TNAG-0097-FCO40-133-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 164

JUNTIAL

sentiment

ith its important commercial implications ➡ and secure For 'Britain a major engineering contract involving lerge quantities of British steel and serving in the region as a notable advertisement for British engineering skill, so have in mind the assumption by H.M.G, of liability for half the guarantee required by F.S.G.D. At worst the proposal could cost us £5 million, but in practice the risk is smaller; the liability is proportionate to the money expended and would be greatest when the project was completed but not yet earning; it would decrease as revenue enabled repayments of the loon to be effected. (A fear has been expressed that, because of rising local costs, the loan required from Lloyds Bank, together with the \.C.G.D. guarantee, would have to be increased. To avoid a situation in which we and E. .G.D. would find ourselves landed with an open- ended commitment, we feel that this is a liability which the Compony and the Contractors must assume by arrangement reached between themselves and that this should be made clear from the outset.')

6. if a solution on this basis can be agreed, then we would suggest

that, since we understand that E.C.G.D. could not be required to

eccept the risk with a guarantes equal to only half that which is required by normal underwriting considerations, the best arrangement would be for the Hong Kong Government to give the 100 guarantee backed by a public assurance from 11.M.C. to the Hong Kong Government that in the event of the guarantee having to be honoured, we would provide half the sum involved. H.M.G, 's involvement in the project would be entirely on political #rounds, There could be no question of it falling under the head of sid since, as Kitching of the 0.9.H. wrote to Lucas on 7th April, Hong Kong has a booming and prosperous economy; the Colony does not need financial assistance per se, but

an act of British faith in its future.

7. le realise that the solution suggested above would be a novel departure in our dealings with our remaining dependent trritories. We are not afraid that, if we were to adopt this solution for Hong Kong, we should be called upon to extend similər treatment to other territories. fe would not expect to come under pressure for such an extension elsewhere; and if we did, we should be prepared to resist it. e hope that in these circumstances you would feel able to accept the proposal. Time is now short if the project is to be saved, and

I