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British citizenship by five years residence, with up to

three of the five years being spent in Hong Kong rather than

the UK.

3. HKG's proposed allocation of the 50,000 places between these four component schemes, and the intended balance between those

which will be

be allocated in response to the

the first round of

applications and those which will be held back for later

below, we believe that

distribution, are set out in Annex A. Subject to decisions on

the matters raised in paragraphs these figures can be approved.

The selection process

4.

A good deal of work has been done on the selection process

although a number of detailed points remain to be worked through.

The paper at Annex B outlines the mechanisms envisaged for each

of the selection schemes (those for the disciplined services are

still subject to discussion of the details between HKG and the

heads of the services concerned). The following paragraphs raise

aspects of the proposals which Ministers will particularly wish

to consider.

The General Allocation Scheme

(a) Occupational groups

The places available under this scheme will be distributed

by occupational groups, with priority going to those groups

which have high emigration rates and where lost personnel

are difficult to replace because of the amount of training

involved. However, HKG argue strongly that no occupational

groups should be excluded altogether from the scheme, as

that would be divisive and politically very difficult in

Hong Kong.

In view of the desirability of avoiding

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