TNAG-0208-FCO40-244-Discussions-about-extension-to-Kai-Tak-airport-1969 — Page 152

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Reference........ MUA 10/393/1.

Miss Brown, A.M. & T. Dept.

Copy to:

Mr. O'Brien,

F.P. & A. Dept.

I think the last you saw of Hong Kong's application for a loan with which to improve Kai Tak Airport was my letter of 27 February, with which I sent to the Treasury a memorandum about this application. I must now return your file through your Registry because, owing to the length of time for which we have had to keep it, there are many unregistered papers. I apologise.

2.

You will be interested to see the reply from the Treasury to my letter and you will wish to consider the suggestion Mr. Steel makes that Hong Kong's application should be considered together with the proposal with which you have been much concerned of late, that we should agree to grant KLM traffic rights at Hong Kong. I do not know whether this proposal will be acceptable to your Department or to the Board of Trade, who will also be studying it, but a number of preliminary points occur to me.

3.

The Treasury no doubt see the same advantage in allowing a British Colony to borrow money overseas as they have recently seen in allowing the nationalised industries to do the same. There must be at least short term advantage for the balance of payments in doing so. In this case the Board of Trade could not so easily sustain their objection to exchanging civil aviation advantage for benefits of another sort, whether political or commercial (e.g. sale of Chieftain tanks). The improvement of Kai Tak Airport is after all a civil aviation advantage.

4 But there are a number of objections

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(1)

(2)

I cannot see how our arrangement of a Dutch loan could have the political impact we want or be represented as a measure of recognition of our aviation interests in Hong Kong. It would not be possible for us to argue convincingly in public that we had made a contribution to Kai Tak by trading our landing rights for Dutch finance. There might be dangers in representing the transaction along these lines even to the Hong Kong Government. Publicly a Dutch loan would probably be represented as indicating that the Dutch had demonstrated greater faith in the future of the Colony than ourselves.

I cannot imagine that the Dutch could be persuaded to make a grant, but if they did, might they not then behave as though they had bought a permanent stake in Hong Kong Airport? Perhaps this is a far-fetched argument but I can imagine Dutch politicians making capital out of the situation.

/ (3) ..