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trades to and from Japan, does not serve Australia and New Zealand, has been obliged to stop serving Burma, and is restricted in Malaysia, Singapore, and discouraged by local circumstances withdrew and has not yet returned to Indonesia. CPA is at times outcarried in the Hong Kong/Philippines trade by PAL and in the Bangkok trade by Thai International; its pool and other inter-airline arrangements help to make this up, and the cumulative importance in carriage within thỏ ragion from the spread of 15 services based in Hong Kong is notablo it would be recognised that this has been substantially assisted, to say no more, by HIG's bilateral stage setting, M.
11.
The facts of ownership of CPA are offered with care to suggest that CPA is predominently owned in the UK itself (Para.6). Insofar as this is so there is nothing in it to support the idea that the UK is ready to play down CPA's interests and therefore Hong Kong's interests. On the argument presented the effect would be to help assure, if assurance were necessary, UK support for CPA.
12. Para.7 of the paper records CPA dividends of HK$2 million and HK$3 million in the last two years, and the paper genorally sets out to show that CPA is a . profitable and thriving airline. CPA recently announced a 25% increase in passenger capacity, 27% increase in freight oapacity, 26% increase in passenger miles and 27% increase in freight ton miles achieved during the last year. This picture gives- no support to the idea that HMG has not looked after CPA's interests as well. These results can only be achieved within the wide and flexible framework of rights which HMG has negotiated for the benefit of CPA.
Value of CPA to the UK
13. While there can be no doubt that CPA makes a valuable contribution to the economy and prestige of Hong Kong, the final net contribution of CPA to the UK economy is far from clear. The figures supplied in the Hong Kong paper (Section B) would need to be identified and substantiated in some detşil, to be used in a realistic assessment, which would have to go much further, to establish and locate final costs and bonofits. The figures given for contributions to the sterling area conflict with one other (see below), and the analysis is relatively superficial. It would be instructive to know what proportion of dividends are actually remitted into the UK, and to have a substantiated account of where CPA's capital and recurrent payments are made and whence calls for funding and capital service are met. A comparison of profits with capital employed would enable some judgement „ of whether this is a very rewarding application of resources and effort.
The rate of 1966 profit to 1966/67 earnings is about 2% on the figures given.
14. The figures given for contribution to the sterling areq could be particularly misleading in the case of a Hong Kong based enterprise. ▲ breakdown by territories of where in the sterling area CPA's expenditure goes might be illuminating. Section C, Para. 10 contains annual expenditure items in Hong Kong of H34 million per annum, not apparently covering all the annual expenditure in Hong Kong, but anyway representing a large slice of the claimed HK$76 million expenditure for 1966/67 in the sterling area. In successive sentences expenditure in the sterling ares is described as HK$76 million and HK$39 million.
15. It might obviously be useful to have a more satisfactory assessment in depth of CPA's contribution to the UK economy, and it is for consideration whether this aspect having been raised, Hong Kong might be invited to make a more detailed study for examination. To set this in context might call for a wider critical examination of the effect of Hong Kong on the UK economy and on sterling.
16.
Profits are remitted by CPA to shareholders in the UK and this is of benefit to the UK. Funds from the UK have, however, been invested in CPA in order to earn these profits and new investment, which is a drain on the UK balance of payments, continues to be made. Aз CPA do not buy British aircraft there is no gain to UK exports as a result of this investment. The value of the investment to the UK
+tad resides solely in the profits likely that these are sufficienty large or accrue quickly enough to make the investment especially attractive.
17.
The overseas earnings of SPA mainly benefit Hong Kong which is able to use them to pay for imports of gocâs and services. Although the value of goods imported
3.