CERITA,
1
2nd August 1967.
(36)
E.C.G.D. Cover for Crisia Areas
Hong Kong Tunrel
You wrote about this in yours of July 25th. We have been looking at it as a thing apart from our normal business. We have sounded Costains about their attitude and declared ours to the Commonwealth Office.
The former seem almost reconciled to withdrawal of E.C.G.D. support for the project. The latter are naturally reluctant to agree to us taking that step for obvious political reasons, but we face an cutstanding problem which we feel must bo answered one way or the other as soon as possible.
When we originally offered to guarantee wo required the "non-official" shareholding to guarantee part of the loan funds and/or operate a sinking fund. We understand they have now withdram support and that the Hong Kong Government will be the defacto controlling shareholder. A telegram (July 6th) to C.D. . asked what our guarantee requirements would be in the circumstances.
We told the Commonwealth Office we would require a 100% guarantee from the liong Kong Government which gave us effective rights against its ascets in London. This has so far not been transmitted to Hong Kong for fear of political repercussion but it rapresenta our 'commercial" underwriting position under Section I and would certainly be our position if we were asked to underwrite "politically" under Section II.
In both cases our view would be that the political upoots themselves, with the possibility of continuing labour troubles, would make the cost and completion date of the tunnel so speculative that it would be impossible to vimalice anything but a cuarantee which was financially open-ended in practice.
We do not think that would be a reasonable risk for us to teko unless we got copper-bottomed security in London for a very high minimna figure considerabl in excess of the present estimated project value of the scheme. This is what we would like to tell the Trade Commissioner now; and we would like to say the same cort of thing to Costains in order to keep our customer relationship right..
We realise that what we as a Department must do, and what is considered politically desirable at the present time are not necessarily compatible in tem of total government policy, but we would welcome an early resolution.of our own
C. C. Iucas, Esq..
K. N. Treasury,
Great George Stroot, London S.W.1.
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