-4-
12.
Our own inclination would be to move to the recommendation above at once; in this way we shall have some concession to make in the first round of negotiations. It may indeed be necessary to go further, and we would wish to establish a fall back position as regards interest should the original proposal prove inadequate and particularly if competitors should be conceding the point. I would not go so far as to suggest that interest prior to completion even of Stage 2 should be avoided entirely, but the case can be made for merely deferring payment of interest rather than for capitalising it, i.e. for not charging interest on the deferred interest. The cost of straight deferment right through to Stage 4 completion would amount in interest on interest foregone to £4.3m (HK$ 60.5m). We suggest therefore that we have authority to agree to deferment of all interest payments falling due before Stage 4 completion, charging interest (but not interest on interest) on payments so deferred, if in our judgement at the forthcoming meetings this should be necessary to maintain Government's interest in a complete UK package.
13. This leaves a reduction in the rate of interest as the only outstanding point. On this we have made our position quite clear: we have power to make such a concession but have said publicly that this power will only be used to match. At this point in time not even the Japanese appear to have suggested a lower rate; and certainly our own contact with the Japanese does not indicate they are thinking of making such a concession. For the present at least therefore we would propose not even to consider conceding on this one.
copied to:
FW Glaves-Smith Esq: DTT P Homan Esq: DTI
A L Ryan Esq: Bank of England A C Stuart Esq: FCO
S N Chilton Esq: DTI
D A Thain Esq : ODA
C H Tarrant Esq: FCO
TW Aston Esq CMG: Hong Kong
V Chapman: ECGD
WH Paxman: ECGD
Miss R M Martin: ECGD
Cell,
在 Ken Collants
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