35.
10
Cost of the System. Costs have been estimated on the basis
of the work being carried out by international competitive tender.
The estimates are based on prices in mid-1970 and no allowance has been
Details of the costs are as
included for possible future inflation.
follows:-
Civil Engineering
}
Construction
Plant and Equipment
Total:
Initial System
(HK$)
Full System
(HK)
1407.5 M
3132.9 M
498.6 M
1257.9 M
a
1906.1 M
4390.8 M
Annex
The above figures exclude engineering fees, supervision of construction
and Government administration costs.
36.
Revenue. The revenues for the system have been calculated on
a tariff of 20 cents for every 2 miles with a surcharge of 20 cents for
the harbour crossing. The Consultants admit the conservative nature of
their estimate of traffic volumes and the Commissioner for Transport is
of the opinion that the "elasticity of demand" factor (see paragraph
5.13 of Vol. I) is too high for Hong Kong. There is some doubt whether
the fares selected amount to what the market will reasonably bear.
is borne out by the volumes carried and fares charged on public light
buses which the Consultants had little opportunity to assess.
37.
This
Viability of the System. Because of the demands on the
Government's revenue in fields such as medicine, education, housing and
welfare it is considered that the subway-system like water supply should
be introduced in such a form that it provides a reasonable return on
the funds required for its construction, equipment and operation.
From
a financial view point it is seen in the same light as existing forms
of public transport whose profitable operation under Government control
1 has been repeatedly endorsed. At Annexes B and B Members will find
the internal rates of return and the discounted cash flow figures for
the Initial System and for the full Preferred System as most recently
calculated by the Consultants.
38.
Studies continue within Government on the ideal fare-
structure. It is sufficient to indicate at the moment that the
Director of Public Works and the Commissioner for Transport are both confident that the estimated return on the system can be increased beyond the 7.1% indicated by the Consultants without a significant loss of
passengers. The cost of the system on the other hand is reckoned by
the Director of Public Works to be realistic and reliable at mid-1970
prices.
CONFIDENTIAL