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VTE17THUR.22
A.
HONG KONG AIRPORT
Mr Adams outlined the problems:-
(i)
(ii)
(iii)
Should the consortium (Trafalgar House/Costains) submit a pre-emptive bid?
Will the project go ahead and what should we do to ensure that the Hong Kong Government is receptive to our strategy?
What to do about ECGD cover and the question of sovereign guarantees which the Hong Kong Government say they will not provide.
On (i), Mr Adams felt that although a pre-emptive bid was unlikely to succeed, it was 'worth a shot', would position them as well for any subsequent open bidding situation. He explained that both companies were prepared to go to an open tender if the pre-emptive bid was unsuccessful. Mr Paul was supportive of the consortium making a pre-emptive strike to establish themselves as front runners.
On (ii), Mr Adams explained that the project was almost certain to go ahead. The new airport was vitally needed and the Hong Kong Government had a large budget allocation for the project and would be able to raise additional finance. In addition, the current situation in China was unlikely to affect plans for the airport. Mr Paul said that the Governor of Hong Kong was currently in the UK but was due to return to the colony on 1 September. He would be meeting the Foreign Secretary before his return. Mr Adams and Paul agreed that the Foreign Secretary should be briefed to stress his support for airport as a factor for confidence and for the British consortium. It was hoped that a meeting between the Governor and a DTI Minister or senior official could be arranged before the Governor's return to Hong Kong.
On (iii), Mr Sedman explained that the question of security was very important when ECGD was asked to underwrite business in the public sector. Ac present Hong Kong was very secure but it was unlikely that the post 1997 Government would be able to offer the same degree of security. Mr Paul felt that there was every chance that the future outlook for Hong Kong/China would be very positive and that for HMG to refuse to authorise commercial credit for the UK content of this project would be politically highly embarrassing. The meeting recognised that there was little point in the Hong Kong Government giving a sovereign guarantee if it would not be in power after 1997 Mr Adams added that the political imperative would probably drive us to offer ECGD cover if it was required. He wondered about a direct approach to the Chinese over this issue. Mr Paul suggested putting the question of a sovereign guarantee after 1997 to the Joint Liaison Group for