ENG-1994 — Page 324

THE AIRPORT CORE PROGRAMME

projects 'to the maximum extent possible' by June 30, 1997, and states that the Chinese Government will 'support the construction of the new airport and related projects'.

During 1994, the Airport Committee, which was set up in accordance with the MOU under the auspices of the Sino-British Joint Liaison Group (JLG), held three meetings to discuss the overall financing arrangements for the airport and airport railway projects, the Airport Bill and other related issues. There were also extensive informal meetings of experts from both sides on financing, the Bill, airport franchises and other issues.

The Consultative Committee on the New Airport and Related Projects (ACC) and its four sub-committees held a total of 23 meetings during the year. The sub-committees had responsibility for: the airport and its related land development projects; planning, environment and people's livelihood; traffic and transport; and financial matters. A wide range of subjects related to the ACP were discussed.

The MOU provides that an Airport Authority will be established and that the ordinance setting up the body will be modelled, as far as possible, on the Mass Transit Railway Cor- poration Ordinance. A White Bill was published in early 1994 for public consultation. The Chinese side of the Airport Committee was also consulted in accordance with the MOU. A Blue Bill will be prepared for introduction into the Legislative Council in early 1995.

Implementing and Financing the ACP

The ACP is being implemented by the government, two statutory corporations wholly- owned by the government, and a franchisee appointed for the Western Harbour Crossing. The government is carrying out direct capital works projects to reclaim land and to build highways and a new town near the airport. The PAA is responsible for planning and developing the airport until a permanent statutory body is established. The MTRC is responsible for building and operating the airport railway. The Western Harbour Crossing is being designed and built, and will be operated, by the WHTC under a 30-year franchise. The cost of the 10 ACP projects was estimated in 1992 to be $163.7 billion in MOD (sometimes known as out-turn prices), which takes into account the impact of inflation on the value of the dollar while projects are designed and built. This is particularly relevant to the ACP because most contracts are let on a fixed-price lump sum basis, which means that contract prices have been adjusted to cover inflation over the contract period. In January 1994, the government announced that the total ACP cost estimate had been reduced by $5.5 billion in MOD to $158.2 billion. This was made up by a reduction of $7.6 billion in MOD in the cost estimate of the seven government projects and other adjustments. The reduction largely stemmed from highly competitive tendering for construction contracts, along with a reduction in project contingency allowances and lower forecasts of construction sector inflation.

Within the $158.2 billion, the government's capital expenditure was estimated at approximately $52.5 billion. This is expected to amount, between 1992-93 and 1996–97, to nearly 30 per cent of the government's total capital expenditure. The remaining 70 per cent of its capital expenditure will be spent on social services projects and other essential construction activities.

In accordance with the agreed minute on financing arrangements for the new airport and the airport railway, the government will inject equity of not less than $60.3 billion into the two projects. This is also provided for in the overall ACP cost estimates.

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