TNAG-0097-FCO40-133-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 264

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Copy for 1.5. Caster-

Reference

G.D.407/2/G.

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Hong Kong Tunnel

Please refer to Cotterill's letter to you of the 22nd March.

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The Board of Trade consider it most important that this tunnel should, if possible, be built by a British contractor. First, the project is a large one which will make a substantial contribution to our exports to Hong Kong and to the balance of payments. The steel for the tunnel 17,000 tons worth over £2m would also benefit our steel industry whose order books are at present low. Secondly, considerable prestige attaches to a project so much in the public eye in Hong Kong. Gaining this contract should have a favourable impact on our standing as a trading nation in Hong Kong while to lose it to the foreigner (almost certainly Japan) in a British colony would inevitably have an adverse effect on the British. image. Thirdly, if it is seen that a British contractor can get this contract in the face of known competition from Japan, this should have beneficial results in other parts of the Far East and South East Asia.

3. The ECGD note refers to the attitude of the Hong Kong Government to the turnel as being "somewhat lukewarm" and indeed we must face the fact that in almost any other country a project of this nature would be fully backed by the Government and not left to private enterprise. However, in the special circumstances of Hong Kong with the calls of housing and other development on government finance, it can be argued that the degree of commitment which the Government is prepared to undertake is reasonable. Certainly the Government is not uninterested. In the letter from Sir Arthur Snelling to Sir Anthony Percival referred to by Cotterill, he reported that the Government of Hong Kong impressed on the Commonwealth Secretary the importance of Britain securing the contract "if hurenly possible".

4.

If ECGD can show that there is a real risk against which. guarantees can reasonably be considered necessary, then it does seem unreasonable that the Hong Kong Government should not be prepared to take a substantial share of the risk, or perhaps even rather more than that. If the departments represented on the Financial Guarantee Committan agree, perhaps the Commonwealth Office should be asked to represent to the Governor of Hong Kong that the Hong Kong Goverment should be prepared to give its guarantee, at least in proportion to its shareholding, and that it should use its influence to persuade the other major shareholders to offer guarantees for the remainder.

5. Costuins tell MS that their discussions with the Tunnell Company on technical matters are going reasonably well and that they hope to discuss the financial aspects next week with one of the directors who is arriving from Hong Kong tomorrow. They cannot, however, uwo this until they get a reply from ECGD and the matter is therfore urgent.

6. I am copying this to Cotterill and the other recipients of his latter as well as to 7. S. Carter of the Commonwealth Office.

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REF.

Mr. C. C. Lucas, Treasury.

0.0.:

Mr. K. 7. Cotterill, ECGD.

Mr. J. C. M. Mason, Foreign Office.

Mr. D. W. Spires, Bank of England.

Mr. D. M. Kitchi

3.CDM.

Mr. I. k. Pord, DEA.

Mr. J. H. Thomas, Kinistry of Technology. Sir Arthur Snelling, Commonwealth Office. Mr. V. S. Morris, CRE.2.

R. 3. Kinsey (General Division) 31st March 1967