TNAG-2561-FCO40-3744-Future-of-Hong-Kong-Special-Administrative-Region-Government-1992 — Page 4

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020226

MDLIAN 2794

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FM HONG KONG

TO PRIORITY FCO

TELNO 2624

OF 041013Z NOVEMBER 92

INFO PRIORITY PEKING, UKREP JLG HONG KONG

1992

TOP COY

Q DIS

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PUBLICATION OF LAND FUND ACCOUNTS: MEDIA REPORTS

1. THE PUBLICATION OF THE LAND FUND ACCOUNTS BY THE CHINESE SIDE YESTERDAY (3 NOVEMBER) WAS PROMINENTLY REPORTED IN THE LOCAL PRESS TODAY. AS AT MARCH 1992, THE TOTAL NET ASSET VALUE OF THE LAND FUND WAS HKD33.7 BILLION, INCLUDING HKD27.8 BILLION OF LAND PREMIUM INCOME AND ACCUMULATED INVESTMENT SURPLUSES OF HKD5.9

BILLION.

2. IN RESPONSE TO REPORTERS, SUN YANHENG DECLINED TO PREDICT THE SIZE OF THE LAND FUND BY 1997. HE WAS ALSO QUOTED AS STRESSING THAT THE LAND FUND WOULD NOT BE USED FOR BUILDING THE AIRPORT. HE ADDED THAT THE DECISION AS TO WHETHER THE FUND WOULD BE USED BEFORE 1997 WOULD REST WITH THE CHINESE SIDE. 'IT WILL DEPEND ON WHETHER THE PROPOSAL IS REASONABLE AND WHETHER THERE IS ANY PRACTICAL NEED. BUT PRESENT BRITISH PROPOSALS FOR DRAWING ON THE FUND WERE 'UNREALISTIC', AND DID NOT CONSTITUTE AN INVESTMENT WITH A RETURN. HE SAID IT WAS PREMATURE TO DISCUSS WHETHER THE LAND FUND WOULD INVEST IN THE AIRPORT PROJECT BEFORE THE FINANCIAL ARRANGEMENTS WERE SETTLED.

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3. THE PUBLIC GENERALLY WELCOMED THE PUBLICATION AS A MOVE TO INCREASE TRANSPARENCY OVER THE OPERATION OF THE FUND. THERE WERE HOWEVER DIVERSE VIEWS ON WHETHER THE FUND SHOULD BE USED ΤΟ FINANCE AIRPORT PROJECTS. A NUMBER OF LEGCO MEMBERS OPINED THAT THE CHINESE SIDE SHOULD CONSIDER INVESTING IN PADS PROJECTS, TAKING INTO ACCOUNT THE ANTICIPATED RATE OF RETURN. CONTRARY OPINIONS CAUTIONED AGAINST INVESTMENT OF THE FUND IN AIRPORT PROJECTS, HIGHLIGHTING THE LOW RATE OF ANTICIPATED RETURN FOR THE AIRPORT RAILWAY.

4. ON THE RATE OF RETURN ACHIEVED BY THE LAND FUND OVER THE YEARS, THE CHINESE SIDE SAID THAT THE APPARENTLY LOW RATE OF RETURN WAS ATTRIBUTABLE TO INVESTMENT PRUDENCE AND THE FACT THAT SECURITIES WERE STATED AT THE LOWER OF COST AND MARKET VALUE ON A PORTFOLIO BASIS, AND THAT UNLISTED SHARES WERE STATED AT COST. IT

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