TNAG-1660-FCO40-2308-Hong-Kong-Kowloon-Canton-Railway-Corporation-(Amendment)-Ord-1987 — Page 47

GRS 200

CONFIDENTIAL

FM HONG KONG

TO PRIORITY FCO

TELNO 2346

OF 180315Z JUNE 87

CONFIDENTIALTOP COPY

Q DIST ?

173/2.

FOLLOWING PERSONAL FOR HUM, HONG KONG DEPARTMENT, FROM CLUFT.

YOUR TELNO 1594: KOWLOON CANTON RAILWAY CORPORATION.

WE AGREE THAT EUGSTER SHOULD BE DISCOURAGED FROM BELIEVING THAT

PRIVATISATION OF KCRC IS AN SSUE WITH WHICH HKG WHLL WHISH/BE IN

A POSITION TO COME TO GRIPS N THE IMMEDIATE FUTURE. THE POSHITIMON

SHOULD BECOME CLEARER LATER THIS YEAR WHEN WE HAVE CONSIDERED

WHETHER THERE IS ANY MILEAGE IN A KCRC/MTRC MERGER. YOU SHOULD KNOW

HINCIDENTALLY THAT ONLY A VERY LIMITED NUMBER OF THE DIRECTORS OF

KCRC/MTRC ARE AWARE OF THE MERGER PROPOSAL AT THIS STAGE. IT WOULD

NOT THEREFORE BE APPROPRIATE FOR EUGSTER TO BE TOLD OF THINS

POSSIBILITY.

2. AS TO THE CHINESE, WE WOULD CERTAINLY KEEP THEM IN THE PICTURE HF AND WHEN ANY DECISIONS ON AMALGAMATION OR PRIWATISATION WERE TAKEN BEWING CAREFUL AS YOU SAY, TO AVOID ANY SUGGESTION OF SELLING THE FAMILY SHILVER. WT CAN OF COURSE BE ARGUED THAT PRIVATHIS ATHON

HS SELLING THE SILVER BACK TO THE FAMILY BUT THERE IS A RISK THAT THE CHINESE MIGHT REACT ADVERSELY IN ANY CASE, ON THE SAMPLE GROUNDS THAT THIS WOULD BE A MAJOR CHANGE IN THE ASSETS DUE TO THE SAR.

BUT PRIOR DISCUSSIONS SHOULD HELP TO DEFUSE THIS.

3. ON THE BROADER ASPECTS OF THE FURTHER SCOPE FOR PRIVATHISATION, CORPORATINSATION AND CONTRACTING OUT MIDEAS ARE NOW BEING CURCULATED

WITHIN THE ADMINISTRATION AND YAXLEY COULD BRIEF YOU FURTHER MIF YOU

ARE INTERESTED WHEN HE HS IN LONDON IN LATE SEPTEMBER (23 - 25).

WILSON

YYYY

HMLNAN 4410

LIMITED

HKD

FED

MR MCLAREN

MR MAUD

CONFIDENTIAL