CONFIDENTIAL
LINE TO TAKE WITH THE HONG KONG GOVERNMENT
16. Towards the end of this year it will be necessary to enter into formal
communication with the Hong Kong Government in order to obtain their agreement to
proceeding with plans for the replacement vessels. It is proposed to take the
following line:-
a. It is understood that the Hong Kong Government agree
with the stated role (paragraph 7), and that they agree
in general terms that the 5 existing patrol.craft should
be replaced by broadly similar vessels.
b. The broad order of capital cost of the replacement vessels
is likely to be M 7 to M 37 which, it is hoped
will be acceptable to the Hong Kong Government (paragraph 15),
c. That on the understanding reached in February 1976, the Hong
Kong Government would pay 75%, and HMG 25%, of the capital cost,
in line with the terms of the LCA (paragraph 4)
d. That the capital cost comprises the full re-provision cost
including overheads (such as R & D, design work
and that the exact figure will depend upon such factors as place of
build and detailed characteristics of the vessels.
f. That the detailed characterisitics of any replacement vessels
and the question of where they should be built (which will affect cost)
would be left to later discussions.
g. That the Hong Kong Government would continue to pay thereafter, as
at present, 75% of the support costs of the Squadron.
17. We would be grateful if Ministers, given the political and financial factors
outlined in this paper, would agree that formal discussiong should at a convenient time
be opened between the MOD and the Hong Kong Government on the lines suggested in para 16
above. These discussions would of course be ad referendum to Ministers who would be
consulted again before final decisions were take on proceeding with the purchase of
replacement craft for the Hong Kong Squadron.
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CONFIDENTIAL.