B)
C)
SECRET
26A
010132
MOHIAN 9014
Redacted Under FOI Exemption
Sec 27(1)(a)(c)(d)
AS A FALLBACK, I COULD, IF NECESSARY, AGREE TO DEAL WITH GUARANTEED BORROWING BY THE AIRPORT AUTHORITY (THE ONLY NEW BORROWER) ON THE SAME PRINCIPLES AS ALREADY AGREED IN THE JLG FOR DEALING WITH FRANCHISES (I.E. TO INFORM THE CHINESE).
FRANCHISES
9.
I WOULD CONFIRM OUR UNDERSTANDING TO HANDLE FRANCHISES AS ALREADY AGREED BY BOTH SIDES AT THE JLG.
EARMARKING A SUM IN THE FISCAL RESERVES
10.
ON THE ABOVE BASIS, I WOULD BE PREPARED FOR THE HKG TO SET ASIDE HKD 14 BILLION OF OUR FISCAL RESERVES WHICH WE WOULD EARMARK. IT WOULD BE KEPT WITH OTHER SUMS INVESTED IN THE EXCHANGE FUND AND WE WOULD ENSURE THAT IT WAS THERE EACH YEAR UP TO 1997 (SQUARE BRACKETS BEGIN) I.E. IT WOULD BE DOLLARS 14 BILLION IN 1997 NOT/NOT THAT SUM PLUS ACCRUED INTEREST (SQUARE BRACKETS END). IN VIEW OF LU PING'S OBJECTIONS, I WOULD NOT PRESS MY EARLIER PROPOSAL WHICH INCLUDED THE LAND FUND ELEMENT.
11. I WOULD EXPLAIN THE LOGIC OF HKD14 BILLION AS BEING THE SIZE OF RESERVES LEFT UNDER OPTION 2 IN 1997, BUT I WOULD AVOID COMMITTING US TO BUILD AN OPTION 2 AIRPORT. I WOULD SIMPLY SAY THAT WE WERE AGREED THAT AS MUCH AS POSSIBLE SHOULD BE BUILT BEFORE 1997. WE WERE EXAMINING THE DETAILS. WE WOULD NEED TO INCLUDE IN THIS THE MOST SENSIBLE TIMING AND METHOD FOR BUILDING THE RAILWAY.
12.
IF NECESSARY, I WOULD BE PREPARED TO ROUND UP THE HKD 14 BILLION TO HKD15 BILLION DURING THE MEETING.
OTHER POINTS
13.
THERE ARE TWO OTHER POINTS THE CHINESE MAY RAISE. THEY HAVE SAID THAT PRUDENCE IS REQUIRED IN INCREASING TAXES. IF THEY REPEAT THIS, I AM PREPARED TO ASSURE LU PING THAT OUR AIM WOULD