aef2.jbnov/min/7.2
HM Treasury
R A Burns Esq
AUSS
the Byns
1. After discussion with DTI and me, Av Pentecost (ECGA) negotiated the changes to these points now incorporated in the draft.
Parliament Street London SWIP 3AG Telephone 071-270
is
2. Para 5: the Treasury will be cross,
Foreign and Commonwealth Office but this is sufficiently
WHITEHALL
LONDON
SW1 2AH
Dear Andrew,
ambiguous for us to place it before our concluding para., rather than give them the last word.
HONG KONG AIRPORT PROJECT
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M. Bone, ERD
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7 November 1991
Mr.CDA
4720
Perhaps ? should und hima mortifynjatter 104/11
I am replying to your letter of 5 November to Jamie Mortimer, who is currently in Paris. When we spoke, I explained that the normal procedure for resolving export credit issues is for the matter 'to be considered by EGC with a paper then submitted to Ministers if it is not possible to reach agreement at official level. However, the letter of 25 October from Stephen Wall requires you to give No 10 early advice, and so I suggest the following procedure. As far as the draft letter is concerned, I shall give you some paragraphs explaining the Treasury point of view. The immediate operational issue is whether ECGD may give an indication of support for the Lantau Fixed Crossing project, which as you say, currently awaits EGC approval. chair of EGC, we are currently organising an EGC meeting to discuss the proposal.
2.
AS
I shall not comment at all on the views attributed to the FCO and DTI/ECGD except to say that the first sentence of the section on ECGD cover (page 3) seems a little strong. While the availability of ECGD cover will obviously be very important to UK companies we are not sure that it will be essential if they are to have any chance of success in every case. You may want to consider toning this down.
3.
I would like to suggest the following Treasury paragraphs, which I think would most conveniently go
at the end of the third paragraph on page 4:
"The Treasury is very concerned about the potential implications for ECGD's finances of taking on further large- scale commitments in Hong Kong. ECGD already has exposure of £2.1 billion in Hong Kong, equal to 10% of total ECGD exposure, compared with a stock control review point of £650 million. ECGD's financial problems (accumulated loss of £4 billion and annual PSBR cost of £500-600 million) result from previous large scale concentrations of exposure in markets, which at the time looked reasonable risks, but which later defaulted. Significant repayments on future credits will fall due after 1997,
when there is obviously an increased risk of default and the possibility of very heavy losses. The larger the new credits, the larger the potential losses.
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