TNAG-0275-FCO40-311-Development-of-Kai-Tak-airport-at-Hong-Kong-1970 — Page 91

for needy territories than the provision of financial facilities and

it was not used when the decision was taken in 1959 to make available an interest free loan of £3 million to the development of Kai Tak. 28. Hong Kong is not asking for a grant but for financial facilities for a loan on terms that reflect in some measure our undoubted aviation interest in the project. But Hong Kong's financial case for the facilities it seeks is not strong; the current performance of the economy and recent budgetary trends belie the forecasts made and fears expressed of reserves being inadequate to meet all the Colony's development needs (see paragraph 6 above). And the Colony's request comes at a time when severe restrictions must be operated in the U.K. on credit and overseas expenditure. On financial and economic grounds there is therefore a strong case for saying to Hong Kong that, notwithstanding the U.K.'s clear aviation interests involved, funds cannot be found from U.K. resources for additional expenditure overseas and for stating our hope that Hong Kong would find the way to finance the project from local resources. 29. But to do so would ignore certain important political implications.

Hong Kong public opinion tends to react strongly to the use of local resources for purposes considered to lie within the U.K. responsibility or interest, to the possible detriment of funds available for local development. This was evident in the

1966 negotiations for an enhanced defence contribution. It is a

local political factor which the Governor and his Executive and Legislative Councils have had to weigh up carefully in deciding whether to go ahead with the project as planned in the absence of outside assistance. Under the challenge of communist confrontation

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