Mr. Carter
Reference HKK 21/4
49
0
A.
Над А.
Flay, B.
Нат
C.
Каздо
Во Листовет Manday 10/2
+ hut
At (47) we are asked by Mr. Lucas of the Treasury to send an urgent brief telegram to the Governor asking if he corroborates the view attributed by Mr. Fogarty in his letter at 2/E to Sir John Cowperthwaite that the Hong Kong Government would be prepared to give a several, as opposed to a joint and several, guarantee.
2.
We have been told by ECGD, and in a telegram approved by them (38) we have told the Governor, that the requirement of several guarantees from all the shareholders in the Tunnel Company is a minimum not for negotiation. It now appears that it might be negotiable, no doubt if the report that the French were contemplating exempting the Hong Kong Government from their share of the several guarantees proved to be true. It is clear that ECGD wish to safeguard themselves against the sort of pressure Colonel Clague is exerting (telegram from Hannam at (40)) by securing the guarantee of the Hong Kong Government as soon as possible. question for us is whether it is wise at this stage to attempt to do so.
3.
9
The
If we succeed in extracting such a guarantee from the Hong Kong Government there is no doubt that it would strengthen our hand in the war of nerves we can see going on. Certainly Mr. Fogarty's letter to the Treasury is a good indication that last November the Hong Kong Government was prepared to give a guarantee proportionate to the equity shareholding on which it has an option. Certainly in the Governor's telegram at (12) there is a statement that the Government has agreed in principle to provide 25% of the equity which it would feel bound to implement if French finance were successfully negotiated; and therefore a fortiori if British finance were found. But presumably the Hong Kong Government, in spite of their obvious preference, for political and other reasons, for a British project, will be hardly less keen than the commercial shareholders to get the most lax/terms they can in the now obviously favourable circumstances where ECGD and the French are in competition. I should think it would be clear enough to them, if we seek the guarantee the Treasury wants by urgent telegram, what we are after.
4. Although there is some risk in doing what the Treasury/ECGD want, I think on balance that we can rely on the Government's known anxiety lest a French deal should lower British prestige to get yit further in the Colony. If so, we should send a telegram seeking to avoid the least hint that we would be prepared to abandon the present position over several guarantees from all shareholders, but aim only at simplifying ECGD's negotiating stance. I have drafted below.
Mux
5 February, 1969
(H. H. Stewart) Hong Kong Department