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Sir D Wayson ov
DEFENCE REVIEW:
Cin
25/11
HONG KONG
PIA A
You may wish to see the attached minute from Mr Jackson of 11 November, together with the Governor's telegram no. 1127.
1.
2.
The position now appears to be that the Prime Minister will not make any statement that will pre-empt consultations with Hong Kong; that the Hong Kong Government are satisfied with the record of their team's discussions with the MOD (FCO telno. 923, copy also attached), subject to the amendment proposed by the Governor which has been agreed by the MOD; and that the Governor will be sending us his comments on the next step.
3.
The ball is therefore still in the air; but the next difficulty patch is not likely to be long delayed. The Governor's commentary will probably set a ceiling on the total amount that he considers Hong Kong could contribute. In view of the escalation of costs for even the reduced force to about £40 m. at end-1974 prices, and presumably something like £50 m. by the time a new agreement enters into force in 1976, the Governor's offer is likely to be substantially below 75%. The MOD believe that, at the end of the day, we should be content if Hong Kong agree to pay more than 50% of the current costs. But it will not be easy to convince the Treasury.
12 November 1974
A C Stuart
Hong Kong & Indian Ocean Dept.
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Governor We shall be telegraphing later today.
Waln
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