All fellow engineers are requested to read the following Budget debate speech

Remarks on the Appropriation Bill 2004
at the Legislative Council
on 21st April 2004

Madam President

I must commend our Financial Secretary, Mr Henry Tang Ying-yen, for lending us his ears. Indeed, he has actually acted on some of the proposals put forward by members of this Council including myself.

Measures conducive to economic recovery

In this Chamber about the same time last year, I queried why the government had to achieve fiscal balance by 2006-7 as set out in the Budget of last year. The rigid approach in reducing deficit for attaining that target in 3 years’ time almost bordered on obsession and served no particular purpose. It would probably send our economy further on its downward spiral.

In this connection, I raised the issue on many occasions with the Chief Executive Mr Tung, Financial Secretary Mr Tang and his predecessor urging the government to take a more flexible approach in restoring fiscal balance so as to introduce more fiscal policies to spur the economy. Now, the government is finally able to see the point. I am happy to learn in this year’s budget that the government has agreed to extend its deadline for eliminating fiscal deficit for 2 years to 2008-9. The extension of the deadline will definitely make the public feel better in the present state of economy and boost their confidence in the future.

Indeed, the government is also receptive to the idea of issuing securitisation instruments and bonds to finance major infrastructure projects. Nevertheless, I am worried that the government may simply take these steps to help finance the earmarked infrastructure projects which are $15 billion short in funding. If the initiatives in issuing bonds are to make a meaningful impact on our economy, proceeds from the sale of $6 billion in bonds, based on revenues from 5 government-owned tunnels and the Tsing Ma Bridge, and another $20 billion bond issuance must be used for projects other than or in addition to those totalling $29 billion already earmarked. As we all know, starting infrastructure projects will spur economy and create employment opportunities. But it will also require huge amount of capital. Take the Harbour Area Treatment Scheme (HATS) as an example, its first stage alone already cost $8.3 billion.

The $20 billion figure in bond issuance is obviously on the conservative side and is barely sufficient to finance new infrastructure projects of moderate scale. Given the fact that Hong Kong’s economic fundamentals and public finances are still in good shape, I believe that the Financial Secretary should consider raising the amount of public borrowing to at least $100 billion. The revenues so raised must be used to finance new projects in order to make a real boost to the economy. After all, it is wise for the government to tap the private sector’s deposit of $3,600 billion sitting in local banks earning unattractive interest rates. In any circumstances, the government must keep the public informed of what exactly it is going to do with the sale proceeds or what infrastructure projects it is going to undertake. Simply telling us that they will be used for financing capital projects is not good enough.

Essential infrastructure for the development of Hong Kong

I welcome that the government has made a priority of actively promoting logistics industry with the development of a value-added Logistics Park on Lantau Island. Besides the huge development potential in its own right, a well-developed logistics industry will allow us to reap the opportunities arising from the economic integration of the Pearl River Delta Region (PRD) and give us a head start in international trade.

Talking about the economic integration with the PRD, cross-boundary transport networks and facilities must be strengthened as a matter of urgency. For the purpose, the government should expedite the improvement works at major road crossing points including Lok Ma Chau, Lo Wu and Sha Tau Kok, and the construction of the Shenzhen Western Corridor. The government should speed up the study on the proposed Zhuhai-Hong Kong- Macau Bridge as well as all the necessary supporting infrastructure and the express rail link between Guangzhou, Shenzhen and Hong Kong with a view to reaching an agreement with the Mainland authorities for their early implementation.

On the other hand, I would also like to draw the government’s attention to the following projects which have already been dragged on for a long while: the Central Kowloon Route, the South East Kowloon Development and Wanchai Reclamation stage II. I believe that it’s time for the government to clear up the uncertainties surrounding these projects and get them back on track as soon as possible.

Adoption of PPP for new facilities and services only

On the issue of financing capital projects, it is worth noting that the government has further expanded the scope of the Public Private Partnerships (PPPs). While I have been advocating Private Finance Initiatives (PFI), I believe that the government should use such an arrangement to encourage private companies to initiate public works projects, which are not already on the government’s list and definitely NOT existing facilities. But it is important that sufficient manpower should be deployed from the works or related departments to monitor the works being undertaken by private companies/contractors.

In any case, facilities pertaining to essential services such as water supply must not be brought into government’s proposed PPP. The Sha Tin Water Treatment Works falls into this category and the proposed inclusion of such existing facilities into the PPP is particularly worrying. Trials of other countries in privatising similar facilities resulted in a lapse of water quality which raised serious safety concern to the public health. This was exactly what happened to Sydney and Adelaide in Australia, when these cities privatised their waterworks resulting in very serious consequences. In case of Atlanta of the USA, the city pulled the plug on its water privatisation deal in 1993 when the promised savings never materialised. I am of the view that the government should drop the proposed PPP of Sha Tin Water Treatment Works or any other existing water treatment plant drawing from other countries’ bitter experiences.

Recurrent funding for public works projects

Earlier this year, the Chief Executive has mentioned in his Policy Address that the government plans to earmark an average of $29 billion per year for capital works projects for the next five years. Paragraph 38 of his Policy Address goes, ‘Apart from providing funding for the preliminary feasibility studies of these public works projects, we (the government) have also secured funding for their operation’. According to my understanding, the Chief Executive’s initiative is to reverse the policy as laid down in a circular issued in August 2002 by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, who has just left the Chamber, calling for suspension and cancellation of some infrastructure projects and maintenance works and requiring all works Group departments, and indeed all departments, to find their own funding for recurrent expenditure of any project they intend to undertake.

To my knowledge, the above mentioned circular still stands and the new policy has yet to be put into full effect. When I raised the issue with the Financial Secretary and the Secretary for Financial Services and the Treasury, they told me the otherwise and that funding for related items have been released to departments. But I have been told by reliable sources that the new policy has been applied only in selective areas such as staff costs. Funding policy on other areas including maintenance costs remains uncertain. In this regard, I would like to invite the Financial Secretary to give us a clear indication on the actual government policy in this respect, whether what the Chief Executive says in paragraph 38 of his Policy Address is only lip service.

Conclusion

Madam President, there is growing evidence that Hong Kong is on the road to economic recovery. However, some sectors including those of engineering and construction have yet to benefit from the growing economy. In order to keep the momentum of the economic growth, we must ensure a healthy recovery of the construction industry which has always been a major pillar of the local economy. Meanwhile, we must also keep investing in our infrastructure and building works to meet the requirements in the future. Madam President, against this background, I give my comments on the Budget.

With these remarks, I so submit.