TNAG-1060-FCO40-1310-Mass-Transit-Railway-in-Hong-Kong-1981 — Page 139

HM Treasury

Parliament Street London SW1P 3AG

Direct Line.-01-233 5015:

Switchboard 01-233 3000

Your Ref: PD3/44-0/913715/31

Our Ref: EFF K/23

cpp & Hats

KK pl

двет

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7 May 1981

CC Birch Esq

Export Credits Guarantee Dept

Aldermanbury House

Aldermanbury

London EC2P 2EL

HKC 13h

RECEIVED IN REGISTRY, NO. 51

feer Charles,

ал

1 MAY 1901

*DESK OFFICER

INDEX

PA

TRY

Taken

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HONG KONG: MASS TRANSIT RAILWAY CORPN (MTRC): ISLAND LINE

Roy Holloway wrote to John Butterworth on 15 April seeking authority under Section 2 to support a variety of contracts for the Island Line, financed in Hong Kong dollars, which could involve a DML of £300 million in sterling terms. I am responding to this because the proposal raises a number of important issues which in our view need consideration before a decision is reached on cover for the project itself. For this reason I am giving the letter a wide circulation within ECGD.

Market Assessment

The Castle Peak 'B' contract involves a substantial increase in your exposure in this market. It now totals over £2 billion; and the Section 2 liability on Hong Kong represents 24% of the total current Section 2 AAR. We have for some time expressed concern both about the amounts at risk on the CLP Group of companies, and on this market as a whole. It seems to us that the time has come to pause and take stock of the situation. Holloway's letter states that ECGD are confident about the Section 2 Hong Kong market level, though this is qualified by the statement that a full review may be required later this year. I would much prefer to discuss a reasoned case now before adding further to your exposure on a market which already represents such a large proportion of your overall risk. AB

Ken Cotterill pointed out in his letter on Castle Peak 'B' of 25 July 1980 the Hong Kong risk has never been discussed formally by EGC, which is an odd situation for your largest single risk market.

See

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