From The Minister of State
Dear Lea
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TRED
Foreign and Commonwealth Office
London SW1A 2AH
ний
1731
26 August 1981
No
Mo a 100 $11
METRO-CAMMELL LTD:
KOWLOON-CANTON RAILWAY (KCR)
I have seen a copy of Kenneth Baker's letter to you of 14 August requesting agreement to the provision of Cost Escalation Cover for the extension of Metro-Cammell's contract to supply rolling- stock to the KCR. I strongly support this request because there are wider issues at stake, not only because of the significance of the order for Metro-Cammell's future, but for other political and commercial reasons.
The original specifications for the modernisation of the KCR and the purchase of rolling-stock were drawn up by British consultants with the Metro-Cammell product in mind. It would do our export promotion work, in both Hong Kong and the Far East as a whole, considerable harm if a British firm failed to negotiate in a British Dependent Territory an extension of an order drawn up to British specifications, and the Hong Kong Government went to international tender. Success in the competitive Hong Kong market is highly beneficial in promoting British exports in the region. Conversely, failure there would have wider repercussions. For example, while it is true that economic readjustment has caused China to cut back her modernisation plans, it is expected that the Chinese will eventually require new rolling-stock for their own railways, particularly their part of the Kowloon to Canton line. If the whole KCR order is secured, Metro-Cammell would then be well placed for such orders.
It is also worth bearing in mind that a Transport Conference is being planned to be held in Hong Kong in February 1982. The aim is to promote the work of British consultants and exporters, using Hong Kong, which has bought much from our transport industry, as a showpiece. It could be serious if the KCR had, just prior to the conference, turned to our foreign competitors for the remaining rolling-stock it requires. I therefore hope you will
agree to the provision of Cost Escalation Cover.
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