SECRET UK EYES
position will have to be reviewed prior to the withdrawal of
the battalion from Brunei.
4.
The Hong Kong Contribution.
The Governor has taken informal soundings of the
unofficial members of the Hong Kong Government and has reported
that his earlier view remains valid that the maximum that Hong
Kong can be brought to pay in 1976/77 (the first year of the
new agreement) is £M17-that is, only about half of the cost of
the suggested garrison. His view is that the major social
programmes now in hand, at a time of recession in the Hong
Kong economy, make it impossible to meet any more greatly
increased defence bill. The Governor indicated that it might
be possible to negotiate a graduated arrangement providing for
a steadily increasing Hong Kong contribution rising from one
half to three quarters over 7 years. It has been agreed with
the Hong Kong Government that the agreement will separately
make provision for inflation.
5.
Despite the Governor's assessment, I believe that in view
of the current pressures on the Defence Budget we should stand
fast by the negotiating aims which emerged from our consideration
earlier this year. We should aim first to get Hong Kong to pay
a full 75% from the start of the new agreement.
If this proves
not to be possible we should be ready to move.to a graduated
/scheme
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