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Hong Kong's defence under the Defence Costs Agreement, is £160 million per year.
8.
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The Governor strongly believes that this basic cost sharing arrangement - 65% to the Hong Kong Government and 35% to the MOD must remain in place. He argues this for two main reasons: first, to vary the arrangements would require Finance Committee's approval and the issue would be
a highly controversial one; and secondly, the arrangements
established for the three patrol crafts could set a
precedent for any other variations to the garrison withdrawal plan.
9.
Attitudes on both sides have hardened since the
negotiations began. It had originally seemed that the differences could be fudged, and a number of possibilities
have been considered (eg front loading the Hong Kong
Government's payments to the MOD to ease the latter's cash-flow problems). But none of these solutions has been mutually acceptable: either they provided insufficient financial advantage to the MOD; or they necessitated, in the
view of the Hong Kong Government, a fresh approach to the
Finance Committee.
B
10. The position deteriorated further in February, when
Sir Michael Quinlan wrote to the Governor, making it clear
that MOD Ministers were not prepared to agree to the
retention of the patrol craft after 1992 without a "very
substantial contribution" from Hong Kong (over and above
what they would pay under the Defence Costs Agreement).
Alternatively, the Hong Kong Government could take over the
manning and operation of the patrol craft from 1992. The MOD would be prepared to provide, on repayment, loan service personnel to help with the transition to full Hong Kong
manning.
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