recurrent, of civil aviation works might be apportioned between a territory and the U.F. on the basis of the respective benefits they derive from the facilities. Many intangible factors are involved and the formule is capable of producing a wide range of mswers by different munipulation. It is more suited to assessing grant aid for needy territories then the provision of financial facilities and
it was not used when the decision was taken in 1959 to make available
an intereat free loan of £5 million to the development of Kai Tak,
28.
Hong Kong is not asking for a grant but for finmeial facilities
for a loan on terms that reflect in some measure our undoubted
aviation interest in the project. But Hong Kong's financial onse for the facilition it seeks is not strong i the current performance of the economy and recent budgetary trends belie the forecasta made and feare expressed of reserves being inadequɛte to meet all the Colony's development needs, And the Colony's request comes at a time when severe restrictions must be operated in the U„K, on credit and overseas expenditure, Ün financial and economic grounds there
is therefore a strong case for saying to Nong Kong that, notwithstanding the U„K's clear aviation interests involved, funds cannot be found fram v.k, resources for additional expenditure overbase and for stating the grounds on which we might hope that Hong Kong would find the way to finance the project from local
resources.
29.
But to do so would ignore certain important political
implications.
Hong Kong public opinion tends to reset strongly to the use of local resources for purposes considered to lie within the U.ă, responsibility or interest, to the possible detriment of funds available for local development. This was evident in the 1966 negotiations for an enhanced defence contribution, It is a local political factor which the Governor and his Executive and Legislative Councils will have to weigh up carefully in deciding whether to go ahead with the project as planned in the absence of outside assistance We should not bank on a decision favourable
to our interests. Under the challenge of communist confrontation in Hong Kong an enlightened policy of repidly improving social services has become a political necessity and, while the Colony obviously cannot ignore measures which would significantly improve
/ the economic