TNAG-0424-FCO40-470-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 103

CONFIDENTIAL

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(a) All that the MTSG was seeking at this stage was an

undertaking from the British Group that they would

try to meet the requirements which the Government

had thought it necessary to lay down, rather than

a commitment to meeting these requirements. If at

some point in the exercise, the British Group felt

unable to meet one or more of the critical require-

ments, it would be understood that this would

disqualify the British Group from entering into

negotiations for the contract.

(b) There seemed to have been some misgivings about the

Government's requirements, but there was nothing

mysterious about them. Put simply, the MTSG, having

sought and received advice from the world at large,

and having held protracted discussions with various proposers (particularly the four consortia), had now

decided on how it thought the project should be

handled. In other words, the requirements represented

a distillation of the advice which the MTSG had

received. Inasmuch as this had been their origin, the

requirements were not something to which the Government

felt absolutely committed, and the MTSG would be

prepared to consider further proposals for modifications.

(c) As regards the $5,000 million ceiling, the figure did

not represent a best offer which had so far been put

forward. Basically, the figure had been derived from

the MTSG's assessment of the cash-flow implications

of the various proposals received. It had become clear

to the MTSG that, even with a Government equity injec- tion of $800 million, and even assuming a revised fare structure (which was about 15% higher than that set

out in the "Relevant Papers" booklet of July 1972,

Contd/...

CONFIDENTIAL