Mr. Laird
aird
Reference.
Financial Assistance for Kai Tak
Airport
15
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You asked me to recommend future action on the request from the Hong Kong Government for a loan for the Kai Tak Airport development.
12.
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ploper J U. Brig
1. Rijpm
27/4
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3.
The present situation is as follows:-
(a) In July, 1968 Hong Kong made an
application for a loan of £6m. at an interest rate of 7% re- payable in 15 years.
(b) Our requests for finance to provide this loan have been turned down by the Treasury, ODM and Board of Trade.
(c) We proposed that a letter be
sent to a Treasury Minister by Lord Shepherd asking for new money to provide this loan but Lord Shepherd did not agree to send the letter.
(a) Meanwhile Hong Kong are starting
the runway extension at Kai Tak without waiting any longer for
a reply to their application for a loan.
Originally £24m. was asked for by Hong Kong in 1967 as a grant for half the estimated cost of
the runway extension at that time. Later the
request was changed to the full cost of the runway
extension of just over £6m. The Treasury, However,
was prepared only to consider £3m. spread over 4
years to be provided from current Votes of Departments. In our draft letter to the Treasury we asked for £6m. despite their previous refusal to consider more than £3m. The estimated cost of the runway extension has now gone up again, the latest estimate from Hong Kong being £11m. The U.K. bank rate is now 7% and this is also ODM's maximum "soft" loan interest rate. I recommend therefore that the request for a loan should be maintained at £6m.
4.
It is possible that Ministers may now be prepared to issue a letter asking for money for a loan to Hong Kong. While it was previously re- commended that this letter should be sent to the Treasury as new money would be necessary, it would now seem better to write to ODM which is the most suitable Ministry to administer a development loan, copies of the letter being sent to both the Treasury and the Board of Trade. The previous submission and background brief brought up to date would be suitable for use with this new draft letter. If you agree,
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