DECKEN
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When the Governor was consulted about Hong Kong's contribution under the new agreement, he proposed that the contribution should be doubled to about £17 m. (He has since spoken of about 220 m. which would be double the present £10 in. contribution.) On the basis that the forces would cost about £40 m., this would mean that Hong Kong's contribution to the g4o total would be about 50%. He thought this reasonable.
Ministers have, however, decided thet Hong Kong should be asked to pey at least 75% of the cost of the reduced garrison. At 1974 prices this would mean a contribution of about £30 m., s three-fold increase for Hong Kong. The Governor has advised that this would not be viable in Hong Kong terms. There will ulready be substantial opposition to paying "more for less". This means that there is a gap of about 210 m. between what hinisters want and that Hong Kong considers it can pay.
6.
If neither HMG nor the Hong Kong Government can move from their positions, the only way of bridging the gap would be a further radical reappraisal of the size and cost of the Hong Kong garrison. The Chief of the Defence Staff already considers that the proposed reductions are as large as is compatible with the internal security of Hong Kong. However, we have asked the Ministry of Defence to reconsider the whole question once again. For example, the present garrison is trained, manned and equipped for general soldiering. If it is to be regarded purely as an internal security force, it might be possible to operate on a more modest and inexpensive scale without substantial risk.
7.
The second possibility is that UK Ministers might be prepared to reduce the proportion of costs which Hong Kong is to be required to pay. The Prime Minister directed in DOPC that, while we should ask for 75%, officials should also prepare briefs on the assumption that Hong Kong might not in the end pay more than half. If this was accepted, then the gap could be virtually closed. Hong Kong might have to find an additional £5 m., over and above the present maximum of £20 m., to take account of rising costs during 1975. But since this would be purely the result of
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