TNAG-0715-FCO40-911-Future-of-the-Dependent-Territories-4 — Page 54

CODE 18-77

Mr WE Quantrill HK&GD

CONFIDENTIAL

Reference

Cc: Mr Pennock

нка

HKG 025/2

3.51

27 NOV 1973

DESK OTH?

INDEX

مام

M.RY ction Taken

PA

17

рух

Mr Dale

Ms Wright

83

POLICY TOWARDS DEPENDENT TERRITORIES

1. I am sorry that we have been slow in responding to your minute of 10 October with a first draft of a new despatch on policy towards dependent territories.

2. This minute deals only with your questions on aid policy. Mr Nason will reply on the general points.

3. The holders of doctrine on aid policy towards the dependencies and on budgetary aid are now Rural Development Department (Mr Beattie) and Finance Department (Mr Pennock). You will no doubt consult them on the proposed despatch, as well as Ms Wright, the inheritor of the functions of the Dependent Territories Economists Unit.

4. Our experience with the Independence Settlements of the Solomons, Tuvalu and the Gilbert Islands, and a sight of the correspondence within ODM about basic needs and social indicators suggests that the conventional policy of giving a great weighting to financial viability remains in tact. Though we were prepared to agree to the independence of Tuvalu in spite of the liklihood of continued budgetary support and the possibility exists for the Gilberts, our aid policies are still designed to help the countries reach budgetary viability if this can ever be achieved. I doubt therefore whether we can go as far as you suggest in Point C of your minute, para.5.

5. You may, however, be able to agree with the experts a passage which explains that aid after independence will not be very different from aid before independence and will take account of the fact that in some countries political progress has been much faster than economic progress. The following paragraphs might be the basis. They draw on your draft and on the paper on aid to the South Pacific which was written last year and which received general agreement within ODM and PCO.

"Our aid to the dependencies is designed to create conditions

in which political independence will become possible.

Aid to the Dependencies is a first charge on our aid resources, and the same priority applies to the ex-dependencies in the early years of independence. Our financial settlements are intended to encourage local politicians to take the irreversible .step to full responsibility for their country's finances and

should be such as to sustain a development programme catering both for economic viability and basic social needs. If budgetary aid is necessary beyond independence this can be provided for in the independence settlement.

While the normal criteria for our overseas aid should apply generally in the dependent territories we accept that the aid programme will for some time inevitably have the same emphasis as it has had for some years on the establishment of sound administrative infrastru ture and the provision of basic

/services

CONFIDENTIAL