TNAG-0423-FCO40-469-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 77

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economically but not necessarily politically.

as capital repayments, interest on interest being charged); this is in line with what the Japanese told us in January that they would, as they commonly do, require no payment of interest during the construction period. Haddon-Cave said further that he had an oral promise (which he believed) from another competitor to do the same. Information received today (a. v. above) suggests that the German-led group are ready to match what others are doing. I am making no case for our doing the same as our competitors except to say that the position of the British Group is far from comfortable and if HMG wish to see them succeed we should certainly match what I am quite sure others have done.

LEC participation in the civil works contract:

At a very late stage immediately before we left for Hong Kong the civil works consortium disclosed that they did not think they would have sufficient capacity to undertake all the work themselves and would propose to bring in contractors from EEC countries up to 30% of the value of their contract. They enquired whether this could be financed from the British loan. Under EEC rules as you know we may be requested to finance up to 30% of other EEC members participation under the reciprocal arrangements. In this case about 1th of the EEC members participation could be in the form of UK materials employed on the contract but the true EEC participation could amount to some £22 million. If the contractors stick to this position (they are under some pressure not to) this proposal can only further reduce the attractiveness of the project for

the UK and I have done no more than state that we would consider the application of the EEC rules to this case. It will be necessary quickly to notify the civil works consortium of what we are prepared to do; should we refuse to accept the financing of non-UK elements they will seek to finance them in the countries concerned (in my view there is a case for requiring them to try to do this first). Failure to achieve either course could prejudice their continued participation.

You will no doubt wish to consider whether we should have a meeting on all these points or whether you would prefer to put them to Ministers at once. Could I put in a plea for urgency; decisions on these matters (particularly that on capitalisation of interest). should be taken this week if they are to be taken into account by the Hong Kong Steering Committee in their current assessment lasting this week and next of the competing submissions.

ぞ Ter Collett

K W Cotterill