CO129-598-3 Tai Lam Chung Reservoir Project 17-3-1949 - 7-10-1949 — Page 12

12 IN HK.

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no.

1135 (dyr.m 53652/48)... 24.8.48

Mr. Wallace (through I. Calman)

17" that

12

Draft herewith. We agreed that we should leave detailed consideration of finance, in this and one or two other cases, to be taken up in one compendious despatch such as we told the Governor we should be sending him in our telegram approving the Estimates.

14.9.1949.

1.

Please see my minute of 19/1, which sets out the position reached then in considering the Tai Lam Chung Reservoir project, and the succeeding minutes by Mr. Bourdillon, Mr. Sidebotham and Sir Charles Jeffries. It will be seen that there was general agreement that the Governor had made out his case that the Tai Lam Chung project was the only satisfactory one for adequately increasing the Colony's water supply and that it ought to be pursued. It was however recognised that there would be great difficulty in securing financial assistance from this country. As to raising money locally we had been told by the Governor that only bearer bonds had any appeal to the Chinese and the Treasury and Bank of England had raised exchange control objections to these. We therefore delayed replying about Tai Lam Chung while we took up the bearer bond question with the Treasury. After a long struggle the Treasury and Bank of England yielded to a large extent and we were able to send to Hong Kong a modified "all clear" about bearer bonds (copy at 10). A despatch to Hong Kong approving the Tai Lam Chung project in principle now becomes not quite such a hollow mockery as it would have been before. The financial difficulties are however still very great and have of course been made worse by the heavy expenditure on the recent reinforcement of the garrison towards which Hong Kong must be asked at least to consider contributing. In his despatch forwarding the 1949/50 Estimates the Governor raised the question of a future loan on the London market (in connection, inter alia, with the Tai Lam Chung project) and, in approving the Estimates, promised a further communication on this question of a London loan and on the Colony's finances generally. (See copy at 12). This is pending - consideration of the cost of the reinforcements of course comes into the question. The draft postpones further discussion on the

difficulties of financing the Tai Lam Chung project to this further communication on the Colony's general finances.

2. I have somewhat re-cast the draft. This is an important despatch and I think a brief introductory recapitulation is desirable. A further point is that, whereas when we were considering this matter earlier, the chief practical difficulty to getting on with the job (once approval in principle had been given) appeared to be finance, there is at the moment another viz. that the Colony is swarming with military reinforcements settling in and its resources in men and material are bent towards

/getting