TNAG-0617-FCO40-765-Strength-and-cost-of-UK-armed-forces-stationed-in-Hong-Kong-1977 — Page 68

CONFIDENTIAL

LINE TO TAKE WITH THE HONG KONG GOVERNMENT

16. Towards the end of this year it will be necessary to enter into formal

communication with the Hong Kong Government in order to obtain their agreement to

proceeding with plans for the replacement vessels. It is proposed to take the

following line:-

a. It is understood that the Hong Kong Government agree

with the stated role (paragraph 7), and that they agree

in general terms that the 5 existing patrol.craft should

be replaced by broadly similar vessels.

b. The broad order of capital cost of the replacement vessels

is likely to be M 7 to M 37 which, it is hoped

will be acceptable to the Hong Kong Government (paragraph 15),

c. That on the understanding reached in February 1976, the Hong

Kong Government would pay 75%, and HMG 25%, of the capital cost,

in line with the terms of the LCA (paragraph 4)

d. That the capital cost comprises the full re-provision cost

including overheads (such as R & D, design work

and that the exact figure will depend upon such factors as place of

build and detailed characteristics of the vessels.

f. That the detailed characterisitics of any replacement vessels

and the question of where they should be built (which will affect cost)

would be left to later discussions.

g. That the Hong Kong Government would continue to pay thereafter, as

at present, 75% of the support costs of the Squadron.

17. We would be grateful if Ministers, given the political and financial factors

outlined in this paper, would agree that formal discussiong should at a convenient time

be opened between the MOD and the Hong Kong Government on the lines suggested in para 16

above. These discussions would of course be ad referendum to Ministers who would be

consulted again before final decisions were take on proceeding with the purchase of

replacement craft for the Hong Kong Squadron.

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CONFIDENTIAL.