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Hong Kong and Indian Ocean Department
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DTI (Mr Glaves Smith)
Treasury (Mrs Boothroyd) ECGD (Mr Cotterill)
Sir Duncan Watson
MASS TRANSIT RAILWAY
J
HONG KONG
204
1. Mr Haddon Cave had a drink with me this evening at my club and spoke quite freely about the "hearings" which his team have had with the British, and Anglo/French/German consortia. Both ECGD and DTI were represented at the meetings so I presume that we have somewhere a full record of what passed. I had been given in advance a summary by the DTI man who had been present. Mr Haddon Cave confirmed what I had been told, but spoke more firmly about the question of how they would react to a pre-emptive bid than I had previously realised was the Hong Kong Government's position. As I understand it what they have said is that they reserve the right at any date between 1 October 1973 and the spring of 1974 (by which time they have said that a decision will definitely be made) to accept a firm offer from any of the consortia. In such circumstances all others would be given 30 days notice of the Hong Kong Government's intention.
2. Mr Haddon Cave said that he had been somewhat shaken by the firmness with which the British consortium led by Mr Wiltshire of GEC had disputed what the Hong Kong Government had set down as conditions for the negotiation. This attack by the Consortium had centred on the principle of a ceiling and absence of escalation clauses. Again as I understand it, at this stage the Hong Kong Government team are holding out for the principle of a ceiling, not necessarily of $5000 million. This is at least what Mr Haddon Cave said to me. His conclusion after the examination of the British consortium was that there was no chance of their getting the contract unless they changed their tune.
3.
Today they had had the "Germans" (Anglo/French/German consortium) who had restored Mr Haddon Cave's faith in the method of approach they were using. The "Germans" had accepted the Hong Kong Government's "conditions" and were now in a strong negotiating position. Without going into details he said that they stood a very good chance, because he made it clear that the Hong Kong Government would prefer a European to a Japanese consortium, if the British one was not going to win.
/4.
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