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investment would have to go towards expanding the essential economic infra- structure of the territory, especially its port facilities. He said the rapid growth of cargo traffic, particularly container traffic, made this essential. When Terminals 6 and 7 at Kwai Chung had been completed, the government would have to decide where in the general harbour area further development should take place. The Governor said it was also critically important for Hong Kong to have a first class international airport. Kai Tak had limited potential for expansion and must eventually reach its ultimate capacity. Even before that point was reached it was necessary to take account of the environmental impact on Kowloon of an airport at Kai Tak developed to full capacity. In looking at possible alternative sites it was clear that the best sites for a new airport were in the west of the territory where new roads and infrastructure could be built to serve both port and airport developments as well as, possibly, to provide a new western harbour crossing. Sir David said the government were now commission- ing a joint port and airport development study to advise on the best and most economical solution to these two critical problems. The study would draw on, and put together, all the work that had already been done on harbour, airport and road development. It would be completed by the late summer of 1989. The government would then be in a position to take some fundamental decisions about the future development of the territory. The resources required would be very large. It might be necessary to seek more private involvement than previously in developing suitable parts of the economic infrastructure.
5. As I say, Mr Wu was very pleased about the tenor of the Governor's
remarks.
6. I have had a word with the Chief Secretary, David Ford, about the project and have explained the UK's keen interest in the contracts. The Chief Secretary said he was all in favour of getting on with it and he thought the Governor was of a similar mind. I said the feeling in the business community was that the Administration were buying time by calling for consultancies. Mr Ford said he had accepted the view of some of his colleagues that it was necessary to proceed with care but he did not want to see the decision-making process drag on for longer than necessary.
Your ev
Reg.
RE Holloway
REH/eb
cc J K Chapman Esq, Peking
H J Tracy Esq, OT2/3A, DTI
CONFIDENTIAL
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