TNAG-0542-FCO40-637-Strength-of-garrison-in-Hong-Kong-1975 — Page 122

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SIGNIFICANCE OF WHAT IS PROPOSED.

(C) WE HAVE COME TO THE CONCLUSION THAT IT IS MORE ACCURATE AND

LESS CONFUSING TO THINK OF THE COST OF THE GARRISON IN HK DOLLARS RATHER THAN IN POUNDS STERLING. TO THINK IN TERMS OF £33.3M. AT SEPTEMBER 74 PRICES CONCEALS THE VARIOUS ARTIFICIAL EXCHANGE RATES USED IN THAT CALCULATION. ALSO, BECAUSE THE BILL WILL BE SETTLED IN DOLLARS, BECAUSE A LARGE PROPORTION OF EXPENDITURE IS IN DOLLARS AND BECAUSE OF THE

EXISTENCE OF THE SERVICES' EXCHANGE RATES SYSTEM, WE WOULD PREFER TO THINK OF THE UPDATED ESTIMATES SEPTEMBER 75 COST OF THE 4 1/3 GARRISON AS HK COLLARS 445.5M. IS THIS

ACCEPTABLE TO YOU?

2. ROYAL NAVY. THE OPINION OF MY ADVISERS IS HARDENING IN FAVOUR OF FIVE PATROL CRAFT IN PREFERENCE TO THE FRIGATE BUT AS INDICATED

(2) IN MY TELEGRAM NO 915 OF 16 SEPTEMBER A FIRM DECISION SHOULD NOT

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BE TAKEN IN ISOLATION BUT AS PART OF THE GENERAL AGREEMENT, SINCE UMELC O HAVE NOT YET BEEN FORMALLY CONSULTED ON THE MAKE-UP OF THE GARRISON, NEVERTHELESS IT MAY BE USEFUL TO YOU TO HAVE THIS

FOREWARNING OF THE LIKELY OUTCOME,

3. CAPTIAL WORKS.

A) WE NEED AGREEMENT ON THE MINIMUM AND MAXIMUM FIGURES TO BE

INCLUDED IN THE MEMORANDUM OF UNDERSTANDING AND AN INDICATION

OF THE MAJOR ELEMENTS MAKING UP THE WORKS PROGRAMME. WILL

YOU PLEASE SUGGEST FIGURES BY TELEGRAM. IN THE MEANTIME, AS EXPLAINED SEPARATELY TO JONES, WE HAVE LEFT THE FIGURE IN THE

UPDATED COSTING AT £5M. = DOLLARS 58.5 M.

(B) WE NEED TO BE CLEAR ABOUT THE MACHINERY TO BE ESTABLISHED FOR DRAWING UP THE CAPITAL AND MAINTENANCE PROGRAMMES AND FOR THEIR ANNUAL REVIEW AS SET OUT IN PARAGRAPHS 5 AND 8 OF THE MEMORANDUM OF UNDERSTANDING. WE ENVISAGE SETTING UP A JOINT COMMITTEE OF U.K. AND H.K. OFFICIALS LOCALLY. IT WOULD BE CONVENIENT IF C.B.F. WERE AUTHORISED TO COME TO DEFINITIVE DECISIONS ON THE PROGRAMME ON BEHALF OF M O D SUBJECT, OF COURSE, TO THE USUAL CONSULTATIONS WITH P S A. GRATEFUL IF MR RODGERS COULD RULE ON THIS BEFORE HE LEAVES HONG KONG.

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