ANGLO JAPANESE CO-OPERATION IN THIRD MARKETS
HONG KONG MASS TRANSIT SYSTEM
The Minister will remember that our efforts to keep the Anglo- Italian consortium in the running for this project have failed, and the Hong Kong Government decided to open negotiations with the Japanese only on the basis of their pre-emptive bid at a fixed price.
Unless the competition is re-opened as a result of a failure of these negotiations - an unlikely assumption the only chance for GEC/Elliott Automation, the main UK element of the Anglo-Italian consortium, of salving anything at all would be though obtaining sub-contracts from the Japanese contractor. At an earlier stage there were indications that the Japanese would have welcomed British participation in their bid for this project as they assumed that for political reasons a 100 per cent Japanese bid would be unlikely to succeed. At that time the prospects of an Anglo-Italian bid being successful looked promising, and the UK would have no doubt obtained a larger share of the business from an Anglo-Italian contract than from an Anglo-Japanese one.
The Japanese may now be less prepared to make room for any form of UK participation, and it may be embarrassing for the Minister to raise the subject. There is however, reason to believe that the Japanese may find the contraints of the fixed price hard to bear. CEC-Elliott Automation believe that both technically and pricewise they are highly competitive. Against this background and on the assumption that the Japanese may find it desirable to spread some of the risk ECGD had indications from their opposite numbers in Japan that they would be relived to see the UK bear some of the risk
it would be useful to sound out Mr Nakasone should an opportunity arise whether UK participation would be welcomed. The subject could be introduced by a remark making the point that GEC/Elliott Automation were highly competitive in technology and in price and would be in the market for sub-contracts for the Hong Kong mass transit system, and that this might make it easier for the Japanese to keep within their fixed price.
Overseas Finance & Planning Division
8 January 1974