TNAG-2480-FCO40-3610-Business-matters-in-Hong-Kong-Swire-Group-1992 — Page 8

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Foreign & Commonwealth

Office

19 November 1992

London SWIA 2AH

Sir David Gillmore KCMG

The Permanent Under Secretary of State

071 270 2150

M J Sweet Esq Cabinet Office

1.

Dear Mike,

You sent me a copy of your letter of 27 October to John Foggo at DTI, about Sir Robin Butler's forthcoming meeting with Sir James Spooner, John and Adrian Swire of the Swire Group. You asked for briefing.

2. I gather that John will be giving you details of Swires' commercial activities.

3. I enclose a contribution covering Swires' wider role in Hong Kong, and their attitudes to the Governor's

constitutional proposals.

Yours Sincerely,

Tim

Tim Simmons

Private Secretary

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But.swi.TF

C

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MEETING OF SIR ROBIN BUTLER (CABINET OFFICE) WITH

SIR JAMES SPOONER, JOHN AND ADRIAN SWIRE, (THE SWIRE

GROUP) : 25 NOVEMBER 1992.

AVIATION

1. The Swire Group retain a controlling interest in Cathay Pacific Airways (CPA), Chinese interests now some 22.5%. Swires have made a deliberate effort to increase the Chinese

holding. As the main Hong Kong airline, Cathay have a major interest in Hong Kong Air Service Agreements.

AIR SERVICE AGREEMENTS (ASAS)

2. We have been seeking since 1984 to separate out Hong Kong's Air Service rights (which are currently contained in the UK's Air Service Agreements (ASAS) with third countries) into self-standing Hong Kong ASAS. To continue after 1997 these need to be agreed with the Chinese. But recently we have made little headway in securing Chinese agreement.

We keep the

Swire brothers briefed on the state of our negotiations with

the Chinese on ASAS. They know that we are doing all we can

to put in place a network of ASAS which will endure beyond

1997 and hence give Cathay a firm basis on which to plan their future fleet. But they would like to see faster progress.

NEW HONG KONG AIRPORT

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3.

Swires also have a direct interest in the new Hong Kong

airport through their subsidiary, Hong Kong Aircraft

Engineering Co, which currently holds the franchise for aircraft maintenance and servicing at Hong Kong's Kai Tak

airport. We have failed to reach agreement with the Chinese

on the financial arrangements for the new airport, despite our

attempts to accommodate their stated concerns and build on their proposals. There is little prospect of securing Chinese agreement while the row on constitutional issues continues,

and without Chinese agreement, it will be impossible to borrow in the markets to complete the project. The HKG have decided that they should, in the absence of an agreement, get as far as

they can with the project using government resources already allocated to the project. This will include the HK$ 9 bn airport platform contract for which funds will be sought from

Finance Committee in late-November, (HKG announced their

intention to do this on 19 November).

But.swi.TF

SWIRES AND MINISTERS

4.

Swires conduct their lobbying of Ministers in a low-key, private and effective way. They are careful not to make public statements critical of Government policy. They are

well plugged in through Baroness (Lydia) Dunn, one of their

executive directors, who is the Senior Member of the Governor

of Hong Kong's Executive Council, and enjoys the Governor's

full confidence. The Swire brothers keep in regular touch

with FCO Ministers, and have been supportive of successive

Governors and of HMG's policies. We have however heard that the Swires are privately concerned by the seriousness of the present dispute with China, and the implications for their

operations. Chinese officials have made a concerted attempt to frighten a senior Hong Kong Chinese employee of Swires with

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