This is an edited version of the speech, entitled 'Hong Kong 1996: The Most Crucial Year in Transition', delivered by Preliminary Working Committee member Sir Sze-yuen Chung on Tuesday. AS you will recall, Sino-British relations turned sour in 1992. This is because the British Government nullified its initial understanding made in early 1990 with the Chinese Government through a series of exchange of letters. The understanding was on the 'through-train' arrangement in 1997 for members of the legislature elected in 1995. In reacting to this sudden change, the Chinese Government appointed a Preliminary Working Committee in 1993. This committee, generally known as PWC in short, is chaired by the Chinese Foreign Minister. Its terms of reference are to advise the Chinese Government on affairs related to the transfer of Hong Kong's sovereignty. Preparatory Committee for the Hong Kong SAR During its last plenary meeting in June this year, the PWC made three recommendations to the Chinese Government relating to the Preparatory Committee for the Hong Kong Special Administrative Region (SAR). This Preparatory Committee, as stipulated in the Basic Law, is to be responsible for preparing the establishment of the Hong Kong SAR. The PWC recommended that the Preparatory Committee should be formed in January 1996. It also recommended that the Preparatory Committee should consist of 120 to 150 members with more than half from Hong Kong. The third recommendation was that the Preparatory Committee should establish offices both in Beijing and Hong Kong. It is expected that the Chinese Government would accept the recommendations of the Preliminary Working Committee and establish the Preparatory Committee in January 1996. The current speculation is that it would consist of about 150 members with approximately 90 from Hong Kong. Selection Committee for the first Chief Executive of the SAR One of the first tasks of the Preparatory Committee is to form the Selection Committee. The function of the Selection Committee is to recommend to the Chinese Government the candidate for the first Chief Executive of the Hong Kong SAR. In accordance with the Decision of the National People's Congress (NPC) on April 4, 1990, this Selection Committee shall compose of 400 permanent residents of Hong Kong, made up from the following four equal segments: 1. The industrial, commercial and financial segment; 2. The professionals segment including doctors, engineers, lawyers, accountants; 3. The labour, grassroots and religious segment; and 4. The political segment. The National People's Congress did not specify how these 400 permanent residents would be derived, and therefore the Preparatory Committee itself will have to decide on this important and difficult issue. It is not yet known how the Preparatory Committee will proceed to form the Selection Committee. However, I believe it is unlikely that it would follow the method of forming the Election Committee prescribed in Annex I of the Basic Law for the second Chief Executive. In any way, this Selection Committee will probably be in place in the second quarter of 1996 so that it will be able to carry out its work to recommend the candidature for the first Chief Executive of the SAR in the second half of 1996. Whilst the Election Committee for the second Chief Executive must choose the candidate by election, the Selection Committee for the first Chief Executive need not necessarily resort to election. The NPC on April 4, 1990 passed a decision providing great flexibility for the Selection Committee to choose the first Chief Executive. The Selection Committee could recommend the candidate through local consultation only without election. Alternatively, it could also make its recommendation through nomination and election after consultations. It would be interesting to speculate which method the Selection Committee would adopt to find the first Chief Executive. Nevertheless, it would be difficult to imagine that all the 400 members of the Selection Committee would agree unanimously on one candidate through consultation alone without any election. If this is to happen, that person must be an ideal one. On the other hand, should there be election among a short list of nominations, the candidates will probably have to canvass votes from the 400 electors through the making of election speeches and by attending question and answer sessions. The Chief Executive Designate Once the first Chief Executive is recommended by the Selection Committee and appointed by the Central People's Government, he or she (but not the Preparatory Committee) shall be responsible for preparing the formation of the first SAR Government in accordance with the Basic Law. This will mean that the Chief Executive Designate will have to nominate as soon as possible at least some principal officials of the SAR Government for appointment by the Chinese Government, and to form the first Executive Council in order to assist him or her in making policies relating to transitional issues. One would expect that the Chinese Chief Executive Designate will become the focus of attention by the people of Hong Kong as well as by the local and world media. The Chief Executive Designate will be bombarded by questions and requests for interview with respect to his or her policies in governing the SAR and matters relating to the impending transfer of sovereignty. He or she will also be asked about views on certain controversial legislation and government policies introduced by the British Hong Kong Government, particularly during the latter years of transition. It is also likely that the British Hong Kong Government would attempt to pressure the Chief Executive Designate to support its new policies and legislation, particularly those not endorsed by, nor discussed with, the Chinese Government. Consequently, the Chief Executive Designate could be sandwiched between two parties, overtly by the British Hong Kong Government and covertly by the Chinese Government. The response of the Chief Executive Designate to these important issues will have a great effect on the confidence in Hong Kong at that time and the immediate years ahead. Whilst the Chief Executive Designate may not wish to provide immediate answers to these issues until he or she has the support and advice from the principal officials and the Executive Council. Nonetheless, the Chief Executive Designate cannot dodge these issues for two long a time, as lack of response would also damage confidence. Provisional SAR Government Secretariat It is very likely that a Provisional SAR Government Secretariat would have to be established towards the end of 1996 with a few hundred staff working in it. However, this could create some concern in Hong Kong and particularly in the British Hong Kong Government. The concern, I believe, is not the size of the Provisional SAR Government Secretariat but rather the existence of a second power centre during the final stage of the transition. It is inevitable that a shadow government will appear prior to the transfer of power in any government. Every four years the American people elect their President in the first week of November to take office on January 20 the following year. There is almost a three-month over-lapping period in which there are two power centres in the United States, one headed by the outgoing President and the other by the President-Elect. The event in Hong Kong in 1997 is more than the transfer of power from one political party to another within a country. It is the transfer of power from one sovereign state to another sovereign state. The process and work of such a transfer of sovereignty are numerous and complicated. In fact, it is unprecedented in modern world history. Under the circumstances, an overlapping period of about six months, in my view, is neither excessive nor unreasonable. We should assess the situation with reason rather than with emotion. The SAR legislature It is unfortunate that the Sino-British talks in 1993 had ended in failure. As a result, Members of the Legislative Council elected in 1995 under British rule cannot straddle 1997 and their term of office will have to end simultaneously with the end of British rule on June 30, 1997. The Chinese Government will establish its own legislature for the Hong Kong SAR. In order to have the Hong Kong SAR Government operative on July 1, 1997, in accordance with the Basic Law, there is the need for an SAR legislature to be established and operative before that date. Let me cite a few examples to illustrate this need. First, Article 90 of the Basic Law specifies that the appointments of the Judges of the Court of Final Appeal and the Chief Judge of the High Court of the Hong Kong SAR would require the endorsement of the SAR Legislative Council. Secondly, upon the establishment of the Hong Kong SAR, Article 160 of the Basic Law authorises the Standing Committee of the National People's Congress to delete those Hong Kong laws in contravention of the Basic Law. Those laws so deleted will have to be replaced and such replacement will have to be debated and passed by the SAR legislature prior to July 1, 1997. Thirdly, there is also the need for the SAR Legislative Council to debate and approve the SAR government budget for the period from July 1, 1997 to March 31, 1998, prior to July 1997. These three examples are the more obvious ones and there are others. It is therefore essential to establish the SAR legislature before July 1997. Let us guess how the Chinese Government would do this under the current circumstances. Any SAR Legislative Council must meet two basic conditions prescribed by the Basic Law. It should be composed of 60 members (Annex II) and must be constituted by election (Article 68). Apart from this, the Basic Law has given the National People's Congress a free hand to decide on the composition of and the method of election for the first SAR Legislative Council. On April 4, 1990, the National People's Congress passed a resolution stating that the first SAR Legislative Council should be composed of 60 members with 20 members returned by geographical constituencies through direct election, 10 members returned by an election committee, and 30 members returned by functional constituencies. It is obvious that under the current poor Sino-British relations such elections, particularly direct election, cannot be carried out by the British Hong Kong Government on behalf of the Chinese Government. Temporary or transitional SAR Legislative Council There are numerous proposals to tackle the problem, and among them two are most talked about. The first is proposed by the PWC. It is the so-called provisional or transitional SAR Legislative Council, to be elected by the same 400-member Selection Committee which was formed originally for the choice of the first Chief Executive. The provisional legislature should be operative before July 1997 to perform the essential functions as mentioned earlier and, according to the recommendation of the PWC, should be dissolved before June 30, 1998. One basic and common objection to this provisional or transitional Legislative Council is that it appears to have no legal base because there is no mention in the Basic Law nor in the Decisions of the National People's Congress of this provisional Legislative Council. To overcome this criticism, the National People's Congress will probably need to pass a new decision authorising the Preparatory Committee to create and establish this provisional Legislature for the SAR. Modified first SAR Legislative Council The other most talked about proposal is the modified first SAR Legislative Council. The Basic Law in its Annex II has authorised the National People's Congress to decide with great flexibility on the method for the formation of the first SAR Legislative Council. There are therefore suggestions that the NPC should replace its earlier decision on April 4, 1990, with another one to suit the changed circumstances. If this route is followed, the National People's Congress could pass a fresh decision for the composition of the first Legislative Council. Nonetheless, there is so far no creditable proposal on the modified composition for the first SAR Legislative Council. Hong Kong SAR legislature at work After the formation of the Hong Kong SAR legislature, irrespective if it's called the provisional or the first Legislative Council, its first tasks are to prepare its Standing Orders, to elect its first President, and to acquire all the necessary logistical support for the legislature to start functioning not later than the early part of 1997. At the same time the Hong Kong provisional SAR Government will have to prepare the necessary bills for introduction into the SAR Legislative Council for debate in public. These bills when passed, with or without amendment, by the SAR legislature will have to be signed by the SAR Chief Executive Designate so as to become the SAR law effective on July 1, 1997. Under the circumstances there will be a period of about six months in which there are in Hong Kong two Legislative Councils at work. One is the British Hong Kong Government Legislature and the other the Chinese Hong Kong SAR Government Legislature. The major objective of putting the SAR legislative to work is for it to approve the first SAR Government Budget for the period from July 1, 1997 to March 31, 1998 as well as those bills relating to the setting up of the Court of Final Appeal, the issuing of the SAR passport, the definition of Hong Kong Permanent Residents, etc. These are essential pieces of legislation which will have to be approved by the SAR Legislature and signed by the Chief Executive prior to July 1, 1997. In addition, the SAR Legislature has to approve amendment bills to fill in the voids of Hong Kong's existing law created through the deletion by the Chinese National People's Congress because of their contravention of the Basic Law. It also has to amend the existing law which the provisional SAR Government considers unsuitable or undesirable for straddling July 1, 1997. Such a situation in which there are two legislatures at work in parallel is, I believe, unprecedented. It is essential that both the provisional SAR Government and the British Hong Kong Government should recognise their obligation and duty to explain this unusual situation to and avoid any misunderstanding by the people of Hong Kong. Trying times Significant numbers of the Hong Kong population are either immigrants from the mainland after 1949 or descendants of these immigrants. They have painful memories of their difficult lives in China. Consequently, they are afraid of and have no confidence in the PRC Government. These Hong Kong residents are already dubious of the effectiveness of the Sino-British Joint Declaration in the implementation of the 'one country, two systems' concept for the Hong Kong SAR. The Tiananmen event in 1989 rekindled their fear and resentment of the PRC Government. It has also led these people to support the demand for the Bill of Rights, for faster pace in democratisation, and for greater autonomy of the SAR Government. Some of them have gone even further to lend support to those people and organisations promoting anti-PRC activities. On the other hand, the pro-PRC voices will grow louder and wider towards the date of sovereignty transfer. It is hoped that these two opposite segments will exercise restraint for the benefit of Hong Kong as a whole so as to avoid creating waves, causing instability and hence damaging confidence in the community. There are trying times ahead.