CONFIDENTIAL
The Airport
2.
The sense of relief in Hong Kong at the successful conclusion of the airport negotiation was almost tangible. Inevitably some people feel that Hong Kong was not sufficiently consulted on the Memorandum of Understanding and that too much say has been conceded to China (points put to me by, Martin Lee when I met OMELCO) but we have good answers to these criticisms and everybody I met thought that we had struck a good deal. Those who understand British politics (especially within ExCo) are especially grateful to you and the Prime Minister for
agreeing to go to Peking. The mood in Hong Kong was
therefore noticeably lighter than during my last visit in
January. Domestic concerns are to the fore. Inflation is
12.3% high (down to about 15% from 13.9%) and will be fuelled by
work on the airport. It is expected to remain in double figures for the foreseeable future. The labour shortage
remains. The winding up of BCC (Hong Kong) has slightly
spoilt the Hong Kong Government's post airport party.
British Interests in the airport
3. The airport move has of course cleared the way for the international consortia chasing the two principal mammoth
contracts (the Lantau Fixed Link and the airport platform)
to gear themselves up again. Decisions on both are
expected before the end of the year. I think that it is
very desirable that Britain should do well. We have
invested an enormous amount of effort and political capital
in securing the MOU and I do not think it will be easily understood at home if we are not involved in the airport's
construction. We have lost out on the five big contracts
issued so far, although we have picked up some useful
consultancies. The DTI have already established a
dedicated task force (akin to that set up for the Channel tunnel) to pursue a large British share of the substantial
CONFIDENTIAL
/sub-contracts
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