TNAG-0422-FCO40-468-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 72

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1. GUARAN

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CREDITS

DEPARTME

Chhail

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Dear Ronald,

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EXPORT CREDITS GUARANTEE DEPARTMEN

FINANCIAL GUARANTEE CASE NO 903 HONG KONG MASS TRANSIT SYSTEM

Aldermanbury House

Aldermanbury

London, E.C.2

28 February 1973

As you may have seen, the Hong Kong Government has now formally announced its intention to proceed with the Mass Transit System. They intend to hold further discussions with four groups (UK, Japan, Franco/German and Italian) who submitted proposals last October in order to define these proposals more precisely and to establish whether a single package contract for the whole of the first four stages is practicable for them. Discussions with the UK group are scheduled to commence in Hong Kong on or about 19 March. We aim to be present.

2.

You will recall from my letter of 30 November last following the London discussions that the Hong Kong Government had indicated four areas where they were seeking co-operation:

3.

a.

c.

pricing, where they seek from the consortium a price basis which at least does not expose them to increased costs arising from unforeseen work, particularly in civil engineering;

repayment terms, where they seek repayments scheduled from completion of the four stages rather than from completion of each;

they want to avoid pre-completion interest payments; and

d. they seek a reduction in the 6% rate of interest.

Tom Aston, the Senior Trade Commissioner in Hong Kong, has maintained close contact with Government circles in Hong Kong since the November discussions. He confirms that the four points enumerated above remain the issues which the Hong Kong Government wishes to explore in the forthcoming meetings.

4.

The Government remain committed to the start of work on the scheme at the beginning of 1974, and to achieve this contracts at least for the initial stages of work will have to be finalised by the third quarter of this year. Unfortunately the site planning and investigation is nowhere near sufficiently advanced for contractors safely to offer firm prices for all the site work (which represents some 60% of the cost of the four stages) and they will seek a basis under which the Government accepts unforeseen work costs. The Government on the other hand see themselves as hostage to the contractor if they accept such a basis.

R Jones Esq

HM Treasury

Great George Street

London SW1

15.