COM
LE NOTE
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Origind at: PKK 164!)
Thi. Copy for HKC 173/1
Information only / Action on Para(s) 3 F 4.
REMOVES IN
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RY .51
- 8 AUG 1977
HONG KONG: MASS TRANSIT AND CLP PROJECT
16.
Mr March's letter of 26 July to me about the MASS TRANSIT EXPENSION and his letter of 28 July to Mr Stewart about ECGD terms for both projects have been copied to OPG.
for I spoke about both letters to Mr Birch of ECGD who is due to leave; Hong Kong on 5 August as a member of the team which will have discussions with CL &F.
On the MASS TRANSIT, ECGD's line is that it would not make sense to dispense with the HONG KONG government guarantee for the 70 Metro-Caminell rail cars on which the MASS TRANSIT have an option, nor would it make sense for the buyer to seek another source of supply before the line is commissioned; nor wouldt make sense to forego the government guarantee for the extension as a whole. There was also the obvious danger en creating awkward precedents if no guarantee was required, and it will be difficult indeed for the Department not to insist on a guarantee.
Pressed as to what ECGD policy would be if a successful bid was dependent on sterling financing, Mr Birch said that for business in excess of £20m. it is now virtually mandatory for ECGD to insist on US dollar financing.
But a special dispensation can be applied for, although the Department would not wish to say so at this stage to the Hong Kongers. Mr Birch said he understood a request was on the way to finance the rail cars purchase in Hong Kong dollars. This could be a starter, as also for the CL & P business (see Alan Williams' letter of 1 August to Joel Barnett which has been copied to Mr March). It would appear there is Cicely scope for flexibility although ECGD are understandably keeping to a tough line at present.
one
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On the letter to Mr Stewart, Mr Birch agreed the draft provided by Mr Milton of FCO (also copied to OPG) covering the "present government of Hong Kong" query. In the extremely unlikely event of a Chinese takeover of the Colony before the debt is paid off there is always the chance admittedly an outside that the existence of a Hong Kong government guarantee would be honoured by the Chinese. But ECGD's main concern I think is that it is reluctant to create the precedent of offering major cover without buyer Government guarantee.
With referece to Mr March's letter to me, I have sent him a brief telex with information that Mr Birch will be glad to discuss on arrival. On the other letter, FCOR/replying to Mr March on the lines of Mr Milton's draft.
are
J Ashwood CRE4
215 5280
5 August 1977
CC.
DF Milton
PCO
Miss Stuart
OPG
Mr Leggatt
OPG
Mr Roberts Mr March
HONG KONG
CRE4
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