TNAG-2120-FCO40-3026-Hong-Kong-Garrison-future-of-the-Royal-Navy-presence-1990 — Page 117

LOCSEN

29

GOVERNMENT SECRETARIAT

布政司署

香港下亞風車道

LOWER ALBERT ROAD

HONG KO

本署檔號 Our Ref.:

TSR 6/57 (88)

THE 062/1 HKC

Pa

RECEIVED IN

來丽熊號 Your Ref:

11 JUL 1990

20 June 1990

R. Hatfield Esq.

Head of Section C (Overseas --

Commitments)

Ministry of Defence

Main Building

Whitehall

London, SW1A 2HB

Mn Hat Rilid,

Пл

MR PAUL

MR STONE

%

୪

Royal Naval Presence in Hong Kong

When you met with Ian Wotherspoon on 3 May, he' undertook to write to outline our current thinking on how we might be able to assist you in meeting MOD's share of the running costs of the Peacocks during the period the vessels remain in service in Hong Kong. In turn, you said you would advise us as to the phasing and scope of the financial assistance required; we look forward to receiving this information in due course.

You will recall we thought there might be difficulties for us in pursuing your proposal that we determine a future depreciated valuation of the vessels thereby allowing you to generate an additional cash flow up-front. I now confirm that we do not wish to pursue this option since it would amount to a break with the agreed 65:35 allocation of costs. Not only could we not accept this change in the ground rules, but we would also have to tell the Finance Committee and, as a result, would almost certainly jeopardise the funding of Hong Kong's future share of expenditure under the 1988 Defence Costs Agreement. remain willing to consider any other arrangement which would assist you in meeting your share of future operating costs, you, will, I am sure, understand that we would not be able to accept any mechanism outside the context of the agreed 65:35 split of gross costs. Nor could we accept one which resulted in Hong Kong suffering a net disadvantage in cash terms at the end of the day.

Whilst we

During your visit we discussed the feasibility of off-setting an increase in the Hong Kong Government's share of the proceeds from stores etc. purchased under the 1981 Agreement, sold or backloaded etc. against an advance to cover MOD's share of operating costs. As you are aware, it is extremely difficult to quantify the likely cash yield from the disposal of stores purchased under the 1981 Agreement, or for that matter, the 1988 Agreement. This difficulty is