ร
Ricketts For Forres
JAR
M.G.
сару
السمه
CONFIDENTIAL
Mr Stone HKD
10
Reference..
2313
From: C E Lane
HKA 182/7
Date: 20 March 1992
cc: Mr Broadbent
FINANCIAL ASPECTS OF THE ACP
1.
8
Mr Broadbent and I briefly have been able to consider the Hong Kong telno 854 and the update on financial aspects of the ACP. The comments below are not on the drafting of the paper to be presented but on issues which the paper raises and may have to be addressed. Your response might delicately flag some of these issues.
2.
We were a little disappointed that the paper confines itself to a costing exercise. Ideally HKG would have come forward with a financial plan including revenues (before and after 1997) and a cashflow for the main implementing agencies to put us fully in the picture. This is particularly relevant as the overall cost has increased i.e. how does that affect overall project viability? Also, it is not clear if the costings included interest costs. These details/plans will no doubt arrive at a later date.
3.
The costing of the ACP has been carried out in March 1991 prices which inevitably make the numbers look rather smaller than they would in current prices, although presentationally they are then more easily digestible. There is the question of what price inflator to use to convert into current prices. This is relevant to the actual costs which will be incurred by HKG. It is not immediately evident that the inflator to be used should be the same as in the Medium Range Forecast (8.5 per cent). The costs of capital projects may rise faster than the average price level and in previous unpublished forecasting exercises by HKG this was assumed to be the case. It would be reassuring to know that this is still the practice used.
4. We note that all of the cost increases since July 1991 have fallen on the private sector with the HKG funding remaining essentially the same but with higher contingent liabilities. Higher private sector funding demands have occurred at a time when the private sector appears to be less excited than before at carrying the risks without additional guarantees. How can we square these observations? Is
Is the envisaged private funding still at a viable level? Whilst the HKG make it clear that the contingent liabilities are manageable, it does raise the question as to what assumptions were used to reach the figures of HK$
CONFIDENTIAL
Si br
CODE 18-77
No comments yet.
Private notes are available after approval.