ures bra-
ts
be
5.
On this aspect of the discussions Moreton concluded that it will not be possible to persuade Hong Kong to place the whole contract in British hands on the basis we were proposing. But it was clear to him that Hong Kong would regard it as a helpful contribution if HMG were to let it be known in advance that ECGD cover would be available for any part of the contract awarded to British firms.
6. Moreton asked Cowperthwaite what he would regard as a fair contribution to the project from HMG given our present economic circumstances and as a visible demonstration of our self-interest. Cowperthwaite replied that above all the waiving of the outstanding repayments of the existing loan for Kai Tak (£1.4 million now outstands with a further repayment of £200,000 due on 1 October) would be so regarded.
7. The discussions next turned to a development of which I think you may be unaware. Hong Kong are submitting applications for a 50% C.D. & W. grant towards the cost of the improved air traffic control system (see paragraph 3(v) of our memorandum); the amount involved is about (280,000), i.e. 50% of the estimated total cost of about £(560,000). There are precedents for the use of C.D. & V. funds for such purposes, including a grant of about £50,000 to Hong Kong in 1950. The tenor of the discussions indicated that a contribution of
ned/ hed this nature, added to remission of the outstanding loan, would probably
be regarded in Hong Kong as adequate recognition of British interest in the project.
8. It seems to us that we now have the possible ingredients of a satisfactory package deal and our Minister (Lord Shepherd) has instructed that I should press ahead on the following basis :
9.
(i)
Remission of the outstanding balance of the 1959 loan;
(ii) 50% grant from C.D. & W. funds towards the cost of the
air traffic control system; and, if possible;
(iii) a statement by ECGD that cover would be available for any
part of the contract awarded to British firms.
In view of Cowperthwaite's remarks, the first of these elements remission of the 1959 loan) must be regarded, I think, as the linch-pin in any acceptable solution. I should be grateful if you could give it early consideration. I am advised that repayments are paid into the Consolidated Fund and are not shown as appropriations- in-aid of votes.
10.
On the second element (the C.D. & W. 50% grant) I shall be writing separately to the Ministry of Overseas Development when Hong The Kong's applications, are complete (we still await one of them). equipment involved (costing in excess of £206,000) would be purchased by Cable & Wireless on the Hong Kong Government's behalf and paid for
/ in one lump