TAL
CONFIDENTIAL
CONFIDENTIAL
CDF 406.
:
His Excellency the Gowamor
Sår Murray MacLehose GBE NCMG KCVO Government House
long Kong.
:
AUS (CS)
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Asst Sec Prianinel........ Gɔ0 2,2)
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Princip (a) GSO 2(a) HEORETI
Principal (b)....
GSO 2 (b)
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Asst Sec Principal
6
April 1970
HEO (A) 'AT
Copy
File No.......
(RS) 60970
Now that the Defence Costs Agreement has been in operation for its first year, you may be interested to have my views on the outturn of the actual financial contributions against fore- casts; also the results of my continuing search for economies and my hopes in this connection for the future.
2. As you know, the DCA foresaw an equal division of expenditure in 1976/77 between the Hong Kong and UK Governments based on an estinated total cost of the Garrison of $450M at September 1975 prices. The first quarterly contribution by the liong Kong Govern- ment vas higher than anticipated only because of the time log in
The UK share of these costs getting works services under way.
which are all mat in the first instance by PVD is offset against the Hong Kong Government's share of the other coats of the Garrison
Thus any under- which are met initially by the UK Government. spend on account of works services is reflected in a larger-than- anticipated not quarterly contribution.
3. The three subsequent quarterly contributions have shoTMm é progzessive improvement in the situation to the extent that, against long Kong's commitment of $225, the actual expenditure
The increase of about 2% can fox 1976/77 is likely to be $22911. be said to compare favourably with the rate of inflation which Hong Kong experienced during the year,
4.Hong Kong's contribution, in fact, represents much less than
As was only to be expected, consider- half the actual expenditure, able transitional costs in excess of the DCA vere incuzzed during the year, for example on the continued presence of a second British Infantry battalion until December 1976. Although the Amay alement of the Garrison is now close to the figures attributed to it in the 101, certain excesses still exist in terms of the
It is inescapable that relatively more expensive UK personnel.
the RAP ME11 beye to gym at a lovel about 137 in excess of its egrond overall figure until Kai Tak is vacated by March A The Royal Navy in some 62 above target and will need to winnin slightly in cxcess of it even beyond 1975 when the conversion of ezeve to mined manuing should be achieved.
CONFIDENTIAL