SECRET
17 In the context of the United Kingdom Defence Review a
further agreement was successfully negotiated in December,
1966, (to run from April, 1967) under which the Colony agreed
to pay £5 million a year for the next four years. The formula
reached was that Hong Kong agreed to make an annual contribu-
tion of £1.5 million plus a special additional contribution
of £3.5 million per annum towards the "local costs" of the
garrison (which were assessed at £9-10 million in a total
cost of about £16 million).
18. The defence contribution has always been a sensitive
issue in our relations with Hong Kong since the Colony has
been the only one to have made regular and substantial payment.
The 1966 negotiations were carried through by Mr. Fred Lee (then
Secretary of State) with great difficulty and the agreement, when
announced, aroused unanimous public opposition locally.
political consequences ould arise if this matter were to be
raised again during the currency of the present agreement; thie
a factor that has to be taken into account in deading whether or not fighter aircraft will be a complicating factor for Hong Kong in finding the money-
should be repositioned in the Colony before April, 1971 when the present agreement to pay for the Hunter aircraft as from March, 1970 (see para expires.
above
1G
Take in den?
Serious
This is
19.
In Ray,
1968
Muistare decided (in OP))
Bat
to defer consideration of where the costs of the besed post-1971 Garrison should be
borne pending a full
Assessment of the cost of the Hong Kong commitment. No information is available as to when the noi will be ready with their assessment.
malter will have to be reached
But some decisions on thwis
in advance of negotiations
with Hong Kong on the a new defence contribution; there can be expected to start with felbed of next year.
Hong Kong Department
May, 1969
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