VZCZCXRO1210
RR RUEHCN RUEHGH
DE RUEHHK #2790/01 3120928
ZNR UUUUU ZZH
R 080928Z NOV 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 3378
INFO RUEHBJ/AMEMBASSY BEIJING 1630
RUEHCN/AMCONSUL CHENGDU 1211
RUEHGZ/AMCONSUL GUANGZHOU 0928
RUEHGH/AMCONSUL SHANGHAI
RUEHSH/AMCONSUL SHENYANG 3664
RUEHIN/AIT TAIPEI 4731

UNCLAS SECTION 01 OF 03 HONG KONG 002790 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE FOR EEB/TRA/AN 
 
E.O. 12958: N/A 
TAGS: ECON EAIR EWWT ELTN CH HK
SUBJECT: CONSUL GENERAL AND TRANSPORT SECRETARY CHENG 
DISCUSS INFRASTRUCTURE AS COMPETITIVE TOOL 
 
REF: A. HONG KONG 2428 
     ¶B. HONG KONG 2587 
     ¶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 
 
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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) 
business. 
 
---------------------- 
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 
 
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U.S. Representatives 
--Consul General James Cunningham 
--Dawn Schrepel, Economic Officer 
Cunningham