dti
the department for Enterprise
8. Hong Kong is of course one of ECGD's six "concentrated" markets. Current ECGD exposure and commitments (including a commitment for an airbus order worth £298 million) is around £2.1 billion. The current market exposure control figure is £3 billion, and this leaves a current headroom of approximately £900 million. In addition cover in Hong Kong scores against the global business budget, which has been set at £1.7 billion for 1991/92, of which around £410 million has been committed so far.
9. It is thus clear that there is current headroom within the PMS figures for the indications which are likely to be required in the current financial year; commitments are unlikely to be required on a large scale before 1992/93. it should also be noted that Treasury authority is required for individual indications and commitments of £100 million or more, and for cumulative annual commitments in any one market of £200 million or more. It is thus clear that Treasury agreement (or at any rate acquiesence) will be required for all the major elements of these projects; and the Treasury has already indicated that there is likely to be resistance there to increases in ECGD's exposure in Hong Kong. In response Mr Lilley has recorded the view that the scale and nature of these projects, and their importance to the future of Hong Kong, means that it is inevitable that they will have to be looked at exceptionally - (Annex B).
10. DTI, ECGD and FCO officials recently discussed the position. We agreed that, given the PMS headroom that exists, it was right to take the early requests for indications/commitments through the usual official machinery. Although there is a case for confronting the wider and more general issue head on at an early stage, on balance we concluded that it was preferable to have what may be an inevitable controversy in the context of a specific request for support, when the implications of turning down the request will be the more stark. From a PEP perspective, it seems almost inconceivable that a request for ECGD cover for these projects should be refused. Both we and the FCO are clear that such a refusal would risk an immensely damaging effect in Hong Kong. It would be widely perceived as undercutting Britain's commitment to the future of Hong Kong and to the joint agreement. UK firms, a number of whom are committing substantial resources and people to pursuing the project, would argue that they had been misled, though we and ECGD have been punctilious in avoiding any implied guarantees or commitment to cover. Our competitors would be incredulous that so many political risks had been taken to ensure progress with the airport, only to have the work handed on a plate to foreign firms. (The UK firms concerned are experienced exporters, and they are well aware of the fact that, for example in the event of a serious political or financial crisis, cover would have to be reviewed. We are however here considering a situation where there had been no events of that sort.)
B
88-273
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