TNAG-0425-FCO40-471-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 206

OVERSEAS FINANCE & PLANNING DIVISION

also CC Mr Denman Dep Sec

Mr Rooke BOTB

Mr Hochfelder OFP Miss Eyles OFP

Ext 3649

COMMERCIAL IN CONFIDENCE

17 October 1973

Yra E H Boothroyd

HM Treasury

Gt George Street LONDON SW1

(245)

HONG KONG MASS TRANSIT SYSTEM

I think I should bring you up to date on two recent developments.

As you know, the contracting side of the British Group have finally decided that they are not prepared to accept the Hong Kong condition of a firm price within a ceiling. idea of a British bid for the total project has thus disappeared.

The

Instead, in the last few weeks the idea of a link-up with the Italians has been pursued. This at first looked like failing on the same ground ie that the British civil contractors would not accept the Hong Kong conditions even for a small proportion of the contract. However, following discussions which I have recently been having with the contractors through the Export Group for the Constructional Industries, three of the British contractors Costains, Balfour Beatty, and. Tarmac - have agreed in principle to go for 25% of the civil contracting side of the project on Hong Kong conditions. There is reasonable hope that this share will be accepted by the Italians, in which event the British mechanical and engineering side will lay claim to 60% or the M & E work. The British contractors and GEC have today sent a telegram to the Italians putting forward the se proposals as a basis for negotiation. The aim will be to agree outline proposals which can be put to the Hong Kong Government jointly by the British and Italian. Groups within the 30 days which they are expected to be given to put in a counter to the Japanese bid.

The British Group have been at pains to say that it will not be possible to put in a fully detailed bid in that period but that their proposals will nevertheless constitute a serious alternative to the Japanese bid.

The next action is clearly with the British Group. When they have taken things a little further with the Italians, however, they will undoubtedly come back to us for an indication of how the new proposals rank for ECGD backing.

The other development is on the Japanese bid. Reports coming back from Hong Kong suggest that the Hong Kong Government may be declaring this bid valid at the end of this week. Less