TNAG-0340-FCO40-376-Aid-to-Hong-Kong-from-UK-1972 — Page 132

NKLUTAD

Foreign and Commonwealth Ollica

OVERSEAS DEVELOPMENT ADMINISTRATION Eland Houco Steg Placo London SW1

E A W Bullock Esq

Treasury Chambers

Great George Street London SW1

Telephone 01-884 2077 okt

217

Your reference

Our reference

2FD 488/22/02

AID 209/262/05

Date

7 August 1972

Dear Bullock,

TERMS OF AID FOR DEPENDENCIES AND ASSOCIATED STATES

In his letter of 1 October 1971, Cecil Hodges agreed that the expiry of the CD&W Acts created a need to bring the policy on the terms of aid provided to Dependent Territories and Associated States more into line with that applied generally to independent countries, under which terms are fixed according to the circumstances of each recipient country and not according to the revenue earning nature of particular projects. He also recognised that the normal criteria used for independent countries would need to be modified to take account of the special political as well as economic factors affecting the Dependent Territories and Associated States but he thought it would be premature for the Treasury to endorse at that time the actual terms proposed for each territory in the paper enclosed with my letter of 7 July 1971.

2. ODA and FCO Ministers have recently agreed to the basic change from project to country terms and have also accepted recommendations on the timing of this change and actual terms for individual territories. Cecil Hodges suggested that we consult the Territorial Divisions concerned in the Treasury in the usual way about the terms considered appropriate as individual cases arose, but in view of the need to inform the Dependent Territories and Associated States simultaneously of the change in policy and the terms of future aid I am writing to you now to obtain your agreement to our proposals on timing and actual terms for individual territories.

3. For the reasons given in Annex I to the paper enclosed with my letter of 7 July 1971, the ODA and FCO have accepted the recommendation of the British Development Division in the Caribbean that the Associated States should be treated uniformly and that aid to those states should be in the form of Variant 1 interest free loans (repayable over 25 years with a 7 year grace period), the FCO having overcome their original doubts about the ability of some Associated States to service loans at all in the foreseeable future. We have also agreed with the FCO, again for the reasons given in the paper enclosed with my letter of 7 July 1971, that most of the Dependent Territories should receive their future aid in grant form. The actual terms proposed for all territories are set out in the enclosed paper.

4. Some delay in introducing the new policy is necessary both in order to facilitate the political presentation of the change to the Associated States and in order to enable the Associated States and certain Dependent Territories to prepare for the economic implications of such a change. It has been agreed between the FCO and ODA that the change for the Dependent Territories should be implemented with effect from 1 April 1973. For the Associated States it is more difficult to suggest at present a firm timetable.

RESTRICTED

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