TNAG-2410-FCO40-3504-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-Brit-1992 — Page 17

CONFIDENTIAL

FM HONG KONG

TO IMMEDIATE FCO

TELNO 2841

OF 070206Z DECEMBER 92

AND TO IMMEDIATE PEKING

CONFIDENTIAL

нка 182/13

18213

192)

136615

MDHIAN 1020

TOP COPY Q DIST?

AIRPORT CORE PROGRAMME: CENTRAL AND WANCHAI RECLAMATION

1. THE CENTRAL AND WANCHAI RECLAMATION (CWR) IS AND ACP PROJECT. TENDERS FOR THE MAIN CONTRACT HAVE BEEN INVITED AND THE TENDER VALIDITY PERIOD WILL EXPIRE ON 28 DECEMBER 1992. WE SHALL BE CONSULTING EXCO ON 8 DECEMBER ON WHETHER TO SOUND OUT THE REACTION OF THE CHINESE SIDE OF THE AIRPORT COMMITTEE TO THE GOVERNMENT'S PROCEEDING WITH THE PROJECT NOW.

2. THE CWR PROJECT WILL PROVIDE ABOUT 26 HA. OF WHICH 20 HA. ARE FOR THE EXTENSION OF THE CENTRAL BUSINESS DISTRICT. SIX HA. WILL BE REQUIRED FOR THE AIRPORT RAIL HONG KONG TERMINUS AND ITS RELATED OVERHEAD COMMERCIAL DEVELOPMENT. WORKS UNDER THE CONTRACT ARE ESTIMATED TO COST A TOTAL OF DOLLARS 1,825 MILLION IN MONEY OF THE DAY.

3.

WORKS UNDER THE MAIN CONTRACT WERE ORIGINALLY SCHEDULED TO START IN OCTOBER FOR COMPLETION IN LATE 1996. THE TENDER REMAINS VALID UNTIL 28 DECEMBER. IN PRINCIPLE, IT SHOULD BE POSSIBLE TO EXTEND THE TENDER VALIDITY PERIOD. THE COST OF DOING SO IS NOT YET KNOWN, BUT WITH TWO LOWEST TENDERS STILL IN THE RUNNING, IT IS POSSIBLE THAT A MODERATE EXTENSION COULD BE NEGOTIATED AT MINIMUM COST. HOWEVER, SPEEDING UP CONTRACT WORKS TO MAKE UP THE LOST TIME IS EXPECTED TO INVOLVE SOME COST PENALTIES.

4. IT WOULD BE POSSIBLE TO OPERATE THE AIRPORT FULLY WITHOUT THE RAILWAY. THE TIMELY COMPLETION OF THE AR IS THEREFORE NOT CRITICAL TO OUR OVERALL ACP STRATEGY. NEVERTHELESS, OUR VIEW IS THAT IT IS HIGHLY DESIRABLE FOR TRANSPORT, ECONOMIC AND FINANCIAL VIABILITY REASONS TO HAVE THE AR IN OPERATION AT OR VERY SHORTLY AFTER THE COMMISSIONING OF THE NEW AIRPORT AT CHEK LAP KOK.

5. WE BELIEVE THAT IT WOULD BE POINTLESS TO TRY TO OBTAIN FC'S APPROVAL TO FUND THE CWR IF THE CHINESE SIDE WERE EXPRESSING OPPOSITION TO IT. WE THEREFORE CONSIDER THAT THE BEST COURSE WOULD BE TO PUT IT TO THE CHINESE SIDE THAT WE ARE READY AND ABLE

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CONFIDENTIAL