TNAG-0855-FCO40-1065-Construction-of-underground-railway-system-in-Hong-Kong-1979 — Page 104

CONFIDENTIAL

(a)

The Consensus was not breached;

(e)

To ensure that Lazards do not make any kind of killing out of extra fees etc;

This arrangement could produce savings for METCAM of about $6m. ECGD need to begin detailed discussions with Lazards and METCAM on how this could be organised, not least since we have to find a way to pass the saving to METCAM which both matches the Japanese terms but does not breach the Consensus.

(i)

I cannot over-emphasise the importance of securing this contract and repulsing the Japanese marauders, for the following reasons:-

METCAM were awarded the first phase, and the loss of the second phase will be taken by future purchasers as displaying MTRC's doubts about METCAM's competence. The loss of an order in the Crown Colony would magnify further any outside purchaser's doubts which would damage substantially METCAM's prospects of obtaining orders elsewhere in Asia;

(ii) More directly the loss of this order would seriously

prejudice METCAM's chances of securing comparable orders from the Republic of China in the near future, for which the Japanese are bidding;

(iii) The substantial size of the order;

(iv) The unethical nature of the Japanese tactics,

All these factors make this contract very exceptional, and justify the exceptional treatment proposed. The Department of Industry will share with ECGD and DoT the responsibility for defending this decision to any company complaining that it has not received similar treatment.

Ο

I should be most grateful for your decision by 4 p.m. to-day (Wednesday), since the offer of any concession will have to be despatched before close of play to-day to reach MTRC by the deadline.

Yours sincerely

All Lean/PS

A J Lippitt

с с

Mr Royce

(ED) (DOT)

Mr G Stephens (ECGD) Mr Benjamin (IIC)

Mr Dell

(M)

Mr Mathrani (IIC)