CONFIDENTIAL
You may point out that no one could then have foreseen the
impact of worldwide inflation and may offer to redress the
imbalance occuring since 1971. But in Her Majesty's Government's
view that could not be a sufficient step. We see it as
inappropriate that Hong Kong's defence contribution should continue to cover only a minor part of the cost. Hong Kong
is unique among our remaining dependent territories, in that
it is rapidly developing economically, has considerable
international economic significance in its own right, and
for all practical purposes enjoys economic and financial
autonomy.
Indeed, if Hong Kong were to be asked to bear
the full cost of the garrison, it would be in our view well
within the capacity of your economy to pay. Hong Kong's
economy enjoyed rapid growth throughout the 1960s and, even
after allowing for the 'setback of the last few years, is well.
placed to resume a rapid rate of growth as soon as the upturn
in world trade gets underway. Even if Hong Kong bore the full
cost of the garrison, this would represent only about 6% of your
total public expenditure programmes and a bare 1% of total GNP.
In comparison with many independent states at the same stage of
economic development, which bear the whole cost of their defence,
this would not be a severe burden. The time has come for
Hong Kong to bear a share of its defence costs more in keeping
with its wealth and economic maturity.
We recognise, as I have said, that special factors apply
to Hong Kong's situation, and that the maintenance of political
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