CONFIDENTIAL AND PERSONAL
terms of the agreement, that we should now think
again. Unless you believe that the resurrection of
the defence contribution debate in this context would
cause unacceptable political repercussions, there would
seem every advantage in going ahead with the review
as a purely technical operation, not least because the
MOD say that if there is no agreement on cost
escalation by June they will have to stop the capital
works programme in its tracks.
4.
The second half of the equation is more difficult
As you will know, there is a current and agonising
Defence Review in which all options are open. We have
of course taken care from the very beginning to inject
the relevant Hong Kong political facts, and particularly
the need for close and private consultation with you
before even preliminary conclusions are approached. My
purpose is not to pre-empt all this, or to spark off
a reaction on the general question, which I think would
be premature. But it does at least seem possible that,
at the end of the day and when all precautions about
presentation etc. have been taken, there might be a
change which would trigger the second review provision of the Memorandum of Understanding (Article 3(i)(b)), by
the removal of a major unit plus some more.
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We have questioned the Ministry of Defence experts
or whether, with this possibility in mind, it would be
appropriate or desirable to go ahead with a review of the
defence contribution under the cost escalation clause
(3(i)(a)). Their answer has been three-fold. First
they say that the completion of the capital works
programme is necessary whatever the likely change of
the garrison; that decisions have to be taken by June,
We reasons I have explained, while the results of
/the
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