TNAG-0310-FCO40-346-Contributions-of-Hong-Kong-for-costs-of-maintaining-military-1971 — Page 144

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PART I. HISTORICAL

In HE the Governor's broadcast talk on 20th December 1966

it was announced that Hong Kong had offered to HMG a four year agreement to pay a defence contribution of £5m a year. The offer was made "as gesture in recognition of the UK's economic difficulties, " The amount would be paid each year in the four financial years 1967-68 to 1970-71 and it would have to be appli ed "not only towards partially meeting the recurrent costs of the garrison but also to covering both the reduced balance still due under the £óm capital works programme and whatever other financial obligations Hong Kong still had under past agreements," 2. The DIS press release described the new arrangements as

"a deliberate contribution towards the continued stability of the pound, as well as a contribution towards defence costs." In a speech in the Legislative Council on 30th March 1967 the Colonial Secretary said that the final sum agreed to had been "offered to Britain as a gift in recognition of her very real economia difficulti

3.

The perilous financial position of the United Kingdom at that time was therefore a paramount consideration among the various factors which had been taken into account, In paragraph 2 of the Memorandum of Understanding dated December 1966 it was clearly stated "In recognition of the United Kingdom's balance of payment difficulties, it was agreed that, for the four financial years commencing with 1967/68, Hong Kong would make an annual defence contribution of £1}m plus a special additional contribution of £3m por annum," Paragraph 5 af the Memorandum records that the Hong Kong Unofficial representatives took note of the fact that, in the event of increases in wages becoming desirable for locally enlisted personnel and locally engaged civilians, it might become necessary to consider variations in the arrangements, 4. From the Memorandum of Understanding, the basic contribution would appear to be £1m and not £5m per annum. When the Memorandum was drawn us in 1966 HMG's case for an increase was based on the need for assistance in overcoming her then acute balance of payment problems. This state of affairs does not exist at the present time.

/ PART II.

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