HONG HUNG DEFERO COSTS AGKLEVENT (DCA) 1981
1.
the this.
A new DCA was signed on 10 October by US of S(Army) (Barney Hayhoe) and the Governor of Hong Kong. Under the new agreement, which came into force on 1 April 1981, the Hong Kong Government will continue to contribute 75% of the cost of the
garrison, but this will be calculated on a new basis to ensure that actual costs are fully reflected. The previously agreed arrangements were not based generally on actual costs; they excluded in practice some costs arising from the stationing of the garrison and did not make provision for certain improvements that have now taken place (eg developments in the equipment field). In the event they also made insufficient allowance for inflation.
2. The new DCA allows for an annual retrospective adjustment
based on the actual size and shape of the garrison. The UK has
agreed to the enlargement of the garrison by one additional
battalion and certain other smaller elements, Recruiting for the
new battalion, which will initially be Gurkha, has been underway and is on target for the planned operational date of early 1982.
3. The new basis of costing and expanded garrison will mean that the Hong Kong Government's contribution will be substantially
larger. Since contributions will in future be based on actual
costs, it is impossible to give an exact estimate for 1981/2, but
a figure of £120M at September 1980 prices is of the right order.
The negotiations were conducted in a friendly spirit. The HKG
naturally wished to minimise the additional costs arising from the
revised basis of costing, whereas MOD wanted to eliminate the
shortfalls of the previous (1976) DCA. However HKG fairly readily
accepted that the HKG contribution could not continue to be with-
drawn from an understated total, although they have been concerned
about the public presentation of the greatly increased costs.
CONFIDENTIAL