From The Permanent Secretary Sir Leo Pliatzky, KCB
Dear Ken,
HKK 1731
ZEED 1078
DEAR OPPI INDEX
Nolas
DEPARTMENT OF TRADE
1 VICTORIA STREET
LONDON SWIH OET
TELEPHONE DIRECT LINE 01 215
SWITCHBOARD 01 215 7877
HKGD ce: TRED
16 January 1978
14)
3785
1.
Exports to Hong Kong
Ww.Corbarsi/nur. Shalton Mur. Thomas / var. Butter Chstank/Hd POD (pañas)
Mass Transit Railway
Attrut
5/1
John Gardiner of the Laird Group came to see me today after visiting Hong Kong to try to get a follow-up order after Metropolitan Cammell's success in winning the order for the rail cars for the first stage of the mass transit railway.
The Company have been asked to bid for a further 70 cars worth £22 million in respect of which the Mass Transit Railway Corporation hold an option under the original contract, and Metropolitan Cammell are at an advanced stage in discussing with ECGD cost-escalation cover for this contract, if secured,
2. But, in addition, there will be a still further 150 cars worth £44 million at current prices for which the contract will not be placed until November, but in respect of which both the Railway Corporation and Cammell Laird need to know now whether the latter will be in a position to meet this requirement also, if they are successful in the competition.
Therefore, John Gardner needs to know now whether cost-escalation cover will in principle still be available at that time.
3. The position, as I understand it, is that a proposal from ECGD to make an Order renewing the cost-escalation scheme for a further year, when the existing Order expires in March, has been put to your people. I do not doubt that it is going forward as it should, but I should be grateful if you could take on board that here already we have one quite substantial case requiring the matter to be dealt with as a matter of some urgency.
In a more general way, of course, we all need to know as soon as possible where we stand on this. I am quite clear that the export effort could not stand our discontinuing the scheme at this juncture.
4.
Gardiner stressed that the competition is formidable and, by way of illustration of their dependence on cost-escalation cover in present circumstances, handed me a copy of some figures put to him by Metropolitan Cammell, showing the combined effect on our price competitiveness, as compared with that of the Japanese and the Germans, of movements in the exchange rate and in domestic costs between June 1976 and mid-December 1977. I enclose a copy
/of
K Couzens Esq CB
HM Treasury Parliament Street London SW1