TNAG-1060-FCO40-1310-Mass-Transit-Railway-in-Hong-Kong-1981 — Page 137

GUARAN

ANTEE

CREDITS

DEPARTM

pas isiyon der Scale.

We should write Strongly suppenting ECCA and jurin

the pritual r

way. May I hea

delete by $4.00 mi

EXPORT CREDITS GUARANTEE DEPARTMENT

Aldermanbury House

Aldermanbury

Telephone: 01-606 6699 Ext 552

London, EC2P 2EL

Telex: 883601

18 Many,

Your Ref: EFP K/23

M V Hawtin Esq

HM Treasury

Parliament Street

LONDON SW1P 3AG

Dear Mischast,

Our Ref: PD3 44-0/913715/31

NICK

เวรใน

RECEIVED IN REGISTRY NO. 31

2 1 MAY 1981

DESK OFFICER

HONG KONG : MASS TRANSIT RAILWAY CORPORATION

(20

1.

Thank you for your letter of 7 May

REGISTRY

IPTAND THEN

4

Ah 2/

PA

15 May 1981

21

See (22 23

(BOA)

2. The detailed market summary included in Ken Cotterill's letter of 25 July 1980 formed the basis of a full discussion of the market at the EGC meeting held on 10 September last to discuss the Castle Peak project at which NKK 164/1

there was a generally optimistic view of the market risks apart from certain 1980 reservations expressed by the Bank of England. Our assessment of the market

remains unchanged from that expressed at that time, and unless the Bank or other departments feel strongly that there has been significant change in Hong Kong's prospects we do not consider that a further review is necessary at this stage, and even if a further discussion of the market were considered desirable we do not believe that this should be allowed to delay our reaching agreement on the terms of ECGD support for the Island Line or our handling the modest flow of other business in the market.

3. I am due to meet Norman Thompson of MTRC in Hong Kong on Friday of next week, 22 May, when I hope to have a meaningful discussion which will take us a step closer towards a realistic judgment of the terms and extent of ECGD support which may be required if British contractors are to bid seriously for the project. In order to do this effectively I feel that I must be able to give a firm indication of the terms we are prepared to offer at this stage, and I therefore suggest that you agree an opening position which I can put to Norman Thompson on the lines set out below, which are intended to meet some of the objections you have raised.

Terms

4. No one can be happy about the levels of subsidy involved in current export credit arrangements whether in Hong Kong or elsewhere, and your point is well taken, although I would question the implication that the limit of ECGD support in a particular market should be determined by the level of export credit subsidy as compared with that in other markets. Apart from the suggestion that we offer at the outset to capitalise pre-commissioning interest, there is nothing exceptional in the terms proposed in Holloway's letter of 15 April, and I would welcome your approval to the credit terms suggested -

81 years from commissioning

for the construction and equipment contracts and 5 years for the line of credit. As to capitalisation of interest, we need not offer this now, but I should be very surprised indeed if we are not subsequently obliged to reconsider in order to match our competitors.

1.