16 Dec 2009

Members' Motions 'Formulating operational standards for public organizations’

Good morning, Deputy President and Honourable colleagues. I have to thank Mrs Regina IP for proposing this motion this morning, which gives us the opportunity to have an in-depth discussion on the operation of public organizations. Many colleagues have talked about the objectives, functions and merits of setting up public organizations, so I am not going to make any repetition. I believe Members have listened to many speeches, and they are aware that the annual audit reports issued by the Director of Audit invariably contain a lot of criticisms against various public organizations, such as the Applied Science and Technology Research Institute, the Hong Kong Tourism Board, the Equal Opportunities Commission and more recently, the Hong Kong Productivity Council. Over the past few years, we have not seen any improvement on the part of these organizations. This gives people the impression that the many public organizations have already grown into independent kingdoms marked not only by the wasteful use of public money but also by chaotic administration. Certain public organizations have even stepped beyond the objectives and terms of reference laid down at their inception.

Deputy President, when I joined the Legislative Council last year, I had the opportunity to join the Public Accounts Committee. Having read two audit reports, I turned very concerned about the corporate governance of public organizations. I therefore wrote to the Chief Executive, stating that any sole reliance on the codes of practice and guidelines issued by the Government could not adequately tackle the problems with the governance of public organizations. The Government should require public organizations to submit self-assessment reports, so as to make the managing boards of these organizations realize that apart from understanding the guidelines and requirements issued by the Government, they must also conduct self-assessment to check whether their organizations have strictly adhered to such guidelines and requirements in operation. If any non-compliance or inadequacies are identified, they must be pointed out in their self-assessment reports. This arrangement is in line with the requirement applicable to listed companies, under which any failure to follow the code of practice and guidelines on the corporate governance of listed companies issued by the Hong Kong Exchanges and Clearing Limited must be disclosed in the annual report of the listed company concerned. If the listed company has any justifications for non-compliance, a full account must be given. After a public organization has submitted its self-assessment report to the authorities concerned, the relevant policy bureau can follow up the case. In case there is any problem, it can be identified before the Director of Audit conducts an audit, and prompt rectification can be made. Since there are many public organizations, if we rely solely on the audits conducted by the Audit Commission, it may take at least ten years, or even more, to audit all public organizations one by one. I believe the public will definitely disallow such wastage of public money, nor will they accept the turning of public organizations into a "malignant tumor" of society, to put it a bit crudely.

Deputy President, I am of the view that besides requiring the submission of self-assessment reports to facilitate appropriate follow-up actions, we must also conduct studies on some other issues. One of the issues, which has also been mentioned by Members, concerns who should be appointed to the managing boards of public organizations. The sound operation of public organizations is after all decided by the quality of their managing boards and senior management. I very much agree with those colleagues who said earlier that appointments should be based on the meritocratic principle, and capable persons and persons with vision should not be shut out for reasons of divergent political convictions. I hope the Government can seriously consider how improvement is to be made.

Another point is that as mentioned in Mrs Regina IP's original motion, issues related to the declaration of interests, handling of conflicts of interests and exit control of the Board of Directors and management of public organizations should be dealt with seriously. I hope Secretary Prof K C CHAN will give his response to this issue later.

Regarding the self-assessment reports mentioned by me earlier, I am glad to receive a letter of reply from the Secretary on behalf of the Chief Executive, which tells me that my proposal has been referred to the Financial Services and the Treasury Bureau and the Efficiency Unit for follow-up. I earnestly hope that the follow-up work can be completed expeditiously and the proposal can be implemented.

Concerning the proposals in the original motion, I have reservation about two of them. First, it is proposed that all public organizations must be subject to the regulation of a fair competition law. I think that such an across-the-board approach may not necessarily be the most desirable approach. Besides, at the present stage, no fair competition law has been confirmed. I do not mean that a fair competition law will not be passed. I only mean that the specific content of such a law has not yet been confirmed. Hence, I think this proposal is inappropriate. Hong Kong is after all a city rather than a country, so I think this across-the-board approach of subjecting all public organizations to the regulation of a fair competition law is impracticable.

Another point is about the original motion's proposal that public organizations must be subject to value-for-money audits by the Director of Audit (D of A) on a regular basis. I agree that public organizations must be subject to the value-for-money audits of the D of A, but I do not think that this should be made mandatory. The reason is that it is stipulated unequivocally in the Basic Law that the D of A shall have full autonomy and independence in deciding which organizations or departments he or she will audit, as well as the means and approach to be adopted in writing up reports. I think we should respect this requirement. After all, there are only some one hundred staff members in the Audit Commission, and if it has to undertake all the work in this respect, it will encounter great difficulty. Though it is true that certain public organizations have much to be condemned and criticized, many organizations are performing well. I think if a mandatory requirement is laid down for conducting audits on a regular basis, resources may be unable to cope. Alternatively, since public organizations have to appoint their own auditors to carry out annual audits, I think the authorities may consider enhancing this arrangement. Regarding the ultimate solution to these problems, as mentioned by many Members earlier, it all depends on who are appointed to the managing board, the appointee's ability, availability of time and commitment as well as how they declare their interests. I think the crux of the problem lies in these issues.

Thank you, Deputy President.