These workers will have to apply for a permit, and companies providing their services will have to seek a licence to operate.

Although the Government says criteria for issuing licences will be worked out by the future Security and Guarding Services Industry Authority, elderly security guards are likely to be cut out by age limitations and health requirements.

The average age of Hong Kong's 130,000 registered watchmen, supplied by 100 different security companies, is between 50 and 60.

But that figure does not include the thousands of even older caretakers - some 75 years old - who take the very low salaried jobs offered in housing estates.

Professor Nelson Chow Wing-sun of Hong Kong University's Social Work Department said about 20,000 elderly caretakers worked long hours for $3,500 to $5,000 a month.

Professor Chow yesterday urged the administration to spare this group, most of whom are well over 60, to avoid creating a serious social problem.

He predicted the Government could end up facing a sudden surge in demand for housing, institutional care, day activity and welfare payments.

Professor Chow said since many old caretakers and watchmen also live in the buildings where they work his immediate concern was how and where to house them if they lost their jobs.

''The backlog of 4,000 elderly single people mentioned in the Governor's policy speech will be more than double when the new law comes into operation.

''Also, the administration needs to provide 100 more daytime elderly activity centres for those without jobs.

''At present only 10 per cent of the 700,000 old people are getting public assistance, but it could suddenly go up to 200,000.

''The Government needs to think seriously of the social consequences arising from such legislative proposals,'' he said.

Professor Chow, who is also a member of Governor Chris Patten's working group on the care of the elderly, said the problem would be raised when they discussed employment of the elderly.

''Personally, I oppose compulsory retirement age because I think old people should be allowed to work if they are fit,'' he said.

Principal assistant Secretary for Security, Karen Pong Leung Kwok-hing, refused to be drawn as to whether the administration had assessed the social impact or how officials would cope with situations of unemployed, aged watchmen.

''We don't want to put a figure on the number of people to be affected [by the draft legislation] without working out criteria for the application of security guard permits.

''The independent authority will have to set out what conditions existing watchmen and guards will have to comply with before they get a licence.

''We don't want to impose rigid rules and conditions because we want to give authority flexibility in determining eligibility criteria for people who want to work as security guards,'' she said.

Mrs Pong said the Security and Guarding Services Industry Authority, to be chaired by a non-official and comprising unofficial members, would carefully study whether the criteria would drive old people out of their jobs.

Apart from providing security and guarding services, companies responsible for cash-in-transit, security design in premises and installation, maintenance and repair of burglar alarms will also come under government controls.

A new unit under the police Crime Prevention Bureau has been set up to investigate applications for licences by security firms. The police licensing division will be responsible for issuing security guard permits.