TNAG-2143-FCO40-3062-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-1990 — Page 212

CONFIDENTIAL

173570

MDHIAN 7991

IMPROVEMENT IN ALL MARKETS. SALES TO CHINA, SINGAPORE, TAIWAN AND WEST GERMANY WERE UP SIGNIFICANTLY, ALTHOUGH THE CONTRACTION IN EXPORTS TO THE UNITED STATES, BRITAIN AND JAPAN WAS CONTAINED. ANOTHER POSITIVE INDICATOR WAS INCREASED IMPORTS OF RAW MATERIALS AND SEMI MANUFACTURED GOODS. DOMESTIC EXPORTS WERE EXPECTED TO ACHIEVE AN OVERALL GROWTH RATE OF 1 PER CENT FOR THE YEAR, AND RE-EXPORTS OF ABOUT 15 PER CENT. INFLATION IS FORECAST TO REMAIN AT ABOUT 9 PER CENT.

6.

UNEMPLOYMENT STANDS AT ABOUT 1.6 PER CENT. THE LABOUR MARKET WILL THEREFORE REMAIN TIGHT WITH NO SIGNIFICANT EASING OF WAGE PRESSURE EXPECTED. THE GOVERNMENT IS PERMITTING A MODEST INCREASE IN IMPORTED OVERSEAS LABOUR, BUT NOT SO FAR IN NUMBERS LARGE ENOUGH TO EAST THE PRESSURE ON WAGES.

7.

EMIGRATION

LAST YEAR SOME 42,000 PEOPLE LEFT THE TERRITORY AFFECTING ALL WALKS OF BUSINESS LIFE. MOST BRITISH COMPANIES FIND THE BRAIN DRAIN IS THEIR GREATEST SINGLE PROBLEM. THE PROJECTED EXODUS THIS YEAR IS 62,000. MOST LEAVE'S ARE THE SKILLED PROFESSIONALS AND MANAGEMENT EXECUTIVES THAT HONG KONG CAN ILL AFFORD TO LOSE. BRITAIN'S NATIONALITY PACKAGE AND OTHER CONFIDENCE BUILDING MEASURES ARE AIMED AT STEMMING THE TIDE.

8.

PROJECTS

THE PROPOSED NEW HKD 127 BILLION AIRPORT PROJECT CONTINUES TO OVERSHADOW ALL OTHER DEVELOPMENTS. IT IS GATHERING SPEED, AND THE FIRST TWO WORKS CONTRACTS, BOTH FOR RECLAMATION, HAVE RECENTLY BEEN AWARDED, ONE TO A MAINLAND CHINESE COMPANY, AND ONE TO GAMMON (50 PER CENT JARDINES AND 50 PER CENT TRAFALGAR HOUSE). PLANNING AND ADVISORY CONTRACTS HAVE GONE TO KLEINWORT BENSON, WARDLEYS AND MOTT MACDONALD AMONG OTHERS. BUT THREE STRATEGICALLY VERY IMPORTANT CONTRACTS HAVE ALL GONE TO THE AMERICANS PROJECT MANAGEMENT TO BECHTEL, AIRPORT MASTER PLAN TO GREINER, AND OVERALL FINANCIAL MANAGEMENT TO MORGAN STANLEY. THERE HAS BEEN RECENT CONTROVERSY OVER A STUDY OF THE PROJECT CARRIED OUT BY A LOCAL HEAD OF A CONSTRUCTION COMPANY, GORDON WU, FOR THE CHINESE AUTHORITIES. HE CLAIMS THAT BY MAKING SOME MAJOR CHANGES IN THE

PROJECT HE COULD SAVE HKD 60 BILLION. THE HK GOVERNMENT HAVE REJECTED HIS PROPOSALS. BRITISH COMPANIES, ESPECIALLY TRAFALGAR HOUSE AND COSTAIN WITH JAPANESE PARTNERS, ARE POSITIONING THEMSELVES FOR THE MULTI BILLION MAIN BRIDGE CONTRACT, TENDER DOCUMENTS FOR WHICH WILL BE ISSUED IN THE COMING WEEKS.

3

PAGE

CONFIDENTIAL