SECRET UK EYES A
potential of the economy was vital and this would be hit
by any significant withdrawal of the military presence. The value of this presence to the economy was however
unquantifiable.
(d) In these circumstances, an increase in the Hong Kong defence contribution beyond that included in the forecasts was particularly difficult for budgetary and fiscal reasons, especially in the first three years, although the possibility of some further increase in the next two years could not be ruled out. The suggested increase to 75% of the cost of the garrison would be
seen as a thoroughly unreasonable demand. 1975 was a particularly difficult year in which to demand such an
increase.
The idea of a graduated contribution over a period of years had presentational attraction. It could not be denied that the present contribution rate was too low. On the other hand, the jump from the present to the new
rate could not be too abrupt. Graduation would help
here. There would also be advantage in having a longer
period for the agreement than five years.
A ten year
period would be helpful for stability and confidence as
it would ensure the continuation of a British military
presence for at least this period. If the agreement were for 10 years it might be possible to increase the rate of contribution to something like two-thirds of the
cost of the garrison by about the seventh year.
(f) The foreign exchange cost of the garrison to the UK, and therefore the benefit to the Hong Kong economy, was
about two-thirds of the total cost. This might be of
presentational value to the UK in justifying a
contribution of about this size.
g) Whereas Hong Kong would prefer to denominate and pay
the contribution in sterling, there were no overriding
difficulties to payment in two currencies sterling for
costs incurred in the UK and Hong Kong dollars for local
costs. This would follow the pattern of the proposed
SECRET - UK EYES A
/inflator
No comments yet.
Private notes are available after approval.