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BACKGROUND NOTE
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KAI TAK AIRPORT IMPROVEMENTS
Improvements at Kai Tak Airport are much needed to enable the Airport to cope with fast increasing passenger and cargo traffic, to meet the increasing requirements of the present generation of aircraft and also the requirements of the new Jumbo-Jet generation. When improvements were last made to the Airport in 1959-62, HMG assisted with an interest free loan of £3m. repayable over fifteen
years.
2.
Hong Kong originally applied for a grant from HMG towards the improvements now proposed, but when it was demonstrated that the Airport would eventually after improvement make a profit, decided to ask for a loan of about £6m. (on "favourable" terms to be negotiated) for the extension of the runway as part of a £13m. programme, the remainder of which would be financed from the Colony's own resources.
3.
Hong Kong's problem is cash availability. The Colony has large reserves, but also large commitments. Priorities have to be considered with an eye on social and political pressures, particularly since the troubles of 1967. If the development of the Airport were to be financed wholly from local resources it might be necessary to make sacrifices in the planned provision of other essential public needs, among them the ever present requirements for housing and water supplies; a project to which many in Hong Kong would give priority over the airport is some form of mass transport system (probably an underground railway).
4. Hong Kong argues that HMG ought to contribute to the airport because BOAC derives substantial revenue from its routes through Kai Tak and from traffic rights obtained for UK civil aviation interest elsewhere by trading landing rights at Hong Kong. These arguments are recognised as valid at least in the FCO and Board of Trade, but the problem is to find a source of funds.
5. The Board of Trade and FCO cannot provide funds for this project from within their present votes. The Ministry of Overseas Development is unwilling to provide funds from within the aid programme on the grounds that Hong Kong's economic and financial
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