message - policy address · 1 message since the downturn of the economy instigated by the asian...

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MESSAGE

Since the downturn of the economyinstigated by the Asian financial turmoil, the taskof managing Hong Kong’s public finances hasbecome increasingly challenging. The very healthyannual surpluses before 1998-1999 appear to bethings of the past and we are faced with theprospect of continual annual deficits, at least forthis and the next two years.

Although we have been able to cope withthe deficits from our healthy fiscal reserves, wecannot afford to be complacent. Since 1998-1999our operating expenditure has exceeded our recurrent revenue. This issomething unheard of in the past 50 years. We need to examine criticallywhether this phenomenon is cyclical or structural in nature and if it is thelatter what remedial measures have to be taken. The Task Force on Reviewof Public Finances is in full swing identifying the problems and will submita report to the Financial Secretary by the end of this year. At the same time,the Advisory Committee on New Broad-based Taxes is considering thesuitability of new types of broad-based taxes for introduction in Hong Kong.It has issued a document on the subject for public consultation and will alsocompile a report to the Financial Secretary by the end of 2001.

There is no need to worry that the Government will introduce anynew taxes in the near term. To do so is not only impractical, but not in theinterest of our economy as our economic growth has slowed down in recentmonths. What we are doing now is to take time to work out a portfolio ofwell thought-out and feasible strategies which may need to be implementedin the longer term.

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4th Floor, Main Wing, Central Government Offices, Lower Albert Road, Hong KongFax No.: 2596 0729 E-mail Address: [email protected]

Website: http://www.info.gov.hk/fb

I wish to conclude by stressing that the Administration remains fullycommitted to maintaining a low and simple tax regime, to managing ourpublic finances on a prudent basis, and to fostering a fiscal environmentconducive to continued economic growth and success.

(Miss Denise Yue)Secretary for the Treasury

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Prudent Management of Public Finances

Policy Objectiveand

Key Result Areas

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Our Policy Objective is to maintain sound and stable public financesand to foster a fiscal environment conducive to continued economic growthand success.

Overall Target

Our target is to ensure that the right balance is struck between meetingpublic demand for better government services on the one hand, and adheringto our principles of small government and low taxes on the other.

Progress

We recorded a deficit of $7.8 billion for 2000-2001, compared withthe $6.2 billion deficit forecast in March 2000. The increase in deficit wasattributable to $19.1 billion less revenue, partly offset by $17.5 billion lessexpenditure than anticipated.

To continue to keep our government small and to respond to commentsthat we must exercise greater prudence in our spending before dipping intotaxpayers’ pockets, we have been taking several measures to invigorate thecivil service for enhanced efficiency and cost-effectiveness. We areprogressing with our Enhanced Productivity Programme through which weaim to deliver productivity gains amounting to 5% of our operating expensesby 2002-2003. Various plans under the Civil Service Reform are now beingimplemented for greater cost-effectiveness. We have also taken steps toreduce the number of civil service posts further through natural wastage,staff redeployment and the Voluntary Retirement Scheme.

Even with such measures to enhance cost-effectiveness, we havebudgeted for an expenditure of $254.7 billion in 2001-2002 against estimatedrevenues of $251.7 billion. Despite the budgeted deficit of $3.0 billion, wehave increased only taxes and fees that do not impact on economic growthand have a negligible effect on people’s livelihood. It is our considered view

PRUDENT MANAGEMENT OF PUBLIC FINANCES

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that the interests of the community are best served at this time by a gentlehand on the tiller.

We also achieved the following progress in our six Key Result Areas(KRAs).

1 Ensure that government expenditure grows no faster than theeconomy over time and ensure that resources available areused cost-effectively in providing quality services thatbest meet the needs of the community

Our indicator of performance in this area of work is the cumulativegrowth in government expenditure compared to the cumulative growthin Gross Domestic Product (GDP).

With the productivity savings achieved from the EnhancedProductivity Programme (EPP) launched across the Government andthe subvented sector and stabilised expenditure under theComprehensive Social Security Assistance Scheme, we have been ableto contain the real growth of government spending to 2.8% in our2001-2002 Estimates. This is close to our target of 2.5% growth. Atthe same time, the stronger than expected growth in GDP in 1999 and2000 has allowed us to close the gap between the cumulative growthin government expenditure and the cumulative growth in GDP earlierthan forecast. We will maintain our momentum in implementing EPPand continue to push ahead with other initiatives to ensure thatresources are used cost-effectively for the delivery of PolicyObjectives.

2 Maintain an effective revenue collection and protection systemto cover our spending commitments

In 2000-2001, our revenue amounted to $225 billion, compared withour original Estimate of $244 billion. The variance is largelyattributable to the lower than expected investment earnings on ourfiscal reserves and lower than expected revenue from land salespremia. Investment earnings, by nature, are subject to fluctuationsdue to market volatility. We have explored with the Hong KongMonetary Authority (HKMA) various measures to minimisefluctuations in the investment return on the fiscal reserves. After

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careful consideration, we have concluded that despite suchfluctuations, we should continue with the existing arrangements forthe time being whereby the rate of return received on the fiscalreserves placed with the Exchange Fund is directly linked to the returnachieved by the entire Fund. We will monitor the investment returnover the next few years before deciding on the way forward.

To ensure a stable revenue base for the Government, we areconducting a detailed review of public finances. An AdvisoryCommittee is also examining new types of broad-based taxes that maybe suitable for Hong Kong should there be a need to introduce suchtaxes. The Advisory Committee has issued a document “A Broader-Based Tax System for Hong Kong?” in August 2001 for publicconsultation. The Advisory Committee will report their findings laterthis year. In addition, we implemented various initiatives to improvethe efficiency of our revenue system further.

3 Provide sources of government finance

We injected $8 billion into the Kowloon-Canton Railway Corporationin March 2001 to allow major works on the Ma On Shan to Tai WaiRail Link and the Kowloon-Canton Railway Extension from HungHom to Tsim Sha Tsui to proceed.

For the development of Hong Kong Disneyland, we advanced$20 million to Hongkong International Theme Parks Limited (HKITP)in March 2001 from the Capital Investment Fund as the firstdrawdown of the $5,619 million loan to HKITP.

4 Maintain the level of fiscal reserves within established guidelinesthrough prudent management of public finances

Our indicator of performance in this area is the level of fiscal reserves.The level of fiscal reserves as at 31 March 2001 was $430 billion,which was about $14 billion less than the level as at 31 March 2000and about $10 billion short of our target. The decrease is due to thedeficit of about $8 billion for 2000-2001 and a provision of $6 billionin accordance with prudent accounting principles to cover the fall inthe market value of the fiscal reserves during the period from Januaryto March 2001. In the 2001-2002 Budget, we forecast that the levelof reserves would be about $430 billion by end-March 2002, withinthe guidelines laid down in the 1998 Budget.

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5 Improve the efficiency, quality and cost-effectiveness ofGovernment’s central support services

In 2000, we implemented various initiatives to improve the cost-effectiveness and quality of Government’s central support services.Through reduction of paper stock holding, withdrawal of outsidestorage and downsizing, the Printing Department achievedconsiderable cost savings. This has enabled it to reduce charges toother government departments by 10% since May 2001. It alsolaunched the electronic Gazette on the Internet in December 2000 foreasy access by the public. The Government Supplies Departmentcompared the procurement prices of some 280 common stock itemswith their market prices and removed from the stock some 81 itemswhich either have no price advantage or are no longer required. TheGovernment Land Transport Agency reduced its transport pool from153 in April 2000 to 122 in April 2001. The Treasury initiated plansto introduce an Enterprise Resource Planning System across theGovernment to meet our needs for financial management informationin the next decade.

6 Manage Government’s estate cost-effectively and efficiently

The Government Property Agency achieved considerable savings in2000. Expenditure on leased offices was reduced by $19.3 million,exceeding the target by 22%. Expenditure on leased quarters wasreduced by $4.7 million, exceeding the target by 47%. The Agencyalso identified 31 additional under-utilised sites against a target of 16.Fifty-nine of such sites with a total area of about 104 hectares arescheduled to be released for redevelopment or disposal within fiveyears. The average take-up rate of government accommodation wasmaintained at 99.8% in 2000.

Progress on each previously announced initiative under the aboveKRAs is set out in the “Detailed Progress” section of this report.

Looking Forward

To achieve our overall targets this year, we will undertake thefollowing initiatives and targets under each of the KRAs for the coming year.

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We believe that the public sector should not grow at a rate that woulddeprive the private sector of the resources needed for economic growth.Therefore, we have to ensure that the growth of government expenditureover time will not exceed the growth of the economy. Within this expenditurecontrol, we consider competing demands for resources and determinepriorities in a disciplined manner with a view to allocating resources to thoseareas which are most beneficial to the community. We strive to ensure thatresources allocated are used cost-effectively in order to maximise the benefitsto the community.

We will assess our performance in respect of this KRA against thefollowing indicator –

l Cumulative growth in government expenditure compared tocumulative growth in Gross Domestic Product (GDP). Our targetis to keep the cumulative growth in government expenditure inline with that of GDP over the Medium Range Forecast period.

We will pursue the following initiatives and targets to deliver resultsin this area –

1Ensure that government expenditure grows no fasterthan the economy over time and ensure that resourcesavailable are used cost-effectively in providing qualityservices that best meet the needs of the community

Initiative * Target

To control the growth ingovernment expenditure

(Finance Bureau (FB))

To control the growth in recurrentand capital expenditure in 2002-2003 to no more than 4% in realterms

To sustain momentum in theimplementation of the EnhancedProductivity Programme (EPP)

(FB)

To publish at least three issues ofthe EPP Newsletter in 2002

* the bracketed information denotes the agency with lead responsibility for the initiative

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We maintain a simple, low and predictable tax regime. This helps topromote investment and enterprise by ensuring that resources are left, asfar as possible, in the private sector where they can be most productivelyemployed. In doing so, we have to strike the right balance in raising sufficientrevenue to cover our spending commitments in the face of rising expectationsin the community for more and better public services. We are committed toimproving the efficiency and user-friendliness of our revenue collectionsystem and promoting voluntary tax compliance. We are committed tocombating tax evasion, minimising opportunities for tax avoidance, andensuring that all taxes due are fully paid.


l The extent to which revenue collected is sufficient to meetgovernment expenditure. In 2001-2002, our estimated totalrevenue is $251.7 billion against estimated total governmentexpenditure of $254.7 billion.


2Maintain an effective revenue system includingrevenue collection and protection to cover ourspending commitments

Initiative Target

To implement an open bondsystem for dutiable commodities

(Customs and Excise Department(C&ED))

To formulate the necessarylegislative proposals by early 2002

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Initiative Target

To conduct a comprehensivereview of the scope of exemptionsfrom First Registration Tax formotor vehicles with a view toupdating the system

(C&ED)

l To complete consultation withthe motor trade on the results ofthe review by end-2001

l To formulate the necessarylegislative proposals bymid-2002

To provide an electroniclodgement service wherebytaxpayers can submit tax returnsby telephone

(Inland Revenue Department(IRD))

To formulate the necessarylegislative proposals by end-2001

To enhance taxpayer enquiryservice by telephone, by providingsecure access to information aboutthe status of taxpayers’ returns, taxassessment, payment and refund,account and balance, and theposition of their Electronic TaxReserve Certificates

(IRD)

To provide a secure access toinformation service from April2002

To shorten the processing time fornotification of amendments toparticulars on the BusinessRegister by business operators inperson from 10 days to 30 minutes

(IRD)

To provide the service fromJanuary 2002

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Initiative Target

To provide access to the ValuationList and Government Rent Rollon the Internet by propertyaddress and district name

(Rating and ValuationDepartment)

To make the access functionsavailable by April 2002

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We make major investments and provide loans in support of economicand social development to improve Hong Kong’s competitiveness and livingenvironment. In particular, we make strategic investments in statutory bodiesby equity, loans or other means, to finance their major infrastructure anddevelopment projects. In so doing, the Government complements the privatesector as a source of finance. This approach allows us to pump-prime, andattract private sector involvement in major development projects which havecommercial potential, for greater flexibility and cost-effectiveness. We alsomonitor, as a shareholder, the performance of Government’s investments toensure an appropriate rate of return to the community.

We will assess our performance in respect of this KRA against thefollowing indicators –

l Amount of government finance provided to fund majorinfrastructure and development projects. We expect to provide$2 billion for investment and $9.4 billion in loans in 2001-2002.

l Expected returns on government loans and investments. In2001-2002, we estimate a return of $2.8 billion from investmentsmade and $5.2 billion repayments from loans made.



Initiative Target

To seek approval of any financingrequired for the implementation ofvarious railway projects


To consider financing proposalsfrom the two railway corporationsfor the implementation of Shatinto Central Link, Island LineExtensions, Kowloon SouthernLink and Penny’s Bay Rail Linkand to obtain approval from theFinance Committee if any equity/loan funding support is required

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Initiative Target

To seek approval of financingproposals for the proposedInternational Exhibition Centre onthe Airport Island

(FB)

To consider financing proposalsfrom the Airport Authority inrespect of the proposedInternational Exhibition Centre onthe Airport Island and to obtainapproval from the FinanceCommittee if any equity/loanfunding support is required

To offer a second tranche ofGovernment’s shares in MTRCorporation Limited for sale

(FB)

Subject to market conditions, tolaunch the second offering

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We have to maintain adequate fiscal reserves to meet the operating,contingency and monetary requirements of the Government. The Asianfinancial crisis underlines the importance of having robust reserves to caterfor our needs during difficult times. We have entrusted the investment offiscal reserves to the Hong Kong Monetary Authority.


l The level of fiscal reserves being held. The 2001 Budget forecastthat the level of reserves would be about $430 billion byend-March 2002.

We will pursue the following initiative and target to deliver results inthis area –

4Maintain the level of fiscal reserves withinestablished guidelines through prudentmanagement of public finances

Initiative Target

To maintain fiscal prudence in themanagement of governmentexpenditure and revenue andmonitor the established guidelineson the quantum of fiscal reserves

(Finance Bureau)

To keep the level of fiscal reservesat about $430 billion as at31 March 2002

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We provide, through our departments, a range of central supportservices to facilitate bureaux and departments to deliver their servicesefficiently and cost-effectively. This includes financial management,accounting, procurement, land transport and printing. We review the modeof delivery of these services regularly to meet customers’ operational needsand improve customer satisfaction. We also devolve, where appropriate,resource and spending decisions to bureaux and departmental managers inorder to enable them to deploy resources more flexibly to meet theiroperational needs.


l Price competitiveness of common stock items provided byGovernment Supplies Department. Our targets are:

(a) to compare the procurement prices of at least 200 or 12% ofthe common stock items with market prices; and

(b) to eliminate from stock those items for which there is noprice advantage in comparison with market price, after takingoverhead costs into account, except where there are specialreasons to justify their retention.

l Size of the vehicle fleet in Government Land Transport Agency’stransport pools. Our target is to reduce the vehicle fleet from 122in April 2001 to 96 by March 2002, both to reduce cost and toimprove utilisation.

l Charges for printing work. We aim to reduce the charge by afurther 10%, in addition to the 10% introduced in May 2001.

5 Improve the efficiency, quality and cost-effectivenessof Government’s central support services

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Initiative Target


To further enhance the efficiencyof Government SuppliesDepartment’s service andoperation through increasingcomputerisation

(Government Supplies Department(GSD))

To introduce the ElectronicMarketplace System in 2003-2004for low value governmentpurchases

To shorten the delivery lead timefor supply of medical items tohospitals and clinics

(GSD)

To improve the delivery lead timefrom seven to three working daysin 2001

To introduce more environmentalinitiatives in the operation ofgovernment fleet

(Government Land TransportAgency)

To examine the feasibility ofprogressively introducing vehicleswith low emissions (e.g. hybridvehicle, Liquefied Petroleum Gasvehicle) by end-2002

To introduce e-Ordering tofacilitate clients to submit printorders including attachments andto proof-read drafts throughgovernment intranet and theinternet

(Printing Department (PD))

To introduce the facilities to fivepilot clients and to extend to allclients in 2002

To implement a recognisedenvironmental managementsystem and to achieve theInternational Organisation forStandardisation (ISO) 14001certification

(PD)

To complete accreditation byMarch 2002

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Initiative Target

To implement therecommendations made by theTask Force on the Review ofGovernment Financial ReportingPolicy

(Finance Bureau/Treasury)

To publish in October 2003 thefirst set of accrual-basedgovernment accounts for 2002-2003

To upgrade our financialinformation systems

(Treasury)

To implement a new GovernmentFinancial ManagementInformation System (GFMIS) byphases during 2003 to 2007 toreplace the existing GFMIS in allbureaux and departments

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We aim to meet Government’s accommodation needs (including officespace and quarters) in an economical and cost-effective manner, by leasingor purchasing property in the private market or building new governmentpremises. We also aim to optimise the use of sites occupied or allocated forGovernment, Institution and Community (GIC) purposes and to release thosethat are surplus to Government’s needs. We ensure that governmentaccommodation is well managed and properly maintained, therebypreserving the value of the properties and providing a comfortableenvironment for users. We also aim to maximise commercialisationopportunities in existing government properties without affecting the normaloperation of the occupants. We will strive to manage the government estatebetter, in line with Government’s environmental protection objective.


l Take-up rate of government accommodation. Our target is toensure that the average take-up rate reaches 99.8%.

l Annual office rental saved as a result of de-leasing. Our target isto achieve $30 million rental savings as a result of de-leasing.

l Annual quarters rental saved as a result of de-leasing. Our targetis to achieve $12 million rental savings as a result of de-leasing.

l Number of under-utilised or reserved sites identified forredevelopment or release. Our target is to identify 16 additionalunder-utilised or reserved sites.

l Number of government buildings for planned maintenance andrefurbishment. Our target is to complete planned maintenance andrefurbishment of 650 government buildings.

6 Manage Government’s estate cost-effectively andefficiently

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Initiative Target

We will pursue the following initiative and target to deliver results inthis area –

To strengthen statutory control ofalteration and addition works ingovernment buildings

(Architectural ServicesDepartment)

To take over from BuildingsDepartment the vetting andapproval of all alteration andaddition plans submitted byprivate tenants in governmentbuildings from end-2001

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Prudent Management of Public Finances

Detailed Progress

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To achieve results in this area, various initiatives have been undertakenin the past years. Details are set out below –

1Ensure that government expenditure grows no fasterthan the economy over time and ensure that resourcesavailable are used cost-effectively in providing qualityservices that best meet the needs of the community

Initiative * Target # Present Position +

To control the growthin governmentexpenditure


To control the growthin recurrent and capitalexpenditure in 2001-2002 to no more than2.5% in real terms

(2000)

The 2001 Budget hascontained the growth inrecurrent and capitalexpenditure to 2.8% in realterms in 2001-2002. Thisgrowth rate is below theforecast growth of theGross Domestic Product(GDP) at the time andclose to the 2.5% growthspending guidelineannounced by theFinancial Secretary in his2000 Budget Speech.

(Action Completed)

* the bracketed information denotes the agency with lead responsibility for the initiative# the bracketed information denotes the year in which the target was set+ the bracketed information denotes the status of the target

To continue toimplement theEnhanced ProductivityProgramme (EPP)across Government andthe subvented sector

(FB)

To achieve, on top ofthe cumulative 3%productivity gain beingachieved in 2001-2002,an additional 2%productivity gain in theGovernment’s baselineoperating expenditureduring the 2001resource allocationexercise

(2000)

The 2001 resourceallocation exercise is beingcarried out with a view toachieving a 2%productivity gain for 2002-2003 as targetted.

(Action in Progress: OnSchedule)

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Initiative Target Present Position

To sustain momentumin the implementationof EPP througheffectivecommunication

(FB)

To publish at leastthree issues of the EPPNewsletter in 2001

(2000)

We issued two EPPNewsletters in March andJuly respectively.


To undertake an EPPacross Government andthe subvented sector

(FB)

To require departmentsto deliver productivitygains amounting to 5%of their operatingexpenditure betweennow and 2002-2003

(1998)

In addition to thecumulative 3% savings tobe delivered in 2001-2002,government bureaux,departments and subventedorganisations are requiredto deliver the remaining2% savings by the year2002-2003.


To provide funding forthe Capital WorksProgramme to meet theneeds for land supplyfor housing and otherinfrastructuraldevelopments andsubvented buildingprojects

(FB)

To apply $135 billionto capital worksprojects in theprogramme during thefive-year forecastperiod of 1997-2002

(1997)

Cumulative expenditure onthe Capital WorksProgramme for the four-year period from 1997-1998 to 2000-2001 was$107 billion. We plan tospend around $25 billionin 2001-2002.


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To achieve results in this area, various initiatives have been undertakenin the past year. Details are set out below –

2Maintain an effective revenue collection andprotection system to cover our spendingcommitments

To establish anAdvisory Committee toadvise on what types ofbroad-based taxes maybe suitable for HongKong should there be aneed to introduce suchtaxes, having regard tothe overriding principleof maintaining a lowand simple taxationregime and preservingHong Kong’scompetitiveness


The AdvisoryCommittee to completeits work and submit areport to the FinancialSecretary by the end of2001

(2000)

The Advisory Committeehas launched a publicconsultation exercise inaccordance with its termsof reference. It willthereafter prepare its reportfor submission to theFinancial Secretary beforethe end of 2001.


To form a Task Forceto review publicfinances in detail; toexamine whether theGovernment’s projectedoperating deficits up to2002-2003 are cyclicalor structural in nature;whether the existing taxbase, types of tax, taxnet and tax rates areappropriate, and, if not,what changes should bemade

(FB)

The Task Force tocomplete its work andsubmit a report to theFinancial Secretary bythe end of 2001

(2000)

The Task Force hasinitiated studies on keyrevenue items such assalaries tax, profits tax andstamp duties as well asindirect taxes. Aneconomic model involvingdemographic, economicand budgetary variables toconsider governmentfinances into the 2020’s isalso being compiled.


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To form an inter-departmental group toconsider detailedarrangements involvedin introducing a landand sea departure tax,including the collectionmechanism, exemptionarrangements andsafeguards againstabuse

(FB)

To complete the studiesand submit a report tothe Financial Secretaryby the end of 2001

(2000)

The studies have beencompleted and the report isbeing compiled.


To conduct acomprehensive reviewof the scope ofexemptions from FirstRegistration Tax formotor vehicles with aview to updating thesystem

(FB/Customs andExcise Department(C&ED))

To formulate a proposalfor consultation withthe trade by the end of2000

(2000)

The trade is beingconsulted on the proposals.

(Action Completed)

To provide anelectronic lodgementservice wherebytaxpayers can submittheir tax returns,applications andnotifications throughthe Internet or publickiosks

(Inland RevenueDepartment (IRD))

To provide the serviceby the end of 2000

(2000)

The service has beenprovided since December2000.

(Action Completed)

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To provide anelectronic notifyingservice whereby thebusiness communitycan inform theGovernment aboutchanges in businessparticulars for businessregistration purposes

(IRD)

To accept notificationof amendments toparticulars on theBusiness Register bysole proprietors throughthe Internet or publickiosks by mid-2001

(2000)

The service was launchedin September 2001.

(Action Completed)

To explore thefeasibility ofdeveloping an openbond system fordutiable commodities

(C&ED)

To launch a pilotscheme of an openbond system onselected representativewarehouses by early2001

(2000)

The six-month pilotscheme has beencompleted.

(Action Completed)

To implement a five-year InformationSystems Strategy Planwhich includes 12projects

(IRD)

To implement theprojects between 2000and 2004

(1999)

l Two projects have beencompleted on schedule.

l Development work onsix projects is underwayfor phasedimplementation in late2001, 2002 and 2003.

l Feasibility study for oneproject has beencommissioned forcompletion in late 2001.

l Feasibility studies forthe remaining threeprojects are scheduledto begin from late 2002to 2003.


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To provide electronicaccess to selectivebusiness registrationservices

(IRD)

To accept electronicsubmission ofapplications forregistration by soleproprietors andapplications for copiesof extracts of theBusiness Register bythe end of 2000

(1999)

The service has beenavailable since December2000.

(Action Completed)

To develop aninteractive tax enquirysystem where taxpayerscan enquire about theirpayment status and thedetails of tax reservecertificate accountsthrough variouselectronic channels

(IRD)


(1999)


(Action Completed)

To provide newelectronic means fortax payments andpurchase of tax reservecertificates

(IRD)


(1999)


(Action Completed)

To provide electronicaccess to enquiries onrates and rent accountsand updating of ratesand rent payers’particulars

(Rating and ValuationDepartment)


(1999)


(Action Completed)

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To resume fee revisionwhen the quarterlyGross DomesticProduct growth rateturns positive, so as toreduce subsidy to usersof government services

(FB)

Subject to the pace ofeconomic recovery, torevise fees in 2000,having regard to users’affordability andacceptability andfollowing consultationwith the LegislativeCouncil

(1999)

We have decided not torevise four livelihood-related fees (water tariffs,sewage charges, schoolfees and medical fees) inthe current financial year.We will review the timeframe for revision laterand consult the LegislativeCouncil.

(Action in Progress: UnderReview)

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To seek approval offinancing proposal forurban renewal projectsunder the proposedUrban RenewalAuthority (URA)


To obtain approvalfrom the FinanceCommittee of theLegislative Council inconnection with theestablishment of theURA

(1999)

The URA Ordinance cameinto operation on1 May 2001, and the URAwas established on thesame date. Subject to theBusiness Plan anddevelopment schemes tobe drawn up by URA,we will seek FinanceCommittee’s approval of afinancing proposal forurban renewal projects.


To vet and seekapproval for loanproposals for schemesof development or toaddress specialcircumstances

(FB)

As proposals arise

(1999)

We will seek relevantapprovals for new loanproposals for schemes ofdevelopment or to addressspecial circumstances asand when necessary.


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To launch an InitialPublic Offering of aminority shareholdingin the MTRCorporation Limited(MTRCL)

(FB)

Subject to marketconditions launch theInitial Public Offeringin early 2000

(1999)

The new MTR Ordinancecame into operation on30 June 2000 and theMTRCL replaced theMass Transit RailwayCorporation on the samedate. The Initial PublicOffering took place from25 to 28 September 2000.

(Action Completed)

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To achieve results in this area, the following initiative has beenundertaken in the past year. Details are set out below –

4Maintain the level of fiscal reserves withinestablished guidelines through prudentmanagement of public finances


To maintain fiscalprudence in themanagement ofgovernmentexpenditure andrevenue and monitorthe establishedguidelines on thequantum of fiscalreserves

(Finance Bureau)

To keep the level offiscal reserves at about$440 billion as at31 March 2001

(2000)

The fiscal reserves as at31 March 2001 were$430 billion, which wasclose to the target.

(Action Completed)

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5 Improve the efficiency, quality and cost-effectivenessof Government’s central support services

To review our financialreporting policy

(Finance Bureau (FB)/Treasury)

To recommend to theFinancial Secretary bythe end of 2000 thestandard and style offinancial reporting forthe Government

(2000)

The Task Force on Reviewof Government FinancialReporting Policy producedits report in December2000. After acceptance bythe Financial Secretary, thereport was issued forpublic consultation fromMay 2001 to July 2001.After considering thepublic views collectedduring the consultationperiod, the Task Force willdecide the form to beadopted for the accrualbased accounts.


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To develop ourfinancial informationsystems

(Treasury)

To review the existingGovernment FinancialManagementInformation System andto determine by the endof 2000 how best tomeet the need forfinancial managementinformation across theGovernment in the nextdecade

(2000)

Based on the outcome ofconsultancy study andoverseas fact-findingmissions, we have decidedto replace the existingsystem with an EnterpriseResource Planning Systemto meet our needs forfinancial managementinformation in the nextdecade. We aim tointroduce the system inphases between 2003 and2007.


To extend the scope ofthe ElectronicTendering System inthe GovernmentSupplies Department

(Government SuppliesDepartment (GSD))

To issue and receiveelectronically tenders ator above $10 million invalue in 2000-2001

(2000)

The Electronic TenderingSystem has started, sincemid-August 2001, to issueand receive electronicallytenders at or above $10million in value.

(Action Completed)

To set newperformance targets andintroduce more efficientwork processes in thelight of a benchmarkstudy comparing GSD’sstorage and deliveryservices with those inthe private sector

(GSD)

To implement newperformance targets andwork processes in2000-2001

(2000)

New performance targetsto improve delivery leadtime and stock-out ratehave been introduced.

(Action Completed)

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To improve theenvironmentalperformance of thegovernment vehiclefleet

(Government LandTransport Agency(GLTA))

l To arrange for allgovernment dieselvehicles to use ultralow sulphur dieselno later thanend-2000

l All government dieselvehicles have switchedto ultra low sulphurdiesel since July 2000.

(Action Completed)

l To install continuousregeneration traps inover 1 000 EUROstandard dieselvehicles in thegovernment fleet by2001-2002 to reduceemission levels ofparticulates

(2000)

l The feasibility ofretrofitting continuousregeneration traps toEURO I & II standardgovernment dieselvehicles is underreview. The resultsshould be available byearly 2002.

(Action in Progress:Under Review)

To introduce anelectronic GovernmentGazette to providetimely and convenientinformation to usersand reduce paperconsumption

(Printing Department)

To upload theGovernment Gazetteand the sixSupplements onto theInternet by end-2000

(2000)

Electronic Gazette fullylaunched on the Internet inDecember 2000.

(Action Completed)

To provide a Help Deskto render assistance/advice to otherbureaux/departments onprocurement matters

(GSD)

To review, inmid-2000, theeffectiveness of theHelp Desk, which wasestablished in May1999, with a view toidentifying furtherroom for strengtheningthe supporting servicesto bureaux anddepartments andrationalising existingprocedures onprocurement matters

(1999)

In accordance with therecommendations of thereview conducted in May2000, GSD has posted aset of frequently-askedquestions with answers onprocurement matters on theBulletin Board of CentralCyber Government Officefor reference by bureauxand departments. Moreguidelines may be includedfrom time to time whennecessary.

(Action Completed)

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To review the cost-effectiveness of theexisting arrangementsfor furnituremaintenance forquarters

(GSD)

To complete the reviewin 1999 and implementany resulting newarrangements in 2000

(1999)

GSD completed the reviewin December 1999. Toenhance cost-effectiveness,GSD has contracted out itsfurniture maintenanceservice . GSD’s FurnitureWorkshop was closed on1 April 2001.

(Action Completed)

To promoteenvironmentally-responsible purchasing

(GSD)

To explore with otherdepartments thepossibility of makingmore environmentally-responsible purchases(such as recycledproducts), and topurchase such productsin the most cost-effective manner

(1999)

GSD will continue topurchase recycled orenvironmentally-friendlyproducts (e.g. recycledpaper, toners andcartridges, and ultra lowsulphur diesel forgovernment vehicles). AllGSD contractors are nowrequired to pack theirgoods for Government inrecycled packagingmaterials.

(Action Completed)

34


To review the use ofgovernment vehiclessolely for passengertransport

(GLTA)

To implement in 1999a trial scheme on pooltransport, and assessthe cost-effectiveness insix months’ time

(1999)

The trial scheme forenhancing the utilisationof pool transport(e.g. single-trip booking,pooling of departmentalcars) was completed inAugust 2000. It revealedthat only limited transportresources, confined totimes of low demand,could be redeployed.These resources could notbe effectively utilised inthe absence of otherdemand. The scheme willtherefore not be pursuedfurther.

(Action Completed)

To improve theGovernment’s landtransport services

(GLTA)

To complete acomprehensive reviewof pool transportservices and draw up atimetable forimplementing anyimprovement measuresarising from the reviewin 1998-1999

(1998)

GLTA reviewed the pooltransport services in 1999and 2000. The tworeviews resulted in themerging of three transportpools into one with areduced number ofvehicles and drivers. Thepool transport chargesmade to other departmentswere also reduced as aresult of improved fleetmanagement andmobilisation.

(Action Completed)

35


To further enhance theoperational flexibilityof Trading Funds so asto improve services,promote productivityand increase cost-effectiveness

(FB)

To consider anddevelop policy ofenhancing theoperational andmanagement flexibilityof Trading Funds in1998-1999

(1997)

The Trading Funds havedesigned and implementeda set of indicators tomeasure productivity andcost-effectiveness andidentify any areas ofunder-performance.

(Action Completed)

36



6 Manage Government’s estate cost-effectively andefficiently

Improve wastemanagement ingovernment properties

(Government PropertyAgency (GPA))

To extend wasterecycling arrangementsto include plasticbottles and aluminiumcans in all governmentoffices and quartersmanaged by the GPA in2000-2001

(2000)

Collection bins for wastepaper, plastic bottles andaluminum cans are nowplaced in all commonareas of offices andquarters managed by theGPA. On-going postercampaigns are alsoarranged to encouragerecycling.

(Action Completed)

Improve energyefficiency ingovernment properties

(GPA)

To use energy efficientdevices in buildingservices installations inall 54 joint-user officesby March 2002

(2000)

Energy efficiency deviceshave been installed in alljoint-user offices.

(Action Completed)

37


Enhance environmentalawareness in theupkeep of thegovernment estate

(Architectural ServicesDepartment (Arch SD))

To complete a reviewof the use of materialsand constructiontechniques in facilitiesupkeep by 2001 andprovide staff trainingon the use ofenvironmentally-friendly materials andprocesses

(2000)

The review has beencompleted as scheduled.Arch SD issued guidelineson the use of recyclablematerials and energy-saving high efficiency lightfittings. Over 80% of thetraining on environmentalawareness have beencarried out. Theremaining will becompleted by end-2001.


To develop anIntegrated GovernmentProperty Informationsystem to facilitate thereview of existing andplanned use ofgovernment premises

(GPA)

To develop the systemby October 2000

(1999)

The IntegratedGovernment PropertyInformation System hasbeen fully operationalsince October 2000.

(Action Completed)

To review theutilisation andcontinued need ofcanteens in governmentpremises to releasespace for alternativeuse

(GPA)

To close 16 canteens byend-2000 and releasethe space for moreproductive alternativeuse

(1999)

The 16 canteens have beenclosed as scheduled andthe space released hasbeen put to moreproductive alternative use.

(Action Completed)

38


To draw up and rollforward annually aprioritised programmefor reprovisioningexisting users of under-utilised GovernmentInstitution andCommunity sites andfor redeveloping orreleasing such sites

(GPA)

l To draw up a five-year programme for1999-2000 to 2003-2004 by early 1999

(1998)

l GPA has rolled forwardthe five-year programmeto cover 2005-2006.This programme nowincludes 59 (out of atotal of 126) under-utilised sites for whichagreement for releasehas been secured.

(Action Completed)

l To arrange for therelease of twogovernment officesites at Canton Roadand Tung Lo WanHill Road for sale in2001

(1997)

l GPA is progressivelydecanting occupantsfrom these twogovernment officebuildings to tie in withthe disposal of the twosites.


l To enhance supportto governmentdepartments in theirreview of siterequirements andco-ordinate action tobring about themaximum degree ofjoint-userdevelopment

(1997)

l GPA has released 10under-utilised sites andis working on therelease of eight other.In addition, the Agencyis exploring thepossibility of releasingfive other sites that maybe surplus torequirements.


39


To plan and monitorprogress in theconstruction of newgovernment officebuildings

(GPA)

l To plan for theconstruction of theSha Tin GovernmentOffice Building forcompletion in 2001

(1998 and 1997)

l Constructioncommenced in July1999. Works are onschedule for completionby December 2001.


l To plan for theconstruction of aworks depot andgovernment officebuilding in ChaiWan for completionin 2003

(1998)

l The original proposalhas been superseded. Analternative proposal toconvert a former aircargo building at KaiTak for the purpose,approved by FinanceCommittee, is nowunderway and scheduledto be completed by late2003.


To implement afurniture replacementprogramme tomodernise officeenvironment andachieve more efficientuse of space

(GPA)

To implement theprogramme involvingabout 350 000 m2 ofoffice space between1999 and 2004

(1998)

GPA has completedfurniture replacement for165 000 m 2 of officespace. The target figureof 350 000 m2 will bereviewed, because overtime, some of the officesincluded in the programmehave already beenreprovisioned with newstyle furniture.

(Action in Progress: UnderReview)

40


To refurbish andupgrade the conditionof old governmentbuildings to preservetheir value and toimprove theenvironment for staffand the public visitingthese governmentoffices

(Arch SD)

To refurbish 268buildings in 1997-1998,346 buildings in1998-1999 and 450buildings in 1999-2000

(1998 and 1997)

Refurbishment of thebuildings has beencompleted as scheduled.

(Action Completed)

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