CONFIDENTIAL
131240 MDHIAN 6230
LORD YOUNG SAID THAT THE TOTAL COST OF THE PROJECT WOULD BE HONG KONG DOLLARS 127 BILLION. THE MONEY WOULD ONLY START BEING PAID BACK FROM PROFITS OF THE DEVELOPMENT AFTER 1997. LAND WOULD BE RECLAIMED ON LANTAO ISLAND. THERE WOULD BE BRIDGES, TUNNELS AND HIGH SPEED TRAINS. OF COURSE, WHEN THE NEW COMPLEX WAS COMPLETED IT WOULD FREE ALL THE EXISTING LAND AT KAI TAK FOR DEVELOPMENT AND THE HEIGHT RESTRICTIONS ON THE PRESENT AIRPORT APPROACHES WOULD BE ABOLISHED. IN ANSWER TO FURTHER QUESTIONS, I SAID THAT IT WAS ESTIMATED THAT THE AIRPORT ALONE WOULD COST ABOUT HONG KONG DOLLARS 40 BILLION. LORD YOUNG REPEATED THAT THE NEW DEVELOPMENT WOULD BE OF SERVICE TO THE WHOLE DELTA AREA DURING THE NEXT CENTURY.
9. LI SAID THAT HE FULLY UNDERSTOOD THE POINTS MADE, AND ADVISED LORD YOUNG TO CONTINUE DISCUSSION WITH THE PRIME MINISTER. HE WENT ON TO SAY THAT HAD HEARD SOME OF THE ARGUMENTS BEFORE. IT WAS A PITY THAT BOTH SIDES FOUND IT DIFFICULT TO UNDERSTAND EACH OTHER BUT EFFORTS SHOULD BE MADE TO IMPROVE THIS. SINCE THE AIRPORT AND CONTAINER PROJECT WAS NOT DUE TO COME INTO SERVICE UNTIL AFTER 1997, WHY WAS THE BRITISH GOVERNMENT SO ENTHUSIASTIC ABOUT IT? LORD YOUNG EXPLAINED THAT BRITAIN GOT NO IMMEDIATE BENEFIT FROM HONG KONG. THE PROBLEM WAS THAT WITHOUT THE NEW INFRASTRUCTURE HONG KONG WOULD SLOWLY BEGIN TO DIE.
10. LI COMMENTED THAT THE SUMS INVOLVED WERE NOT INSIGNIFICANT. THEY WERE THE EQUIVALENT OF US DOLLARS 15 BILLION. HE COULD SEE THAT THE DEVELOPMENT WORK WOULD TAKE PLACE BEFORE 1997, BUT HE WAS CONCERNED THAT IT WOULD THEREAFTER TRANSFER TO CHINA A BIG DEBT WHICH WOULD HAVE TO BE REPAID. IT WOULD BE GOOD TO SEE INVESTMENT FROM PRIVATE SOURCES. THERE WOULD BE NO DIFFICULTY ABOUT AGREEING TO THAT. BUT THE REST WOULD BE GOVERNMENT INVESTMENT AND REPAYMENT OF DEBT WOULD NOT BE EASY. IF HONG KONG CONTINUED TO BE PROSPEROUS, THAT MIGHT BE ACCEPTABLE SEMICOLON BUT IF HONG KONG STAYED AS IT WAS NOW, IT WOULD BE HARD TO REPAY THE DEBT AFTER 1997 WHEN SOVEREIGNTY OVER HONG KONG REVERTED TO CHINA. THE TOTAL LIKELY DEBT EVEN ON A MODERATE CALCULATION WOULD BE ONE AND A HALF TIMES THE TOTAL OF FIXED ASSETS OF PEKING AND THREE TIMES THE FIXED ASSETS OF TIANJIN. ONE COULD ALMOST BUY OUT SHANGHAI WITH THE SUMS INVOLVED.
11. LORD YOUNG ARGUED THAT AFTER 1997, CHINA WOULD HAVE A REAL ASSET IN THE AIRPORT AND CONTAINER TERMINAL. IT WOULD GO ON EARNING HARD CURRENCY FOR MANY YEARS. THE CALCULATIONS WERE THAT IT WOULD BE EASY TO PAY OFF THE DEBT WITH THE EARNINGS FRCH THE DEVELOPMENT. BUT MORE IMPORTANTLY, WITHOUT THE AIRPORT, HONG KONG
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