TNAG-0308-FCO40-344-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 121

CONFIDENTIAL

Reference..

37

Mr Laird (Hong Kong Department)

RECEIVED IN REGISTRY No.51

23 MAR 1971

HKK 10/9

1. I am replying to Mr Gaminara's minute of

4 March to Mr Philipps about the Hong Kong Defence contribution.

2.

Para 7 of the unofficial members submission

It is true that we give aid to other dependent territories and the Associated States in the Caribbean. We do not expect to be reimbursed, since the recipients of the aid are in no position to make reimbursement. Financial aid is generally in grant form, but we sometimes make loans on very soft terms. Official aid is subject to quite strict "tying" rules.

3. Dependent territories pay the recurrent costs of their internal security forces. In the case of grant-aided territories, where we subsidise the cost of the local administration, our subsidy includes provision for an adequate police establish- ment. Development aid has been used to help train, accommodate and equip local police forces.

Para 8 of the submission

We have no information about the 1966 discussions

or the suggestion that HMG would help Hong Kong financially. As far as we can discover there has been no aid to Hong Kong in the context of the 1966 agreement. Hong Kong is not unique as a dependent territory in that it receives little financial aid from HMG. Neither the Bahamas nor Bermuda receives and like Hong Kong, they are too rich (by dependent

territory standards) to qualify for it.

5. Para 10

We have no information about the consequences of sterling devaluation to Hong Kong. I understand however, that both the Treasury (Defence Materials Division) and Mr Turner at the Bank of England are working on this aspect of the unofficial members'

submission, and will advise you about it.

Autavi

A O Davies

Financial Policy & Aid Department

10 March 1971

CONFIDENTIAL