CONFIDENTIAL
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MDHIAN 6182
(B) THE COST OF THE AIRPORT ITSELF, TO BE FINANCED BY THE AIRPORT AUTHORITY, HAS GONE UP BY DOLLARS 1.7 BILLION:
(C) WE ARE NOW ALLOWING A CONTINGENCY OF DOLLARS 2.7 BILLION TO COVER ALL OF GOVERNMENT'S WORKS IN THE ACP. THIS WILL BE ON TOP OF THE USUAL 20 PERCENT CONTINGENCY ALLOWED IN EACH PROJECT TO COVER WORKS ACCELERATION OR PROJECT INTERFACE PROBLEMS: AND
(D) THE REMAINDER OF THE INCREASE IS CAUSED BY REFINEMENT OF THE SCOPE AND COSTS OF THE INDIVIDUAL PROJECTS. A NOTABLE CASE IS THE WEST KOWLOON RECLAMATION, WHICH HAS GONE UP BY DOLLARS 1.4 BILLION AS A RESULT OF HIGHER LAND ACQUISITION COSTS AND A NUMBER OF MINOR ADJUSTMENTS.
5. IN REPLY TO ANY CRITICISM HERE, WE WILL BE ABLE TO POINT OUT THAT THE INCREASED COST TO THE GOVERNMENT IS ONLY THREE PER CENT. THE GOVERNMENT CASH EQUITY REQUIREMENT FOR THE PAA AND THE MTRC WILL BOTH BE LOWER THAN PREVIOUSLY INDICATED (ALTHOUGH THERE WILL NOW BE SOME CONTINGENT LIABILITIES THAT WE HAD NOT PREVIOUSLY MENTIONED). FURTHERMORE, WE ANTICIPATE LAND PREMIUM FROM THE MTRC OF ABOUT DOLLARS 42 BILLION, OF WHICH ABOUT DOLLARS 20 BILLION WILL ACCRUE TO HKG BEFORE 1997. HKG'S SHARE OF THE OVERALL COST HAS FALLEN TO 54 PERCENT, WHILE THAT OF THE PRIVATE SECTOR HAS RISEN TO 46 PERCENT. THIS COMPARES FAVOURABLY WITH THE GOVERNMENT TO PRIVATE RATIO OF 64 PERCENT TO 36 PERCENT ESTIMATED IN JULY
1991.
6.
WE SHALL BE PUTTING A PAPER ON OVERALL COSTS TO EXCO ON 25 MARCH AND, IF EXCO AGREE, PLAN TO PASS IT TO THE CHINESE SIDE ON THE SAME DAY. AT THAT POINT, THE FIGURES WILL NO DOUBT LEAK. WE SHALL THEREFORE BRIEF THE LEGCO AD-HOC GROUP SHORTLY THEREAFTER.
AIRPORT RAILWAY. (MY TELNOS 224 AND 292)
THE CHINESE SIDE OF THE AC HAS AGREED TO AN INFORMAL MEETING ON 10 MARCH. WE WILL GO OVER THE SALIENT POINTS OF THE PAPER WE HANDED TO THEM ON 11 FEBRUARY. WE SHALL EXPLAIN THE NEED TO CONSTRUCT THE AR TO MEET THE OPENING OF THE AIRPORT, SO AS TO FORESTALL ANY IDEA THE CHINESE MAY HAVE THAT IT SHOULD BE DELAYED (WE ARE IN ANY CASE COMMITTED UNDER THE MOU TO BUILD AS MUCH OF THE RAILWAY AS POSSIBLE BY 1997 ). WE SHALL GIVE THE CHINESE THE DRAFT AGREEMENTS BETWEEN THE HKG AND THE MTRC (PROBABLY LATER THIS WEEK), AND UNDERTAKE TO PASS OVER A PAPER ON OVERALL ACP
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