TNAG-0426-FCO40-472-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 37

BRITISH TRADE COMMISSION IN HONG KONG 7th Floor, Shell House, Queen's Road, Central, HONG Kong Mail Address: P.O. Box No. 528, Hong Kong Cable Address: "Uktrade Hongkong" Telephone- 230176

CONFIDENTIAL

Our reference: 21/1

Your reference:

DM Royce isq

(versoas Projects Group

Department of Trade & Industry

1 Victoria Street

London SW 1

Dear David

MASS TRANSIT SCHEME

21 December 1973

Shortly after I had despatched my letter to you of 20 December I received a tele- phone call from Philip Haddon Cave asking me to call in to see him at the end of the day; it transpired that he wanted to talk to me about the private note which I lnd dropped to the Governor in which I had said that I had been surprised at the EXCO decision. He said that the Governor had asked that he should have a word with me about this because neither the Governor nor Philip Haddon Cave could see that anyone who knew the figures could be surprised.

I said that I was fully aware of the figures but this had not altered my surprise nor that of any of the rest of us who had been involved in the hasty preparation of the counter bid, bearing in mind the background against which we were doing it. As to this I rehearsed the points made in paragraph 2, 3, 4 and 5 of my previous letter to you. In addition I stressed that what the Anglo/Italian (and for that matter the Anglo/Franco/German Consortium) were being asked to do was to meet the most difficult desiderata of all, ie a fixed price, in a matter of weeks (whereas they had been planning on evolving it over months) in order to counter a proposal by the Japanese which totally ignored what had presumably been for the Japanese the most difficult desiderata (ie the guarantee). We had all sincerely thought it was Fhilip Haddon Cave's wish, and the Governor's, to establish some figures which would take the counter bid forward into the next round and give time for realistic figures then to be evolved in competition with the Japanese so that Hong Kong could be assured of finishing up with the best deal at the best price. The Anglo/Italian Group had therefore done its best in the short time available to produce figures which represented an order of magnitude with every intention of trying to improve on them and every belief that they could given more time

later.

J

Philip Haddon Cave did not refute that he and the Governor had given the impression that the figure of $5,000 million could be exceeded or that some escalation could be provided for but argued that it was stretching it too far to exceed the price and propose "force majeuro" escalation "we really could not be expected to pay for the guarantee twice". I said that I could see that there were limits to which they could be reasonably expected to do that but we had all assumed that if the Anglo/Italian .bid stretched this too far then the negotiators would have been tol and given an opportunity to rovise the figures so that they would be accept- able. le said that it was never his intention to enter into a "negotiation" of this sort at this stage, his purpose and that of the Steering Group had simply been to obtain counter bids that were capable of comparative evaluation with the

CONFIDENTIAL

Japanese ` /

Every effort is made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors or omis sions in that information and no responsibility is accepted in regard to the standing of any firms, companies, or individuals mentioned.

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