D/MIN/WR/8/7
MINISTER OF STATE FOR DEFENCE
hut Mellon th Mr. Jayunin
Coprict 6 HKM 6/545/2
12
Prime Minister
(409)
as)
(408)
HONG KONG DEFENCE COSTS NEGOTIATIONS
In the absence of the Defence Secretary I am writing in response to your Private Secretary's letter of 28 November asking for a further report on the negotiations with
Hong Kong.
2. Since the signature of the Heads of Agreement in Hong Kong on 1 November (reported in the Defence Secretary's minute of 3 November) work has continued to establish the
feasibility of the release of land at Kai Tak and Victoria Barracks within the timescale sought by Hong Kong and to finalise the Memorandum of Understanding setting out the details of the Agreement, including particulars of the Hong Kong contribution and the mechanism for dealing with inflation. I had a further meeting with the Governor of Hong Kong this morning (when I was supported by officials from the FCO, the Treasury and PSA, as well as my own) at which, after some hard bargaining and making use of the
formula on the duration of the Agreement set cut in the
Defence Secretary's minute of 25 November, I was able to secure agreement on all outstanding issues of substance. A report on the release of land at Victoria Barracks and Kai Tak, which concludes that release in step with the increases in Hong Kong's financial contribution is practicable provided that an early start is made and some procedural short cuts taken, has now been accepted by both sides; and the Memorandum of Understanding has been agreed, although some work remains to be done in tidying up the
related documents.
SECRET
/3. The
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