Mr G Barues
29 September 1977
3.
e
Indeed, the capital expenditure required is relatively high in relation to the domestic market volume, and because of this the production costs contain a heavy element of standing charges.
The second part of paragraph d. raises a difficult question. It is virtually asking the manufacturer to enter into a price control arrangement with the government. If the manufacturer, through some system of regulation, were to achieve a virtual monopoly, then it would not be unreasonable to expect him to accept such a condition. For our part we would, in such a situation, be prepared to discuss a system of regulating the prices according to cost variations, but without some form of protection, it seems unreasonable to expect the manufacturer willingly to accept price controls.
I think you will appreciate that we recognise the importance to the Government of the free market philosophy.. In accepting this situation, however, it is important from our point of view that we retain the ability to control costs by such measures as changing the raw materials of manufacture if there is a cost or operational advantage to be gained. Also, as a commercial enterprise it would be difficult for us to accept a system of price control, especially when there would be no way of knowing for example, whether discounts or rebates on bulk supplies were being agreed between the supplier and user in the country of origin or elsewhere outside Hong Kong,
Guarantee of Supply
We see no problems in maintaining the minimum stock level required, and as we have manufacturing operations in Taiwan and the Philippines there would be no problem in providing back-up supplies in the event of disruption in production.
f.
Manufacture
Formula and Process
I think we could furnish relevant information required by this section providing that suitable confidentiality safeguards are exercised.
I hope the above remarks might be of some help to you in framing the request for whatever additional information may be called for with the tender.
Many thanks for letting us have an advance view of the document.
Yours sincerely
GG Riley
Overseas Projects Manager