SECRET
SECRET
нив 182 12
RECEIVED N
13 MAY 1991
(738
012232
MDHIAN 6006
FM HONG KONG
TO IMMEDIATE FCO
TELNO 1459
OF 101119Z MAY 91
SK OFFICEF
X
HY
TOP COPY
Q DIST?
INFO IMMEDIATE PEKING CANBERRA,-UKREP JLG HONG KONG
737
PERSONAL FOR BURNS, AUSS FROM DEPUTY TO GOVERNOR CANBERRA: PLEASE PASS TO PS/GOVERNOR (VISITING)
YRTELNO 895: AIRPORT PROJECT: COSTINGS
1. OUR COMMENTS ARE AS FOLLOWS:
A. THE FIGURES PUT TO THE CHINESE ARE BROAD ORDERS OF COST, AND DESCRIBED AS SUCH IN THE DOCUMENTS HANDED OVER. THE MOST CURRENT ESTIMATES ARE STILL BROADLY IN LINE WITH THESE FIGURES:
B. ON THE AIRPORT, THE AMOUNT OF EQUITY INJECTION TO BE PROVIDED TO THE AIRPORT AUTHORITY BY THE GOVERNMENT IS MORE IMPORTANT THAN THE COST OF THE PROJECT AS FAR AS GOVERNMENT'S FINANCE IS CONCERNED. THE LATEST CONSULTANT'S ESTIMATE IS SOMEWHAT HIGHER THAN PREVIOUS FIGURES, BUT THIS IS SUBJECT TO CRITICAL REVIEW AND WILL PROBABLY NEED TO BE BROUGHT DOWN. EVEN ON THE BASIS OF THESE HIGHER COST ESTIMATES, AS ADVISED IN MY TELNO 1259, THE INITIAL FINDINGS OF OUR FINANCIAL ADVISER ON THE AIRPORT INDICATE THAT THE SIZE OF THE HKG FINANCIAL CONTRIBUTION IS VERY MUCH OF THE ORDER ASSUMED IN THE FOUR OPTIONS HANDED TO THE CHINESE:
C. UNTIL ALL THE CONTRACTS ARE LET, ABSOLUTE CONFIDENCE IN COST ESTIMATES CANNOT BE ATTAINED. THIS APPLIES IN THE CASE OF ANY CIVIL ENGINEERING PROJECT:
D. SUBSEQUENT INCREASE IN THE COSTINGS OF THE AIRPORT PROJECTS WILL HAVE TO BE WHOLLY OR PARTLY OFFSET BY THE REDUCTION OF GOVERNMENT EXPENDITURE IN OTHER AREAS AND/OR GENERATION OF ADDITIONAL REVENUE, SO AS TO MEET THE SET-ASIDE COMMITMENT. WE ALSO HAVE IN OUR PROPOSED TEXT SOME SAFETY MARGIN IN THE FORM OF POSSIBLE GOVERNMENT BORROWING AND/OR SALE OF THE LANTAU FIXED CROSSING FRANCHISE TO HELP COPE WITH ANY ADVERSE DEVELOPMENTS:
E. INEVITABLY A REALISTIC COMPLETION DATE IS DEPENDENT ON WHEN THE DISCUSSIONS WITH THE CHINESE SIDE WILL BE SATISFACTORILY
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