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5.
The defence contribution has always been a sensitive issue in our relations with Hong Kong, since the Colony has been the only one to have made regular and substantial pay- ments. The 1966 negotiations were carried through by the then Secretary of State with great difficulty and the agree- ment, when announced, aroused unanimous opposition in Hong
Kong.
6. When the then Defence Secretary visited Hong Kong in June, 1969, the Governor suggested to him that, as a first step in preparing for the negotiations over the post-1971 € defence contribution agreement, officials of the Hong Kong Government should work out a figure for Hong Kong's contrib- utim, both in relation to the size of the garrison and to what would be politically acceptable in Hong Kong. This would then be put to the Foreign and Commonwealth Office and if the latter (after consultation with the other departments concerned) considered the figure to be a reasonable one, the Governor could put it to his Executive Council at the approp- riate time. If the latter agreed the figure, it could then be put forward as an offer by the Hong Kong Government, thus avoiding any appearance of its being a demand by Her Majesty's Government. It was agreed that such an approach seemed sensible and this is in fact the course which is being adopted. We now await the Governor's initial proposals in the light of the figures provided by the Ministry of Defence.
7. It would be logical to assume that any reduction in the strength of the post-1971 garrison in Hong Kong which may now be decided upon in the light of any decision by Her Majesty's Government to retain a military presence in the Far East (and assuming that the capability is retained to reinforce the garrison from within the Far Eastern theatre), would enable a corresponding reduction to be made in the estimates prov-
ided by the Ministry of Defence; and that this in turn should mean a resultant reduction in the amount of the
defence contribution to be expected from Hong Kong. For
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