TNAG-0309-FCO40-345-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 114

PRIORITY

CYPHER CAT/A

FM HONG KONG 160915Z

SECRET

SECRET

RECEIVED IN REGISTRY No. 51 17 JUN 1971

MKIL10/4

TO PRIORITY F.C.O. TELEGRAM NO. 410 OF 16 JUNE.

9

TOP COPY

GRATEFUL YOU PASS THE FOLLOWING TELEGRAM TO HONG KONG GOVERNMENT

OFFICE LONDON AS MY TELEGRAM NO. 83.

FOLLOWING FOR SIR DAVID TRENCH.

TOTAL EXPENDITURE ON SERVICES MAINTENANCE WORKS (INCLUDING MINOR WORKS) OVER THE FOUR YEARS OF THE LAST AGREEMENT WAS DOLLARS 63.5 MILLION (INCLUDING NAVY AND R.A.F.). OF THIS JUST UNDER

DOLLARS 32 MILLION FELL ON HONG KONG FUNDS, REMAINDER BEING

REIMBURSED. CONVERTED AT DOLLARS 16 TO £1 (WHICH IS FAIREST

COMPARISON IN THIS CASE) LATTER FIGURE AMOUNTS TO £2 MILLION

AGAINST THE NOTIONAL FIGURE OF £1.9 MILLION IN THE AGREEMENT AND

MOD'S ORIGINAL FIGURE OF £2.3 MILLION. AT EXCHANGE RATES

APPLYING AT DATE OF EXPENDITURE IT WOULD BE £2.2 MILLION.

2.

THESE FIGURES ARE ON THE BASIS OF THE AGREED ''ONCOST'' OF

16%. THIS FIGURE HAS BEEN ON THE LOW SIDE IN PRACTICE. IT MAY

HAVE COST US ANOTHER DOLLARS4.2 MILLION OR £263,000 BUT WE DO NOT

INTEND TO MENTION THIS POINT HERE.

3. TOTAL EXPENDITURE (INCLUDING 163 ONCOSTS) GREW FROM A FIGURE OF ABOUT DOLLARS 13 MILLION IN 1967/68 TO ABOUT DOLLARS 21 MILLION

IN 1970/71. THIS WAS PARTLY DUE TO INCREASED MAINTENANCE CONTRACT PRICES (UP 18% ON THE ORIGINAL CONTRACT FROM DECEMBER 1969 AND UP 25% FROM THE ORIGINAL CONTRACT FROM OCTOBER 1970).

4. THE ESTIMATE FOR THE YEAR 1971/72 IS APPROXIMATELY DOLLARS

25.5 MILLION OR £1,760, AGAINST THE U.K. ESTIMATE OF £2.2

MILLION AVERAGE OVER FIVE YEARS. THIS IS AT 15% ONCOST, WHICH

MAY BE ABOUT DOLLARS ONE AND ONE HALF MILLION BELOW THE TRUE

SECRET

/ FIGURE.