TNAG-0543-FCO40-638-Strength-of-garrison-in-Hong-Kong-1975 — Page 6

SECRET UK EYES A

ment if necessary.

The annual cost of this garrison was

estimated at £33.5M at 1974 prices; but as a result of

inflation the cost in 1976/77, the first year of the new

agreement, is now estimated at about £432M or HK $463M.

•

If a frigate is included in place of patrol craft as the

naval element the cost (allowing for a refit in the UK

during the course of the agreement) rises to £44M or HK $468M.

1

UK Objectives

4. Our objective must be to secure a new defence agreement,

preferably for a further 5 years, from 1st April 1976 which

will enable us to station in Hong Kong the garrison which we

consider necessary for external defence and internal security,

but which will permit us to recoup from the colony a

substantially higher proportion of the cost than in the past.

Given the pressure on the defence budget it is important to

obtain the highest possible contribution from Hong Kong. The

agreement must be in a form which provides for inflation and

exchange rate changes during its operation.

5. At OPD in July Ministers accepted the reduced 4 units

garrison, confirmed their view that Hong Kong must be pressed

for an immediate contribution of 75% of the cost, and decided

that in view of the difficult position of the Governor and

the seriousness with which HMG viewed the matter. the Minister

of State should be sent out to conduct the negotiations for a

new agreement. Although the possibility of a graduated

Hong Kong contribution, 'starting at 50% and rising to 75%

by the end of the agreement, was discussed the Minister of

State was not given authority to negotiate on this basis but

was instructed to refer back if he could not obtain 75%.

SECRET

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UK EYES A