reservations apart, the larger British contractors with experience of overseas contracts are obtaining as much work as they can handle, in the Kiddle East and elsewhere, profitable work which they seem able to secure on easier terms than those proposed for the Mass Transit scheme. Even if we wished to do so our chances of persuading them to forego such work in favour of the MT Scheme would, I suspect, be slim. The answer seems to lie in expanding the UK's capacity to handle large overseas construction contracts: this is under consideration, but it can only provide a longer term solution and for the time being a major British participation in the civil contracts for the MTA looks unlikely.
5 The position on the M & E contracts is more promising and perhaps it would be right to focus our efforts on that side. Several companies have applied for prequalification on individual contracts and we must give them what help and en couragement we can and if necessary jolly them along. In this respect the rolling stock contract, ET, is a particularly valuable one warranting more attention then most of the others and we need to keep abreast of Metcam's activities in this respect.
6 Still on the M & E side, there remains the question whether to press the industry to make a package offer in addition to bids for individual contracts. GEC Transportations Projects Ltd, the company which would have the task of putting together a GEC-based package, has applied for prequalification, but is wary of becoming commited to a package because of doubts that the project will proceed and the expense involved in preparing such a bid. The company has said it would be reluctant to offer a package unless it were given an edge either through some assurance from the MTA that GEC were starting as favourties or through being allowed better credit terms than its competitors. GEC recognise that at present no such MTA assurance is likely to be forthcoming and have therefore been pressing for pre- ferential ECGD terms.
7 ECGD's current attitude is basically that set out in Panton's letter of 7 February to you.
I do not see that we can, at this stage, produce a convincing case for a major change in that attitude. It would not I think, serve our interest if ECCD were to start the sort of beggar-my-neighbour race to offer better terms which characterised the last bidding round. Such a race would almost certainly benefit no one but Hong Kong, since most credit insurers are prepared to match terms offered by their counter- parts in other countries. At any rate any reconsideration of the position on credit would seem best left until such time as the situation on the project itself and its chances of proceeding has clarified, and we are better able to assess the likely strength of the UK's industry's bids and that of its competitors' offers. If it emerges that a credit insurer elsewhere is offering better terms ECGD would of course be prepared to consider matching them.
8 Turning to the political aspect we accent that a failure by Britain to win a sub- stantial share of contracts might tend to reflect unfavourably on its image in Hong Kong but I understand that there is no lack of British interest in much other business in Hong Kong and the splitting of the scheme into so many contracts will undoubtedly make it far less prestigious for any successful bidders than it would have been bad a single contract been involved. This is not to say that we should not do our best to see British firms succeed but, there is of course a balance to be struck between the advantages that would accrue from winning contracts and the time and expenditure that are devoted to securing them,
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