Tsy Ref: 2F45/54/02
K W Cotterill Esq
Export Credits Guarantee
Department
Aldermanbury House
Aldermanbury
London EC2P 2EL
مه
167
67
Treasury Chambers Great George Street London SW1P 3AG Telephone 01-930 1234 ext 288
16 March 1973
HONG KONG MASS TRANSIT SYSTEM
At my meeting on 14 March, we discussed with Departments your letter of 28 February proposing certain improvements to the terms of the UK offer approved in the Chief Secretary's letter of 28 September. You will recall that the Chief Secretary is a qualified approval and that further reference to Ministers will be required before any commitment is undertaken. Clearly a considerable amount of information is still required before a final recommendation can be made. Particular points include the cost and time scale of the project, the arrangements for operating the system, the degree and method of participation by the Hong Kong Government, and what
In the arrangements would be made to deal with cost escalation. meantime, we discussed the line it would be appropriate for you to take against this background during the next round of discussions to be held in Hong Kong on 19 March. You explained that the costs shown in the paper submitted to Ministers last September were derived from the consultants' estimates and had not been further revised. You confirmed also that in your view the proposals in your letter would not infringe our EEC commitments.
2. You acknowledged that your proposals reflected not firm knowledge, but your judgement of the likely Japanese approach, since the Italians and the Germans did not appear to be serious contenders for the business. You also explained that the main purpose of the proposals The DTI and the was to allow the ECGD negotiators some flexibility. FCO gave support on the grounds that the contract was of very considerable importance to UK industry, and since concessions of the kind proposed might encourage the Hong Kong authorities to opt for a The ODA said that consortium rather than a multi-contract approach.
the UK should match rather than lead, and that a careful assessment of the balance between the UK's technical and financial competitiveness should be made. The Bank pointed out that their earlier calculations of the implied subsidy in our financial offer (just over 20%) already assumed that repayments would start after the completion of Stage 4. But the effect of conceding the two proposals in your paragraph 12 would be to increase that subsidy to 32% and 39% respectively. All Departments agreed that our present offer was
therefore very favourable and had been received well in Hong Kong;
any further concession should be made only if it was unavoidable.
1