CONFIDENTIAL
of Yen 230 = US 1 was openly talked about in Tokyo as compared with the current rate of about Yen 260 = US 1. The uncertainty of further Yen revaluation should be of distinct value to our- selves. Otherwise Mr Fell said the Japanese financial package seemed much the same as ours but they were talking about Hong Kong Government Guarantees which are strongly disliked in Hong Kong. This was confirmed later by Mr Haddon-Cave, who said he disliked the Japanese financial proposals - they wanted "to make me a debtor and I refuse to be a debtor". Mr Haddon-Cave also said he saw political difficulties from Hong Kong's point of view in giving the contract to the Japanese unless the bid was, as already mentioned, substantially better than ours. This was in view of Hong Kong's very adverse level of trade with Japan, which the Japanese made no effort to tackle, and the increased anti- pathy of the Chinese in Hong Kong to so many lucrative contracts going to the Japanese in these circumstances.
6. The present timetable is that following the talks with our- selves earlier this week, Mr Haddon-Cave will be seeing the Italians, Germans and Japanese prior to Mr Peter Walker's over- night stay in Hong Kong (31 March/1 April). Mr Haddon-Cave said he did not expect the Germans and Italians to remain in the running after that round. Further talks are then being arranged for the latter half of April. The British consortium will have "theirs last which will give us some advantage in the week
beginning 30 April. At this stage, the British group are aiming to provide an estimate of the likely price, stating the assump- tions on which it is based and the factors likely to effect it. It is then expected that agreement in principle to give the contract to a consortium will be taken in May with final signa- ture in October following agreement of a price based on on-site bore hole tests, etc, in the summer.
7. Treasury officials (Mr Jones and Mrs Boothroyd), who were present at yesterday's meeting with Mr Fell, are now considering whether Ministers should be approached at this stage on the financial package especially to confirm that the interest rate for the contract should be agreed at the current rate for this purpose, ie 6%, even if the rate were to increase between now and the final signature. This would seem sensible as any change would have considerable effect on HMG's financial backing. I said that I thought any increase in the rate at this stage could well destroy the goodwill which we clearly enjoyed.
8. Mr Peter Walker leaves for China today and Mr Glaves-Smith (Overseas Projects Group, DTI) undertook to bring the Minister's brief up to date for his return via Hong Kong on 31 March. Mr John Mason (formerly Head of EID and now with ECGD) will accompany Mr Walker.
CONFIDENTIAL
19.
No comments yet.
Private notes are available after approval.