STORE!

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tangible capital assets. It followed that should vacant possession not be forthcoming through no fault of the Hong Kong Government within the time scale eventually agreed, there should be a corresponding postponement in the increase in Hong Kong's contribution.

.7.

The Governor then stressed the presentational point that, although the Minister of State's visit was the culmination of a year of negotiations, the impression had been given to the public that the negotiations started with his arrival, and there was little that could be done to disabuse the public of this. If it were to be announced or implied that agreement in principle had been reached during this week the public would strongly criticise the Hong Kong Government for having given way too soon. It was therefore extremely important that the impression should be given to the public that while the talks had been useful and had made progress, no agreement had yet been reached. The Governor suggested it should be announced that the discussions would be continued during his visit to

London in the first week of December. By that time it would

have been possible to prepare the Hong Kong public, and to announce an agreement, which by that time might be in a final form that could prove acceptable.

8.

The Minister of State said that the propositions advanced by the Governor involved considerable difficulties which might prejudice the prospect of an agreement. He pointed out that the Governor's initial statement at the meeting with the Executive Council and Finance Committee had not specifically linked the further release of land to the higher contributions demanded. It had been mentioned as an additional presentational point. He added that the Services had already vacated a substantial amount of land recently and that further releases had already been agreed. He regretted that the UK Government had been given no credit for these releases.

SECRET

SECRET

/The Minister

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