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6/38
BRITISH EMBASSY
No. I Ichiban-cho, Chiyoda-ku, Tokyo, Japan
K W Cotterill Esq
AS Special Guarantees Division ECGD
LAST
REF
3 April 1974
REC IN REGIE: 0.51
- 8 APR 1974
NEXT
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161
HKK 21/2.
HONG KONG MASS TRANSIT SCHEME
1. In my letter 6/38 of 14 March I mentioned possible difficulties for the Japanese consortium in the Mass Transit contract due to increased costs.
2.
In this context, it was interesting that the suggestion was given support by an article in the "Japan Industrial Journal" of 28 March. This quoted sources in the construction industry as saying that the twelve construction companies involved in the Japanese consortium were having second thoughts about the undertaking, in view of the rapid rise in the costs of materials, wages, etc. The companies assessed that they might face a loss of around 12 billion about US$43 m, Unless if they were to proceed on the present basis. an escalation clause were introduced into the agreement, they might even have to withdraw from the negotiations. The article mentioned that although Mitsubishi Corporation, the overall coordinators, might well have suggested changes in the terms of the proposed contract to the Hong Kong authorities, they would leave themselves open to severe criticism if their new proposals did not reflect the views of the construction companies.
JI McGhie
CC: HKIOD
FCO
Personal for:
T W Aston Esq CMG
BTC
HONG KONG
RM Evans Esq
FED
FCO
P G A Wakefield Esq CMG, EJU, DOT
46
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