CODE 18-77
SERTJULA COILERUTAL IN OSTELJANJE
Reference
6.
Even with the benefit of BR orders given now, production would be unlikely before 1983/4 and the company on existing schedules forsees a rundown in their labour force to around 600 throughout 1982.
7.
I would stress that we have been given the above information strictly in confidence. It has not been disclosed to the company's bankers. If news of the company's position were to become known in Hong Kong the company fear it would lead to the KCR and Island Line contracts being placed with foreign competitors probably Japanese.
8. In my view the three situations disclosed above are interdependent. There is an urgent need to give the company decisions on the extent to which the government, in one form or other, is prepared to help.
9.
Metro-Cammell say that they must conclude their negotiations with KCR by mid September and with MTR by early October. They are very keen to secure the contracts on a negotiated basis to prevent them from going to internationel competition for a number of reasons:
10.
i. The KCR contract is being negotiated on a cash basis. Open tender would almost certainly lead to competitors offering credit terms which would involve additional public funds subsidy costs if ECGD support were necessary through the interest make up scheme to enable Metro-Cammell to compete.
ii. As sole suppliers of rolling stock to the MTR system,
Metro-Cammell are able to use this as a strong marketing ploy in their representations to other prospective cities contemplating MTR systems.
iii.
The opening of both contracts to international competition would almost certainly lead to very keen pricing. It is considered that the Japanese in particular would be prepared to undertake the Island Line work at a loss to secure an entree to the Hong Kong MTR system.
Other cities known to be contemplating the installation of TR systems are Baghdad, Singapore and an extension to the Hong Kong system the TUEN MUN extension. The total export potential of these 3 projects is considered to be in the region of £750.0m. This includes the supply of not only cars but also rail control systems etc. In contracts of this nature it is helpful for the suppliers of cars and of the control systems to work together, and since the supply of cars represents approx- imately 60% in value terms of a system, the car manufacturer
STRICTLY COMMERCIAL IN CONFIDENCE
3