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ANNEX
HMG appreciate that few if any other dependent territories have contributed to the cost of their own defence by HM Armed Forces on the same scale as Hong Kong has done over the years. But this should not be allowed to obscure the fact that the reason why many territories have not paid defence contributions to HMG is that their defence requirements have been met by essentially local forces paid for from the local budget.
2.
Hong Kong is not unique as a dependent territory in that it receives little aid for development purposes from HMG. The Bahamas and Bermuda are both in a similar position and have been since develop- ment aid was initiated.
3.
It is true that the 1966 Defence Contribution was formally presented as a basic contribution of £11⁄2 million p.a. plus a special contribution of £3.5 milli n p.ao HMG for their part agreed to this method of presentation at that time in order to assist the Hong Kong Government to satisfy public opinion in the Colony on the matter. At the same time, as unofficial members will recall, HMG continued to press the view that £5 million per annum was a not unreasonable figure for the contribution. HMG are well aware of the presentational difficulties in Hong Kong of an increased contribution and would once again be ready to consider any proposals for easing these difficulties which the Hong Kong Government on the advice of the Executive Council may wish to suggest.
4.
As was stated in paragraph 6 of HMG's earlier message to the Unofficial Members, the calls for financial aid upon HMG, are such that they can only be met on a system of priorities based on need. Because of this it is difficult for HMG to assist Hong Kong financially with its development problems. However, it must not be thought that HMG would not be prepared to consider assisting Hong Kong in some appropriate way if an urgent need for such assistance were to arise at some future time and
a specific case were put forward. Meanwhile, HMG are always ready to help Hong Kong in other ways whenever the opportunity to do so arises.
5.
HMG fully realise that despite Hong Kong's spectacularly booming economy, the Colony's future trading position is to a considerable degree dependent on external factors over which the Hong Kong Government can exercise little control. HMG have been doing and will continue to do their best to minimise the pressures which may develop against the Colony's economy as a result of these factors. If these pressures were to develop to such an extent that Hong Kong's economy were seriously threatened, a new situation would have been created and this would have to be considered both by the Hong Kong Government and by HMG in the light of the circumstances at the time.
6.
The views of the Unofficial Members as expressed in paragraph 10 of their memorandum are noted and it is recognised that there are strongly held views on this subject. HMG appreciate also that Hong Kong's situation was such that devaluation resulted in the Colony's sustaining losses in 1967.
7.
It is true that when Mr. Heath, as Leader of the Opposition, visited Hong Kong and the Far East during January 1970, he mentioned the figure of £300 million in relation to Britain's earnings of foreign exchange from Malaysia and Singapore. Mr. Heath was speaking in the context of general defence policy east of Suez and the figure of £300 million did not relate to Hong Kong.
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