TNAG-0565-FCO40-660-Construction-of-an-underground-railway-system-in-Hong-Kong-1975 — Page 105

Treasury Chambers Parliament Street London SW1P 3AG

94

TelephoneXXXXXXKITAKE Y

233-8789

.0.513 October 1979

Treasury ref. 2FE 17/68/01

Re REC.

IN

OCT 1975

E G Lowton Esq

Aldermanbury House

Aldermanbury

Export Credits Guarantee Department

LONDON EC 2

tment

Dear Ted

HONG KONG MASS TRANSIT SCHEME

90

RECEIVED IN REGISTRY N6. 43

- OCT

393/1

• 60CT 1975

/MTm33931

HK → o Oper

We discussed your letter of 30 September to Joan Kelley, and I am now writing to confirm that we agree on further reflection that the minimum aggregate contract value attracting 10 years' credit should be reduced from £25m to £15m. We do not think it necessary to go further than this, given the inclusion of civil engineering contracts, but we should be grateful if you would in due course check with the French credit insurers the Kleinwort Benson allegation mentioned in your paragraph 4. No concessions should be made on local costs or pre-commissioning interest. There i a case for an approach to the Japanese to withdraw their offer on local costs, and we should like you to pursue this. It is also not clear whether this offer involves the provision of cheap finance or is limited to insurance.

I have also now received a copy of the telegram to Thompson which sets out the UK terms in toto. I was slightly disconcerted to see that the quoted interest rate is 8% since we have not seen any evidence to suggest that the 83% mentioned in Mrs Boothroyd's letter of 5 March is too high, and your letter of 10 September states the ECGD intention to refuse a request from the Mass Transit Authority for interest at 8%. I note too that contracts placed on or after 1.1.76 are to attract interest "at rates within the ECGD fixed rate export finance scheme". On present evidence we should not wish the interest rate to be less than 1 babove the minimum (in other words 81% at present). For this particular business we wish to be consulted bout any proposed changes in the terms, including interest rates, even if others make concessions which you might ordinarily expect to match.

Copies to

:

GM Lambert: Bank of England R G Marlow: FCO MA Cowdy: Washington

Yours sincerely In Paki Ri

I E RICH

P M Newton: Tokyo S N Chilton: DOT

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