covernity)
The Financing of the Project; the Position of the Chinese
Government
13.
The HKG has been looking for substantial private sector investment in the project. This was particularly so for certain key elements such as the fixed link though, as has been noted, the decision has now been taken to proceed with the fixed link as a public sector project. Investors will of course need to be satisfied about the fundamental viability of the project; air traffic has been increasing strongly in Hong Kong and all the forecasts suggest that this will continue. Detailed sensitivity work is of course being done, in relation to the fixed link, on traffic flows and the level of tolls, since these are fundamental to calculations about viability.
14.
In addition the timing of the project inevitably means that the bulk of the cost will be incurred before the Transfer
Loverersly) of Tower in 1997, while the associated revenues and repayments
will take place after 1997. Potential investors therefore have the clearest interest in the position of the People's Republic of China; and there have been detailed and difficult discussions with the PRC about the project in recent months. It is highly desirable - indeed almost essential - that the PRC should give the project its endorsement and even, at best, to invest in some limited way in the project itself. It has been difficult to secure this sort of commitment from the PRC, though there have been detailed discussions with them. They have been prone to recriminate about the fact that they were not consulted at an earlier stage; and they are fond of depicting the project as a scheme to empty Hong Kong coffers prior to the transfer of power. There have been suggestions from the PRC that the PADS proposals are too grandiose and expensive, and that airport developments at Shenzhen (just over the border into the PRC) and at Macau will take the pressure off Kai Tak and delay the need for a new airport (this does not take account of the HKG view that it is of primary political importance that Hong Kong should have its own links and communications at an adequate level).
15.
We and the Hong Kong Government have been making every effort to convince the Chinese of the merits of the project. During Mr Maude's visit to Peking in July 1990, Li Peng acknowledged that Hong Kong needed a new airport to replace Kai Tak but made clear that the Chinese Government could not give a substantive view until their own experts had assessed the feasibility of the project. A team of Chinese experts visited Hong Kong in October for a detailed briefing on the financial and technical aspects of the project. The Hong Kong Government have agreed to continue to have further talks at expert level, and further talks are likely to take place early in the New Year. It will be interesting to have the Government's up-to-date assessment of the situation.
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