TNAG-1060-FCO40-1310-Mass-Transit-Railway-in-Hong-Kong-1981 — Page 75

PP LTC HONG KρHQ

GPS 430

CONFIDENTIAL

Aar Anc Quatar Anjobs?

HKM 173/1 Allian

RECEIVED IN TINY NO. 51

14 SEP 1981

DESK OFFICER

FM ECGD 0914001

TO PRIORITY HONG KONG Mas..

PA

PMISTRY Action Taken

R+R

TELEGRAM NUMBER EXCED 30 OF 9 SEPTEMBER

to

me

ECGD

129. (3) глед

H.K, IG)

Mos

MASS TRANSIT RAILWAY: YOUR TELELETTER P173/1(A) OF 27.8.81 TO

DURIE REFERS.

1. OUR TERMS FOR CONSTRUCTION CONTRACTS PROVIDE FOR 85 PERCENT

OF THE UK ELEMENT TO BE FINANCED FROM THE BUYER CREDIT LOAN. FURTHER FINANCE TO THE VALUE OF 15 PERCENT OF UK ELEMENT IS ALLOWED TOWARDS LOCAL COSTS. TOTAL FINANCE WILL EQUAL 100 PERCENT OF VALUE OF UK ELEMENT. UK CONTRACTS ESTIMATE THAT UK ELEMENT OF EACH CONSTRUCTION CONTRACT WILL BE ABOUT 40 PERCENT IN WHICH CASE THE DIFFERENCE BETWEEN JAPANESE AND UK BIDS AMOUNTS TO 10 PERCENT OF CONTRACT

VALUE.

2. WE HAVE TOLD THE COMPANIES WHO HAVE PRESSED THE POINT IN THE PRE-TENDER STAGE THAT MASS TRANSIT WOULD NEED TO JUDGE ECH BID AS A WHOLE AND THAT WE WOULD LISTEN TO THEIR REPRESENTATIONS WHEN NEGOTIATIONS HAD ADVANCED FAR ENOUGH TO ENABLE THEM TO MAKE A

REALSTIC ASSESSMENT OF THE RELATIVE IMPORTANCE OF ANY PARTICULAR

FACET OF THE FINANCIAL PACKAGE. IT IS EXTREMELY UNLIKELY THAT A HIGHER PROPORTION OF FINANCE WILL BE AGREED FOR LOCAL COSTS. WE SHALL REPORT DEVELOPMENTS AS THEY OCCUR.

3. EID, THE OFFICIAL JAPANESE CREDIT INSURER, SAY THEY HAVE NO APPLICATIONS FROM JAPANESE CONTRACTORS. DO YOU KNOW IF THE JAPANESE BIDS ARE BASED ON THE AVAILABILITY OF OFFICIAL SUPPORT?

4. YOUR PARAGRAPH 2(C). THE ARRANGEMENT OFFERED BY BIRCH DOES NOT PROVIDE A MEANS OF SUPPORTING A HIGHER LEVEL OF FINANCE FOR LOCAL COSTS THAN THE 15 PERCENT REFERRED TO ABOVE. IT SOLVES A MINOR ADMINISTRATIVE DIFFICULTY ARISING FROM THE PRACTICE OF TRYING TO MEASURE THE PRECISE PROPORTION OF FUNDS AVAILABLE FOR LOCAL COSTS AGAINST SUMS ACTUALLY DRAWN FROM TIME TO TIME FOR THE UK ELEMENT. UNCERTAINTY OCCURS WHERE UK COSTS

IN HONG KONG DOLLARS BECAUSE OF EXCHANGE RATE FLUCTUATIONS. WE NOW OFFER TO FIX THE AMOUNT AT THE OUTSET, IE TO AGREE WITH THE CONTRACTOR AT THE OUTSET THE SUM TO REPRESENT 15 PERCENT OF THE UK ELEMENT. THIS SUM WOULD REMAIN AVAILABLE FOR LOCAL COST FINANCING IDRESPECT LUC AC

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