GRS 280
PRIORITY
CYPHER CAT/A
SECRET
CEIVED IN
PTS AT No. 50
2607
૨૧૩
FM HONG KONG Ø40144Z
SECRET
TO PRIORITY F C O TELEGRAM NO 985 OF 4 OCTOBER.
YOUR TELEGRAM NO 755.
DEFENCE COSTS.
THANK YOU FOR THIS HELPFUL ADVICE.
HRILIO/1
LAST REF
292
REA
REF.
2. OUR COMMENTS ON M O D'S RESPONSE ARE AS FOLLOWS:
PARA 1. WE ARE GLAD YOU AGREE TO USE DOLLARS AS THE COMMON
CURRENCY FOR THE DISCUSSIONS AND LOOK FORWARD TO RECEIVING THE
DETAILED REVISION AS SOON AS POSSIBLE. WE HOPE IT WILL NOT
DIFFER SIGNIFICANTLY FROM THE FIGURES NOW BEING USED. WE
UNDERSTAND YOUR MINOR POINTS ON THE HQ B F TABLE RELATE TO
SERIALS 1 AND 6. WE ARE HAPPY TO TAKE YOUR ADVICE ON THE
PROPORTION ASSUMPTION IN RESPECT OF SERIAL 1 (TENTATIVELY PUT
AT 25% THOUGH IT COULD BE HIGHER) BUT ARE CONCERNED AT YOUR APPARENT WISH TO USE A HIGHER EXCHANGE RATE FOR THESE ITEMS. UNDER THE TERMS OF THE DRAFT M O U, PAYMENTS RELATING TO COMPONENTS OF COST EXPRESSED IN STERLING WILL BE CONVERTED AT THE AVERAGE RATE OF EXCHANGE FOR THE QUARTER. IT SEEMS THEREFORE MORE REALISTIC TO USE THE GENERAL ACCOUNTING RATE
FOR THE TIME BEING.
PARA 3.
(1) THE INDICATION OF THE MAJOR ELEMENTS IN THE CAPITAL WORKS
PROGRAMME IS HELPFUL. WHILST WE NOTE AND AGREE WITH YOUR
COMMENTS ON THE MACHINERY TO BE ESTABLISHED, WE SHALL NOW DISCUSS THE ITEMS IN MORE DETAIL WITH H Q B F AND P S A. THE REFERENCE TO CHATHAM RO AD SEEMS INCORRECT SINCE THE DATE WE HAVE BEEN GIVEN FOR ITS RELEASE BY HQ B F IS
JANUARY, 1976.
SECRET
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