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CONFIDENTIAL
I have said above, be accommodated within ECGD's Market Exposure Controls for Hong Kong and China which have been set in consultation with the Export Guarantees Advisory Council.
The effect of the compromise proposed by the Chief Secretary would inevitably be that ECGD would be perceived by the UK exporting and banking community as being effectively "off cover" for project business in China and this would inevitably become known to the Chinese Government with the risk that this will prejudice UK commercial opportunities in the future. Furthermore, the Chief Secretary has stated his unwillingness to see substantial additional new indications or commitments in either market in 1991-92. Indications are given by ECGD on a basis which does not commit them either legally or morally to subsequently providing cover. There is nothing to be gained by withholding indications until the beginning of the next financial year and this again, is contrary to the agreed PMS methods of operation. Tenders for the Hong Kong Airport Platform are due to be submitted in February 1992 and an indication of ECGD cover will be required beforehand. It is almost certain, too, that an indication will be required on the Black Point Power Station in Hong Kong before the end of the Financial Year. Failure to provide ECGD indications for these projects will prevent UK companies submitting credible bids and will be interpreted as ECGD being "off cover" for Hong Kong which would have enormous political implications.
As far as new commitments are concerned, the Chief Secretary has acknowledged that commitments under the Chinese CFA are morally inescapable and it is likely that at least one and possibly two sizeable new commitments under the CFA will be required before the end of the Financial Year. To delay these commitments until the beginning of the next Financial Year in a situation where the cases can be accommodated by ODA and under the Amber Zone Budget would create totally unnecessary difficulties for UK exporters and the Chinese Government authorities.
My
My Secretary of State has already made clear his support for an indication on the Lantau Fixed Crossing and has emphasised the need for an early decision. The complex bid documentation must be submitted to Hong Kong by 16 December 1991 and the companies need a decision as soon as possible before then. Secretary of State also fully supports the issue of an indication on the Shajiao C power station on a basis which includes China risk. He hopes that the Prime Minister will agree to both indications, and that ECGD indications and commitments in respect of further business which shall be required on China and Hong Kong in this Financial Year should be considered on their merits according to agreed PMS criteria
CONFIDENTIAL
dti
the department for Enterprise
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