TNAG-0276-FCO40-312-Plans-for-construction-of-underground-railway-system-in-Hong-1970 — Page 47

Mr. Laird

with 21

Reference...

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for:

Underground Railway-Hong Kong

The Treasury in their letter of 26 November ask

a.

70.

C.

a.

General advice about the project and

its standing within Hong Kong.

What ideas there may be about where the contract could be placed (e.g. Japan).

General advice on the political situation in the Colony.

The attitude of the Hong Kong Government to the project.

The tunnel cover was for 7 years from estimated completion date which gives approximately 12 years total risk from date of contract.

2.

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Flag C

Flag A

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3. The Underground Railway project construction period is estimated to be between 3 and 5 years. Adding credit term of from 7 to 15 years to this gives a minimum of 10 years and a maximum of 20 years. The Treasury say that a total of 20 years credit is out of the question.

4.

The Treasury consider that the Hong Kong Government should be involved to cover the contract. Presumably the cost of the project would, in this case, be paid by Government and a commercial company would not be set up as was the case in the cross harbour tunnel project. The latter project was financed by a company, with six shareholders, being formed which borrowed £14 million from Lloyds Bank at 51% repayable over 7 years. The Hong Kong Government subscribed 25% of the Tunnel Company's capital and also undertook to guarantee 25% of the Bank loan. On this basis ECGD agreed to give cover for the loan. There was a waiver for the guarantees given by Tunnel Co. shareholders" in the event of the Government ceasing to have effective control of the Colony" which has been kept confidential.

5. Although there has been considerable correspondence between DTI and the British Trade Commission in Hong Kong and between ECGD and the Treasury about this proposed project, we have not yet been approached by the Hong Kong Government for financial help. This is presumably because the project has not yet been accepted by them as a viable one. Should the Hong Kong Government decide in due course to go ahead with the underground railway project, they will doubtless come to HMG for assistance and at that time it will be essential for ECGD to agree to provide cover, if the contract is to be given to British concerns. No doubt, ECGD will insist on a counter guarantee from

/the..