ODE 18-77
SS 8/78
CONFIDENTIAL
Reference
10.
The latest figures available on the value of direct investment in Hong Kong are for 1974. These show that the book value of UK investment was £142 million, representing some 1.5% of total UK direct investment. Since this book value reflect historic costs; it considerably understates the current worth of these assets. Data on the flows of outward investment in subsequent years is given below (£ million):-
Table 5: UK Net Investment
Cic. investuok less dis-ingest want
in each particular year.)
(m)
1975
1976
77
78
UK net investment in
Hong Kong
1416
32.4
21.9
47.6
Total UK net investment in World
1094.2
2408.3
1770
2394
Hk shrest rank:
Source: Dept of Industry
=4:5
11.5
- 3+3
5.7
ult
63.2
41.7 - 3.7
546
Auto LDC ihvik
Export Credits
11.
1
Of compoisson, til foreign ship'tan uit b8 = 1240:)`
Hong Kong is ECGD's major market in terms of the amount at risk. Latest figures from the ECGD show that total ECGD liabilities in Hong Kong amount to £1,253 million, representing same 7% of their total business at risk.
12. The major issue for decision at the present time, and one which will dramatically alter the figures above if the project goes ahead, is if ECGD provides a sterling buyer credit to enable GEC to install the equipment to expand the Castle Peak
'B' Power Station. If ECGD provide the buyer credit, then their commitments would increase by £1,120 million, consisting of a credit for a loan of £700 million and the balance as interest. This particular contract raises a number of problems for ECGD. The main points and subsequent developments are summarised below.
13. The project presents ECGD with two main problems. Firstly, it would lead to a substantial increase in the proportion of ECGD's commitments outstanding in one market. Secondly, a large proportion of these commitments would be on a small group of privately owned companies, reflecting ECGD'S involvement with the earlier phase of this development Castle Peak 'A' including both Exxon and the China Light and Power Company. ECGD is naturally concerned that it should have adequate security for its buyer credit given its high exposure in this market to only a few companies. The need for improved security the 'normal' uncertainties inherent in projects of this nature including estimates of demand for electricity over a long period, the relationships between the private companies, the ability of the CLP to service its debt by changing realistic prices, coupled with the fact that their commitment on this project will extend over the next 20 years, and thus beyond 1997.
14.
-
reflects
Latest information from ECGD shows that commitments to Hong Kong are as follows:-
CONFIDENTIAL
/Table 6