G.F, 323 0003230
CONFIDENTIAL # 3
ANNEX C TO XCS(73)12
Ref: SCR 1/14/5591/72
CO P Y
Colonial Secretariat,
Lower Albert Road,
Hong Kong.
18th October, 1973.
Dear Sir,
Please refer to the Japanese Consortium's letter of 27th September, 1973, to my letter of 9th October, and to the agreed records of our three subsequent meetings held on 10th, 12th and 16th October.
2.
The Mass Transit Steering Group has now carefully considered and assessed all the statements which have been made by or on behalf of the Japanese Consortium, as set out or recorded in the above-mentioned documents. The Group has come to the view that, for the purpose of validation under the agreed procedure for dealing with a pre-emptive bid, the Janpanese Consortium's bid, as amended, is satisfactory with one important exception, namely, the Consortium's requirement for a Hong Kong Government guarantee in respect of the finance which the Consortium have offered to arrange. This requirement is, as you are aware, directly in contrast with one of the Hong Kong Government's requirements, namely, that a Hong Kong Government guarantee must not be required for export credits/consortium finance.
3.
The Steering Group has taken careful note of your explanations regarding the Consortium's requirement for a Hong Kong Government guarantee, and understands the Consortium's position. Although the Group is not persuaded that the Government's position on the question of a guarantee should be modified in any way, the Group has taken an overall view of the Consortium's bid, and, having regard to all other factors, has come to the conclusion that it should not withhold validation of the bid solely on the ground that it falls short of one of the Government's "musts" in its list of requirements.
4.
Nevertheless, the Consortium's requirement for a Hong Kong Government guarantee creates substantial difficulties for the Steering Group, particularly with regard to the Group's position vis-a-vis the other three interested consortia. In view of the emphasis which the Steering Group has always laid on the Government's insistence that it would not be prepared to give a guarantee for export credits/consortium finance, the other three consortia have accepted the Government's position, and have based their proposals on the assumption that no Hong Kong Government guarantee would be given. If they were now informed that the Steering Group has received a valid bid, they would naturally assume that the bid meets all the Government's requirements (or, at least, all the "musts"), and would have legitimate cause for complaint if they eventually discovered that this were not the case. Moreover, having made its own rules in an exercise of this nature, the Steering Group must abide by them, or give sufficient notice of any proposed modifications to all concerned, so as to maintain its good faith with all interested parties.
D.K. Newbigging, Esq., J.P.,
Jardine, Matheson & Co., Ltd.,
Jardine House,
HONG KONG.
CONFIDENTIAL
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