CONFIDENTIAL
connection has brought trading benefits (to both) and Hong Kong's
prosperity owes much to the dcfensive stṣld we provide (but to
the cost of which Hong Kong contributes). We are undoubtedly
vulnerable on this point. It would have been easier to meet
criticism if we were making a contribution to the current project.
7. The Hong Kong Government have already decided to go ahead
with this project, with or without our assistance. In this
knowledge Lord Shepherd is reluctant to press the issue with other
departments at Ministerial levd, at least for the present.
The arguments for deferring a decision are :
(a) Although our economic position has improved of late,
(b)
It is not to be expected
no relaxation of current restrictions on overseas
expenditure is possible.
therefore that we will be able to obtain agreement to
the provision of additional funds.
If a decision were to be rerched to support the project
from funds already provided, the Aid programme must
be the source. It is feared that the outcome could
only be the allocation of funds to Hong Kong at the
expense of other territories whose needs are much
greater.
These arguments are likely to hold good for some time to come.
Idcally it would be wise to postpone bringing this issue to a
head at Ministerial level until the recovery in our balance of
payments is established on a more permanent basis, offering
some hope that additional funds might be approved for this
project.
CONFIDENTIAL
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