TNAG-0422-FCO40-468-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 9

HANDED

OVER

By

MR FELL ECGD

22 JARCH

21

E

Discussion with Mr Haddon-Cave 21.3.73

Mr Haddon-Cave said that he was satisfied with the outcome of the meetings with the British Group. The essential point was that they now gave him a price. The Group might feel that his procedure was unusual: in fact, it was logical from his point of view. During the March/April stage he expected the German and possibly the Italian Consortium to drop out. I expressed surprise that he should feel that the Italians would give up so easily. He said that their bid was hedged with impossible conditions (he mentioned guarantees) and he doubted whether they would follow the course he wanted. As far as ECGD was concerned, he agreed that at this stage no change was necessary in the financial package.. There might have to be improvements at a later stage. The essential now was the price from the Consortium. The credit package would not be able to compensate for over bidding on the price side. He still saw the real race between the British and the Japanese.

2.

I then gave Mr Haddon-Cave our account of the Japanese approach to us and I said that I would welcome his comments on their motives. I mentioned in particular the points made by Mr Ozu on the previous evening, namely, the pricing difficulty for medium term exports from Japan and the fact that their financial package would be the same when the Japanese began their next round in Hong Kong. I asked whether there was any political or other benifit to the Hong Kong authorities in a coming- together of the British and Japanese Consortiums.

3.

The Mr Haddon-Cave said that he disliked the Japanese financial proposals. Japanese wanted "to make me a debtor and I refuse to be a debtor." He would refuse

He showed some the line of credit technique which they seemed to be following. surprise that there was no change as the head of the Mitsubishi had told him that he would be able to influence MITI to produce an acceptable package.

4.

Trade

As far as we were concerned, there was a clear bias in our favour. balances with Japan would in fact make it difficult to put the contract to them unless they had substantially the better proposal. He said that if he could speculate on what might happen after a decision had been taken on a consortium approach, the

It would go contract would go to the Japanese if they were substantially better.

to the British consortium if they were clearly the better. If both sides were some- where in the middle, then they, the Hong Kong authorities, might be the catelyst bringing the two sides together. In these circumstances this course would have an attraction to them but it was impossible to speculate at this stage how best the consortiums might be joined.

5.

We agreed that we should push along our present course with the greatest possible emphasis and secure the fundamental decision about the consortium approach. I said that I thought that it would be useful if this decision could be taken in principle before Mr Haddon-Cave went on leave early in May.

it