CONFIDENTIAL
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LORD GORONWY-ROBERTS'S VISIT TO HONG KONG: 11-17 JANUARY
BRIEF NO. 15: MASS TRANSIT RAILWAY (MTR)
1.
In 1972, the Hong Kong Government decided to commission the construction of an underground railway system to help solve the Colony's growing urban traffic problem. The MTR is the biggest civil
engineering project ever planned for the Colony. It is to have above- ground as well as under-ground sections, pass under the harbour and have a length of 32 miles and 50 stations when completed. The MTR authority will rank second only to the Government itself as an employer of labour in the Colony.
2. The estimated cost at mid-1972 prices was HK$ 5,000 million, a
limit which the Government are determined not to exceed for reasons of
the future economic viability of the system, calculated on a basis of tolerable fare levels in relation to an acceptable amortisation period. Three main consortia contended for the job: an Anglo/Italian, the successful Japanese, and a Franco/German (with minor associated).
3.
In September 1973, the Japanese consortium, headed by Mitsubishi, put in a pre-emptive bid offering to complete the work to agreed specifications within the prescribed financial ceiling and without any cost escalation provisions. On this basis the Hong Kong Executive Council decided in December that year to enter into sole negotiations with the Japanese consortium. These culminated in the signing by the Japanese of a preliminary contract, in the form of a letter of intent, in February 1974.
4.
A series of technical discussions between the two sides has
since taken place against a background of growing rumour and press speculation regarding the ability of the Japanese to complete the work at the contract price without incurring a serious and possibly unsustainable loss. Speculation has centred on assumed Japanese intentions to attempt to reduce the overall cost by a lowering of specified construction standards, but this has been refuted by the Financial Secretary of Hong Kong, who has said that he firmly
believes that a final contract will still be concluded.
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