TNAG-0422-FCO40-468-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 5

HANDED)

EWER

By

MR FELL BECD:

A

AT MEETING

ON 22

22 MARCH

72

DISCUSSIONS WITH SIR DOUGLAS CLAGUE AND MR LEVER 18.3.73

I gave Sir Douglas Clague an account of the Japanese approaches and of the reaction of Sir Arnold Weinstock and United Kingdom Ministers. I emphasised the delicacy of the position and welcomed his appreciation of the Hong Kong scene and of what he might regard as the best course in British interests.

2.He said that generally he thought that the omens were favourable. The Japanese "camp" seemed much less confident than they had been. At one stage Jardine's had been suggesting that it was all over bar the shouting but this was no longer the scene. As far as the Hong Kong Government were concerned, there was a wish to favour Britain, but the consortium had to show its paces. The immediate task was to assist Haddon-Cave achieve his next aim, namely the consortium-type approach against the multiple contract school of thought which was strongly entrenched. He had felt in the beginning that a joint approach with the Japanese would have been the most profitable course but at that stage he had been overruled by the British interests.

?. As regards the Japanese, their change in attitude was difficult to diagnose. It could be connected with their trade balance with Hong Kong on which the Governor had expressed himself so clearly in Japan. It could also be connected with the currency changes. A Japanese organisation had in fact contacted Hutchisons some time ago but they were holding them at arms length (Kanematsu-Gosho).

4.

We speculated on the chances of the other groups. I said that we would welcome any intelligence about the Italian talks as I took them seriously on the basis of their performance elsewhere and their ability to put together attractive financial packages. Sir Douglas Clague said that this presented no problem. He had direct access to the Head of Fiat organisation and he volunteered that in fact he was expecting a call during the week from one Italian banker. (Note: In discussions next day within the British consortium, Mr Newall of Costains disclosed that there had been an approach by the Italians to the British consortium but the consortium had said they were not interested at this stage).

5. Sir Douglas Clague gave his advice as follows:

During

a. the first aim was to secure the consortium approach.

this stage we should make the British package as attractive as possible and in this connection we should consider capitalisation of interest in the consortium period;

b. we should keep our options open about joining with other

groups until we saw our relative strengths;

•

in the meantime we should open up the line with the Japanese and inform MITI of the approach made to Hutchisons;

at the end of the day we should be free to join forces if appropriate with whichever group or groups gave us the best chance of securing the biggest orders.