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9th October, 1969.
In his letter (IKK 10/9) of 31st July, Carter mentioned that I would be writing to you about the negotiation of the post-1971 defence i contribution. As he indicated, we think your suggestion of preliminary exchanges at "official" level to be a very good one, but you will want to consider the matter with knowledge of how we see the problem at this end.
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2 When you had your discussion with the Defence Secretary on 25th June you knew, I think, that the garrison which had been proposed hero consisted of 7% major Army units, 5 mine countermeasure vessels, 2 frigates, a Whirlwind helicopter unit and RAF general support # (together possibly with a Hunter unit), but you have not been told the costs of such a force.
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3. I attach at Annex A a schedule of the forces proposed and the best estimate we can make of their costs, from which it appears that the running costs in 1971-72 would be about £20m a year. (This compares with running costs of about £15m in 1966.) The cost would increase if the proportion of British troopy in the garrison wore increased. The schedule does not allow for any price increases betwee now and 1971 (let alone during the currency of a new agreement) nor for the increased cost of the new Service pay structure which is expected to be introduced next year, but which we cannot yet cost. In addition to the running costs in Hong Kong there would of course be thị very considerable running costs of the support provided by the United Kingdom base and the Gurkha Line of Communications. I also attach at Annex B a forecast of expenditure on capital works which again would be subject to increase if the proportion of British troops in the increased, (In connection with capital works I think I should also say that the total cost we now expect to have to meet for the new works within the present agreement is £3.5m as against a total contribution by Hong Kong of £2.4m),
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Sir, David Trench, GCMG,
MC.
Hong Kong.
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