TNAG-2413-FCO40-3515-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-fina-1992 — Page 158

CONFIDENTIAL

FM HONG KONG

TO IMMEDIATE FCO

TELNO 751

OF 10110OZ MARCH 92

INFO IMMEDIATE PEKING

CONFIDENTIAL

155540

MDHIAN 6182

THE AIRPORT CORE PROGRAMME: PROGRESS REPORT FOR FEBRUARY 1992.

SUMMARY

1. MANY KEY ELEMENTS OF THE ACP ARE REACHING A DECISIVE STAGE. WE EXPECT MOST OF THE MAJOR CONSULTATIONS WITH THE CHINESE SIDE IN THE AIRPORT COMMITTEE (AC) TO TAKE PLACE WITHIN THE NEXT SIX MONTHS.

OVERALL COST OF THE ACP

2.

WE PROMISED FINANCE COMMITTEE IN JULY 1991 THAT WE WOULD REPORT TO THEM ON THE OVERALL COST OF THE ACP FROM TIME TO TIME. NEW MEMBERS HAVE POINTED OUT ON A NUMBER OF OCCASIONS SINCE THEN THAT THEY NEED AN OVERVIEW OF THE COST IF THEY ARE TO CONSIDER INDIVIDUAL ITEMS IN PROPER CONTEXT. THE CHINESE SIDE OF THE AC HAS ALSO INDICATED INFORMALLY THAT THEY FACE THE SAME PROBLEM. WE HAVE THEREFORE ASSUMED THAT AN UPDATED OVERALL COST STATEMENT FOR THE ACP IS A PREREQUISITE OF CHINESE ACCEPTANCE AND FINANCE COMMITTEE APPROVAL OF FUTURE ACP ITEMS.

3. THE NEW AIRPORT PROJECTS CO-ORDINATION OFFICE HAS CARRIED OUT A THOROUGH REVIEW OF ACP COSTS. THEIR PRELIMINARY ASSESSMENT, WHICH WE ARE EXAMINING CRITICALLY AND ARE LIKELY TO REDUCE, IS THAT THE OVERALL COST OF THE ACP (INCLUDING GOVERNMENT AND PRIVATE SECTOR SPENDING) HAS RISEN BY DOLLARS 15.1 BILLION FROM DOLLARS 98.6 BILLION TO DOLLARS 113.7 BILLION: AN INCREASE OF 15 PERCENT IN REAL TERMS. (WE ARE USING 1991 PRICES THROUGHOUT THIS TELEGRAM FOR EASE OF COMPARISON).

4. THESE NEW ESTIMATES ARE MAINLY ATTRIBUTABLE TO:

(A) THE ESTIMATE FOR THE AIRPORT RAILWAY (AR) FROM DOLLARS 12.5 BILLION HAS INCREASED TO DOLLARS 22.2 BILLION (THE REASON FOR WHICH IS SET OUT IN OUR PAPER FOR THE CHINESE FAXED TO YOU ON 30 JANUARY 1992 (MY TELNO 292):

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