TNAG-0541-FCO40-636-Strength-of-garrison-in-Hong-Kong-1975 — Page 33

CONFIDENTIAL

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Those aspects to which attention needs to be drawn and which there is further action in some cases, are as follows:

a.

C.

d.

there is now a reference in the MOU to a capital works programme over the period of the Agreement which is to be within minimum and maximum limits in money terms. It was made clear by DOE/PSA that it was likely to be the end of the year before any figures could be agreed in this context. This is obviously an aspect on which there will have to be close liaison between DOE/PSA, DDAQ. and CBF's staff and we have to bear in mind the ramifications of the maximum figure being allowed to exceed the £3M per year included in the £33.5M breakdown. However, it is a matter on which the initiative must come from HMG so we should be able to avoid any difficulty of our own making.

we now have both capital works and minor works/ maintenance on the same basis as the rest of the contribution and it means that minor works and maintenance ceases to be dealt with on a purely nominal basis. The Hong Kong representatives were in favour of this change because actual figures existed for such expenditure and separate assessments with subsequent adjustments for inflation presented no difficulty. For our part, it was always a gamble depending on what was chosen as the nominal figure. Under the present agreement, actual expenditure did not reach the nominal figure until the fourth year. The change in respect of capital works on which the initiative came from the UK side means that we no longer have the full expenditure in one year included within the amount of the Hong Kong contribution. It will be treated on exactly the same basis as all other expenditure and % shared in accord with the overall agreement. But as Hong Kong will be carrying out the work and thus paying for it all initially, there will be subsequent adjustment to reflect the UK's share of the costs.

the insertion of a new paragraph 10 about requesting information and reviews concerning elements of cost stems from the Hong Kong proposal referred to in para 4c above. We have watered this down so far as we could and it leaves us free to reject any request if there are reasonable grounds for doing so.

there was little difficulty in reconciling our differences over the procedure for up-dating the amount or the contribution. The inclusion of a provision for quarterly adjustment as distinct from the annual arrangement contemplated originally

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CONFIDENTIAL