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suggestion that Hong Kong should be required to meet any part of the capital cost of the aircraft (if we road your proposals correctly you are asking that Defence Votes should be reimbursed an amount equivalent to the net credit that would have accrued to thom had the aircraft been sold elsewhere). This is a feature of the proposals that could make his task almost hopeless at whatever stage he takes the matter to his Councils. It would certainly make the next round of negotiations on the defenco contribution more than usually acrimonious. The Governor has indicated that if the aircraft cannot be provided without a capital charge being raised then he fears that he may have to abandon altogether any idea of putting the proposal for a fighter unit to his Councils.
7.
There are similar arguments against Hong Kong having to meet the running costs in their entirety. Tarlier in this letter I referred to the provision of air cover for Hong Kong from the UK. In the absence of an air presence in Hong Kong the political need to demonstrate our capacity to provide such cover and the need to provide a deterrent to Chinese incursions into llong Kong air space (which seems to us to be as much a military as a political point) would undoubtedly involve regular visits of aircraft from the UK. These visits could bo substantially reduced in frequency if there were a llunter force in the Colony. It does seem to us that some recognition of this potential saving of expenditure on your Votes should be shown in the extent to which Hong Kong is required to meet the running coats of the Hunter unit.
8.
Our Minister of State (Lord Shepherd) will be visiting Hong Kong from 31 May to 8 June and I shall be accompanying him. We expect to talk with the Governor about this matter.
If you aro roady with any proliminary views on the matters raised in this letter it would be helpful if I could have thom (by telephone if necessary) before my departure on 30 May; in particular, it would be a great help to have your views on the proposal in paragraph 5 above to postpone the positioning of the Hunters in the Colony until 1971.
sincerely, 1300)
yours
(J. 0. Moreton)
C ́NRIDENTIAL
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