HKK 10/9
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Discussions with for I. Towel.
November 1969
BACKGROUND NOTE
Defence Contribution
By March 1971 the defence contribution agreement between
HMG and the Hong Kong Government has to be renegotiated, having regard to the new Force levels Ministers have approved for the Colony's garrison after the withdrawal of British forces from Singapore/Malaysia in 1971.
2. Kong Kong has paid an annual cash contribution to "Imperial" defence since 1863. In 1958 this was fixed at £11⁄2 million per annum. In 1964 the Hong Kong Government agreed to contribute, in addition, up to £6 million over the next six years towards
the Army and R.A.F. works programme in the Colony. In the context of the United Kingdom Defence Review a further agreement was negotiated in December 1966 (to run from April 1967) under
which the Colony agreed to pay £5 million per annum for the next
four years.
The formula reached was that Hong Kong agreed to make an annual contribution of £1 million plus a special additional contribution of £31⁄2 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).
3.
The defence contribution has always been a sensitive issue
in our relations with Hong Kong and the 1966 negotiations were carried through by Mr. Fred Lee (then Secretary of State) with
great difficulty. The agreement, when announced, aroused unanimous public opposition locally and serious political
consequences could arise if we were to seek a revision of the contribution during the currency of the present agreement.
4.
When in May 1968 the Defence and Overseas Folicy Committee
approved the Force levels of the post-1971 garrison, Ministers
decided to defer consideration of where its costs should be
borne pending a full assessment of the cost of the Hong Kong
commitment.
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