THURSDAY, MARCH 4, 1993
26
IN
GOOD
MORNING FINANCIAL SECRETARY.
QUESTION:
JUDGING BY THE ALLOCATION OF FUND THAT APPEAR TO HAVE BEEN PUT FOR THE AIRPORT PROJECT, DOES IT NOT APPEAR THAT YOU ARE HAVING INTENTIONS OF EITHER BREACHING THE PROVISIONS OF THE MEMORANDUM OF UNDERSTANDING OR ABANDONING THE PROJECT ALTOGETHER? BECAUSE AT THE PRE-MOU NEGOTIATIONS YOU HAD INDICATED TO THE CHINESE SIDE THAT YOU WOULD BE A POSITION TO LEAVE ANYTHING BETWEEN $70-90 BILLION AND THAT YOU WOULD NOT NEED TO BORROW ANY MONEY FOR THE PROJECT. BUT THE CHINESE SIDE INDICATED THAT THEY WOULD NOT HAVE ANY LIABILITIES CROSSING OVER AND INSTEAD SAID INSTEAD OF 70-90 LEAVE BEHIND ONLY 25 BUT DON'T BORROW MORE THAN 5 BILLION. SO THEREFORE THERE WAS AN ADDITIONAL 55 BILLION EQUITY THAT YOU WERE EXPECTED TO INJECT OVER AND ABOVE WHAT YOU PROPOSED TO THE CHINESE SIDE AT THE COMMENCEMENT OF THE MEMORANDUM OF UNDERSTANDING TALKS. DOES IT NOT APPEAR THAT IN THE LIGHT OF THE FACT THAT THE CHINESE HAVE SAID THERE SHOULD BE NOT MORE THAN FIVE BILLION BORROWING, AND YOU DO NOT SEEM TO INTEND TO PUT UP THAT 55 BILLION, THAT YOU HAVE DECIDED TO BREACH THE MOU OR TO ABANDON THE PROJECT?
FS:
WELL NO, THERE IS ABSOLUTELY NO PROBLEM THERE. AS YOU SAY, UNDER THE MOU WE COMMITTED OURSELVES TO ENSURE THAT THERE WAS AT LEAST $25 BILLION IN THE RESERVES IN 96-97. I DON'T THINK ANYONE WOULD ACCUSE US OF BREACHING IT IF WE HAVE A BIT MORE, I PRESUME THEY WOULD BE RATHER HAPPY.
QUESTION:
WITH REGARD TO RESERVES, THERE IS A SUPPLEMENTARY QUESTION FOR MR MACLEOD. YOU ANTICIPATE THAT IN 1996-97 THE RESERVES WILL STAND AT $78.4 BILLION, BUT THEN IN THE PAST TWO YEARS THE ESTIMATES HAVE BEEN OFF THE MARK. THIS TIME AROUND IT HAS BEEN LUCKY BECAUSE WE HAVE MORE SURPLUS, BUT THEN YOU ARE QUITE FAR OFF THE MARK, SO IS THERE A GREAT POSSIBILITY THAT THE AMOUNT OF 78.4 MAY TURN OUT TO BE WRONG?
FS:
YES, OF COURSE. FORECASTS LOOKING YEARS AHEAD ARE FALLIBLE, THEY ARE FALLIBLE IN THE PUBLIC SECTOR AND THEY ARE FALLIBLE IN THE PRIVATE SECTOR, AND I HIGHLIGHTED A FEW OF THE DOWN-SIDE RISKS IN THE BUDGET SPEECH, THAT WOULD BE PARTICULARLY, THE MFN ISSUE. OF COURSE THERE ARE UP-SIDES TOO, AND IT IS ACTUALLY QUITE DIFFICULT AT THE MOMENT TO FORECAST. WE HAVE, OF COURSE, THE POLITICAL ISSUE WHICH IS STILL UNRESOLVED AT THE MOMENT. WE HAVE, AS A CALLER MENTIONED, THE AIRPORT TALKS ALSO STILL UNRESOLVED. BUT MY MAIN COMFORT AND THE CONFIDENCE I HAVE IN MAKING THOSE PROJECTIONS, STEMS BASICALLY FROM OUR FORECASTS OF ECONOMIC GROWTH AND THERE, I THINK, WE ARE AT ONE WITH MOST PRIVATE SECTOR COMMENTATORS. I THINK MOST, FOR INSTANCE BANK ECONOMISTS AND SO ON WHO PUBLISH THEIR FORECASTS, ARE ALSO PRETTY BULLISH ABOUT OUR ECONOMIC GROWTH, PARTLY BASED ON A BULLISH VIEW OF CHINA'S OWN GROWTH. THAT IS BASICALLY WHAT IT IS. THE JOY OF HAVING PRETTY GOOD RESERVES AND MORE OR LESS NO BORROWING IS THAT ONE HAS SOME FLEXIBILITY TO ADJUST IF ONE'S FORECASTS PROVE TO BE WRONG. I MEAN BY THAT, PARTICULARLY FORECASTS OF ECONOMIC GROWTH.
KIT CUMMINGS: AND CAN I JUST ASK A QUICK SUPPLEMENTARY ONE HERE. COULD WHAT YOU ARE SAYING APPLY ALSO TO THE PROJECTED DEFICITS OVER THE NEXT FEW YEARS THAT IF THINGS ARE BETTER THAN WOULD BE INDICATED AT THE MOMENT, YOU MIGHT END UP ACTUALLY WITH SURPLUS BUDGETS WHERE YOU WERE FORECASTING DEFICIT BUDGETS?
/IT IS