TNAG-2256-FCO40-3240-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-gene-1991 — Page 37

220954Z

RE

MR BURNS FOR DIST ADVICE

LNMD 1427 HMLNAN 6790

SECT

DD

JOOZ FCOLN

FM HOKON TO FCOLN

22093OZ MAR

GRS 620

SECRET

FM HONG KONG

TO DESKBY 22110OZ FCO

TELNO 897

OF 22093OZ MARCH 91

INFO IMMEDIATE PEKING, UKREP JLG HONG KONG

PERSONAL FOR BURNS, AUSS, FROM GOVERNOR

PEKING PERSONAL FOR AMBASSADOR

UKREP JLG HONG KONG PERSONAL FOR GALSWORTHY

YOUR TELNO 549 : PADS : THE WAY FORWARD: MEETING WITH LU PING ON 23 MARCH

1. WE WILL BE DOING VERY WELL INDEED IF WE REACH FULL, OR CLOSE TO FULL, AGREEMENT TOMORROW. SHOULD WE DO SO I TAKE YOUR POINT ABOUT THE VALUE OF SOME RECORD OF WHATEVER IS AGREED ON THE FISCAL RESERVES. HOWEVER WE SHOULD HAVE TO BE VERY CAREFUL ABOUT HOW WIDE TO CAST THE NET ON WHAT IS RECORDED FORMALLY AND AGREED TO SPECIFICALLY BY THE CHINESE. IT WOULD BE VERY DIFFICULT, I AM SURE, TO NEGOTIATE WITHOUT ENDLESS DISCUSSIONS A TEXT ACCEPTABLE TO BOTH SIDES THAT COVERED ALL THE DETAILS. I AM INSTEAD INCLINED, IF WE DO REACH A SATISFACTORY CONCLUSION AT FANLING, TO TELL LU THAT I WILL WRITE TO CONFIRM OUR UNDERSTANDING. THIS WOULD GIVE ME AN OPPORTUNITY TO CLEAR THE TEXT WITH YOU, AND ALSO WITH EXCO (WHICH WILL BE ESSENTIAL).

2. I DOUBT IF ANYTHING MUCH NEED BE SAID IN SUCH A LETTER ABOUT THE AIRPORT AUTHORITY AND CONSULTATIVE COMMITTEE. I WOULD PROPOSE TO CONCENTRATE ON THE FINANCIAL ASPECTS. I WOULD REFER TO OUR AIM OF RETAINING A MINIMUM LEVEL OF HKD 14-15 BILLION IN THE FISCAL RESERVES IN 1997 AND SOME SUITABLE FORMULA ON HOW WE WOULD DO THIS (EG WE WOULD EARMARK SUFFICIENT FUNDS TO ENSURE THAT, AT THE END OF EACH YEAR, THERE WAS HK 15 BILLION AT MONEY OF THE DAY PRICES IN THE FISCAL RESERVES). I MIGHT ALSO NEED TO SAY SOMETHING ON THE LIMIT OF HONG KONG GOVERNMENT BORROWING UP TO 1997. THESE POINTS WOULD BE IN RETURN FOR FULL CHINESE SUPPORT FOR THE AIRPORT AND AN ASSURANCE THAT THE TASK OF CARRYING OUT THE PROJECT IN THE PERIOD UP TO 1997 WOULD BE UNDER THE EFFECTIVE CONTROL OF THE HKG. I WOULD ALSO WISH TO RECORD A CHINESE COMMITMENT THAT, IF ASKED BY INVESTORS, THEY WOULD CONFIRM THAT OBLIGATIONS EXTENDING BEYOND 1997 WOULD BE HONOURED IN THE WAY SET OUT IN ARTICLE 160 OF THE BASIC LAW.

3. I RECOGNISE YOUR INTEREST IN ENSURING THAT ANY SUCH LETTER DOES NOT IMPLY THAT THE LEVEL OF HKG'S RESERVES IS GUARANTEED BY HMG. BUT I VERY MUCH HOPE THAT THERE WILL NOT BE ANY UNDUE DIFFICULTY OR DELAY IN CLEARING A TEXT.

4. TO ANSWER THE REMAINING POINTS IN PARAGRAPHS 5 AND 6 OF YOUR TUR, I WOULD IF NECESSARY EXPLAIN TO LU WHAT WE MEAN BY RETAINING THE AGREED SUM IN THE RESERVES. IN FACT, WE DO NOT EXPECT THE FISCAL RESERVES UNDER ANY OF THE FOUR AIRPORT OPTIONS TO DROP NEAR HKD 15 BILLION BEFORE 1995/96. IF WE LOOKED LIKELY TO DROP BELOW THAT FIGURE SUBSEQUENTLY, WE WOULD CERTAINLY HAVE TO CONSULT THE CHINESE. THEY WILL IN ANY CASE BE ABLE TO CHECK THE

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