WEDNESDAY, NOVEMBER 24, 1982
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+IMPROVEMENTS ARE POSSIBLE IN ANY SITUATION; BUT SO OF COURSE IS DETERIORATION. ON THE WHOLE IN HONG KONG WE HAVE GOOD UTILITY SERVICES AT PRICES AT LEAST COMPARABLE WITH OTHERS IN ASIA.
SOME INDIVISIBLE SERVICES MUST BE PROVIDED DIRECTLY BY GOVERNMENT, HE SAID. OTHERS ARE MORE EFFICIENTLY PRODUCED IN THE PRIVATE SECTOR.
MR BREMRIDGE POINTED OUT THAT NEGOTIATION OF SCHEMES OF CONTROL CALLED FOR A MEETING OF THE MINDS, AS THE GOVERNMENT COULD NOT COMPEL INVESTMENT.
+FAILING AGREEMENT THE ALTERNATIVES BASICALLY ARE AN INCOMPETENT AND INEFFICIENT SERVICE, OR GOVERNMENT SUBSIDY, OR TAKE-OVER BY THE GOVERNMENT. THE LATTER TWO ARE ATTRACTIVE ONLY TO THOSE WHO CANNOT SEE THAT GOVERNMENT FUNDS ARE THEIR FUNDS – THE PEOPLE'S FUNDS.+
MR BREMRIDGE SAID THE GOVERNMENT ENCOURAGED PRIVATE ENTERPRISE, AND WHILE MOST SERVED US WELL. SOME ARGUABLY DID NOT. HOWEVER FORCED SEQUESTRATION - SAY NATIONALISATION - WAS ALIEN TO US.
→IF BOTH COMPANIES WANT TO MERGE I DOUBT IF GOVERNMENT WOULD OBJECT. IT IS VERY HYPOTHETICAL. IN ANY CASE IT IS USEFUL FOR GOVERNMENT TO BE ABLE TO COMPARE THE DIFFERENT COSTS OF THE TWO COMPANIES. IN FACT IN 1959 THE MOULD COMMISSION RECOMMENDED THE ESTABLISHMENT OF AN AUTHORITY TO GENERATE, TRANSMIT AND DISTRIBUTE ELECTRICITY, THIS INVOLVED NATIONALISATION OF THE TWO POWER COMPANIES. LUCKY HONG KONG TO AVOID SUCH A FATE.
+ IF A TAKEOVER OF THE TWO COMPANIES WAS UNDERTAKEN TODAY MY EXCEEDINGLY ROUGH CALCULATIONS SHOW THAT FAIR COMPENSATION OF ABOUT $20 BILLION WOULD BE NEEDED. WITH 10 PER CENT GOVERNMENT BONDS AND Ä 10-YEAR SINKING FUND LESS EARNINGS THE ANNUAL COST WOULD BE AT LEAST $2 BILLION, AND THE BURDEN OF MANAGEMENT WOULD BE TRANSFERRED TO GOVERNMENT. AT PRESENT IN HONG KONG ANNUAL CORPORATE TAX PROFIT YIELDS ABOUT $6.8 BILLION PER YEAR.
+WOULD THOSE WHO BELIEVE IN NATIONALISATION ACCEPT THE NEED FOR CORPORATE PROFITS TAX TO BE INCREASED BY 29 PER CENT? WHAT EFFECT WOULD THIS HAVE ON INDUSTRY? IN ANY CASE I SUSPECT THAT UNDER GOVERNMENT CONTROL ELECTRICITY PRICES WOULD ANYWAY STILL RISE, NOT FALL SO THE PROBLEM WOULD STILL BE WITH US,+ MR BREMRIDGE SAID.
+WELL, SOME WILL SAY, LET US HAVE SUBSIDIES INSTEAD. REFUSAL TO ALLOW A 10 PER CENT ACROSS THE BOARD INCREASE IN ELECTRICITY CHARGES COULD INVOLVE GOVERNMENT IN PAYING A SUBSIDY TO THE COMPANIES OF $660 MILLION PER YEAR. SALARIES TAX WILL YIELD ABOUT $2.2 BILLION. WHAT DO YOU FEEL ABOUT A 30 PER CENT INCREASE? WOULD THE VAST MAJORITY NOT PREFER DIRECT CHARGING OF USERS?+
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+ LET ME ALSO POINT TO THE FACT THAT LONG-TERM SHAREHOLDERS NOT SPECULATORS ARE AS MUCH CONCERNED WITH YIELD ON INVESTMENT AS WITH ANY OTHER CRITERIA. THE CURRENT DIVIDEND YIELD ON HEC AND CLP SHARES IS BELOW FIVE PER CENT. IS THIS EXORBITANT? IS IT A GOOD BASIS FOR GOVERNMENT INTERFERENCE? OR CRITICISM OF EXCESS RETURNS? INDEED I BELIEVE THAT EXXON WITH A MAJORITY STAKE IN THE GENERATION SECTOR OF CLP HAVE IN FACT SO FAR TAKEN NO DIVIDENDS.
/MR BREMRIDGE