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improvements to the Air Traffic Control system (Hong Kong has put in application for a C.D. & W. grant of about £300,000 in this connection).
(c) The remission, in whole or in part, of the outstanding balance (about £1.6 million) of the 1957 interest free loan for Kai-Tak development.
6. The ECOD element in this proposition will certainly not be regarded with enthusiasm, It will be argued (and we have already had this preliminary reaction from Sir John Cowperthwaite) that Hong Kong interests require the project to be put out to inter- national tender; if credit facilities are sought in this connec– tion, evan cheaper credit terms than ECGD offers may be forth- coming from other sources (e.g. the French). This cannot be denied. Our counter can only be that if there is a strong political reason for associating British and Government- sponsored finance with this project, this is the only way we see of providing it.
7. An additional difficulty arises from uncertainty about size of the "British export content" in the project. The figure of £6.2 million is only a "guesstimate" based on Board of Trade experience of similar projects elsewhere, It is almost certainly too high; it would probably stand to be reduced by at least £t million if we succeeded in the application for grant assistance mentioned in paragraph 4(b) above. However if £3-4 million of the contract (totalling £13.7 million) would qualify for credit, this would not seen an unreasonable response to Hong Kong's request for financial facilities.
8. In putting forward the package at paragraph 5 above, we should not imply that we are making a firm and definite offer. ECGD have understandably reserved their position on (a); we face a battle with the QDM on (b); and the Treasury have not indicated that they would accept (c). I suggest that we take the line in Hong Kong that this is a package which, if it would meet their needs, we would be prepared to battle for with other departments,
Hong Kong Dept.
29 May. 1969.
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