TNAG-1060-FCO40-1310-Mass-Transit-Railway-in-Hong-Kong-1981 — Page 133

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Foreign and Commonwealth Office

London SW1A 2AH

Telephone 01-233-4381

MV Hawtin Esq HM Treasury

Parliament Street London SWI

HKK 17311

Your reference

RECEIVED IN REGISTRY NO. 51 Our reference

M

DESK OFFICER

INDEX

REGISTRY Action Taken

Dute

PA

No

©

Mas

21

A

Wया

19 May 1981

23

Dea

Hawtin

HONG KONG: MASS TRANSIT RAILWAY CORPORATION : ISLAND LINE

(20)

21

Please refer to your letter of 7 May, Charles Birch's of 15 May and David Durie's of 18 May.

1.

2. We fully support ECGD's view that a review of the Hong Kong market is unnecessary following the discussion of this subject at ECG on 10 September 1980. Apart from the considerable opportunities for British involvement in forthcoming major projects (including the MTR Island Line), there are also strong political reasons for the continu- ation of ECGD cover for large-scale projects in Hong Kong such as the MTR extension.

3. There has been considerable public concern in Hong Kong recently at what they see as signs of Britain trying to distance herself from the colony. The British Nationality Bill, and higher overseas student fees are prime examples. Local opinion feels that HMG are trying to cut their links with Hong Kong, possibly as a prelude to surrendering the territory to the Chinese. I am sure you will appreciate the effect it would have on business confidence in Hong Kong if this suggestion became widely accepted. We have, therefore, been concerned to reassure people there that HMG is totally committed to maintaining the prosperity and stability of Hong Kong. The fact that ECGD are involved in supplying credit for the Castle Peak 'B' Power Station order has been seen as a welcome and concrete example of this commitment.

4.

As you will appreciate, therefore, any sign that IMG is either not prepared or reluctant to see ECGD provide cover for any major Hong Kong project might be misinterpreted as a sign that we ourselves have no confidence in the Territory's long-term future, political or economic. Any wavering over future ECGD cover could have far-reaching and unfortunate consequences for the stability of the Territory.

5.

We

See

I should also like to make a small point with regard to terms. have always called for flexibility on terms for cover in the Hong Kong market for the reason that it would be very difficult to obtain orders in Hong Kong at all if the terms offered are not comparable with those of our competitors. It is not a case of subsidising one contract to obtain others on more normal terms. The Hong Kong market is so valuable, in itself and in terms of being a 'shop-window' for other markets in the region, that out competitors, especially the Japanese, are prepared to offer cover on minimal terms. If we are to compete effectively we must do likewise.

/6.

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