This report will show to the reader that the department has continued to make good progress in 2003/04 towards fulfilling its mission to alleviate flooding and improve the sewerage infrastructure. I am particularly pleased to report the achievements attained in a year during which Hong Kong faced the unprecedented challenge of combating the SARS epidemic. Throughout this period, our staff had not only undertaken their duties responsibly to ensure all essential services were maintained but also extra duties to assist the Government in winning the battle against SARS.

During the year there were no serious large-scale flooding in the NT, and the number of flooding incidents have dropped substantially as a result of the progressive completion of critical flood prevention projects in the past few years. In the coming years, the focus of our work will shift to improving the secondary and local drainage systems so as to further reduce the risk of flooding in the rural areas of NT. Major advances

were also made during the year in completing key components of the West Kowloon Drainage Improvement Scheme. We expect the risk of flooding in Mongkok will be substantially lowered once these works are completed in 2004.

To improve the sewerage infrastructure, we are continuing with the construction of a substantial programme of works costing $7.2 billion which includes the Shatin Sewage Treatment Works Stage III, Siu Ho Wan Sewage Treatment Plant, Ngong Ping Sewage Treatment Plant and the upgrading of the sewerage system on Hong Kong Island. The completion of the Harbour Area Treatment Scheme Stage 1 in December 2001 has brought about significant improvement to the water quality in Victoria Harbour. Since then we have carried out a number of studies to map out the way forward for the next stage of the scheme. Most of these studies were completed during the year and we are now ready to consult the public on the way forward.

Looking ahead, I am hopeful that a consensus on the next stage of the Harbour Area Treatment Scheme will emerge in the process of public consultation. This will provide a firm basis for drawing up the plans and moving forward the implementation of this important sewerage infrastructure as soon as possible. As the department's asset will continue to grow in the coming years, the challenge for all of us will be to find ways to raise productivity so that the additional resources needed to manage the expanding assets are tightly controlled while at the same time satisfying the public's expectation of higher standards of service.

I am very grateful to the staff of the department for their hard work, ingenuity and devotion to serve the public which was so well demonstrated during the SARS outbreak. I am also very appreciative of the support given to us by our partners in the industry and Government.