Following is a question by the Hon Fred Li and an oral reply by the Secretary for the Environment, Transport and Works, Dr Sarah Liao, in the Legislative Council meeting today (October 22) :-
Question:
According to the 1989 Water Supply Agreement, the prices of Dongjiang water supplied to Hong Kong are to be determined each year through consultation between the governments of Guangdong Province and Hong Kong, and the adjustment range depends on the increase in operating costs, taking into account changes in relevant price indices of the two places, and the exchange rate between the Hong Kong Dollar and Renminbi. In this connection, will the Government inform this Council:
(a) of the changes in the three factors just mentioned, namely "operating costs", "relevant price indices in Guangdong and Hong Kong" and "exchange rate", in each of the past five years; and, based on the changes in these factors, how the current Dongjiang water prices should be adjusted;
(b) whether it has sought mediation or assistance from the Central People's Government (CPG) during its discussion with the Guangdong Authority on formulating a new water supply agreement; if it has, of the reasons for that, and whether CPG has proposed to compensate the injured party by itself; and
(c) whether its negotiation with the Guangdong Authority on the prices and amount of Dongjiang water to be supplied to Hong Kong is nearing completion; if so, of the major negotiation results; if not, the reasons for that?
Reply:
Madam President,
(a) Since the agreement came into effect, we have been liaising with the Guangdong Authority about the prices of the Dongjiang water. The operational costs of supplying water to Hong Kong and the expenditure on water resource protection are the internal information of the Guangdong Authority. It is not appropriate to release such information without the prior approval of the Guangdong Authority. For the five years from 1998 to 2002, the average deflation rate of Guangdong Province and Hong Kong was 1.3 per cent. During the same period, Renminbi remained strong against Hong Kong Dollar, appreciating by 1.15 per cent in total.
In the negotiations on the price of Dongjiang water, the Hong Kong Government has repeatedly requested the Guangdong Authority to reduce the supply quantities and incorporate flexible supply arrangements into the agreement so as to conserve the precious water resources. Both sides have agreed to consider these issues together with the price of water. As such, the price of Dongjiang water cannot be determined solely by the changes in price indices of the two places and movements in the exchange rate between Hong Kong Dollar and Renminbi.
(b) The Central People's Government (CPG) fully understands the importance of the supply of Dongjiang water to Hong Kong and is concerned about the negotiations on Dongjiang water supply between Hong Kong and Guangdong Province. As the water resources of our country are state-owned and their management is within the ambit of the Ministry of Water Resources. In other words, it is not a local government but the Ministry of Water Resources that determines the water prices. It is quite natural that CPG is concerned about this issue. However, concrete arrangements will still be decided by the governments of the two places through negotiations. The details of the latest agreement on the price and supply quantities of Dongjiang water have yet to be finalised, the relevant details and arrangements could not be disclosed at this stage. We will certainly inform the public and the Members about these in due course when appropriate.
(c) According to the 1989 Water Supply Agreement, the price of Dongjiang water is determined through consultation between the governments of the two places. The adjustment range depends on the increase in operational costs and takes into account the relevant price indices of the two places and movements in the exchange rate between Hong Kong Dollar and Renminbi.
In the negotiations on the price of water in recent years, we repeatedly and strongly urged the Guangdong Authority to lower the price of water, citing the relevant price indices of the two places and movements in the exchange rate between Hong Kong Dollar and Renminbi. However, the relevant agency of Guangdong Province requested that the price be raised, believing that the continuous development of the Guangdong economy had led to a corresponding increase in operational costs and that the rise in expenditure on water resource protection should be taken into account in calculating the operational costs.
According to the 1989 Water Supply Agreement, the quantities of water supplied to Hong Kong in 1995 would be 690 million cubic metres (mcm) and thereafter would be increased by 30 mcm annually to 1 100 mcm in 2008. Water charge is also payable for the unused balance of quantity during a year on the basis of the agreed water price and cannot be carried forward to the following year. In making the projection on water supply at that time, we adopted, after taking into account the scenarios of high, medium and low growths in water consumption, the low growth scenario. It is contrary to our expectation that the actual growth in water consumption deviated from our projection as a result of our industries moving northwards since the early '90s. Therefore, in negotiating the loan agreement for the construction of a closed aqueduct for the Dongshen Water Supply System in 1998, the Hong Kong Government strongly requested the reduction in supply quantities. Finally it succeeded in reducing the supply quantity from 780 mcm to 760 mcm in 1998 and the annual increase in quantity thereafter from 30 mcm to 10 mcm until 2004. The supply quantities beyond 2004 would be subject to further negotiations. For the seven years from 1998 to 2004, the total reduction in water supply quantity is 560 mcm.
In negotiating the supply quantities in subsequent years, the Hong Kong Government will, on the principle of conserving precious water resources, request the reduction in supply quantities. The Guangdong Authority might therefore, through proper redistribution to other areas in Guangdong which are comparatively short of water supply, use the surplus quantities to promote their local development. Such reduction could also be reduce the pressure and impact on the ecology in the rivers in the Guangdong area. In doing so, a win-win situation between Hong Kong and Guangdong could be achieved. Considering that the local water supply mainly comes from rainfall and that the catchment yield may not be adequate in times of drought, the Hong Kong Government has requested the incorporation of flexible supply arrangements into the new agreement. Although both sides have already agreed to consider these issues together with the price of water, we have not reached a new agreement yet.
Our agreement has always been on the basis that we have a minimum level of water supply. Water supply can always be increased but then the price has to be increased by 10 per cent. We have been asking for reduction in the volume of water supply. It has not been easy. This is because we have our water supplied to us from an open river and the upper reach is cleaner than the lower reach. They need to use a pump to pump a certain volume of water from the upper reach to the lower reach so that water of good quality can be provided to us. Never that the closed adqeduct has just been completed, this problem no longer exists. We can get the water directly from the upper reach of the stream. There is no need to rely on that particular mechanism.
We are now talking about the prices of water as well as the supply quantities. Just like any other agreements, the agreement on the price and supply quantities of Dongjiang water can only be reached if there is consensus between the two parties. In negotiating the price and supply quantities of water in future, the Hong Kong Government will certainly bear in mind the overall interest of Hong Kong, and strive for a reasonable new agreement acceptable to both sides. And then we can have sustainable development.
Ends/Wednesday, October 22, 2003
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