A
5.
Mr Wilks continued that information available to the Department suggested that the Hong Kong Authorities had hoisted aboard the importance of their own involvement in, and support for, the project. The Foreign and Commonwealth Office had made HMG's interests in the project known to the Governor of Hong Kong and had confirmed both that HMG would be ready to consider credit and would like the opportunity to match any credit offers from other supplying countries. It was not possible to say now what the view of Departments would be in, say, a year's time.
6. Mr Deacon asked whether the Department was dismayed by the propsect of business of £100 million or more. He enquired if any security arrangements such as on the blocking of reserves or lodging of irrevocable deposits in London would be necessary. Mr Wilks said that he had to some extent dealt with the first point. He was not "dismayed", but consultation with other Departments would of course be necessary. The lease on the New Territories only had 26 years to run and it was always difficult to anticipate the actions of the Chinese Government, even in the short run. On the second point, he doubted that such arrangements would be necessary. The financial standing or viability of the Hong Kong Government or of the market itself were not in doubt. He agreed that there might be some chance of disagreement between UK Government Departments on cover for the business, but this could not be assumed and would depend on the size and nature of the propsotion put up for consideration and the general circumstances prevailing at that point in time. At the present time, ECGD would probably be prepared to recommend support for a UK element of up to £100 million, subject, of course, to the points he had made earlier.
7. In answer to a series of questions, Mr Wilks said that he was not prepared to be rushed into authorising any kind of pre-emptive bid. Indeed, information available to the Department threw serious doubts on whether or not such tactics would cut any ice with the Hong Kong Authorities. However, 7 years credit from completion of each part might be possible. But this was not a commitment, it was simply an off the cuff indication of the horizon of risk which could be involved. Mr Paxman pointed out that as GEC well knew, it was never satisfactory to seek firm details of maximum terms at such an early stage. They soon became the mini- even if they had been linked to a minimum UK element value. Mr Forsyth said that the consultants had spoken of 12 years credit, although this probably included a 5 year construction period. Mr Paxman, in answer to a number of questions, said that 7 years post completion credit would probably be appropriate for a UK element down to, perhaps, a £20 million minimum. In the current climate of export credit policy, the loan percentage of the UK element would not be more than 80% and finance for local costs would not be available. Hong Kong could raise money for these in its own right and the Government had a substantial budget.
8. After a pretty lengthy discussion on the possible use of Eurodollar funds, Mr Wilks agreed that the Department might be prepared to give cover on such funds for local costs, but that the extent of such cover would probably be broadly linked to what had been normal local cost criteria, say up to 15% of the UK element repayable over 5 years from drawing. At this stage it was not possible to be more definite than this. The Department was still reviewing the question of covering Eurodollar borrowing.
9. Mr Wilks noted that the Japanese decision to accept the UN target for aid of 1% of GNP could lead to a massive outflow of Japanese credit and to a more relaxed Japanese attitude to export credit policy generally. The ramifications for the UK could be serious.
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