TNAG-0097-FCO40-133-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 88

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CONFIDENTIAL

IMMEDIATE COMMONWEALTH OFFICE TO HONG KONG (D.T.D.) TELNO 2139 19 OCTOBER, 1967 (HWB 21/5)

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FOR HALL FROM GALSWORTHY. YOUR TELEGRAM NO.1540.

E.C.G.D. AND TREASURY POSITIONS ARE CONTAINED IN TUNNEL BRIEF AND COVERING LETTERS WHICH WERE SENT TO YOU IN FRIDAY'S BAG NO.A32. ASSUME IT HAS REACHED YOU BY NOW. IF NOT, SHALL WE TELEGRAPH GIST? 2. YOUR PARAGRAPH 2. C.D.C. TELL US IT IS QUITE UNTRUE THAT C.D.C. BOARD REJECTED PARTICIPATION AGAINST ADVICE OF THEIR EXECUTIVE

MANAGEMENT BECAUSE OF 0.D.M. OPPOSITION. FACTS ARE AS FOLLOWS.

3. MONEY WHICH C.D.C. DRAWS FROM EXCHEQUER COMES UNDER AID CEILING,

AND IS THEREFORE RATIONED. AGAINST THIS BACKGROUND IT IS THE PRACTICE OF C.D.C. MANAGEMENT, WHEN ASKED TO CONSIDER A PROJECT IN HONG KONG, TO SEEK POLICY GUIDANCE FROM THEIR BOARD BEFORE EMBARKING ON DETAILED INVESTIGATION OF THE PROJECT. REASON FOR THIS IS SIMPLY THAT HONG KONG HAS AMPLE RESOURCES OF ITS OWN COMPARED WITH MOST OTHER AREAS, AND CONSEQUENTLY AT A TIME WHEN C.D. C. MUST RATION THEIR MONEY THEY DO NOT RATE HONG KONG'S NEEDS FOR EXTERNAL FINANCE VERY HIGH.

4. EXECUTIVE MANAGEMENT'S SUBMISSION TO BOARD WAS THUS IN NO SENSE A RECOMMENDATION IN FAVOUR OF TUNNEL PROJECT, BUT SIMPLY A REQUEST FOR GUIDANCE ON WHETHER BOARD WISHED THE MANAGEMENT TO EMBARK ON DETAILED INVESTIGATION OF PROJECT. BOARD DECIDED THAT, FOR REASONS IN PARAGRAPH 3 ABOVE, THEY WOULD NOT WISH TO PROCEED FURTHER WITH THIS PROJECT, UNLESS THERE WERE VERY SPECIAL REASONS WHY H.M.G. WOULD WISH THEM TO DO SO.

C.D.C. SPOKE ACCORDINGLY WITH THEIR REPRESENTATIVE IN HONG KONG WHEN LATTER TELEPHONED FOR DECISION.

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C.D.C. HAVE NEVER DISCUSSED THIS PARTICULAR PROJECT WITH O.D.M. BUT O.D.M. ARE KNOWN TO SHARE C.D.C. BOARD'S VIEWS AS IN PARAGRAPH 3. 6. C.D.C. HAVE REPEATED TO US THAT, IF H.M.G. WERE TO PRESS THEM ON SPECIAL POLITICAL GROUNDS TO CONSIDER AN INVESTMENT IN TUNNEL PROJECT, THEY WOULD BE WILLING TO LOOK AT THE PROPOSITION IN DETAIL. THIS WOULD BE ON BASIS OF A LOAN OF UP TO £1.5 MILLION. THEY WOULD NEED TO SATISFY THEMSELVES ON PROJECT'S COMMERCIAL PROSPECTS AND ON QUESTION OF ADEQUATE SECURITY FOR THEIR LOAN. IF THEY THEN FAVOURED INVESTMENT WE SHOULD HAVE TO SECURE AGREEMENT OF 0.D.M. AND TREASURY. ALL THIS WOULD TAKE CONSIDERABLE TIME: AND SINCE MAXIMUM WE COULD EXPECT C.D.C. TO CONTRIBUTE WOULD BE A LOAN OF £1.5 MILLION, I DOUBT WHETHER THIS LINE IS WORTH PURSUING.

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SENT 1809Z 19 OCTOBER