TNAG-0131-FCO40-167-Asia-Committee-of-British-National-Export-Council-1969 — Page 33

CONFIDENTIAL

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reply is that he will be prepared to propose to his Executive and

Legislative Councils (the agreement of the latter is necessary

both to taking up the Government's share option and to an

extension of time for completion of the tunnel) that the

Government should give an individual guarantee. But he questions

whether the commercial interests will be satisfied on the score

of their protection against the political risks. However, that

was before ECGD explained in greater detail the circumstances in

which they would cease to invoke their guarantees and it may be

that the shareholders will now be satisfied (although Mr. Kadoorie

may need some persuading).

5.

These are circumstances, of course, in which the Company is

well placed to conduct a sort of Dutch Auction amongst the various

sources of finance Moreover, ECGD's information continues to be

that the French will not make up their minds until March so that

if in fact the Company has been made an offer by French commercial

interests in the terms reported to us, those interests are out of

step with their official agency COFACE, with whom ECGD are

maintaining close contact. These are hardly circumstances in

which to press upon ECGD a line of action in which they throw

normal commercial prudence to the winds. We, therefore, think

that we should await developments.

14 February, 1969

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CONFIDENTIAL

(W. 8. Carter)

Hong Kong Department