TNAG-0208-FCO40-244-Discussions-about-extension-to-Kai-Tak-airport-1969 — Page 155

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We discussed with you the various sources of funds available. either we nor the Bank of England believe Hong Kong could successfully raise a loan on the London market except under the guarantee of H.M.G. and this is not something to which we are prepared to agree.

Equally we see no prospect of being able to make savings of overseas expenditure of more than a minimal amount on the Board of Trade Vote (or for that matter on the Foreign and Commonwealth Services Vote even if political grounds were accepted). The area where the necessary savings could most easily be found would appear to be within the £205 million annual aid ceiling. reaching a conclusion we would ask the Board of Trade to quantify the value of the expenditure to British civil aviation interests, e.g. under the "Colonial Formula"; to consider what amount they would as a matter of policy be prepared to defend as a grant or loan on civil aviation votes if funds were available; and finally to assess the priority they would give to such expenditure on the assumption that it would not otherwise come from any other department but, if financed by the Board of Trade, would have to be at the expense of other agreed civil aviation projects.

5. I come now to the request by the Netherlands Government for traffic rights for K.L.M. for a weekly service to and from Hong Kong. This was turned down in the OPD Committee but it might be worth considering with the Board of Trade the idea of re-opening the talks with the Dutch on the basis that as a quid pro quo for traffic rights in Hong Kong they would help finance the airport development by making a grant or loan to the Hong Kong Government. Two questions for H.M.G. are (a) would such a deal be acceptable to us in the context of civil aviation policy and (b) how big would the Dutch contribution have to be to make it worthwhile for us.

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I shall be very interested to hear whether you think a solution on these lines, if acceptable to departments in Whitehall, would be negotiable with the Dutch and with the Hong Kong Government. As time is short and we have taken rather a long time in which to consider your proposal you may prefer to call a meeting of those interested. Copies of this letter have gone to Coe at the Board of Trade, Whitecross at O.D.M. and Downey in the Treasury, and Turner at the

Yours sincerely Rsters.

(R.H.J. Steel)

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