TNAG-0955-FCO40-1174-Legislation-for-traffic-on-roads-in-Hong-Kong-1980 — Page 69

Sir E Youde

Original at: HKIC 16411

This Copy for:

Information only / Action on

Para(s)

COMMERCIAL IN CONFIDENCE

CONFIDENTIAL

1

ECGD COVER FOR CONTRACTS IN HONG KONG

HKK 1721

Fee

RECEIVED IN REGISTRY NO. 51

0 6 OCT 1980

DESK OFFICER INDEX

No

MS

PA

Msa

I REJISTRY

Action Taken

Awa

1. The Governor may mention this subject to you. Two contracts are involved:

a) Castle Peak 'B' Power Station;

b) Supply of buses to the Kowloon Motor Bus Company.

Background

33

2. Having been bitten recently in a number of markets, especially Iran, ECGD are very sensitive about taking on too big a commitment in any one territory. In Hong Kong they estimate that it could get as high as 25% of their total Section 2 cover. They are there- fore taking a tough line on major contracts and insisting on very full security, ie Government or bank guarantees. They realise that in some cases they will be directed by Ministers to go ahead but they want to cover their flank.

Castle Peak 'B' Power Station

3.

ECGD have asked for extensive security including absolute guarantees of repayment by CLP/EXXON and a Hong Kong Government guarantee. The Hong Kong Government are concerned because:

4.

a) they believe that insistence on rigid terms could still

scare the customer off and make him turn to the Japanese;

b) they have serious problems about providing a government

guarantee. The Governor and other officials have already bent over backwards to promote British exports. They will meet strong opposition if they suggest to LEGCO that financial guarantees are provided for British exports.

We have made this clear to ECGD and have been supported generally by DOI and DOT. It has been agreed that no action will be taken until EXXON have definitely made up their minds to participate in the project. Further discussions will then be held in Whitehall.

5.

I have written to the Governor explaining the situation and suggesting that at some stage he may wish to talk to ECGD explaining the limitations on the Hong Kong Government and discussing what may satisfy them. It should be possible to build on a general undertaking by the Hong Kong Government to continue to operate the official scheme of control of electricity tariffs in order to ensure the viability of CLP/EXXON.

COMMERCIAL IN CONFIDENCE

CONFIDENTIAL

/Kowloon Motor