TNAG-0332-FCO40-368-Visits-of-Secretary-of-State-for-Foreign-and-Commonwealth-Af-1972 — Page 201

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E O Laird Esq CMG MBE Foreign and Commonwealth King Charles Street London SW1

RECEIVED IN OffiEGISTRY No. 51

15FEB 1972

HKK3/548/5

Our reference MID 77/270/01

Date

4 February 1972

Dear Laird

SECRETARY OF STATE'S VISIT TO HONG KONG

We spoke on the telephone about the last paragraph of your brief on Aid to Hong Kong (Brief No 8) that has been prepared for the Secretary of State's visit.

2. The suggestion that the Secretary of State should take the opportunity to explore with the Governor and his officials the idea that British aid might be used more extensively to further the UK commercial and industrial interests will, we think, need careful handling. As explained in the earlier part of your brief, we have not hitherto thought it right to offer much aid to Hong Kong, despite her status as a dependency, because of her relative affluence and large financial reserves. The idea that we might nonetheless offer aid to Hong Kong to further our own commercial or industrial interests might be consistent with one of the recommendations of the Report of the Adams Working Party (which, incidentally, has yet to be considered by Ministers). In practice, however, we are by no means clear how aid can be used to further the UK economic interest, as opposed to the interests of individual British firms, and a number of points have to be watched carefully. In particular, it is generally accepted that it is against the UK economic interest to provide aid on concessional terms to finance contracts that might otherwise be won on a commercial basis,

3.

I am not familiar with the details of the mass transit scheme in Hong Kong to which reference is made in your brief, but I understand that it is a very large project and that British firms interested in it have formed a consortium. No doubt our hope is that this consortium might be successful in any competition for contracts to be let under the project, presumably with financing arranged by the Hong Kong Government and perhaps with the help of ECGD guarantees for the supply of some of the equipment. We think it might be misleading to encourage hopes in Hong Kong of an aid contribution, on the basis that this would be in the UK economic interest, if it would be likely to displace exports or other business on commercial terms. There is of course little prospect that, considerations of UK commercial interest apart, any substantial aid contribution could be found for the project.

40

I am sending a copy of this to Marshall (FPAD).

Your micerely

(R E Radford)

CONFIDENTIAL