TNAG-0544-FCO40-639-Strength-of-garrison-in-Hong-Kong-1975 — Page 99

PRIME MINISTER

SECRET

UK EYES 'A'

HONG KONG DEFENCE AGREEMENT

CHIEF SECRETARY TO THE

TREASURY

827/11

Ps

36

Sutr tome quickly please

وحمل

PS / hand forming, sabate мі пале resein vol.

Mr

351

The Defence Secretary's minute of 3 November briefly reported the

outcome of the recent negotiations with Hong Kong. I am writing

now to convey my agreement to the proposed package, subject to

certain conditions.

2.

First, in order not to prejudice the financial terms which the

Minister of State for Defence has secured, it is essential that we

should confirm the feasibility of the proposed land releases, which

are the key to the whole agreement, by the end of the month. There-

after we must make every effort to ensure that the releases are

achieved by the due dates or we shall put at risk the substantial increases in the Hong Kong contribution rates which depend upon

them.

3.

Second, our reprovisioning requirements must be kept within

the limits of what Hong Kong would accept as being both essential and reasonable, otherwise we might prejudice Hong Kong's acceptance

of the full reprovisioning costs.

4. Third, whereas we are of course ready to discuss the Hong Kong

request for a further examination of the possibility of limiting the cost of differential inflation, I do not regard this as a

serious problem and it must not be allowed to interfere with the

operation of the inflator mechanism already agreed ad referendum

with Hong Kong officials.

1