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YDENTIAL
HAL
HONG KONG DEFENCE COSTS NEGOTIATIONS OCTOBER 1975
WORKS MATTERS
BRIEF J
Provision of Present Agreement
1. The agreement concluded for the period 1971 - 1976 was largely works-orientated.
This was very much on the advice of the then Governor who considered that the
Hong Kong Government would find a contribution geared to real estate (in which they
thereby acquired a reversionary interest) easier to justify than a straight cash
contribution.
2.
Thus out of the contribution of £40M (specified in Sterling) originally envisaged
for the 5-year agreement period:-
a.
£17M related to capital works (or cash in lieu provided that failure
to meet this level of expenditure could be laid at the door of the Hong
Kong Government).
b.
full maintenance of existing real estate. This activity contributed
in kind was valued at £11M (nominally £2.21 per annum).
3.
These provisions were subject to review if costs. rose by 50% in the running
time of the Agreement.
Implementation of Present Agreement
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4. Once we had acceded to a substantial part of the present contribution being
tied up in capital works, it was necessary to ensure that a programme (which would
not have been carried out until later had it had to be Sterling funded) was
accelerated in order to make full use of this resource.
5. It became clear early in 1974 that the initial problem of ensuring that the
money was fully spent had given way to the probability of overspend through a