TNAG-2251-FCO40-3235-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-fina-1991 — Page 140

7

Affordability to the Government

14.

Government

affordable.

In planning the

implementation

of the ACP, the

is obviously insistent that it should be

Accordingly, a long-term projection of the

Government's financial position has been undertaken on the

basis of the preliminary financing strategy for the ACP as

described above. For financial prudence, the projection has been tested against various possible adverse deviations such

as lower trend growth rate of the economy, reduced revenue, price escalation and increased cost of the ACP. The results

show that there would be a few years of deficit budgetting but that by 1996 at the latest, the annual Government budget would be back in surplus. More importantly, the forecast shows that after meeting projected deficits, the level of fiscal reserves

(excluding the reserves in the Land Fund and assuming no Government borrowing) would still be maintained at a prudent level throughout the period up to 1997.

15.

The projection also

shows

that the starting financial position of the Hong Kong Special Administrative Region Government (SARG) would be very strong, for it will not only inherit the fiscal reserves and the accumulations in the

Land Fund, but also derive considerable additional revenue

when the ACP is completed. For example, there will be substantial revenue from the sale of land generated by the Western Kowloon Reclamation and by the North Lantau development, as well as the redevelopment of East Kowloon upon closure of Kai Tak airport. In addition, the Government will receive significant revenue from the Lantau Fixed Crossing either in the form of tolls or a lump sum from the sale of an operational franchise. As the sole shareholder of the MTRC

and the AA, the Government will also receive dividends from these bodies, as their financial position permits.