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to deal with Chinese incursions. It would save the MOD about HK$8.75 million per year: or over £3 million in the
period 1992-97. (The total cost to the MOD for three craft would be £15 million in this period 1992-97.)
4.
This may not go far enough to meet the MOD. But the
Governor is adamant that no fudging of costs, either for the
vessels or under the Defence Costs Agreement, will be
possible. He has asked the Secretary of State to speak again to Mr King.
5. The proposal represents significant savings for the MOD. The Hong Kong Government have made real efforts to find an accommodation. If agreement could be reached on this basis it would avoid a showdown with the Finance Committee and avoid a potential major row with the Chinese.
6. If the Secretary of State can personally urge the Defence Secretary to give the proposal a fair wind it may be possible to resolve the impasse. Putting it across at a
lower level would be less effective. Given the
intractability of the other problems we face on Hong Kong we should do our utmost to settle this one which lies
within HMG's own authority.
7.
If the MOD reaction is sympathetic the Governor will quickly send a negotiating team here.
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