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Wednesday, March 28, 1973
In reply, the Financial Secretary, the Hon. C.P. Haddon-Cave assured
Dr. Chung that the Government was working with the full mass transit system
very much in mind, although the Government had so far committed firmly to
constructing only the first four stages.
Mr. Haddon-Cave agreed with Dr. Chung that the estimated capital
cost of the full system had increased by about 15 per cent in each of the
two years between mid-1970 and mid-1972.
But he described these two years as "somewhat unusual" and thought
Dr. Chung was "a little too pessimistic" in predicting a rate of cost escalation
of 10 per cent per annum over the entire construction period for the full system.
Indications from a number of sources were that it would be reasonable
to assume an average five-per-cent annual increase in costs from mid-1972 levels.
"On this basis, it is estimated that the total cost of the full system,
excluding interest charges, would be in the region of $10,000 million," he added.
The Financial Secretary said the Government had come to the conclusion
that the project would be "financial viable" on the basis of this estimate and
of a series of assumptions about interest rates, repayment terms, operating
costs and revenue.
"It now remains to be seen whether a price is likely to be obtained
for the contract or contracts to fit into our projected cash flow table," he said.
To this end, he told the Council, further consultations were currently
being held with a number of consortia so that a decision could be reached as to
the most appropriate contractual arrangements to be adopted.
The motion was later adopted by the Council.
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