WI. 43560/43 4/63
Ed. (53)
NOTHING TO BE WRITTEN IN THIS MARGIN
Minutes 21/1
10
Note for File
Since Mr Mason (ECGD) was not able to Bee Mr Haddon-Cave, as he had hoped, I arranged for him to meet Mr Jones at my house on Sunday morning. Most of the discussion was in effect general background which is well known and previously recaded, but the following were new points that merged.
2. The Japanese Consortium are still having to ask for a Government guarantee because the Japanese Government themselves are insisting on it as a condition for assisting the Consortium. The Financial Secretary has told them that there can be absolutely no question of a Hong Kong Government guarantee and that if they continue insisting on it they will be ruled but. This has thrown them into some confusion but it seems probable that they Will manage to find a way out of it possibly by using the Hong Kong Government's equity participation in the Mass Transit Authority as equivalent to a guarantee.
3. The Japanese have said that by the
time they come to the next round of discuss- ions they will be prepared to give a pretty firm price on the E and M, and that their intention eventually is to give a fixed price lump sum for the whole project for the first four stages. This is very attractive in principle.
Mr Jones acknowledged that such an offer would in fant effect amount to their
buying the contract" since given the present uncertainties about the technical data, combined with the uncertainties about the future value value of the yen, ́ a fixed price could only be a fiction. But, as he commented, if the Japanese Goverment decided that it is worth going for then all the difficulties will be put to one side and they will make sure that · the terms that they offer are virtually irresistible.
5. In this context he mentioned that the Japanese financial terms are still based on the concept of a loan of US$ 400million to a Japanese company to be set up in Hong Kong to, in turn, lend the money to the Mass Transit Authority, This figure might prove to be insufficient in which case there was no doubt that if the Japanese wanted the contract they would increase it to whatever was necessary.
The Italian and Franco-Genman Consortium appear not to have done very
uch preparatory work so far. He, personally, was doubtful whether the Franco-Bermans were really very serious but the addition of G K N to make it an Anglo Franco-German Consortium