is I think I over-emphasised it. I can tell you that there were not a few eyebrows reised round the table when I expressed more or loss your own sentiment that the Colony's interest might bo adequately served by a small extension or none. On that occasion a meeting in the Treasury - it was definitely counter-productive to play down the Hong Kong benefits too far. For one thing I was not believed: there will always be those readier to suspect us of some tactical manoeuvre than to take us at face value. And for another, I was very oxposed to the challenge that it seemed strange you should be asking for a large loan to execute a scheme of no value to yourselves.
4. I realise that you do not look at your application for this loan as a request for aid. We have been faithful to this approach and to your argument in your letter of last July that your problem was one of cash availability; in fact we have all along used the tera "financial facilities". And the cash availability argument has become no casier to maintain the larger your reserves become. However we have now realised that by denying that we were after aid we were denying ourselves access to the largest, perhaps the only large, source of funds for such a purpose as this. I have already caid that the Board of Trade has virtually no funds; the same is truc of the Foreign and Commonwealth Office; and the possibility of supplementary provision today for expenditure overceas is virtually Although another direction in which we might turn is towards the open market, we may expect difficulties in this direction too (I will return to this later). My point is that the only substantial source of funds for overseas expenditure of this sort is in fact the Ministry of Overseas Development. I would not have you beliove that development funds are going to be easy to obtain when the whole philosophy of that Ministry is against expenditure in territories as financially healthy as yours. But I do ententain nome hopes that this cource may yet be persшded to yield something if for no reason other than that it may be the only source.
2211.
5.
Frankly I find it hard to judge what are our chances of getting any money out of 0.D.M. I have to admit that 0.D.M. themselves wil1 not part at all readily, having said at an earlier stage that they hoped that the matter would not mature to the point where they were asked. This was partly because their funds are fully committed for Bome time ahead und partly for the reasons of doctrine to which I have already referred. But not everyone - and I think this includes at least some in the Treasury is as dedicated as they are to the oltruistic view of aid, and I do not deppsir. It is for thic reason that I am prepared to go along with the Treasury request for an analysis of the development benefits at your end and earnestly a ak you to do the same, however sceptical you are of the value of any figures you may produce. I assure you that the dangers you see in this are not so real as those which might arise from too single minded a concentration on the benefite to the UK.
6. There is another reason why we must not seal ourselves off, as it were, from access to development funds by doctrinaire insistence that Hong Kong is not asking for aid. To revert to the possible solution of a loan on the open market. As you are aware the interest rates paid at the moment arc excepti onally high, I cannot believe that you would be content to pay the going rate of % or even more, and if, say, 7% were your ceiling a subvention amounting to the
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