TNAG-0308-FCO40-344-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 175

SECRET

HONG KONG DEFENCE CONTRIBUTION

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Background

1. Traditionally Hong Kong has made a contribution to Her Majesty's

Government towards the cost of its defence and of the assistance which

Her Majesty's forces provide for internal security. For the past

four years this has been at the rate of £5 million per annum made up of an annual contribution of £1.5 million (fixed in 1958), plus a "special additional contribution" of £3.5 million, negotiated in 1966.

The agreement under which the contribution was provided expires in April 1971 and on the assumption that we should continue to expect

Hong Kong to pay a share of its defence, it is now necessary to

negotiate a new one.

2. In 1966 the then Secretary of State for the Colonies took a

negotiating team to Hong Kong. There was an atmosphere of considerable

opposition in the Colony to the idea of an increased contribution of

the order then being demanded and agreement was only reached after

long and difficult negotiations, at one stage of which there was a

real danger that the Governor's unofficial advisers would tender their

resignation.

3. In 1967 the estimated cost of the United Kingdom armed forces in Hong Kong was £16 million. In 1971/72 the comparable costs are estimated (at 1970 prices) at £26,4 million comprised of £21.8 million

running costs of the units in Hong Kong, £2.4 million capital works and £2.2 million maintenance and minor works. The cost of capital works is forecast to rise over the succeeding years to a peak of £4.6 million in 1974/75. Over half the total cost is foreign exchange expenditure. Details of forecast figures are at Annexes A and B. 4. To avoid creating the atmosphere of crisis which was occasioned by the despatch of a Minister to Hong Kong for the 1966 negotiations, Sir David Trench proposed to the previous Administration that it would be best if, in the light of the situation as he saw it, he were to

assess the maximum sum which he believed he could persuade his Executive Council and Legislative Council to accept as a fair contrib- ution; and then armed with Her Majesty's Government's agreement in principle to this sum, to put the matter to his unofficial advisers. Also to avoid too frequent local crises over re-negotiation he suggested that any new agreement should run for five years.

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