HK row set for resolution

The two-year row over how Hong Kong's œ13.3 billion Chek Lap Kok airport should be funded could finally be resolved this week, clearing the way for millions of pounds of work for UK contractors. A meeting last Friday of the full Sino-British airport committee agreed to instruct each side's financial team to prepare a draft funding agreement within the next six days.

Contractors seeking work on the airport were encouraged to hear that the Hong Kong government plans this week to ask for œ1.3 billion from the legislative council to start work on construction of the airport terminal and runway.

One contractor said: 'It looks like good news finally, but it has been such a long row that we are cautious. An agreement should result in large slices of work being awarded.'

Hopes that disputes over Hong Kong's economic and practical problems might be solved result from the easing of relations between London and Beijing.

Two years of negotiations over the prestigious new airport project have resulted in the Hong Kong government increasing the equity it will invest in the airport and its connecting railway project from œ1.4 billion to œ5 billion. But if the work does come through there are concerns that it will not be as lucrative as expected.

Reports from Hong Kong suggest that profit margins on projects already initiated in the Airport Core Programme (ACP) are lower than expected.

Intensive competition among construction firms eager for the work has led to 'speculative' bidding which has driven down the value of winning work. Profit margins are currently running at less than 3% for work on the Chek Lap Kok project - initially they stood at a more comfortable 10%.

One reason is that the Provisional Airport Authority is insisting on milestone payments rather than a progressive payment schedule.