TNAG-0098-FCO40-134-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 111

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5. The Prime Minister will know that whatever the Section of the

Act under which business is underwritten E.C.G.D. must make an

ases ment of the risks and that in neither case can the Departament

accept risks which in the views of their advisers both in Government

and in banking appear axosssively hasardous. It is the general

concensus of opinion that even under Section 2 of the Export Quarantees

Aet the risk that the Colony might be over-run by the Chinese is such

that it would not be reasonable for the Department to cover more than

5 years forward risk. The necessity for a joint guarantee arises from

the need to pursue whichever of the shareholders with funda outside

Hong Kong can be pursued during the second 5 years of the contract

period.

6.

Colonel Clague argued strongly that in political and social

terms it was desirable for H.M.O. be seen to be supporting Hong

Kong by accepting the political risk involved during the 10 year period

of the contract. It is the view of Commonwealth Office that there is

no significant political element in this and that the contract should

be assessed solely on its own commercial merits. This being so there

would seem to be no justification for ary special arrangements to be

made for withdrawing the conditions which the Tumel Company as

borrowers find onerous; certainly it would be difficult for E.C.G.D.

to accept the risks involved on a loss secured basis.

7%

Costains and the Tunnel Company are being informed accordingly.