Cablegate: Consul General and Transport Secretary Cheng

DE RUEHHK #2790/01 3120928
R 080928Z NOV 07





E.O. 12958: N/A

C. 2006 HONG KONG 4449

1. (SBU) Summary: Transport and Housing Secretary Eva Cheng
told CG Cunningham that the Transport Bureau is focused on
six-large scale infrastructure projects that will
strategically shape Hong Kong's future competitiveness, while
expanding land, sea and air links to mainland China. She
stated that cross-border projects between the three
governments (Hong Kong, Macau and Guangdong Province), such
as the Hong Kong-Macau-Zhuhai Bridge, will enhance regional
trade and economic development. She also noted that growing
competition in the region, specifically Macau's emergence, is
putting additional pressure on the HKG. The CG urged Cheng
to restart the U.S.-Hong Kong aviation services agreement
negotiations in the near future. Secretary Cheng responded
by saying that the HKG would welcome discussions when both
governments agree the timing is right, noting, "it is the
government's responsibility to expand and optimize air
infrastructure to maintain a competitive edge." She is
closely watching the neighboring competition as FedEx moves
its regional air cargo operations into Baiyun Airport in
Guangzhou in 2008. End summary.

2. (SBU) Comment: Secretary Cheng is a well-respected civil
servant, with extensive experience in the HKG, most recently
serving as Permanent Secretary for Economic Development and
Labour. In her new role, she and her staff are intensely
focused on Hong Kong's competitiveness, versus Macau and in
the region. Cheng recognizes her bureau's role in
maintaining Hong Kong's edge through the effective and timely
development of these infrastructure projects and services,
while expanding links to the Pearl River Delta and Southern
China. She is understood to have the full confidence of the
Chief Executive, and will be a leader to watch during this
five-year Administration. End comment.

3. (U) Background: On July 1, as part of the Hong Kong
Government's reorganization of the cabinet structure, the
former Bureau of Environment, Transport and Works was divided
into an Environment Bureau and a restructured Transport and
Housing Bureau. Eva Cheng was designated as the new
Secretary for Transport and Housing. On October 10, HKG

Chief Executive Donald Tsang delivered his annual Policy
Address, highlighting "economic development through
infrastructure projects," as a top HKG priority, and
identifying ten large-scale projects expected to generate
economic benefits of HKD$100 billion annually, and create
over 250,000 additional jobs (reftel B).

Linkage to the Mainland
4. (SBU) The Consul General opened the October 29 meeting by
noting that in the Chief Executive's October Policy Address,
the Transport Bureau would play a significant role in the
Hong Kong 2007-2012 policy agenda. Secretary Cheng confirmed
that six priority large-scale infrastructure projects were
the Transport Bureau's responsibility, including several
major "strategic" cross-boundary projects:
Guangdong-Shenzhen-Hong Kong Express Rail Link, and the Hong
Kong-Macau-Zhuhai Bridge.

--Guangdong-Shenzhen-Hong Kong Express Rail Link: A
high-speed rail connecting the three cities, with the Hong
Kong portion originating in West Kowloon, extending 30km to
the mainland border, and linking to the mainland national
high-speel rail network (planned for 12,000km in total). The
goal of both governments is to reduce transport time between
Hong Kong and Guangzhou to less than one hour -- it is
currently 100 minutes. Construction on the mainland-side is
already underway, and the Kowloon-Canton Railway has been
invited to begin planning service for the project.
Anticipated initiation of operations is in 2009.

--Hong Kong-Macau-Zhuhai Bridge: The 35km bridge, spanning
the Pearl River Mouth (Zhujiang Kou), will connect Hong Kong
with the Western Pearl River Delta, both in Macau and Zhuhai.
The goal is to shorten travel time and distance, while
simultaneously yielding economic development for the Pearl
River West, and strengthening regional tourism and transport.

HONG KONG 00002790 002 OF 003

Each of the three governments (Hong Kong, Macau and
Guangdong Province) is responsible for funding and building
their portion of the connecting infrastructure, and the main
structure has a toll mechanism included in the revenue
stream, but substantial additional funds are needed for
project completion.

5. (SBU) The CG inquired specifically about the bridge, as
it has been planned for over a decade, and explosive growth
makes the connection more needed than ever before. Secretary
Cheng explained that almost everyone has underestimated the
complexity of this project. The will to pursue the project
has been present for some time, but the land, sea and air
issues are extensive, and each of the governments involved
has numerous and competing priorities. Secretary Cheng
indicated that step-by-step the project is moving in the
right direction. The feasibility study is nearly complete,
and discussion continues about how to engage private sector
and community financing. (NOTE: HKG Chief Secretary Henry
Tang was in Beijing during the last week of October to
discuss cross-border infrastructure issues, including the
Express Rail Link and Bridge. END NOTE.)

Macau SAR Competition and Sea Linkage
6. (SBU) As visitor growth to Macau continues to burgeon,
expanded ferry service has fast become a necessity, and the
Macau Government has responded by opening a new temporary
ferry terminal on Taipa island in Macau. This marine
terminal provides service to the adjacent Macau International
Airport, and the neighboring U.S.-owned casinos of the Cotai
Strip. While already in possession of permits to operate in
Macau, Cotai Waterjets, the new ferry company associated with
The Venetian/Las Vegas Sands in Macau, is awaiting the HKG
Transport Bureau's permission to utilize the HKG-operated
ferry terminal on Hong Kong island for its Cotai-Hong Kong
ferry service. The CG inquired as to the reason for the
perceived delay in permit issuance, and a date for resolution
of the application. Secretary Cheng explained that the HKG
was processing the request and berthing slots would be open
within several weeks. The existing terminal is limited in
space and currently is home to only one ferry company
operator, Hong Kong tycoon Stanley Ho's Shun Tak. The move
to a multi-operator terminal is taking time, Cheng said,
"safety, continued mainland-bound ferry service, and balanced
connectivity are high priorities as the HKG tries to provide
first-class service to more and more upscale passengers. It
is good that they (Macau) are keeping us on our toes." She
added that Hong Kong transportation and infrastructure
operations will be greatly affected by the growth in Macau
MICE (Meetings, Incentives, Conferences, and Exhibitions)

Air Services Agreement
7. (SBU) The CG told Cheng that in October 2006 Consulate
Officers delivered a request from the State Department's
Office of Aviation Negotiations to Hong Kong's Chief Aviation
Negotiator to re-start the U.S.-Hong Kong aviation services
negotiations. Hong Kong's tepid response indicated that the
HKG did not see this issue as a top priority (reftel C).
(NOTE: The last substantive discussion between USG and HKG
negotiators was in 2005 and resulted in no progress. The
U.S.-Hong Kong Aviation Services Agreement was last revised
in 2002. END NOTE.) The CG urged Cheng to restart the
negotiations in the near future. Secretary Cheng responded
by saying that the HKG would welcome discussions when both
governments agree the timing is right. She went on to say
that the third and fourth freedoms have gone well, and fifth
freedoms are the next step in capacity, and "it is the
government's responsibility to expand and optimize air
infrastructure to maintain a competitive edge." HKG's
negotiator in any future aviation talks would be Esmond Lee,
Deputy Secretary for Transport.

8. (SBU) The Transport Bureau is closely watching regional
competitiveness in the sector, particularly in transit of air
cargo. Secretary Cheng mentioned that she is interested to
see how FedEx does at Baiyun International Airport in
Guangzhou. (NOTE: FedEx is moving its Asia hub from Subic Bay

HONG KONG 00002790 003 OF 003

in the Philippines to a $150 million, 155-acre facility at
Baiyun in late 2008. END NOTE.)

9. (U) Meeting participants included:

Hong Kong Government Representatives
--Secretary for Transport and Housing Eva Cheng
--Esmond Lee, Deputy Secretary for Transport
--Kwok Ming Fung, Master Mariner and Chief Assistant
Secretary for Transport


U.S. Representatives
--Consul General James Cunningham
--Dawn Schrepel, Economic Officer

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