SECRET
UK EYES A
205 275
~264
3571
21.
It should be possible, with the advice of the Governor,
to form a view fairly soon on how far the Hong Kong Unofficials
are prepared to go to meet us. The next phase will probably
be a series of discussions between the Governor and the
Unofficials, the Minister and the Governor, and probably the
Minister and groups of Unofficials, designed to explore each
other's position. At this stage the Minister will want to
emphasise not only the political and economic considerations
which make us believe that Hong Kong should in future bear
the greater part of the cost of its defence, but also the
UK's economic difficulties, the pressures on our defence
budget, and the disparities between the UK and Hong Kong in
terms of percentage of GNP spent on defence, rates of taxation
etc. He will wish to make it clear that it is politically
impossible for the UK to continue to carry a large share of
the cost of the defence of Hong Kong.
22. The main object in this phase will be to discover what
possibilities of movement exist. The Hong Kong opening
position may well be the HK $205M referred to above, in which
case there will be a very large gap between their offer and
our opening demand of HK 351M. HK $205M is a 1974 figure
and we could argue that as a result of rising prices it should
now be increased to HK $235M; but this will still leave a large
gap. Our own room for manouevre lies essentially in three
areas:-
(a) Possible (marginal) reductions in the cost of the
garrison: e.g. by charging a reduced figure for the
refit of the frigate or going for the patrol boat
option; and by adjusting the incidence of the cost
of the capital works programme.
SECRET
28-
UK EYES A
1
+
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