GUNKLEJENE LAD
The calculations of subsidy element shown for options 2-5 have been prepared by ECGD. Inch case two sets of figures are shown to cover both old and new Consensus interest
rates.
OPTION 1
to decide a subsidy percentage in advance
For negotiating purposes, if using this approach, the UK team should be aware of the
as would acceptable upper ceiling. The opening percentage would need to be defined
the elements that make up the percentage. These latter issues are for further considera-
tion if this option is chosen.
At the old Consensus interest rate of 73% it is suggested that a subsidy element of up
to 50% should be conceded at the limits of negotiation in order to equate to the effective
subsidy inherent in the Castle Peak projects Annex C.
At the new Consensus interest rate of 10% it is suggested that a subsidy element of up
be conceded
to 44% at the limits of negotiation, would achieve the same effect.
44%/at
Advantage
Disadvantage
In detailed negotiations where the effects of conceding ground piece-
meal on different elements of the package might not be readily
discernable this option gives the negotiators clear upper and lower
limits within which to work and minimises the risk of creeping concession
at the top rate end.
As the elements making up the overall subsidy percentage and their
various inter-relationships would need to be determined in advance the
balance between them might leave little, if any, room to manoeuvre if
the Chinese were to contest particular items in the package.
See Recommendation 8.
CONFIDENTIAL