4
Internal Security and External Defence
( ) The distinction between internal and external security in Hong Kong is artifical. The external threat is from the
Communist Government in China. Their strategy is to play on local grievances in Hong Kong so as to create internal distur- bances which would give them an occasion to "intervene" and
reproduce a Maco-type situation. A crisis over the defence
contribution would provide them with the best chance of all of fomenting internal trouble and so best suit their strategy.
7. Capital Costs
When the Goverior stated in his letter of 17 October that they had "adjusted to take into account the reduced scale of works required", he meant that their review had virtually been confined to the abandonment of the Erskine Barracks project.
The Governor suggested that if it gould help he could try to get agreement locally to the proposal that if the capital costs increased or decreased over the period of the agreement such increase or decrease should be shared between HMG and the Ilong Kong Government on a fifty-fifty basis. It may be that mention. of this proposal in general terms will help to sway opinion in favour of the Governor's revised offer 7
8.
(a)
Kr. Stretton's letter of 10 November.
Paragraph 3. The answer is 'yes'.
(12) Faragraph 4.
•
The Hong Kong proposal is that there should. be no departure from the present formula (a percentage of the totel annual cost) The PWD are 'hot entirely happy" with the current arrangements simply because they involve them in a degree of administra›ive detail (eg provision of electric light
arrangement' bulbs) which goes far beyond their own engagements for the maintenance of Hong Kong Government property. No changes of
substance are proposed.
(c) Paragraph 5. The main assumption made by the Governor is that Erskine Barracks will not be built. No adjustment was made to take into account the present level of costs because
/building
Secret
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