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MDHI
14536
3075)
CONVEY SOME OF THIS TO SENIOR MEMBERS OF THE ADMINISTRATION, BUT WITHOUT NAMING PEOPLE OR COMPANIES, SINCE TO DO SO MIGHT DISADVANTAGE THEM. THE RESPONSE HAS BEEN FORTHRIGHT. SELBY FOR EXAMPLE, IN THE CONVERSATION DESCRIBED IN MIPT, TELLS ME THAT ALTHOUGH THERE WAS 'SOME WINGING' FROM SOME FIRMS EARLY ON, THERE WAS NOW NO SUGGESTION THAT ANY OF THE MAJOR BIDDERS FOR THE MAJOR CONTRACTS FOUND THE TERMS UNACCEPTABLE, AND ANY QUALIFIED BIDS WOULD BE INSTANTLY REJECTED, I AM NOT SURE. THE SUMS INVOLVED IN THESE MAJOR CONTRACTS ARE BIG ENOUGH TO BANKRUPT ANY COMPANY IN THE WORLD IF THEY GET THEIR CALCULATIONS WRONG. IF COMPANIES SEE NO ESCAPE CLAUSES IF COSTS ESCALATE AND NO POSSIBILITY OF RECOMPENSE AT ALL IF UNFORESEEN DIFFICULTIES OCCUR, THEN THEY MAY PUT IN VERY HIGH BIDS INDEED, OR IN SOME CASES, MAY DECLINE TO BID AT ALL. THE EUROPEAN CONTRACTORS ASSOCIATION, THE JAPANESE CONTRACTORS ASSOCIATION AND THE H.K. CONTRACTORS ASSOCIATION HAVE ALL MADE APPROACHED TO THE HONG KONG GOVERNMENT ABOUT THE TERMS
OF CONTRACT BUT ALL HAVE BEEN TOLD THESE WILL NOT BE CHANGED.
3.
ON FINANCING, THERE ARE ALSO A LOT OF NEGATIVE MUTTERINGS AROUND TOWN. A NUMBER OF SENIOR BANKERS, BRITISH AND AMERICAN, HAVE SAID TO ME THAT THE HK ADMINISTRATION HAS NOT UNDERSTOOD THE DIFFICULTIES OF RAISING THE SUMS INVOLVED IN THIS RANGE OF PROJECTS IN THE PRESENT WORLD FINANCIAL CLIMATE. A DIRECTOR OF GOLDMAN AND SACHS, WHO RUN A VERY LARGE OPERATION IN HONG KONG HEAVILY INVOLVED WITH PROJECT FINANCE, HAS TOLD ME THIS WEEK THAT THE HK ADMINISTRATION HAS BEEN MISLEAD BY THE POLITELY POSITIVE REACTIONS THEY HAVE RECEIVED WHEN THEY HAVE TAKEN THEIR ROADSHOW TO JAPAN, UK AND THE US, BUT THAT IT WILL BE VERY DIFFERENT WHEN BANKS ARE REQUIRED TO COMMIT SPECIFIC AND VERY LARGE SUMS. ANOTHER BRITISH BANKER HAS SAID TO ME IN THE LAST FEW DAYS THAT WHEREAS ANY BANK WILL LEND UNLIMITED AMOUNTS IN HONG KONG SHORT- TERM, MEANING TWO YEARS OR SO, IT WILL BE VERY DIFFERENT FOR SUMS REQUIRED BEYOND 1997: BANKS ARE NOT ONLY COMBINING THEIR HONG KONG AND CHINA LENDING RISKS BUT GOING BEYOND 1997 THEY ARE REDUCING THESE. OTHER BRITISH BANKERS HAVE SUGGESTED TO ME THAT MANY OF THE ASSUMPTIONS THE HKG HAVE BEEN MAKING ABOUT THE AVAILABILITY OF FINANCE HAVE BEEN BASED ON AN EXPECTATION THAT THE BULK OF THE FINANCIAL BACKING WILL COME FROM JAPAN, AND THAT THIS NO LONGER LOOKS LIKELY.
I MAY BE READING TOO MUCH INTO THESE REACTIONS. I HOPE SO. THE EFFECT ON HONG KONG, IN EVERY POSSIBLE WAY, POLITICALLY AS WELL AS ECONOMICALLY, IF THE AIRPORT PROJECT WERE TO FALTER SERIOUSLY WOULD BE VERY DAMAGING. IT IS VITAL TO PROVIDE THE
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