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contingencies) the total was only about 282 million, then the Authorities would feel able to go to the Legislative Council with a clear conscience. If, however, (and P.W.D. are still working on this) the scheme looks as if it is going to cost quite definitely more than $280 million, then the Secretariat would feel bound to go back to Executive Council to seek their views, before putting the matter to the Legislative Council. This would entail quite a lot of extra delay.
5. While all this has been going on of course, the political situation in Hong Kong has deteriorated sharply. You presumably have access to the telegrams that have been passing between the Secretari ́t and the Commonwealth Office. Thesc, naturally, concentrate on the political side of affairs, and therefore display rather more anxiety than is nt present felt by the business community. Nevertheless, if the rioting on the one hand, and the threats and demands from Peking on the other, continue for very much bnger it is fairly obvious that there will be a sharp loss of confidence in Hong Kong. In addition to this if the settlement which is finally reached with Poling appears to involve a loss of face for the authorities here, then we can look forward to further industrial unrest and internal troubles. If it is true that the contract terms virtually impose a fixed price on Coctain's, then I think they will be wise to consider their position very carefully at the present time. No doubt your own thoughts are also running in the same channel at the present moment.
6. I imagine that in view of the latest events, you will be in fairly close touch with the Political Department about this project. I have not yet discursed the matter in specific terms with the Colonial Government here, but I can imagine that if it were announced that Costain's (and therefore E.C.G.D.) had withdrawn from the project then there would be a sovere loss of confidence in Hong Kong. Conversely, if an announcement is made fairly soon that the project is going ahead, then this will help to restore the position here.
7. I am copying this letter to Anthony Elliott, the Political Adviser to the Governor and to Anthony Darlington in C.R.E. Department of the Board of Trade.
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C
J. E. Elliott Esq.,
(M. P. V. liannam)
Principal Trade Commissioner
Export Credits Guarantee Apartment,
P. O. Box 272,
LONDON E.C.2.
MPVH1118
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