CO129-623-8 Estimates of Expenditure- includes a report for the year ending March 1951 1-12-1949 - 31-3-1951 — Page 64

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Tai Lan Chang water scheme, without the assistance of loan funds, especially as the work will have to be spread over several years; but it is clear that at some stage a substantial loan will have to be raised to enable the work to be completed.

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4. We have continually urged on Hong Kong the desir

ability of raising local loms but, as in Malaya, the banks are the main investors in any such loans, and even for them the rate of interest is hardly attractive with so many other more profitable forms of investment available. The local population is not interested in a 31% investment! Accordingly so far as we can foresee at present, there seams little hope of raising any sub- stential local lom for this purpose. In these circum- stances the alternatives appear to be:40

(a) a loan on the London market; although unless international relations improve considerably, it seems doubtful whether the Colony could raise such a lom without His Majesty's Government's guarantee; or

(b) financing the project by a group of financial

housos, as suggested by the Governor. It is

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not clear whether the Governor has in mind that the financial houses should be responsible for the project on a commercial basis, or whether they should loan the money to the Hong Kong Govern- ment on somercial terms (probably more onerous than those obtainable by a London loan) on the security of specifie revenues fran water charges. I should be grateful for Hicks' comments on this suggestion;

(c) a direct loan by His Majesty's Government

on suitable tems. I assume you would only

be prepared to consider this as a last resort.

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Subject therefore to my comments Hicks may have on this question it seems to us that we must face the prospect that

/Hong Kong