TNAG-2251-FCO40-3235-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-fina-1991 — Page 94

CONFIDENTIAL

нив 18211

FROM: S H Broadbent

DATE: 15 August 1991

cc:

Mr Bayne o/r

Sir J Coles

Mr Cox, HKD

(20

سال

The Home form, delayed

23/4=

Me

Ра

27/8

Mr Burns o/r

HONG KONG AIRPORT:

1.

ECONOMICS

I promised you a report on my investigations in Hong Kong. This is attached, with apologies for not getting it to you I did in fact run into some difficulties with the figures provided to you and me by Mr Yeung. He was in London today, and I spoke to him briefly. I am giving him lunch in the first week of September, when he hopes to have clarified a bit of arithmetic - I hope to HKG's advantage.

2. As agreed, I did not pursue the adequacy of the economic appraisal very far, although I did pick up a few pointers. the Treasury still press it, the way is clear to ask for more figures, but I do not think this will be terribly profitable and it may produce bad feeling. However, I should record that the more I look into it, the more I think the appraisals were a tawdry effort and HKG's decision-making processes not terribly clever (that may, of course go for HMT's as well, at times!). I see that in his recent despatch, Sir D Wilson quotes the HK$ 101bn of disbenefits from not building an airport as the main plank of its justification; the right language, but I do not think the figure bears examination.

3. Nothing will, however, be gained by recrimination or indeed too much investigation. The main objective now is to make a success of the project. It is going to put rather a strain on Hong Kong's finances. If, as we hope, there is a boom (but not an inflationary one!) between now and 2000, most of the doubts will be banished. The nightmare would be an economy that remains sluggish and unconfident, continued pressure on the finances, competition from Shenzhen and a slump in air traffic as fees go up. I do not think this is very likely, and I see no reason to make a great point to ministers about this possibility. If the economic justification for the airport is less than wonderful, the effects are only likely to be seen for a very long period, if at all. It is only the possibility of visible failing which would be a serious political worry.

CONFIDENTIAL