TNAG-1061-FCO40-1311-The-Kowloon-Canton-Railway-1981 — Page 49

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NO DISTRIBUTION

00 BTC HONG KONG DESKBY 19010OZ

GR 220

CONFIDENTIAL

DESKBY 19010OZ

FM DOT 18180OZ AUG 81

TO IMMEDIATE BTC HONG KONG

TELEGRAM NUMBER CREDA 165 OF 18 AUGUST.

FOR MARCH FROM SANSUM.

CREDA 199. KOWLOON-CANTON RAILWAY.

PA

H K G D

Nu williamson

пише

H K K D 3 h

RECEIVED SE

2 0 AUG 1981

DESK OFFICER

INDEX

PA

51

: REGISTRY

Action Taken

1. LIKELY COST OF BACKDATING COST ESCALATION COVER AS OPPOSED TO A POTENTIAL CREDIT DEAL. IT APPEARS THAT THE COST TO HMG OF THE CREDIT MAKE-UP WILL BE CONSIDERABLY GREATER THAN FOR CEC. THIS IS OBVIOUSLY A VERY STRONG ARGUMENT IN FAVOUR OF CEC AND WE ARE HOPEFUL THAT WHEN THE TREASURY HAVE HAD A CHANCE TO CONSIDER THE DETAILED CALCULATIONS THEY WILL NOW BE PERSUADED THAT WE SHOULD ADOPT THE CEC ROUTE.

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2. WE WOULD OBVIOUSLY NOT WISH TO PERSUADE KCR OF THE VALUE OF CREDIT AT THIS JUNCTURE WHEN THE CHEAPER CEC ALTERNATIVE IS STILL ALIVE. WE WOULD HOPE YOU CAN THEREFORE AVOID DEFINITE DISCUSSION ON LIKELY ECGD CREDIT TERMS AT YOUR MEETING. WOULD A CHANGE TO A CREDIT ARRANGEMENT AS A MAJOR CONTRACT DIFFERENCE IN ANY EVENT REMOVE KCR'S ABILITY TO NEGOTIATE?

3. CONSIDERATION OF METCAM'S REQUEST IS NOW AT MINISTERIAL LEVEL AND WE EXPECT A DECISION TO BE REACHED. IN AMPLE TIME TO REVERT TO THE CREDIT APPROACH IF THIS SHOULD BE NECESSARY.

MINN