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COLONIAL SECRETARIAT, HONG KONG.
10th April,1968
Your letter of 27th March about the Cross Harbour Tunnel project reached me at the same time as a letter from the company which just squeaked in before offer's deadline. I enclose a copy of that letter and of my reply.
The $12 million "concession" referred to was a suggestion of ours that our expenditure on roads etc., for the tunnel should be repayable on deferred terms instead of, as previously proposed, by the end of the construction period. The company's proposal that this should be converted into a loan would have the effect of our providing them with short- time bridging finance of about $6 million in addition to deferment of payment for the roads. This would ease for them the problem set by E.C.G.D's requirement that the shareholders spend their full share before any U.K. money is used.
I am holding out no hope to them, however, that we will be prepared to meet any other of E.C.G.D's objectionable terms.
I am not at all clear what the London meeting is supposed to achieve but they have a touching faith no doubt inspired by the $10 million stake they already have in ensuring that the project goes forward.
Montagu is misinformed about there being any more favourable an attitude to the tunnel; while our new population projections and the under-utilisation of the Lion Rock Tunnel arouse even stronger suspicions about the commercial viability of the scheme.
As to the terms of an announcement, that will largely be a matter for the company, except that as the terms of the offered franchise would no longer be met by the company, if the latter were to announce a shelving rather than an abandon- ment, we would have to say something about our attitude to the implied extension of the franchise offer. We can perhaps discuss the question how (or whether) consciences should be eased when we meet in London.
W.S. Carter,Esq., C.V.O.
Commonwealth Office, LONDON. S.W.1.
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(J.J. Cowperthwaite)
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