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emanate from the reasonable rate of return decided
upon and the capital financing requirements of HKIA.
4.1.2
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There is no internationally recognised reasonable
rate of return for airports which can be adopted.
The BAA has a financial target of around 6% 7% on
net assets employed based upon the current cost
accounting convention. Given that current cost
accounting requires the current value (as distinct
from original cost) of assets to be included in the
asset base the required percentage return is much
lower than that which is reasonable on a historic
cost asset base. Current cost accounting has not
been generally adopted in Hong Kong and it would be
impracticable to do so for the memorandum accounts of
one Government utility.
4.1.3 The argument that a reasonable rate of return is that
which is derived from charging what the market will
bear or
fees of similar levels to those of another
airport elsewhere in the world would not accord with
HMG's international obligations. Charges must be
based upon covering costs at Hong Kong plus a
reasonable rate of return on investment.
4.1.4 The only ready guide to what might be considered a
reasonable rate of return is the profit limits set in
the schemes of control applied to Hong Kong's public
utility companies with a franchise or a quasi-
franchise in their respective fields of activity
(obviously HKG has decided what a reasonable rate of
return is for them). While these limits vary
slightly from one utility company to another and the
basis for calculating the return is not identical in
all cases, most have the following general
characteristics: