RESTRICTED
fa
ні
82
21
DIST?
CEIVED IN
MAR 199
RESTRICTED
FM HONG KONG
TO PRIORITY FCO
TELNO 874
OF 21110OZ MARCH 91
INFO PRIORITY PEKING, UKREP JLG HONG KONG
5
007531 MDLIAN 7757
WEN WEI PO EDITORIAL: PADS FINANCIAL ARRANGEMENTS
1. TODAY'S (21 MARCH) EDITION OF WEN WEI PO CARRIES AN EDITORIAL QUESTIONING THE FINANCIAL ARRANGEMENTS FOR THE NEW AIRPORT.
2. THE PAPERS SAYS THAT HK PEOPLE HAD BEEN SHOCKED BY THE RECENT BUDGET AS IT MADE THEM REALISE THE IMPACT OF THE NEW AIRPORT. MORE AND MORE PEOPLE WERE BEGINNING TO DOUBT WHETHER FINANCIAL ARRANGEMENTS FOR THE NEW AIRPORT WERE REASONABLE.
3. THE PAPER ADDED THAT HK'S LOW TAX REGIME ATTRACTED FOREIGN INVESTORS. BUT ONCE THE WORK ON THE AIRPORT WAS UNDERWAY, THE SCALE AND SCOPE OF TAX INCREASES WOULD BE EXPANDED. INFLATION WOULD INEVITABLY INCREASE AND VARIOUS PRODUCTION COSTS WOULD GO UP. BY 1997 IT WOULD BE DIFFICULT TO MAINTAIN HK'S PROSPERITY AND
STABILITY.
4. IN HIS BUDGET, THE FS HAD PUT FORWARD A PLAN TO ISSUE SHORT- TERM BONDS MATURING IN 1994. BUT IN 1994 PAYMENTS ON THE NEW AIRPORT WOULD BE AT THEIR PEAK. WHERE WOULD HKG FIND THE MONEY TO REPAY THE BONDS? ONE FEASIBLE METHOD WOULD BE TO ISSUE MORE
BONDS. BUT THESE WOULD MATURE AROUND 1997. THE ABILITY OF HKG TO REPAY THE BONDS AT THAT TIME WAS EVEN MORE IN DOUBT.
5. IF THE ORIGINALLY PLANNED EXPENDITURE OF HKD 140 BILLION ON ROSE GARDEN PROJECTS WENT AHEAD, ONLY HKD 5 BILLION WOULD BE LEFT IN THE FISCAL RESERVES BY 1997. THE NEWLY ESTABLISHED SARG WOULD THEN FIND IT DIFFICULT TO DEAL WITH THE HUGE PENSION PAYMENTS, CIVIL SERVICE SALARIES AND ANY FLUCTUATIONS IN EXCHANGE RATES. IT WOULD BE IMPOSSIBLE TO CONTINUE WITH LARGE SCALE ENGINEERING WORKS AFTER 1997.
6. THE PAPER ALSO DOUBTED THE FS'S ESTIMATE THAT THE LAND FUND MIGHT HAVE ACCUMULATED HKD 80 BILLION BY 1997. IN THE FIRST SIX YEARS OF THE TRANSITION PERIOD ONLY HKD 20 BILLION HAD BEEN ACCUMULATED. IT WAS DIFFICULT TO SEE HOW THIS MIGHT REACH HKD 80
1
PAGE RESTRICTED