CONFIDENTIAL
Foreign and Commonwealth Office
London SW1
R Jones Esq HM TREASURY
2.9
Telephone 01.
Your reference
2F(E)17/68/01
Our reference
HKK 21/4
Date
26 September 1973
file
1920
27.1x
Dear Jones,
HONG KONG MASS TRANSIT SYSTEM
215 1.
I have just seen your letter of 19 September to Ken Cotterill which you copied to Mark Goodfellow in my department.
219
2 •
I have very little doubt that Haddon-Cave' S statement that the Hong Kong Government could not raise fares, and that in certain circumstances they might allow the Corporation to be wound up, is special pleading, designed to justify his fixed- price approach and to get the system built as cheaply as possible. Once the Mass Transit System is in operation and the patterns of residence and work in Hong Kong are established to take account of it, the demand for the underground will be relatively inelastic. Social policies may keep fares relatively low, but not, I think, economic pressures. Similarly it is, I think, politically almost inconceivable that the Hong Kong Government would allow the Mass Transit System to fail. It follows that I am sure we should not, at this stage, allow Haddon-Cave's remarks to frighten us away from financial support of the project.
3.
Ken Cotterill suggests in his letter to you of 24 September that all this may prove academic since the Japanese are likely to put in a pre-emptive bid and the British civil contractors have rejected the concept of a fixed price on which Hong Kong are now insisting. This may be true, and it is indeed an additional reason for holding back any new submission to Ministers. But I understand that GEC at least have not given up the attempt to put together a viable bid, if necessary with new partners, and I am equally sure that it would be a mistake to write off their attempt at this stage.
CONFIDENTIAL
Yours cour Andrew Sh
A C Stuart -
Hong Kong and Indian Ocean Department
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