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4.
CONFIDENTIAL
(2) Speed - The conclusion in our February, 1977 paper
(see paragraph 23(d)) was that 25 knots was the minimum acceptable maximum speed. In discussions with MOD(N) in August, we were advised that this would rule out consideration of vessels which might otherwise be suitable, but which were slower. Accordingly, we agreed that the study should consider vessels from 20 knots upwards. In the annex attached to your letter, the lowest maximum speed for purposes of cost consideration and for incremental increases has been put at 15 knots. Our view remains that a minimum speed of 25 knots is probably required. What is the thinking behind your decision to reduce the lower limit of the study to 15 knots?
(3)
Possibility of Local Construction - Paragraph 36 of NST 7015 refers to the possibility of the vessels being built locally. We also made this point in our submission in February last year, This point has not been specifi cally covered in the annex to your letter. We wish to ensure that this possibility is not overlooked.
We have noted the preliminary assessment of possible cost and your confirmation that 75% of the capital cost would fall to be paid by the HK Government, irrespective of the financial provisions in the successor to the present Defence Costs Agreement, which might come into force before all the vessels had been delivered. You also refer to 'R&D, design work and overseeing and of the cost of any infrastructure required in HK for their support', We should like to identify what precisely these costs cover. In the course of carrying out the craft study, would it also be possible to identify the estimated cost of each item?
5.
A further point which you do not mention is the ultimate intention over the disposal of the 5 existing patrol craft. If they were sold then we assume that 75% of the proceeds will be credited to the Hong Kong Government.
6.
At this stage we are not yet sure as to whether anything sufficiently important will emerge in the next few months to require a meeting in London in June. We suggest that we
reconsider this when we have had an opportunity of considering the craft study here. It seems at least possible that the points which we shall have on it could be covered by correspondence.
7.
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I am sending a copy of this letter to DCBF, John Stewart in the FCO and Dennis Bray, Hong Kong Commissioner, London.
(L M Davies) Secretary for Security
CONFIDENTIAL