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9. Mr. Healey said ho would do his best to persuade his colleagues to handle the problem in the manner best calculated to minimise those risks. In any ways there were advantagos in proceeding by stages; but equipment for the forces had to be ordered 10 years in advance so it was ossential to make long term planning assumptions. Once the assumption had boon made to run-down completely by the mid-70s, it was necessary to be completely frank with those affected in order to work out the problems in greater detail and to give people the maximum chance to make the necessary adjustments. Tho British Governmont had therefore thought it right to give their friends a full indication of their thinking.
10.
Mr. Leo said ho was not questioning the British Government's right to deploy its forces as it thought best, but he urged them to take account of psychological factors. South East Asia roacted differently from other areas. There would either be panic or, because of Lotional factors, grave changes in relationships throughout the region. If Britain could at this stage prosont her intention as a phasod operation to reduce by 50 per cent by 1960/71 he believed that this could be done without generating instability in the region and that it should also satisfy British domestic political requirements.
11.
Mr. Healey interjected that he did not believe that the British Government would change their planning assumption about the mid-70s but what was to be said publicly and when it should be said were open for consideration.
12. Turning to economic considerations, Mr. Lee said that Singapore had just recovered from the shock of separation from Malaysia and the economy was beginning to pick up. Unless it was possible to reassure bankers that Singapore was not losing the Lajor prop of her economy, confidence would be affected. They would be losing 10 per cent of G.N.P. which was not in itself catastrophic if Britain really meant to contribute significant economic aid and to onsure an orderly withdrawal by phasing redundancies sensibly. But if it meant in- discriminate cuts without proper consideration, capital would take flight. It would be disastrous for them to have to impose currency controls since they depended on a free economy. They were about to institute their own currency. A serious liquidity problen could arise in a matter of wooks if confidence were affected. Even the British business houses would tend to rodeploy their re- sources elsewhere once they knew that British forces were withdrawing complotely.
/Sone
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