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The still substantial magnitude of the UK involvement in this project and the desirability of maintaining a UK presence in this territory, coupled with the virtual certainty that regression from the terms agreed for the wholly British Group would wreck the chances of any British involvement, seem to us to argue that we maintain the terms of support already indicated to the Hong Kong Government. They have worked out all their cash flow projections on the basis of these terms as the absolute minimum necessary for a viable operation and there can be no doubt. whatever that unless we are prepared to maintain these terms any approach by the new consortium will be doomed to failure from the outset.
The terms of the new consortium's letter to the Hong Kong Government have been the subject of considerable discussion. They have now been agreed and the following words relate to the questions of ECGD support
"We foresee no difficulty in fitting together the British and Italian financial proposals, which have already been outlined to you, into one coherent financial plan for the project as a whole. There might indeed be some advantages to be gained in this respect from the merger of the British and Italian groups since a certain number of the off-shore purchases of equipment and services envisaged by the Italian group can be directed to sources in the UK and would under these circumstances qualify for the longer term export finance guarantees by ECGD."
We have told the group that we see no objection to these words. The letter is being sent to Her Majesty's Commercial Representative in Hong Kong by tonight's bag and unless he is instructed otherwise he will submit it to the Hong Kong authorities early next week.
I should be grateful for your early agreement to our maintaining for the British component in the British/Italian consortium the same. terms (details of which I append for ease of reference) as were agreed when the whole British consortium put in their bid early this ** year.
Keen Callend
K W Cotterill
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cc D Royce Esq: OFG DTI
A C Stuart Esq: HKIOD FCO G F Finlayson Esq: EPD FCO Miss Lackey: CRE DTI
A L Ryan Esq: Bank of England
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