Pour ref: 21/2
Our ref: BC 47
Confidential
By F. 0. Bag
Export Credits Guarantee Department,
Barrington House,
59-67 Gresham Street,
P.0.Box 272,
London, E. C.2.
172
25th February, 1969.
64
58
Crosa Harbour Tunnel
Thank you for your very informative letter of 14th February, which did suggest that at long last here and there it is beginning to be understood that our problems in this case are commercial and not political.
2. I wish that this process of education had gone further. We have only just seen a copy of Kadoorie's letter of 7th February to Clague. It is a bitter letter, obviously sincere and equally obviously quite wrong in its assumptions. As for his view of E.G.G.D., the worst that can be said, in all honesty, is that our judgement of the security required can be questioned. To go beyond this and allage motives for which there is no evidence is, I would have thought, a dangerous practice.
3.
Feter Tennant's letter of 13th February was even more disappointing. (I assume you have seen it; it was written on your office notepaper, and clearly reflects, among other things, discussions with yourself.) More disappointing because Tennant knows, or should know, that E.C.G.D. does not repeat not reflect the political views of H.M.G. but attempts to assess propositions on their camer– cial merits. Apart from the 1967 episode when for a time all commercial bets were off this is what we have tried to do throughout this long episode. It is true that we have never been encouraged (let alone urged) by the Commonwealth Office (now F.C.0.) or the Tressury to consider the matter in other than cold comercial terms. (F.C.0.'s attitude perhaps reflected the Hong Kong Government's own coolness to the scheme.) The affect has been that we have considered the question solely as a commercial proposition, and our sin is apparently that we have not sufficiently permitted sentiment to colour our judgement (political considerations being neutral). Peter Tennant might have been expected to know better. And even if we have not always kept you as fully informed as you would wish (for which I apologise) I find it difficult to believe that much of what I have written above is new to you.
Rightly or wrongly we have treated this proposal throughout in exactly the same way se if it had originated from Chicago or Timbuktu. We have had no regard to the geographical situation of Hong Kong, except insofer as we have had to react to the worries of the Tunnel Company on this score. From the first the project has bee an unsound risk for our underwriters because (a) it was speculative and (b) the Company was grossly under-capitalised. To overcome these deficiencies we have consistently insisted on payment guarantees in various forms, and because we have not been able to regard some of these guarantees as first-class for various reasons, we have at times had to ask for supplementary security of one kind or another. The foregoing states our position in a nutshell. It is essentially commercial. Unfortunately we have continually been met by political pressure in an attempt to gain a ocomercial advantage at our expense. If at last everyone concerned can be convinced that they are faced simply with ordinary commercial problema, there may be hope of progress.
5. I have obtained a report on Tommills Brokerage Co. Inc. They are a mall company of mortgage brokers with a paid-up capital of 1.5.$25,00 mainly owned by the president, Tom Mi la. They have a staff of 20, and work for commercial, indus- trial and real estate development concerna in U.d.., Puerto Rico, Canada and Europe. Obviously they will not be providing finance for the tunnel themselves, but are hoping to raise money in the U.S.A. There must be considerable doubts about their chances.
M. P. V. Hammam, Esq.,
British Trade Commissioner in Hong Kong,
British Trade Commission,
7th Floor, Shell House,
LAST
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16.
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