CONFIDENTIAL
5. We do not know how the latest bids submitted by the two UK companies compare with the bids of their competitors in terms of price. But Fairy Brook Marine expressed concern last year that the Australian companies might have an advantage because they would receive a 15% export subsidy from their Government.
Political Arguments
6.
The Governor has so far been completely unreceptive to lobbying on this subject. He has already made clear to Mr Lilley (who raised this matter with him in January) that he expects normal commercial considerations to apply. made the same point to you, adding that this was an issue in which he did not expect to become involved.
He
7. It is, I suppose, just conceivable that some kind of linkage might be made with the question of the Royal Naval patrol craft. Mr Heap suggested at the end of last year that there would be scope for some creative accounting that might link concessions to Hong Kong on the Royal Naval patrol craft with a promise by the RHKMP to purchase their new patrol boats from the UK. But I doubt whether a deal of this kind would have any attractions for the MOD since they would derive no benefit for their own budget.
8.
However, one point which we could legitimately make to the Governor is that if the Hong Kong Government were to award the RHKMP contract to a non-UK company and announced this decision in April, it would be extremely ill received by MOD (as well as DTI ministers) and would almost certainly scupper their chances of making any further progress on the Royal Naval Patrol Craft.
ARPanc
A R Paul
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