TNAG-2868-FCO40-4122-Sewage-strategy-in-Hong-Kong-1993 — Page 5

CONFIDENTIAL

XCC(93)127

CHINA DIMENSION

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The HPP is a self-contained programme which will be completed and paid for by 30 June 1997. We are therefore on strong grounds if we proceed with it without seeking the approval of the Chinese side first, on the works programme or on the related funding arrangements. However, they are clearly interested in this issue, and have put questions to us through the Joint Liaison Group, to which we shall respond soon.

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If the Chinese side request, we would also brief them on the trading fund proposals. Their prior approval should not be necessary as the establishment of the trading fund only represents a change in the accounting arrangements for funding sewage services. There will be nothing in the resolution to commit the SARG to continue with the arrangements after 1997.

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Some further stages of the sewage strategy to be completed after 1997 will require approval from the Chinese. An example is the proposed oceanic outfall in Chinese water south of Hong Kong. Geophysical and oceanographic surveys are currently being conducted there jointly with the Guangdong authorities. We are keeping the Chinese environmental authorities informed of developments in this field through the Joint Hong Kong - Guangdong Environmental Protection Liaison Group.

FINANCIAL AND STAFFING IMPLICATIONS

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Fifteen posts have been created, on a supernumerary basis, in the Planning, Environment and Lands Branch (one directorate post at $1.7 million for 12 months) and the Drainage Services Department (including two directorate posts at an annual recurrent staff cost of $8.9 million for two years) to prepare for the introduction of the charging scheme and the trading fund. The publicity campaign for preparing the ground for public acceptance of sewage charges will cost about $2.4 million. Funds are available for this purpose. Upon the establishment of the trading fund for sewage services, the cost of staff and other expenses incurred in the administration of the fund and the charging scheme will be charged to the trading fund. There will be no charge to the General Revenue Account. The Government's capital injection into the trading fund will amount to $6.8 billion.