ECGD Cover
"As your letter suggests, and Departments agree, ECGD cover will
obviously be very important to UK companies' chances of
maximising success. (There is also a wider political aspect to
this, discussed below.) One of Mr Heap's telegrams mentioned
in your letter reports that the French have already offered
full financial support for their companies and pledged to match
any terms offered by
The international
competition is expected to be fierce, and we cannot afford to
appear half-hearted."
competitors.
the
potential
on further
"The Treasury is very concerned about
implications for ECGD's finances of taking
large-scale commitments in Hong Kong. ECGD already has
exposure and commitments of £2.1 billion in Hong Kong, equal to
8% of total ECGD exposure and commitments compared with a stock
control review point of £650 million. ECGD's financial
problems (accumulated deficit of
deficit of £4 billion and annual PSBR
cost of £500-600 million) result from previous large scale concentrations of exposure in markets, which at the time looked
reasonable risks, but which later defaulted. Significant
repayments on future credits would fall due after 1997, when
there is obviously an increased risk of default and the
possibility of very heavy claims. The larger the new credits, the larger the potential for loss (although if claims should
arise they cannot be assumed to equate to ultimate loss)."
"It is Treasury policy to resist taking on commitments in Amber Zone markets greater than £200 million per year with the aim of broadly speaking limiting new commitments in these markets to
expected repayments. In Hong Kong's case, such a £200 million limit will be broadly in line with expected repayments. The Treasury recognises that this could mean that some projects that come forward will not receive cover and as a result may not go ahead. But, providing cover
cover in response to demand
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