CONFIDENTIAL
HKK 173/23, NO. 51
RECOVE
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Flag A
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Mr Murad
PS/Lord Goronwy-Roberts
PS
Jouk
HONG KONG:
OFFICEK
INDEX
PA
REGISTRY
Action Taken
No
MODERNISATION OF KOWLOON/CANTON RAILWAY (KCR)
f
1. The Secretary of State for prade is seeking very urgent approval for arrangements which will enable Metro-Cammell Limited (Metcam) to obtain a contract for the supply of new rolling stock for the KCR (Mr Harris' letter of 17 November)
Finally,
2. This contract is part of a programme to modernise the KCR on the British side of the border with China. The Chinese Government are proposing to carry out similar modernisation work on their side of the border and whoever wins the Hong Kong contract will be in a strong position to win the larger Chinese one as well. Failure on Metcam's part could also have wider implications for UK/China trade: the Chinese authorities are unlikely to be very impressed if a British company is unable to win the Hong Kong contract despite the advantages of tendering in a British colony to specifications drawn up by British consultants (Transmark, a British Rail subsidiary are the consultants for KOR modernisation and expect to win the consultancy contract for the Chinese modernisation as well). failure to obtain this contract could adversely affect Metcam's chances of winning other important contracts in Hong Kong. 3. It is therefore important for political as well as commercial reasons that Metcam should obtain this business, but their initial bid was much the highest of the four received. Together with Metcam and their sub-contractors, the departments concerned in Whitehall have been making strenuous efforts to bridge the gap between Metcam's bid and that of their nearest competitor. As a result, the Metcam price has now been reduced to the point where it is fully competitive (£44.4 million). The ways in which this has been done are detailed in Mr Harris' letter. (EID(I) have confirmed that as none of these measures involve direct export subsidies, there is no need to seek Community approval.
4.
The Governor of Hong Kong, who has been extremely helpful throughout, has informed us in strict confidence that the contract will be
1 CONFIDENTIAL
/awarded
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