TNAG-1660-FCO40-2308-Hong-Kong-Kowloon-Canton-Railway-Corporation-(Amendment)-Ord-1987 — Page 46

CONFIDENTIAL

Reference..........

173/26

KOWLOON CANTON RAILWAY

1.

Mr Maud's minute of 5 June.

Mr Maud may wish to see telegraphic exchanges on the subject resting with Hong Kong telegram number 2346.

2.

I suggest that he might take the following Line when speaking to Christopher Eugster of Kleinwort Benson:-

a)

b)

c)

d)

30

Privatisation of various statutory bodies is under consideration by the administration in Hong Kong at present. It is not certain that they will conclude that the KCRC is a suitable candidate for privatisation;

The picture should become clearer later this year. Nonetheless it is difficult to give a precise steer on when Kleinwort Benson might best offer their services for a privatisation operation. But we would not see any point

see any point in putting together a presentation in the immediate future;

The need to take into account Chinese views and reactions is a major political consideration. Great care would be needed in any privatisation to avoid suggestions of "selling off the family silver";

We are puzzled by Eugster's reference to privatisation as a confidence-building measure. We do not think that privatisation will have any bearing on confidence. The key will be the perception in Hong Kong of the reliability of Chinese undertakings set out in the Joint Declaration. These include the continuation of the capitalist system in Hong Kong. we have been greatly encouraged by the flexibility and pragmatism of the Chinese approach.

So far,

You will see from the telegrams that we should not give any indication to Eugster about the possibility of a merger between the KCRC and the Mass Transit Railway.

savers

18 June 1987

CODE 18-77

agres.

2 dont think that the HKKE

printisatim

wull or shall embark on

Jecause this wall done cofilence, CONFIDENTIAL

RD Lavers

Hong Kong Department WH 306 270 2650

but arguthy a succumbed printisation would be so: cuvesels

an unsuccended one, or one

измества

of which Chin desaproved, wall to the reverse.

сък Goten 18/6