TNAG-0854-FCO40-1064-The-Kowloon-Canton-Railway-1979 — Page 30

Sir J Cater KBE JP

Chief Secretary

Government Secretariat

HONG KONG

CONFIDENTIAL

Foreign and Commonwealth Office

London SW1A 2AH

3 July 1979

Hck. 173/1

- 4 JUL 1979

IN"

4/7

... 5.1

29

Dear Jack,

KOWLOON-CANTON RAILWAY

1.

In your letter (reference CS/PER) of 17 February you recorded a complaint from the Canadian Commissioner in Hong Kong about the way in which the contract to supply rolling stock for the Kowloon-Canton Railway was awarded to the British firm Metro-Cammell Limited (Metcam).

2. The First Secretary (Economic) at the Canadian High Commission called on me today to raise the same matter, making it clear that he was doing so on instructions from Ottawa.

3. Howard outlined the story in the version reported by the Canadian Commissioner and Hawker-Siddeley (Canada) Limited. There had been allegations that the tendering procedure had been weighted in favour of a British firm by the appointment of Transmark to advise the Hong Kong Government in evaluating the bids. There were also strong suspicions that the Metcam bid had been among the highest of those submitted; that it had been modified after the closing date for tenders in order to make it more competitive; and that the award of the contract to Metcam had been directed by the Governor acting on instructions from London. Hawker-Siddeley (canada) felt very strongly about the matter. They took the view that the time and money spent in preparing their tender had simply been wasted sicne the Hong Kong authorities clearly intended the contract to go to a British firm from the outset. Howard referred to the imbalance of trade between Canada and Hong Kong. While there was no direct connection, the allegations of discrimination against a major Canadian firm would not make it easier for the Canadians to maintain a liberal attitude towards Hong Kong imports.

4. I told Howard that he would not expect me to discuss the details of the Hong Kong Government's tendering procedures, or to give reasons why this particular contract had been awarded to Metcam; you had explained the position clearly to the Canadian Commissioner in Hong Kong in February. But it might be helpful if I made a few general points. Firstly, Hong Kong was a highly competitive market in which British firms enjoyed no special

CONFIDENTIAL

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