40&HOZ
N
of a package would be that the contractor would assume the responsibility for interfacing the components of the package and that reliability of supply would be a major factor in the award of contracts.
5 Mr Scott said that CEC had reservations about the scheme's viability for a number of reasons, among them the likelihood that the ITA would not easily obtain finance for local costs and that credit would be available on less favourable terms than those offered in the first bidding round. Before incurring the considerable expense of putting a package together, GEC would need assurances from the Hong Kong authorities that the scheme would go forward and an indication of the compensation they would be prepared to pay if it did not. Mr Royce said that the Post would be asked to look into this as a matter of urgency and also into the chances of finance being found for the proposed development of the KCR rail network.
Other Matters
6
On finance Mr Panton said that whereas ECGD had, in the first bidding round, led the way in offering favourable terms, it would not do so on the second round. The sort of terms ECGD were prepared to offer had already been discussed with interested parties and he confirmed that the HK Government would be expected to assume the role of borrower or to guarantee repayment by the borrower. Though GEC intended to consider taking out cost escalation insurance under the Department's new scheme, Mr Panton could, at that stage, give no guidance on the terms which might apply to such insurance.
7
Mr Royce said that, in political terms, HMG regarded the winning by British firms of a substantial share of the contracts as a desirable achievement though not an essential one. The advice from British firms and HMG had been proved right in the first bidding round and the HK Government should, as a result, be more disposed to give British representations their due weight in the second round. The Department would seek, in consultation with other Departments, to formulate an agreed Government line on the project.
8
Mr Royce said the Department would get in touch with Mr Alistair Frame of RTZ about the possibility, mentinned by Mr Kline, that this company would offer the MTA to undertake the management of the project.
ME FARRY
OFP 2
26 February 1975
2
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Mr Kinnear Hong Kong
Mr Roberts CRE
Mr Stuart FCO
Miss J Kelly Treasury
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