RESTRICTED
38
1600 80
MEEDIATE
DEDIP
CYPHER/CAT A
FM FCO 221933Z
DEDIP
SECRET
1974
LAST
REF.
NEXT
REC
3230
Q
PÅ
2
3.50
TO IMMEDIATE HONG KONG TEL NO 305 OF 22 MARCH/AND TO IMMEDIATE HAMILTON AND BELIZE.
MY TELS NOS 262 AND 263 TO CANBERRA AND NO 80 TO WELLINGTON (WEITHER TO ALL): EXCHANGE CONTROL.
FOLLOWING IS SOME FURTHER EXPLANATION OF THE CHANGES DESCRIBED IN THE CHANCELLOR'S MESSAGE.
1. THERE IS NO REASON TO BELIEVE THAT THE VOLUME OF UK DIRECT INVESTMENT WILL IN ANY WAY BE AFFECTED BY THE RESTRICTIONS ON THE USE OF OFFICIAL EXCHANGE, THEY WILL MERELY AFFECT THE METHOD OF FINANCING. UK COMPANIES WITH VIABLE SCHEMES OF INVESTMENT WILL READILY DE ABLE TO BORROW EURO-CURRENCIES FROM UK BANKS OR BANKS ABROAD. THE SAME REQUIREMENTS AS ARE NOW BEING INTRODUCED FOR THE OSA HAVE APPLIED TO INVESTMENTS IN THE NON-STERLING AREA FOR A NUMBER OF YEARS AND THIS HAS NOT PREVENTED TOTAL INVESTMENT FROM INCREASING.
2. ON THE QUESTION OF WHETHER UK COMPANIES WILL BE ALLOWED TO RETAIN PROFITS OR FORCED TO REPATRIATE THEM, THE RULES ALLOW FOR A PROPORTION OF PROFITS (NORMALLY ONE-THIRD) TO BE RETAINED WITHOUT QUESTION. BUT THE REQUIREMENT VILL IN ANY CASE BE APPLIED GLOBALLY i.E. TO ALL THE SUBSIDIARIES OF A UK COMPANY COLLECTIVELY, HOT ON A COUNTRY BY COUNTRY BASIS, IT WILL THEREFORE BE OPEN TO A UK COMPANY WITH SUBSIDIARIES ELSEWHERE TO RETAIN A LARGER SHARE OF PROFITS IN A PARTICULAR COUNTRY IF THEY WISH TO.
RESTRICTED
E-C-R-TIT
13.