CO129-629-12 War Risk insurance- availability of contractors plant 1-2-1951 - 31-5-1951 — Page 12

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Mr. Sidebotham.

Please see (8), (9) and (10). Briefly, the Netherlands Harbour Works Company was proposing to leave Hong Kong in view of the poor prospects of ever obtaining contracts again in China, and in view of the unsettled political situation in the Far East see paragraph 10 of (1). The Governor originally suggested that this was the only company who could undertake work on either Deep Bay or Kai Tak Airports.

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The M.C.A., Air Ministry and Mr. Bigg have been consulted and their view is that the future development of these airports is so uncertain that there are no special grounds for giving preferential treatment to this firm in order to retain them in Hong Kong for airfield construction work.

In No. (10) the Governor has now given further reasons why the firm should remain in Hong Kong. Both Mr. Palmer and I have discussed this very fully with the Treasury, and the Treasury are not so much afraid of any precedent being created in Hong Kong by the arrangement proposed in paragraph 3 of (10) but fear that if these proposals become widely known they might have considerable repercussions in other colonies and particularly on service contractors. The Treasury are firm in their opinion that H.M.G. cannot accept liabilities of this nature. I have pointed out to them that if Hong Kong were occupied the whole matter would have to be considered afresh and this company's affairs would only form a minor considera- tion in any settlement which was reached. The Treasury have agreed that the decision should be left to the Governor of Hong Kong but a reservation should be put in that any liability arising out of this proposal will not necessarily fall on H.M.G., i.e. that the contractor cannot come to H.M.G. and insist that H.M.G. foot the whole bill if the Hong Kong Government are unable to do so themselves. The Treasury have concurred in the draft opposite which, as I have pointed out, leaves the final decision to the Governor.

Although Hong Kong is not under Treasury control the Governor is bound to refer any matters to us which involve any matters of principle, or capital expenditure of $1,000,000 or recurrent expenditure of $250,000. The Treasury, therefore, could, if they liked, insist that the proposal was turned down but have been persuaded not to adopt this course.

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Mr. Remitten is not available

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11. 5. 1951.

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11-5-51.