of the property value, whichever is lower. In each of the next five years, 6 000 loans would be made available.

Tenant Purchase Scheme

In December 1997, the government approved a scheme, called the Tenant Purchase Scheme, for the HA to sell public rental flats to tenants. The target is to provide the opportunity for at least 250 000 families living in public rental housing to buy their flats at reasonable and affordable prices over the next 10 years. The scheme will make a significant contribution towards achieving the government's 70 per cent home ownership target.

The basic sale price will be set by reference to an 'adjusted replacement cost' approach which takes into account the replacement cost, location of the property, its age and other relevant factors.

A structural safety guarantee of seven years will be provided and a maintenance fund will be set up with a one-off contribution from the, sales proceeds to pay for major repair works in the future. The first batch of about 27 000 flats in six estates, selected from estates built between 1985 and 1992, was scheduled for sale in January 1998.

Mixed Development

As a means to encourage further private sector involvement in the public housing programme, the government will invite private developers to build subsidised home ownership flats as part of a 'mixed development'. Under this approach, residential sites will be offered for sale by tender. The successful tenderer will be required to hand over a specified proportion of flats selected at random within the development to the government for sale to eligible purchasers at designated prices. A pilot scheme has been announced for launching in 1998.

Interim Housing

Interim housing provides accommodation for people who are rendered homeless by clearances, fires and natural disasters but are not eligible for permanent public housing. There are several types of interim housing: old-type low-rise timber structures, multi-storey concrete blocks (converted from the existing blocks in the older estates) and prefabricated interim housing blocks. In 1997, the Housing Authority cleared all pre-1984 interim housing areas. It has also developed plans to construct a new form of vertical interim housing on earmarked sites in the New Territories. All remaining old-type interim housing areas will be cleared by 2000. Thereafter, permanent flats in high-rise blocks will be built to meet the continuing and long-term need for this type of accommodation.

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 interim housing. The Housing Department manages four transit centres with a capacity for 620 people.




Cottage and Squatter 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. There are now five cottage areas in Hong Kong housing some 3 000 people, and the Housing Authority plans to clear them by 2001.

  The squatter population has been reduced to 21 000 in the urban area and to about 212 300 in the New Territories as a result of rehousing. The 1982 squatter structures survey provides a baseline for control of new squatting on government land and private agricultural land. Squatter control is maintained by carrying out regular patrols and hut-to-hut checks. About 3 000 illegal structures and extensions were demolished during the year.

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 people rendered homeless. Eligible households are offered rehousing and 900 people were given either permanent or interim housing under this category in 1997.

  All squatters on government land in the urban area were offered rehousing by the end of March 1996. During 1997, 130 hectares of land were cleared, with 7 100 and 1 200 affected people given permanent or interim housing. Some 210 industrial, commercial and agricultural undertakings affected by clearances were given ex-gratia allowances.

  A non-development clearance programme was devised on the advice of the Geotechnical Engineering Office of the Civil Engineering Department. Some 1 000 persons living in squatter huts on slopes vulnerable to landslips were provided with either permanent or interim housing elsewhere, according to their eligibility.

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.



EFFICIENT delivery of a wide range of infrastructure is essential to sustaining Hong Kong's continued success. In 1996-97, some $23.5 billion worth of public works projects were under management. In the past decade, expenditure on the Public Works Programme (PWP) has grown at an average rate of 6 per cent per annum in real terms, ensuring infrastructure keeps pace with the demands of an increasingly sophisticated society.

Eight of the 10 Airport Core Programme (ACP) projects have been substantially completed. The ACP transport corridor linking Hong Kong Island with Tung Chung new town opened to traffic in May 1997. The corridor comprises the Western Harbour Crossing, the West Kowloon Expressway, Route 3 (Kwai Chung and Tsing Yi Sections), the Lantau Link and the North Lantau Expressway. The other two ACP projects, namely the new airport at Chek Lap Kok and the Airport Railway, are expected to be completed in April and June 1998 respectively.

       With the running down of the ACP projects, new projects have been identified for injection into the PWP. These include a significant number of projects to provide land and associated infrastructure for housing. A review is currently being conducted of projects which require the government to acquire or clear land, and to ensure that important projects, such as those related to housing, will be given high priority.

Container Terminals, 9, 10 and 11 and other key port projects are under active planning. The first berth of Container Terminal 9 is planned to come into operation in late-1999, with Container Terminals 10 and 11 coming on line early next century. The programme for the development of these key port projects, together with typhoon shelters, mid-stream sites and river trade terminals, is co-ordinated to ensure the timely completion of new facilities.

Various measures have been taken to improve slope safety. The accelerated five- year Landslip Preventive Measures (LPM) Programme spanning 1995 to 2000 is progressing, with some 170 substandard slopes being upgraded each year. A new 10- year LPM Programme to upgrade another 2 500 substandard slopes will begin after the current five-year programme is completed. A new slope catalogue, and a register of maintenance responsibility, are being prepared and will be available to the public in 1998 and 1999 respectively to help ensure proper maintenance of slopes. To support this programme, more manpower resources and funding will be allocated for the various maintenance departments. In addition, the guidelines on the division of maintenance responsibility among various departments are being reviewed through the interdepartmental Standing Committee on Slope Safety. Existing legislation is being reviewed, and, where necessary, new or amended legislation suggested, to




enhance slope safety associated with private developments and to effect mandatory slope safety inspection.

  In addition to implementing a vast number of public works projects, various systems have been introduced to maintain the quality and delivery of public works cost-effectively, safely and in a timely manner. The works group of departments has begun to use value management in the planning of major projects. Using this project management technique will improve value-for-money in public works by fully utilising resources while maintaining the necessary functions, quality and performance of the end product. A computerised public works management system has also been implemented to facilitate the execution and co-ordination of projects.

  A Pay for Safety Scheme (PFSS) and an Independent Safety Audit Scheme (ISAS) were introduced in March 1996 to encourage contractors to set up efficient safety management systems and to enhance the standard of safety performance of contractors at public works construction sites. Under the PFSS, safety related items are specified and priced in each contract. If the contractors can satisfactorily meet the required standard for these items, they will be paid accordingly. By the end of 1997, 95 contracts had been included in the PFSS. Under the ISAS, the Occupational Safety and Health Council appoints independent Accredited Safety Auditors to carry out quarterly safety audits on each contract. Contractors risk suspension from tendering if they repeatedly fail to pass these audits. Since 1996, 36 contracts have been included in the ISAS. Mandatory safety induction training has also been specified in public works contracts requiring construction workers to undertake such training when they start work on sites. Safety Advisory Units established in each of the seven works departments continued to provide support to staff in maintaining safety and health on public works construction sites. The results of these safety initiatives can be seen in the accident statistics on public works sites, which were less than 30 per cent of the average accident rate for the construction industry as a whole in the 12 months ending July 1997.

  In addition, quality standards among the works group of departments have been enhanced. The Architectural Services Department, the Landslip Preventive Measures Branch of the Civil Engineering Department, the Structures Division of the Highways Department and three sub-divisions of the Electrical and Mechanical Services Department have already been certified to ISO 9000 quality standards. Other departments, including the Drainage Services Department, Territory Development Department and Water Supplies Department are progressing with implementation of their own quality management systems. The government policy of requiring consultants and contractors for major projects to be certified to ISO 9000 standards was well supported by the industry. More than 70 per cent of major consultants and more than 80 per cent of major contractors engaged in public works projects have obtained ISO 9000 certification.

The Organisational Framework


The primary objectives of the government's lands and works policies are to ensure an adequate supply of land to meet the short-term and long-term needs of the public and private sectors, to optimise the use of land within the framework of land use zoning and development strategies, and to ensure co-ordinated development in infrastructure and buildings.


      The Secretary for Planning, Environment and Lands is chairman of a committe, which is responsible for monitoring the general progress of the physical development of Hong Kong, 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, Territory Development Department and the Government Laboratory.

      The Secretary for Works is responsible for the formulation of policies on slope safety and water supply. He oversees, and has policy responsibility for, the 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 also oversees the operation of the Electrical and Mechanical Services Trading Fund in the Electrical and Mechanical Services Department, as well as the New Airport Project Co-ordination Office set up in 1991 to co-ordinate the overall implementation of the ACP.


Town planning is carried out by the Planning Department under policy directives from the Planning, Environment and Lands Bureau and the Housing Bureau. During the year, the department was involved in revising the proposals of 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 reviewing 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; and continued the work on the Port and Airport. Development Strategy and the Rural Planning and Improvement Strategy.

      The department was also engaged in other forward planning activities including efforts to co-ordinate the formulation of the urban renewal strategy and programme; in development control for the districts and conducting site search exercises for major uses/developments; and in undertaking enforcement action against unauthorised developments in designated rural areas.

Review of the Town Planning Ordinance

     The Town Planning Ordinance was first enacted in 1939 and has remained largely in its original form. In view of the increasing complexity of the social, economic and political environment in Hong Kong, the Administration found it necessary to review the requirements of the community and to introduce the required changes to the Ordinance to meet contemporary and anticipated future needs.

In 1991, a consultative document on comprehensive review of the Town Planning Ordinance was published for public comment. A special committee was also set up




concurrently to consider the complex and contentious issues of compensation and betterment. Public comments received on the consultative document and the recommendations of the special committee provided important inputs in the formulation of legislative proposals to improve the planning system.

In view of the quantity and complex nature of the proposals involved, the administration decided to prepare a new piece of planning legislation with a view to replacing the existing one. The Town Planning Bill was then published in July 1996 in the form of a white bill for public consultation till the end of 1996. The comments received were diverse and on some issues conflicting. The administration has therefore considered it prudent to introduce interim measures, pending further study on the various issues relating to the comprehensive overhaul of the ordinance, to shorten the existing statutory planning procedures which is one of the proposed changes that received widespread support during the consultation. An Amendment Bill imposing a statutory nine-month period within which objections should be considered will be introduced into the legislature in early 1998.

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. The document is constantly under review to take account of changes in government policies, demographic characteristics as well as social and economic trends. Major tasks undertaken during the year included the formulation and revision of planning standards and guidelines for community centres, social welfare facilities, recreation and open space, industry, retail facilities and parking and loading/unloading 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 land use, transport and environmental framework for the planning and development of Hong Kong. The aim is 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 civil aviation.

  A comprehensive review of the strategy commenced in 1990. Two regional development scenarios have been postulated in the current TDS Review. The first scenario assumes the Pearl River Delta as Hong Kong's 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 generation and evaluation of TDS development options and the formulation of a recommended long-term development strategy for Hong Kong and a medium-term strategy with an outline development programme. Public consultation was carried out


in 1993 to seek public views on goals/objectives and strategic development options. A Consultative Digest on the recommended strategies was produced in July 1996 to invite public comments. A Final Executive Report incorporating comments received will be published for public information in early 1998.

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 then Governor in Council in 1991 as a planning framework for developing and upgrading the Metro sub-region, including Hong Kong Island, Kowloon, Tsuen Wan and Kwai Tsing, up to the year 2011.

      Following the approval of the Metroplan Selected Strategy, steps have been taken to prepare a series of Development Statements to translate the Metroplan concepts into more specific district planning objectives. The Development Statements for West Kowloon, South-East Kowloon, 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 for NWNT is held in abeyance pending the completion of the Planning and Development Study on the NWNT which commenced in October 1997. Work on the review of the SWNT sub-regional development strategy is in progress. The review aims at producing an appropriate land-use, transport and environmental framework to guide the planning and development of the sub-region up to 2011.

      The NENT Development Strategy Review was completed in October 1996. A review for the SENT would be undertaken in due course.

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: the outline zoning plans (OZPs) and development permission area (DPA) plans. The DPA plans are prepared for areas not covered by OZPS and they mainly cover the rural areas in the New Territories. Development scheme plans prepared by the Land Development Corporation (LDC) also require approval by the TPB.

OZPs are intended to show the broad land-use framework of specific areas, including major roads and other transport systems, and provide statutory planning




controls through land-use zoning and specification of development parameters within concerned areas. DPA plans are similar to but less comprehensive and definitive than OZPs. They are interim plans to be replaced by OZPs. In areas covered by DPA plans or their replacement ÖZPs, the Planning Authority can take enforcement actions against unauthorised development.

In 1997, one new OZP to replace a DPA plan and three new DPA plans were published, and 22 existing plans were amended by the TPB. At the end of the year, there were 90 OZPS and three DPA plans.

Under the Town Planning Ordinance, any person affected by statutory plans on exhibition for public inspection, including the LDC development scheme plans, can lodge objections with the TPB. In 1997, 38 objections to the draft plans were lodged, and 3 208 objections (including those brought forward from the previous years) were considered by the TPB. Draft plans, together with amendments made to meet objections, and withdrawn objections, are required to be submitted to the Chief Executive in Council for approval. In 1997, 11 OZPs, one DPA plan and one LDC Scheme Plan were approved. The Chief Executive in Council referred six approved plans back to the TPB for further amendments.

Attached to each statutory plan is a set of notes indicating the uses in particular zones which are always permitted and uses for which the TPB's permission must be sought. In 1997, the TPB considered 1 033 applications for planning permission and 122 reviews of planning applications.

Guidelines are formulated by the TPB to help applicants submit planning applications. The TPB has promulgated 13 sets of such guidelines and has published an annual report since 1990.

The Town Planning Appeal Board, a statutory 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 years, the Town Planning Appeal Board heard five cases in 1997, of which four were dismissed and one was allowed. Nine 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 1997, there were 88 ODPs and 353 LPs.


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 which cannot satisfy any of these criteria is an unauthorised development (UD).

  The Planning Authority may serve notices on the respective land-owners, occupiers and responsible persons, requiring them to discontinue the UD by a specified date


unless planning permission for the development is obtained, or demanding a reinstatement of the land. It is an offence in law if the requirements of the notices are not complied with.

      Most of the UDs in the rural New Territories were related to site formation; earth- filling; the open storage of vehicles, containers, trailer/tractors and construction materials; and vehicle repair workshops. In 1997, 251 complaints and 383 referrals of suspected UDs from other government departments were received and 166 suspected UDs were detected through patrolling. The Director of Planning issued 321 warning letters for 144 cases, 1 664 enforcement notices for 285 cases, 72 reinstatement notices for five cases and 1 405 compliance notices for 218 cases. As for the prosecution, 41 defendants in 25 cases were convicted and the average of fine was $37,730 with a range of $5,000 to $300,000. Upon taking enforcement action, 173 UDs were discontinued and 112 UDs were regularised through section 16 planning application, which involved 43 ha and 60 ha of land respectively.

Special teams have also been set up to work in collaboration with the Black Spots Task Force of Lands Department on the common objective of cleaning up the environmental black spots in the rural New Territories. The special teams are to expedite enforcement and prosecution actions against UDs in the Pat Heung Pilot Action Area, the North District East Action Area and the Tuen Mun Container 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


The Land Development Corporation (LDC) was established in 1988 to undertake, encourage, promote and facilitate urban renewal. Since its inception, 11 urban renewal projects have been completed and 16 projects are under way.

During the year, the then Governor in Council approved one more LDC development scheme plan for comprehensive redevelopment in the older parts of Tsim Sha Tsui. Seven 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. For the LDC to carry out pilot schemes to test the linked-site approach, two comprehensive redevelopment projects have been identified at Kennedy Town New Praya and Tsuen Wan Town Centre to be linked to development projects at Ka Wai Man Road and Yeung Uk Road, respectively. A site at West Kowloon Reclamation will be granted to the Hong Kong Housing Society for rehousing residents affected by LDC projects.

Following the publication of the Policy Statement on 'Urban Renewal in Hong Kong' in June 1996, an urban renewal division has been set up in the Planning Department to render assistance to the Planning, Environment and Lands Bureau (PELB) for the implementation of various proposals in the Policy Statement. The division is undertaking a planning study on urban renewal strategy whereas PELB is actively studying the setting up of a statutory Urban Renewal Authority, the creation




of a rehabilitation fund and the introduction of legislation to facilitate private land owners to redevelop their properties.

Planning Studies

 During the year, the Planning Department worked on several major development proposals, notably the West Kowloon and South East Kowloon reclamations. Studies were completed on future use of ex-military sites in Kowloon and the New Territories; Hong Kong Island West Development Statement; car park and traffic study at Stanley; study on comprehensive assessment of redevelopment potential in the metro areas; survey of housing aspiration of households; shopping habits and Metroplan Review Stage I study.

  Studies including office decentralisation and the formulation of an Office Land Development Strategy, and the third review of the Port Development Strategy are still ongoing. New planning studies on the Planning and Development Study on NWNT; the Planning and Development Study on NENT; Study on Sustainable Development for the 21st Century and the feasibility study for additional cross- border links stages I & II were commenced. The Planning and Development Study on Hong Kong Island South and Lamma is scheduled to start in 1998.

Urban Development Areas

 Construction works and feasibility studies on new urban development areas generally follow the broad pattern of land-use and guidelines in the Metroplan, and integrate with the replanning and redevelopment of adjoining old areas in a co-ordinated manner. The TDD is conducting feasibility studies of several major reclamation projects to provide solution spaces in the urban area.

Hong Kong Island

 Central and Wan Chai Reclamation extends along the waterfront from Sheung Wan to Causeway Bay. Central Reclamation Phase 1, involving some 20 hectares of land at the Central waterfront, was completed in March 1996. The project provides land for expansion of the Central Business District and construction of the Airport Railway's Hong Kong Station which is scheduled for completion by mid-1998.

  Central Reclamation Phase 2 was completed in September 1996. The project provides 5.3 hectares of land in the Tamar Basin area for commercial and open space development.

  The detailed design for Central Reclamation Phase 3, which connects Central Reclamation Phases 1 and 2 with Wan Chai Reclamation, was completed in mid- 1997. Implementation of this phase was under review.

  The infrastructure works for Wan Chai Reclamation Phase 1 were completed in time for the opening of the Hong Kong Convention and Exhibition Centre Extension in June 1997. Wan Chai Reclamation Phase 2 is under planning. Together with the other phases of Central and Wan Chai Reclamation, it will accommodate strategic road links along the north shore (between Central and the eastern part) of Hong Kong Island.

  On the western side, Belcher Bay Reclamation and the construction of Belcher Bay Link on it were completed in February 1997 to tie in with the opening of the Western Harbour Crossing.


On the eastern side, the Aldrich Bay development has produced some 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 was completed in August 1997.

Infrastructure works and building developments for various uses were well advanced on the 56 hectares of land formed at Siu Sai Wan. Two secondary schools and three Private Sector Participation Scheme housing developments together with most of the infrastructure were completed. The Siu Sai Wan Sports Ground has come into operation. Another secondary school and the two remaining footbridges were under construction.

Site formation and road works for public housing development at Woodside, Quarry Bay, will commence in mid-1999 for the building works to start in mid-2002 for completion in mid-2005.


Further to the substantial completion of West Kowloon Reclamation in 1996, major distributor roads serving transport links to Western Harbour Crossing, West Kowloon Expressway and a section of Route 3 were completed and opened to traffic in 1997. In addition, improvements to the trunk storm drains and sewerage system were substantially completed. The remaining road and drainage works on the reclamation will be progressively completed to tie in with the developments. A large open space fronting Nam Cheong Estate serving as a buffer zone between the residential area and the West Kowloon Expressway was formed. Other developments on West Kowloon Reclamation including private and public housing and commercial developments are in progress. These developments will ease pressure on the existing adjacent congested residential and industrial areas and house about 118 000 persons. At Hung Hom Bay Reclamation, the 36 hectares of land formed will be used for private and public housing, commercial development, extension of the existing Kowloon-Canton Railway freight yard, government, institutional and community facilities, schools, open space and road works. The area will house about 11 500 persons. Engineering infrastructure, including two trunk roads (the Hung Hom Bypass and Princess Margaret Road Link) is being built for completion in mid-1999. The South East Kowloon development feasibility study on developing the existing Kai Tak Airport area after the relocation of Hong Kong International Airport to Chek Lap Kok will be completed in early 1998. The feasibility study indicates that about 270 hectares can be released from the existing airport site, some 300 hectares formed by reclamation and about 100 hectares 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 also offer opportunities for urban renewal. A wide range of engineering works, including the reprovisioning of marine and land-based facilities, reclamation, highway construction and the provision of drainage, sewerage, sewage treatment and other public utilities, will soon be carried out and works will continue into the next century. The target population to be accommodated in the new development areas is in the range of 285 000 to 310 000.

The Kowloon Point development feasibility study was completed in June. Its proposal for a 40-hectare reclamation at the southern end of the West Kowloon




 Reclamation is considered necessary for extending the railway and roads to Tsim Sha Tsui to improve the transport network in Kowloon. The study's recommendations are being reviewed.

New Towns and Rural Townships

The development of new towns in Hong Kong continued in 1997. At the end of 1997, about 2.7 million people were housed in the new towns in which a wide range of facilities like parks and open spaces, community and recreational facilities, schools, markets and shopping centres and convenient transport links were provided.

  Engineering design and construction works on land formation and infrastructure of the development areas in new towns are overseen and co-ordinated by the TDD. Extensive landscaping and greening works are also carried out in conjunction with the development works. Under the afforestation programme associated with the new town and urban development, more than one million trees were planted in and around the new towns and Metroplan development areas over the year. About 100 hectares of land were afforested to reduce water runoff from hillsides.

  With a view to meeting the flat production targets set by the administration, the TDD has already put in extra resources to expedite the delivery of housing sites and the provision of essential infrastructure within New Towns, Strategic Growth Areas and Major Development Areas. For long-term planning, studies are also being conducted to identify potential development areas and to consider the expansion of existing new towns.

Tsuen Wan

Tsuen Wan new town embraces the areas of Tsuen Wan, Kwai Chung and Tsing Yi Island. Its population is expected to stabilise at around 800 000 over the next 10 years.

  Hong Kong's container terminals are mainly concentrated in the Kwai Chung area. Container Terminal 8 has been operational since July 1994. Container Terminal 9 will be located at 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 for completion in early 1999. Construction of a flyover across Castle Peak Road connecting Tsuen King Circuit and Sha Tsui Road started in mid-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 about 590 000 people, approximately 69 per cent of whom live in public housing developments which comprise 15 public rental estates and 21 home ownership and private sector participation schemes. The new. town will house about 625 000 people by 2001.

  Since 1981, development works have been extended to Ma On Shan, involving 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.

An unexpectedly long record of settlement in Hong Kong

was uncovered during 1997, when ancient remnants were unearthed at Tung Wai Tsai on Ma Wan Island.

The island's formerly isolated shores have been joined

to Kowloon by the Lantau Link. The Neolithic relics uncovered (left and below) are believed to be at least 4 000 years old. Specialists are reconsidering Hong Kong's prehistory as they analyse the latest findings.

A spectacular fiery 'waterfall' cascades from the Tsing Ma Bridge at the opening of the Lantau Link on April 27. More than 1000 guests, including mayors and civic representatives from other cities with famous bridges. They enjoyed a colourful programme built around a theme of community participation that included a parade by 1 100 people representing Hong Kong's 18 districts, a fly-past by helicopters and fixed-wing aircraft, a flotilla representing the marine community and a car procession over the link. It culminated in the 20-minute firework and laser display which was visible from most points overlooking the harbour.







NewAirport at Chek Lap Kok


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A host of information and interesting exhibits on the Airport Core Programme (ACP) await visitors to the ACP Exhibition Centre

at Ting Kau (above). More than 437 000 people visited the centre in 1997, which also offers

a panoramic view of the Lantau Link.


Three public housing estates/Home Ownership Scheme projects are under construction. The construction of Trunk Road T7, which will bypass the Town Centre, is planned to start in 2000. Upon full development, Ma On Shan will house about 750 000 people.

      The programme to improve conditions in the old villages in and around Sha Tin continues. 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.

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 72 per cent of the town's 446 000 people live in public housing developments, which comprise 11 public rental estates, 16 home ownership and private sector participation schemes and one temporary housing area. Within the next five years, four more home ownership and private sector participation schemes, one public rental estate and one Vertical Interim Housing project will be developed to provide new accommodation for 67 000 people. Upon full development, the new town will provide homes for about 524 000 people.

      In western Tuen Mun, a 73-hectare site is earmarked for special industries and a 79- hectare site is being developed by the private sector as a River Trade Terminal. Reclamation works for the special industry area commenced in September 1995. In association with these developments, a major road, the Foothills Bypass, will be constructed to cater for the increasing traffic demand. Construction work is scheduled to start in mid-1998.

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 276 000 on about 1 270 hectares of land. This new town is well developed with the major infrastructure in place.

      A feasibility study for the Pak Shek Kok development area to the immediate north of the Chinese University of Hong Kong commenced in April 1997. The study site, covering 105 hectares, is planned for the development of a science park, and residential and recreation uses. The feasibility study is scheduled for completion in August 1998.

      The Tai Po Convalescent/Infirmary Hospital was completed in April 1997 and the Waterfront Park near Fu Shin Estate was completed in August 1997.

Fanling and Sheung Shui

Fanling and Sheung Shui sustain a population of around 203 000 people on about 773 hectares of land. This population is expected to increase to 230 000 by the turn of the century.

      Planning work on various flood control schemes for River Indus is progressing for completion by early 2002 in step with the Shenzhen River regulation project to reduce flooding risks by then. The river training works on the River Indus will commence in mid-1998.




Yuen Long

The population in Yuen Long Town stood at 130 000 at the end of the year and 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 and new infrastructure provided. The construction of new infrastructure at Hung Shui Kiu and Ping Shan areas is planned to be implemented in stages commencing in mid-1998 for completion in 2003.

  Yuen Long development will be extended southward covering an area of about 12 hectares of land mainly for public housing development. Site förmation and infrastructure works will be implemented in phases commencing in early 1999 for completion by 2002.

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 which includes the reclamation and engineering infrastructure for the town centre northern area will 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 in progress. An initial 30 hectares of serviced land was completed in March 1995. A further 65 hectares of serviced land were completed in 1997 for industrial development. The southern part of Siu Chik Sha is also being developed for industrial use.

  In preparation for further industrial development, about 104 hectares of land south of Tseung Kwan O will be developed for deep waterfront industries and potentially hazardous installations. Reclamation work is in progress.

The population of the new town, 161 000 at the end of March 1997, will be more than 440 000 upon full development by 2010. A study commenced in August 1997 to examine the feasibility of extending the new town to accommodate a maximum population of 520 000. The proposed extension of the MTR to Tseung Kwan O and the Western Coast Road, both intended to improve the traffic of the new town with the metro area, are under study.

Tin Shui Wai

The development of Tin Shui Wai as Hong Kong's eighth new town began in 1987. About 450 hectares of land were reclaimed from fishponds.

  The initial development of 169 hectares of land in the southern part of the reclaimed land (the Development Zone) has been substantially completed. The Development Zone's well-integrated layout, with public and private residential developments grouped around a Central Park, now provides homes for about 135 000 people.

  An engineering investigation study on the further development of Tin Shui Wai was completed in March 1997. Site formation on the rest of the reclaimed land to the


north (the Reserve Zone) commenced in June 1997. Upon full development, the population of Tin Shui Wai is expected to reach 325 000 by the year 2003.

Tung Chung/Tai Ho

Hong Kong's ninth new town now taking shape on the northern shore of Lantau Island is designed as a supporting community for the new airport at Chek Lap Kok. The new town will be developed on about 830 hectares of land based on 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 a total target population of 320 000 by 2011. 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 major utilities, including a water treatment works, a sewage treatment works, railway depot and a refuse transfer station.

The new town will be developed in phases. Phase 1 was included in the Airport Core Programme and was substantially completed in mid-1997 to accommodate about 20 000 residents at Tung Chung. Construction of the first stage of the North Lantau sewage collection, treatment and disposal system was completed. Site formation and infrastructure works for the Phase 2 development are in progress. A comprehensive feasibility study is looking at new targets for the completion of Phase 3 in 2006 and the fourth phase by 2011.

Islands District

The development of the Islands District continues. The reclamation, road and drainage works at Sai Wan, Cheung Chau have been completed. Construction of sewers for Pun Lo Pang, Tai O and the road improvement works for Cheung Chau Old Town and the reclamation, road and drainage works at Yung Shue Wan, Lamma Island are in progress. The construction of the north-east riverwall and site formation at Tai O started in December 1997.

Rural Planning and Improvement Strategy

The Rural Planning and Improvement Strategy (RPIS) is a coherent strategy for planning and improving the rural areas of the New Territories through infrastructural development/environmental improvement and land use control. It is implemented at both strategic and district levels.

At the strategic level, land-use policies are reviewed to control incompatible uses and provide a sustainable framework for public and private developments in the rural New Territories. Several planning studies and surveys have been, or are being, undertaken to facilitate the review.

At the district level, smaller-scale improvement projects are implemented under the RPIS Minor Works Programme monitored by the Home Affairs Department since late 1994. Moreover, a streamlined two-tier administrative structure consisting of the RPIS Minor Works Steering Committee attended by representatives of Heung Yee Kuk and New Territories Provisional District Boards (NTPDBs) and the District Working Groups attended by representatives of NTPDBs and Rural Communities has been adopted. This two-tier structure provides stronger local participation in the




identification of local needs, prioritisation of project implementation and resolution of local objections.

  The TDD continues to implement the major improvement works, such as river- training and village flood protection works, either through agent departments or consultants.

Large tracts of low-lying land at Yuen Long, Kam Tin and Ngau Tam Mei are particularly susceptible to flooding during heavy rains. Major river-training and flood-prevention projects are being implemented to improve the drainage systems of the area. The flood control works for Shan Pui River, the down-stream and mid- stream sections of Kam Tin River, and the village flood protection works at Sha Po Tsuen, San Tin Village and Ha Mei San Tsuen are in progress.

Building Development

The Private Sector

Private building development underwent another year of consolidation in 1997. The number of building plan submissions increased from 13 340 in 1996 to 15 862 in 1997, and 838 buildings with a total floor area of 3.4 million square metres were completed at a cost of $31.22 billion. This compared with 1 000 buildings with a total floor area of 3.2 million square metres built at a cost of $28.08 billion in 1996.

  Private sector activities continued to include redevelopment of existing sites, alterations and additions to existing buildings and new developments. The growing trend is towards an increase in the number and size of developments in the northern New Territories. To cope with the housing demand, measures have been introduced to expedite the building development process.

  Apart from the extensive building works associated with the new airport at Chek Lap Kok, the Buildings Department has been increasingly involved with the building developments above the railway stations of the Airport Railway. Other involvement included developments concerning hotels, government assisted housing projects and the school improvement programme.

  The department is studying the feasibility of the submission of plans and supporting documents for building proposals in electronic data format. The new approach will reduce the use of paper in building designs and drawings and will facilitate their retrieval. In the longer term, the study will pave the way for use of artificial intelligence in plan processing through computer technology.

  A special task force continued to monitor and enhance the safety of construction and demolition sites in the private sector. In 1997, the department carried out 3 572 site safety inspections and issued 456 advisory letters to the responsible persons of those sites where safety related irregularities were discovered. The site monitoring task force has been successful in reminding contractors and professionals in the building industry of the importance of construction site safety.

  New systems for the registration of authorised persons, registered structural engineers and contractors have been introduced to improve their experience, competence, and qualification and to ensure the quality and safety of building works. The requirement for the preparation of supervision plans to set out clearly the responsibilities of all parties involved in the supervision of building works has also been implemented. The new requirement will enhance the safety of construction sites.


       In all, 2 840 buildings in the 1946-58 age group were inspected and 570 investigation or repair orders were served under the inspection programme to implement recommendations in the consultancy study on buildings in this age group. The department also inspected 666 cantilevered slab canopies, resulting in the issue of 32 investigation orders.

The department received 249 calls under the 24-hour service for emergencies, and 97.2 per cent of the cases were attended to within three hours. In addition, 3 722 reports on potential dangerous building elements were received. Sixteen per cent of the emergency calls and other reports concerned danger from external elements of buildings including projections, appendages, advertising signs and loose finishes. The remaining cases related mainly to water seepage, dangerous scaffolding, dangerous slopes and damage by fire.

To ensure that private buildings in Hong Kong continue to meet standards of safety and health after they have been certified for occupation, the government has been exercising pragmatic control over unauthorised building works (UBW). The growth of UBW has now been generally contained as all significant new UBW are subjected to immediate enforcement action. To help identify new UBW, the department has been taking aerial photographs on rooftop structures twice a year. Record photographs are also taken on buildings. On the public safety front, the department has been removing all identified dangerous or UBW as a matter of priority. In 1997, a task force was set up to remove all dangerous or abandoned air conditioning water cooling towers in old industrial areas. As a result of the operations, 455 cooling towers and frameworks were removed in Kwun Tong, Kwai Tsing and Tsuen Wan.

Greater emphasis has also been placed on the health and environmental aspect of UBW. Unauthorised structures such as exhaust fans, ventilation ducts and the like which cause environmental and health nuisance to neighbours or the general public are subjected to immediate enforcement action.

In 1997, 12 427 reports of UBW were dealt with, resulting in the removal of 6 829 UBW. In all, 127 prosecution cases were instigated against offenders for erecting UBW or for not complying with removal orders. As a result, 77 convictions were secured with total fines of $2.04 million.

Lack of proper building maintenance causes building safety problems. The voluntary Building Safety Inspection Scheme, which serves to promote systematic inspection and preventive maintenance of buildings under 20 years of age, was launched in April 1997. The details of the proposed mandatory Building Safety Inspection Scheme, targeting at buildings over 20 years old, were announced in August 1997 for comments by the public. The department aimed to start implementing the essential measures of the scheme by mid-1998.

During 1997, 178 statutory orders were served on building owners, requiring slope upgrading works to be carried out. In addition, emergency action was taken by contractors in response to 38 reports on landslip incidents. To ensure proper maintenance and repair of buried water-carrying services, leakage from which might otherwise endanger slopes, 328 fill slopes were studied, resulting in the issue of 33 investigation/repair orders.

The government has since May 1997 been implementing the Fire Safety (Commercial Premises) Ordinance to upgrade fire safety measures in certain




prescribed commercial premises such as banks, betting centres, jewellery shops, shopping arcades and supermarkets.

  After the tragic fires in Garley Building, Top One Karaoke and Mei Foo Sun Chuen, the government stepped up inspections with a view to improving the fire safety standards attained. A total of 648 inspections were made, 6 423 advisory letters issued, and 72 statutory orders served. As a result, rectification works were completed in six buildings and were in progress in 31.

Community education and publicity were strengthened to cultivate higher awareness of fire safety and to promote better management of buildings.

The Public Sector

The Architectural Services Department (Arch SD) provides planning and technical advice on building-related matters to all government departments. The department also provides financial control and project management services for both public building developments under the Public Works Programme and subvented building projects financed by the government. Further, it is responsible for professional design services for government departments, the Hospital Authority, the Urban Council and the Regional Council in Hong Kong; and maintenance services for buildings owned or occupied by these bodies.

  During 1997, the Arch SD designed or constructed 260 projects valued at $47.6 billion. It monitored a further 149 projects valued at $19.8 billion. Actual expenditure on building projects undertaken or monitored by the department totalled $11.8 billion, with a further $2.6 billion being spent on routine maintenance and minor alteration works.


 Seven primary schools and six secondary schools were completed in 1997 under the School Building Programme. One special school, one practical school and a skills opportunity school were also completed. Improvements to 143 schools were completed in 1997 under the School Improvement Programme. Construction work started on 11 primary schools, 12 secondary schools, three special schools, one practical school and three skills opportunity schools. Improvement work on 102 schools started under the School Improvement Programme.


Projects completed for the disciplined services include the junior disciplined services quarters at Wong Tai Sin.

Disciplined Services

Projects completed include Tung Chung Divisional Fire Station, Lam Tin Ambulance Depot, Marine Police District Headquarters at Sai Wan Ho and Tung Chung District Police Station, with the Sham Tseng Ambulance Depot under construction.


The Air Traffic Control Complex and Tower and the Airport Fire Station for the new airport at Chek Lap Kok were completed in mid-1997. Construction of the Airport Police Station, the Government Flying Services Headquarters, the Air Mail Centre


and the fitting-out work for the government facilities inside the Passenger Terminal Building are on track. Construction of the Airfield Traffic Control and meteorological facilities for the second runway started in mid-1997. The Lantau Link toll plaza administration building was completed and handed over to the franchisee/operator.


Construction of the Naval Base on Stonecutters Island, the Military Hospital in the Gun Club Hill Barracks, the Military Warehouse in Shek Kong Camp and the Joint Movement Unit at the new airport at Chek Lap Kok were all completed in early 1997. These military facilities were in use by the Garrison in early July 1997. The Joint Movement Unit will be operated concurrently with the opening of the new airport scheduled in April 1998.

Medical and Health

      Major medical and health projects completed in 1997 include the Princess Margaret Hospital improvements to Blocks A and B, the Tai Po Convalescent/Infirmary Hospital, the Princess Margaret Hospital Geriatric Day Patient Centre, the Prince of Wales New Specialist Out-patient Clinic, the Queen Elizabeth Hospital Specialist Out-patient Clinic, the Kwong Wah Hospital major refurbishment and improvement, and the Hospital Authority Headquarters Building. Major projects under construction include the Queen Mary Hospital Specialist Out-patient Clinic, the Queen Mary Hospital Radiotherapy Department Extension, the Princess Margaret Hospital Specialist Out-patient Clinic, the Princess Margaret Hospital Centre of Nephrology and Urology, the Queen Elizabeth Hospital New Operating Theatre Block and Rehabilitation Block, the Kowloon Medical Rehabilitation Centre, the Castle Peak Hospital Redevelopment Phase I Stage II, the Central Kowloon Child Assessment Centre and Skills Centre, and the Kowloon Bay Polyclinic and Nursing Home.

Leisure and Recreation

Major Urban Council projects completed in 1997 include Shek Kip Mei Park Indoor Games Hall; Recreational Development at Shek O; Urban Council Health Education Exhibition and Resource Centre in Kowloon Park; Conversion of water sterilisation system at Sham Shui Po Park Swimming Pool and at Choi Wan Swimming Pool; Lok Kwan Street Park and Installation of water play equipment at Pao Yue Kong Swimming Pool. Major Projects under construction include Hong Kong Central Library; Film Archive and Leisure Centre at Sai Wan Ho; Sai Ying Pun Market and Yee On Street Market; Ho Man Tin Recreation Ground; Hong Ning Road Park; Shun Lee Tsuen Recreation Ground; Repulse Bay Beach Building; Squash & Tennis Complex at Chung Mei; Sam Ka Tsuen Complex, Ap Lei Chau Complex and Chai Wan Complex.

Regional Council projects completed during the year include the Swimming Pool Complex at Area 100, Ma On Shan; Waterfront Park at Tai Po; District Open Space at Tseung Kwan O; Ecological Facilities at Tuen Mun Park; Ozone Sterilisation to existing Swimming Pool Phase II; District Open Space at Area 7, Tsuen Wan (Phase I & II); Local Open Space at Area 2, Tsuen Wan and Reprovisioning of Yeung Uk Road Sports-ground in Shing Mun Valley, Area 7, Tsuen Wan.




Construction works have started on a swimming pool, library, indoor recreation centre and District Open Space in Tseung Kwan O; the Regional Council Complex, Tsing Yi Town Centre; Peng Chau Market; District Open Spaces in Tsuen Wan, Tuen Mun, Tseung Kwan O; and improvement works to public toilets - Phase II.


The Arch SD, being the lead department in the management of landscape architects for the government (excluding housing projects), has enhanced its comprehensive services by fully integrating the professional skills of landscape architects into its multi-disciplinary operations in all services areas. A varied, thematic approach to landscape design has been developed, in response to the increasing aspirations of the community, by ensuring the availability of a wide variety of recreational experiences. Projects have ranged from many different styles of traditional Chinese gardens, ecological parks through to modern hi-tech imagery.

Particular accomplishments in 1997 include the completion of Hong Kong's largest urban park at Tai Po Waterfront Park, together with the very successful City Beautification Scheme linked to the Handover Celebrations. Throughout, the department has further enhanced its leading role in the greening of Hong Kong and the continuing improvement of the urban environment, as exemplified by receiving one Silver and two Merit Awards in the Green Urban Project Award Scheme, co- sponsored by the Urban Council and the Hong Kong Institute of Landscape Architects.

The landscape group also provides advisory services to the Lands Department on the inclusion of landscape clauses in lease conditions in private land sale. It also assists in assessing development proposals on the compliance with the conditions. The group also provides advice on strategic planning on landscape issues to the Planning Department and the Highways Department.

Design and Build Contracts

Design and Build Contracts are used in a number of projects. The Disciplinary Services Married Quarters at Chai Wan and at Ngau Chi Wan and the Government Flying Services Headquarters at Chek Lap Kok were completed in 1997. Construction of a joint-user office building at North Point continued in 1997 and it is expected to be completed by early 1998. Construction of a joint-user building at Cheung Sha Wan and a slaughterhouse at Sheung Shui began in 1997. A maintenance Depot at Siu Ho Wan, Lantau Island, a joint-user building at Kennedy Town and departmental quarters at Fanling are due to start in 1998 and to be completed by 2000.


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 antiquities group is undertaking the conversion of the Lei Yue Mun Redoubt to a Museum of Coastal Defence, and the preservation of the facade of the High Street mental institution to be incorporated with the new District Community Centre of Sai Ying Pun.


Environmental Policy

The department, through its quality management system, is committed to improving the environment in all aspects of work. Environmental impact assessments are carried out for all Arch SD projects that require them. The department aims to obtain ISO 14001 Environmental Management System certification in early 1998.

Energy Efficiency and Conservation for Building Design

Energy efficiency and conservation awareness form a continuous issue which is closely attended to by the department in the design of all projects. Overall Thermal Transfer Value (OTTV) calculations are carried out to limit the building solar heat gain and comply with the Building (Energy Efficiency) Regulation. Energy-efficient technologies and design techniques are adopted in the building services installation design. Examples of recent particular projects include the Hospital Authority Building, Castle Peak Hospital, Public Records Office Building in Kwun Tong, Cheung Sha Wan Government Office Building, New Naval Base, Queen Elizabeth Hospital Operating Theatre Block, and Central Kowloon Rehabilitation Centre. Clean energy is adopted such as photovoltaic electricity supply in Kowloon Walled City Garden and Tai Mo Shan Radar Station, and solar heating in Tsuen Wan Area 7 Swimming Pool and Sheung Shui Slaughterhouse. Adequate monitoring and measuring equipment is provided to monitor and audit building energy consumption.

Green Management and Good Housekeeping

The department's Green Manager conducts regular meetings to review and implement a programme of green housekeeping, introduce measures to increase staff consciousness and involvement in relation to environmental issues, publicise the commitment to protect the environment, record and formulate action plans. As a result, the paper consumption for photocopying, offsetting and A4 single-line printing has been reduced by 14 per cent and the electricity consumption has been reduced by 2 per cent in 1996. From mid-1996 to mid-1997, 60 professional and management staff received training on Environmental Management System - ISO 14 000.

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 41.

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 1997, about 359 000 square metres of private land in the New Territories were acquired at a cost of $1.52 billion for public works projects, such as the Phase II




development of Tung Chung New Town on North Lantau, the Shenzhen River Improvement Works in North District and a number of village flood protection schemes in Yuen Long District.

  On Hong Kong Island and in Kowloon, compensation of about $130 million was paid for land and buildings acquired during the year for public works projects, such as 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 the improvement work for Lung Cheung Road/Ching Cheung Road.

  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. More than 60 properties were resumed at a cost of about $1 billion in 1997.

A specialist section, called the Railway Development Section, was set up in July 1997 within the department to deal with land aspects of various railway projects. It has been working on the gazetting and land acquisition for Phase I of the West Rail Project, which will eventually involve the acquisition of about 1 300 private lots, and clearance of over 390 hectares of government and private land. Phase I of the West Rail Project was gazetted under the Railways Ordinance in October 1997.

Land Disposal

 All land within the HKSAR is state property. The government is responsible for the management, use and development of the land and for its lease or grant to individuals, legal persons or organisations for use or development. From July 1, 1997, leases of land are normally for a term of 50 years from the date of grant on payment of a premium and subject to an annual rent equivalent to three per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter. The 50-year lease term from the date of grant avoids the situation where too many leases expire on the same day, thereby allowing the extension of leases to be dealt with individually.

  In July 1997, the government announced its first five-year land disposal programme (on a financial year basis), which will be updated and rolled forward a year for announcement before the start of each financial year. The programme will be site specific for the first two years and more general (in terms of land use and hectarage) for the following three. This information will provide a clearer picture on land supply and facilitate planning by developers.

  To help meet the Chief Executive's flat production target of 85 000 units per year, the Lands Department has assumed a direct role in the private sector's contribution towards the target. All transactions are closely monitored from the date of initial site availability right through to consents to sell and occupation.

The department has also streamlined its procedures in land exchanges and modifications, and is assisting the private sector to redevelop all available and suitable land for early residential development.

  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, 19 sites for housing (including some at Chai Wan, Repulse Bay, Hung Hom and Stanley) with a total area of 24 hectares were sold; seven sites with a total area of 16 hectares were granted for the Home Ownership Scheme; and three sites with a total area of five hectares were sold for the Private Sector Participation Scheme.

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.

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 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.

All land registers are computerised. Each land register provides a complete picture of all transactions affecting a property, from the grant of the lease. The registers, memorials and related land documents are available for search by members of the public at the respective land registries on payment of a small fee. A purchaser or mortgagee will 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.

The Direct Access Services, an on-line computer search facility, allows its subscribers, mainly solicitors and other professional firms, to have direct access to the computerised registers and to place orders for copies of land records from computer terminals in their own offices.

The Document Imaging System enables land documents presented for registration to be scanned and stored as electronic images on optical discs. The images can be retrieved and distributed quickly.

All paper land documents in the eight New Territories Land Registries were converted into electronic images in May 1997. Conversion of the microfilmed land documents of the Urban Land Registry into electronic images started in June 1997 for completion by the end of 1998.

The Memorial Day Book, which is computerised and contains essential data of land documents lodged for registration each day, can be viewed by its subscribers on computers in their offices.

Land Registration statistics are at Appendix 40.

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 and variation of




 government leases as well as the drafting and execution of conditions of sale by auction, grants and exchanges of government land, the apportionment of government rents and premiums, and the recovery of outstanding arrears of government rents. It provides conveyancing services to the Housing Authority in connection with the sale of flats under the Home Ownership Scheme and the Tenant Purchase Scheme, The Financial Secretary Incorporated for the extension of non-renewable leases and The Secretary for Home Affairs Incorporated for the purchase of accommodation for welfare purposes in private developments. It is also responsible for processing applications for the sale of units in uncompleted buildings which are subject to the Lands Department Consent Scheme. During the year, 10 applications involving 7 879 residential units in the urban areas were approved and in the New Territories, 29 applications involving 20 619 residential units were approved.

  To meet the Chief Executive's target of producing not less than 85 000 flats a year, the office has commenced the contracting out to private solicitors of work on the approval of Deeds of Mutual Covenant and has simplified and will continue to look into other ways of simplifying the procedures for approving Deeds of Mutual Covenant and applications for consent to sell residential units in uncompleted developments.

  Pamphlets on the main services of the office and the legal obligation of property owners to pay government rents were published in early 1997, and are available free of charge to the public. A hotline on consent applications was set up in November. The public can obtain information on developments for which consent has been issued or will be issued in the near future.

Survey and Mapping

The Survey and Mapping Office of the Lands Department defines and records the boundaries of land developments, providing and maintaining survey control networks, producing maps of Hong Kong at various scales for land administration, engineering works and legal purposes, and managing a computerised land information system.

  The office provides land survey services for land administration purposes such as land sale and resumption. It maintains a complete index plan in digital form of all leasehold lots and government land properties. Under the Land Survey Ordinance, the office, being the Survey Authority, is responsible for checking the quality of land subdivision plans submitted by Authorised Land Surveyors and maintains a record of these plans for reference by other land surveyors.

  The survey control networks provide the essential reference points for all types of land and engineering surveys. A Global Positioning System, which receives signals from satellites, is used for establishing these reference points. More permanent reference stations are being installed to provide wider and more precise coverage. The use of this system for mapping survey is also being experimented with. The received signal data is available to private practising surveyors.

  The office produces a large variety of maps, the largest scale being 1 to 1 000 and many in colour. All these maps are bilingual or will be so by early 1998. The 1 to 1 000 and 1 to 20 000 digital maps are available for sale to the public. The 1 to 5 000 digital maps will be ready in early 1998.


The office also provides extensive cartographic services for many government departments. These include the production of geological maps, aeronautical charts, electoral boundary maps, as well as plans for land disposal and resumption, street and place names, government notices and legal purposes.

The Air Survey Unit takes aerial photographs regularly and upon request for photogrammetric survey and record purposes such as for flooding and landslip. The photographs, some in colour, are available for sale to the public.

Drainage Services

The Drainage Services Department is responsible for planning, designing, constructing, operating and maintaining the sewerage, sewage treatment and stormwater drainage infrastructures.

Treatment and Disposal of Waste Water

Waste water disposal projects being implemented by the department are broadly divided into two categories: 'Sewerage Master Plan (SMP) schemes' which are 16 territory-wide sewerage rehabilitation and improvement schemes; and the 'Strategic Sewage Disposal Scheme' which is a multi-billion-dollar project to collect and treat sewage discharges from the urban areas of Kowloon and Hong Kong Island. The latter scheme was developed in 1989 under the new strategy to combat water pollution in Hong Kong.

Projects under these two categories, valued at some $7 billion, were under construction by the Drainage Services Department, and projects worth a further $9 billion were at various stages of planning and design in 1997.

On Hong Kong Island, work continued under the Central, Western and Wan Chai West SMP to lay 5.9 kilometres of trunk sewers and build new pumping stations and new screening facilities. Two works contracts for sewer laying and re-lining work under the Wan Chai East and North Point SMP will commence in 1998. As far as practical, trenchless construction methods were planned to minimise disruptions to traffic and inconvenience to the public.

       On the other side of Victoria Harbour, sewerage improvement work under the East Kowloon SMP, the Tsuen Wan, Kwai Chung and Tsing Yi SMP and the North and South Kowloon SMP were progressing for completion in 1998. Construction of the remaining sewers under the West Kowloon SMP will start in 1998 while planning and design work was in hand for the Tseung Kwan O SMP.

      In the New Territories, the initial phases of sewerage improvement work for the Port Shelter SMP and the laying of a 2.8-kilometre pressure sewer under the Yuen Long and Kam Tin SMPs were completed in 1997. Planning and design work was in progress for the remaining phases of these two SMPs. At Sham Tseng, reclamation for the construction of a sewage treatment works was completed in June 1997. The laying of associated public sewers along Castle Peak Road and construction of the sewage treatment works will start in 1998 and 1999 respectively.

      Implementation of the $5.32 billion Strategic Sewage Disposal Scheme, Stage I, reached its final stage of completion apart from the sewage conveyance tunnels. The Stonecutters Island sewage treatment works a key element of the scheme was commissioned in May 1997. The plant, the world's largest chemically enhanced primary treatment plant, is capable of serving a projected population of 3.5 million




by the year 2021. Tunnelling works were delayed by a contractual dispute in 1996. Construction of all six tunnels resumed after new contractors were appointed and it is expected to be completed in 2001.

  The department upgraded existing sewage treatment facilities as another initiative to improve the quality of treated sewage and hence the receiving waters. The upgrading works completed in 1997 included the sludge disposal facilities for Yuen Long, Tai Po, Shek Wu Hui and Sai Kung sewage treatment works, and the upgrading and refurbishment of the existing facilities at various sewage treatment works. The planning and design of the Stage III extension to the Sha Tin Sewage Treatment Works began in early 1997 while the upgrading of Shek Wu Hui sewage treatment work was scheduled to commence in January 1998.

Sewage Charges

The sewage charging scheme in Hong Kong was introduced on April 1, 1995. Developed on the 'Polluter Pays Principle', the scheme has two components: the general sewage charge and trade effluent surcharge. The general sewage charge is levied at a fixed rate of $1.2 per cubic metre of wastewater discharged and is payable by all water consumers discharging wastewater into the public sewerage system. Some 30 trades discharging at heavier pollutant level are required to pay additionally the trade effluent surcharge which is calculated according to the quantity and pollutant level of the wastewater discharged. In the 1996-97 financial year, sewage charges totalling $695 million were collected.

Stormwater Drainage and Flood Control

The northern and north-western districts of the New Territories are particularly vulnerable to flooding because of their low-lying topography and the effects of urbanisation. The department continued in 1997 to implement major schemes aimed at alleviating flooding in these areas. Projects valued at some $6 billion were at various stages of planning, design and construction.

  In the North-Western New Territories, construction work on improvement of some 10 kilometres of the lower reaches of the Kam Tin River and the Shan Pui River in Yuen Long will be completed in 1998. Design work was in progress to build a further 24 kilometres of drainage channels in Kam Tin, Ngau Tam Mei and San Tin.

  In the Northern New Territories, Stage I of the Shenzhen River Regulation Project was completed ahead of schedule in April 1997. The construction of Stage II Works started in November 1996 and was scheduled for completion by end-2000. Working jointly with the Shenzhen Municipal Government, preparation for Stage III of the project was under way. The training of eight kilometres of the Indus and Beas Rivers in the Northern New Territories was under design. On completion, these river training works will provide a high flood protection level to the communities along the rivers.

  As an associated measure, 15 floodwater pumping schemes were built and put into operation to prevent low-lying villages in the New Territories from flooding. The construction of four more floodwater pumping schemes for San Tin, Chau Tau, Sha Po and Tsung Pak Long and Tai Tau Leng were in progress. Another eight schemes were at various stages of planning and design.


      To alleviate drainage problems in the old areas of West Kowloon, a comprehensive plan to upgrade the stormwater drainage system in these areas at a cost of over $2.5 billion was drawn up. Detailed design for the first package of works was nearing completion for construction to commence in early 1998 while the construction of Stage II works and the detailed design of Stage III works are scheduled to start in 1999.

      The department was also commissioning seven Drainage Master Plan Studies to cover all flood-prone areas in Hong Kong. The studies would review the condition and performance of the existing stormwater drainage system in a comprehensive manner. Both long-term and short-term measures to upgrade the system to cope with current and future development pressures would be devised. The first study began in January 1996 and the rest have been carried out in phases. All studies will be completed by end-1999.

Maintenance of main watercourses passing through private land was a major problem in the past. The department is now empowered under the Land Drainage Ordinance to gain access through private land to carry out drainage works and remove obstructions in main watercourses. In this way, efficient maintenance and enhancement of the capacities of the watercourses can be provided to reduce the frequency and severity of flooding.

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 1997, of which 150 million cubic metres received full biological treatment. This was handled by 137 sewage pumping stations and 77 sewage treatment plants throughout Hong Kong.

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 1997. Some 45 000 clearance exercises were carried out to remove more than 25 000 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, 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 1997 was $1.15 billion. This sum is increasing steadily as more and more sewerage infrastructure is completed and taken over for maintenance.

Geotechnical Engineering

     The Geotechnical Engineering Office (GEO) was established after landslip disasters in the 1970s. The control of geotechnical aspects of construction works and upgrading of sub-standard slopes to reduce landslip risk, continue to be its main




duties in terms of staff deployed. Geotechnical checks were made on 11 686 design proposals during the year.

As part of the implementation of the recommendations of the Slope Safety Review Report endorsed by the Executive Council in February 1995, increased resources were provided to further accelerate the Landslip Preventive Measures (LPM) Programme. During 1997, a total of $550 million was spent on the LPM Programme to increase the annual output of slope upgrading works. LPM works were completed on 110 government slopes and statutory Dangerous Hillside - Orders were recommended for 300 private slopes. Preliminary studies were carried out on 12 000 slopes and detailed geotechnical investigations were completed on 600 slopes.

In 1997, the abnormally prolonged and intense summer rainfall resulted in 547 landslides. The GEO carried out detailed investigations of the more serious incidents, including those at the Ten Thousand Buddha Temple and Kau Wai Keng Village which resulted in two deaths.

During the year, work continued on the 'Systematic Identification and Registration of Slopes in the Territory' (SIRST) project and 'Systematic Identification of Maintenance Responsibility of Slopes' (SIMAR) project. A new computerised Slope Information System is being compiled containing important information on all sizeable man-made slopes and retaining walls in the HKSAR.

The GEO strives for continuous improvement. During the year, a mission statement and a five-year strategic plan to achieve the mission have been developed. The GEO slope safety hotline has been upgraded to provide a 24-hour service to members of the public seeking information on slope maintenance and slope safety. The emergency system for providing professional assistance in landslip incidents has been upgraded through improvements in communications and transport.

The GEO continued the public education campaign on slope maintenance and slope safety warnings by, inter alia, wide distribution of promotional booklets and pamphlets, attending media interviews and public seminars, mounting displays at popular shopping centres and advertising in MTR stations. The landslip warning messages have been amplified by frequent TV broadcasting of announcements of public interest. In April 1997, a slope maintenance audit section was set up to assist maintenance departments to improve their performance in discharging their slope maintenance responsibilities.

The GEO continued to inspect squatter villages to identify dwellings which are especially vulnerable to landslips during heavy rainfall. Up to 1997, 73 800 squatters had been cleared upon the GEO's recommendations 58 000 from urban areas and the others from about 200 of the more vulnerable villages in the mainland New Territories.

  In 1997, the Hong Kong Geological Survey published a memoir on the geology of the north-eastern New Territories, completed a book on the offshore geology of Hong Kong, and digitised four 1:5 000-scale geological maps of the Kowloon area. It also began a detailed investigation of the sub-surface geology of the area around Tung Chung New Town, assisted with several major landslide investigations, and responded to 297 requests for advice on geological matters.

The GEO carries out engineering geological research. Studies of the volcanic rocks in the Aberdeen and Chai Wan areas were completed in 1997, together with trials of

      Hong Kong's magnificent deep-water harbour is one of the world's busiest and a scene of constant movement. Vessels of all shapes and sizes ply the waters day and night, including ferries to the outlying islands, the world- renowned Star Ferry, and the most modern high- speed catamarans sailing to Macau and up the Pearl River. New piers for ferries to the

outlying islands have been built (above) and work on the Airport Railway terminus on reclaimed land at Central is continuing as part of the Airport Core Programme.



Workmen lower a road section into place (left) as another stunning Hong Kong landmark takes shape. The Ting Kau Bridge forms part of a new road network to the Lantau Link and beyond to Yuen Long. The cable-stayed bridge links Tsing Yi Island to north-west Kowloon near Sham Tseng and is due for completion in mid-1998.

;' -

The 12.5-kilometre North Lantau Expressway,

which was opened to traffic in May, provides access to Tung Chung New Town on Lantau Island, and the new airport site at Chek Lap Kok. The toll plaza for the Tsing Ma Control Area is in the background,

as well as the towers of the cable-stayed Kap Shui Mun Bridge (below). The Tsing Ma Bridge, the Kap Shui Mun Bridge and the Ma Wan Viaduct together form the Lantau Link, which connects the mainland of Hong Kong to Lantau Island.


non-destructive engineering geophysical techniques for site characterisation. Research into the nature and occurrence of landslides on natural terrain was also carried out, and an inventory of such landslides was completed and made available for public reference.

      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 30 000 users during 1997.

      The GEO manages the Public Works Central Laboratory at Kowloon Bay and six Public Works Regional Laboratories in various parts of Hong Kong. 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 296 tests were carried out in 1997.

The GEO provides ground investigation services for government projects. In 1997, major ground investigations were carried out for the proposed Route 16 from West Kowloon to Sha Tin, Tseung Kwan O Development, South Cheung Chau disposal area and water supply to Tan Kwai Tsuen North, Yuen Long. Many ground investigations were completed for the accelerated LPM Programme.

In 1997, the GEO provided geotechnical advisory services to government departments on a wide range of projects including road improvement works, such as the Tsing Yi North Coastal Road project, construction of embankments on soft clay for the Shenzhen River Regulatory Works, drainage improvement works in Yuen Long, and site formation and slope works for various other projects.

Fill Supply and Mud Disposal

The Fill Management Committee (FMC), formed in 1989, is responsible for identifying, investigating and managing fill resources and marine disposal areas required for developments in the HKSAR. Technical and administrative support for the FMC is provided by the FMC Secretariat, which is housed in the GEO of the Civil Engineering Department (CED).

      From 1990 to 1997, about 260 million cubic metres of marine fill (15 per cent from nearby regions in China) and 160 million cubic metres of land-based fill were used for reclamation projects. It is expected that a further 400 million cubic metres of fill will be required to meet the need for land for housing and infrastructure developments in Hong Kong over the next 10 years.

The CED managed the mud disposal facilities. During the year, about 12 million cubic metres of uncontaminated mud generated from various projects were disposed of in open sea floor disposal grounds and in exhausted marine sand borrow pits; about 13 million cubic metres of contaminated mud were placed in the purpose- dredged seabed pits at East Sha Chau. An empty marine sand borrow pit in East Sha Chau for contained disposal of contaminated mud came into operation in late-1997. The Public Filling Sub-Committee of the FMC co-ordinated the public filling activities for beneficial use of construction and demolition debris. During the year, about 4.4 million cubic metres of pubic fill were used in reclamations.

In connection with the management of Hong Kong's fill resources and mud disposal capacity, the CED, on behalf of the FMC, continued to undertake a series of geotechnical, 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 may affect the flow of water, sediment transport and wave activity in the harbour. To minimise any adverse effects, 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 models are used for reclamation layout planning, design of marine structures, waterway studies and assessment of future maintenance dredging requirements. The models comprise computer-based mathematical models and a large physical model housed in the Harbour Hydraulics Laboratory at Tuen Mun.

To meet the requirements for comprehensive assessments of impact on the harbour arising from the large reclamation projects being planned, the Civil Engineering Department is enhancing the physical and mathematical models to improve their predictive capacity. Enhancement of the physical model has been completed. Upgrading of the mathematical models began at the end of 1996 and was completed at the end of 1997.

Water Supplies

Water from Guangdong

 Guangdong rivers are Hong Kong's major source of water, and will meet all future increases in demand. This arrangement dates from 1960, when a scheme was formulated for receiving a piped supply of 22.7 million cubic metres a year. The supply from Guangdong stipulated under the agreements was increased to 750 million cubic metres year in 1997. This will continue to increase in stages until the present designed maximum capacity of the supply system of 1.1 billion cubic metres per annum is reached.

Water Storage and Consumption

 Full supply was maintained throughout the year. At the end of 1997, 485 million cubic metres of water were in storage, compared with 477 million cubic metres at the end of 1996. Hong Kong's two largest reservoirs, High Island and Plover Cove held 430 million cubic metres. A particularly high rainfall of 3 346 millimetres - 51 per cent higher than the annual average of 2 214 millimetres - was recorded in 1997.

A peak daily consumption of 2.77 million cubic metres was recorded on May 14, compared with the 1996 peak of 2.82 million cubic metres. The average daily consumption throughout the year was 2.5 million cubic metres, a decrease of 1.3 per cent compared with the 1996 average of 2.54 million cubic metres. The consumption of potable water totalled 913 million cubic metres, compared with 928 million cubic metres in 1996. In addition, 198 million cubic metres of sea water were supplied for flushing, compared with 185 million cubic metres in 1996.

Water Works

Construction work for the two major treatment works at Tai Po and Ngau Tam Mei and for the additional service reservoirs, pumping stations and water supply networks in Tai Po, Tseung Kwan O and Tuen Mun was in progress. In addition, the major


renovation work of the sea water supply system for Central Kowloon, Central and Western areas on Hong Kong Island continued. 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 and the north-eastern and north-western New Territories.

Detailed design of Sham Tseng Treatment Works Stage II was completed and construction work commenced. Other major design work mainly concentrated on the provision of additional service reservoirs, pumping stations and water supply networks in Kowloon East, West Kowloon Reclamation, Central and Wan Chai Reclamations, Pok Fu Lam, Yau Tong and Tuen Mun.

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.

Water Accounts and Customer Relations

The number of consumer accounts continued to rise at a rate of about 2 per cent per annum and the consumer account base expanded to approximately 2.18 million accounts at the end of 1997. The Sewage Services Ordinance came into effect on April 1, 1995. For administrative convenience, sewage charges and water charges are combined into a 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 318 000, or about 14.6 per cent of all consumers. The Payment-by-Phone service was also well received and about 10.4 per cent of the total payments received were using this service at the end of 1997.

     In August 1997, the Water Supplies Department participated in a one-stop consumer registration service introduced by the Hong Kong Housing Authority. This lets a new tenant of a housing estate apply for utility services such as water, electricity, gas, and telephone by signing a Form of Consent to authorise the Housing Authority to release his personal particulars through e-mail to the utilities for processing his application. The department also announced in July its achievements against performance targets for the past year which showed improvements over those of the previous year in most areas. Most achievement rates were close to, or reached, 100 per cent. New enhanced performance targets were also publicised.


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 a frequency of 50Hz alternating current while the voltage is 220 volts single-phase and 380 volts three- phase.




  The two supply companies are investor-owned and do not operate on a franchise basis. The government monitors their performance through mutually-agreed Scheme of Control Agreements. Current agreements with CLP and HEC came into effect on October 1, 1993 and January 1, 1994, respectively. Both will last for 15 years and interim reviews will be carried out in 1998 and 2003. The agreements require each company to seek the government's approval 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 1997, total installed capacity at the Lamma Power Station was 3 305MW.

  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 Black Point (1 250MW), Castle Peak (4 168MW) and Penny's Bay (300MW) Power Stations, with the total installed capacity being 5 718MW. Tsing Yi 'A' and 'B' power stations (1 520MW) as well as seven gas turbine units (442MW) at Tsing Yi and Castle Peak were decommissioned in stages over 1994, 1995 and 1997.

  The government has approved CLP's installation of four more 312MW generators in the new power station at Black Point, Tuen Mun. Two are planned to be commissioned in 1998 and 1999. The remaining two units will be commissioned between 2003 and 2006 subject to a review in 1999. 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.

  The CLP and HEC transmission systems are interconnected by a cross-harbour link. 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, has a capacity of 720 MVA.

  CLP's system is also interconnected with that of the Guangdong Electric Power Holding Company (formerly named the Guangdong General Power Company) of China and electricity is exported to Guangdong Province. Such sales are made from existing reserve generating capacity and are governed by an agreement with the government, signed in March 1992, under which CLP's consumers receive priority of supply and 80 per cent of the profit from the sales.

  CLP has a contract with the China Merchants Steam Navigation Company Limited for the supply of electricity, for 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 between Guangdong and Hong Kong.


      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 build 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.

Through its affiliated company, the Hong Kong Pumped Storage Development Company Limited, CLP has bought the right to use 50 per cent of the capacity of the Guangzhou Pumped Storage Power Station, at Conghua. The total installed capacity of the current phase is 1 200 MW. Off-peak electricity from the CAPCO's system 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, with its subsidiary regulations, is the main enabling legislation on electricity safety. It aims to set out the legal framework encompassing all the areas within which the concerned legislation shall apply, including the registration of electrical workers and contractors, and the safety standards and requirements for electricity supply, electrical wiring and products.

      To be eligible for electrical worker registration under the Ordinance, applicants must possess the necessary experience and qualifications. The Vocational Training Council, Hong Kong Examinations Authority, University of Hong Kong and Hong Kong Polytechnic University regularly organise trade tests and examinations for applicants to acquire the necessary qualifications for registration. As at December 1997, more than 8 200 electrical contractors and 53 000 workers held valid registration.

      To ensure electrical safety, fixed electrical installations in certain specified types of premises are required to be inspected, tested and certified periodically. Moreover, regulation to ensure the supply of safe plugs and adapters came into effect in March 1995. More comprehensive legislation, which provides statutory control over the safety of all electrical products designed for household use and supplied in Hong Kong will be put into operation in May 1998.

In 1997, to enforce the Electricity Ordinance, the government conducted 5 460 site inspections to check the safety standards of electrical installations and electrical product supply outlets, and 53 prosecutions were raised against violations.

The upgrading of electricity supply voltage from 200/346 volts to 220/380 volts has been carried out in two phases. Phase 1, covering installations inside government buildings, started in 1990 and was completed in 1992. Phase 2, covering remaining installations in buildings managed by the Housing Authority and those in the private sector, began in 1993 and was completed in 1997.


     Gas is widely used throughout Hong Kong 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 1997, Towngas accounted for 74 per cent of the total fuel gas sold in energy terms, and LPG for 26 per cent.

  Towngas is manufactured in plants at Tai Po and Ma Tau Kok, both using naphtha as a feedstock. They 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 1.17 million customers.

  The mains network extends throughout Hong Kong via an 111.7-kilometre high- pressure pipeline and some 2 095 kilometres of distribution mains. A further 27 kilometres of high-pressure pipeline was completed in mid-1997 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 790 000 customers. About 59 per cent of total sales is supplied in cylinders by 524 distributors operating 765 cylinder wagons. The government aims to provide designated overnight parking sites for these cylinder wagons. The first two, at Tuen Mun and Kwai Tsing, have begun operations and a third site at Pok Fu Lam is scheduled to open in mid-1998. 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 29 per cent in 1997; and some 89 529 gas water heaters have been upgraded. As a 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 1997, eight gas supply companies, 3 434 gas installers and 454 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.



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 services and measures to achieve more economic use of the limited road capacity.

      The Third Comprehensive Transport Study (CTS-3) was commissioned in August 1997 to formulate transport strategy and policy for the first two decades of the next century. Upon completion in early 1999, the study will provide recommendations for an integrated, up-to-date transport strategy and a plan for the development and provision of transport infrastructure and facilities up to 2011. It will also provide a broad indication of the longer-term transport demands and transport issues up to 2016.

       Since the announcement of the Railway Development Strategy in December 1994, the government has pressed ahead with those projects recommended for priority implementation. The Kowloon-Canton Railway Corporation (KCRC) and the Mass Transit Railway Corporation (MTRC) will respectively build and operate the West Rail (WR), from the north-western New Territories to West Kowloon, and the extension of the Mass Transit Railway to the Tseung Kwan O New Town. The two corporations are proceeding with detailed studies for the two projects, with a view to finalising agreements for government consideration in 1998. In December 1997, the government decided that the KCRC should be invited to build and operate a third project the Ma On Shan to Tai Wai rail link plus the extension of the Kowloon- Canton Railway to Tsim Sha Tsui - and invited the corporation to submit its proposals in mid-1998. The three projects will cost a total of $110 billion and will be completed between 2002 and 2004.

      A total of $25 billion will be spent on new roads up to 2002. Projects include construction of Route 16 between Sha Tin and West Kowloon; grade-separated interchanges at the junction of Pok Fu Lam Road and Sassoon Road and at Tsing Yi North Coastal Road; and improvements to Fo Tan Road, the Tolo Highway between Ma Liu Shui Interchange and the Island House Interchange and to the Island Eastern Corridor between North Point Interchange and Sai Wan Ho.

      Major transport links with the new airport at Chek Lap Kok were opened in 1997. These included the Tsing Ma Control Area - a 17-kilometre highway system with four bridges, a tunnel and expressways - and the third cross-harbour tunnel, the Western Harbour Crossing. Good progress is being made on the construction of




Route 3 (Country Park Section) and the Ting Kau Bridge, which will be opened by mid-1998.

To ease traffic congestion and to give priority to public transport, the government has commissioned a consultancy study to explore the feasibility of introducing cross- district bus-only lanes. The first trial scheme for a bus-only lane from Aberdeen to Wan Chai was launched in August 1997. A trial park-and-ride scheme was launched in Sheung Shui in December.

Legislation to improve the safety of school transport has also been implemented. The government will continue to monitor and review the effectiveness of drink- driving legislation and seat-belt legislation.

Good progress has been made in providing more parking spaces for private cars, goods vehicles and container vehicles through various measures including the use of short-term tenancy sites. In the long term, suitable sites will be identified for the incorporation of multi-storey vehicle parking into other development projects.

The expansion of public bus services has continued. New franchises for the New Lantao Bus Company (1973) Limited and Kowloon Motor Bus Company (1933) Limited (KMB) came into effect on April 1, 1997, and September 1, 1997, respectively.

New franchises for Citybus Limited and Long Win Bus Company Limited to operate 25 public bus services to North Lantau and the new airport came into effect on June 1, 1997. Five of these routes are in operation and the remaining ones will begin services when the new airport opens.


On September 1, 1997, the Octopus a 'smart' card that need not make contact in order to operate was introduced as a new ticketing system for passengers using the MTR, KCR, Light Rail, cross-harbour routes of KMB and Citybus, and certain outlying islands and new town routes run by Hongkong & Yaumati Ferry Company Limited (HYF).

The Administrative Framework

The Transport Bureau 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 Chief Executive in Council on major transport policies and issues. The committee has 16 appointed members, including the chairman and three government officials, and is supported by a Transport Complaints Unit, which received 12 681 complaint cases on traffic and transport matters in 1997. 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. Responsibilities cover transport planning, road traffic management, government road tunnels, car-parks and metered parking spaces, and the regulation of internal road 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 Hong Kong 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 on buses, disqualifications under the Driving Offence Points System, and breaches of vehicle safety regulations, government tunnel regulations and Tsing Ma Control Area regulations. In 1997, the section prosecuted 52 cases in respect of buses, 5 959 cases for which disqualification was sought under the Driving Offence Points System, and 1 826 cases in respect of breaches of tunnel, Tsing Ma Control Area and other regulations.

      A Transport Tribunal, set up under the Road Traffic Ordinance, and with a chairman and members appointed from among the public, provides 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 the designation of car-testing centres.

      The Transport Department also operates an Emergency Transport Co-ordination Centre which provides a focal point for liaison with public transport operators on traffic and transport arrangements during serious traffic and transport disruptions, rainstorms and typhoons. The centre undertook 12 operations in 1997.

      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 and monitoring their construction.


The Third Comprehensive Transport Study began in August 1997, for completion in about 19 months. It will help formulate an integrated transport strategy for Hong Kong up to 2016.

       A Feasibility Study on Electronic Road Pricing (ERP) commenced in March 1997. The 27-month study will examine the need and the practicability of implementing an ERP system to improve the mobility of people and goods in Hong Kong.

Cross-Boundary Traffic

      Sha Tau Kok, Man Kam To and Lok Ma Chau are the three road crossing points between Hong Kong and the Mainland of China and together can handle about 40 000 vehicles per day. The Lok Ma Chau crossing started 24-hour operations for freight traffic on November 3, 1994. The Sha Tau Kok and Man Kam To crossings open daily at 7 am and close at 6 pm and 10 pm, respectively. For passenger traffic, the crossings open daily at 7 am; the Sha Tau Kok and Man Kam To crossings close at 8 pm and the Lok Ma Chau crossing closes at 9 pm.

      Cross-boundary vehicular traffic increased by about 7 per cent during the year, compared with 1996. The increase was registered mainly at Lok Ma Chau. Average daily vehicular traffic at the three crossing points in 1997 was about 1 900 at Sha Tau Kok; 8 400 at Man Kam To; and 15 700 at Lok Ma Chau. Goods vehicles accounted for 90 per cent of the traffic, reflecting the rapid growth in trade and industrial links with the Mainland. At the end of the year, 57 companies operated 128 tourist coach services across the border. Planning and design work is being carried out for improvements to Lok Ma Chau crossing. These will include the completing by late- 1999 of 10 extra pairs of Immigration/Customs kiosks for processing vehicles, plus additional coach lay-bys and extension of the Control Point Building for 2001/2002.




  In March 1997, a shuttle bus service between the Lok Ma Chau Public Transport Interchange and Huanggang was introduced and the average daily passenger flow at Lok Ma Chau crossing increased from 9 000 to 14 000. At the Man Kam To and Sha Tau Kok crossings, the daily passenger flows were 2 500 and 3 000, respectively. At the Lo Wu railway crossing, the average daily passenger flow in 1997 reached 154 000.

  The Kowloon-Canton Railway continued to play an important role in carrying freight and passenger traffic between Hong Kong and the Mainland. There were some 900 000 and 600 000 tonnes of inbound and outbound goods respectively in 1997 compared with 1.2 million and 800 000 tonnes in 1996. There are six freight yards, at Kowloon, Ho Man Tin, Mong Kok, Sha Tin, Fo Tan and Lo Wu. Some 55 million rail passengers crossed the boundary at Lo Wu in 1997 compared with 48 million the previous year.

  Ferry services between Hong Kong and the Mainland carried 7.0 million passengers in 1997, the same as in 1996. At year's end, seven companies offered a choice of 28


Road Network

Hong Kong's roads have one of the highest vehicle densities in the world. At the end of 1997, there were 492 539 licensed vehicles and about 1 831 kilometres of roads - 421 on Hong Kong Island, 425 in Kowloon and 985 in the New Territories, representing 269 vehicles per kilometre of road. This high vehicle density, the difficult terrain and a dense building development pose constant challenges to transport planning, road construction and maintenance. There are 10 major road tunnels, 912 flyovers and bridges, 507 footbridges and 315 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 35 road projects are under construction and another 50 are being planned.

  The department's budget for the financial year ending March 1998 totalled $5.27 billion $4.4 billion for major highway construction, and $870 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 the 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 was completed in 1997. It is a dual carriageway on the new reclamation in Belcher Bay.

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 early 1998.

The Lung Cheung Road and Ching Cheung Road Improvements started in July 1994 for completion in early 1998. 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-boundary 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.

The construction of the Ting Kau Bridge and the Approach Viaduct started in December 1993 for completion in mid-1998. Lying between the Tai Lam Tunnel and Tsing Yi sections of Route 3, the roads will connect the western New Territories via Tuen Mun Road to the Lantau Link, and the new airport at Chek Lap Kok.

New Airport Access

Work on the major highway projects related to the new airport at Chek Lap Kok and developments along the north-western shore of Lantau was completed and opened to traffic during the year. The projects include the Western Harbour Crossing, the West Kowloon Highway, the Tsing Kwai Highway, the Rambler Channel Bridge, the Cheung Tsing Tunnel, the Lantau Link and the North Lantau Highway.




  The Airport Core Programme includes a rail link which will provide a fast, efficient service to the new airport and a domestic service to Tung Chung New Town. The new line will help to relieve existing congestion on the Nathan Road Corridor of the Mass Transit Railway and it will also serve new developments on the West Kowloon Reclamation.

Environmental Impact of Road Construction

The environmental impact of new road projects is carefully examined at the planning stage. Where practical, measures such as landscaping, artificial contouring of surrounding hillsides and the installation of noise barriers are considered. 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 through other means.

Road Opening Works

Besides serving as carriageways for vehicles and pedestrians, 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. There were about 140 new road openings on each day in 1997. 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 was developed in 1997 to further improve co-ordination and minimise disturbance to road users.



The six government-owned tunnels Lion Rock, Aberdeen, Airport, Shing Mun, Tseung Kwan O and Cheung Tsing are managed and operated by private companies under management contracts. 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 97 000 vehicles daily. The toll was $6 in 1997.

  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 1997. 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 55 000 vehicles daily in 1997.

  The Shing Mun Tunnels between Sha Tin and Tsuen Wan were opened in 1990 and measure 2.6 kilometres. An average of 55 000 vehicles a day paid $5 each to use them in 1997.


     The 900-metre Tseung Kwan O Tunnel, opened in 1990, links Kowloon and Tseung Kwan O New Town. It was used by 48 000 vehicles daily in 1997. The toll was $3.

     The 1.6-kilometre, toll-free Cheung Tsing Tunnel opened in 1997 and links Lantau Island with West Kowloon and the North-West New -Territories. It was used by about 6 000 vehicles daily.

     The Cross-Harbour Tunnel, the Eastern Harbour Crossing, the Tate's Cairn Tunnel and the Western Harbour Crossing were built by the private sector under 'Build, Operate and Transfer' franchises.

     The 1.9-kilometre Cross-Harbour Tunnel connects Causeway Bay on Hong Kong Island and Hung Hom in Kowloon. Opened in 1972, it was used by a daily average of 123 000 vehicles in 1997, making it one of the world's busiest four-lane road tunnels. The tolls, which include a government passage tax, varied from $4 to $30 per vehicle.

     The Eastern Harbour Crossing is Hong Kong's second cross-harbour road tunnel. It was opened in 1989 and links Quarry Bay on Hong Kong Island and Cha Kwo Ling in Kowloon. A daily average of 86 000 vehicles used the two-kilometre tunnel in 1997. 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 Hong Kong's longest road tunnel and was used by an average of 71 000 vehicles daily in 1997, paying $8 to $20 each.

     The Western Harbour Crossing is the first six-lane road tunnel in Hong Kong. Opened in April 1997, it links Sai Ying Pun on Hong Kong Island and the West Kowloon Reclamation near Yau Ma Tei in Kowloon. Its capacity of 180 000 vehicles per day is about 50 per cent higher than that of the other two cross-harbour road tunnels. It was used by an average of 22 000 vehicles daily in 1997. Tolls ranged from $15 to $95.

An automatic toll collection system was installed at the Cross-Harbour Tunnel and Aberdeen Tunnel in August 1993, the Lion Rock Tunnel in August 1994, the Eastern Harbour Crossing in September 1995, the Tate's Cairn Tunnel in May 1996, the Western Harbour Crossing in April 1997, and the Shing Mun Tunnels and Tseung Kwan O Tunnel in October 1997, 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, there were 1 377 signalised junctions, of which 994 were under the control of Area Traffic Control (ATC) system. By the end of 1997, 308 signalised junctions on Hong Kong Island were under the ATC system and 40 closed circuit television (CCTV) cameras were in use for traffic surveillance. There were 509 signalised junctions under the control of Kowloon ATC system and 60 CCTV cameras were in use for traffic surveillance in Kowloon. In the New Territories, the ATC and CCTV systems for Tsuen Wan, Kwai Tsing and Sha Tin




controlled 177 signalised junctions and monitored traffic conditions through 22 CCTV cameras.

  Works on the Sha Tin ATC system continue and, upon completion in early 1998, will cover 83 junctions. A related CCTV system with 19 cameras will be completed in 1999. Plans to expand the ATC and CCTV systems to other new towns are continuing.

In addition to the 19 CCTV cameras on Tuen Mun Road, three CCTV cameras were commissioned for the West Kowloon Highway in early 1997. Works to add eight CCTV cameras for the North Lantau Highway are also being carried out and scheduled for completion in late 1998. Similar CCTV cameras are being planned for Yuen Long Highway, part of Tolo Highway and major transport interchanges leading to the new airport.

  There are 616 sets of roadside emergency telephones installed along expressways and flyovers 81 sets on Hong Kong Island, 112 in Kowloon, and 423 in the New Territories. A renewal programme is under way to improve operational effectiveness. All future expressways will be equipped with emergency telephones.

Tsing Ma Control Area

The Tsing Ma Control Area (TMCA) has been designated to cover a key section of the highway route to Hong Kong's new international airport at Chek Lap Kok to ensure safe and efficient traffic operations. It comprises a 17-kilometre expressway network stretching from the Mei Foo Interchange at the start of the Tsing Kwai Highway to the Yam O Interchange on the North Lantau Highway. This includes the Tsing Kwai Highway, the Rambler Channel Bridge, the Cheung Tsing Tunnel, the Cheung Tsing Highway, the Lantau Link and the North West Tsing Yi Interchange. Except for the Ting Kau Bridge, all bridges and expressways - including a tunnel were opened to road traffic in May 1997.

  The Control Area is equipped with the most extensive traffic control and surveillance system yet introduced in Hong Kong. The system provides a high degree of automation to regulate traffic flow, to assist in dealing with incidents and to provide useful information to motorists. The TMCA is operated and maintained by a private management contractor - Tsing Ma Management Limited. With a one-way toll collection arrangement, vehicles travelling on the Lantau Link will be charged twice the single journey toll when they leave Lantau Island. The toll ranges from $20 to $80. Adjoining a viewing platform and visitor centre on the Lantau Link, an open- air car park is provided on the Tsing Yi side of the Link with more than 100 parking spaces. Parking fees range from $15 to $50 an hour.


The management and operation of on-street metered parking spaces is contracted out to a private operator. On-street parking is provided where traffic conditions permit. At the end of the year, there were 14 190 parking spaces in Hong Kong, 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.


To improve the efficiency of parking meter operations, a new contract for the supply of electronic parking meters which accept smart cards was awarded in late 1997. Installation of the new meters will start in April 1998.

The government owns 14 multi-storey carparks which provide a total of 8 250 parking spaces. They are operated and managed by two private operators.

Off-street public parking is provided by the Civil Aviation Department at the Hong Kong International Airport, the Housing Department in its housing estates and the Kowloon-Canton Railway Corporation 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 156 000 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 1997.


     By the end of the year, Hong Kong had 492 539 licensed vehicles in all classes, representing an increase of 5.28 per cent over 1996.

      New private car registrations rose 93.31 per cent, from 22 203 in 1996 to 43 054 in 1997. This brought the number of licensed private cars to 314 833, an increase of 7.31 per cent over the past year.

Registered goods vehicles numbered 134 861 by the end of the year, 0.33 per cent more than the 134 419 in 1996. Of these, 91 823 were light goods vehicles, a decrease of 1.16 per cent from 1996.

Vehicle examination is to upgrade vehicle safety through improved design requirements and correct maintenance. The private car inspection scheme is carried out at 23 designated car-testing centres. Compulsory annual inspection applies to all public services vehicles and goods vehicles. Examination of trailers is being implemented to cover all trailers by March 1, 1998.

There were 1 142 226 licensed drivers at the end of 1997, an increase of 4.25 per cent over 1996. The average number of new learner-drivers fell from 4 501 per month in 1996 to 4 369 per month in 1997. To improve services, since June 2, 1997, driving licences valid for 10 years have been issued, instead of the previous limit of one year or three years, to applicants aged 60 or below on the day of application. Those aged above 60 will be issued a driving licence valid for a shorter period.

      Since the introduction of the Driving Offence Points System in August 1984, 52 541 disqualifications have been ordered by the courts and 430 473 notices have been served under the Road Traffic (Driving-offence Points) Ordinance. The figures for 1997 were 5 959 and 53 824 respectively. Over the past five years, 475 047 drivers have incurred penalty points for committing scheduled offences under the system.

A performance pledge scheme for licensing services was introduced in December 1992. The scheme was extended in December 1996 to cover vehicle examination and government tunnel services. An active customer liaison group, with 33 members,



 enabled direct public participation in advising the Transport Department of customer' requirements and in gauging public opinion on services provided.

Road Safety

In 1997, there were 14 776 traffic accidents involving injuries, of which 229 were fatal and 3 154 serious. This was an increase of 2.6 per cent compared with the 14 397 accidents in 1996, of which 252 were fatal and 3 084 serious. In-depth investigations were carried out at 200 traffic accident blackspots to identify common accident causes. Remedial accident prevention measures were recommended at 147 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 analysis and road safety strategy formulation. (Accident statistics are at Appendix 45.)

  Thirty red-light camera systems were installed at signalised road junctions in the territory to deter motorists from disobeying traffic signals. Additional red light camera systems are being planned for 18 road junctions in 1998. Installation works have begun on a speed-enforcement camera trial system on a 15-kilometre section of the Tolo Highway and Fanling Highway to deter speeding activities on major trunk roads. The system will come into operation in late-1998.

The seat-belt legislation has been extended to bus drivers. From July 1, 1997, all new buses must be fitted with seat-belts for the driver's seat. Bus drivers are required to wear seat-belts if fitted. A grace period of five years is granted to buses registered before July 1, 1997.

  Road safety campaigns continue to play an important role in reducing traffic accidents. The major theme in 1997, as in 1996, was 'pedestrian safety'. Radio and television announcements were broadcast throughout the year on pedestrian safety, drink-driving and wearing rear seat-belts. Leaflets on the safe loading of vehicles, airbags, cycling safety and the road crossing code were among other items promoting road safety.

At year's end, 247 student road safety patrol teams of the Road Safety Association had been formed. There were also 1 519 school staff crossing patrols serving in 309 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.

  To improve school bus safety, new measures were introduced in 1997. These included a more eye-catching colour scheme for newly registered school buses and the provision of an escort on large school buses carrying primary and kindergarten pupils.

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. In September 1997, the major public transport operators launched a contactless card system, the Octopus, which uses smart card technology for fare 232 payment.

- - - -

- -- -- -- -- -- -- -- -



Left: The West Kowloon Reclamation is, for the time being, dominated by sweeping lanes and loops of a highway and byways. Development planned for the area will include commercial space and housing for more than 90 000 people. Below: Cars emerge from the Kowloon side of the Western Harbour Tunnel into what for

Hong Kong is unaccustomed - and welcome - space on more than 30 kilometres of multi- lane highway. This will change after the new airport opens and routes through western Kowloon are completed.


Confetti and cameras greeted

the arrival on October 1

of the first of the sleek new

trains for the Airport Express

     rail link (right). The dedicated service will take passengers

on the 34-kilometre journey from the Hong Kong Island Terminus to the new airport in 23 minutes, with stops at Kowloon and Tsing Yi. Departing airline passengers will be able to use special check-in services at the

      Kowloon and Central stations, which will save them time.

Below: The Financial Secretary, Mr Donald Tsang, joins other VIPs at Kowloon Station, Hung Hom, to welcome the first Kowloon-Beijing Through Train Service on May 19. The service provides a direct journey to Beijing and Shanghai.




Right: The new West Kowloon Expressway provides easy access not only to the new airport at Chek Lap Kok, but also to the container terminals at Kwai Chung. Below: A container ship brimming with cargo makes its way slowly into

Hong Kong's busy shipping lanes. In 1997, Hong Kong handled about 14.6 million twenty-foot equivalent units of containers - making it the world's busiest container port for the sixth successive year. Port-related industrial and commercial enterprises are estimated to contribute about 20 per cent of Hong Kong's gross domestic product and the latest

prediction is that port cargo will more than double over the next two decades.



The five rail systems include a heavily-used 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. By the year's end, the railway was carrying more than 2.38 million passengers on an average weekday. It is one of the busiest underground railways in the world. Single journey adult fares ranged from $4 to $13 per trip depending on distances travelled.

Construction of the Airport Railway is progressing and is scheduled for completion on June 21, 1998. It will have a dedicated express service linking the new airport at Chek Lap Kok and Central, with stations at Airport, Tsing Yi, Kowloon and Central (Hong Kong Station); and a domestic service between Lantau Island and Central, with stations at Tung Chung, Tsing Yi, Lai King, Tai Kok Tsui (Olympic Station), Kowloon and Central (Hong Kong Station). The domestic service will interchange with the Tsuen Wan Line of the existing Mass Transit Railway (MTR) system at Lai King Station and with the Island Line at Hong Kong Station, bringing relief to the MTR Nathan Road Corridor.

Kowloon-Canton Railway (East Rail)

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 1997, the railway, with 13 stations, handled 716 000 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 $9.

      In 1997, the KCRC continued efforts to improve 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.

West Rail

In December 1996, the government decided to proceed with the construction of Phase 1 of West Rail, which is a 31-kilometre domestic passenger line linking West Kowloon with Tuen Mun via Tsuen Wan, Kam Tin, Yuen Long and Tin Shui Wai. Phase 1 is expected to be completed to Yuen Long by the end of 2002 and to Tuen Mun the following year.



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 the 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 119 cars, either operating singly or in pairs.

  The LRT provides free transfer from one route to another within the same fare zone and with connecting feeder buses. A new fare structure was introduced in September 1997 following the launch of the smart card Octopus by major public transport companies. The Light Rail Octopus fare structure is distance-based, with adult fares ranging from $3.70 to $5.80.

  Personal Octopus holders who travel frequently on the LRT enjoy frequent-user bonuses ranging from 10 to 28.2 per cent. From September 1997, single-ride ticket fares for adults ranged from $4 to $5.80. At the end of 1997, the LRT and its feeder and auxiliary buses carried an average of 364 000 passengers per day.


 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 about 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 279 200 boardings daily in 1997. Fares were $1.60 for adults and 80 cents for children and senior citizens aged 65 or above.

The company engaged consultancy studies to improve the electrical system of the tram cars and tram tracks, and its motorman training. Recommendations from the studies were being introduced in phases to improve the service.

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 11 500 passengers a day, mostly sightseers and some residents on The Peak. One-way fares for adults and children were $18 and $5 respectively.


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 234 Company Limited (HYF).


The Star Ferry operated 12 vessels across the harbour and carried 89 000 passengers on its three routes daily during the year. Fares ranged from $1.70 to $2.70. Passengers aged 65 and above can enjoy free travel on all Star Ferry services.

      HYF owned 77 vessels and operated 24 ferry routes, including passenger and vehicular services and licensed services. In 1997, the company carried 84 000 passengers and 1300 vehicles daily. Fares ranged from $4.80 to $32. Elderly passengers aged 65 and above can enjoy concessionary fares, set at the same level as children's fares, on all ferry services except the deluxe class.

A further 13 ferry services were operated by eight licensed operators, including the service to Discovery Bay on Lantau Island. These were supplemented by kaitos, local village ferry services, licensed to serve remote coastal settlements. At the end of the year, 87 kaitos were in operation.

Road Passenger Transport

Road passenger transport accounted for two-thirds of all public transport journeys. More than half of public transport journeys made by road were on franchised buses, and the remainder on green minibuses, public light buses, taxis and non-franchised buses.

Franchised Buses

There were significant improvements in the franchised bus service network during the year, made feasible by the opening of the Western Harbour Crossing (WHC), the West Kowloon Highway, the Lantau Link and the North Lantau Highway. Another 53 new bus routes were introduced, with six of them diverted to operate via the WHC, providing direct bus services between the New Territories, West Kowloon and Hong Kong Island. Another four bus routes were introduced to operate to Tung Chung New Town and Chek Lap Kok Temporary Bus Terminus via the Lantau Link and the North Lantau Highway.

The largest operator is the Kowloon Motor Bus Company (1933) Limited (KMB). It runs 312 bus routes in Kowloon and the New Territories; 31 cross-harbour routes jointly with the China Motor Bus Company Limited (CMB); 10 cross-harbour routes with Citybus Limited and 13 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 3 839 registered vehicles, with 2 067 double-decker buses, and 1 494 air-conditioned double-decker and 278 single- decker buses. Of these, 13 were 'super' low-floor single-deck buses with provision for wheelchair passengers.

KMB made 1.05 billion passenger trips and covered 300 million kilometres in 1997. It was granted a franchise up to July 31, 2007. Fares ranged from $1.20 to $23.60 for non air-conditioned services, and from $3 to $34.20 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 the Nathan Road Corridor, KMB operated 25 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 helped keep the MTR passenger flows along Nathan Road at acceptable and safe levels.

 Bus services on Hong Kong Island were provided by CMB and Citybus. During the year, CMB operated 82 routes on Hong Kong Island, 31 cross-harbour routes jointly with KMB and two cross-harbour routes of its own. It was granted a three-year franchise from September 1, 1995.

At the end of 1997, CMB's registered fleet comprised 794 double-deckers and 29 single-deckers, of which 166 double-deckers and 29 single-deckers were air- conditioned. They made 176.4 million passenger trips and travelled 46.3 million kilometres during the year. Fares ranged from $2.40 to $34.20. Concessionary fares are offered to passengers aged 65 and over on all CMB routes, except for airport services.

Citybus operates two bus networks under two franchises. The first franchise, which lasts until June 30, 2006, comprises 67 bus routes on Hong Kong Island. It also runs 10 cross-harbour routes jointly with KMB and two cross-harbour routes of its own. Citybus was granted a second franchise effective from June 1, 1997, to operate a network of 13 franchised routes for North Lantau and the Chek Lap Kok airport. At the end of 1997, five routes were introduced and the other bus routes will be introduced by phases.

At the end of the year, Citybus had a registered fleet of 590, 561 of which were air- conditioned. Of these, six were 'super' low-floor single-deck buses with provision for wheelchair passengers.

 Fares ranged from $2.30 to $34.20. 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 and North Lantau routes. The company's bus services made 148 million passenger trips and travelled 37 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. It runs 13 routes with a registered fleet of 80 vehicles. During the year, NLB made 5.92 million passenger trips and travelled 3.64 million kilometres.

 The Long Win Bus Co Ltd is the fifth and newest franchised bus company in Hong Kong. In October 1996, it was granted a franchise effective from June 1, 1997, to operate a network of 12 bus routes for North Lantau and the new airport at Chek Lap Kok. The first route, E31 which plies between Tung Chung Town Centre and Tsuen Wan, commenced operation on June 1, 1997. Other bus routes will be introduced in phases to cater for the passenger demand for Tung Chung and the new airport at Chek Lap Kok.

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 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. The bus-only lanes between


Aberdeen and Wan Chai are being implemented in two stages from August 1997 to mid-1998. These inter-district bus-only lanes are expected to shorten bus journey times, make services more reliable and attract more commuters to use buses instead of private cars, in turn alleviating traffic congestion.


Hong Kong's minibuses are licensed to carry a maximum of 16 seated passengers. There were 6 742 minibuses in 1997. Of these, 4 350 were public light buses (PLB), and 2 392 private light buses. Private light buses are authorised to carry only 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 2 107 of these operating 287 routes and carrying 970 115 passengers a day in 1997.

Red minibuses operate without specified schedules. They are not required to operate on fixed routes or timetables and are free to set fares. In 1997, 2 243 red minibuses carried 805 489 passengers daily.

In mid-1997, the Transport Advisory Committee completed a review on PLB policy with particular regard to the role, regulation and control of green and red minibuses. In line with government policy to convert red minibuses to green, more new scheduled routes will be identified. During the year, a green minibus operators selection exercise was conducted and minibus operators were selected to operate a total of 10 routes.


At the end of 1997, there were 15 161 urban taxis (coloured red), 2 707 New Territories taxis (green) and 50 Lantau taxis (blue), carrying a daily average of 1.1 million, 199 000 and 1 252 passengers respectively.

      To meet the increase in demand for Lantau taxi services upon opening of the Lantau Link and population intake in Tung Chung New Town, 10 new Lantau taxi licences were issued in 1997.

      In March 1997, the Transport Advisory Committee re-convened its Working Group on Taxi Policy Review to review the taxi licensing system with the objective of improving the quality of taxi services. During the year, the law was amended to require all taxi drivers to issue fare receipts to passengers on demand by June 1998.

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 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 are introduced mainly to and from housing estates primarily during peak hours, supplementing services provided by the franchised bus operators. At the end of 1997, the 227 residents' bus services made an average of 111 000 passenger journeys per day. During the year, 50 new services were introduced.




Non-franchised bus operators also serve the needs of factory employees, tourists and students on a group-hire basis. At the end of the year, the licensed fleet of non- franchised buses totalled 6 053 vehicles.

Marine Facilities

 The Civil Engineering Department is responsible for planning, design, and construction of public marine facilities including piers, beacons, breakwaters, seawalls, navigation channels and anchorage areas. In 1997, the Civil Engineering Department completed the Sok Kwu Wan pier and Gemini Point pier. It continued with the construction of the Hei Ling Chau typhoon shelter and three public piers in the Sai Kung area, all of which are due to be completed in 1998. It commenced construction of a light beacon at Sha Lo Wan, public piers at Sai Kung and Sam Ka Tsuen, modification to the northern breakwater of China Ferry Terminal and the planning for construction of a sheltered boat anchorage at Tai O. It also planned the reconstruction of five existing piers at Castle Peak, Hei Ling Chau, Pak Shan Wan, Tai Lam Chung and Tung Lung Chau. It completed a preliminary environmental assessment for construction of the Peng Chau typhoon shelter and in early 1998 will complete another such assessment for the Siu Lam typhoon shelter.

The Civil Engineering Department is also responsible for maintaining public marine facilities. It inspects and repairs public marine structures including breakwaters, beacons, piers and seawalls. It also oversees maintenance dredging of navigation channels and anchorage areas.

The Port

The port handles about 90 per cent, by weight, of Hong Kong's trade. In 1997, it remained the world's busiest container port, handling some 14.5 million TEUS (20-foot equivalent units). It also remained one of the busiest in terms of vessel arrivals and departures, as well as cargo and passenger throughput.

  About 233 200 sea-going and river-trade vessels arrived in Hong Kong during the year. These vessels handled more than 169 million tonnes of cargo and around 18 million passengers, most of whom were carried on the world's largest fleet of high- speed ferries.

Container handling, vessel arrivals and departures, and cargo saw growth rates in 1997 of 8 per cent, 6.4 per cent and 7.6 per cent, respectively, compared with 1996. Details of international movements of vessels, passengers and cargo are given at Appendix 43.

Port Administration

The Marine Department administers the port. Its principal function is to ensure safety of navigation and efficiency of shipping activities in Hong Kong waters. 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 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 ports; 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's home page on the Internet, launched in January 1996, provides information on the port and the Hong Kong Shipping Register, on services and facilities provided by the department and various marine department notices. A Hong Kong Shipping Directory providing information on marine services companies based in Hong Kong, and real-time shipping movements in the port are also available on the home page. From September 1, 1997, certain port formalities can also be processed via the Internet.

Vessel Traffic

The Marine Department's Vessel Traffic Centre (VTC) is responsible for ensuring safe and efficient marine traffic flow in Hong Kong waters. All vessels of 300 gross tonnes and above are required to participate in the Vessel Traffic Service (VTS) and must follow VTC directions.

The movements of VTS participating vessels are directly regulated by the VTC through a computer-based integrated radar surveillance system, a database information system and VHF (very high frequency) radio telephone communications. The system was enhanced in 1996 to increase its vessel tracking capability. A new radar station is now under construction in Mirs Bay which, when completed in 1998, will further improve traffic surveillance in that area. Looking ahead, a complete upgrading of the existing VTS system is planned for the early 2000's to cope with anticipated growth in marine traffic 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 ensure safety of navigation and other marine activities, as well as to respond to emergencies. In addition, a local traffic control station at Gemini Point which, together with dedicated patrol launch, monitors and regulates the traffic using the Ma Wan Channel on a 24-hour basis and provides escort services to large vessels during their transit through the area. To further improve the Marine Department's traffic control functions, another local traffic control station, expected to come into operation in 1999, is being established at the Kwai Chung Container Terminal 8.

Educational Seminars and Marine Safety Campaign

Continuing with its initiative in 1996, the Marine Department conducted six educational seminars and two major campaigns on marine safety in 1997. One seminar held in Shenzhen attracted more than 80 participants from various Mainland government departments and shipping companies. These seminars and safety campaigns are aimed at all personnel involved in vessel operations and form a major part of the department's efforts to ensure marine safety within Hong Kong waters. More such activities are planned for 1998.




Pilotage Service

Pilots play an important role by helping shipmasters to navigate safely within Hong Kong waters. Ships of 3 000 gross registered tonnes (GRT) or more and all gas carriers are required to engage a pilot. There are 83 licensed pilots who provide pilotage services through a private company.

The Director of Marine is the authority regulating and monitoring the pilotage service. He achieves this through the assistance of the Pilotage Advisory Committee, the membership of which covers a wide spectrum of port users and shipping interests. A new pilot boarding station (PBS), Ngan Chau PBS, was established at the outer entrance of the East Lamma Channel in December 1996, and ships of 40 000 GRT and over are required to pick up pilots at Ngan Chau PBS. This obligation was extended to ships of 20 000 GRT in December 1997. It is expected all ships under compulsory pilotage will pick up pilots at Ngan Chau PBS by the end of 1998.

Hydrographic Office

The Hydrographic Office has taken over provision to the shipping community of nautical services which were provided by the British Admiralty before the reversion of sovereignty on July 1, 1997. Hong Kong will attend the International Hydrographic Organisation (IHO) conferences as part of the Chinese delegation.

Major re-surveys of the port areas continue and bilingual nautical charts and publications are published for sale to the public. Hydrographic surveys and nautical charts follow the standards set by the IHO.

Dangerous Goods

A Dangerous Goods Information System has been developed to monitor all vessels carrying dangerous goods in Hong Kong waters. This system allows shipping agents to declare dangerous goods manifest via the Internet. In any accident involving ships carrying dangerous goods, rescue parties are able to identify immediately the substances being carried, establish the particular risks and initiate safe remedial actions to minimise the hazards to the people and environment.

Public Cargo Working Areas

On completion of a financial viability study, a working group was set up to develop and to oversee the implementation of the management reform of public cargo working areas. A new management system was established after extensive consultations within the government and with the industry. The first phase of the management reform, i.e. contracting out berthing spaces to a majority of existing operators for three years, was implemented from July 11, 1997. The Marine Department will review the situation, in light of operational experience and in consultation with the industry, before deciding on subsequent phases of reform.

Participation in International Shipping Organisations

International Maritime Organisation

Hong Kong is an associate member of the International Maritime Organisation (IMO) and since July 1, 1997, it is officially known as 'Hong Kong, China' in its participation in IMO activities and other international maritime forums.


      Various international conventions which were extended to Hong Kong before July 1, 1997, continue to apply to Hong Kong after the reversion of sovereignty to China. Since Hong Kong waters have become internal waters of China, administrative procedures for the conventions such as reporting to the IMO, liaison with neighbouring countries and areas that apply only voluntarily to internal waters of a country will be changed. In 1997, Hong Kong representatives attended 23 meetings on various subjects.

      Hong Kong was particularly active on several issues, including measures to control air pollution from ships, contamination by transport of aquatic organisms in ballast water, major revision and interpretation of a chapter on fire prevention within the International Convention for the Safety of Life at Sea, revision of the High Speed Craft Code, safety management systems for ships and bulk carrier safety, which will have long-term effects on Hong Kong registered ships as well as ships owned or managed by Hong Kong companies.

Maritime Search and Rescue

The responsibility of co-ordinating all maritime search and rescue operations within a sea area of 450 000 square kilometres of the South China Sea, as agreed internationally, is undertaken by the Marine Department, whose Maritime Rescue Co-ordination Centre is manned 24 hours a day by professionally-trained staff. The centre is one of the few fully operational shore-based radio stations of the Global Maritime Distress and Safety System. Calling upon resources provided by other government departments, the centre provides an effective and efficient search and rescue service in the region.

During 1997, the centre handled 260 cases of notified vessel emergency, of which 52 developed into search and rescue operations. A total of 178 lives were saved.

Port State Control

As a committee member of the Asia-Pacific Regional Memorandum of Understanding on Port State Control, the Marine Department has the obligation to ensure that foreign merchant ships visiting Hong Kong comply with the provisions of various international safety and environmental protection conventions. To discharge this function, the department's surveyors carry out selective inspections for those ships.

      During 1997, 501 port state control inspections were conducted on foreign merchant ships visiting Hong Kong. This represented about 11 per cent of the total number of ships visiting Hong Kong. About 38.32 per cent had deficiencies which had to be made good before they could leave Hong Kong.

Services in the Port

Mainland and Macau Ferry Services

The number of passengers using the two ferry terminals managed by the Marine Department was 6.9 million in the China Ferry Terminal (CFT) and 11 million in the Macau Ferry Terminal (MFT), representing a decrease of 6.5 per cent and 16.6 per cent compared with last year's figure. Improvements to the terminals such as




widening the northern entrance of the CFT, installing a bunker supply line to most berths at the CFT and decorating the exterior walls of the MFT are in progress.

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 Anchorages. 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

Mooring buoys in the harbour provide places for transfer of cargo between ships and barges. The Marine Department provides and maintains 60 buoys which can be booked through the Vessel Traffic Centre.

  To cope with recent port development, plans are afoot to reorganise the mooring buoys in Kellett Bank and Junk Bay. This project will involve substantial dredging and co-ordination with other port development projects.


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 Marine Department provides refuse collection services for both ocean-going and local vessels. It also scavenges floating refuse in Hong Kong waters with six specialised vessels and 58 hired vessels. Oily and chemical wastes from ships are collected by contractor and delivered to a treatment plant at Tsing Yi Island. Refuse collection and scavenging services are being expanded. When the expansion is completed by early 1999, the department will be able to provide much improved services for collection and scavenging.

  An inter-departmental working group has been formed to give advice and co- ordinate resources to safeguard a clean marine environment.

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 chemical dispersant, one oil skimming boat and an oil storage vessel.


      Each year, the unit co-ordinates a major oil pollution exercise involving oil companies and government departments such as the Government Flying Services and Civil Aid Services. The latest exercise was held in late August 1997 in the East Lamma Channel, the main traffic lane for ships entering into Hong Kong. Delegates from the Shenzhen Harbour Superintendency Administration, the Zhuhai Harbour Superintendency Administration and the Macau Marine Department were invited to participate.

      Regular meetings have been held quarterly with neighbouring Pearl River Delta ports such as Shenzhen, Guangzhou, Zhuhai and Macau. A basic information exchange network has been set up to enable information on a major oil spill occurring in one port to be immediately known to other ports.

Local Craft

The concerted efforts of 14 600 local craft including ferries, barges, cargo working and harbour engineering craft, fishing boats and pleasure vessels provide a variety of efficient and continuous services for the Port of Hong Kong. More than 1 300 lighters and 340 cargo boats offer rapid and customised cargo movement services between ocean-going vessels berthing at anchorages or mooring buoys and cargo working areas ashore. In 1997, 100 of the 780 launches and ferries were operated by three major ferry companies providing scheduled services for ferrying more than 80 million. passengers between urban areas and outlying islands. A fleet of 6 700 fishing and 4 600 pleasure vessels continued to provide important support to the fishing industry and to recreational activities.

Development and Reclamation Projects

The Development Section of the Marine Department co-ordinates all marine works associated with development and reclamation projects within the waters of Hong Kong, such as Tseung Kwan O and the new airport related developments. The safety of marine traffic and operations of port facilities were protected by taking appropriate marine traffic measures.

Government Fleet

The government fleet of 343 powered vessels is highly visible in the port. It includes specialised vessels such as fire boats, police launches, airport rescue launches, pollution control launches, hydrographic survey launches and floating clinics. The government also has launches for harbour patrol, immigration, port health, customs clearance, correctional services, environmental protection and

                                               surveys of international shipping. In July 1997 many of these vessels were involved in the celebratory events held in the harbour to mark re-unification with China.

      The Marine Department designs, procures and maintains all government vessels. It has a rolling 10-year fleet development plan to replace old vessels with new ones. In 1997, 15 vessels costing $66 million were delivered and 29 construction contracts, worth $238 million, awarded to shipbuilders in Hong Kong and overseas. Twelve vessels were procured for the new airport project at Chek Lap Kok.





The Hong Kong Shipping Register

The Hong Kong Shipping Register is administered by the Marine Department. Its supporting legislation embodies international standards for the construction, equipment and manning of ships, and is consistent with Hong Kong'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 register had a total fleet of 484 vessels, amounting to 5.66 million GRT, at the end of 1997.

The department's surveyors or authorised classification societies undertake statutory world-wide surveys of Hong Kong registered vessels to ensure these standards are met. Since established in 1990, the register has earned a reputation for high standards and good quality.


Hong Kong is a centre for employing well-trained seafarers. Some 870 Hong Kong officers and ratings serve on foreign-going ships flying flags of more than 17 different maritime administrations. The Marine Department's Mercantile Marine Office registers Hong Kong seafarers and regulates and supervises their engagement on board ships.

The Marine Department's Seafarers' Certification 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 1995 amendment.

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. Hong Kong shipping companies continue to sponsor cadets and trainees joining the Seamen's Training Centre.

Civil Aviation

In 1997, 28.3 million passengers passed through the terminal at the Hong Kong International Airport, which was 4.1 per cent less than the 29.5 million in 1996.

Some 1.79 million tonnes of cargo, valued at $654.9 billion, were handled, representing an increase of 14.3 per cent and 10 per cent respectively when compared with 1.56 million tonnes and $593.8 billion in 1996. Air transport continues to play an important role in Hong Kong's external trade in that goods carried by air account for about 24 per cent, 33 per cent and 17 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 34 per cent and 25 per cent respectively. An increase of 4.0 per cent in aircraft movements was recorded in 1997, bringing the annual total to 165 154, of which 81 per cent were wide-bodied aircraft.

  Preparations for the opening of the new Hong Kong International Airport (HKIA) at Chek Lap Kok were proceeding at full steam. The Air Traffic Control Complex building was completed in February. Some 20 major items of air traffic control


(ATC) equipment and air navigation facilities including radar sensors, radar data processing and flight data processing systems, navigational aids and communication systems were installed. The system integration and final acceptance testing of these equipment and facilities were completed in October.

The first landing at the new HKIA - by a Government Flying Service Super King Air fixed wing aircraft on February 20, 1997 - represented a major milestone in the Airport Core Programme.


The CAD has maintained close liaison with the civil aviation authorities of the Mainland and Macau in relation to the development of flight procedures and ATC co-ordination arrangements. In June 1997, the three parties signed the 'Memorandum of Understanding (MOU) on Flight Procedures and Air Traffic Matters in the Pearl River Delta Area'. It basically sets out the revised flight procedures in the region upon the opening of the new airport. The MOU was confirmed at the plenary meeting of the Hong Kong and Mainland Cross-Boundary Major Infrastructure Co-ordinating Committee in October.

      It was agreed at the Sino-British Joint Liaison Group (JLG) in June 1997 that from July 1, 1997, aircraft registered in Hong Kong would use 'B', the unified nationality mark of China, as their nationality mark but they could continue to use a group of three letters beginning with the letter 'H' as their registration mark. To allow time for Hong Kong airlines to amend the nationality marks on their aircraft, it was also agreed that there would be a six-month transitional period from July 1 to December 31, 1997, during which either 'B' or 'VR' could be used as the nationality marks for aircraft registered in Hong Kong on or before June 30, 1997. The change of nationality mark to 'B' was completed in early December.

Improvements to the Kai Tak Airport

Continuous improvements in the facilities for the users of the Kai Tak Airport include: two designated smoking lounges with enhanced ventilation system were provided at the airside departures area in February to cater for the need of passengers; 13 colour monitors were installed at the public departures area in the same month to display up-to-the minute information to assist passengers in locating their check-in counters; the VIP Suite was expanded in June, adding an extra of 560 sq.m. to the existing facility to meet increasing demand; and the runway capacity was increased from 30 to 31 movements per hour in October 1997.

      An aircraft noise and flight track monitoring system was installed in June to help evaluate the track keeping performance and noise impact of flights operating to and from the Kai Tak Airport. In the same month, a telephone hotline service was launched for handling aircraft noise complaints and inquiries.

To enhance the security protection and access control of airport restricted areas, an integrated access control system was commissioned in September. Also, a Mobile Command Unit was provided in the same month for use in the event of airport emergencies.

Air Services

The Hong Kong Special Administrative Region (HKSAR) is home to three international airlines. Cathay Pacific Airways (CPA), the largest of the three, concentrated its expansion in 1997 by increasing frequencies on existing routes. To




cope with the increasing scale of operations, CPA acquired one A330-300 and one A340-300. At the end of 1997, its fleet comprised seven B747-200, six B747-300, 19 B747-400, four B777-200, 11 A330-300, six A340-300, four B747-200F and two B747-400F - a total of 59 aircraft.


  Hong Kong Dragon Airlines (Dragonair) commenced scheduled passenger services to Chongqing in April. At the end of 1997, the airline operated scheduled services to 11 cities in the Mainland and eight other destinations in Asia, together with non- scheduled passenger services to other cities in the region, mostly in the Mainland and Japan. In addition, Dragonair continued to participate in the joint services between Bandar Seri Begawan and the HKSAR operated by Royal Brunei Airlines. With the introduction of an additional A330-300 aircraft, the airline now operates seven A320-200 and five A330-300 aircraft.

  AHK Air Hong Kong (AHK) continued to operate scheduled all-cargo services to Manchester, Brussels, Dubai and Osaka, and non-scheduled cargo services to various destinations in Asia using three B747-200 freighters. The airline terminated its scheduled all-cargo services to Chicago at the end of May.

  During the year two new Air Operator's Certificates (AOC) were granted. Helicopters Hong Kong Limited was granted an AOC to operate helicopter service within the territorial boundaries of the HKSAR using a Bell 206. Metrojet Limited was granted an AOC to operate non-scheduled passenger services using an HS125-700B.

  Three new carriers introduced scheduled services to the HKSAR during the year Japan Air System in June, Transaero in July and Kampuchea Airlines (replacing Royal Air Cambodge) in October. As a result of these changes, the number of scheduled airlines serving the HKSAR increased to 67. At the end of the year, these airlines together operated about 1 500 direct round trip services weekly between the HKSAR and over 120 other cities. In addition to these scheduled services, an average of 200 non-scheduled flights were operated each week.

  The HKSAR Government continues to negotiate air services agreements (ASAs) and air services transit agreements (ASTAs). It also continues to hold air services consultations with foreign aviation partners to review and update current bilateral arrangements to cope with changing market circumstances. In 1997, 13 rounds of air services consultations were held with 12 countries. Seven more ASAs were signed with Japan, Myanmar, Thailand, USA, Philippines, Indonesia and the United Kingdom bringing the total of such agreements to 22.

In 1997, the Air Transport Licensing Authority granted two licences: one to Dragonair and the other to AHK. At the end of 1997, CPA held licences to operate scheduled services to 75 cities, Dragonair to 79 cities and AHK to 38 cities.

Aviation Security

 The Aviation Security Ordinance provides comprehensive local legislation to implement aviation security-related conventions and agreements promulgated by the International Civil Aviation Organisation. Aviation security programmes developed by the Government, airport operators, airlines and other concerned parties form the basis for implementing effective aviation security measures in Hong Kong. These measures establish a clear framework for maintaining Hong Kong's aviation security practices to the highest international standards.



It was a fruitful year for the Airport Core Programme (ACP). Following the opening between February and April 1997 of the West Kowloon Expressway, the Kwai Chung Viaduct of Route 3 and the Western Harbour Crossing, the remaining sections of the ACP transport corridor were opened to traffic on May 22. These were the North Lantau Expressway, the Lantau Link, and the Tsing Yi Section of Route 3. Their opening signified the full completion of the transport corridor between Central and Tung Chung.

A ceremony was held on April 27 to mark the official opening of the Lantau Link the largest transport project in the ACP. Over 3 000 guests and performers witnessed the ceremony, around 100 000 members of the public enjoyed the fireworks display on site and another two million people watched it on television. Extensive coverage of the ceremony by local and international media projected Hong Kong as a capable provider of infrastructure development services and promoted the Lantau Link as a landmark and a symbol of Hong Kong's success.

       Eight of the 10 ACP projects are substantially complete. By the end of the year, the ACP was 94 per cent complete overall. The remaining two projects, the new airport and the Airport Railway (AR), are on course to meet their respective target completion dates in April and June 1998. The government has decided to open the new airport for operation on July 6, 1998, after the AR is available to ensure that there will be adequate and efficient transportation support for the new airport.

The overall ACP budget has been reduced by $8.4 billion from $163.7 billion in 1992 to the present estimate of $155.3 billion. This was made possible principally as a result of rigorous cost control efforts on ACP works and the open and transparent system in awarding ACP contracts.

Benefits for the Community

The main benefits for the community, apart from a new world-class airport operating around the clock, come from improved road and rail facilities which help ease congestion in the West Kowloon and Kwai Tsing areas and open up north Lantau. The closure of the existing airport will provide substantial environmental benefits for the 380 000 residents living under its flight path, who will escape the noise of aircraft, and make available much-needed land for residential and commercial developments in Kowloon.

The projects will provide further local job and business opportunities. More than 30 000 jobs have been generated for local workers during the construction period. It




 is estimated that the new airport and the AR alone will create around 10 000 new jobs.

Implementing and Financing the ACP

The ACP is implemented by the government, two statutory bodies wholly owned by the government, and a franchisee. The government is responsible for seven of the 10 projects, covering the two land reclamations, the transport corridor and Tung Chung new town. The Airport Authority (AA) is responsible for providing, developing, operating and maintaining the new airport. The MTR Corporation is responsible for building, financing and operating the AR. The Western Harbour Tunnel Company Limited (WHTC) built and operates the Western Harbour Crossing (WHC) under a 30-year franchise.

  The ACP is projected to cost $155.3 billion in money-of-the-day values. Of this amount, the estimates for the new airport, AR and WHC are $70.2 billion, $34 billion and $6.5 billion respectively, and $44.6 billion for the seven other government ACP projects.

  The government has completed equity injection totalling $36.6 billion and $23.7 billion into the new airport and the AR respectively. It will meet a total of $109.9 billion, or more than 70 per cent of the total ACP budget, in the form of direct funding of government works projects ($49.6 billion) and through equity injection ($60.3 billion) into the AA and the MTR Corporation. The remaining 30 per cent comes from private sector participation in the form of commercial lending for the new airport and the AR, key franchises at the new airport and the WHC franchise.

International Participation

At the end of 1997, a total of 182 major contracts worth about $96.4 billion had been awarded. They included 92 contracts worth $38.4 billion awarded by the government; 58 contracts worth $34.5 billion awarded by the AA; 31 contracts worth $17.8 billion awarded by the MTR Corporation; and one contract worth $5.7 billion awarded by the WHTC.

  The government, AA, MTR Corporation 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 have won ACP contracts, often as part of joint ventures. By the end of 1997, the People's Republic of China had won the largest share by value with 31 per cent (PRC Mainland, 8 per cent and HKSAR, 23 per cent) of the total, followed by Japan (26 per cent), the United Kingdom (16 per cent), the Netherlands (6 per cent), France (5 per cent), Belgium (3 per cent) and New Zealand (3 per cent). Spain, Australia, the United States of America and Germany each had about 2 per cent and the remaining 2 per cent was shared by Italy, South Africa, Austria, Sweden, Norway, Portugal and Denmark.

New Airport

 Good progress continued to be made on the development of the new airport. With its opening set for July 6, 1998, planning for the transfer of the aviation business and overall airport operations from Kai Tak to the new airport is in full swing.

Left and below: The Chief Secretary for Administration, Mrs Anson Chan, joins other VIPs on an open-top double- decker bus at the opening of the six-lane Western Harbour Tunnel on April 30. The tunnel links Central to the West Kowloon Reclamation and an impressive road network serving the new airport at Chek Lap Kok and, eventually, the north-west New Territories.








20 April


     Above: Air Traffic Controllers practice in preparation for their move to the new Hong Kong International Airport at Chek Lap Kok in mid-1998. The Civil Aviation Department has installed an Air Traffic Control Tower Simulator at the new airport which provides a simulated 360-degree view of aircraft activities at the new site. Right and far right: Air Traffic Controllers familiarise themselves with the new equipment. Centre right: The new airport's main terminal stretches off between the runways in an elongated 'Y' shape. Some of the world's most advanced people-moving systems will help shift passengers and their luggage inside the vast building. Top right: The new airport's control tower.





Above: A replica of the wooden and fabric plane Wanda, the first plane to fly

in Hong Kong, takes off from Chek Lap Kok's southern runway for a 10-minute flight on November 15. Wanda, a French-made Farman biplane, made its historic first flight over Sha Tin tidal flats on March 18, 1911. The 1997 version was built and flown by Texan Roger Freeman. Left: This Government Flying Service King Air B-200C was the first plane to touch the tarmac at Chek Lap Kok during a symbolic flight on April 30.



      Construction and fit-out work entered its most intensive phase during the year. All time-critical elements of the airport, from the airfield to the passenger terminal building and ground transportation centre, and from the airport island's road network to the installation of utilities and communications systems, were well in hand.

      The passenger terminal building, with a gross floor area of 516 000 square metres at airport opening, dominated the landscape on Chek Lap Kok. During the year, the work focus moved from the exterior to the interior of the building. The structural and building services work were substantially complete by the year's end, and the installation and integration of the airport's vital and all-embracing communications and security systems were well under way.

      The transportation centre was rapidly taking shape. Incorporating the AR Airport Station, it will act as an integrated transport hub for all surface transport. Access roads to the terminal and the transportation centre were completed in the year.

      Flight trials at the first (or southern) runway began on schedule in February 1997. Trials were then conducted on electronic and visual systems throughout the year. Works for landside infrastructure made good progress.

      Contracts for the second (or northern) runway and for the main building contract for the extension to the passenger terminal north-west concourse were awarded in April and September respectively. The northern runway, which is outside the ACP scope, is scheduled for operation in late 1998.

Government Facilities

Work progressed well on the government facilities, including the air traffic control complex and tower, the Government Flying Service Building, an airmail centre, a police station and three fire stations. Additional government facilities were being developed to support the operation of the northern runway.


The AA continued to plan and control its finances within the parameters of the AA Ordinance and, with regard to first-phase development, in accordance with the provisions of the Financial Support Agreement (FSA) signed with the government in 1995. The FSA has given the AA a package of financial support to faciliate the raising of finance. Following success in securing an $8.2 billion syndicated loan facility which covers a substantial part of its permitted borrowings for the first phase development, in September 1997 the AA signed a $4 billion syndicated revolving loan with 32 international financial institutions for general corporate purposes. These include the financing of the second runway, the north-west concourse and new capital expenditure arising after airport opening. In October, the AA signed a $5 billion Note Issuance Programme arranged by the Hong Kong Monetary Authority.

Commercial Franchises and Real Estate Development

     The AA has awarded the major franchises on aviation support services that are required on airport opening. Works on these franchisees' facilities were moving ahead rapidly. The award of other commercial franchises and licences continued. At the




same time, preliminary planning went on for the long-term development of the airport island's real estate.

Retailing - Hong Kong Sky Mall

The Hong Kong Sky Mall will be a world-class retail complex covering some 30 000 square metres inside the passenger terminal. During 1997, the AA awarded licences for the operation of more than 140 retail and catering outlets, including the world's largest single duty-free liquor and tobacco concession, perfumes and cosmetics, general merchandise, watches and fine jewellery, bookstores, pharmaceuticals and convenience stores. It will have more than two dozen restaurants and food and beverage outlets.

Planning for Airport Opening

The lead-up to full operation of the new airport involves intensive planning by the AA, its contractors, service providers, airlines, commercial tenants and government departments. This major team effort is co-ordinated by the AA within the framework of an integrated programme which aims to achieve a seamless transition from construction, testing and commissioning of facilities and systems to full airport operation. Within this overall programme, the Airport Operational Readiness (AOR) Programme identifies and monitors the progress of those activities critical to the airport's opening, such as staff recruitment and training and the development of operational policies and procedures. It got into top gear during the year.

  The AOR programme also encompasses the conduct of integrated airport trials, scheduled to commence in early 1998, and the mobilisation and relocation of plant, equipment and personnel to the new airport, to be carried out in five phases over a 90-day period before the airport opens.

Transport Corridor

The ACP transport corridor is designed to cater for traffic to the new airport and to relieve congestion on existing roads. It comprises the WHC, West Kowloon Expressway, Kwai Chung and Tsing Yi Sections of Route 3, Lantau Link, and North Lantau Expressway.

  The WHC is a dual three-lane, immersed-tube road tunnel linking the West Kowloon Expressway with the Western District. It is a key part of the ACP transport corridor and helps relieve congestion at the two existing cross-harbour tunnels. The WHC was opened to traffic on April 30.

  The West Kowloon Expressway runs 4.2 kilometres from the WHC to Lai Chi Kok. It serves developments on the West Kowloon Reclamation and helps relieve pressure on existing local roads. It was opened to traffic on February 19.

  The Kwai Chung and Tsing Yi sections of Route 3 link the West Kowloon Expressway to the Lantau Link. They comprise the Kwai Chung Viaduct, Rambler Channel Bridge and the Cheung Ching Tunnel. The Kwai Chung Viaduct and the Tsing Yi section were opened to traffic on February 19 and May 22, respectively.

  The double-deck Lantau Link consists of the Tsing Ma 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, with a main span of almost 1.4 kilometres, is the world's longest suspension bridge carrying both road and rail traffic. The


Lantau Link was opened to traffic on May 22, and has become a new landmark for Hong Kong. The North Lantau Expressway is a 12.5-kilometre highway along the northern coast of Lantau, joining the Lantau Link to Tung Chung new town and the new airport. It also opened to traffic on May 22.

Airport Railway

The AR will provide an efficient passenger link to the new airport, and will also offer much-needed relief to the existing MTR Nathan Road corridor. It will provide two separate services, operating mainly on the same track but with different platforms. The Airport Express service will link Central to the new airport, with stops at Kowloon and Tsing Yi; and the Tung Chung Line domestic service will link Central to Tung Chung, with stops at Kowloon, Tai Kok Tsui (Olympic Station), Lai King and Tsing Yi. Check-in facilities will be available at the Hong Kong and Kowloon stations for the Airport Express service.

In February, the AR Rambler Channel Bridge was structurally completed. In November, breakthrough was achieved at the Central Subway, joining the AR Hong Kong Station with the existing MTR Central Station. Meanwhile, system-wide installation as well as electrical and mechanical works continued in full swing. Delivery of rolling stock commenced with the first Tung Chung Line train and Airport Express train shipped to Hong Kong in January and September respectively. Test runs proceeded immediately afterwards and progressed well. Track-laying and energisation of overhead lines were substantially complete.

Formation of Land

In all, 1 669 hectares of land have been created: 1 248 hectares for the new airport platform; 67 hectares for Phase I of Tung Chung new town; 334 hectares for West Kowloon Reclamation; and 20 hectares for Central Reclamation Phase I.

Tung Chung new town, which is planned to house 320 000 people by 2011, will ultimately occupy two valleys at Tung Chung and Tai Ho at Lantau, plus a coastal strip of reclamation in between. 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 is a mixture of private and public rental and home ownership scheme. Population intake has commenced since July after completion of the Phase I work in the second quarter of 1997.

      The West Kowloon Reclamation will provide housing for more than 100 000 people, commercial space and vital road and rail arteries linking Kowloon with the new airport and north-west New Territories. The reclamation was substantially complete in 1997. Phase I of the Central Reclamation will provide opportunities for the development of Hong Kong's central business district, plus a site for the AR's terminus on Hong Kong Island. The project (excluding works entrusted to the AR Hong Kong Station Contract) was substantially complete by end-1996, ahead of the target completion date of mid-1997.

Project Management and Cost Control

The Airport Development Steering Committee (ADSCOM), which is chaired by the Chief Secretary for Administration and comprises the Financial Secretary and Bureau Secretaries concerned, has the overall responsibility of overseeing, directing and co-




ordinating the ACP. The New Airport Projects Co-ordination Office (NAPCO) serves as the executive arm of the ADSCOM and is responsible for overall project management and co-ordination.

  Management and control systems have been implemented for the ACP, laying down procedures for monitoring and controlling programme, progress and costs. Government works departments, the AA, MTR Corporation and WHTC have full responsibility for their own project-level planning, execution, control and management. NAPCO's role 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. To this end, regular reviews are undertaken by NAPCO to monitor the overall ACP programme and costs.

During the year, eight of the 10 ACP projects were substantially complete ahead of schedule and below budget. Principally as a result of rigorous cost control efforts, the ACP budget has been reduced three times by a total of $8.4 billion, from the original budget of $163.7 billion projected in 1992-93 to the present estimate of $155.3 billion.

Protecting the Environment

Environmental impact assessment studies have been undertaken for each ACP project as an integral part of project planning and design. Suitable mitigation measures such as installation of noise barriers have been adopted where necessary.

  As construction proceeds, extensive environmental monitoring and audit programmes are being conducted to ensure the acceptable performance of individual projects. In addition, environmental project offices have been established to monitor and audit the cumulative effects of the works and to ensure that environmental issues are quickly identified and acted upon.

Safety at Work

The government continued to implement safety measures to encourage proactive safety management on site and to spread a safety culture among all ACP participants. 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 Sub-committee on ACP Construction Safety for review on specific safety actions taken. Lessons learnt from accidents were circulated to all ACP participants.

  ACP contractors with good safety management and safety records received commendations from the Secretary for Works. Accident prevention and safety management training courses were provided by the Occupational Safety and Health Council, Labour Department and Works Bureau for site supervisory staff. In 1997, the industrial accident rate for ACP contracts was 58 reportable accidents per thousand workers per year, compared with the corresponding rate of 220 for the whole construction industry in 1996.

Community and Public Relations

Opening ceremonies were held between February and May to mark the successive completion of the ACP transport corridor's components. Other public events were organised during the period to promote community participation in the ACP. These included the Community Chest Western Harbour Crossing Walk on March 16; a


duathlon on the North Lantau Expressway on April 20; the Tsing Ma Bridge Marathon and 10 Km Race on May 4- the largest single individual participation event in the history of running in Hong Kong with over 5 000 local and overseas runners from 14 countries and the Community Chest Lantau Link Walk

on May 11, with around 80 000 members of the public participating.

The pinnacle of the celebration programme was the Lantau Link Opening Ceremony. About 1 000 guests, including mayors and representatives from overseas cities that have famous bridges and people in Hong Kong who have contributed to the ACP over the years, witnessed the ceremony on the evening of April 27.

The ceremony was built around a theme of community participation, and symbolised the land, sea, and air components - highways, tunnels, reclamations, bridges and the airport of the ACP. The colourful programme featured a 30- minute land parade by 1 100 people representing Hong Kong's 18 districts, a fly-past by helicopters and fixed-wing aircraft, a flotilla of boats representing the marine community, lighting-up of the Link, and a car procession over the Link by members of the international community in Hong Kong as well as beneficiaries of the Community Chest. The grand finale was a 20-minute fireworks and laser display, which included a spectacular 'waterfall' of fireworks cascading from the deck of the Tsing Ma Bridge.

To provide a vantage point for the public to view the Lantau Link, NAPCO has established public facilities at north-west Tsing Yi which include a Viewing Platform and a Visitors Centre. These were well received by the public, attracting more than 639 000 visitors since their opening in May and August, respectively. Meanwhile, the ACP Exhibition Centre at Ting Kau remained popular, with over 437 000 members of the public visiting it in 1997.

Visits to and briefings on the ACP were given to a wide range of local and overseas guests, including members of the Provisional Legislative Council, the two Provisional Municipal Councils and the 18 Provisional District Boards, and the Airport Consultative Committee; overseas government officials and parliamentary members; major business, professional and financial groups; consular representatives; and the news media. In June 1997, an ACP presentation was given at a Minister-Industry Symposium in Canada attended by over 600 government officials and business leaders from 18 member economies of the Asia Pacific Economic Co-operation.

      The AA provided a wide range of programmes to cater for the immense local and international interest in the new airport. In June and July, about 30 000 people visited the new airport through the 'Getting to Know Our New Airport' programme jointly organised by the AA and Home Affairs Department. Press releases and promotional publications such as brochures, leaflets and newsletters were issued throughout the year to publicise ACP works progress. Videos on the ACP, the new airport and the Tsing Ma Bridge were updated and an ACP home page was established, in addition to the AA pages on the Internet.





HONG KONG, the world's busiest container port for six consecutive years, handled about 14.6 million twenty-foot equivalent units (TEUS) of containers in 1997. This represents an increase of some 8.2 per cent over 1996.

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 account for nearly 22 per cent of its workforce. Matching supply of port facilities with demand will, hence, ensure economic growth and optimise employment opportunities for the community. Growth forecasts are, therefore, important. A major review of the Port Cargo Forecasts is carried out every two years to ensure that these forecasts, which span up to 20 years ahead, are as accurate and up-to-date as possible.

The latest Port Cargo Forecasts predicted that by 2016 there would be a demand for Hong Kong to handle 33 million TEUS a year. This is equivalent to handling 63 TEUS every minute of every hour of every day.

To cope with this demand Hong Kong is planning a completely new container port on Lantau Island with twice the capacity of the present port at Kwai Chung. The timing for building the new terminals on Lantau will be determined after the updating of the Port Cargo Forecasts in early 1998.

Building this new port, on a series of artificial islands stretching south-east from north 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. More than 64 per cent of cargo passing through Hong Kong is entrepôt trade with the mainland of China.

Despite the upgrading of mainland China 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 system has worked well to make Hong Kong not only 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 as a port and a centre of demand-led, free market


economics. Its port has grown along with its own economy and that of the mainland of China.

About a decade ago, it became apparent that future growth would be of an order not previously appreciated and that careful co-ordination would be needed so that the development would integrate into overall plans for developing Hong Kong.

       From recognition of this need came the Port Development Board (PDB) established in April 1990. It advises the government on all aspects of port development and is responsible for:

identifying strategic port needs

• monitoring plans to meet these needs


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 they are ready on time.

Current Strategic Planning

The significant investment in upgrading equipment and systems in the eight existing terminals at Kwai Chung over the past two or three years, which is on-going, enabled the port to handle the continuing growth in container throughput. In 1997, one container terminal handled over 1 million TEUS at its single-berth terminal than three times the rate of most other ports in the world.


To meet the growing demand, Hong Kong is building a new container terminal, Container Terminal 9 (CT9), on Tsing Yi Island opposite the existing terminals. Much of 1997 was spent in the detailed planning of the project, which includes overall rationalisation of the berths at Kwai Chung and Tsing Yi. The terminal will consist of four deep-sea berths and two feeder berths to accommodate the interchange of containers between large ocean-going vessels and regional carriers. Construction of CT9 is expected to start in early 1998 with the first berth coming into operation by the middle of 2001.

      In view of the increasing number of river trade vessels operating between the Pearl River Delta and Hong Kong, the first dedicated River Trade Terminal (RTT) is being built at Tuen Mun in the north-west New Territories. This location means that many river trade vessels will be able to avoid the busy Ma Wan Channel. The project is on target and phase one is due to start operating in the latter half of 1998.

      The completion of CT9 and the RTT will enable Hong Kong to maintain its role as the premier port for southern China well into the first decade of the next century. Planning for a new container port at North-East Lantau, with a potential for four




 more terminals and over 20 berths, has also been substantially completed and could rapidly be brought into operation when the demand arises.

In planning the 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. Continuous review of future port requirements is necessary to take into account changing trends in vessel size and trading pattern and flexibility is maintained to ensure that Hong Kong can meet these challenges.

Port Cargo Forecasts

The forecast that container throughput will reach 33 million TEUs by 2016 represents an average growth rate of 4.6 per cent annually. Total cargo to be put through the port in 2016 would be in the order of 398 million tonnes, growing by 4.7 per cent each year. It is also forecast that by 2006 some 68 million tonnes of freight will be carried by river, rising to some 89 million tonnes in 2016.

The PDB's Port Cargo Forecasts are the basis of the government's Port Development Plan and Programme. They are revised every two years to ensure that they are kept as up-to-date as possible. A contract was signed in April 1997 to conduct the major review and 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 the mainland of China, particularly southern China, expected competition from regional and mainland China ports and likely changes in the related shipping and cargo patterns. It is clear that the cargo demand in this part of the world continues to grow. 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 mainland China ports is expected to stimulate growth and facilitate the further development of the economy. That will be good not only for mainland 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. 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.



       HONG KONG is one of the safest cities in the world. The overall crime rate in 1996 was the lowest in the past 15 years and the downward trend continued in 1997. Compared with 1996, the overall crime rate and violent crime rate dropped by 17.3 per cent and 12.4 per cent, respectively, which was the lowest for 24 years.

In the fight against crime, the Police Force is strengthening its intelligence and detection capabilities against economic and serious crimes, such as money laundering and commercial fraud. Liaison with overseas law enforcement agencies has been stepped up to tackle international organised crime. Co-operation with the authorities on the mainland of China has also been enhanced to tackle trans-boundary crimes such as smuggling, illegal immigration and offences involving the use of firearms.

Fight Crime Committee

The Fight Crime Committee, chaired by the Chief Secretary for Administration, provides valuable advice and puts forward recommendations on areas of public concern and on measures to improve the maintenance of law and order.

      In 1997, the committee continued to provide advice on measures to combat crime. Specific subjects considered included the Police Force service quality programme, measures to tackle sexual and related offences, action against the sale and publication of pornographic materials, work on sex education, and control of psychotropic drugs. It also commissioned two research projects, launched a publicity campaign on the prevention of juvenile involvement in crime, and held a Fight Crime Reception in October 1997 to foster community interest in the fight against crime.

      Implementation of the service quality programme is part of the Police Force's on-going commitment to improving the quality of its service and engendering the confidence of the public. The Force aims to foster a customer-based culture and has adopted major development projects on culture change, management, training, communication, customer focus, and standards. The committee firmly agreed that the Force should build upon existing successes while identifying and strengthening areas requiring improvement.

       In view of the increasing concern of sexual and related offences, the committee considered the proposed legislative amendments to increase the maximum penalties on sexual offences, improvement measures to support victims of sexual crimes, and preventive education programmes. It was recommended that the government should adopt various measures to tackle the problem.




  The committee also considered that one contributing factor to the increase of indecent assault cases was the availability of pornographic articles in the market and through the Internet. On its advice, a special three-month campaign against pornographic materials, in particular pornographic video compact discs and computer disks, was jointly conducted by the enforcement agencies the Police, the Customs and Excise Department, and the Television and Entertainment Licensing Authority from March to May 1997.

  As many victims of sexual and related crimes were juveniles or young people, the committee felt that sex education in schools was an important preventive measure. It provided valuable advice on the drawing up of the new sex education guidelines in schools and the provision of training to teachers to teach sex education.

  The committee recommended that action under the Pharmacy and Poisons Ordinance and the Dangerous Drugs Ordinance should continue to be taken against the illegal sale of psychotropic drugs by medical practitioners and pharmacies.

  In 1997, the committee continued to devote much of its attention to the prevention of juvenile involvement in crime. It commissioned two research projects and considered the findings. One was on juvenile gangs and runaway youths by the Chinese University of Hong Kong's research team and another on the effectiveness of rehabilitation programmes for young offenders by the City University of Hong Kong's research team. Based on the recommendations, the government drew up plans to improve youth services and rehabilitation services for young offenders.

  District Fight Crime Committees continued to play an important role. They monitored the crime situation in their districts, and helped foster community awareness of the need to prevent crime and community participation in fighting it. In October 1997, all District Fight Crime Committee members participated in the Fight Crime Reception at the Island Shangri-La Hotel.

Police Force

The Hong Kong Police Force has operational responsibility for crime prevention and detection; the maintenance of law and order; traffic matters and the detection of illegal immigration. At December 31, the Force had 33 514 members, comprising 27 588 disciplined staff and 5 926 civilians. Police operations are reinforced by 5 455 volunteer citizens of the Hong Kong Auxiliary Police Force.

  The Handover Ceremony to mark the transfer of sovereignty in June/July and the Annual Meetings of the World Bank Group/International Monetary Fund (WB/IMF) in September presented unprecedented policing challenges. The Force was wholly responsible for the security of these two major events and the protection of all visiting dignitaries where necessary. Both security operations went smoothly and the favourable law and order situation in Hong Kong was maintained throughout the transition period.

Following the promulgation of the Force Vision and Statement of Common Purposes and Values, a set of strategic directions has been formulated to govern the Force's management and operations over the next five years.

Operationally, it is resolved to maintain the rapid and effective response capability of uniformed Police officers and to enhance its professionalism in preventing and controlling crime. On crime prevention, the Force will involve all sections of the


community in the fight against crime. On crime control, it will focus on improving and enhancing its capability in the access to and use of crime information; the pursuit of criminals and investigation of crime cases; and the procedures for dealing with witnesses and suspects.

These operational priorities will be supported by a series of management initiatives to promote the Force values through: wider use of modern technology; a focus on human resource management; more widespread communication; and better management of resources.

During the year, the Force conducted its first Customer Satisfaction Survey and the second Public Opinion Survey. The customers generally rated the service they received as quite good or very good (72 per cent), with only a few rating the service as quite poor or very poor (5 per cent). In general, the respondents were more than satisfied with the quality of police services with 73 per cent rating overall performance as worthy of praise, down from the 1995 opinion survey result by 5 per cent.

      The overall law and order situation continued to improve. The crime rate of 1 036 cases per 100 000 population in the year was the lowest in the past 24 years.

Handover Ceremony WB/IMF Annual Meetings

A Planning and Implementation Team was set up at Police Headquarters in January to deal with all security matters relating to the Handover Ceremony and WB/IMF Annual Meetings. It was led by an Assistant Commissioner of Police, assisted by seven experienced officers ranging from the rank of Chief Superintendent to Chief Inspector. It worked closely with the main organising bodies of the two events and acted as a link between the Force and other agencies in the development and subsequent implementation of security plans.

      To prepare for this, Police officers were sent abroad between 1994 and 1997 to observe major international conferences and meetings. These included the WB/IMF Annual Meetings in Madrid and Washington, DC, the Olympic Games in Atlanta, the Commonwealth Heads of Government Meeting in New Zealand and the World Trade Organisation Meeting in Singapore. Officers also attended overseas training courses to enhance their skills in conducting large-scale security operations and crowd control events.

       For the Handover Ceremony, 2 000 officers were deployed at the Extension to the Hong Kong Convention and Exhibition Centre (HKCEC) and the East Tamar site where the official ceremonies were held. The Police Tactical Unit, VIP Protection Unit, Force Search Cadre, Force Escort Group, Special Duties Unit, Explosive Ordnance Disposal Unit, Police Dog Unit and other non-front-line units were mobilised. Special equipment such as metal detector archways, X-ray machines and electronic search equipment were acquired to assist in the operations.

      Screening stations were set up at strategic locations at the Extension to the HKCEC for security checks. Officers from the Police Tactical Unit were deployed to maintain venue security and the VIP Protection Unit was temporarily expanded to cater for the mammoth task of protecting 65 dignitaries. It was supported by the Force Escort Group to ensure smooth passage for the dignitaries under protection. The Special




Duties Unit was deployed to counter any potential threats. Good rapport was built among all parties and the protection service provided was highly regarded.

  More than 6 000 local and international media representatives were accredited to cover the Handover Ceremony and Hong Kong became literally the focus of the world. Detailed plans were made to facilitate media coverage without affecting the overall security arrangements. Police worked closely with the Information Services Department to keep the media thoroughly briefed on the security arrangements.

  With so many dignitaries and guests attending the various official ceremonies besides the fireworks display over Victoria Harbour and the other celebrations going on round Hong Kong, it was vital to ensure proper traffic and crowd management. Special traffic diversions and transport arrangements were implemented in conjunction with the Transport Department and the Police liaised closely with organisers of public events on safety and crowd management measures.

  Police also liaised with organisers of demonstrations to ensure that they were conducted in a peaceful and lawful manner. Designated Demonstration Areas were established near the HKCEC for demonstrators to express their views. More than 10 demonstrations took place during the Handover Ceremony and, on the whole, the demonstrators were peaceful and co-operative.

The two-week security operation for the WB/IMF Annual Meetings was similar to the arrangements for the Handover Ceremony. The general principles of cordon, search, access control, venue security, VIP Protection, media arrangements and traffic management were followed. About 1 550 Police officers were directly involved in the operation. Among the 12 000 delegates there were 22 dignitaries under Police protection. The extent of traffic diversions was reduced as the Annual Meetings were held at the HKCEC only. Fewer media representatives attended, although the number of press events was comparatively larger.

  Five groups of demonstrators staged public meetings and public processions near the venue during the meetings. Most of the demonstrators were peaceful.


 Reported crimes in 1997 totalled 67 367, a decrease of 14.8 per cent compared with 79 050 crimes recorded in 1996. The crime rate stood at 1 036 cases per 100 000 of the population, a decrease of 17.3 per cent, compared with 1996. This figure was the lowest in the past 24 years.

  Violent crimes, including murder, wounding, serious assault, rape, indecent assault, kidnapping, blackmail, criminal intimidation, robbery and arson, declined to 13 749 cases, compared with 15 191 in 1996. Robbery, wounding and serious assault accounted for some 72.1 per cent of the total number of violent crimes in 1997.

  The situation regarding vehicle theft continued to improve. Overall, 2 184 motor vehicles were reported missing in 1997, a drop of 14.7 per cent compared with 1996. The number of robberies involving the use of firearms both genuine and pistol-like objects was 79, a decrease of 4.8 per cent compared with 1996.

In all, 34 593 crimes or 51.4 per cent of the total were detected, with 41 714 people arrested for various criminal offences. Of those arrested, 5 964 were juvenile offenders (aged between seven and 15 years) and 6 855 were young persons (16 to 20).


Violent Crime (Firearms Only)

The number of robberies involving the use of genuine firearms rose slightly during the first half of the year for the first time since 1993, although no high-powered firearms surfaced. Sustained Police enforcement activity contained the situation and there were 13 robberies involving the use of genuine firearms compared with seven reported in 1996.

Vehicle Theft

The overall vehicle theft situation has improved. There were many contributory factors, but high-profile local enforcement measures in conjunction with enhanced cross-border co-operation between Hong Kong and Mainland authorities have played instrumental roles.

Most of the stolen luxury vehicles were believed to have been smuggled into the Mainland overland by containers, although some were smuggled by sea using sandbarges. The use of high-powered speed boats in vehicle smuggling declined substantially.

       There was a rising trend of left-hand-drive vehicles stolen in the United States, Taiwan and Japan being smuggled into the Mainland via Hong Kong. Close liaison between Hong Kong Police and overseas counterparts has led to the interception of several major consignments in Hong Kong.

Organised Crime and Triads

Throughout the year, the fight against triads and organised criminal syndicates continued. Operations were mounted against triad involvement in public entertainment, prostitution, decoration-racketeering, debt-collection, loan-sharking and other associated activities. Long-term, intelligence-based and undercover operations resulted in many prosecutions. Senior triad members were arrested and prosecuted for various triad-related offences in several major operations.

      Action against loan-sharks continued to be a high priority. Several syndicates were neutralised and convicted.

      The Organised and Serious Crimes Ordinance, which was fully implemented in 1995, continued to enhance the Force's drive against triads and organised crime. During 1997, the special investigative powers were used in a number of major investigations.

       During the year 782 money laundering cases were prosecuted and $7.9 million, being the proceeds of various crimes, was confiscated. A further $40.6 million was under restraint pending court proceedings. Ten investigations were launched into the channelling of the proceeds of crimes committed overseas, into or through Hong Kong.

      In addition, during 1997 there were 18 successful applications to the courts to enhance the defendants' sentences in triad-related or serious crimes.

Witness Protection Unit

This centralised body co-ordinates the Force's Witness Protection Programme. It consists of 34 officers, supported by a volunteer cadre of 64 officers, who can be




 called in for large operations. It liaises with other government departments to arrange for the security of co-operating prisoners and for the relocation of witnesses and their families in the community. The unit was greatly involved in the drafting of legislation to facilitate the re-identification of endangered witnesses.

Vulnerable Witnesses and Child Protection

The Child Protection Policy Unit (CPPU) and the five Regional Child Abuse Investigation Units (CAIUs) took up 163 cases (136 sexual offences and 27 physical abuse cases) for joint investigation with the Child Protective Services Units of the Social Welfare Department during 1997. In all, 53 video-recorded interviews (all for sexual offences) were conducted. The five CAIUS assisted other Crime Investigation Teams in 71 investigations (48 sexual offences, 19 physical abuse cases and four others) resulting in a further 26 video-recorded interviews.

  Up to December, a total of 97 police officers participated in special training programmes conducted by overseas experts on video recorded interviews with vulnerable witnesses, and 38 of these trained officers are serving in the CAIUS. The training programmes covered various issues of child protection.

  In November 1996, a Witness Support Programme using trained non-government volunteers or family aides of the Social Welfare Department was launched. The programme aims to facilitate court preparations of children and mentally retarded witnesses and to provide a 'support person' to accompany child and mentally handicapped victims when giving evidence. Up to December, 58 such witnesses had been provided with this service. A second training programme for a group of newly recruited volunteers was held in October.

  The CPPU gained access to the Internet in April to monitor the development of child pornography through the systems of newsgroups, chatrooms and bulletin boards. The unit liaises closely with the Commercial Crime Bureau, which investigates individuals posting pornography on the Internet.

  In May, the unit organised a multi-disciplinary workshop on child sexual abuse and a seminar on forensic evidence for various professionals. Officers from this unit also attended a conference on 'Offences Against Children' held in Argentina in March and a 'Child Pornography Workshop' held in the USA in June.

Commercial Crime

The Commercial Crime Bureau (CCB) had another busy year, with a mixture of traditional types of fraud and more modern scams. Hong Kong remained a popular location for West African crime syndicates to conduct Advance Fee Frauds against both local and overseas investors. Major convictions received widespread publicity. Long Firm Fraud cases continued to be reported but in fewer numbers than in the past. Some syndicates which had been active for several years were successfully neutralised, with their members being convicted and imprisoned.

The year also saw two long-term investigations undertaken by a CCB Task Force come to fruition. Enquiries into the activities of two publicly-listed companies, which had taken several years to complete, led to charges being laid against eight people in Hong Kong and extradition proceedings being initiated against a suspect in Australia.


The Counterfeit and Forgery Division had another successful year in combating counterfeit credit card activity, the counterfeiting of currency and the use of forged travel documents by illegal immigrants. The fraudulent use of credit cards dropped to its lowest level in five years.


The retail price of No. 4 heroin fluctuated throughout 1997. By the end of 1997, the average purity was 49.49 per cent at the average price of $418.90 per gram compared with a purity of 44.97 per cent and a price of $390.65 at the end of 1996.

During 1997, 169.5 kilograms of opiate drugs, comprising opium and No. 4 heroin, were seized, compared with 309.1 kilograms in 1996. Police and the Customs and Excise Department made 12 483 arrests for narcotics offences, compared with 14 827 in 1996. The decline in seizures was attributed to unlawful syndicates' practice of storing drugs in bulk across the border and then bringing supplies in small quantities into Hong Kong to meet local demand.

       Narcotics enforcement resulted in 12 heroin manufacturing and cutting centres being neutralised. A total of 74.6 kilograms of methylamphetamine or 'ice' was seized in 1997, compared with 46.8 kilograms in 1996.

       Since the introduction of the Drug Trafficking (Recovery of Proceeds) Ordinance in September 1989 and the establishment of the Financial Investigation Unit, assets valued at $297 million have been ordered confiscated and a total of $216 million has been paid to the government. Further assets amounting to $169 million were under restraint at the end of 1997, pending confiscation proceedings.

Efforts to prevent young persons from getting involved in the drug trade continued to be a main target of the narcotics enforcement strategy. In 1997, amendments to the Dangerous Drugs Ordinance were made and implemented to provide for heavier sentences for adults exploiting young persons in the illegal drug trade. Other plans include the proposed extension of the Superintendent's Discretion Scheme to cover minor opiate offences.

Crime Prevention

The Crime Prevention Bureau continued to promote the principles of self-protection for both the public and private sectors through the provision of target-specific security advice. Demand for its services in architectural design and computer security continued to expand.

       Since the implementation of the Security and Guarding Services Ordinance in 1995, more than 700 security companies have applied for licences. The bureau carries out inspections on first application and annually. It also pays close attention to security companies with poor track records to ensure their compliance with the licensing criteria.

      The bureau has maintained its public education role through the promotion of domestic security by the Crime Prevention Bus. The 'Robotcop' continues to provide a popular channel of communication to juveniles. It is deployed regularly to schools, youth organisations and fight crime exhibitions.




Crime Information

The Criminal Records Bureau is the sole repository for all criminal records in Hong Kong. It houses complete records of all persons convicted of crime in the Hong Kong Special Administrative Region (HKSAR).

The various records and indices provide details of wanted persons, missing persons, stolen property, outstanding warrants and missing vehicles. The bureau is also responsible for the operation of the 'Enhanced Police Operational Nominal Index Computer System' which provides immediate case enquiry support to all operational officers on a 24-hour basis. The bureau is gradually introducing a fully computerised system to house all records and to improve efficiency and effectiveness.

Ballistics and Firearms Identification

The Ballistics and Firearms Identification Bureau is the HKSAR's authority on arms and ammunition. It is responsible for forensic investigations of all firearms-related crime cases in Hong Kong.

The bureau's recent acquisition of very sophisticated equipment, including a computerised system for the capture of digital image photomicrographs, has significantly improved the service which can be provided to courts. The purchase of a computerised comparison microscope has enhanced the bureau's ability to capture images of micro stria on fired ammunition, which can be checked against all firearms- related crime cases. This equipment gives the bureau investigation capabilities available to few forensic firearms facilities in the world, which is a great step forward for the Force in the investigation of armed crime.


The Identification Bureau continued to play an important role in crime detection and investigation, providing an efficient service to all units in the Force and other law enforcement departments in fingerprint technology and forensic photography.

On fingerprint identifications, the bureau achieved a high level of efficiency and service in 1997 with the implementation of Phase II of the Computer Assisted Fingerprint Identification System and the introduction of new fingerprint recovery techniques by the Advanced Technology Unit. Altogether 1278 persons were identified in connection with 1 243 crime cases. After the identifications, fingerprint experts presented expert evidence in 394 cases.

  During the year, officers from the Scenes of Crime Section attended 15 942 crime scenes. In confirming people's previous criminal convictions, the bureau processed the fingerprints of 151 867 persons, which led to the identifications of 68 843 with criminal records.

The Photographic Section produced 80 217 monochrome photographs and 945 486 colour prints and slides in 1997. It made videos of crime re-enactments and prepared photographic exhibits for presentation in courts.


 Liaison Bureau (the former Interpol Bureau) acts as a co-ordination centre in dealing with criminal information and associated inquiries between the Hong Kong Police


Above: On October 1, the Hong Kong Police Band played at the flag-raising ceremony marking the National Day of the People's Republic of China. It was held on the harbour- front beside the extension to the Hong Kong Convention and Exhibition Centre at Wan Chai. The six-metre representation of Hong Kong's floral emblem is a gold-plated bronze sculpture called the 'Forever Blooming Bauhinia' and was a gift from the Central People's Government to mark the Handover. The sculpture is on a cylindrical pedestal which sits within a low square structure symbolising the Great Wall of China. Taken together they represent the 'One Country, Two Systems' policy. Left: An officer fits a new cap badge designed for the Hong Kong Special Administrative Region police force to replace the previous insignia. The old badge is in his right hand.




Chubb Fire De


Left: Firemen deploy water cannon and firehoses during an exercise at Hong Kong's new international airport at Chek Lap Kok. Below: Members of the Correctional Services Department learn about the machinery of justice during a training session in court procedure. Below left: The Commissioner of Customs and Excise, Mr Lawrence Li, examines equipment for making illegal CDs discovered at a factory in Cheung Sha Wan.

     Immigration Department officers patrol on the tarmac at Hong Kong International Airport at Kai Tak (right) and (below) a female officer checks some forms with new arrivals to Hong Kong. The Immigration Department has an important role

in maintaining law and order by controlling entry

to Hong Kong. Each year, the department detects thousands of undesirable

persons, including

international criminals and terrorists, seeking entry

to Hong Kong.




     Force and other police organisations. It also maintains close liaison with local consulate officials.

The bureau's Liaison Division maintains contacts with the Mainland police authorities. Close liaison has been kept with Interpol China National Central Bureau in Beijing, the Guangdong Liaison Office, Shenzhen and Zhuhai Liaison Sub-Offices in Guangdong Province and other Mainland law enforcement organisations. Two liaison officers from the China National Central Bureau are attached to Hong Kong. Since 1992, 105 criminal fugitives and 104 stolen vehicles had been returned to Hong Kong from the Mainland.

      Since the transfer of sovereignty, the Interpol Division represents the Force as a sub-bureau of the China National Central Bureau, in the International Criminal Police Organisation (ICPO), better known as Interpol. A Hong Kong Police officer is seconded to the ICPO General Secretariat in Lyon, France to work in one of its specialised groups.

Public Order

     During the year, the Police Tactical Unit (PTU) played a major role in crowd management during large-scale public events such as the opening of the Tsing Ma Bridge, the Handover Ceremony and the WB/IMF Annual Meetings. PTU officers also assisted in policing the more-than-usual number of fireworks displays held in 1997 and undertook anti-crime patrols and anti-illegal immigration operations. They helped other Police units maintain law and order at public gatherings, processions and demonstrations.

      The Special Duties Unit, the Force's counter-terrorist response unit, was deployed several times during the year to help other units tackle armed gangs and hostage- takers. It was also heavily committed during the visits by various Internationally Protected Persons attending major events.

Illegal Immigration

The number of illegal immigrants (IIs) from China has been declining since 1993 at a yearly rate of approximately 15 per cent. In 1997, 17 819 IIs were arrested, an average of 49 per day, representing a decrease of 23.1 per cent from 23 180 in 1996. The number of IIs arrested for crimes was also declining. The Police arrested 1 043 IIs for various criminal offences in 1997, which represented a decrease of 31 per cent from 1 505 in 1996, and was the lowest since 1992. Despite the downward trend, 2 222 minor IIs were arrested compared with 754 in 1996. Most had surrendered to the Immigration Department arguing that their parents' permanent resident status entitled them to the right of abode in Hong Kong under Article 24 of the Basic Law. This increase was halted with the introduction of legislation in July regulating the legal entry of these minors.

Action against illegal immigration is one of the Force's top priorities. Anticipating a major influx of IIs before and after the transfer of sovereignty, the Force embarked on close and regular liaison with its counterparts in Guangdong Province. Apart from setting up an enhanced intelligence exchange network and increased publicity, a large-scale co-ordinated sea exercise was mounted in May.




Vietnamese Arrivals

An increase in Vietnamese illegal immigrants (VIIs) that began in the latter half of 1996 continued into 1997 with 1 721 VIIS being intercepted. These were primarily economic migrants who came to Hong Kong to seek illegal employment. The government aims to repatriate all Vietnamese migrants (VMs) and VIIs as soon as possible. During the year, the Police provided escorts under the Orderly Repatriation Programme for the repatriation of 2 478 VMs and VIIs on 25 flights to Vietnam without any untoward incidents.

Bomb Disposal

 During the year, the Explosive Ordnance Disposal Bureau rendered safe 12 083 explosive devices, including home-made bombs, pyrotechnics and unexploded items of ordnance. It was also required to investigate explosions. The most notable was an accident in which a man was killed during the filming of a special-effect sequence.

Police Dog Unit

The Police Dog Unit, which was provided with purpose-built training facilities, trains general-purpose patrol dogs and dogs for different aspects of search work. Apart from foot patrols, Police dogs joined mobile patrol teams to enable a speedy response to any incident. Patrol dogs were involved in the arrests of 1 073 persons in 618 cases in 1997.

  Search dogs were trained to search for dangerous drugs, explosives and firearms. They were deployed at the Hong Kong International Airport. They also provided support for searches in special operations, especially during major events of the year including the Handover Ceremony and the WB/IMF Annual Meetings.


Traffic officers played a major role in the year's large-scale public events. The Handover Ceremony and the WB/IMF Annual Meetings necessitated major diversionary traffic schemes and full deployment of the Force Escort Group as well as regional enforcement and control teams.

  The opening of major infrastructure projects associated with the port and airport development led to an increased policing commitment, notably at the West Kowloon Corridor and the bridges and highways linking to Lantau Island.

  Enforcement of drink-driving legislation introduced in 1995 continued to expand, although the number of drivers involved in accidents and found to have consumed alcohol remained constant at around 10 per cent. All traffic patrol officers had been issued with screening devices by the end of the year.

  Additional cameras for detecting red-light offences were bought, allowing the number of locations covered to double from 15 to 30. A further 15 sets of equipment were installed at junctions on the Light Rail Transit system in the New Territories, which were considered accident black spots. Mobile Enforcement also benefited with the purchase of two more VASCAR in-car video speed detection devices.

  During 1997, there were 14 747 traffic accidents involving casualties, representing an increase of 2.4 per cent over the previous year. The number of fixed penalty tickets


issued for moving offences increased by 1.7 per cent compared with 1996. Police and traffic wardens issued 1.56 million tickets for parking offences during the year, representing a decrease of 8.2 per cent.

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 is also responsible for the registration/exemption from registration of the establishment of local societies.

On July 1, the Societies (Amendment) Ordinance 1997 came into operation and the notification system was replaced by the requirement of registration/exemption from registration. During the year, 1 306 societies applied or were deemed to have applied for registration. No societies applied for exemption from registration and none was dissolved. A total of 8 695 societies have been or are deemed to have been registered.

In 1997, 88 182 applications for a Security Personnel Permit were received. A replacement exercise has been conducted since May 12, whereby Watchman's Permit holders are notified in phases to apply for a Security Personnel Permit. In all, 5 438 applications were received.

Marine Police

Marine Region had a particularly busy year, especially with activities in the harbour where hundreds of craft of various sizes watched fireworks and other displays relating to the opening of the Lantau Link and the Handover Ceremony.

The Marine Police took delivery of three eight-metre and four nine-metre replacement inshore patrol craft and eight replacement fast-pursuit craft for the Small Boat Unit. Five high-speed pursuit craft specially designed and built to replace the Anti-smuggling Task Force tai feis (speed boats) are expected to begin service in 1998. Communications, surveillance and safety equipment were continually enhanced with a view to maintaining an advantage over the increasingly sophisticated syndicates involved in the smuggling of contraband and illegal immigrants.

      Due to rigorous enforcement action, the establishment of more formal avenues for liaison and the exchange of information between Marine Police and their counterparts in the adjacent provinces in the Mainland and abroad, smuggling activities involving tai feis and chung feis have continued to drop.

Some 1010 IIs were apprehended while trying to enter Hong Kong by sea, compared with 1 554 IIs arrested in 1996. A total of 451 Vietnamese people arrived by sea on 31 vessels in 1997. Of these, 377 elected to have their vessels reprovisioned and continued their journey.

Environmental and safety issues associated with the illegal use of explosives and toxic substances to catch fish continued to be accorded high priority with some 164 kilograms of explosives being seized during the year. Marine Police continued to assist other departments in their efforts to enhance shark prevention measures, to protect Marine Parks, to curb pollution and to provide search and rescue services within and outside Hong Kong waters.




Public Relations

The Police and the Hong Kong General Chamber of Commerce jointly administer the Good Citizen Award and the Good Citizen of the Year Award Schemes. These were introduced in 1972 and 1984 respectively and continue to be effective vehicles for gaining and recognising public support in the fight against crime. The schemes have given recognition to a total of 2 653 public-spirited citizens.

  Telephone hotlines and the Crime Information Forms continue to be useful conduits through which the public channel information to the Police. In 1997, 45 375 calls and 1 737 completed forms were received. These sources of information have led to positive results and arrests.

  The Junior Police Call (JPC) Scheme is a bridge between Police and the youth. At the end of 1997, its membership reached 205 086. The scheme helps guide its members towards awareness of their civic responsibilities, and becoming law-abiding citizens. In conjunction with Radio Television Hong Kong (RTHK), the Force produces a weekly radio programme, Voice of JPC, which provides a good publicity forum for the co-ordination and promotion of youth activities.

The Force has been producing, jointly with RTHK, two TV programmes: Police Magazine and Police Report, which are broadcast on local Chinese and English channels. The programmes include appeals for information on undetected crimes, advice on road safety and updates of crime trends. The Police Public Relations Branch (PPRB) provides a similar service to Cable TV News Channels. To widen the scope of service, the Radio Traffic Studio in PPRB delivers peak-hour traffic reports to the public through RTHK.

  Information on crime, police action and activities is disseminated to all news organisations in Hong Kong around the clock through PPRB. Professional staff seconded from the Information Services Department deal with media enquiries and assist media coverage at major scenes of crime and incident.

In the year, they handled 215 000 media enquiries, organised 326 press conferences and briefings, attended 417 incidents, and issued 3 452 press releases. They also produce a fortnightly newspaper, OffBeat, monitor media coverage of police and criminal activities; and conduct various campaigns, major ones including Fight Crime and Police Recruitment.

Planning and Development

Construction of the new airport police station at Chek Lap Kok was completed in November. Plans on airport-related projects, particularly the in-town check-in facilities, police facilities at various stations along Airport Railway and manpower to police the road link to Chek Lap Kok, were completed and tested to prepare for the opening of the new airport. The newly constructed Tung Chung Police Station was in place to serve an expected population of 150 000 residents.

  Planning has begun for the comprehensive redevelopment of Police Headquarters to improve efficiency and more fully utilise the Arsenal Yard site. A modern facility will be built to serve the Force's needs well into the next century. It will be constructed on the existing May House site. The complex will include a new Wan Chai District Headquarters and a Divisional Police Station. The space provided will


be able to accommodate offices presently housed in Caine House and a large portion of leased accommodation. Construction is scheduled to start in early 1999 and be completed in 2002.

Plans are complete for a purpose-built complex at the Detective Training School, to house a new school and a centralised in-service training centre. Building will commence in November 1998 and the project is expected to be completed in mid-2001.

During the year, planning also started for the construction of a purpose-built state-of-the-art tactical weapon training complex in Man Kam To. The project will commence in November 1999 and be completed in October 2002.

A new town is growing in Tin Shui Wai Reserve Zone and a new district headquarters and divisional police station are being built, to be completed in January 2001.

Planning also progressed well for a new vehicle pound and vehicle examination facility to be built at Tai Po and North Lantau. These facilities will enhance the capability of the Traffic Police to enforce legislation regarding the construction and use of vehicles, and enable obstructions to be removed more rapidly from major roads.

The disposal of former military sites occupied by the Force has created a need to plan for replacement facilities. Major facilities affected include the Field Patrol Detachment's Headquarters Depot, Queen's Hill Camp Recreation Centre and 140 Junior Police Officers' Married Quarters.

Two projects are being developed with a view to putting more officers on the beat. The first includes the automation of station security in the use of smart-card access, the installation of automatic barriers and closed circuit television monitoring systems. The second includes installation of an intercom and buzzer system in every police cell, linked to a console beside the duty officer's desk. A pilot scheme is being carried out and a second will start shortly.

A Police Property Steering Group, comprising representatives from the Government Property Agency, the Security Bureau and the Finance Bureau, conducted regular meetings and has so far drawn up a comprehensive property strategy for the six Police Regions, on training facilities and on Junior Police Officers' Married Quarters.


The 999 hotline service was enhanced with the provision of caller number display to enable a quicker response to emergency calls. The number of operator positions in the 999 centres was also increased. The Force's computer-based directory enquiry system was upgraded to provide a more efficient response to telephone enquiries made to Police Headquarters.

      A programme to provide a secure radio system for the Witness Protection Unit and the VIP Protection Unit was completed. The Police Driving School was provided with a dedicated radio system. A quality management system with reference to the International Standard for Quality Assurance (ISO 9002) was successfully implemented.




The planning and development of communication needs for other major projects are proceeding. They include the provision of a new Marine Police communications system and the replacement of radio control facilities in the Mass Transit Railway District, the Air-to-Ground radio system and the Command and Control Integrated Communications System.


The Force has 850 motorcycles and 1 650 four-wheeled vehicles. To enhance safety for Police officers and other road users, three-point seat belts have been fitted to all forward-facing passenger seats. Vehicles have been fitted with air-bags and anti-lock braking systems. Improved conspicuity markings on vehicles are an added safety feature.

  The Force has introduced an Electronic Fuel Management System, the first computerised fuelling mechanism adopted by the government. It has improved efficiency and reduced manpower costs.

Information Technology

 In order to reduce the number of terminals required in accessing different computer systems of the Force, a Common Terminal (CT) approach was adopted to provide end users with a single point of access on their desktop. The CT approach was successfully implemented in January.

  The roll-out of the Formation Information Communal System, which assists officers in handling reports to the Police, dealing with complaints of crime, processing lost and found properties, and managing persons in police custody, was completed in June for all 23 districts and 60 divisions. It has enhanced police services by eliminating repetitive paper work, providing a fast and reliable cash (bail money) accounting system and producing up-to-date and comprehensive management information.


Two other new systems under the Information Technology Strategy Reference Materials System and the Leave Recording System - also went live in 1997. Fourteen types of commonly referenced materials and leave information are now available on-line to facilitate on-line enquiries and staff resources planning. The development of the Regional Information Communal System, the Traffic Operations and Management Systems and the further enhancement of the Enhanced Computer- assisted Command and Control System are on schedule and will be rolled out in 1998.

The Police Data Network connecting stations and offices was put in place to provide an information highway for the sharing and transfer of information between different information systems. A Bulletin Board System was also implemented as part of the Police E-mail Network to facilitate the promulgation of documents of common interest within each division.

Service Quality Wing

 Established in 1994, the Service Quality Wing consists of three branches responsible for Performance Review, Research and Inspections, and Complaints and Internal Investigations.


      The Performance Review Branch will develop a customer-focused strategy to improve the Force's service to the community. The document which underpins this strategy is the Vision and Statement of Common Purpose and Values launched in December 1996. Last year, the Force underwent a cascading process of discussion groups involving each member of the Force in identifying barriers to living up to the values.

The Research and Inspections Branch monitors inspections within police formations and conducts thematic studies throughout the Force. It aims to develop an effective, efficient and economic service which meets the needs of the public. It has now included Value for Money studies which will further improve service to the public. It 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 Independent Police Complaints Council (IPCC), which is an independent body comprising non-official members, is appointed to monitor and review the investigation of complaints against the Force.

      In 1997, 2939 complaints were received. This represented a decrease of 370 cases, or 11.2 per cent compared with 1996. Over 95.8 per cent of complaints in 1997 came from people either involved with, or subject to, constabulary action. Complaints of assault, neglect of duty and conduct or manner made up the majority of cases, or 75 per cent of total complaints. Investigations into 3 006 cases were completed and endorsed by the IPCC. The substantiation rate for complaints fully investigated was 13.5 per cent. In all, 1 467 cases were classified as Withdrawn or Not Pursuable, representing 48.8 per cent of the total. Altogether, 806 cases or 26.8 per cent of all complaints were dealt with through an Informal Resolution Scheme. A total of 28 Police officers were disciplined and 18 charged with offences resulting from the complaints.

CAPO 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. A Complaint Prevention Committee, made up of various ranks in the Force, was formed in 1992 to recommend on how preventable complaints may be reduced and how its recommendations may best be implemented. In close consultation with the IPCC, 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 television, 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. A complaint




hotline for CAPO was introduced in June to supply complaint forms by facsimile to members of the public.

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. A new performance management system based on the core-competence concept was launched for the Police Communications Officer Grade in 1997, in keeping with the Force's strive for excellence.


To help officers at all levels carry out the broad range of police functions as efficiently, effectively and economically as possible, training focused on developing their knowledge, skills and confidence. Considerable emphasis is being placed on developing a more customer-oriented training philosophy and on cultivating a strong learning ethos in which officers can fully develop and enhance their professional abilities.

 Most police training is designed and provided by the Force on its own resources, plus appropriate local vocational and overseas training. All newly recruited Constables and Inspectors must attend a 27-week and a 36-week residential course, respectively, at the Police Training School in Wong Chuk Hang.

 Training for male and female officers is now fully integrated with women recruits being trained in the use of firearms. Training related to juveniles, previously restricted to women recruits, is applied to all now.

 After basic training, Constables carry out duties under a tutor for two weeks and attend a day of instruction each 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 roles and where inspectors' leadership and management skills are further developed.

 The promotion and continuation courses for Sergeants were reviewed and revised during 1997. Training is now aimed at teaching and enhancing management skills, with particular emphasis placed on furthering the Force Values and Common Purpose. Similarly, the syllabus of the Probationary Inspector training course is undergoing a systematic review. The review included not only the updating of legal knowledge, police practice and procedures but also incorporating new management initiatives and emphasising the practical aspects of community policing and law enforcement.

 It is the Force policy to encourage officers to undertake local training courses and private studies to enhance their professional knowledge and skills. Much emphasis is also placed on English and Putonghua language training. Assistance in the form of financial reimbursement is available as an incentive. The Force offers language training courses to officers in conjunction with the Civil Service Training and Development Institute. A total of $7.18 million was available in the financial year


1997 to sponsor officers to attend development and vocational training programmes


      In-service management training is provided through three levels of command courses run by the Higher Training Bureau. Inspectors attend the Junior Command Course after serving four years in the ranks. Chief Inspectors and Superintendents attend the Intermediate and Senior Command Courses, respectively, within one year of promotion to each rank. The Intermediate Command Course was changed in February to include a comprehensive and certificated package of lectures on key management topics delivered by professional lecturers from the City University of Hong Kong. Complementing this, Chief Inspectors are encouraged to attend one- or two-day training modules during the year. These address nine core competencies for their rank. This fresh approach to command training is being assessed and may be extended to other courses.

The Police Driving School is the Force's primary driver training facility and trains some 1 800 officers each year. Of these, approximately a quarter are trained to ride large motorcycles (750 c.c.) and half attend various four-wheel vehicle courses. They include basic courses to qualify officers with civilian driving licences to drive government vehicles and advanced operational driving course for Traffic and Emergency Unit drivers.

The Detective Training School has restructured many of its courses and will run additional courses to provide the knowledge and skills needed for the investigation of serious crime, vice, gambling and dangerous drugs. Officers undergoing the annual revolver continuation training and qualification courses

courses are improving their standards with the aim of maintaining a 75 per cent target hit rate by 1999.


The number of applications for Inspectorate posts remained steady at 2 796 in 1997, compared with 3 268 in 1996, and 90 were appointed as Inspectors. Another 68 serving officers were promoted from within the ranks.

Recruitment at Constable rank remained satisfactory with 792 recruits taken on strength out of a total of 7 930 applicants. Satisfactory recruitment saw the strength of the Force remain healthy and strong at 27 588 disciplined officers and 5926 civilian staff.


     Promotion prospects in the Force remained good at most levels. In 1997, 66 officers were promoted to the rank of Senior Superintendent and above, 80 Chief Inspectors and 143 Senior Inspectors were promoted to Superintendents and Chief Inspectors respectively, 13 Station Sergeants were promoted to Inspectors, 52 Sergeants were promoted to Station Sergeants and 328 Police Constables to Sergeants. Within the civilian grades, 63 general grade and 42 departmental grade officers were promoted.

      In 1997, some 372 disciplined officers retired from the Force, 13 were invalided, 292 resigned, 45 were transferred to other departments, and 38 were either dismissed or had their services terminated. Likewise, 272 general grade, and 188 departmental grade civilian staff left the Force through various means such as retirement, transfer




to other government departments, termination of their service, completion of contract or dismissal.


The Personnel Services Branch (PSB) provides a wide range of support services for Force members and their families. During the year, PSB staff conducted 4 603 casework interviews and made 7 446 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. The branch has also pursued an initiative in promoting a healthy life style and family values amongst members of the Force.

Psychological services, including professional counselling and education, were provided to Police officers, civilian staff and their immediate family members to help them cope with the high level of stress associated with Police work and in events of personal or emotional difficulties. Critical incident stress debriefing services were available to officers involved in difficult or dangerous operations such as the Garley Building fire disaster.

Other services included support groups for officers and their family members and stress management training to new recruits. A recent, successful project was the provision of conflict management training to officers to enhance their efficacy in handling potential conflict situations.

The branch's Police Catering Division continued to monitor canteens in Police formations with emphasis on hygiene and the provision of nutritious and value- for-money food. The division arranged the supply of 10 000 meals to officers on operational duties in the field during the Handover Ceremony. It also provided catering support for Police officers during the WB/IMF Annual Meetings.

The Police Welfare Fund has been the major source of finance for all welfare activities within the Force. In all, 1 634 children of regular and Auxiliary Police officers were awarded bursaries from the two Police Education Trusts to help them further their education.

Force Housing

The implementation of the policy to provide housing for all eligible married local Police officers of the rank of Superintendent and below continued. The Force now manages 12 514 departmental quarters, of which 11 608 are for Junior Police Officers and 683 are for Inspectorate officers.

Three new quarters projects in Wong Tai Sin, Ngau Chi Wan and Chai Wan were completed in mid-1997. They provided 1 237 high-quality quarters, replacing 534 very old Junior Police Officers quarters at sites on Hollywood Road and Canton Road. Proposals to build 1 171 quarters in Tung Chung, Tuen Mun and West Kowloon Reclamation are at the planning stage.

Older quarters continued to be upgraded under a programme to refurbish some 4 500 married quarters for Junior Police Officers. Since the introduction of the scheme in 1987, 1874 quarters have been refurbished, significantly improving structural conditions and standards.


In 1997, the Police Force secured 66 per cent of the Civil Service Special Housing Quota for Disciplined Services to facilitate Junior Police Officers who were approaching retirement to acquire public housing. Alternative housing assistance provided for eligible Police officers included the Civil Service Home Financing Scheme, Home Purchase Scheme, Housing Loan Scheme and the Accommodation Allowance Scheme.

Hong Kong Auxiliary Police Force

The Hong Kong Auxiliary Police Force (HKAPF) comprises volunteers from all walks of life and has a proud history dating from its establishment in 1914. At the end of the year, the strength of the Force stood at 5 455 of whom 10.87 per cent were female.

     Traditionally, the main function of the Force was to provide a trained manpower reserve in internal security situations and civil emergencies. It also took part in crowd management at festivals and large-scale events. In the early 1970s public disquiet at a deteriorating crime situation and difficulties in maintaining the regular Force's strength led to an expanded role for the HKAPF in supplementing regular officers on 'watch and ward' duties. These duties include crime prevention, crowd control, traffic control, operational duties, communication and community relation. Between January and September, the average daily turnout was 644 officers. The rate was reduced to 538 officers from October 1, in the light of improvements in the operational strength of the regular Force.

Independent Police Complaints Council

The Independent Police Complaints Council (IPCC)'s main function is to monitor and review investigations by the Complaints Against Police Office (CAPO) of public complaints about the Hong Kong Police Force.

The IPCC is an independent committee whose members are appointed by the Chief Executive. It comprises a chairman, three vice-chairmen and not fewer than eight other members, with the Ombudsman, or his representative, serving as an ex-officio member.

      During the year, the IPCC endorsed the findings of 3 006 complaint investigations. It implemented the recommendations arising from the review of CAPO procedures and the comparative study of overseas police complaints systems. These include, among other things, review of the monitoring procedures for serious cases, expansion of the Informal Resolution system and improving the efficiency of scrutiny of complaint investigation reports. It also started a three-year publicity programme including surveys and research projects to enhance public awareness of the IPCC's role and activities as well as to assess public opinion on the police complaints system.

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 4 773.




The department enforces 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 1997, it collected $8.74 billion in revenue from dutiable commodities, representing an increase of 6.2 per cent over 1996.

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 1997, the Motor Vehicles Valuation Group registered a total of 136 motor traders and assessed the provisional taxable value on 66 931 vehicles.

Prevention of Revenue Evasion

Cigarette smuggling continued to be a priority in the department's enforcement effort. In 1997, the department brought 1 616 cases to court and seized 132.3 million cigarettes with a duty potential of $95 million.

The illegal use of industrial diesel oil has been one of the department's major challenges and it has strengthened the manpower of the Diesel Oil Enforcement Division to deal with the syndicates involved. Legislation has been amended to increase the maximum penalty for offences relating to the marking and the detreatment of diesel oil marking to two years' imprisonment and a $200,000 fine the same level as that for offences relating to the illegal use of marked oil. The department has also adopted two new measures against the misuse of marked oil, i.e. to take the fingerprints of all diesel oil offenders and to seize vehicles involved in more than one offence. As a result, the number of cases of misuse of marked oil has dropped significantly. The department has consequently been able to focus its attention on diesel oil smuggling.

During the year, the department detected 27 smuggled diesel oil cases compared with four in 1996. Positive results have come from the Oil Industry Reward Scheme, sponsored by five major oil companies, which rewards those providing information about illegal diesel oil cases. In 1997, the department detected 286 illegal filling stations and 14 oil detreatment plants where markers and colouring substances were removed from marked oil. In all, 2.2 million litres of diesel oil with a duty potential of $6.5 million were seized and 1 024 persons were arrested.

Anti-narcotics Operations

The department continued to take vigorous enforcement action to prevent and suppress unlawful trafficking in dangerous drugs and their manufacture and distribution. To reinforce this effort, it also enforced the Control of Chemicals Ordinance which aims at preventing the diversion of chemicals for the illicit manufacture of dangerous drugs and psychotropic substances.

The Customs Drug Investigation Bureau is the department's major investigative arm. Its main functions are to conduct investigations and surveillance in cases involving illegal trafficking or use of drugs. The department worked closely with the Hong Kong Police Force, various provincial Public Security Bureaux in the mainland


of China and overseas drug enforcement agencies in the exchange of intelligence and in the arrest of drug criminals.

In 1997, the department cracked 50 major trafficking cases, and neutralised four heroin attenuating, 12 packing and two storage centres.- Officers seized 39 kilograms of heroin, 858 kilograms of cannabis, 1.5 kilograms of raw opium, 2.5 kilograms of prepared opium, 33.1 kilograms of cocaine, 50 grams of methamphetamine, three tablets of Ecstasy and 15 607 tablets of other psychotropic drugs. A total of 912 persons were arrested for drug-related offences. The department had several successes in preventing the diversion of controlled chemicals at the international level and 7 700 kilograms of controlled chemicals were seized.

During the year, the department confiscated assets worth $430,000 derived from drug trafficking and conducted 1 836 investigations into money laundering. Drug- related assets worth $2.8 million were restrained.

Boundary Control

Vehicular traffic through the three control points at Lok Ma Chau, Man Kam To and Sha Tau Kok increased substantially from a daily average of 24 361 vehicles in 1996 to 26 035 in 1997. To cope with further increases in cross-boundary traffic in the future, expansion of customs facilities has started at Lok Ma Chau and Sha Tau Kok Control Points, and Kowloon Railway Station. In March, the commissioning of the new shuttle-bus service between Lok Ma Chau and Huanggang partly alleviated pressure at the Lo Wu railway crossing. Preparations are well advanced to extend the opening hours at Sha Tau Kok Control Point by two hours.


The department detected 232 smuggling cases, arrested 358 persons for smuggling offences and seized contraband worth $204 million, representing a 54 per cent. decrease as compared with 1996.

Smuggling between Hong Kong and the Mainland was still serious, particularly smuggling by sea. Popular items smuggled from China included cigarettes, diesel oil, fake video compact discs and compact discs, live pigs and meat. Contraband commonly discovered being smuggled to the Mainland included left-hand drive vehicles, vehicle spare parts, hi-tech electronic goods, mobile phones, film products and audio-visual equipment. The department intercepted several stolen vehicles smuggled into Hong Kong from Japan, Taiwan and the USA for re-export to the Mainland. A total of 129 vehicles valued at $40.7 million was seized. Close liaison is maintained with the police and overseas law enforcement agencies for the exchange of intelligence and this has contributed considerably to successful operations against smuggling. Close contacts with Customs authorities in the Mainland have also yielded encouraging results.


All recruits to the department go through basic training at the department's training school at Tai Lam. During the year, 41 inspectors and 173 Customs officers passed out of the school. With the new airport at Chek Lap Kok opening in 1998, three selection boards were held to recruit the 500 people required. A temporary training




school at Perowne Barracks in Tuen Mun was set up to cater for the higher number of trainees.

The department provides specialist training to enhance investigation, prosecution and other techniques. As part of international co-operation, the department organises courses for officers from other Customs administrations. In 1997, 56 officers from the Mainland, Thailand, Singapore, South Korea and Macau attended courses in Hong Kong.

Electronic Data Interchange

Procedures for the submission of import and export declarations were streamlined during the year by the introduction of EDI. Traders can now submit their declarations through the EDI service provided by Tradelink Electronic Document Services Ltd., in which the government is a partner. The department's declaration counters in collection offices will be closed by April 2000 when submission of trade declarations by electronic means becomes compulsory.

Information Technology

Information technology plays an important part in the department's administrative and investigative functions. Three major computer systems were implemented during the year. A system for air cargo clearance at the new airport at Chek Lap Kok is under development. The system will be linked with air cargo operators for the transmission of cargo data and Customs clearance and restraint codes.

Work started on a replacement of the department's central computer system which contains a comprehensive data base to facilitate control processes and risk management and to improve intelligence and statistical analysis. A new computer system is being developed to support operations and controls at the land border to allow for increasing traffic flows and 24-hour operations at the border.

Performance Pledges

The department's fourth set of performance pledges was published, together with the department's vision, mission and value statements. These reinforce the department's commitment to quality service. To support better public accountability, the department regularly reviews the quality of its services with three customer liaison groups connected with air cargo, sea cargo and dutiable commodities.

Independent Commission Against Corruption

The Independent Commission Against Corruption (ICAC) is independent of the civil service; its Commissioner is directly responsible to the Chief Executive. The commission fights corruption through investigation, prevention and education.


The Operations Department receives and investigates reports of suspected corruption under the Prevention of Bribery Ordinance, election malpractices under the Corrupt and Illegal Practices Ordinance, and corruption-related offences under the ICAC Ordinance.


The ICAC received 3 057 reports alleging corruption (excluding election-related reports) in 1997. Of these, 1 288 reports were made against civil servants, a decrease of 1 per cent compared with 1996. There were 1 571 reports concerning the private sector, a decrease of 5 per cent, and 198 reports against employees of public bodies, compared with 131 in 1996.

Sufficient information was contained in 2 213 of the corruption reports received for investigation to commence. The department's caseload was 1 174 at the end of the year. In 1997, 314 persons were prosecuted and 59 cautioned for minor offences.

Corruption remained under control in Hong Kong. During the year, the department strengthened its strategy to unearth unreported corruption, and underwent an organisational restructuring to provide more front-line investigators. It also formed Operational Liaison Groups to forge closer links with all disciplined services and government departments.

Corruption Prevention

The Corruption Prevention Department examines the policies, practices and procedures of government departments and public bodies, and makes recommendations to remove opportunities for corruption. On request, it also advises the private sector on corruption prevention methods.

On completion of a corruption prevention study, a report with detailed recommendations is issued to the organisation concerned. In 1997, it produced 101 reports on such areas as law enforcement, licensing and inspection systems, purchasing, tendering and contract administration. Corruption prevention studies are systematically followed up to ensure that their recommendations are implemented and are effective.

     Besides these detailed studies, the department also participates in numerous consultation exercises through correspondence and membership of working groups and committees. This is to ensure that early corruption prevention advice is given when public sector policies and procedures are being formulated. In 1997, the department was involved in such consultation activities on 220 occasions.

The department advised 205 private sector organisations in 1997. Typically the problem areas were related to purchasing, stock control and wage administration. In June, a telephone hotline was set up for members of the public to obtain immediate corruption prevention advice.

Community Relations

The Community Relations Department educates the public against the evils of corruption and enlists community support to fight the problem. Community education is conducted via the media and its network of eight regional offices.

In 1997, the department continued to produce radio and TV commercials to educate the public and enlist their support. In June, a panel briefing on the ICAC's work was conducted for the overseas media, followed by visits to the ICAC. The events attracted 170 local and overseas journalists.

To maintain a clean civil service, the department conducted 800 regular corruption prevention training sessions for staff of 42 government departments and 40 public bodies in 1997.




The department launched a programme to promote business ethics in 1994. Since then, some 70 per cent of the 2 600 listed companies, large private firms and trade/professional associations approached have formulated a code of conduct. To extend the programme from management to the working level, the department conducted 1 500 talks for 600 business organisations in 1997. In addition, three new ethics training videos were produced for front-line workers of different trades.

Young people have always been one of the priority targets in the department's preventive education work. Apart from regularly conducting anti-corruption talks for 85 000 secondary and tertiary school leavers, the department also joined other organisations to promulgate work ethics among young people at work.

To help educate new immigrants from the Mainland, a new video on Hong Kong's anti-corruption work was produced. A pocket-size telephone book with ICAC messages was distributed to every immigrant at the Lo Wu immigration control point. In addition, educational programmes including talks and visits to ICAC regional offices were organised for them.

During the year, the department started publishing a newsletter for members of the public. It contains information about the ICAC. It also organised district events and meet-the-public sessions, and produced radio programmes.

  Co-operation with anti-corruption agencies in the Mainland continued. During the year, talks were given to 3 000 Mainland officials visiting Hong Kong. In November, the Commissioner led a delegation to visit the procuratorates in Beijing and Guangzhou.

International Co-operation

The ICAC continues to enhance liaison with other anti-corruption organisations and overseas law enforcement agencies. During the year, the ICAC received 118 visitors from law enforcement agencies and other organisations in various countries.

  ICAC officers also attended overseas forums, including the Eighth International Anti-Corruption Conference in Peru. Directorate officers regularly meet the legal attaches of major overseas law enforcement agencies stationed in Hong Kong to discuss matters of mutual interest.

In November, the ICAC hosted the Fifth Regional Seminar on Corruption-Related Crime attended by representatives of local law enforcement agencies and those in the Pacific Rim region. The ICAC now produces a quarterly newsletter on matters of mutual interest for anti-corruption agencies in the region.

Cross-Boundary Liaison

Since the establishment of a mutual assistance scheme with the Mainland in 1988, the Operations Department has sent officers to the Mainland on 94 occasions, and assisted investigating officers from the Mainland in enquiries in Hong Kong on 105 occasions. In 1997, a dedicated Hong Kong-Mainland Operational Liaison Section was set up to co-ordinate increasing co-operative efforts with the Mainland authorities to combat cross-boundary corruption. On the non-operational front, the Hong Kong Mainland Liaison Office, which was set up in the Community Relations Department in 1996, continued to work closely with the Guangdong Provincial People's Procuratorate on publicity and educational programmes.

Law (fort!

Shopping is one of Hong Kong's great pastimes and the attraction is no greater than at Christmas when malls such as New Century Plaza (top) and Times Square (above) make special efforts to promote the festive spirit. Right: A young girl admires a toy display at the Dream of Childhood Exhibition at the World Trade Centre in Causeway Bay.


Left: The striking design

of the new Peak Tower became

an instant landmark when opened in September. The complex includes the Peak Tram terminus, restaurants, shops and other attractions for the visitor. Below: The magnificent Hong Kong cityscape can be viewed from the comfort of a restaurant at the Peak or from one of the vantage points on a 3.5-kilometre walk around it, which is popular with locals and visitors alike.


Clockwise from left: Flaming daredevil divers,

a wayward explorer, the beat of jungle drums, and a 'princess' are all part Ocean Park's new attraction Discovery of the Ancient World. The secrets of the 'lost civilisation' were unveiled to the adventurous public in the summer.


Checks and Balances

To minimise the possibility of any abuse of power, the ICAC is subject to a stringent system of checks and balances. In addition, the exercise of a number of special powers is now subject to close judicial supervision.

The commission's four advisory committees play an important role in monitoring and supervising the work of the ICAC. At the policy level, it is guided by the Advisory Committee on Corruption. The Operations Review Committee (ORC) receives and considers progress reports on current major investigations, all investigations over one year old and all bail cases of six months duration or more. It may draw to the Chief Executive's attention any aspect of the work of the Operations Department or any problem encountered by the ORC. Two other committees, the Citizens Advisory Committee on Community Relations and the Corruption Prevention Advisory Committee, review and give advice on the work of the Community Relations Department and Corruption Prevention Department respectively. All advisory committees are chaired by non-official members.

The public may lodge formal complaints against ICAC officers to the ICAC Complaints Committee. It consists of members of the Executive and Provisional Legislative Councils, and other prominent citizens. The commission also has an internal investigation group which monitors the conduct of its officers and investigates complaints against ICAC officers.

Into the 21st Century

The HKSAR Government is committed to fight corruption in every area of public and private life. Keeping corruption under control is essential to the community's continued stability and prosperity. The ICAC will build on its achievements in the past and enhance its preventive and enforcement capability. With the support of the community, the commission looks to the 21st century with confidence.

Government Laboratory

The Forensic Science Division of the Government Laboratory provides a specialist scientific service to the criminal justice system in Hong Kong. The division's services, which have been accredited by the American Society of Crime Laboratory Directors/Laboratory Accreditation Board (ASCLD/LAB), are rendered mainly to government departments dealing with law and order, although private sector and subvented organisations can also make use of them on a cost-recovery basis. The division aims to provide an impartial, accurate and efficient service to its clients.

Sixty of the division's 150 staff are professional forensic scientists operating in two broad groups covering seven specialist areas. One group, which covers controlled drugs and toxicology, deals with a high volume of cases including illicit drugs analysis in cases of possession, trafficking and manufacturing, possession of controlled pharmaceutical preparations, analytical toxicology in certain death enquiries and blood alcohol determination in suspected drink-driving offences.

The other group covers a wide range of physical and biochemical evidence in cases including homicide, arson, robbery, fraud, sexual assault and traffic accidents. A comprehensive 24-hour scene of crime attendance service is also in operation.




  The Biochemical Sciences Sections continued development of the new DNA-related PCR/STR techniques, introducing these into casework on a limited basis in the middle of the year. Compilation of databases continues as does development of further systems. It is hoped that the PCR technique will form the basis of all biochemical casework by the middle of 1998.

  The Chemical Science Section devoted a great deal of time to the investigation of the tragic Garley Building fire, in November 1996, culminating in evidence being given to the Commission of Inquiry in June 1997. It was one of several large multi- fatality fires investigated by the section during the year.

  By reorganising into three parallel units in 1996, the turnover time for the Controlled Drugs Section improved considerably during 1997. Heroin remained the major drug of abuse, but the number of cases involving methylamphetamine in the form of 'ice' continued to increase (676 compared with 580 in 1996) as did cases involving 'ecstasy' (59 compared with 43 in 1996) and the benzodiazepine drugs midazolam (1 449 compared with 1 313 in 1996) and estazolam (47 cases compared with 19 in 1996).

  At the beginning of the year, the responsibility for the control of human resources and quality management was placed under a new section covering the entire laboratory. The section's brief includes responsibility for all quality assurance trials and proficiency tests of staff in the Forensic Science Division. This testing forms an essential part of the overall procedures required as part of the accreditation process. It also helps to ensure the achievement of high standards of excellence that the division sets itself and which are essential for an impartial and efficient service to the public of Hong Kong.

Immigration Department

 By controlling entry to the HKSAR, the Immigration Department plays an important role in maintaining law and order. Through examination at control points and the vetting of visa applications, undesirable persons including international criminals and terrorists, are detected and denied entry. In 1997, 9 935 such travellers and persons not in possession of proper documentation were refused permission to land and 2 495 people were refused visas.

Detection of Forged Travel Documents

 Officers detected a total of 3 083 forged travel documents during the year, compared with 3 192 in 1996. Strict measures were taken to guard against the use of forged travel documents by travellers, as well as illegal immigrants. Frequent contacts with local and overseas law enforcement agencies and consulates were maintained. Special operations were mounted against forgery syndicates.

Interception of Wanted Persons

In 1997, 121 501 wanted persons were intercepted at immigration control points and other offices. They were suspected to be in connection with trafficking of dangerous drugs and other criminal offences such as murder and robbery.


Illegal Immigration and Unlawful Employment

In 1997, 19 584 illegal immigrants were apprehended and repatriated, compared with 24 408 in 1996. Despite the overall decrease, the number of illegal immigrant children increased substantially from 751 in 1996 to 2 257 in 1997. The influx started in January 1997 after rumours that Mainland children born to a permanent resident parent would have automatic right of stay in the HKSAR after June 30, 1997. Enforcement action was stepped up and the influx subsided in May 1997.

Illegal workers were either illegal immigrants or visitors who breached their condition of stay. They were attracted to HKSAR to take up illegal employment. The lower wages accepted by these illegal workers encouraged unscrupulous employers to offer them employment. The Immigration Task Force conducted frequent checks at targeted locations, including construction sites, factories, restaurants and other places. of employment. In 1997, 1 897 operations were conducted and 3 992 illegal workers. were arrested, compared with 1 618 operations and 4 560 arrests in 1996.

The illegal workers were prosecuted and either fined or gaoled before being repatriated to their places of origin. Employers of illegal workers were also prosecuted and fined and, in serious cases, gaoled. In 1997, 371 employers of illegal workers were prosecuted, compared with 580 in 1996.

Deportation and Removal

The department processes deportation and removal orders. During the year, 8 169 persons who had been convicted of possessing or trafficking in dangerous drugs, deception, theft, forgery and other criminal offences were considered for deportation and 629 were deported. Another 1 668 persons were removed from the HKSAR under removal orders. These included 1 056 illegal immigrants, mostly coming from the Mainland and 612 persons who had breached their condition of stay.

Investigation and Prosecution of Immigration Offences

During the year, 22 577 charges were laid against persons who had committed various immigration offences. These included: remaining in the HKSAR illegally, breach of conditions of stay, making false statements or representations, and using or possessing forged documents.

Fire Services

The Fire Services Department fights fires, protects life and property in case of fire and other calamity, provides emergency ambulance services and gives fire protection advice to the public.

The department's establishment of 8 592 staff comprised 7 847 uniformed and 745 civilian members. It is one of the world's finest fire brigades, with well-trained personnel, advanced communication systems, and modern equipment and appliances. The department responded to 35 543 fire calls, 20 899 special service calls and 438 247 ambulance calls during 1997, representing an average of 1 200 calls a day. January was the busiest month, with six No. 3 alarm fires and more than 370 vegetation fires reported.




The department made significant advances during the year, despite heavy operational commitments. These included the launching of a 'Fire Safety Ambassador' scheme in May to give members of the community fire safety training, the establishment in September of a Community Relations Unit within the Fire Protection Command with a view to strengthening community relations and fire safety education, and the full commissioning of the computer-aided Trunked Radio System which provides more radio channels and restricts unauthorised users from intruding into the system.

Fire Suppression

 Of the 35 543 fire calls received in 1997, 26 were classified as major fires of No. 3 alarm and above. Unwanted alarms, caused mainly by faulty automatic alarm systems or their poor positioning, contributed to about 53.9 per cent of the total number of fire calls. Careless handling or disposal of smoking materials was still the major cause of fires, totalling 4 411 cases in all, followed by accidents involving the preparation of foodstuffs and electrical faults, which accounted for 3 005 and 1 529 cases respectively.

Fires claimed 47 lives and 605 injuries, including 16 firemen. Fire personnel rescued 2411 people. Notable fires during the year included: a No. 3 alarm in a karaoke establishment in a commercial building in Tsim Sha Tsui on January 25, claiming 17 lives and 13 injuries; a No. 1 alarm in a Shek Kip Mei housing estate unit on February 20 which claimed three lives; a No. 3 alarm in a Mei Foo Sun Chuen domestic unit on April 8, claiming nine lives and 37 injuries, including three firemen; and a No. 3 alarm in a Sai Wan Ho domestic unit on April 25, in which three people died and six others were injured, including a fireman.

Special Services

The department also provides wide-ranging rescue services in incidents such as traffic accidents, people trapped in lifts or locked rooms, gas leakage, house collapses, flooding, landslides, industrial accidents and attempts to jump from a height. The department handled 20 899 special service calls in 1997.

Major incidents included the crash of a floral parade vehicle in Tsim Sha Tsui on February 7 in which one person died and 31 others were injured; the immersion of a fishing vessel off Ap Lei Chau on September 27 in which three people trapped inside the vessel were killed; the leakage of toxic gas in a Kowloon Bay unit on October 17, in which seven people were injured, including five firemen; and spillage of sodium cyanide from a lorry travelling along Tai Po Road near Kam Shan Country Park on December 4.

Ambulance Services

 Demand for emergency ambulance services kept rising in the year. During 1997, ambulances answered 367 064 emergency calls, representing an increase of 5.6 per cent compared with 1996.

Non-emergency ambulance services were transferred to the Hospital Authority in October 1995, and in April 1997 the Auxiliary Medical Service took over the non- emergency ambulance service originating from private hospitals, the Social Welfare Department and Department of Health for the whole territory.


      The programmes to commission the second Mobile Casualty Treatment Centre to strengthen the ability of the Fire Services Department to handle multiple casualty incidents and to equip all ambulances with automatic external defibrillators reached a final stage and will be completed in early 1998.


A new computer-aided Trunked Radio System has been put into service since September. It provides more radio channels and restricts unauthorised users from intruding into the system. The system also provides better communication between the Fire Services Communication Centre and all fire appliances, fireboats and ambulances, thus improving operational efficiency.

      The department is implementing an Address Transmission System to enhance the accuracy and efficiency of the mobilising of operational resources. The system will transmit the address of an emergency call to stations responding to the call. With the address printed out, the responding crews can attend to the reported address more expeditiously. The system is expected to be commissioned in late-1998.

      Upgrading of the Ambulance Mobilising software is also in progress. The upgraded system will be able to select the most appropriate type of ambulance to respond to a call. For example, Emergency Medical Assistant Ambulances will be despatched for trauma cases and ambulances equipped with a defibrillator will be sent for cardiac


Fire Prevention

The department formulates and enforces fire safety policies and regulations. It also assists and advises the public on fire protection measures and the abatement of fire hazards. The Fire Protection Command places great emphasis on public education on fire prevention.

A Community Relations Unit was set up in September to strengthen community education and relations, with a view to arousing the fire safety awareness of the public. The 'Fire Safety Ambassador' scheme launched in May aims to provide fire safety training to members of the community, who will then disseminate such knowledge and skills generally. To kick off the scheme, boy scouts, girl guides and members of the department's Public Liaison Group were trained as Fire Safety Ambassadors. Arrangement was also made with the Housing Department to conduct 'Train-the-trainer' courses for members of the Estate Management Advisory Committee, who will then provide training to the residents of various public housing estates. The scheme will be extended to other sectors of the community. At the end of 1997, 534 persons had been trained as Fire Safety Ambassadors and trainers.

A fire prevention campaign with the theme 'Fire Safety in Commercial Buildings and Industrial Buildings' was launched on November 30. The Fire Protection Command produced 2000 video tapes and 20 000 fire safety pamphlets for distribution to the management bodies of the commercial and industrial sectors and the public respectively. Other publicity activities included broadcast of fire safety messages through radio before and after the launching of the ceremony, fire station open days and exhibitions.




Fire officers gave 857 fire prevention talks to people from different sectors of the community. They were supplemented by exhibitions and demonstrations. Fire Services personnel inspected 113 244 premises of all types and issued 7 582 fire hazard abatement notices for the removal of fire hazards during the year. These helped to ensure that fire prevention measures met the required standards and to enhance public awareness of fire safety. There were 297 prosecutions in cases of non- compliance, with fines amounting to $1,484,020. Prosecutions for obstructing the means of escape in buildings resulted in 159 convictions, with fines totalling $792,260. After the tragic fires at the Garley Building and a karaoke establishment in Tsim Sha Tsui, new legislation was planned to improve fire safety measures in old commercial buildings and karaoke establishments. Before it is enacted, the department will step up inspections and conduct surveys to different types of buildings, with a view to ensuring that fire safety standards in these buildings are properly maintained.

  The Fire Protection Command also sets fire services requirements for new buildings to ensure proper protection for the public. Some 9 564 submissions of building plans, including plans for new airport-related projects, were processed during the year.

Appliances and Equipment

The department operates 661 fire appliances and supporting vehicles fitted with up- to-date fire-fighting and rescue equipment. During the year, four 37-metre turntable ladders, nine 16-metre hydraulic platforms, seven major pumps, one mobile casualty treatment centre, nine mini trucks and one village ambulance were purchased to replace old ones.

The department is building two fireboats, two high-speed diving boats and one diving support vessel. One fireboat will replace the existing Fireboat No. 3 and the other the Fireboat Alexander Grantham. The three diving vessels are to enhance diving rescue services. The new Fireboat No. 5 was completed in October to provide a new service to protect the River Trade Terminal in Tuen Mun Area 38 in 1998.

Staff Training

The Fire Services Training School and the Ambulance Command Training School organise a 26-week initial training for new recruits. For recruit firemen, this covers basic fire-fighting techniques, appliances and equipment, breathing apparatus, ambulance aid and physical training. Subjects such as fire protection, legislation, physics and the science of combustion are also included. Courses for recruit Station Officers also cover incident command-and-control elements.

Altogether 367 recruits, comprising 39 Station Officers and 328 firemen, successfully completed initial training during the year. Moreover, continuation training courses were also arranged for 76 in-service Probationary Station Officers.

Apart from providing initial basic training for the recruits, the Fire Services Training School also conducted various training courses for 1 406 staff of other government departments and private organisations on basic fire-fighting techniques and the use of breathing apparatus. Arrangements were also made for 4 375 members of the general public to visit the Training School.


      The Ambulance Command Training School had a very tight training schedule in the year. To cope with the increase in demand for emergency ambulance services, the school trained 156 recruit ambulancemen from April. It also ran 18 refresher and re-certification courses for 231 ambulance personnel.

In-service training was provided to 8 739 fire and 394 ambulance personnel, while 26 officers were selected to attend various overseas training programmes in the UK, USA, Canada and China. The department recruited and appointed 38 Station Officers, 10 Ambulance Officers, 22 Senior Firemen and Firewomen (Control), 295 Firemen and 158 Ambulancemen during the year.

Buildings and Quarters

     In line with the government policy to provide an emergency response to all areas within minimum set times according to category of risk, the department has continued to plan and build fire stations and ambulance depots at strategic locations to cope with local developments.

      During the year, the Chek Lap Kok Fire Station, Tung Chung Fire Station- cum-Ambulance Depot and Lam Tin Ambulance Depot were commissioned. The Sham Tseng Fire Station was also under construction and scheduled for completion in 1998.

      The department manages 3961 quarters, of which 3 681 are for other ranks uniformed officers. Work completed during the year included 110 new quarters at Fung Shing Street and 27 at Muk Lun Street.

Public Liaison Group

The Public Liaison Group was set up to encourage public participation in monitoring and improving the delivery of emergency fire and ambulance services. Thirty members of the public from all walks of life were randomly selected from among 153 applicants to form the group's fourth-term membership during the year.

Correctional Services

The Correctional Services Department (CSD) administers a wide range of services for adult and young offenders, drug addicts and offenders with psychiatric problems. The services fall broadly under two programme areas prison management and re-integration into society. The CSD also manages detention centres for Vietnamese migrants (VMs) and Vietnamese illegal immigrants (VIIs).

At the end of 1997, the CSD managed 23 correctional institutions, four halfway houses, a staff training institute, an emergency support group, two custodial wards in public hospitals, and two detention centres for VMs. In all, 7 085 staff were looking after 11 463 inmates, 969 VMs, and 3 758 people under supervision after discharge from custody.

In 1997, the prison population remained high and averaged 22 per cent over the certified accommodation, with prisons for adults being the major pressure points. To cope with the perennial overcrowding problem in correctional institutions, a former military camp was converted into Lo Wu Correctional Institution, a minimum security prison. It became operational on August 4, 1997, with a certified




 accommodation of 208. Despite overcrowding which stretched resources, the CSD continued to implement its programmes effectively.

  The number of VMs continued to decrease in 1997 when 5 846 were repatriated. With the declining Vietnamese population in detention centres, the Whitehead Detention Centre was closed in June 1997, which was a landmark achievement in the final chapter of the whole Vietnamese migrant saga.

Male Offenders

 Prisoners are assigned to institutions according to their security rating, which takes into account, among other things, the risk they pose to the community and whether they are first-time offenders. There are 13 prisons for adult males, consisting of four maximum, four medium and five minimum security institutions. One maximum security prison, Siu Lam Psychiatric Centre, accommodates prisoners requiring psychiatric treatment.

Adult prisoners released under the Pre-release Employment Scheme are housed in a halfway house. Residents must go out to work during the day and return in the evening.

Young Offenders

 Prisoners aged under 21 are detained separately from adult prisoners. In 1997, 625 young men and 469 young women were sentenced to imprisonment, and 779 young men and 155 young women were received for custody on remand. Young persons aged between 14 and 20, who are convicted of an offence punishable by imprisonment, may be remanded in custody for a period not exceeding three weeks for assessment of their suitability for admission to a training centre or, for males, a detention centre. For the detention centre, young adults aged between 21 and 24 may also be so remanded. A comprehensive report, together with the appropriate recommendations, will then be forwarded to the courts concerned. In 1997, 6 937 offenders were remanded for suitability reports, and the selection board deemed 3 790 - 3 367 males and 423 females suitable for admission to a training centre or the detention centre.

Training centres provide correctional training for young offenders for periods ranging from a minimum of six months to a maximum of three years. They attend half-day educational classes and receive half-day vocational training. They also receive character development training in the form of scouting/guiding, Hong Kong Young People Award activities and Outward Bound training. On Sundays and public holidays, visits to youth centres, factories, sports centres and country parks are arranged for inmates nearing discharge to provide additional educational and training opportunities and to prepare them for re-integration into society. Upon release, inmates must have suitable employment or a place in school, and will be subject to a statutory period of supervision of three years.

In 1997, 209 young males and 33 young females were sentenced to detention in training centres, while 101 young male offenders and 21 young female offenders were recalled for further training for breach of supervision conditions. After being discharged from training centres, 59 per cent of the male offenders and 91 per cent of the female offenders completed the three-year supervision without reconviction.


       An effective detention centre programme is carried out at Sha Tsui Detention Centre for young offenders aged between 14 and 20 years, and young adults aged between 21 and 24. It emphasises strict discipline, strenuous training, hard work and a vigorous routine. After release, detainees are subject to a statutory supervision period of one year. During 1997, 216 young offenders completed the supervision and 205 were not reconvicted during the period a success rate of 95 per cent.

       Young male offenders identified as having special needs are, on discharge from a training centre or the detention centre, housed at Phoenix House for up to three months before they are permitted to live at home or in other places while they continue to receive after-care supervision.

Female Offenders

Adult females serve their sentences at Tai Lam Centre for Women, which also caters for remand prisoners. Most of these inmates are assigned to work in an industrial laundry, which provides services to government departments and public hospitals. Young females serve their sentences at Tai Tam Gap Correctional Institution, which accommodates remand prisoners, training centre inmates and young prisoners. Since 1994, the medium security Chi Ma Wan Correctional Institution has held adult and young female prisoners to cope with an increasing population of female offenders. A halfway house is provided for adult and young female prisoners released under supervision from the training centre or under the Pre-release Employment Scheme. Residents go to work or attend full-time school during the day and return in the evening.

Drug Addiction Treatment

     Drug addicts found guilty of an offence punishable by imprisonment may be sentenced to a drug addiction treatment centre. They can be detained for two to 12 months, depending on their progress. In-centre treatment is followed by 12 months of statutory after-care supervision.

      The drug addiction treatment programme aims to detoxify, restore physical health and, through the application of therapeutic and rehabilitative treatment, wean addicts from their dependence on drugs. Assistance is also given to drug addiction treatment centre inmates with post-release employment and accommodation problems. Temporary accommodation is available at halfway houses for those in need of such support immediately after release.

To cope with the increasing demand for the treatment of female addicts, Chi Ma Wan Detention Centre (Lower) was converted to a female drug addiction treatment centre with facilities for 250 female inmates. The centre came into operation on December 16, 1996.

Young Offender Assessment Panel

The Young Offender Assessment Panel, comprising staff from CSD and the Social Welfare Department, was established in 1987 to provide magistrates with recommendations on the most appropriate programmes of rehabilitation for young offenders between the ages of 14 and 25. The service provided by the panel is available to juvenile courts and certain magistracies.




Education and Vocational Training

Offenders under the age of 21 attend educational and vocational training classes conducted by qualified teachers and instructors. For educational classes, textbooks compiled by CSD and those supplied by publishers for public examinations and higher level classes are used to provide inmates at different levels with suitable and practical learning material matching their maturity and development. Adult offenders attend voluntary evening classes taught by part-time teachers. Self-study packages and distance learning courses are also available for those who are interested.

  All offenders are encouraged to take part in public examinations organised by the City and Guilds International, Pitman Qualifications, London Chamber of Commerce and Industry Examination Board, and the Hong Kong Examinations Authority. Young inmates may sit for the Hong Kong Certificate of Education Examination as school candidates, and formal classes up to certificate level are provided for them. Adult inmates can sit for the examination as private candidates. Some offenders, mostly adults, have also participated in degree courses offered by the Open University of Hong Kong and other academic institutes.

  Vocational training programmes are provided to help young inmates cultivate good work habits and discipline, acquire employable skills, obtain recognised public qualifications, and engage in productive work.

  A Prisoners' Education Trust Fund set up with charitable donations in 1995 provides financial assistance to prisoners in educational pursuits, in the form of grants to cover course or examination fees, and expenses on reference books.

Medical Services

All institutions have their own hospitals or sick bays providing basic medical treatment, health and dental care. Inmates requiring specialist treatment are either referred to a visiting consultant or to specialist clinics in public hospitals. Although HIV infection and AIDS are not a problem among inmates, the CSD has established guidelines for its staff in handling such cases, as well as a programme of education and prevention.

  Ante-natal and post-natal care is provided in institutions for female inmates, but babies are normally delivered in public hospitals. Siu Lam Psychiatric Centre treats prisoners with mental health problems, and offers psychiatric consultations and assessments for inmates r