TNAG-0097-FCO40-133-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 84

Mr. Godden

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Cross Harbour Tunnel

It is regretted that the brief prepared for Lord

Shepherd did not arrive in Hong Kong until after he had

left. It was put into the bag here in good time but,

probably because of typhoon Carla, the bag did not reach

the Colony until 21 October and the mail containing the

brief was not handed to the Hong Kong Government until

23 October.

2.

However, the opportunity was taken of Mr. Cowperthwaite's

presence in London last week for talks on E.E.C. matters to

go through with him and representatives of E.C.G.D. and the

Treasury the conditions under which the Hong Kong Government

might give a 100% guarantee for E.C.G.D's cover, with H.M.G.

meeting half the sum involved should Hong Kong's guarantee be

called. As a result, those conditions have now been modified

and are in a form that Mr. Cowperthwaite feels able to accept

for subuission to Executive and Legislative Councils in Hong

Kong. It is not possible, of course, to say whether these

Councils will accept this proposition and the other

considerable financial commitments involved in the Tunnel

project, nor is it certain that Costairs, the Contractors,

will feel able to extend the validity of their tender while these matters are being decided. We understand that Costain's

reluctance to hold the position open is not because of the cessation of the monthly retainer (which was in any case only a limited and temporary arrangement) but bocause they cannot afford to tie up in this way skilled staff on unproductive

work.

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3. As Colonel Clague indicates in his letter of 21 October,

there is a shortfall in the equity required for the project.

This was occasioned by Colonel Clague and his colleagues reducing the amount they were prepared to subscribe from an original 77% to 55% of the equity capital, a difference of

1.475 million. The Yaumati Ferry Company declined to take

up any of this so the promoters invited C.D.C. to participate;

but, because there are needier bidders for its limited funds,

the Corporation was unable to consider becoming involved.

There is no other Agency in this country which might be asked

to fill the gap. A draft reply to Colonel Clague along these

lines is below.

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4.

Mr. Montague has also written on this subject. A draft

reply is attached.

Copy (without enclosures) to:

Mr. H.P. Hall.

(W.58 Corter)

.10.67.