CO129-598-2 Tai Lam Chung Reservoir Project 24-6-1948 - 3-3-1949 — Page 12

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We are getting an increasing number of proposals for developments in the New Territories and it seemed to me that the time had come for a review of the political considerations which must necessarily be taken into account in considering such proposals. From this point of view, the historical note at No. 7 and Mr. Sidebotham's memorandum at No. 9 are very useful.

It seems to me that, unless we approach this matter from the fundamental assumption that the New Territories will not be handed back to China until the expiration of the lease in 1998;-(a) there would be an almost overwhelming case against embarking upon developments, (b) that policy based on such an assumption would be in complete conflict with our doctrine of "trusteeship".

My conclusion therefore is that, generally speaking, we should not be deterred from embarking on such developments even though there is an undeniable risk that circumstances may compel us to give up the New Territories before that date, and even though there is a most extreme uncertainty about the kind of arrangements which we might be able to make with China as to the control of any public utility services which may be established in the New Territories.

I also agree with Mr. Sidebotham's conclusion that any such developments should be financed on the basis that the capital cost will be fully amortized before the end of the lease.

In view of the political and financial implications of such a policy I also agree that we should now endeavour to carry the Treasury and the Foreign Office with us.

At the same time, it is I think quite clear that, within the framework of such a policy, we must examine each individual proposal very critically. As regards the present proposal for the construction of a new reservoir at Tai Lam Chung it seems to me that the immediate and growing needs of Hong Kong Island clearly require that this development should be undertaken.

Mr. Gorell Barnes.

12.x.48.

You passed me this file.

I understand that you

that

yourself are going to comment on the subject matter of the latest minutes, but you pointed out, with reference to para.4 of the draft on the file, there are objections, for exchange control reasons, to the issue of bearer bonds, unless certain safeguards are imposed. This is all too true, and I am sorry that I did not pick the point up earlier. I have now inserted some further sentences in the draft which reflect the present doctrine on this subject.

H.T.B

14th October, 1948.