CONFIDENTIAL
Arguments against reconsideration
The
(a) There is no change in the purely
commercial considerations involved.
Company is not adequately capitalized to
borrow so large a sum for a project of this
nature. Because repayment of the loan is
dependent on the successful operation of the
Tunnel, some security is required in the
event of the Tunnel's failure as a
commercial operation: otherwise the loan
will be providing equity investment and it
is not ECGD's function to guarantee such
investment.
(e) The political risk that Hong Kong
might cease to exist because of a Chinese
takeover.
I feel that the political considerations
urged in (c) above, although not pressed by
us to any great extent last year, now justify
our taking a further look at our terms,
particularly in view of the Governor's current
assessment of the possible effect in Hong Kong
of an arrangement with the French. I would
hope that our correspondence last year about
the possible risks of a Chinese takeover has
satisfied you on this particular score,
although I must say that some here (and apparently many in Hong Kong) still feel
lingering doubts that this point must have
played some part in your assessment of the
terms necessary to cover the commercial risk;
in particular your requirement of a joint
guarantee. It does seem to us that several
guarantees from the shareholders would meet
the commercial
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