TNAG-2120-FCO40-3026-Hong-Kong-Garrison-future-of-the-Royal-Navy-presence-1990 — Page 135

EELAGV

HKC

SECRET

062/1

RECEIVED

DES

INDE

2 MAY 1990

0661 AVW LLY

Mr

Ir Pay

Рустния

FROM:

M V Stone

Hong Kong Department

DATE:

11 May 1990

As discussed this

Homing, grateful

Cc:

Mr McLaren

Jou

Mr Pz

Paul

1

would resubunit

whenthe Governor has

Aplice to

PS/Mr Maude

tel.

yout

JBrower

1415

ROYAL NAVAL PRESENCE AFLOAT

A

1.

B

Mr Burns

RM1/5

Miss Marosch Mr Stone 14/5

14/5

Please refer to your minutes of 3 and 9 May. Mr Hatfield

returned from Hong Kong on 9 May and I attach for consideration a

draft telegram in response to the Governor's.

2. I understand from the MOD that, at the working level, HKG and

the MOD have agreed the bones of an agreement, subject to further

consultations on both sides. The agreement involves HKG paying 100%

of the crewing costs of the vessels, in exchange for an amendment to the DCA which will allow Hong Kong to recover 75% of any capital items (ie stocks) brought under the previous DCA, which are

subsequently sold, or returned to HMG. The current DCA provides for

HKG only to obtain 65%, although they would have originally paid

75%. Capital goods bought under the current DCA would still revert

65% to HKG if sold.

3. MOD tell us that under this measure Hong Kong considers they

will be able to offset the higher recurrent costs by gains in the

longer term over stocks sold. MOD are also apparently happy. Apparently, because of the way the DCA works, Hong will not have to approach Finance Committee over the deal. The Financial Secretary

likes the deal but the Governor has yet to be convinced.

We need therefore to tread carefully. The

such a deal should be a one-off and not be

precedent. The MOD are not keen for us to

main point must be that

quoted in the future as a

mention the bones of the

SECRET

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