CONFIDENTIAL
Original at: HKK 16+)
This Copy for: HKK 173/1
Information only/Action on Para(s)
D M March Esq
British Trade Commission
9th Floor
Gummon House
121 Harcourt Road
HONG KONG
:
LARI
4 August 1977
.17
*
HONG KONG AND ECGD
1. Thank you for your letter ECO 173/1 of 28 July and the enclosed copy, which I had not previously seen, of the record of ECGD s meeting in June with the Chairman of the Mass Transit Railway Corporation.
2.
We have consulted the DOT and ECGD about the question of continuing to require Hong Kong Government guarantees for ECGD credits in connection with the construction of the hass Transit Railway. As you know, the Hong Kong Government did guarantee the ECGD loan (S) provided for the Modified Initial System of the MR. It would therefore be in accordance with what has already been done in Hong Kong's case (and with wall-established precedence elsewhere) if a Hong Kong Government guarantee were to be sought in connection with the next phase of the project. When Kemp told Thompson at their meeting in June that he fully accepted that the Hong Kong Government would never allow the
TR Corporation to default on its loans, whether or not guarantees had been given, he felt obliged to qualify this statement by the remark, to which you have drawn attention, that this could only be regarded as valid so far as the presaut Hong Kong Government is concerned. No-one, including, of course, ECGD, expects that there will be any "change of government" in Hong Kong. What Kemp had in mind was the possibility, which he did not wish to spell out to Thompson, that China could conceivably recover Hong Kong during the terms for which loans would run. In that event there might be advantage in the Hong Kong Government having given a guarantee which the Chinese, as a successor govemment, might be prepared to honour. I think it is arguable, as ECGD would agree, whether in those circumstances a guarantee undertaken by the "present Government of Hong Kong" would be worth having. Even so, and hearing in mind that the Hong Kong Government did guarantee the loans made to the MTEC for the first phase of the project, we think
CONFIDENTIAL