TNAG-0425-FCO40-471-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 99

NOTE OF A MEETING

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297

HONG KONG MASS TRANSIT SCHEME

1. Mr Buckler of GKN called on Mr Royce today to discuss the position on the German/French/British Group's proposals and to ask that the group be given HMG's blessing in HMG's exchanges with the HK Government. I was also present.

2.

Mr Royce was non-commital on the question of possible HMG backing for the GFB group.

As regards the group's proposals, Mr Buckler said that GKN's share of the bid had been raised to 50% mainly to take advantage of the favourable UK credit terms. The group had been informed of the Japanese pre-emptive bid and was making a counter-bid which would not commit its members to a firm price but which, in essence, would satisfy all the HKG's other requirements.

3. Mr Buckler was unable or unwilling to disclose the make-up of GKN's share of the bid or explain how the company could take on 50% of the contract without being saddled with a substantial part of the civil engineering involved. He agreed that GKN would need to rely heavily on sub-contractors. (Note: if GKN are to achieve a 50% British content they will need significant participation by UK civil contractors but are unlikely to have arranged for this in view of these contractors' known distaste for the project. They may have no intention of sticking to a 50% British content or else are taking a considerable risk in banking on their ability to arrange for the necessary contractor participation, if and when they get the contract).

4. Mr Buckler went on to speak about GKN's views on the HKG's handling of the project (which coincided in many respects with those of the Anglo-Italian group). The HKG lacked the technical expertise required competently to handle negotiations on such a large project they should have appointed competent project managers to handle it for them. They over-estimated their ability to withstand Japanese pressure to jack up the price once other bidders had been eliminated.

It was becoming steadily harder to believe that the Japanese would not attempt this, especially as results from recent test boreholes were not encouraging: the scheme involved tunnelling along an old shoreline which had been filled in, with attendant problems arising from soft ground and the foundations of old docks. Once the HKG were committed to the Japanese it would be difficult for them to resist Japanese pressure because the alternatives to abandon the project or switch to another group would be politically impracticable. It was dangerous for the

·

HKG to accept a bid, which was obviously speculative, rather than wait for offers based on an adequate knowledge of the conditions prevailing in Hong Kong and the system required.

ME Farry OFP 2

20

November 1973.

сс

Mr Royce

Mr Edwards

Mr A C Stuart

Mr K Cotterrill

Mre HE Boothroyd

Mr T Aston

DTI/OFP DT1/CRE

FOO

ECGD

Treasury

UK Trade Commissioner Hong-Kong.

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