TNAG-0322-FCO40-358-Construction-of-underground-railway-system-in-Hong-Kong-1971 — Page 22

ni Churchy

HONG KONG MASS TRANSIT SCHEME

Hi Blackwell you me the trip to-dy

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ECGD have been approached by UK commercial and financial interests to determine what degree of support ECGD would consider for contracts in connection with the Hong Kong Underground scheme. Two points have been predominant in the minds of enquirers: whether there is any limitation to the amount of cover ECGD would give and what length of credit ECGD would support.

2. Enquirers have, however, not been able to provide any significant and realistic details of the exact proposals. We know that the Government of Hong Kong has had a Consultancy Report prepared and we understand that this report suggests that the whole scheme might be undertaken in 3 phases:

a. an initial scheme (running for about 13 miles);

a preferred scheme (running for about 33 miles), and

c.

the very much larger complete scheme.

Various

There has been mention of either two tracks or four being laid down. figures for the costs involved in these schemes have been put forward but they differ widely and give no precision as to the sub-division between Hong Kong cost and imported cost.

3. ECGD experience of the negotiations for the Hong Kong tunnel project (see summary note attached) gives rise to concern on the apparent lack of any move by the Hong Kong Government to determine what scheme it intends to proceed with and in what manner (eg commercial credit, World Bank loan, Hong Kong Government funds, Hong Kong commercial funds) it intends to pay for the project. This concern is made more real by suggestions that have been half voiced that the Hong Kong Government might wish to know what credit was available to it before taking any decision in principle and that the Hong Kong Government might not wish to be involved in any way in repaying such finance as was borrowed externally.

4.

With such widely different propositions in terms, of value and of time, it is unrealistic to suppose that any decision, even in principle, as to the length of commercial credit that ECGD would support can be taken. The number of possible permutations on the scheme is far too large.

5. ECCD consider that it must first be for the Hong Kong Government to decide in principle what scheme it intends to proceed with immediately and whether the work will be undertaken by the Government itself or by a statutory corporation created for the purpose or by some other means. ECGD also consider that in reaching decisions on these points the Government of Hong Kong should consider broadly what sources of funds it intends to utilise to meet the costs of the scheme.

6. With such decisions in principle having been taken, it will then be possible to evaluate within limits the cost of the proposals and the sub-division as between Hong Kong costs and imported costs. When these figures are available it should be possible to determine what degree of support in amount and in length of credit ECGD will be prepared to give.

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7. As regards the issue of a Goverment of Hong Kong commitment in respect of any funds borrowed (the point which did create some difficulty in the Tunnel negotiations) ECGD consider it unlikely that any close parallel between these proposals and that project can be properly drawn. On the face of it, it appears unlikely that this project could be considered as a purely commercial proposition amortising itself within anything like the sort of credit period which might be conceded commercially. It seems inevitable that the involvement of the Government of Hong Kong, either as borrower of external funds or as guarantor of repayment of such funds, will be essential..

ECGD 4.10.71