(13)
CONFIDENTIAL
Mr Loade
Sip D Watson
PS/Mr Blaker
MASS TRANSIT SYSTEM: HONG KONG
PA
Gogodfellow
As
12.11
1. I attach Hong Kong telegrams nos. 172, 173 and 174 with the Letter of Intent on the Japanese Mass Transit contract, together with the Governor's comments on points raised by me at the time of Executive Council's decision in principle. The letter in to be signed or
11 Glmiany.
2. The Letter of Intent is not the final contract. But it is evident that so far the Japanese have swallowed whatever doubts they may have about Hong Kong's fixed price of 5,000 million dollars and have not tried, or not succeeded, in including any escalation clause in the force majeure provisions. I do not think there is any comment for us to make either in public or in private at this stage. I attach a copy of a telegram which I have sent to the Governor saying so. It seems that, unless the Japanese draw back from the brink, British industry's participation in the contract will be limited to minor sub-contracts. There is no point in going all over the ground again.
3. One point that is not covered in any of these telegrams is the Japanese demand for a guarantee from the Hong Kong Government. Presumably this will be covered in the final contract. We must now consider the question of a disclaimer. I have included the point in my telegram to the Governor. I am sending a copy of the telegrams and of this minute to Mr Royce in the DTI. I would be grateful if he would note carefully the caveats in para. 9 of Hong Kong telegram no. 172, particularly the requirement of confidence vis-à-vis the other consortia.
8 February 1974
cc (with enclosures)
Mr Marshall
News Dept.
Mr Royce, DTI
dest
A C Stuart
Hong Kong & Indian Ocean Dept.
rate minute
I have sent a separe
to Mr Blaker
CONFIDENTIAL
8/2.