000
GUVERNMENT HUUSE
HUNG KUNG
91
6-14 14:19
PHOE 04
9.
CONFIDENTIAL
機密
The HKG does not accept that the case to retain the Patrol Craft rests solely on political grounds. The local military assessment is that the vessels have a military role in maintaining the integrity of Hong Kong's sea boundaries, and operating in support of the Marine Police, In their absence, Hong Kong's ability to deter incursions would be diminished and British assertions of sovereignty compromised.
1988 Defence Costs Agreement
Limits of Flexibility
10.
The 1988 Memorandum of Understanding between the two Governments provides inter alia for the payment of specified costs on the basis of a 65:35 apportionment. Finance Committee was advised in fairly detailed terms of the various heads of expenditure under the Memorandum in July 1988.
11.
The framework of the 1988 Agreement provides virtually no scope for providing HMG with cash additional to the HKG's 65% agreed share of costs without going back to Finance Committee. Having made a "reconciliation" payment of 19m in 1988 in respect of the earlier 1981 Agreement, together with 48m in respect of the defence estate, there is no scope for further "clawbacks" under that Agreement.
12.
The relationship of the level of costs to withdrawal timings is important. The defence costs discussions in 1987 and 1988 were founded, in financial terms on a broad brush assessment of total costs formulated within fairly flexible parameters, viz. there would be a full garrison until the early 1990's, and it would thereafter contract at a rate to be determined by the outcome of the 1991 Garrison Withdrawal Review. The discussions focused, not on the detailed timings of withdrawal, but in determining the overall quantum of costs, and how these were to be shared between HMG and the HKG. At no time did either side contemplate trying to reduce overall costs by accelerating withdrawal timings which were seen then as being outwith the purview of the negotiations. The possibility that cost components such as the Patrol Craft, would be funded at a level different from the agreed apportionment was not considered.
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