TNAG-1060-FCO40-1310-Mass-Transit-Railway-in-Hong-Kong-1981 — Page 129

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нит HK+ED

25,

HM Treasury

Parliament Street London SW1P 3A0

Direct Line ~01-2335015 Switchboard 01-233 3000

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Your Ref: PD3 44-0/913715/31

Our Ref : EFP K23

CC Birch Esq

Export Credits Guarantee Department

Aldermanbury House

Aldermanbury

LONDON

EC2P 2EL

03 JUN1981

RY

The

INCEN

27 May 1981

Deer Charles,

HONG KONG : MASS TRANSIT RAILWAY CORPORATION : ISLAND LINE

Thank you for your letter of 15 May.

2. Although our view remains that a full review of the Hong Kong market is needed in the near future, we are prepared to accept that this should not delay or prejudice your immediate discussions on the Island Line contracts. Subject to what is said below, support for the Island Line is therefore confirmed. But we shall not be prepared to agree any further significant increase in your exposure until EGC has considered a country assessment paper which we suggest should include your recommendation for a Section 2 limit on this market. It would be helpful if CPD could set in hand the preparation of such a paper as soon as possible, with a view to EGC discussion before the summer holidays.

3. On terms for the Island Line we agree that 8 years from commissioning is appropriate for the construction and equipment contracts and 5 years for the line of credit.

4.

We remain concerned about financing in HK $; in particular with the position in a disaster situation when HK might not be available in sufficient quantities. In order not to prejudice your current discussions, we are prepared to agree to your proposal to open discussions on the basis that local financing is only acceptable for the railcars, the E & M equipment and the tracklaying, up to a limit of £100-120 million. Even this level of commitment has its dangers, and our agreement is subject to two conditions:

(i) that, as far as is practicable, roll-over dates should be staggered to avoid overloading the local currency market;

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