TNAG-0098-FCO40-134-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 13

Mr. A. H. Reed,

Dar Eastern & Pacific Department

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LAST

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127

OCTOBER HEATING OF BNEC

(ASIA COMMITTEE)

HONG KONG TUNNEL

127

My note of 8 August refers.

In the final event, RCOD decided that they were unable to vary the requirement of joint and several guarantees from the shareholders in the Company, which they represented as being conditions dictated by normal prudent under- writing considerations.

2.

After due consideration Ministers decided not to intervene. Assessment of the right underwriting standards to adopt was considered to be essentially a matter for ECON's judgment, and this department was unable to urge any special political considera- tions that might justify a departure from normal underwriting standards. (In the latter connection it is to be noted that the Hong Kong Government's attitude towards the project remains lukewarm has not in their view a high priority and the project no longer has the political significance it had at the neight of last year's crisis when it tended to be regarded as a symbol of confidence in the Colony's future existence).

it

3. I see no reason why you should not make use of the material in paragraphs 1 2 above if the decision is called in question. The following points may also be useful :-

4.

(a) In the case of an "infrastructure" project,

it is a normal ECGE requirement that the government of the territory or country concerned should give a covering guarantee.

(b) The proposition, as put by the Tunnel

Company to COD, was always on the basis that the Hong Kong Government would be a participant; the joint guarantee was a means in these circumstances of securing an effective guarantee of last resort from the Hong Kon, Government.

(c)

It would seem that the Hong Kong Government are opposed in principle to giving a 100% guarantee in respect of a project which is essentially a private project; and that each private shareholder is similarly not disposed to give a guarantee for more than that part of the loan proportionate to his shareholding.

He may

There are reports thɛt Colonel Clague (a shareholder) vill return to ong Kong via Japan with a view to discussions on the award of the contruct to e Japanese firm. This is consistent with intentions he has expressed recently. well find the Japanese no more accommodating on the

question of guarantees, particularly a Government guarantee.

5. I am sending a copy of this minute to

/K. W. Cotterill