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HKG projects and franchises with which
the Chinese might interfere for political reasons
Summary
The Chinese can interfere with HKG projects and franchises in a number of subtle and unsubtle ways -
(a)
(b)
they can withhold their agreement to projects and franchises straddling 1997 on which we are committed to consult them, and for which Chinese support must be available before such contracts can be awarded;
they can resurrect trans-1997 issues on which they have previously been consulted;
(c) they can inhibit the grant of new land rights
through the Land Commission;
흐흐
(a)
they can withhold physical support for projects going on now (e.g. supply of water, materials, access to PRC territorial waters, access to fabrication areas in the PRC);
(e) they can threaten contractors prepared to work with HKG (particularly their own) with sanctions or blacklisting.
Trans-1997 contracts and franchises
SCA has circulated a list of major franchises straddling 1997. A copy is attached.
2.
3
risk
As 1997 approaches, there may also be difficulties for overseas contractors in obtaining sovereign insurance where delays could cause contract works to slip past mid-1997 and Chinese support was not
not forthcoming. A four-year construction period is common for major HKG and private sector projects. Such issues will therefore start to arise from this year.
4.
It is now a commercial reality, following Chinese statements made in recent months, that no sensible private investor or lender will undertake HKG contracts or accept franchises extending beyond mid-1997 if the Chinese question their post-1997 validity. If this happens, we will be frustrated in terms of our spending aspirations regarding the creation of major new infrastructure (insofar as contracts are concerned), and we may come under pressure to substitute public sector spending for private sector
investment.
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