CONFIDENTIAL
Department of Trade and Industry Overseas Finance Planning Division
1 Victoria Street London SW1H OET
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Telegrams Advantage London SW1
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RECEIVED REGISTRY No.52 26 NOV 1974
PKK 212 аккиі
I A C Kinnear Esq
Senior British Trade Commissioner
British Trade Commission
Hong Kong
By Diplomatic Air Bag
Your reference
Our reference
21/1
OPG 300
Date
22
November 1974
88
HONG KONG MASS TRANSIT
1 Thank you for the very helpful report, in your letter of 4 November to David Royce, and your earlier accounts of the state of play on the negotiations between the Government and the Japanese.
2
Confirmation of the difficulties encountered by the Japanese comes from a personal approach last week to Fell ECGD, from one of his Japanese contacts in MITI, to the effect that the Japanese had predictably run into serious trouble and were seeking relaxations of the specification and an increase in price. Fell cabled this information to Haddon-Cave, on a personal basis and expressed the hope that if no progress could be made on the existing Japanese offer and the project was still to proceed, other consortia would be given the opportunity to bid on whatever new basis was laid down. Haddon-Cave replied that the HK Government were still negotiating with the Japanese on the terms set out in their letter of intent and that because, broadly speaking, these were the only ones on which they could afford to proceed no relaxation of the terms could be envisaged.
3 Since these were personal exchanges it would be as well, we feel, for you not to disclose to Government officials that you knew of them. Haddon-Cave's reply is another indication of the Government's intention to act on the assumption that a contract with the Japanese can be concluded on the Government's terms attitude which as you suggest, makes sense at this point in the negotiations. Whether one side or the other will crack remains to be seen.
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4 I have passed the gist of your account, without mentioning sources, to Harry Codd, Chairman of the GEC's Rail Transport Projects Unit and made it clear that he should treat it in strict confidence. He told me GEC had had no response to their expression of willingness - which the Japanese had sought to negotiate subcontracts, beyond Mitsubishi's statement in June that the Japanese side were making detailed plans and would approach GEC when these had been completed. GEC are still anxious that nothing of this should be said to the Governor or HK Government officials.
5
I need hardly add that any approach by us to the HK Government is best avoided at this stage, especially after Fell's recent reminder of the UK's continuing
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