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HONG KONG’S INDEPENDENT THINK TANK

FINANCING OF ENVIRONMENTAL INFRASTRUCTURE IN HONG KONG

BY JULIA SURMAN AND KYLIE UEBERGANG JULY 2003

CIVIC EXCHANGE ROOM 701, HOSEINEE HOUSE, 69 WYNDHAM STREET, CENTRAL, HONG KONG TEL: (852) 2893-0213

FAX: (852) 3105-9713

www.civic-exchange.org

Financing of Environmental Infrastructure in Hong Kong TABLE OF CONTENTS ABREVIATIONS AND ACRONYMS ............................................................................ i EXECUTIVE SUMMARY .............................................................................................. ii 1.0 General Overview ....................................................................................................... 1 2.0 Regulatory and Institutional Framework................................................................. 2 3.0 Legal Framework........................................................................................................ 3 3.1 Overview ............................................................................................................................... 3 3.2 Public Finance Ordinance................................................................................................... 3 3.3 Cost Recovery Legislation.................................................................................................... 3 3.4 Consumer Protection ........................................................................................................... 4 3.5 Competition Regulation ....................................................................................................... 4

4.0 Government Financing............................................................................................... 5 4.1 Government Accounts.......................................................................................................... 5 4.2 Capital Works Reserve Fund ............................................................................................... 5 4.3 Annual Resource Allocation Exercise (i.e. the Budget) ..................................................... 6 4.4 Government’s Fund Allocation Process - Public Works Program .................................... 7

5.0 User and Polluter Pays Principles ............................................................................. 9 5.1 Overview ............................................................................................................................... 9 5.2 Changes to user / polluter charges .....................................................................................10 5.3 Water Charges .....................................................................................................................11 5.4 Sewage Charges ..................................................................................................................13 5.5 Refuse Transfer Station Charges .......................................................................................14 5.6 Landfill Charges..................................................................................................................15

6.0 Private Sector Involvement...................................................................................... 16 6.1 Overview ..............................................................................................................................16 6.2 Private Public Participation – present and future .............................................................17

7.0 Case studies: Waste, Water and Sewerage ............................................................. 18 7.1 Overview ..............................................................................................................................18 7.2 Waste - Environmental Protection Department .................................................................18 7.3 Water - Water Supplies Department ...................................................................................26 7.4 Sewerage - Drainage Services Department ........................................................................29 ACKNOWLEDGEMENTS ............................................................................................... 33 APPENDICES ................................................................................................................. 34 Appendix A - Summary of the Consultative and Regulatory Framework ..................................35 Appendix B - Summary of Environmental Legislation in Hong Kong .......................................38 Appendix C - Summary of the PWP funding and resource allocation process ..........................43 Appendix D1 - Landfill Survey - NENT, SENT and WENT........................................................45 Appendix D2 – Refuse Transfer Station Survey .........................................................................47 Appendix E - Survey of Sewerage Master Plan (SMP) Works ...................................................49

Financing Environmental Infrastructure in Hong Kong ABREVIATIONS AND ACRONYMS ACE BOT CE C&D CED CEPT COD CTB CWRF CWRF RAS DBO DSD ExCo ETWB EPD HATS FSTB HKSAR IRP IWRTS LCSD LegCo LegCo EAP MARPOL MRF MTR Corp PFO PPFS PPP PSI PWP NENT RAE RTS SC SCMP SENT SMPs SSDS SSTF TES WENT WFBU WSD

Advisory Council on the Environment Build, Operate, Transfer (Facilities) Chief Executive of the HKSAR Government Construction and Demolition Civil Engineering Department Chemically-enhance Primary Treatment Chemical Oxygen Demand Central Tender Board Capital Works Reserve Fund Capital Works Reserve Fund Resource Allocation System Design, Build, Operate (Facilities) Drainage Service Department HKSAR Government Executive Council Environment, Transport and Works Bureau Environmental Protection Department Harbour Area Treatment Scheme Financial Services and the Treasury Bureau Hong Kong Special Administration Region International Review Panel Island West Refuse Transfer Station Leisure Culture Services Department HKSAR Government Legislative Council Legislative Council Environmental Affairs Panel Marine Pollutant Medium Range Forecast Mass Transit Railway Corporation Public Finance Ordinance Preliminary Project Feasibility Study Public Private Partnering Private Sector Involvement Public Works Programme North East New Territories Landfill Resource Allocation Exercise Refuse Transfer Station Sewage Charge South China Morning Post South East New Territories Landfill Sewerage Master Plans Strategic Sewage Disposal Scheme Sewerage Services Trading Fund Trade Effluent Surcharge West New Territories Landfill Waste Facilities Business Unit Water Supplies Department

Exchange rate US$1.00 = HK$7.8 i

Financing Environmental Infrastructure in Hong Kong EXECUTIVE SUMMARY This report has been written for the OCED as a contribution to the second OCED workshop on promoting environmentally sustainable development in Asia. The workshop has been organised within the OECD programme of co-operation with emerging Asian economies and designed to provide an opportunity for policy dialogue between OECD countries and emerging Asian economies on critical environmental challenges that need to be addressed nationally, regionally, and globally.

The issues discussed in this report cover the Hong Kong Special Administrative Region Government’s (the Government) approach to the management and financing of the environmental infrastructure including an overview of environmental policy making processes and planning initiatives, environmental financing procedures and cost-recovery mechanisms, and the potential role of alternative non-government financing sources for environmental investments. Particular attention has been given to the development and operations of Hong Kong’s water supply, sewerage system and waste disposal and collection as these are the areas that have the most comprehensive cost-recovery mechanisms in place.

To date, the Government has financed the capital development costs of all environmental infrastructure relating to waste, water supply and sewage treatment. However the construction and operations of environmental infrastructure and facilities are not always undertaken within the Government’s works departments and are usually contracted out to pre-approved private sector contractors. Private sector ownership does not exist and private sector involvement is through private sector contracts in stages such as engineering, designing, building, operating or maintaining of environmental facilities. Each respective Government department responsible for waste, water and sewerage are currently at different stages of development in terms of private sector involvement.

While land premiums and taxpayers finance all capital costs for environmental facilities, the Government has implemented cost-recovery user and polluter pay schemes for water supply and sewerage collection and treatment, although these schemes recoup less than 50% of the operation costs incurred by the Government in supplying these services. Solid waste collection operation costs are also largely funded by taxpayers, although a charging scheme exists for private municipal waste disposed at Government owned refuse transfer facilities. However this charging scheme aims only to recoup the incremental costs incurred in disposing private waste and not the total costs of operating the Government refuse transfer facilities. Landfill charges for nonmunicipal construction and demolition waste was approved by the legislature in 1995, although it was never implemented as a result of strong opposition from private waste collectors.

All user and polluter pays charging schemes are regulated through law and changes to the rates of these schemes must be approved by the legislature. This has had an effect on the overall cost recovery of providing these services as in the past the legislature has opposed rate increases during tough economic times.

The writers of the report have not provided opinions on the financing of Hong Kong’s environmental infrastructure, rather their aim was to provide readers with an insight into the regulatory, institutional and legal frameworks and the decision making process and procedures involved in the funding of such infrastructure. The final section of this report includes a number of case studies from each sector, including: waste, water and sewerage, with the intention to illustrate the types of environmental facilities that have been developed in the past, the types of contracts under which these have been administered as well as the relevant financing details, where available.

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Financing Environmental Infrastructure in Hong Kong 1.0 General Overview Environmental infrastructure in Hong Kong for the purposes of this paper refers to water supply, wastewater collection and treatment and municipal solid waste disposal1, as is summarised in Table 1.0. To date, the Government has financed the development and operation of all environmental infrastructure projects relating to waste, water supply and sewage treatment.

However the building and operations of environmental infrastructure are not always undertaken within the Government’s works departments and are usually contracted out to private sector contractors. In the cases of water and sewerage it is the relevant Government departments that oversee the building and operations of such facilities, whereas waste infrastructure is usually contracted out to private sector parties who design, build and operate the infrastructure. In all cases the Government retains the ownership of the physical assets, i.e. the land on which the facility has been built as well as the facilities themselves.

Existing private sector ownership does not exist and private sector involvement is largely through contracts involving third party contractors in stages such as engineering, designing, building, operating or maintaining of facilities. The Government has indicated that they are currently reviewing the ongoing viability of existing financing of infrastructure in light of the tightening public finance budgetary constraints during the past few years.

While the capital costs of all environmental facilities are borne entirely on taxpayers, the operating costs for facilities such as water and sewerage are at least partially born by users as the Government in principle advocates full user and polluter pay policies. The Government hopes to widen this policy in the next few years with the introduction of landfill charges for construction and demolition waste. If the current proposal is approved, charges under this landfill scheme will cover both the capital and recurrent expenditure involved in disposing of this type of waste.

Table 1.0 Summary of Environmental Infrastructure in Hong Kong Collection Waste: • Refuse Collection Point (responsibility of the Environmental • Refuse Transfer Station Protection Department) Disposal • Landfill • Closed Landfill Water Treatment Water: (responsibility of the Water Supplies • Treatments works Department) Water Supply • Reservoirs (including dam maintenance) • Water supply/resources projects (Dongjiang) Supporting infrastructure – common to supply and treatment • Catchwater • Tunnels • Access Roads • Pipeworks • Pumping stations

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Municipal solid waste is defined as solid waste from households, commercial and industrial sources. This excludes construction and demolition waste, chemical waste and other special waste. In Hong Kong municipal solid waste is disposed of at Government owned landfills.

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Financing Environmental Infrastructure in Hong Kong

Sewerage Treatment: (responsibility of the Drainage Services Department)

Collection • sewerage systems • pumping stations Disposal • sewage treatment plants • disposal schemes

While there is no master plan for city development or the development of overall environmental infrastructure projects, there are a number of long-term studies and plans within each Government works departments including Environmental Protection, Water Supplies and Drainage Services, which are outlined in Section 7.0. With all public works projects, including environmental infrastructure, the approval of each project is determined through a legislative based process, which considers the level of public funding available, the need for the project and the competing policy objectives; this process is further outline in the following sections.

2.0 Regulatory and Institutional Framework Figure 1: Organisation chart of the HKSAR Government’s bodies involved in environmental infrastructure2 Chief Executive

Chief Secretary for Administration

Financial Secretary

Department of Finance * Secretary for Financial Services and the Treasury *

Policy Creation Policy Implementation

Department of Administration*

Financial Services and Treasury Bureau

Council on Sustainable Development

(FSTB)

(CSD)

Secretary for Environment, Transport and Works*

LegCo Enviro.

Affairs Panel

(Legco EAP) Advisory Council For the Environment

(ACE)

Environment, Transport & Works Bureau

(ETWB) Sustainable Development Unit (SDU)

Environmental Protection Department (EPD) Drainage Services Department (DSD) Water Supplies Department (WSD)

* Not all government bureaus, departments or personnel which report to this level, are listed

As can be seen in Figure 1 environmental infrastructure in the areas of water supply, wastewater collection and treatment and municipal solid waste disposal currently comes under the directive of the Environment, Transport and Works Bureau, (ETWB) which is overseen by the Secretary for the Environment, Transport and Works. The ETWB consults with the Advisory Council on the Environment (ACE) on matters relating to pollution control, environmental protection and 2

An organisation chart of the Government showing all departments and agencies under each bureau is available at <http://www.info.gov.hk/govcht_e.htm> Page 2

Financing Environmental Infrastructure in Hong Kong nature conservation. Most of the planning, design and implementation of environmental infrastructure projects is initiated by the Environmental Protection Department (EPD), one of the operating departments under the ETWB. Ultimately the responsibility for the environment lies with the Chief Executive (CE) 3 of Government. In this regard the CE relies heavily on his most important advisory body the Executive Council (ExCo) 4 . Further input and advice is also received from the Legislative Council (LegCo) 5 , which must approve all legislation and spending of Government Funds.

Policy is therefore developed through an executive led government. LegCo receives consultation from an active Environmental Affairs Panel (LegCo EAP), which also consults directly with the ETWB, and a panel on Planning, Lands and Works. The LegCo Finance Committee is responsible for scrutinizing the expenditure estimates of all capital works projects (including environmental infrastructure projects) that are presented by the Government.

A Sustainable Development Council and Sustainable Development Unit within government is responsible for issues in relation to sustainable development and all government bureau departments must undertake Sustainability Impact Assessments which are to be included in their submissions to ExCo and the Policy Committee. Figure 1 illustrates the relevant Government bodies involved in the financing of environmental infrastructure, while further details of the roles of these bodies, bureaux and departments are included in Appendix A.

3.0 Legal Framework 3.1 Overview While the approval process of financing environmental infrastructure is strictly adhered to through the Governmentâ&#x20AC;&#x2122;s Public Works Programme, [see Section 4.4], there is no specific legislation that details financing conditions in relation to environmental or indeed any other type of Government infrastructure projects. This is largely due to the fact that the government owns all environmental infrastructure projects and the decision-making criteria determining whether or not to proceed with a project is policy driven.

3.2 Public Finance Ordinance The over-riding legislation which effects financing of public infrastructure projects in Hong Kong is the Public Finance Ordinance (PFO) which sets out the structure of the Governmentâ&#x20AC;&#x2122;s accounts, including the procedure of government and legislative approval for public expenditure6.

3.3 Cost Recovery Legislation Cost recovery mechanisms for environmental based Government services in the forms of user or polluter charges have been legislated in the areas of water, sewerage, private waste collection and chemical waste. Legislation was also passed in 1995 for charging of user fees for the disposal of

3 The position of CE replaced that of the Governor after the Handover of Hong Kong from Britain back to China in 1997.

4 As laid down by the Basic Law, the CE 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.

5 Hong Kong became a Special Administrative Region of the People's Republic of China on 1 July 1997.

Under the Basic Law of the HKSAR of the People's Republic of China, which came into effect on the same day, the HKSAR is vested with legislative power and the Legislative Council (LegCo) is the legislature of the Region.

6 The PFO, Chapter 2 of the Laws of the HKSAR Government can be accessed at <http://www.justice.gov.hk/Home.htm> Page 3

Financing Environmental Infrastructure in Hong Kong construction and demolition waste, however this legislation7 was never enforced due to the strong opposition of waste haulers at that time [see Section 5.6]. A list of relevant legislation dealing with user and/or polluter charges is included in Table 2.0.

Table 2.0 List of environmental user charges legislation Cost Recovery Charge Municipal waste: Water charges (see also Section 5.3)

Relevant Legislation

Purpose of Legislation

Waterworks Ordinance (cap.102), effective 1902.

Bases charges on the amount of water used. Also charges for the installation of waterworks.

Sewerage charges (see also Section 5.4)

Sewerages Ordinance (cap. 463), effective 1995.

Bases sewage charges on the amount of water used.

Private waste collection charges (see also Section 5.5)

Waste Disposal (Refuse Transfer Station) Regulation (cap.354M), effective 1998

Bases charges on the amount of private waste dumped in Government owned refuse transfer stations.

Waste Disposal (charges for disposal of chemical waste) (Amendment) Regulation, 1997, effective since June 1997

Bases charges on the disposal of waste at the Government owned Chemical Waste Treatment Centre.

Oil from ships waste charges

Merchant Shipping (Prevention and control of pollution)(Charges for discharge of polluting waste)(Amendment) Regulation 1997, effective January 1998

Bases charges for the collection and disposal of MARPOL waste8 at the Government owned Chemical Waste Treatment Centre.

Landfill charges (see also Section 5.6)

Waste Disposal (charges for disposal of waste) regulation (cap.354K), enacted in 1995 but not yet effective.

Not yet enacted but current proposal to recover 100% of the operating and capital costs of the landfills.

Non-municipal waste: Chemical waste charges

3.4 Consumer Protection Existing legislation which deals with consumer protection is largely limited to the Consumer Council ordinance (Cap.216), enacted in 1977, which set up a Consumer Council to protect and promote the interests of consumers of goods and services and purchasers, mortgagors and lessees of immovable property. However, “goods and services” as defined in the legislation does not include those supplied by the Government.

3.5 Competition Regulation Competition regulation in Hong Kong relies on a decentralised institutional structure and decision-making process. There is currently no overall competition law in Hong Kong and principal officials, policy bureaux and Government departments have primary responsibility for competition regulation. Only a few sectors such as telecommunications have a well-established regulatory framework9.

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Laws of Hong Kong - Waste Disposal (Charges for Disposal of Waste) Regulation (cap. 354k).

Under the International Convention for the Prevention of Pollution from Ships 1973, as amended by the 1978 Protocol (MARPOL Convention), port administration are required to ensure that adequate reception services are available for certain types of waste, called MARPOL waste.

9 Further discussion of the existing competition regulatory environment in Hong Kong can be found in Civic Exchange’s report entitled “Is Hong Kong anti-competitive? Competition policy and regulation”, March 2003, available at http://www.civic-exchange.org under Publications, March 2003.

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Financing Environmental Infrastructure in Hong Kong 3.6 Environmental Legislation There is much legislation that deals with the treatment of waste, the management of water quality, the distribution of water, the provision of sewerage services and the requirements to conduct Environmental Impact Assessments on infrastructure projects, which are summarised in Appendix B. However, these laws deal with details of the provision of services such as water and sewerage treatment and measures to monitor the collection and control of waste generally, rather than issues specifically pertaining the financing of environmental infrastructure.

4.0 Government Financing 4.1 Government Accounts For control and funding purposes the Governmentâ&#x20AC;&#x2122;s financial activities are undertaken through a General Revenue Account and a variety of Funds including the Capital Works Reserve Fund (CWRF)10. While individual financial accounts are prepared for the General Revenue Account and each of the eight Funds, a set of Consolidated Accounts is also prepared on a cash basis including most of the financial activities of these Funds and the General Revenue Account11. A summary of the Consolidated Account financial information for is included in Table 3.0.

4.2 Capital Works Reserve Fund The CWRF finances the Public Works Program (PWP) (which includes all environmental infrastructure), land acquisitions, capital subventions, major systems and equipment items and computerisation and the payment of redemption money in respect of land exchange entitlements.

The PWP is the vehicle that drives the funding approval and authority for all public works.

Funded entirely by the CWRF, whose income is derived mainly from land premiums and appropriations from the Governmentâ&#x20AC;&#x2122;s General Revenue Account, the PWP effectively prioritises all public works.

The CWRF Resource Allocation System (CWRF RAS) provides for the planning of capital works expenditures on a five-year basis having regard to the resources likely to be available, the claim made on these resources and the relative priority of these claims. As outlined below, all projects have to progress through the PWP within the framework of the CWRF RAS. Capital expenses include only direct capital expenditure as recorded in the CWRF and do not include recurrent expenditure. For instance the railing on an access road to a reservoir is included as recurrent expenditure, which is therefore included in the annual recurrent expenditure of the relevant Government department [see Section 4.3] and not in allocations of the CWRF. Also, capital expenses do not include the amortised cost of land used for the project, as the Government does not account for land as an asset in their accounts. A summary of the CWRF financial information, including details of total PWP expenditure and specific environmental infrastructure related PWP expenditure is included in Table 3.0. As a mid-range forecast, the Government has earmarked a provision of about HK$29 billion (equivalent US$3.72 billion) per year on PWP infrastructure spending for the upcoming 5 years. However, since the precise timing of implementing public works projects depend on many factors, such as progress of planning, the precise project demand, results of public consultation, design, land availability and project readiness programmes of individual projects tend to vary from the original programme timing and it is difficult to forecast the timing of specific projects to be financed in future years. Overall the 10

Other Funds include the Capital Investment Fund, the Civil Service Pension Reserve Fund, the Disaster Relief Fund, the Innovation and Technology Fund, the Land Fund, the Loan Fund and the Lotteries Fund.

11 Certain activities are excluded from the Consolidated Accounts including the assets and liabilities of the Capital Investment Fund and the Loan Fund. For a full discussion of the structure of the HKSAR Government accounts see Civic Exchange, The Budget and Public Finance in Hong Kong; Chapter 4, Hong Kong 2002. Available under Publications 2002 at http://www.civic-exchange.org Page 5

Financing Environmental Infrastructure in Hong Kong ETWB estimates that some HK$6 billion will be spent on environmental infrastructure in each of the years 2002-03 and 2003-04.12.

Table 3.0: Summary of relevant Government financial information.13 Actual 1997-98

(all in HK$ Billions) Consolidated Government Information Total Consolidated Government Revenue Total Consolidated Government Expenditure (CGE) Consolidated Government Net Assets

Actual 1998-99

Actual 1999-00

Actual 2000-01

Actual 2001-02

281.2 (194.4) 457.5

216.1 (239.4) 434.2

233.0 (223.0) 444.2

225.1 (232.9) 430.3

175.6 (238.9) 372.5

57.2

25.7

39.1

32.2

10.7

(0.78) (0.98) (2.45) (2.07) (6.28)

(1.85) (2.17) (3.63) (1.28) (8.93)

(2.11) (2.51) (3.34) (0.24) (8.20)

(1.83) (2.26) (2.75) (0.62) (7.46)

(1.47) (2.12) (2.37) (0.42) (6.38)

(22.4) (49.2)

(22.3) (8.8)

(21.2) (5.0)

(23.1) (6.0)

(23.9) 0.0

(77.9) 45.7

(40.0) 31.4

(34.4) 36.0

(36.6) 31.6

(30.3) 11.9

Total PWP environmental exp as % of total CGE

3.2%

3.7%

3.6%

3.2%

2.6%

Government Works Departments Information Works departments operating expenditure:* Environmental Protection Department Drainage Services Department Water Supplies Department â&#x20AC;&#x201C; operational Water Supplies Department â&#x20AC;&#x201C; purchase of water Total works depts. operating expenditure Total works dept.s operating exp as a % of total CGE

2.98 ^ 4.54 ^ 7.52 3.8%

2.10 1.25 2.23 2.70 8.28 3.4%

2.07 1.34 2.76 2.39 8.56 3.8%

2.41 1.37 2.73 2.38 8.89 3.8%

2.45 1.45 2.85 2.45 9.19 3.8%

CWRF Information CWRF Revenue: CWRF Expenditure: Public Works Programme expenditure, including: Sewerage Drainage Water works Other environmental (mainly solid waste) 14

Sub-total PWP environmental expenditure Other PWP expenditure non-environmental Other CWRF expenditure - non PWP (including transfers to the GRA) Total CWRF Expenditure CWRF Net Assets

* Operating expenditure includes departmental, operating and maintenance expenses but does not include depreciation. ^ Individual breakdown not available; amount combined with the number immediately above.

4.3 Annual Resource Allocation Exercise (i.e. the Budget) The Government bases its overall expenditure and revenue budget on a rolling five-year, Medium Range Forecast (MRF) of cash expenditure and revenue15. As a part of the annual Resource 12

Advised by the ETWB through Access to Information channels.

Figures obtained from Government Accounts accessed at http://www.info.gov.hk/tsy/intrnet/ca.pdf (for the 2000-01 and 2001-02 accounts), and previous government budget figures which can be accessed at: http://www.budget.gov.hk/2003/eng/previous.htm 14 The individual components of total environmental infrastructure capital expenditure have been collected from a variety of sources including the published Government accounts (which are accounted for on a cash basis) and individual Government departmental accounts such as those of the WSD (which are accounted for on an accruals basis). It should therefore be highlighted that there is no complete summary of total expenditure on environmental infrastructure available from the Government and the above figures therefore only represent a best guess estimate.

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Financing Environmental Infrastructure in Hong Kong Allocation Exercise (RAE), which determines each department’s recurrent budget for the year, each policy bureau submits its ‘wish list’ of spending requirements to the FSTB, who then advises a provisional sum to each bureau/ department to cover its recurrent expenditure. The bureau/ department then resubmits a second round of bids for the years RAE and the FSTB, after consultation with a top Policy Committee, then informs the bureau/ departments of their final allocations under the RAE. Non-recurrent or capital project expenditure (which should be clearly distinguished from recurrent expenditure), such as environmental infrastructure projects, is included in the PWP, which are funded from the CWRF. All projects included in the PWP require approval from LegCo and the various advisory committees including the Finance Committee (see the PWP financing process in Section 4.4).

4.4 Government’s Fund Allocation Process - Public Works Program The PWP is effectively a list of all public works projects of a non-recurrent nature. The projects comprise public works on drainage and waterworks projects, port development, government building projects, civil engineering projects (e.g. reclamation and landslip preventive measures), highways projects, new town and urban area development and housing-related infrastructure projects. All environmental infrastructure projects are included in the PWP. The list of PWP projects is arranged according to a system of categories, namely Category C, B, A and D. Each category constitutes the authority to proceed with a specific stage or value of work. This system of categories is designed to integrate the PWP with the CWRF RAS described above.

Figure 2.0 provides an overview of the process involved in progressing a PWP project from identification and planning through to funding approval and implementation, further details of this process are included in Appendix C.

15 Since 1987, the Government has used the Total Expenditure Growth Criterion as a budgetarymanagement technique to carry out the MRF. The MRF extended the previous planning timeframe from one to five financial years. One of the budgetary criteria in the MRF is Total Expenditure Growth, which stipulates: “It is intended that, over time, expenditure growth should not exceed the assumption as to the trend growth in GDP”.

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Financing Environmental Infrastructure in Hong Kong Figure 2.0 Overview of the PWP approval and funding process Becomes a part of the Public Works Program 1. Project Identification, (including feasibility and environmental studies)

2. Client Project Brief

Requires Policy Secretary and FSTB Approval

All projects over HK$15 million (equiv. US$2 million) are subject to a funding approval process through the Public Works Program as illustrated through this diagram.

3. Preliminary Project Feasibility Study

Requires Policy Bureau Approval (including ETWB and FSTB)

Consultation with ACE and the Environmental Affairs Panel

Category C Becomes a part of the Public Works Management System (PW_MS) 4. Detailed Project Deign

Projects under HK$15 million are classified as Category D and will only be subject to this approval process if elected by the relevant Policy Bureau.

5. Funding application made through the Capital Works Reserve Fund Resource Allocation System

Category B Tender process begins

Project is put out for Tender

Category A

Requires LegCo and Finance Committee Approval

6. Public Works Subcommittee Paper

4.4.1 Financial Information Required for the PWP The project planning stage must include estimates of the recurrent and capital of the project as well as a forecast of the expected timing of expenditure. Table 4.0 outlines the different financial information required at each stage of the financing process.

Table 4.0 â&#x20AC;&#x201C; Financial Information required at each stage of the financing process16 Funding Stage Category C

Estimating Requirement (i.e. financial information required) Include an estimate of the recurrent and capital (i.e. one-off) costs of the project as well as a forecast of the timing of expenditure in the PPFS.

For entry to Category B

To include up-to-date quantities current prices and re-assessment of risk elements and contingency items.

Category B

Annually for the CWRF RAS and once selected to start this estimate is then the baseline against which cost and scope changes are compared and justified.

Whenever significant information becomes available which affects costs (for instance when contingency items are settled and/or eliminated, probability of occurrence and extent of risks, elements are changed).

For entry to Category A

Prepared by pricing the tender document Bills of Quantities and include the reassessment of risk elements and remaining contingency items.

Once LegCo approves the works project, the CWRF will meet all capital costs of the project.

Overall the CWRF will meet expenditure on projects included in the PWP provided there are sufficient resources available in the CWRF. Expenditure on each project is limited to the amount approved (i.e. the project estimate) by LegCo.

16

Source: Civil Engineering Department, Project Administration Handbook, Chapter Four: Project Design and Estimates, Rev 4-2. 1998.

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Financing Environmental Infrastructure in Hong Kong 4.4.2 Forms of Contract The Government issues contracts for the construction of specific infrastructure facilities under the PWP, such as bulk supply reservoirs, drinking water or wastewater treatment plants, waste transfer stations, and waste disposal stations as well as for maintenance of these facilities. These projects typically involve the construction and operation of only one facility and not the entire system, and ownership of the facility always remains with the public sector. Both construction and operation contracts are governed by stringent performance standards and requirements which are outlined in the contracts. Whilst contractors build and often operate facilities the relevant government works department will regulate operations to ensure compliance with original contract specifications and legal requirements.

The type of works contract used to govern the financing of environmental infrastructure depends on the type of works project under consideration and the procuring department in charge of the project. A summary of the range of contracts utilized by the Government is included in Table 5.0 Table 5.0 Range of Government contracts Contract type (Illustrations of these contract types are included in some of the case studies in Section 7.0): Service provision Management only of facility Design and Build facility Design Build and Operate facility (DBO)

Usually used for: • • • • • • • •

Water facilities Sewerage facilities After-use for landfill rehabilitation Water facilities Sewerage facilities Refuse transfer stations Landfills Landfill rehabilitation

5.0 User and Polluter Pays Principles 5.1 Overview Generally the Government has endorsed both the "user pays" and “polluter pays” principles17.

The “polluter pays” principle was originally promulgated as Government policy in the 1989 White Paper on Pollution. Under these principles polluters and users of government services should pay the full costs incurred by the Government in the clean up and/ or provision of such services. For the purposes of this discussion the use of the term user pays and polluter pays is interchangeable as all relevant charges are levied on environmental services which involve the clean up and minimisation of pollution.

While there has been widespread support of the polluter pays principle, it has not yet achieved full implementation in any environmental clean-up costs, which are otherwise absorbed by Hong Kong taxpayers 18 . Generally the Hong Kong public are averse to paying for government provided environmental services, and certain sectors have in the past applied enough pressure to stop the implementation of polluter pay schemes such as landfill charging for construction and demolition waste, which was first introduced in regulatory form in 1995 although due to pressure from vested parties, has never been enacted [see Section 5.6].

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As outlined in the ETWB’s Waste Reduction Framework Plan, Chapter 2, “The Polluter Pays Principle requires that those who cause pollution should pay for the costs of treatment of cleaning it up….the User Pays Principle obliges users of facilities or services to pay for the cost of providing them” (this can be accessed at the ETWB website under Publications - see http://www.etwb.gov.hk ).

18 In the year 2001-02 there were 1.2 million taxpayers in Hong Kong representing only 37% of working employees and less than 20% of the total population of Hong Kong.

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Financing Environmental Infrastructure in Hong Kong Similarly, the now abandoned Sewerage Services Trading Fund (SSTF), which was established in 1994 to separate the costs and revenues of maintaining sewerage services initially set the rates sewerage charge rates at a low level based on the understanding that they would be increased gradually in subsequent years 19 . However in 1996, the Government could not secure the Legislative Council’s support to increase charges in line with inflation as the Legislative Council argued that it would affect the livelihood of the public in times of economic downturn. The SSTF was closed by a resolution of the Legislative Council in 1998 basically because it was bankrupt.

While the Water Authority now collects sewerage revenues, there is no longer any initiative to ensure that these revenues cover the full cost of sewerage works operations, which are funded out of the Government’s General Revenue Account. Some polluter pay advocates argue that confusing information, poor publicity and obscuring of the full long term costs, have contributed to the Governments failure to sell the polluter pay principle to the public; instead charges are set by what the Government considers the public would be willing to pay, rather than based on stated economic benchmarks20.

In relation to water and sewerage costs, the Government currently recoups only part of the operating costs of providing these services although the capital costs in providing the infrastructure will continue to be absorbed by the Government through the CWRF fund which is largely finance through Government land sale proceeds. In contrast the proposed landfill charging scheme charge incorporates a portion for both the recurrent operating costs and the capital costs of the landfills. Further details of these charging schemes are included below.

5.2 Changes to user / polluter charges In relation to non-environmental government charges the Government’s policy is to set fees at levels sufficient to recover the full cost of providing the services on a cost recovery basis. To find out the current cost and cost recovery rate-costing reviews are conducted every 4 or so years.

However, like environmental based government charges, these government fees and charges are also subject to macro-economic based policy decisions. For instance many government fees and charges were frozen in 1998 to help the public deal with the recession triggered by the Asian Financial crisis. In June 1999 the Financial Secretary decided to continue the fee revision moratorium until the year-on-year quarterly Gross Domestic Product turned firmly positive. In June 2000 this issue was further reviewed through a sub-committee of the Legislative Council.

The sub-committee proposed that only fees which “would not directly affect peoples livelihood or general business activities21” should be revised.

In relation to environmental infrastructure, the Government charges users for water supply, sewerage treatment, disposal of private waste (at government-owned refuse transfer stations), and disposal of chemical waste. Since 1995 these charges have not been increased and while each respective department conducts frequent reviews of revenue and expenditure levels, the Government maintains its moratorium on rate increases, which it instigated in 1995. However, in the 2002 Budget the Financial Secretary significantly reduced water and sewage charges for a period of one year as a part of a special economic relief package provided to the public due to the

19

The SSTR was a management and financial arrangement to partially recover the cost of government sewerage services from users and the objective was to increase transparency of the operational performance within DSD and allow for more flexibility in matching consumer demand. The revenue from user charges was paid into the fund and not included in government revenue so the public was assured that it was used to solve water pollution problems.

20 See “Polluter partly pays?”, Citizens Party of Hong Kong, 11 September 1997, available at http://www.citizensparty.org/environment/polluterpay.html 21 For further information see Legislative Council Paper No. CB(2)373/00-01 available at http://www.legco.gov.hk/english/index.htm under sub-committees on subsidiary legislation.

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Financing Environmental Infrastructure in Hong Kong tough economic climate22. The reduction of charges was ordered by the Chief Executive under Section 39A(a) of the Public Finance Ordinance23 and approved by the Legislative Council. The reduction in water charges and sewage charges was estimated to lower the expenditure of an average household and businesses by around 0.19 of a percentage point and 0.02 of a percentage point, respectively24 at a total estimated cost to the Government of HK$1.3 billion. There is no information available as to how and why the Government calculated this the rate of reduction or what benchmarks were used to assess the macro and micro affordability of these services.

However the Government advised that generally rate reviews have regard to the cost of providing the services, the existing level of Government subsidy, Hong Kong economic situation, public acceptance, and affordability. While there are no formal measures in place that assesses the affordability of charges for vulnerable groups in society such as the unemployed, the WSD Annual Report outlines measures enabling households to obtain a minimum amount of water without water or sewerage charge levied, â&#x20AC;&#x153;in the first tier [of rate charges], a free supply of 12 cubic meters has been provided for each household every four months. This is regarded as the minimum amount of water needed for health and hygiene by reference to household size in public housingâ&#x20AC;?25. In the year 2001-02 average domestic account charges for sewerage and water were low representing some 0.11% and 0.50%, respectively, of median monthly employment earnings of employed persons by industry and profession in Hong Kong.26.

5.3 Water Charges Water supply to consumers in Hong Kong is individually metered and charged through the Water Authority, which operates under the Director of Water Supplies. As outlined in Sections 3 and 4 of the Water Ordinance, the Water Authority shall have the custody and control of the waterworks and of all water therein and shall acquire and supply water, supervise and regulate consumption of water, require and enforce payment for water and generally administer and manage the waterworks. However the setting of water charges must be approved by the Legislative Council and enacted into law.

A policy and charging structure for the consumption of water was introduced in 1902 and as at 31 March 2002 there were some 2.49 million accounts (of which 2.22 million are domestic accounts) representing metering of 99.9% of the population in Hong Kong27. As illustrated in table 6.0, over 67% of domestic customers/households pay less than HK$50 per month (under normal charges) 22

In the 2003 HKSAR Budget, 6 March 2002, the Financial Secretary announced reductions on both water and sewage charges meaning that overall about 80% of customers (about 2.1 million households for water charges (representing 77% of domestic water accounts) and 1.9 million households for sewage charges (representing 81% of domestic sewerage accounts) plus about 180,000 non-domestic accounts (representing 83% of non-domestic accounts) for both water and sewage charges and about 21,000 flushing accounts) would pay no water or sewage charges for the period of one year, costing the Government an estimated HK$1,237 million. Similarly reductions in Trade Effluent Surcharge would cost an estimated HK$63 million (see http://www.info.gov.hk/gia/general/200203/06/0306318.htm and Legislative council brief file ref.: FIN CR 4/7/2201/01) 23 Section 39A(a) of the PFO provides that the Chief Executive may by order reduce or vary any fee or charge made payable to the Government by or under any ordinance. Variations on charges could also be made under the section 46 of the waterworks ordinance (cap.102) and Section 12 of the sewerage services ordinance (cap.463).

24 For further information see Legislative Council Brief File Ref.: FIN CR4/7/2201/01 available at http://www.legco.gov.hk/english/index.htm under subsidiary legislation.

25 WSD Annual Report 2001-02, pg. 107 see: http://www.info.gov.hk/wsd/ under About WSD; Annual Report.

26 This based domestic account average charges of HK$11 for sewerage and HK$50 for water and on a median monthly employment earnings of employed persons by industry and profession of main employment for the 4th quarter of 2002 of HK$10,000.

27 Total population in HK (estimated as at December 2001) was 6,759,000 per DSD website.

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Financing Environmental Infrastructure in Hong Kong representing less than 0.5% of the average median income in Hong Kong.28. The Water Authority also holds deposits from customers to cover any charges that are or become due.

The WSD Annual Report 2001-02 states, “the major consideration for setting water charges is its financial impact on customers. For domestic users, other factors considered include the implications of consumer price indices, and the intention to avoid any cross subsidization between domestic and other users”29. While a tariff revision is undertaken on an annual basis taking into account five year projections of forecast income and expenditure levels, capital investment, levels of water consumption and inflation or deflation, any proposed rate changes must be placed before the Executive Council prior to being tabled at the Legislative Council (before becoming law). Since the difficult economic times of the mid-1990’s this has been a major stumbling block for tariff increments.

Table 6.0 Distribution of Household Average Monthly Bill 2001-02 HK$ $0 $1-25 $26-50 $51-75 Over $75 Total number of domestic accounts Total population served

% of total domestic accounts 17 29 21 12 21 100 2,221,452 6,750,500

The water tariff for domestic consumption has several tiers with rates going up as the quantity of water used increases, after providing an initial free allowance, while the water tariff for the trade and industrial consumption, however, consists of only one single tier30. The Water Authority is also the recipient of government levied property rates which are based on the market value of property and which heavily subsides the expenses of providing water, as can be seen in Table 8.0.

Table 7.0 Debt collection figures for 2001-0231 Types of actions taken Water bills Reminder bills Final notices Disconnections

Total Number issued 7,129,900 464,500 82,500 5,300

% of total water bills 100.00% 6.51% 1.16% 0.07%

Under the current debt collection procedures the WSD issues a reminder bill, inclusive of a 5% surcharge, to the outstanding account immediately after the due date of the water bill. If the customer does not settle within 2 weeks the WSD issues a final notice to the customer to inform that the water supply will be disconnected unless the bill is settled immediately. A summary of 28 This based a median monthly employment earnings of employed persons by industry and profession of main employment for the 4th quarter of 2002 of HK$10,000, as reported in Table 9A and 9B of the “Quarterly report on General Household Survey – October to December 2002”, Census and Statistics Department of the Government.

29 WSD Annual Report 2001-02, pg. 107 see: http://www.info.gov.hk/wsd/ under “About WSD”; “Annual Report”.

30 For domestic consumers the 1st tier of 12 cubic metres is free of charge; the 2nd tier of 31 cubic metres is charged at $4.16 per cubic metre; the 3rd tier of 19 cubic metres is charged at $6.45 per cubic metre; and the 4th tier for any consumption above the level of 62 cubic metres is charged at $9.05 per cubic metre.

Further details of water charges can be found at http://www.info.gov.hk/wsd/charges.htm.

31 Information supplied by the Water Services Department under Government Access to Information rules.

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Financing Environmental Infrastructure in Hong Kong the debt recovery numbers for the year 2001/02 is included in Table 7.0 (given that the Water Authority also levies and collects payment for sewerage charges, the numbers can also be considered representative of debt collection statistics for domestic sewerage charges).

Table 8.0 Summary of the Water Authority operating account32 2001-02 HK$M

% of total

2000-01 HK$M

% of total

Revenue: Water charges Rates Water supplies to Government establishments Contribution from Government concessions and allowances* Other revenue Total revenue

2,282.5 1,907.8 143.6

40% 33% 3%

2,402.5 2,162.3 169.3

43% 39% 3%

1,295.6 80.2 5,709.7

23% 1% 100%

742.5 96.2 5,572.8

13% 2% 100%

Expenses: Bulk purchase of water Operating expenses Depreciation Total Expenditure Net revenue/(expenditure)

2,445.5 3,314.4 731.2 6,491.1 (781.4)

38% 51% 11% 100%

2,425.2 3,160.2 607.0 6,192.4 (619.6)

39% 51% 10% 100%

* The contribution from the Government was to cover concessions and allowances announced in the 2002 Budget Speech (see Section 5.2).

As outlined in Table 8.0 for the financial year 2001-02, the recurrent cost for providing water supplies in Hong Kong (including the purchase of water from Guangdong and depreciation charges) was HK$6,491 million although the Government was only able to recover some HK$4,333.9 million through water supply and rates charges, which represents recovery of some 66% compared to some 76% in 2000-01 (the difference is largely due to the concessions and allowances announced in the 2002 Budget Speech). However, water charges alone (without the subsidisation of rates) represents 35% and 38% of total expenditure for the years 2001-02 and 2000-01, respectively.

5.4 Sewage Charges A sewage charge (SC) is payable by all water consumers discharging into the public sewer systems based on a standard rate per cubic metre of water consumption33. For the 30 selected trades with effluent strength higher than that of domestic sewage, they are required to pay the trade effluent surcharge (TES) in addition to SC to cover the additional treatment costs. The TES rate for a particular trade is set based on its generic Chemical Oxygen Demand (COD) value, the higher the COD value, the higher the treatment cost and hence the higher TES rate. Trades providing their own wastewater treatment facilities to reduce their effluent strength can apply for reduction in TES rates. The SC is calculated based on water consumption readings provided by the Water Authority (who administers the billing of sewerage charges) and excludes salt water 32 The Water Authority operating accounts, see: http://www.info.gov.hk/wsd/ under About WSD; Annual Report.

33 Sewage charges for domestic Households is at rate of $1.20 per cubic metre of water consumed, with exemption for the first 12 cubic metres, in a four-month billing period; For Trade, Business and Manufacture customers - the charges include a TES payable by thirty specific trades and a SC: (i) the SC is at a prescribed rate of $1.20 per cubic metre of water supplied; and (ii) the TES is equal to the volume of water supplied, multiplied by the appropriate rate specified in Schedule 1 of the Sewage Services (TES) Regulation. (iii) the volume of water used in the calculation of charges is reduced for certain categories of trade, business and manufacture which discharge less water than they are supplied with.

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Financing Environmental Infrastructure in Hong Kong supplied specifically for flushing purposes. The Drainage Authority, which is an administrative arm operating under the Director of Drainage Services, issues TES bills separately.

The Government aims to recover 50% of the costs for treating ordinary sewerage from the SC and 100% of the additional cost for treating TES trade effluent. Both rates are reviewed annually, having regard to the cost of providing sewerage services, the level of Government subsidy, Hong Kongâ&#x20AC;&#x2122;s economic situation, public acceptance and affordability etc., However the rates have been set at the same level since the introduction of the charges in 1995 due largely to the lack of public acceptance of rate increases. The Chief Executive also waived charges for the year 2001-02 as a part of an overall relief package to ease the burden of the community and business sector at a time of economic downturn. This reduction was meant to be one-off and time limited (see Section 5.2).

As at 31 March 2002 there was about 2.3 million sewerage charging accounts, of which about HK$2 million are domestic account holders. In the year 2001-01 about 16% of domestic account holders paid nothing, about 54% paid less than HK$9.3 a month and about 75% paid less than HK$15 per month (when the SC charge is at normal levels). The average domestic account sewerage charge is less than HK$11 per month (0.11% of the average median income in Hong Kong).34.

Table 9.0 Summary of DSD operating account35 2001-02 HK$M

% of total

2000-01 HK$M

% of total

Revenue: Sewage charges Trade effluent surcharges Other revenue* Total revenue

412.2 226.6 798.8 1437.6

29% 16% 56% 100%

456.8 239.8 52.5 749.1

61% 32% 7% 100%

Expenses: Operating expenses Depreciation Total Expenditure Net revenue/(expenditure)

1,172.0 299.2 1,471.2 (33.6)

80% 20% 100%

1,129.40 247.1 1,376.5 (627.4)

82% 18% 100%

* Included a one-off mediation settlement of HK$750 million

As outlined in Table 9.0 in the financial year 2001-02, the recurrent cost for providing sewage services in Hong Kong (including depreciation) was HK$1,471 million although the Government was only able to recover some HK$660 million through sewage and trade effluent charges, which represents recovery of some 45% as compared to a recovery rate of 50% in 2000-01 (the difference is largely due to the concessions and allowances announced in the 2002 Budget Speech).

5.5 Refuse Transfer Station Charges A private refuse transfer station (RTS) charging scheme enacted through the Waste Disposal (Refuse Transfer Station) Regulation (Cap.354) was put in place in 1998 to enable private waste collectors to dispose of their waste in the government owned RTSâ&#x20AC;&#x2122;s. The rates payable are set by the Government, bearing in mind the amount that would be commercially viable to the waste 34 See DSD website at http://www.info.gov.hk/dsd/charges.polluter.htm. Percentage of median monthly income is based on a median monthly employment earnings of employed persons by industry and profession of main employment for the 4th quarter of 2002 of HK$10,000.

35 Sewage Services Operating Accounts 2001/02 which can be accessed at: http://www.info.gov.hk/dsd/aboutus/annual/0102rpt/08e_h.html Page 14

Financing Environmental Infrastructure in Hong Kong collection trade and the amount required for the Government to recover at least the additional costs for handling the waste delivered by private waste collectors. The rates are therefore different for each RTS and range from HK$30 per tonne to HK$110 per tonne and in no way cover the entire operations costs of the RTS. When charging was introduced there were both peak hour and non-peak hour rates in an aim to discourage private waste collectors from delivering their waste to the RTS’s during peak hours when they were heavily patronized by the Government waste collection vehicles. However the peak hour charging was dropped in 2001 as a review indicated that the RTS’s could easily cope with all waste loads at peak times.

The Waste Disposal (Refuse Transfer Station) Regulation (Cap.354) empowers the Director of Environmental Protection to maintain order and counteract the evasion of charges payable.

Table 10.0 Summary of the EPD accounts; extracted from Governments Consolidated Accounts

Revenue: RTS private waste charges Chemical waste charges 36 MARPOL waste charges37 Other revenues (including licenses) Total revenue Expenses: Operating expenses (excluding depreciation) Non-recurrent expenses Total expenses Net revenue/(expenditure)

2001-02 HK$M

% of total

2000-01 HK$M

% of total

4.87 47.76 34.75 16.42 103.80

5% 46% 33% 16% 100%

4.40 67.45 24.88 12.65 109.38

4% 62% 23% 12% 100%

2,446.79 363.25 2,810.04 (2,706.24)

87% 13% 100%

2,117.17 295.29 2,412.46 (2,303.08)

88% 12% 100%

As outlined in Table 10.0 for the financial years 2001-02 and 2000-01, RTS private waste revenue represents only a small percentage of total EPD revenues and chemical and MARPOL waste (which is also a chemical waste charging scheme as outlined in Section 3.3) account for the majority of EPD’s revenues. However overall EPD’s revenues covered only 4% and 5% of its expenses in 2001-02 and 2000-01, respectively. Although we are not able to provide a breakdown of EPD operating and non-recurrent expenses by service category, we are able to estimate, based on previous year averages, that approximately 70% of EPD’s total expenses are made up of expenditure on waste facilities and other waste programs, however we are unable to determine the amount of expenses EPD requires for the operation of its refuse transfer stations.

5.6 Landfill Charges Although the Waste Disposal (Charges for Disposal of Waste) Regulation was introduced and enacted in May 1995, the landfill-charging scheme was not implemented due to strong opposition from private waste collectors 38 . Waste collectors argued that the proposed charging scheme would give rise to cashflow and bad debt problems as they would effectively have to pay for waste disposal and recoup the monies from the actual waste producers (their clients) at some later 36

Current charges recovers 31% of variable operating costs of the Government owned Chemical Waste Treatment Centre.

37 Current charges covers 31% of the variable operating costs of the Government owned Chemical Waste Treatment Centre.

38 Waste collectors are private for commercial and industrial waste but municipal waste is largely collected by the Government.

Page 15

Financing Environmental Infrastructure in Hong Kong stage. In addition, members of the Legislative Council did not support the charging scheme partly in support of the waste collectors and partly in fear that charges would be imposed municipal waste. Since that time, EPD has been working on details for a new landfill charging scheme that is acceptable to all parties involved. The Government put forward a revised proposal, which was discussed at the Environmental Affairs Panel in February 2002 and the panel has urged for the earliest finalisation in order to proceed with the proposed new landfill charging system39.

Although the original proposal was to charge 50% of the landfill disposal cost (gradually increasing to 100% cost recovery), the proposed new system involves charging for 100% of construction and demolition (C&D) waste at HK$125 per tonne which fully covers both the capital (HK$56 per tonne) and recurrent costs (HK$69 per tonne) of the existing landfills but does not cover amortised land costs40. To counter the argument of cashflow problems the EPD would establish a direct settlement system with major C&D waste producers. Nevertheless, waste haulers still remain opposed to the revised scheme. EPD estimates that if the proposed levy of HK$125 per tonne was collected, then the scheme should generate revenues of some HK$280 million per annum, 50% of which would be due to Government projects and 50% which would be collectable from private sector contractors (see Table 6.4 for a summary of EPD’s total expenditure). The costs in implementing the charging scheme (i.e. computerization of the process and sorting facilities) would be absorbed by EPD. The Government has also approached the central government of Mainland China to export construction and demolition waste or fill materials suitable for reclamation projects to Mainland China in order to ease the pressure on Hong Kong’s landfills, which are estimated to fill within the next 10 years. However to date no agreement has been reached. The Government is also urging contractors to send construction waste to government-built sorting facilities and temporary storage sites for reusable waste, although it is estimated that these storage sites will be full by the end of 2004.41.

6.0 Private Sector Involvement 6.1 Overview The current role of the private sector in the financing of environmental infrastructure is usually one of a third-party contractor and not of a facility financer or owner. However, there has been much discussion and debate in recent years about the involvement of the private sector in the financing and ownership of public assets. This has largely arisen from issues such as tighter public finance and concerns that industry is failing to deliver on innovation and productivity through the existing level and structure of private sector involvement. ETWB is currently reviewing the future of municipal waste disposal facilities and is considering the options of Public Private Partnering (PPP) as a way of improving public services by involving the private sector in selected roles and responsibilities otherwise performed by the public sector. DBO contracts are also being reviewed to determine their effectiveness and to consider alternatives that may make better use of public moneys.

The biggest issues impeding the development of PPP in Hong Kong are varied and include: • the lack of financial viability for the private sector to own and operate environmental infrastructure; 39

For further information see Legislative Council Papers Nos. CB(1) 1811/01-02(06) and CB(1) 1811/0102(07) available at http://www.legco.gov.hk/english/index.htm 40 Ibid. Details of the calculation of these figures are not available to the public.

41 See, Chueng Chi-fai, “Sites targeted for dumping of building waste”, South China Morning Post, 22 April 2003.

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Financing Environmental Infrastructure in Hong Kong •

a lack of a clear statement of support of the principle from the Government including policies to back this up;

•

a lack of willingness from the Government and the Legislative Council to change the way it operates, being one deep rooted in central ownership and administration of all social services; and

•

the dichotomy of facilities distribution and integration.

6.2 Private Public Participation – present and future PPP, or, Private Sector Involvement (PSI) as it is described in Hong Kong outlines ways in which the private and public sectors interact to supply public sector services. The idea behind this is that the private sector, operating on more commercial principals, can often create and provide government services more effectively than the public sector (largely though innovation and competition) and as a result use public money more efficiently.

Figure 3.0 highlights the differing scales of public and private interest in asset ownership and service provision. The scales are characterised by increasing risk being transferred to the private sector with the range being from 100% government risk through 100% ownership and operation to 100% private sector risk though 100% private sector ownership and operation. As outlined below Hong Kong’s position along this scale in relation to environmental infrastructure assets varies in relation to different assets with the most risk being apportioned to the private sector through DBO contracts (see Shuen Wan landfill restoration case study in Section 7.2.4).

Figure 3.0 Contracting options illustrating the risk transfer between the pubic and private sector 100% Private Investment Privatisation

Corporatisation

Build, Own and Operate

Build, Operate and Transfer Design, Build, Finance and Operate Design, Build, Operate and Finance

HKSAR Government usual contracts Design Build and Operate

Management

Service

100% Public Investment

Increasing level of Risk Transfer

Many private sector participants agree that while there is greater awareness of PPP/PSI within the Government, to date there has been very little progress towards realistically exploring and/ or implementing such options. However, the Financial Secretary of Hong Kong in his 2003/04 Budget announced that as apart of the Government’s “big market and small government” principle “the Government plans to sell or securitise a total of HK$112 billion worth of assets in the next five years”42. While details of the assets to be sold have not been revealed and in any event are unlikely to be environmental infrastructure assets, this announcement nevertheless 42

2003-04 HKSAR Government Budget, 5 March http://www.budget.gov.hk/2003/eng/budget.htm#Capital%20Revenue

2003,

paragraph

106,

see

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Financing Environmental Infrastructure in Hong Kong allows us to see that the mindset of the Government is moving further away from the principal that all public assets need to be 100% owned43.

There have also been calls by academics and local green groups such as the Conservancy Association to set up an independent, privately owned Water Authority to replace the existing structure of water supply and treatment including sewerage treatment, which is highly fragmented within the WSD, DSD and EPD. Local newspapers have also reported recently that the Secretary for ETWB is seriously considering this proposal, although to date there has been no formal announcement from ETWB. The Conservancy Association cites the example of the Harbour Area Treatment Scheme “a sewerage disposal project, in which a number of departments are involved in tasks such as planning, design, engineering, tendering, construction, operation and monitoring. No single department has responsibility for the whole scheme”44. Academics further argue that as a result of the inefficient provision of services by the public sector “Macau paid 80 cents for one cubic meter of water to its Xijian supplier, Hong Kong paid [HK$] $3.20 for the same volume from Dongjiang”.45

7.0 Case studies: Waste, Water and Sewerage 7.1 Overview All departments under the ETWB (excluding the EPD) are referred to as Works Departments. As mentioned previously the three departments relevant to this study include the EPD, DSD and WSD. This section provides a brief introduction to these departments and includes a number of case studies which illustrate the types of environmental facilities that have been developed in the past, the types of contracts under which these have been administered as well as the relevant financing details, where available. It should be noted that due to confidentiality reasons not all information relating to the financing of the projects was made available to the researchers – this is indicated in the case studies that follow.

7.2 Waste - Environmental Protection Department The EPD began as the Environmental Protection Unit in 1977, was upgraded to an agency in 1981 before becoming a department in 1986. Its responsibilities have been expanding along the way and now include a number of areas including: proposing policies; enforcing environmental legislation; monitoring environmental quality; providing collection, transfer, treatment and disposal facilities for many types of waste; advising on the environmental implications of town planning and new policies; and handling pollution complaints and incidents.

Policies and issues concerning waste, water, air, noise and community awareness all fall under EPD’s remit. However, for the purposes of this report, the Researchers have only focused on the issue of municipal waste in Hong Kong.

43

In areas such as rail and airports the HKSAR Government has already corporatised assets, which are now operated, based on commercial principles although the HKSAR Government predominantly still owns them.

For instance The MTR Corp was established in 1975 as a government wholly owned statutory corporation to operate the mass transit railway system. However the government sold a portion of the shares in an IPO in October 2000. The Airport Authority is also statutory body that operates and maintains the Hong Kong International airport. The Authority is a wholly owned subsidiary of the HKSAR Government.

44 South China Morning Post, “Deficit may force privatisation of HK water services”, 14th March 2003.

45 Ibid (SCMP) Page 18

Financing Environmental Infrastructure in Hong Kong 7.2.1 Overview: Solid Waste - Municipal Waste “Hong Kong has spent a great deal of effort over the last 30 years to ensure its streets are kept free of rubbish. It has put a similar effort over the past 12 years towards collecting and disposing of rubbish in an environmentally-acceptable way. But removing rubbish from sight does not end the problem. Although most people cannot see where their waste goes, the situation could be different in the next decade. Landfills are filling up more quickly than expected and no alternative sites are available yet.”46 Waste collection, waste disposal and treatment are serious issues facing the Government of Hong Kong with Hong Kong’s landfills potentially reaching capacity in as little as eight years despite increased waste reduction and recycling efforts. To deal with waste collection, disposal, and treatment the EPD established the Waste Facilities Business Unit (WFBU). WFBU is responsible for managing all facilities in Hong Kong relating to waste collection and disposal including the Waste Refuse Transfer Stations, the landfills and the closed landfills. More information on these is provided in Section 7.2.4.

In the 1980’s EPD developed the 1989 Waste Disposal Plan as problems with waste capacity were already being recognised. Over the following 10 years EPD further defined its policy on waste and launched the Waste Reduction Framework Plan in 1998, which focused on waste avoidance, minimisation, recovery for reuse and recycling and implementing various waste reduction measures.

The overall objectives of the Waste Reduction Framework Plan are to reduce the amount of waste produced that requires disposal; prolong the life of the landfills; and reduce the increasing costs of transportation, treatment and disposal of waste. As part of the plan a Waste Reduction Committee was established to assist the EPD to devise, co-ordinate and implement waste reduction measures.

The Plan adopts an integrated approach for reducing waste by implementing three programmes, namely: • Prevention of Waste Programme to reduce generation of waste at source and increase the amount of waste recovered for recycling.

•

Institutional Programme which includes setting up a Waste Reduction Committee, Resource Recovery Units in the Environmental Protection Department and sectoral task forces to spearhead and facilitate the implementation of waste reduction in the community.

•

Waste Bulk Reduction Programme which includes technological tools such as waste-toenergy and composting to reduce the volume of waste requiring final disposal.

7.2.3 Survey of environmental infrastructure facilities Appendices D1 and D2 include a summary of all waste treatment and disposal facilities in Hong Kong, namely waste refuse transfer stations and landfills. In addition to this the report presents three case studies in Section 7.2.4 to provide more detailed information on the contract and finance agreements between EPD and private sector companies for the design, build and operation of these facilities.

46

Environmental Protection Department, HKSAR Government, The Environment 2002 Page 19

Financing Environmental Infrastructure in Hong Kong 8.2.4 Case Studies A. Closed Landfill - Shuen Wan a) Overview – Landfill restoration in Hong Kong: Hong Kong has 13 closed landfills that collectively occupy about 300 hectares of land or 1.6% of Hong Kong’s total urban area. These closed landfills need to be restored to minimise their potential impacts on the environment and to enable their development for future beneficial usage.

Restored facilities feature facets such as low permeability final cover, leachate collection systems, landfill gas management systems and environmental monitoring systems. The restored landfills have an operation period of up to 30 years during which normal building development cannot take place due to settlement problems.

The cost of landfill restoration is not consistent throughout the 13 landfills. Costs vary as a result of the amount of infrastructure that is in place at the site prior to the commencement of the restoration contract, the size and location of the site and the required degree of environmental mitigation measures that are required. For instance some landfills have partial gas control systems or leachate removal systems already in place from their days as operating landfills. The location of other complementary facilities such as sewerage treatment may also have a bearing on the overall costs of rehabilitation.

Of the 13 landfills, we have chosen the following case study because this site illustrates the full rehabilitation cycle that has now resulted in the operation of an after-use facility golf driving range that is open to the public and generates revenues, which the contractor is allowed to use to fund his operating costs for the range. Furthermore, the upgrading of the existing driving range to a 9-hole golf course is being planned. b) Shuen Wan Landfill Restoration Project The project’s main contract covers the Design, Build and Operate (DBO) of a management system that will rehabilitate and restore the landfill. This DBO contract is administered and monitored by EPD. The site was identified by an “after use working group”47 as having the potential to be further developed into a golf course. The Hong Kong Jockey Club Charities Trust, a local charity, pledged to finance the capital costs of the golf course although the ongoing operational costs would need to be funded through the annual operating budget of the Leisure Culture Services Department (LCSD)48. In the interim the DBO contractor made an agreement with the EPD to build and operate a golf driving range, which began operating in 1999.

Facts: Area - 50 hectares Capacity - 14.3 metric tonne Year of landfill closure – 1995

47

DBO Project timing: Contract awarded Works commenced Works completion Contract expiry

Nov 1996 Dec 1996 Dec 1997 Dec 2027

The “after use working group”, which was made up of representatives from relevant Government Bureaux and Departments including EPD, Lands Department, LCSD, Planning Department, ETWB and the Home Affairs Bureau, determined that at least 4 of the 13 landfill sites could be potentially converted to recreational facilities in the longer term.

48 The LCSD is a HKSAR Government department that is responsible for providing the community with leisure and cultural services.

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Financing Environmental Infrastructure in Hong Kong

DBO Total Project Cost: Original Total Project Cost (Nov 1996)49 Revised Total Project Cost 50 Made up of: a) Lump-sum capital component (approx. % of revised total) b) Operating/ recurrent component (approx. % of revised total) Payment Schedule: Upfront payment Works completion One year after works completion51 Operating/ recurrent component

HK$ 390 M HK$ 326 M 50% 50%

0% 95% of capital component 5% of capital component monthly in arrears

c) DBO Contract Financing As with all landfill restoration projects, the Government fully finances the DBO Total Project Cost. Once this landfill restoration need was identified and a feasibility study was undertaken on the project, funding for the project was sought in the same manner as other public works in the PWP, which is further outlined in Section 4.4.

Generally in the case of PWP infrastructure facilities, approval would be gained at the same time for the capital and operating costs associated with the project to ensure there is no problem to fund the recurrent costs. The department’s baseline allocation of recurrent costs would simply be increased to tie in with the commissioning of the facility. The annual “Resource Allocation Exercise – Recurrent Expenses” is a process to assess new funds for the next year but would not affect the baseline. (see further details in Section 4.3). Generally the project capital costs would be funded out of the CWRF and the annual operating costs would be funded from EPD’s (or the relevant departments) annual recurrent budget (which is funded through the General Revenue Account). However, in the case of this project and other landfill restoration contracts, both the capital and operating costs are funded from the CWRF. Furthermore, while the DBO Original Total Project Cost, including both the capital and operating components, is estimated prior to building of the facility, EPD must undertake an environmental review of the project every 5 years (from the date of operations commencement) to assess the level of aftercare completion and to gain approval for continued or further funding of the aftercare operating costs. d) DBO Contract details The contract included the following information52: 1. General and special conditions of contract; 2. Specification; and 3. Financial Offer, which is made up of: i. Lump sum to build; 49

The DBO Total Project Cost covers the design, building and operation of the landfill restoration system only. It does not include the costs of any aftercare facility such as the planned 9-hole golf course.

50 The costs were revised after the contract was awarded to reflect the lower than estimated tender price.

51 5% of the capital amount is withheld under a “defects correction clause”. This allows the EPD to ensure that any facility requirements, which are not met within one year of the completion of the works, are rectified. To date EPD have confirmed that 5% is a reasonable amount to withhold on this basis.

52 Due to the sensitivity of the contract details we were not able to review the contract documentation.

However, a senior officer within the EPD outlined the overall contract details and confirmed that the above summary includes the key financial aspects of the contract.

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Financing Environmental Infrastructure in Hong Kong ii. Monthly operation costs; iii. (Non-compliance clauses); and iv. Contingency sum. i.

General and special conditions of contract The general conditions of contract are the common legal requirements that are applicable to a particular type of works. Special conditions of contract include any special conditions which the employer deems necessary in relation to a specific contract.

格式化: 項目符號及編號

ii.

Specification The contract scope, as prepared by the EPD, is to design, build and operate a system to manage the identified problems of the closed landfill, namely gas, leachate and settlement.

格式化: 項目符號及編號

The contract specification is a critical part of the contract as it is the part of the document that effectively allocates the risk between the contractor and EPD. Too much risk pushed on to the contractor will increase the costs of the contract and may jeopardise the overall success of the project and conversely, not enough risk given to the contractor may result a lower contract price but a requirement of greater overall resources from EPD to complete the contracts stated objectives.

EPD advised that rather than containing detailed technical specifications, the contract outlines specific performance standards that need to be achieved. For instance, a performance standard may be that leachate be treated to a specified standard before discharging to the Government sewer or Sewage Treatment Works. These performance standards are developed by EPD and EPD’s consultants prior to the contract being put out for tender. The advantage of this is that the contractor already understands a conceptual design of the project before they tender for it. During the 3-month tender process the contractor is then able to create an outline design, which they know from their experience will achieve the performance standards and for which they are solely responsible. EPD’s experience of these DBO contracts indicates this system allows the contractor to competitively price the proposed system at the tender stage.

Once the contract has been awarded the outline design is then finalised by the contractor over a period of around 6 months (which forms about half of the works building period).

During this time the contractor must submit all detailed designs to EPD and an independent consultant and allow EPD and the independent consultant to comment on the detailed design to ensure that design conforms to the expectation of achieving the stated performance standards. These detailed designs are then modified to take on board EPD’s and the independent consultant’s comments. The acceptable design is then registered and effectively becomes the contract obligation.

EPD are currently reviewing other approaches to contractor involvement. For instance a partnering approach may mean that the contractor could become involved at an earlier stage thus allowing them to provide valuable input in the conceptual design phase of the project. The benefits of this are that it would avoid duplication of work, allow identification of savings to the project and would further share the risks of the contract.

Other countries such as Australia and the UK have adopted these types of partnering arrangements under “Public Private Partnerships” initiatives (further details of these types of arrangements are included in Section 6.2).

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Financing Environmental Infrastructure in Hong Kong 3. Financial Offer i. Lump sum to build The lump sum to build represents the capital portion of the contract costs. As suggested by the name, the amount stated in this category is stated as one lump sum to design and build the facility as outlined in the project specification. Once the lump sum amount is accepted by EPD, the contractor is obligated to deliver the system (designed to achieve the performance standards) regardless of the costs involved to the contractor. In this way, EPD is transferring certain contract risks to the contractor.

Breakdowns for the individual components of the capital project work are available as non-contractual information. However the contract does include a schedule of rates and charges for future work and labour. The breakdown and the rates are useful in agreeing a price if EPD wishes to request the contractor to undertake any further work that has not been priced in the contract. EPD further explained that due to the many unknown factors at the beginning of a contract, there might be requirements which are unveiled during the contract, that were not originally conceived in the conceptual design or will allow a better environmental standard to be achieved. If this is the case, EPD would usually ask the contractor to undertake this additional work at a negotiated price and the breakdown and schedule of rates can be useful in determining this provided that such additional work is within the scope of the project. ii. Monthly operation costs The monthly operation costs represents the operation portion of the contract costs and usually takes the form of a monthly contract fee payable to the project contractor. These costs are fixed for the 30-year period beginning at the commencement of contract and are adjusted for inflation or deflation. Because the level of contaminants are expected to decrease with time the monthly operating costs priced by the contractors reduce as time goes on. The contractor is not required to account for the actual costs; however inflation costs are reviewed and calculated with the contractor every 5 years. iii. Non-compliance clauses Non-compliance clauses are stated for both the capital construction and aftercare operation phases of the contract. These clauses ensure adherence to environmental standards in areas such as air, noise, gas, leachate etc. These environmental standards are aligned with the contract performance standards. While the timing varies from clause to clause, compliance with these performance standards are reviewed regularly and noncompliance with any clause will deduct points so that the contractor will not receive his contract payment in full. For instance half a point would be deducted if gas exceeds 1% of methane. Based on a mathematical calculation, overall non-compliance with contract performance standards would result in EPD deducting monies from the capital or operating payments. iv. Contingency sum A contingency sum of approximately HK$10 million dollars is usually built into the Total Contract Cost to allow for EPD to carry out additional work on the project without having to obtain further funding approval from LegCoâ&#x20AC;&#x2122;s Finance Committee. e) After use Facility Financing There is an existing after use facility on site, a temporary golf driving range (which began in 1999). A golf course is being planned (which is not yet built and which may not arise for some years).

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Financing Environmental Infrastructure in Hong Kong At the time that the golf driving range contract was completed the contracting parties were included the contractor (being the DBO contractor), the Provisional Regional Council and the EPD. The contractorâ&#x20AC;&#x2122;s responsibilities were to collect revenues from the public (based on rates set by the Provisional Regional Council), which would then be used to pay the facility expenses.

No further details of the golf driving range contract have been provided for our review.

B. South East New Territories Landfill - SENT a) Overview of Landfills in Hong Kong Three strategic landfills namely West New Territories (WENT) Landfill, South East New Territories (SENT) Landfill and North East New Territories (NENT) Landfill, are the key waste disposal sites for Hong Kong. Daily, a total of 16,820 tonnes of solid waste are disposed of at these three landfills. All three landfills have been built to include state-of-the-art landfill technology in response to a demanding environmental requirements and standards and to provide maximum capacity for waste disposal in Hong Kong.

In particular it is important to note that the landfills have been designed and constructed, as a secure containment facility incorporating multi-layer composite liner systems covering the entire surface area of the landfill site. Landfill gas and contaminated liquid within the landfill (otherwise known as leachate) is collected and treated to ensure that no untreated discharges are released from the landfill to the environment.

For the purposes of this case study we have selected the SENT landfill for further review. Of the three landfills in operation in Hong Kong it has the highest capital costs as can be seen in Appendix D1. b) Background for SENT The projectâ&#x20AC;&#x2122;s main contract covers the Design, Building and Operation (DBO) of a management system that will operate the landfill. This DBO contract is administered and monitored by EPD. Facts Location Area - site area

Dimensions Capacity Current waste intake Waste types Operation life Aftercare period Contract type

Shek Miu Wan, Tseung Kwan O Land : 50ha Marine : 50ha Total : 100ha Max. height of filling 135 mPD and max depth of waste 100 m 39 million tonnes (based on original design) 43 million tonnes (based on latest landform design) about 7,700 tonnes /1,700 truckloads per day Municipal waste, Construction and Demolition waste and Special waste about 13 years 30 years after completion of operation Design, construction, operation, restoration and aftercare will be carried out by the Contractor to the specified performance criteria

DBO Project timing: Contract awarded Commencement of construction Works commenced Works completion Commencement of operation: Contract expiry

September 1993 September 1993 September 1993 September 1994 September 1994 Estimated 2040 (landfilling plus after-care)

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Financing Environmental Infrastructure in Hong Kong

DBO Total Project Cost: Capital cost Made up of: a) Lump-sum capital component (approx. % of revised total) b) Operating/ recurrent component (approx. % of revised total)

(Sep 2001 price) HK$ 2,311 M

Recurrent costs, estimate only (per annum)

* * (for 2003/04) HK$ 189 M

Payment Schedule: Upfront payment Works completion One year after works completion Construction/ recurrent component * Data in relation to this contract is not publicly available from the Government.

* * * *

Further information on contract agreements and structure relating to SENT are similar to those presented in Case Study A – details for SENT were not made available to the Researchers.

C. Refuse Transfer Station - IWRTS a) Overview – Refuse Transfer Stations in Hong Kong In early to mid 1980’s EPD carried out a review of the waste refuse transfer system in Hong Kong, as a result of this EPD introduced the refuse transfer station (RTS) network, the aim of which was to have RTSs strategically located for public and private waste collectors to reduce haulage distances as well as provide a more efficient waste collection service to the public.

Waste from all the major urban and town centres of population is delivered to RTSs around Hong Kong, where waste is compacted into purpose built containers for onward transportation to strategic landfills. This method of transporting waste in bulk was identified as a means to both greatly reduce overall transportation costs of the waste but also as a means to reducing traffic and environmental nuisances associated with the movement of a large fleet of small refuse collection vehicles on the roads. In addition it has limited the turn around time for the private waste collectors as they can choose the RTS service and no longer need to travel to the outer reaches of the New Territories to dispose of waste at one of the three landfills.

A total of eight RTSs are currently in operation around Hong Kong; differences between the stations including capacity, cost and operations are summarised in Appendix D2: Refuse Transfer Station Survey. Of the eight refuse transfer stations in Hong Kong, we have chosen the Island West Transfer Station as a case study as it is uniquely built inside a cavern and by far the most expensive of all of the transfer stations in terms of design capacity (as can be seen in the survey table). b) Overview of IWRTS The project’s main contract covers the Design, Building and Operation (DBO) of an operation management system. This DBO contract is administered and monitored by EPD. Facts: Location Design Throughput Waste delivered to Major plant equipment Other Facilities

Mount Davis, Kennedy Town (underground inside cavern) 1,000 tonnes per day West New Territories (WENT) Landfill Container Vessels, "Live Floor" System & Compactors, Yard Tractors, Landfill Tractors, Container Handling Units, Road Sweeper, Containers Computerized Weighbridge System, Exhaust Ventilation System with Odour Removal Unit, Waste Water Treatment Plant, Vehicle Wash System Page 25

Financing Environmental Infrastructure in Hong Kong DBO Project timing: Contract awarded Works commenced Works completion Commissioning Date Contract expiry

April 1995 May 1995 April 1997 May 1997 April 2012

DBO Total Project Cost: Capital costs Recurrent costs, estimate only (per annum) Payment Schedule: Upfront payment Works completion One year after works completion Operation payment

HK$ 637 M HK$ 50 M

0% 95% of capital component 5% of capital component Monthly in arrears

Further information on contract agreements and structure relating to IWRTS are similar to those presented in Case Study A – exact details for IWRTS were not made available to the Researchers.

7.3 Water - Water Supplies Department The principal functions and services of WSD are to: • Plan and manage water resources and water supply systems; • Design and construct waterworks projects; • Operate and maintain water supply and distribution systems; • Control the quality of water supply to customers; and • Provide consumer services and to enforce the Waterworks Ordinance.

Note: For the purposes of this report the Researchers will only be focusing on WSD’s responsibilities relating to water supply and distribution in Hong Kong.

Hong Kong's two main sources of water are rainfall from natural catchment and supply from Dongjian in Guangdong Province [see Section 7.3.3], Mainland China. Currently 80% of the water demand in Hong Kong is met by Dongjiang water and the remaining 20% is met by rainwater collected from local catchments and stored in reservoirs. WSD’s scope of work, therefore, covers the whole process from the collection of natural yield from rainfall, the reception of raw water from China to the provision of a supply with a quality of accepted international standards to the consumers' taps in Hong Kong.

Policies relating to water supply are formed in close discussion with ETWB, EPDs’ Waste and Water Division, Water Policy and Planning Group and the WSD. In addition the Advisory Committee on the Quality of Water Supplies formed in April 2000, plays a key role in advising WSD on the water quality and supply issues.

7.3.1 Overview of Water Supply in Hong Kong Hong Kong's supply system includes reservoirs, treatment works, pumping stations, service reservoirs, water mains, catchwaters and tunnels; about a third of the total land area has been established as water gathering grounds. The present total reservoir and water treatment capacities are 586 million cubic metres and 3.9 million cubic metres per day respectively. In addition to this Hong Kong supply system also includes the delivery of water from Dongjiang to Hong Kong in a dedicated closed aqueduct to ensure water remains uncontaminated during transfer.

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Financing Environmental Infrastructure in Hong Kong 7.3.2 Survey of water related environmental infrastructure facilities53 A

Number 17

B

20

C

145

D

38

E

152

F

44

G H

5,574 km 1,400 km

Facility impounding reservoirs - total storage capacity of 586 million cubic metres water treatment works - total daily treatment capacity of 4.55 million cubic metres fresh water pumping stations - total daily pumping capacity of 29.53 million cubic metres sea water pumping stations - total daily pumping capacity of 1.88 million cubic metres fresh water service reservoirs - total storage capacity of 3.8 million cubic metres sea water service reservoirs - total storage capacity of 0.22 million cubic metres fresh water mains sea water mains

Cost HK$ M * 1,600 B+C+E+G = 17,000 D+F+H =2,500 -

* A precise cost breakdown of the all water infrastructures is currently not available from the Government. The above-summarised costs are estimated based on net book values as shown in WSD’s Annual Report 2001-2 (page 135).

7.3.3 Case Study A. Dongshen – Hong Kong Water Supply Scheme a) Overview This project was selected as a case study for the purposes of this report as a result of the very significant role it plays in supplying the population of Hong Kong with 80% of its water supply.

In addition the complexities of the involvement of the authorities from Hong Kong and China makes for an interesting case study. b) History of the Scheme The supply of water from Guangdong, in southern China, is now the major single source of water supply for Hong Kong. Its history dates back to the 1960’s when a scheme between the Hong Kong Government and the Guangdong Authorities was first formulated for Hong Kong to receive a supply of 22.7 million cubic metres of water a year.

Further water agreements were reached between 1964 and 1987, increasing water supplies to Hong Kong from 68 million cubic metres of water each year from 1965 to 660 million cubic metres in 1994. The latest long-term water supply agreement with Guangdong authorities signed in 1989 has secured sufficient water supplies to meet Hong Kong's needs well into this century. It provides an annual increase from 690 million cubic metres in 1995 to 780 million cubic metres in 2,000, through a system with a maximum design capacity of 1,100 million cubic metres per year.

During 1986 water from Guangdong represented only about 52% of the total demand; today, the annual supply is 730 million cubic metres. c) Facts of Hong Kong’s Water Reception and Transfer System Dongjiang, or the East River, is Hong Kong’s major source of water from Guangdong. Water extracted from the river at a point some 83 kilometres north of Hong Kong is pumped through a series of dams built across the Shima River, a Dongjiang tributary. From here water is discharged into the Shenzhen Reservoir before being fed through a series of pipelines to the Shenzhen’s Special Economic Zone and across the border at Muk Wu to Hong Kong. Water received at Muk 53

Source: Water Supplies Department website: http://www.info.gov.hk/wsd/ Page 27

Financing Environmental Infrastructure in Hong Kong Wu is delivered along the following three aqueduct systems for transfer to Hong Kong’s reservoirs and treatment facilities: • Western Transfer System via Au Tau Pumping Station to Tai Lam Chung Reservoir; • Central Transfer System via Tau Pass Culvert to Tai Po Tau Pumping Stations, to the Sha Tin Treatment Works or to Plover Cove Reservoir; and • Eastern Transfer System via the River Indus Pumping Station and the Nam Chung Aqueduct to Plover Cove Reservoir, and to the High Island Reservoir or Pak Kong Treatment Works via the Harbour Island Pumping Station, Tolo Channel Aqueduct and High Island tunnels.

These three routes are inter-connected through the Tai Po Tau Pumping station, which acts as a central control for water flow to Hong Kong throughout the year. d) Summary of Costs and Major Agreements between Guangdong Provincial Government and the HKSAR Government54: Date

Particulars

Nov 1960

1st Agreement for importation of raw water from Shenzhen to Hong Kong 2nd Agreement ‘Agreement on the Supply of Water to Hong Kong and Kowloon from the East River (Dongjiang) 3rd Agreement signed to increase quantity of supply on an annual basis 4th Agreement signed to stipulated that starting from 1989/1990 quanitity of supply would increase up to 660 million cubic meters in 1994/5 5th Agreement – “Agreement relating to abstracting water from Dongjiang for supply to Hong Kong (effective until 2008) Approval given for the “Feasibility Study Report of the Stage III Extension Works of Dongshen Water Supply Scheme”

April 1964

Nov 1978 Dec 1987

Dec 1989

Feb 1990

Cost HK$ M

Breakdown not available

1,580 (pre-paid by HK Government to Guangdong) 1,100 (Total amount of Investment some % was prepaid through water cost from HK and the rest paid by Chinese Authorities)

The Water Authority is also the recipient of government levied property rates which are based on the market value of property.55 The Mainland and Hong Kong have signed a total of 5 agreements on water supply since 1960; if revisions to the agreement were taken into account, agreements have been signed at 10 times.

Each agreement has had the same objective: to increase the quantity of water supply to Hong Kong.

Further agreements have been made as a result of concerns regarding a decrease in the water quality supplied from Guangdong to Hong Kong. In response to this the Guangdong Authorities put forward an engineering proposal in August 1997 for the Hong Kong Government to build a closed aqueduct at an estimated cost of HK$4,096 million. In support of this the Government’s Finance Committee signed a loan agreement with the Guangdong Provincial People’s Government in July 1998 to provide an interest free loan of HK$2,364 million to assist with financing the construction of the closed aqueduct for transporting the water to Hong Kong.

54

Source: Water for a Barren Rock – 150 Years of Water Supply in Hong Kong, Ho Pui Yin, 2001, The Commercial Press 55 15% of the annual rates received by the Government is allocated to subsidize all waterworks operations.

Page 28

Financing Environmental Infrastructure in Hong Kong Under the water supply agreement signed between the Hong Kong Government and the Guangdong Provincial People’s Government signed in December 1989, Hong Kong contracted to take an annual raw water supply quantity with an increment of 30 million cubic metres (mcm) from 1995 onwards. However, the relocation of Hong Kong’s industries to the Mainland has slowed down the demand for water in Hong Kong during recent years and resultantly it was in the interest of Hong Kong to reduce the growth rate as agreed to in the 1987 agreement. Hence in return for the interest free-loan to build the aqueduct, the Guangdong authorities agreed to reduce the annual increase of raw water supply from the original amount to 10 mcm from 1998 – 2004 (resulting in total reductions of 560 mcm during that period).

Based on the agreed schedule for draw down and repayment of the loan and the then current “no gain, no loss” interest rate of 6.26%, calculated on the basis of the overall return on the Exchange Fund on a time weighted basis, the total interest forgone from the loan to the Guangdong authorities is about HK$2,000 million. This amount was offset by the total expenditure savings of some HK$2,240 million56 arising from the reduction in water purchased from Guangdong. 57 7.4 Sewerage - Drainage Services Department The Drainage Services Department (DSD) is charged with the “responsibility for providing the community with a good standard of flood protection and ensuring the effective treatment of wastewater through the planning, construction and operation of the stormwater drainage, sewage treatment and sewerage infrastructures”. 58 Note: For the purposes of this report the Researchers will only be focusing on DSD’s responsibility of ensuring the effective treatment of wastewater through the planning, construction and operation of stormwater, drainage, sewage treatment and sewerage infrastructure.

The amount of sewage generated by the community exceeds 2.4 million cubic metres a day.

DSD’s responsibilities, with regards to sewage, are two-fold, firstly, they must operate and maintain all existing sewerage network and sewage treatment facilities properly and efficiently such that sewage is collected, treated and disposed of safely and to the required standard.

Secondly, DSD is responsible for upgrading the existing sewerage infrastructure and building new facilities to serve the continuously expanding urban developments in the territory as well as meet higher environmental standards demanded by the community.

In 1987 the EPD commissioned the Strategic Sewage Strategy Study to define the water quality objectives necessary to protect Hong Kong’s waters and to develop a long-term strategy for sewage collection, treatment and disposal. In response to this the Government adopted a Strategic Sewage Disposal Strategy (SSDS) in 1989 for sewage treatment of main urban areas around Hong Kong. Since then, 16 Sewerage Master Plan Studies (SMPs) have been undertaken

by EPD which provide detailed district plans on sewerage to cover all of Hong Kong.

SMPs provide a blueprint of the sewerage infrastructure required to collect the sewage on a catchment-by-catchment basis and direct it to the treatment facilities. Hong Kong has been divided into 16 areas, and SMPs have been produced for all of them. The recommendations of

56

The total saving in recurrent expenditure arising from the reduced water supply are based on the unit price of water agreed fro 1998 and assumed annual inflation adjustment of 8.655 (which was the rate agreed in the last round of negotiations on water unit prices).

57 Supplementary Information Paper for LegCo Panel on Environmental Affairs and LegCo Panel on Planning, Lands and Works – Joint Panel Meeting, 5 February, 1999 58 Drainage Services Department, Annual Report, 2001-2 Page 29

Financing Environmental Infrastructure in Hong Kong these SMPs are being implemented progressively to cater for the present and future development needs of Hong Kong. 59 7.4.1 Overview Wastewater Collection and Treatment About 95% of Hong Kong’s population is served by the public sewerage system with over 98% of the sewage produced being collected and treated. Hong Kong’s sewage system includes a sewerage network of over 1,320 kilometres in length and around 60 plants throughout Hong Kong ranging from preliminary (screening) treatment plants to secondary (biological) treatment plants treating sewage from residential, commercial and industrial premises in the territory prior to disposal to the sea for dilution and dispersion through submarine outfalls.

In the past, Hong Kong’s new towns located in the New Territories have been provided with modern secondary sewage treatment works, the sewage infrastructure for the older urban areas has not been upgraded to cater for the high and rapid levels of development throughout Hong Kong. In order to handle the pace of development and the rise in people' standard of living, the sewage infrastructure is now being upgraded under the Harbour Area Treatment Scheme (HATS) and a Hong Kong-wide sewerage rehabilitation and improvement programme.

Hong Kong is divided into 16 catchment areas and the sewerage network and sewage treatment facilities are currently being upgraded on a catchment-by-catchment in order to enhance the functions of the entire system. In addition to this some of the older sewage treatment works will also be upgraded.

The proportions of Hong Kong's sewage receiving treatment and the different levels of treatment are shown in the following table: Preliminary Treatment

Primary Treatment

Chemically Enhanced Primary Treatment

Secondary Treatment

Total

28%

0.4%

54%

17.6%

100%

7.4.2 Survey of environmental infrastructure facilities In total DSD is responsible for over 200 different types of environmental infrastructure facilities relating to sewage treatment and disposal; it was therefore deemed not possible to carry out a survey of such a vast nature for these facilities. The Researchers have therefore narrowed down the scope of the survey to only include the 16 Sewage Master Plans to provide readers with an insight into the cost and scope of each of these. This survey can be found in Appendix E. Information collected includes details on the following: • Scope • Area of the project • Project Cost in HK$ million • Completion date • Commission date; and • % complete (where relevant)

59

http://www.epd.gov.hk - Accessed 23 March 2003 Page 30

Financing Environmental Infrastructure in Hong Kong 7.4.3 Case Study A. Harbour Area Treatment Study â&#x20AC;&#x201C; HATS HATS has been chosen as a case study for this research as it is an on-going project as well as being one of the most significant projects, in terms of cost and environmental impacts, to have been undertaken by DSD in recent years. a) Overview of HATS The Harbour Area Treatment Scheme, an overall sewage collection, treatment and disposal scheme for areas on both sides of Victoria Harbour, is aimed at improving the water quality of the Harbour. Construction of this world-class sewage treatment infrastructure is being carried out in several stages and has involved a capital investment of HK$8.2 billion for Stage I of the project.

Work on Stage 1 of HATS, (previously known as the Strategic Sewage Disposal Scheme â&#x20AC;&#x201C; SSDS - before an IRP (International Review Panel) review was carried out on the whole project in 2000), commenced in 1994. This stage comprises a chemically-enhanced primary treatment (CEPT) plant based on Stonecutters Island, an interim outfall, the comprehensive upgrading of seven preliminary treatment works and six tunnels for collecting sewage from urban Kowloon, Tsing Yi, Kwai Chung, Tseung Kwan O and eastern Hong Kong Island and conveying it to Stonecutters Island. b) Review of HATS In 2000 a panel of international experts was invited to carry out a detailed review of the SSDS. As a result of the review, treatment and discharge options for the remaining stages of HATS were proposed. The IRP suggested a number of alternative options for the next stages of HATS that they believed to be both economically and environmentally more sustainable. Since then, the Government has been commissioning trials and studies to ascertain the environmental and engineering feasibility of these options, the related costs, and review procurement options that will quicken the delivery of the scheme in a cost-effective manner. All the findings will be put forward for public consultation by the end of 2003. c) Total Project Cost and Project Timing STAGE:

Stage I

Brief Project Description Involved the construction of a 23.6 kmlong system of tunnels deep underground, with a daily carrying capacity of 1.7 million tonnes of sewage from around Hong Kong Island to the sewage treatment plant on Stonecutters Island.

Cost of Stages: HK$

Project Commenced

Project Commissioning

8.2 billion

1994

2001

Stage II Stage III Stage IV

The details of these Stages of HATS, the associated costs and implementation programme, as well as the procurement arrangements are being investigated under a series of trials and studies by DSD. The project cost, including the capital and recurrent costs, will be available once these studies are completed.

d) Breakdown of costs for Stage 1: Preliminary treatment works upgrading Sewage transfer tunnel system and pumping stations Stonecutters Island Sewage Treatment Works and inlet pumping stations Outfall

$1.0 billion $3.9 billion $2.6 billion $0.7 billion Page 31

Financing Environmental Infrastructure in Hong Kong

The annual depreciation charge for HATS Stage I on full commissioning is around $180M. The government contributes all payments. e) The Tendering Process for Stage 1 The tendering process adopted during the construction of HATS Stage I followed all relevant government’s standard procedures. This includes the prequalification of tenderers, preparation and finalization of tender documents, invitation of tenders from prequalified tenderers, tender assessment and award of contract. Depending on the nature of the works procured, both ‘Engineer-Design-Contractor-Build’ and ‘Contractor-Design-and-Build’ contract arrangements were adopted for the design and build of HATS Stage I. The difference between the two types of contract are as follows: a) Under the Contractor-Design and Build arrangement, the Contractor is responsible to design the works in details in accordance with the outlines and requirements laid down by the Engineer. The Contractor is also responsible to build these works after the design is approved by the Engineer. b) Under the Engineer-Design-Contractor-Build arrangement, the Engineer is responsible to design the works in details and specify them in the contract documents. The Contractor is only responsible to build the works in strict accordance with details provided in the contract.

Therefore, the scope of services required from the Contractor differs under the above two arrangements. DSD is solely responsible for operating the facilities after commissioning. f) Contract Financing / Payment Schedule – for work carried out to-date The works for HATS Stage I were procured by way of a number of different contract arrangement, and hence payment terms, depending on the nature of the works involved. They included re-measurement contracts, re-measurement contracts with major lump sum items and lump sum contracts with milestone payments. The contract forms and payment schedules all followed standard government practices.

Among the works that have been procured from Contractors for HATS Stage I, about 28% has been procured under Contractor-Design and Build arrangement and 72% has been procured under Engineer-Design-Contractor-Build arrangement. g) Contract details for work carried out to date The contract documents for HATS Stage I contained the following as per the HKSAR Government’s standard contract: 1. Article of Agreement 2. General and Special Conditions of Contract 3. General and Particular Specification 4. Bill of Quantities or Payment Schedules depending on the type of the contract 5. Contingency sums As no operation services were procured under the contracts for HATS Stage I, no payment for operation was involved. Further information on contract agreements and structure relating to HATS were not made available to for this report.

Page 32

Financing Environmental Infrastructure in Hong Kong ACKNOWLEDGEMENTS Thanks go to the following people for their kind assistance in sourcing, collating and reviewing the information contained in this report.

• • • • • • • • • • • • •

Drainage Services Department of the HKSAR Government Public Access to Information Service Environment, Transport and Works Bureau of the HKSAR Government Public Access to Information Service Hopkinson, Lisa, Civic Exchange Ltd, Hong Kong King, Andy, Environmental Protection Department, HKSAR Government McInnis, Art, Clifford Chance Water Supplies Department of the HKSAR Government Public Access to Information Service Wong, Carmen, Drainage Services Department, HKSAR Government Wong, MC, Water Supplies Department, HKSAR Government Wu, David, Drainage Services Department, HKSAR Government Lai, Thomas, Environmental Protection Department, HKSAR Government Lau, Wessex, Environmental Protection Department, HKSAR Government Le Clue, Sophie, Hong Kong Productivity Council Loh, Christine, Civic Exchange Ltd, Hong Kong 格式化: 項目符號及編號

Page 33

Financing Environmental Infrastructure in Hong Kong

APPENDICES

Page 34

Financing Environmental Infrastructure in Hong Kong APPENDIX A

Appendix A - Summary of the Consultative and Regulatory Framework Figure 1.0: Organisation chart of the HKSAR Governmentâ&#x20AC;&#x2122;s bodies involved in environmental infrastructure Chief Executive

Chief Secretary for Administration

Financial Secretary

Department of Finance * Secretary for Financial Services and the Treasury *

Policy Creation

Department of Administration*

Financial Services and Treasury Bureau

Council on Sustainable Development

(FSTB)

(CSD)

Policy Implementation

Secretary for Environment, Transport and Works*

LegCo Enviro.

Affairs Panel

(Legco EAP) Advisory Council For the Environment

(ACE)

Environment, Transport & Works Bureau

(ETWB) Sustainable Development Unit (SDU)

Environmental Protection Department (EPD) Drainage Services Department (DSD) Water Supplies Department (WSD)

* Not all government bureaus, departments or personnel which report to this level, are listed

(a) Environment, Transport and Works Bureau The Environment, Transport and Works Bureau (ETWB) is responsible for all policy matters pertaining to environment, transport and works projects in Hong Kong; the latter including all Public Works Programmes (PWP) (ie the building of new or improving existing infrastructure projects), slope safety and water supply. These three areas of responsibility are further divided between two Permanent Secretaries, one for Transport and Works, and the other for the Environment.

The ETWB oversees a total of nine government departments, three of these being the Environmental Protection Department (EPD), the Drainage Services Department (DSD) and the Water Supplies Department (WSD). 60 The focus of this paper will therefore be on the works of these three government departments as their areas of responsibility (among others) include municipal waste disposal, sewage treatment and water supply respectively.

(b) Advisory Council on the Environment Advisory Council on the Environment (ACE) is responsible for keeping the state of the environment in Hong Kong under review; and to advise the HKSAR Government, through the Secretary for the Environment, Transport and Works, on appropriate measures, which might be taken to combat pollution of all kinds, and to protect and sustain the environment. All projects 60

Other departments that fall under the responsibility of ETWB include the Transport Department (TD), Territory Development Department (TDD), Highways Department (HD), Electrical, Mechanical and Services Department (EMSD), Civil Engineering Department (CED) and the Architectural Services Department (ArchSD).

Page 35

Financing Environmental Infrastructure in Hong Kong APPENDIX A

therefore relating to environmental issues, mitigation measures and sewage treatment and disposal must be formulated and approved in accordance with ACE. Under the Environmental Protection Impact Assessment (EIA) Ordinance61, the Director of Environmental Protection is required to take into account comments of ACE, if any, on EIA reports.

ACE’s members are appointed by the CE and include prominent figures from the community, comprising academics, businessmen, professionals, members of major green groups and trade and industry associations62.

(c) Council for Sustainable Development and Sustainable Development Unit Sustainable Development Unit (SDU), which was established in April 2001 under the Administration Wing of the Chief Secretary for Administration's Office, main tasks are “to facilitate the integration of sustainable development into new Government initiatives and programmes and in the community generally, and to provide support to the Council for Sustainable Development.”63 As initiated by the SDU, from April 2002 all government bureaux and departments are required to carry out Sustainability Assessments of “new strategic initiatives or major programs which may bring about notice or persistent implications on the economic, environment and social conditions of Hong Kong”64. These Sustainability Assessments should be included in submissions made to ExCo or the Chief Executive’s Policy Committee.

The recently established Sustainable Development Council main tasks will be to provide expert advice to the HKSAR Government, to help build a better understanding among the public of the issue of sustainable development and to encourage the community to put the concept into practice.

(d) Chief Executive, Executive Council and Legislative Council The CE, who has the ultimate authority over all areas of policy in the HKSAR, consults the Executive Council (ExCo) before making important policy decisions, introducing bills to LegCo and making subordinate legislation65. Under the new Principal Officials Accountability System, implemented in July 2002, key decision makers, called Principal Officials are members of ExCo, which serves as Hong Kong’s defacto Cabinet. These Principal Officials are political appointees that are accountable to the CE for the success or failure of their policy initiatives.66 Overall direction in administrative policies is outlined in the CE’s annual policy address, which also includes details of each Bureaux policy agenda for the upcoming year.

LegCo serves as a watchdog for the executive branch of the HKSAR Government. Its main functions are to enact laws (through the passing of Bills), examine and approve budgets, taxation

61

The EIA Ordinance (Cap. 499) requires certain designated projects (generally major infrastructure projects) to undergo an EIA before they can be granted an environmental permit for development to proceed.

62 The Secretary for the Environment and Food, the Director of Environment Protection, the Director of Planning, the Director of Agriculture, Fisheries and Conservation, the Director of Health and their representatives are all in permanent attendance on ACE. 63 Further details of the Sustainable Development Unit and the Council for Sustainable Development can be found at <http://www.susdev.gov.hk/html/index.htm> 64 Ibid.

65 ExCo currently has 19 members, 14 of whom are principal officials with operating portfolios and 5 that are non-officials.

66 For further information on the recently implemented Principal Officials Accountability System, see Civic Exchange & National Democratic Institute, Accountability without Democracy, Hong Kong 2002.

Available under Publications 2002 at <http://www.civic-exchange.org> Page 36

Financing Environmental Infrastructure in Hong Kong APPENDIX A

and public expenditure and to monitor the work of the HKSAR Government67. All laws and requests for public expenditure need to be approved by LegCo before they can be enacted or implemented. Because it is difficult for LegCo to introduce legislation (their main role is to amend or pass legislation) in practice this makes ExCo a much more powerful policy influencing body in Hong Kong. The legislative bodies are further illustrated in Figure 2.0.

Figure 2.0: Organisation chart of the HKSAR Legislative bodies involved in environmental infrastructure Legislative Council (LegCo) * ^

Finance Committee *

Environmental Affairs Panel *

Chief Executive * (CE)

Executive Council * (ExCo)

Planning Lands and Works Panel *

Public Works Subcommittee (PWSC)

* Not

all committees and panels which report to this level are listed. ^ Legislative Council reviews Bills initiated by the HKSAR Government and Private Members Bills.

However, Private Members Bills (which can be submitted by legislative councillors) cannot have policy or financial implications.

(e) Finance Committee and Public Works Subcommittee LegCo’s Finance Committee reviews and approves public expenditure proposals put forward by the HKSAR Government. A Public Works Subcommittee established under the Finance Committee, has the role of examining and making recommendations to the Finance Committee on the Government’s expenditure proposals under the Capital Works Reserve Fund, the fund from which all environmental infrastructure projects are financed.

(f) Environmental Affairs Panel LegCo’s Environmental Affairs Panel’s (LegCo EAP) role is to monitor and examine government policies and issues of public concern relating to environmental and conservation matters. It receives briefings and formulates views on any major legislative or financial proposals in respect of the above policy areas prior to their formal introduction to LegCo, the Finance Committee or the Public Works Subcommittee. (g) Planning Lands and Works Panel Similar to the Environmental Affairs Panel, the Planning Lands and Works Panel monitors and examines Government policies and issues of public concern relating to lands, buildings, planning matters, works and water supply and the Public Works Programme. The panel receives briefings and formulates views on major legislative or financial proposals in respect of the above policy areas prior to their formal introduction to LegCo, the Finance Committee or the Public Works Subcommittee..

67

LegCo currently has 60 members; 24 representing directly elected geographical constituencies, 6 elected by an election committee comprising 800 elected representatives of the community and 30 representing functional constituencies (for instance, labour, textiles and garment, tourism, etc.).

Page 37

Financing Environmental Infrastructure in Hong Kong APPENDIX B

Appendix B - Summary of Environmental Legislation in Hong Kong Summary of the Legislative Framework for the operation of environmental infrastructure and programs in Hong Kong68 A. Legislation for Waste Disposal The Waste Disposal Ordinance (Cap 354), enacted in 1980, provides a comprehensive framework for managing waste from the point of arising to the point of final disposal. in short Cap 354 states that â&#x20AC;&#x153;it is prohibited to dump waste in public places or on Government land, or on private premises without the consent of the owner or occupier.â&#x20AC;? The intention is that waste be disposed of in an environmentally acceptable manner. The ordinance has been amended several times to enable such things as controls over livestock keeping, chemical waste, illegal dumping of waste and the import and export of waste. Further amendments are currently being considered to improve controls on illegal dumping and imports and exports, to control clinical waste and to give effect to proposed charging schemes. Provisions for dealing with special wastes are also contained in other laws, for instance oily wastes from ships are controlled under Merchant Shipping legislation.

Legislation Waste Disposal (Cap.354) 1980

Description of Legislation Ordinance Provides for the licensing of collection services and disposal facilities for all types of waste, the prohibition of livestock keeping in urban areas, the control on livestock keeping in restriction areas, the control on discharge or deposit of livestock waste in designated control areas, the control scheme on chemical waste, the control on illegal dumping of waste, the control on import and export of waste and for the establishment of a system whereby specified wastes must be notified to the relevant authority who may give directions as to the method of disposal. Requires also the production of a comprehensive plan for the collection and disposal of wastes.

Waste Disposal (Livestock Sets out the legal requirements for proper handling of livestock Waste) Regulations 1988 waste to guard against dangers to public health or risks of pollution.

Waste Disposal (Chemical Provides for control of all aspects of chemical waste disposal, Waste) (General) Regulation including storage, collection, transport, treatment and final 1992 disposal.

Waste Disposal (Permits and Prescribes the forms and fees for application of licences for Licences) (Forms and Fees) waste collection and disposal, and the permits for import and Regulation 1992 export of waste.

Waste Disposal (Appeal Board) Provides for the setting up of an appeal mechanism against Regulation 1992 decisions made under the Waste Disposal Ordinance.

Waste Disposal (Charges for Requires payment of charges for disposal of chemical waste at Disposal of Chemical Waste) the Chemical Waste Treatment Centre thus creating an Regulation 1995 economic incentive towards waste minimisation.

68

Details of the ordinances and regulations can be found in the "Bilingual Laws Information System" web-site of the Department of Justice at http://www.justice.gov.hk .

Page 38

Financing Environmental Infrastructure in Hong Kong APPENDIX B

Waste Disposal (Charges for Requires payment of charges for disposal of solid waste at Disposal of Waste) Regulation landfills thus creating an economic incentive towards waste 1995 minimisation. However this legislation was passed in 1995 but never enacted due to pressure from waste haulers.

Waste Disposal (Designated Provides for the maintenance of orderly conduct within sites Waste Disposal Facility) used for waste disposal activities; measures to counteract the Regulation 1997 evasion of charges payable in connection with the provision of waste disposal services at such sites; and proof of matters in proceedings before a court in relation to the provision of waste disposal activities at such sites.

Waste Disposal (Refuse Extends the service of Government-owned refuse transfer Transfer Station) Regulation station to private waste collectors and requires payment of 1998 service charges.

Public Health and Municipal Provides for the control of discharges of hazardous materials to Services Ordinance (Cap.132) sewers and littering, and places restrictions on the storage of 1960 wastes in buildings.

Country Parks (Cap.208) 1976

Ordinance Places controls on littering in country parks.

Summary Offences Ordinance Contains provisions relating to littering offences including (Cap.228) 1933 marine littering.

Town Planning (Cap.131) 1939

Ordinance Provides for control over land use including waste management uses.

Buildings Ordinance (Cap.123) Allows the Building Authority to require adequate waste 1956 treatment facilities in any new building. Provides for control over the design of refuse chutes within buildings and oil storage facilities.

Buildings Ordinance Similar provisions to Cap.123.

(Application to the New Territories) (Cap.121) 1987 Source: Environmental Protection Department of the HK SAR Government

Development of New Waste Legislation Proposed Legislation/ Control

Features

Current Status

Waste Disposal (Amendment) Provides for control of the Amendment bill to be submitted Bill arrangement of clinical to ExCo and LegCo for waste and improves control Approval. of waste import and export and illegal dumping of waste.

Waste Disposal (Clinical Specifies the operational Draft Regulation Waste) (General) Regulation requirements of clinical prepared. waste producers, collectors and disposal facility

is

being

Page 39

Financing Environmental Infrastructure in Hong Kong APPENDIX B

operators.

Waste Disposal (Permits and Amends the schedules and Drafting Instructions are being Licences) (Forms and Fees) prescribes fees for clinical prepared.

(Amendment) Regulation waste collection licences.

Waste Disposal (Charges for Gives effect to the new Drafting Instructions are being Disposal of Chemical Waste) charging scheme for prepared.

(Amendment) Regulation clinical waste through amendment of the regulation.

Waste Disposal (Chemical Amends the schedule and Amendment proposal will be Waste) (General) (Amendment) clarifies the definition of prepared pending the progress of Regulation chemical waste in light of amendment of the DGO. the amendment to the Dangerous Goods Ordinance (DGO).

A new regulation to substitute Gives effect to the revised Draft Regulation the Waste Disposal (Charges landfill charging scheme. prepared. for Disposal of Waste) Regulation

is

being

Source: Environmental Protection Department of the HK SAR Government B. Legislation for Management of Water Quality The Water Pollution Control Ordinance, enacted in 1980, is the main legislation to control water pollution in Hong Kong. The ordinance and its subsidiary legislation allow the government to declare Hong Kong waters into ten water control zones (WCZs). Control of discharges in these zones to achieve and maintain water quality objectives is exercised mainly through a licensing system.

All discharges, other than domestic sewage to a foul sewer or unpolluted water to a storm drain, must be covered by an effluent discharge licence. The licence specifies the permitted physical, chemical and microbial quality of the effluent and the general guidelines are that the effluent does not damage sewers or pollute inland or inshore marine waters. Details of the effluent standards can be found in the Technical Memorandum on Effluent Discharges.

Legal controls also apply to sewerage connections. The Government is extending public sewers to some major rural areas in an effort to improve the environment there. In areas where these new sewers become available, a notice would be issued asking owners to connect their sewage to the public sewer. If necessary, a further notice may be issued asking the owner to demolish or fill in any redundant sewage treatment facilities or septic tanks and soakaway-pits.

Legislation

Description of Control

Water Pollution Control Provides for the designation of control zones within which Ordinance (Cap. 358) 1980 discharges of effluent other than domestic sewage into a foul sewer must be licensed.

Page 40

Financing Environmental Infrastructure in Hong Kong APPENDIX B

Water Pollution Control Gives practical effect to the ordinance.

(General) Regulations 1986 Water (Appeal 1985

Pollution Control Sets out procedures to be followed in appeals against orders Board) Regulations made or directions given under the ordinance.

Water Pollution Control Imposes requirements on private lot owners to collect and (Sewerage) Regulation 1994 convey wastewater to public sewers and provides for control over the operation and maintenance of private wastewater treatment facilities.

Buildings (Cap. 123) 1956

Ordinance Allows the Building Authority to require adequate waste treatment facilities in any new building. Provides for control over the design of refuse chutes within buildings, private drainage works and oil storage facilities.

Waste Disposal (Cap. 354) 1980

Ordinance Prohibits livestock keeping in urban areas and provides for control over the discharge or deposit of livestock waste in designated control areas.

Public Health and Municipal Provides for control over the discharge of hazardous materials Services Ordinance (Cap. 132) to sewers, and for the control of littering. Also provides for the 1960 designation of bathing beaches and the control of pollution at such beaches, together with swimming pools and wells.

Foreshores and (Reclamations) (Cap. 127) 1985

Sea Bed Provides for the control of reclamation and use of the foreshore Ordinance and seabed.

Waterworks (Cap. 102) 1975

Ordinance Prohibits polluting discharges in water gathering grounds.

Source: Environmental Protection Department of the HK SAR Government

Development of New Water Quality Legislation Legislative proposals are being prepared to provide for tighter controls of water pollution.

Together with the existing legislation, an improved framework would ensure that the water quality objectives are achieved to further improve the water quality of Hong Kong.

Proposed Legislation/ Control Water Pollution (Amendment) Bill

Features

Current Status

Control Streamlines the control Drafting instructions are being arrangements and prepared. strengthens enforcement powers.

Source: Environmental Protection Department of the HK SAR Government

Page 41

Financing Environmental Infrastructure in Hong Kong APPENDIX B

C. Environmental Impact Assessment Ordinance (Cap.499) The Environmental Impact Assessment Ordinance, was implemented on 1 April 1998, to avoid, minimise and control the adverse impact on the environment of designated projects through the application of the environmental impact assessment process and the environmental permit system.

Designated projects, unless exempted, must follow the statutory environmental impact assessment (EIA) process and require environmental permits for their construction and operation69.

Legislation

Description of Control

Environmental Impact Provides for a statutory EIA process to avoid, minimise and Assessment Ordinance (Cap. control the adverse impacts of designated projects through the 499) application of the EIA process and the EP system.

Environmental Assessment (Appeal Regulation.

Impact Provides for the setting up of an appeal mechanism and the Board) procedures of the Appeal Board.

Environmental Impact Prescribes the application fees that are payable for applications Assessment (Fees) Regulation made under the EIAO. Environmental Impact Amends Part I of Schedule 2 to the EIAO (Cap. 499) by adding Assessment Ordinance theme parks and amusement parks with a site area of more than (Amendment of Schedule 2) 20 ha in size as designated projects.

Order 1999 Source: Environmental Protection Department of the HK SAR Government

69

The Ordinance applies to certain types of projects, called "designated projects", which are contained in two schedules. The designated projects in both schedules must go through the statutory EIA process, but only those listed in Schedule 2 require environmental permits Page 42

Financing Environmental Infrastructure in Hong Kong APPENDIX C

Appendix C - Summary of the PWP funding and resource allocation process Figure 1.0: Summary of the funding and approval process of the Public Works Programme Becomes a part of the Public Works Program 1. Project Identification, (including feasibility and environmental studies)

2. Client Project Brief

Requires Policy Secretary and FSTB Approval

All projects over HK$15 million (equiv. US$2 million) are subject to a funding approval process through the Public Works Program as illustrated through this diagram.

3. Preliminary Project Feasibility Study

Requires Policy Bureau Approval (including ETWB and FSTB)

Consultation with ACE and the Environmental Affairs Panel

Category C Becomes a part of the Public Works Management System (PW_MS) 4. Detailed Project Deign

Projects under HK$15 million are classified as Category D and will only be subject to this approval process if elected by the relevant Policy Bureau.

5. Funding application made through the Capital Works Reserve Fund Resource Allocation System

Category B Tender process begins

Project is put out for Tender

Category A

Requires LegCo and Finance Committee Approval

6. Public Works Subcommittee Paper

While various departments operating under the ETWB may implement environmental infrastructure projects, EPD is regarded as the department responsible for identifying the need for such projects. The need for a project may arise to meet planning and development requirements, to improve existing facilities and services or to complete an existing development programme.

To gain a formal status in the PWP the relevant government department or bureau makes the project need a subject of a Client Project Brief (CPB), which is prepared using in-house resources.

The CPB explains the rationale behind the project and must be approved by the relevant policy secretary; preliminary planning may commence once this procedure is complete. Relevant government departments should be consulted to obtain comments and agreement to any proposed projects.

The appropriate government department then carries out a Preliminary Project Feasibility Study (PPFS), based on the CPB, to establish the viability, determine the scope, devise an implementation strategy, and prepare project estimates including costs and revenues and the overall cost effectiveness of the project70. In recent years the PPFS has been simplified into a 2-3 page memo including only summary information. The CPB and the PPFS are intended to be a complimentary processes to ensure a project is viable, cost-effective and well defined in terms of scope, rationale, description and implementation plan. The PPFS report may conclude that further feasibility studies may be required before proceeding to the preliminary design stage. The completion of the PPFS must also involve EPD; it is a requirement that their comments form part 70

The PPFS can be carried-out using in-house resources although if these are insufficient, funds are available for the use of consultants to undertake this step.

Page 43

Financing Environmental Infrastructure in Hong Kong APPENDIX C

of the documentation.71 On completion of the PPFS report, the Works Bureau and relevant policy bureau review and recommend the project for the approval of the Financial Services and Treasury Bureau (FSTB).

The ETWB and FSTB will consult the Environmental Affairs Panel and the Advisory Council on the Environment before approving the project at this stage. Once approved by the ETWB and the FSTB the project becomes designated as a Category ‘C’72 project of the PWP. All projects upon receiving Category ‘C’ status must be registered in the Public Works Management System (PW_MS). A statement of scope, the cash flow and a project schedule must be recorded as part of this project registration.

Having achieved a Category ‘C’ status for a project, the relevant works department must carry out further work on planning and designing the project. At this stage consideration must be given to the availability of resources needed to undertake the project before an application for funding is made through the CWRF Resource Allocation System (RAS) which is based on a rolling fiveyear forecast. A detailed estimate of the cost of the project should be prepared when detailed design is nearing completion – costs should include necessary re-provisioning works, including any administrative costs, such as fee, expenses etc. Acquisition and clearing of land for the project as well as allocation of the works area must also be requested at this stage to tie in with the target start date included in the latest CWRF RAS. Projects in Category C will compete for resources under the CWRF RAS and only successful projects will receive Category B status based on the priorities of the HKSAR Government. When a project is in Category B and it is planned to call tenders for the project in the next financial year, it is necessary to include the project in the draft Resource Allocation Estimates for that year.

Once a detailed design and plan has been prepared the Director of the relevant works department presents the project to LegCo, its Finance Committee and the Public Works Subcommittee through the Public Works Subcommittee paper. Approval for funding from the Finance Committee bestows a Category ‘A’ status on the project73. Once a project receives Category ‘A’ status the works department is entitled to put the project/work out to tender to a number of prequalified contractors74.

For small scale Category D projects costing under HK$15 million, the preparation of a PPSF is only required when considered necessary by the appropriate Policy Bureau.

71

The EIA Ordinance came into operation on 1 April 1998; since then it has been necessary for all designated projects to obtain an EIA study brief from the EPD in order to conduct an EIA study upon upgrading the project to a Category ‘B’ project.

72 All projects within the PWP are given a category status from ‘D’ to ‘A’ depending on how far along the approval procedure they are ie: once a project is given a Category ‘A’ status EPD can put their work to tender.

73 In 2000-2001, 74 new projects were upgraded to Category A (http://www.etwb.gov.hk/policy/pa2001/worke.pdf) 74 The Government has ‘pre-qualified’ several firms based on their past experience in designing and operating transfer stations and then held a competitive tendering process to select the winning firm. The bidding documents laid out technical and environmental performance requirements, maintenance requirements, and equipment replacement schedules.

Page 44

Financing Environmental Infrastructure in Hong Kong APPENDICES D1 and D2

Appendix D1 - Landfill Survey - NENT, SENT and WENT Background

NENT

SENT

Location

: Ta Kwu Ling, New Territories

:

Area - site area

: 67 ha

:

Max. height of : 240 mPD filling Max. depth waste

of : 120m : 35 million tonnes

Capacity

Current intake

WENT

Shek Miu Wan, Tseung Kwan O • • •

Land : 50ha Marine : 50ha Total : 100ha

: :

Nim Wan, Tuen Mun • • •

:

135 mPD

:

170 mPD

:

100m

:

120m

:

waste : about 3,600 tonnes 1440 truckloads : per day

•

39 million tonnes (based on : original design) • 43 million tonnes (based on latest landfill design)

Land : 67ha Marine : 43ha Total : 110ha

61 million tonnes

about 7,800 tonnes / 1,900 truckloads per : day

6,000 tonnes /750 truckloads per day

: Municipal waste

:

Municipal waste

:

Municipal waste

: Construction waste

:

Construction waste

:

Construction waste

: special waste

:

special waste

Operation life

: about 20 years

:

about 13 years

:

25 years

Aftercare period

: 30 years after completion of operation :

30 years after completion of operation

:

30 years after completion of operation

Waste types

Page 45

Financing Environmental Infrastructure in Hong Kong APPENDICES D1 and D2

Appendix D1 - Landfill Survey - NENT, SENT and WENT Continued Contractual Arrangement NENT

SENT

WENT

Contract type

: Design, construction, operation, restoration and aftercare will be carried out by the Contractor to the specified performance criteria

:

Design, construction, operation, restoration and aftercare to be carried out by the Contractor to the specified performance criteria

:

Design, construction, operation, restoration and aftercare to be carried out by the Contractor to the specified performance criteria

Client

: Environmental Protection Department

:

Environmental Protection Department

:

Environmental Protection Department

Contractor

: Far East Landfill Technologies Limited

:

Green Valley Landfill, Limited

:

Swire SITA Waste Services Ltd.

Commencement of construction

: August 1994

:

September 1993

:

May 1993

Commencement of operation

: June 1995

:

September 1994

:

November 1993

Capital cost

: $1,841 million

:

$2,331 million

:

$1,916 million

Operation cost

: $113 million/year

:

$180 million/year

:

$133 million/year

Financial Detail

Page 46

Financing Environmental Infrastructure in Hong Kong APPENDICES D1 and D2

Appendix D2 â&#x20AC;&#x201C; Refuse Transfer Station Survey IETS

IWTS

KBTS

STTS

NLRTS

Bay, Sha Tin, Territories

OITF

WKTS

NWNTRTS

Location

Sun Yip Street, Mount Davis, Kowloon Chai Wan Kennedy Town Kowloon (underground inside cavern)

New Siu Ho Wan, Various outlying West Kowloon Shun Tat Street, North Lantau islands Reclamation Tuen Mun (near area, between Lam Tei) the West Kowloon Expressway and Stonecutters Island

Contractor

Island Transfer Co. Ltd.

Capital Cost

$400 million

Design Throughput

1200 tonnes per 1,000 tonnes 1,800 tonnes per 1,190 day per day day day

Commissioni ng Date

November 1992

May 1997

April 1990

October 1994

June 1998

June 1997

September 2001

Waste Delivered to

WENT

WENT

NENT

NENT

WENT

WENT

WENT

East Swire SITA Swire SITA Swire SITA Waste Ecoserve Limited Station Waste Services Waste Services Services Ltd Ltd. Ltd $637M

$215 million

$200 million tonnes

$238 M per 650 tonnes per day (Phase I) 1,200 tonnes per day (Phase II addition of one more waste compactor)

Swire SITA South China Swire Waste Services Transfer Waste Limited Limited Ltd $303M

$627M

SITA Services

$216 million

2,500 tonnes 1,100 tonnes per per day day

Page 47

Financing Environmental Infrastructure in Hong Kong APPENDICES D1 and D2

Appendix D2 â&#x20AC;&#x201C; Refuse Transfer Station Survey Continued Major Plant / Container Vessels, Pushpit / Equipment Compactors, Yard Tractors, Landfill Tractors, Container Handling Units, Road Sweeper, Containers

Container Vessels, "Live Floor" System & Compactors, Yard Tractors, Landfill Tractors, Container Handling Units, Road Sweeper, Container

Yard Tractors, Road Tractors, Landfill Tractors, Trailers, Road Sweeper, Bucket Loaders, Lifting Platform Vehicle, Containers, Compactors.

Yard Tractors, Highway Tractors, Trailers, Containers, Road Sweeper, Bucket Loader, Bobcat Loader, Tennant Scrubber

Container Vessel "Live Floor" System & compactors, Yard Tractors, Landfill Tractors, Container Handling Units, Road Sweepers, Containers

Container Vessels, Compactors, Hooklift Container Transporters, Landfill Tractors, Containers, Refuse Bins

Container Vessels, Gantry Cranes, Compactors, Landfill Tractors, Container Handling Units, Road Sweeper, Bucket Loader, Containers

Yard Tractors, Road Tractors, Trailer containers Tipper, Road Sweeper, Backhoe Loader, Telescope Loader, Flow Scrubber, Emergency Generator

Computerized Weighbridge System, Exhaust Ventilation System with Odour Removal Unit, Waste Water Treatment Plant, Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System with Odour Removal Unit, Waste Water Treatment Plant, Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System, Odour Removal Units, Waste Water Treatment Plant, Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System completed with Venturi Scrubber Units (for odour removal), Waste Water Treatment Plant, Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System with Odour Units, Waste Water Treatment Plant & Vehicle Wash System

Computerized Weighbridge System, Waste Water Treatment Plant & Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System with Odour Removal Unit, Waste Water Treatment Plant, Vehicle Wash System

Computerized Weighbridge System, Exhaust Ventilation System with Odour Removal Unit, Waste Water Treatment Plant, Vehicle Wash System

Other Facilities

Page 48

Financing Environmental Infrastructure in Hong Kong APPENDIX E

Appendix E - Survey of Sewerage Master Plan (SMP) Works 1. HK Island South SMP Scope: Construct and improve 32 km of sewers, 17 pumping stations, a sewage treatment plant at Shek O, an underground sewage treatment plant at Stanley, and a 2.3 km long submarine outfall.

Services area: Hong Kong Island South from Shouson Hill to Shek O. Project Cost ($M) Start Date

922 Mid 1990

% Completed Completion

100% Early 2000

2. Chai Wan and Shau Kei Wan SMP Scope: Improve and construct 1.7 km of sewers in the areas Services area: Chai Wan and Shau Kei Wan Project Cost ($M) Start Date

25 Early 1995

% Completed Completion

100% End 1997

3. East Kowloon SMP Scope: Construct and improve 17.3 km of sewers, 7 dry weather flow interceptors and rectify expedient connections in industrial areas in San Po Kong, Kowloon Bay and Kwun Tong.

Services area: San Po Kong, Kowloon Bay and Kwun Tong Project Cost ($M) Start Date

868 Mid 1991

% Completed Completion

100% End 2001

4. North West Kowloon SMP Scope: Construct and improve 24.4 km of sewers, 2 pumping stations, 13 dry weather flow interceptors and rectify expedient connections in industrial areas in Sham Shui Po, Mong Kok and Yau Ma Tei Services area: Sham Shui Po, Mong Kok and Yau Ma Tei Project Cost ($M) Start Date

978 End 1992

% Completed Completion

90% Early 2003

5. Tolo Harbour SMP Scope: Provide public sewerage facilities to 169 unsewered areas in Shatin and Tai Po Services area: Shatin and Tai Po Project Cost ($M) Start Date

931 Mid 1993

% Completed Completion

26% 2013

6. Outlying Islands SMP Scope: Construct and improve about 20 km of sewers, 4 pumping stations, 7 sewage treatment plants and 4 outfalls on Outlying Islands under Stage 1 works Services area: Lantau Island, Lamma Island, Peng Chau and Cheung Chau Project Cost ($M) Start Date

1,397 Early 1998

% Completed Completion

3% -

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Financing Environmental Infrastructure in Hong Kong APPENDIX E

Survey of Sewerage Master Plan (SMP) Works Continued 7. Port Shelter SMP Scope: Construct about 64 km of sewers, 23 pumping stations and 12 km of rising mains to collect sewage from 17 unsewered areas in the Port Shelter catchment Services area: Sai Kung, Pak Sha Wan and Silverstrand Project Cost ($M) 569 % Completed 21% Start Date End 1993 Completion 2008 8. Northern District SMPScope: Upgrade capacity and treatment level of Shek Wu Hui STW and construct 16 km of trunk sewers, 25 pumping stations and provide public sewers to 74 villages in North District Services area: North District Project Cost ($M) 1,120 % Completed 35% Start Date End 1997 Completion 2010 9. Yuen Long and Kam Tin SMP Scope: Improve 7 km of sewers in Yuen Long Town, construct 3 km of flow diversion sewer from Yuen Long STP to San Wai STP, construct about 50 km of trunk sewers and provide public sewerage system to 43 unsewered villages in NWNT, and expand the existing San Wai STP. Services area: North West New Territories Project Cost ($M) Start Date

2,793 End 1993

% Completed Completion

4% -

10. Tuen Mun SMP Scope: Construct 2.2 km of trunk sewers, 6 pumping stations, 2 low-flow interceptors, provide public sewers to 25 unsewered villages in Tuen Mun, and upgrade Pillar Point STW Services area: Tuen Mun Project Cost ($M) Start Date

1,061 Mid 1995

% Completed Completion

8% -

11. Aberdeen, Ap Lei Chau and Pokfulam SMP Scope: Upgrade the existing Aberdeen Sewage Screening Plant, construct 3.4 km of trunk sewers from Wong Chuk Hang to the plant, improve 15.5 km of branch sewers, and rectify the expedient connections in the areas Services area: Aberdeen, Ap Lei Chau and Pok Fu Lam Project Cost ($M) Start Date

472 Mid 1998

% Completed Completion

80% 2007

12. Central, Western and Wan Chai West SMP Scope: Construct 5.6 km of trunk sewers, 35 km of reticulation sewers and 2 new pumping stations at Wan Chai and Central Services area: Central, Western and Wan Chai West Project Cost ($M) Start Date

2,589 End 1996

% Completed Completion

60% 2007

Survey of Sewerage Master Plan (SMP) Works Continued 13. Wan Chai East and North Point SMP Page 50

Financing Environmental Infrastructure in Hong Kong APPENDIX E

Scope: Construct and improve 16.8 km of sewers and a new pumping station in the North Point Sewage Screening Plant Services area: Wan Chai East and North Point Project Cost ($M) Start Date

1,876 Early 1998

% Completed Completion

10% -

14. Tsuen Wan, Kwai Chung & Tsing Yi SMPScope: Construct and improve 14.2 km of sewers, an industrial wastewater pumping station, and rectify expedient connections in the industrial areas in Tsuen Wan, Kwai Chung and Tsing Yi; construct a sewage treatment plant, a submarine outfall, 8 km of trunk sewers and 7 km of branch sewers to villages in Ting Kau, Sham Tseng and Tsing Lung Tau Services area: Tsuen Wan, Kwai Chung, Tsing Yi, Ting Kau, Sham Tseng and Tsing Lung Tau Project Cost ($M) 1,225 % Completed 52% Start Date End 1994 Completion 2006 15. North and South Kowloon SMP Scope: Construct and improve 11.6 km of sewers, 2 pumping stations, 8 dry weather flow interceptors and expand an existing pumping station in Tsim Sha Tsui, Hung Hom Bay reclamation, Hung Hom, To Kwa Wan and Wong Tai Sin Services area: Tsim Sha Tsui, Hung Hom Bay reclamation, Hung Hom, To Kwa Wan and Wong Tai Sin Project Cost ($M) Start Date

1,030 Early 1995

% Completed Completion

70% 2009

16. Tseung Kwan O SMP Scope: Construct 5.5 km of sewers and 2 pumping stations to 9 unsewered villages in Tseung Kwan O Services area: Tseung Kwan O Project Cost ($M) Start Date

33 2005

% Completed Completion

2007

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