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VI DIG HEŵ agreemom AMI NAIU

South China Morning Post W/oct.

A year of hard bargaining

By OUR OWN CORRESPONDENT

Behind the new £40 million defence agreement announced last night lies a year of hard bargaining between London and Hongkong in which finally the Governor, Sir David Trench, had to intervene.

It is a mark of the respect with which he is held in Whitehall that the British Government eventually accepted his view that demand for £60 million was "out of the question and quite unreasonable.

Obvious

Så David made. what to Hongkong people is an obvious point: Hongkong is faced with heavy calls on its resources over the next few years and the imposition of such a heavy commitment might well impede Government's efforts To continue its policy of economie improvement of the people's lot,

In yesterday's statement, the Inancial Secretary, Mr C.P. Haddon Cave referred briefly ter the "diiticult and complex negotiations” and wid the agreement had been reached "alter much sideration in 1 ondoa,*

But I can reveal that there were several stumbling blocka during the talks,

these includedt

Von

the Ital Hongkong could afford to pay:

possible variations in the

size of the gRETINONI

the base month for the

estimation of costs;

provision for review of the agreement in the event of Hongkong running into economic hardships.

The agreement represents a considerable triumph for the negotiators, for while on paper Hongkong shows that its outlay on the garrison will be £40 million, the cash contribution will be only £12 million, wherens in the previous agreement it was 75 per cent of £20 million.

The greater part of the new agreement therefore represents money that will be spent in Hongkong by Government on Army installations which will one day revert to the Colony.

Moreover, by agreeing to this + rebuilding programme, the Army will be able to surrender large areas of land which it occupied in more spacious days.

The total area of land to be surrendered will be about 520 neres and this will mean a htige windfall to Government. Most of the land is in the New Territories but there is some in 1 yemum and in Argyle Street and C'hatham Road,

Among the provisions which Hongkong had included in the matreenient was one that the base months for cost estimates should be April 1971, whereas Britain wanted April 1970,

Britain opted for April 1970 because its proposals

were

(Contd from Page 1) based on figures prevailing in April last year.

But when the negotiations dragged on Hongkong insisted that this April's figures should be used because the agreement would begin from this date.

The virtue of this is that if during the term of the agreement' costs of military works rise or fall by more than 50 per cent compared with the

April 1971 Äpures there is to be # review of the capital works element.

If Britain's 1970 figure had been accepted and budding costs rose 50 per cent or more above this figure before 1976, Hongkong would have had to stump up more.

But Hongkong officials feel that with the rise in building costs in the past year it is unlikely that costs will rise 50 per cent above these levels, and may conceivably fall, giving Hongkong a saving.

1

Hongkong also argued -- and won acceptance on the point that if our economy suffers such adverse change that the defence contribution becomes an "unreasonable burden," then it will be reviewed,

The one snag here, however, is "who determines what is an "unreasonable burden.' This will have to be settled by discussion.

Size

Another point Hongkong worked into the agreement was that if the size of the Garrison increased or decreased by more than one major U present size is 6 2/3 major units the agreement will be subject to review,

its

There is also provision to send more troops if needed and Hongkong can be certain that the size of the present Ciarrison will not be decreased, so long as Government and the Army consider that the present strength is justified.

It is understood that Hongkong's former Financial Secretary, Sir John Cowpertwaite, took a prominent part in the bargaining and his skill as a negotiator can be seen in many of the provisions agreed upon.

But it was the intervention of the Governor that was responsible for Britain reducing its demand from £60 million as exclusively reported by this newspaper last week to £40 million.

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