TNAG-0938-FCO40-1157-Visit-of-John-Nott--Secretary-of-State-for-Trade--to-Hong-Ko-1980 — Page 64

CONFIDENTIAL

BRIEF 7

DEFENCE COSTS AGREEMENT

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The existing garrison is funded under the terms of the 1976 Defence Costs Agreement which now provides for the Hong Kong Government to bear 75% of the costs assessed by a prescribed

formula. This formula does not now reflect the true cost of the garrison. Discussions are being held with the Hong Kong Government to reach a new agreement both to cover the proposed enlargement and to reflect the true costs. The amount of the Hong Kong Government

contribution could double under a new agreement.

REPLACEMENT PATROL CRAFT

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The ageing TON class RN patrol craft are becoming due for replacement. The requirement for five new craft has been discussed with the Hong Kong Government, and it has been agreed that they should be pro cured by MOD under the same terms as the existing

DCA. The first craft will be built in the UK but the arrangements

will include the possibility of subsequent craft being built in Hong Kong should this prove practical and economic.. Tenders were invited at the end of July from a number of British firms, and are

due in late October.