Development of Lok Ma Chau Loop – advance works and main works package 1
Land use planning
In response to Mr CHAN Chun-ying’s enquiry, CIT undertook to provide information on whether the 60 000 square metres (“sq m”) of commercial land use vis-à-vis the 1.2 million sq m of gross floor area to be provided by the Park (i.e. 5%) was proportionately sufficient, and how such a proportion compared with that of similar facilities in Hong Kong such as HKSP.
Mr CHAN Chun-ying said that as stated in the MOU, the Shenzhen side would develop an area of about three square kilometres to the north of Shenzhen River and adjacent to the Loop into a Shenzhen Innovation and Technology Zone. He enquired whether the completion time of the Shenzhen Innovation and Technology Zone would tie in with that of the Loop.
CIT responded that a Joint Task Force on the Development of the Hong Kong-Shenzhen Innovation and Technology Park in the Loop had been formed to study and negotiate major issues arising from the development of the Park. Moreover, the Board of Directors of HSITPL set up to operate, maintain and manage the Park and comprising members nominated by both sides would soon be holding its first meeting. The Administration would keep in view the development of the Shenzhen Innovation and Technology Zone and update the Panel as and when necessary.
Noting that about 57 000 cubic metres of contaminated soil necessitating treatment existed within the Loop, Mr CHAN Chun-ying enquired whether the land decontamination treatment proposed in paragraph 18 of the Administration’s paper (LC Paper no. CB(1)449/17-18(03)) would be a proper and safe approach for treatment of the contaminated soil.
Project Manager (West), Civil Engineering and Development Department said that according to the findings of the EIA under the planning and engineering study for the Loop development, land contamination within the Loop was not serious. The further site investigation carried out during the detailed design of the advance works confirmed that contaminated soil necessitating treatment was limited to local spots with a total quantity of 57 000 cubic metres. This was in line with the findings of the approved EIA report. The Administration would carry out land decontamination treatment by the well-established in situ solidification/stabilization method for these local spots in accordance with the Remediation Action Plan recommended in the EIA report.
Proposal for an enhanced tax deduction for research and development expenses
Sharing Mr Jimmy NG’s view, Mr CHAN Chun-ying said that in the financial services sector, the regulatory authorities would generally require that testing be carried out and third party expert advice be sought before any new financial technology products were introduced. As such, he opined that testing expenses and fees paid for expert advice were vital and should not be excluded from the proposed definition of qualifying R&D expenditure. If the expenses on such activities were to be excluded, it would be difficult for the Administration to encourage private R&D investment and achieve its policy objective of doubling the Gross Domestic Expenditure on R&D as a percentage of the Gross Domestic Product to 1.5% by 2022. Ir Dr LO Wai-kwok shared a similar view and expressed support for the enhanced tax deduction proposal. He also urged the Administration to put more effort in marketing promotion of the R&D deliverables developed by local enterprises.
CIT responded that the Administration would carefully examine applications for enhanced tax deduction and screen out any non-qualifying R&D, and would work out the operational details with the Inland Revenue Department (“IRD”). CIT added that testing was excluded as it could be carried out with existing testing systems, and might not have direct relevance to R&D which should involve the development of new technologies, materials or knowledge.
Progress on the establishment of the Innovation and Technology Venture Fund
Mr CHAN Chun-ying enquired about the total number of co-investment partners (“CP”) applications received as at the deadline of 15 January 2018 and whether the number was up to the Administration’s expectation. Noting the Administration’s initial plan to partner with a few VC funds and co-invest with them in around 40 to 50 local innovation and technology (“I&T”) start-ups during the active investment period, Mr CHAN enquired whether the Administration would be able to meet the set objective.
S for IT said that 14 CP applications had been received by the application deadline. It was expected that the selection result would be announced in the second quarter of 2018, and CP’s investment in local I&T start-ups would probably commence in the second half of the year. Commissioner for Innovation and Technology (“CIT”) added that the expected number of 40 to 50 I&T start-ups as investee companies was a preliminary ballpark estimate.
Incentives for CPs
Mr CHAN Chun-ying noted that CPs would be offered an option to purchase the ITVFC’s shares in all of the investee companies within five years from the commencement date of the master agreement at a cost of the principal amounts plus suitable premium as the upside incentives, which were performance-based incentives contingent on the success of the investee companies. He enquired about the mechanism and timing of determining the premium concerned.
S for IT responded that the five-year exit mechanism would provide an incentive for CPs to select I&T start-ups with good potentials and bring added value to the investee companies to foster their business development, while allowing the Government to recoup its investment and profits generated to be used for other co-investments. CIT added that for the residual investments after the expiry of the master agreement, the premium would be assessed by an independent third party valuer to be nominated by the Government to the investee company, the cost of which would be borne by the investee company concerned.