SG4AEL
November 1991
CONFIDENTIAL
Hong Kong Airport Project
Thank you for your letter of 25 October. This letter deals with the ECGD cover aspects: I am writing separately about how we can best promote our interests in the Hong Kong Government.
All Government Departments involved agree that ECGD cover will be vital to UK companies' chances of winning a good share of the business which will be on offer: the projects associated with the Hong Kong Airport are some of the biggest civil engineering works ever undertaken. The Foreign Secretary and the Trade and Industry Secretary believe that we can and should give substantial support under existing ECGD arrangements.
Hong Kong is already ECGD's most heavily exposed market for medium-term cover. ECGD's Advisory Council has approved a Market Exposure Control (MEC) of £3 billion, after which medium-term cover for Hong Kong needs to be reviewed. There is still £900 million spare capacity this ceiling, which will increase as repayments of existing debts are made (now over £200 million per year).
Under the Portfolio Management System (PMS), support for an individual project where ECGD exposure would exceed £100 million needs approval by the inter-Departmental Export Guarantees Committee (EGC). Similar approval is needed for a project of any size which would take ECGD's new commitments for a single market to over £200 million in a year.
The impact of new commitments on the global business budget for "amber zone markets" is also important, although there is now £1 billion headroom available this year (with 5 months of the year remaining), and the timing of contract awards may well push Hong Kong commitments into the budgets for future years.
The Treasury want us to limit new commitments of ECGD cover for Hong Kong to expected repayments: this would give scope for new cover of around £200 million per year. Trafalgar House have already applied for support for their share of an Anglo-Japanese bid for the Lantau Fixed Crossing which would involve new exposure of about £400 million. is waiting for EGC approval of this. Further large applications for parts of the Airport Project are likely to follow and British companies (notably GEC/Alstom) have high hopes of business from a new power station at Black Point.
ECGD
It