TNAG-2146-FCO40-3065-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-1990 — Page 90

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CONFIDENTIAL

15.

In our financing strategy for the new airport and related projects, we have

assumed that Hong Kong Government will

not draw at all on the Land Fund. We will.

however, draw on some of our fiscal reserves

in the few years of projected budgetary deficits when capital expenditure on these

projects is at a peak.

16.

There will be considerable reve-

nue arising from the airport projects, includ-

ing -

(a) revenue going to Government

direct: There will be revenue from the

Lantau Fixed Crossing tolls and/or from sale

of the franchise, as well as tolls from other

roads such as Route 3. In addition, there

will be potential revenue of nearly $40

billion (at present day prices) from land

sales at East Kowloon (upon the closure of

Kai Tak airport), West Kowloon (land

formed by reclamation) and North Lantau (along the approaches to the new airport) made possible as a result of the implementa-

tion of the airport programme; and

(b) revenue going to Government indirectly: This takes the form of dividend

available to the Government as the share-

holder of the Airport Authority and the airport railway, as their revenue reach a

level which enables them to more than

service their debt.

17.

The Government decided to

proceed with the new airport and related

projects because it was confident that doing so was clearly within Hong Kong's financial

capacity and that the long-term prosperity and economic growth are contingent upon

the undertaking of these projects. The Government, however, fully recognises the

continuing importance of prudent manage-

ment of public finances. This continues to be based on the target of keeping overall

public expenditure growth over a period

broadly in line with the growth of Gross

Domestic Product. The decision to build a

new airport has not caused this strategy to

be changed. But we must recognise that in-

evitably capital expenditure will peak during

the three or four years leading up to the

actual opening of the airport, and this would

cause a temporary departure from our

guidelines

18.

The Government will continue to

exercise a tight control on mublic sector expenditure. This is needed even without o

decision to build the new airport The

projected lower growth in the economy and

the prevailing level of inflation would in any

event require us to contain the increase in

public expenditure more tightly. Here, a

distinction between recurrent and capital

expenditure must be drawn. The prime

CONFIDENTIAL

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