4.
to limit their holding to a total of $61 million
(i.e. 55% against the original 77%). The
(?)
Hong
Kong
Government were asked to take up their 25% option
($27 million) and persuade the present Ferry
Company to take up the remaining $21.5 million but
the Governor, in reporting this approach, said that
he would prefer to take up the whole $49 million and offer the
erthe Ferry Company only so much as would
leave control in the hands of the Hong Kong Government
and the Hong Kong and Shanghai Bank.
10. The project presently depends on whether or not
E.C.G.D. assistance is made available. E.C.G.D. Mow
consider that, in view of the risks, they must require a 100% guarantee from the Hong Kong Government which
would give effective rights against its assets in
London; this requirement would be necessary whether the
department gave assistance under Section I t (where the fourverations are purely
(commercial) political considerations are involved) under Section II (where political considerations &
the national intefest are also involved) of the Act. The Hong Kong Government has not been
informed of this but, in view of its refusal previously
to guarantee only its own shareholding, there can be
little, if any, hope that it will feel able to accept
this much greater responsibility; indeed, it has
already suggested that any guarantee should be H.M.G's
responsibility.
11. Recent events in Hong Kong have made the Tunnel
project less of a good commercial risk but have greatly
increased its political importance. The local
Communist elements have sought by propaganda, intimida-
tion and violence to undermine the confidence of the
people of Hong Kong in our ability to maintain our
authority and administration there. They have failed
so far because the vast majority of Chinese have firmly
and openly supported theie Government and the existing
/order.
NOTHING TO BE WRITTEN IN THIS MARGIN