TNAG-0208-FCO40-244-Discussions-about-extension-to-Kai-Tak-airport-1969 — Page 71

EXPORT

GUARAN

TEE

CREDITS

EDITS LA

IMENT.S

DEPARTN

1) Photo cry by yo Blanks

21 Mr. Carter.

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EXPORT CREDITS GUARANTEE DEPARTMENT

P.O. BOX NO. 272, BARRINGTON HOUSE, 59-67 GRESHAM STREET, LONDON EC2 Telephone: 01-606 6699 Telex: 21821

Your reference

Our reference

سمه

༡༢

(28

22nd May 1969

Dear Moreton,

1. In Mr. Dickinson's absence I am writing to thank you for your letter of 16th May 1969 about the development of the Kai Tak Airport in Hong Kong.

2. We have spoken to the Board of Trade and the Treasury about this scheme, and we can confirm that the potential United Kingdom export content would qualify, in principle, for commercial credit supported by E.C.G.D. However, we need more information about the nature of the export content before we can take a view about the appropriate credit terms.

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3. The Board of Trade have given us the attached list of items likely to be involved, and there is little doubt that they would attract 5 year terms from the date of shipment or from the date of completion of each phase depending on the way the Hong Kong authorities decide to organise the contracting process. Subject to a closer examination of the goods, and their respective values, there might be a case for considering 7 year terms, especially if, as you suggest, the entire project were undertaken by a British contractor. However we must reserve our position on this point until all the relevant basic data is available. In either event the credit would relate to 80% of the value of the United Kingdom goods and services. A normal spread of the remaining 20% would be say 10% with order and 10% on shipment.

4.

Against this background, I think your line with the Hong Kong Government should be based on the following points:-

(i) normal E.C.G.D. cover is available to British contractors and bankers

to finance a United Kingdom participation in this project;

(ii) the precise terms will depend on the nature and values of the U.K. goods and services involved, and the way in which the contracting is arranged;

(iii) in principle credit for 80% of the U.K. goods and services should be

available, repayable on terms up to 5 years from shipment, if goods are ordered piecemeal, or over 5 years from completion of each phase, if U.K. contractors win the entire project or phases thereof.

(iv) the credit could be given by the contractors themselves (supplier credit) or by means of a loan from a United Kingdom bank (buyer credit) which the buyer would use to pay cash to the supplier. In the former case, where both goods and credit are handled under the supply contract the buyer may have difficulties in unscrambling the cost of each. However under a buyer credit operation the financing costs would be exposed in the loan agreement, and the goods would be bought on a 'cash' basis: the interest rate would be the special rate for E.C.G.D. guaranteed credit, at present 5% plus normal banking charges.

(v) for 'project' business of this kind, the normal mode of entry to E.C.G.D.

facilities is through the contractors or bankers to whom our guarantees would be given and the Hong Kong Government should therefore work through normal commercial channels to this end.

R.

D IN #YNǝ.51,

26

N 1969

HKK 2/11

BRANCH OFFICES; BELFAST BIRMINGHAM BRADFORD BRISTOL CARDIFE EDINBURGH GLASGOW LEEDS LIVERPOOL LONDON (CITY, SOUTH & WEST END) MANCHESTER NEWCASTLE NOTTINGHAM SHEPITELD! & NEW YORK

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