260
1) PUSS(TRADE)
2) SECRETARY OF STATE
HONG KONG MASS TRANGIT SYSTEM
cc Minister (TCA)
Secretory (Trade) Kr Denman Dep Sec Mr Preston Dep Sec Er Fell ECOD
Mr Edwards CR22 Kr Hochfelder OFP
I attended a meeting at the Treasury this afternoon to discuss the validation of the Japanese bid by the long Yong Government (sce my earlier minute of today's date to PS/Secretary of State),
We were advised by the FCO lawyer that the Hong Kong Government could issue a guarantee which would not legally bind HMG. But there were nevertheless difficulties because:-
(a) HG might be regarded as in some sense morally committed
unless there were a public disclaimer, which itself would be an embarrassment; and
(b) Imo be the ultimate power to veto the Hong Kong Covernment
guarantee, end it might be said that HKG should use the power, politically difficult though this would be.
The view of the meeting was that it would not be advisable to try to veto the Hong Kong Government guarantec. If the Japanese then withdrew the condition they would be home and dry. if they did not, we could czpect the Hong Kong Government to insist scrupulously on all the other conditions, some of which we could not meet.
Instead, the recommendation is that we should use the Hong Kong Government's action on the guarantec as a lever to strengthen the position of the Anglo/Italian competition in two ways:-
(e) By insisting that there should be some major compensatory
concession to the views of the Anglo/1talian consortium; and
(b) By pointing out to the Hong Kong Government the political
difficulties which would be created by the Japanese getting the contract with a Hong Kong Government guarentee.
are
IN DEI Ministers agree, the 700 will play these cards with the Hong Kong overnment to re-inforce the Anglo/Italian proposals when they put forward. We must obviously continue to encourage the Britiéh Group to work hard on these joint proposals.
FW Clavos-Smith
OPP
23 October 1973