TNAG-1461-FCO40-1987-Future-of-the-Dependent-Territories-Hong-Kong--Gibraltar-and-1986 — Page 22

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CONFIDENTIAL

economy. These are all additional reasons for establishing the reputation for a responsible attitude to the security

implications of disengagement.

Economic Aspects

25 The Caribbean and Bermudan economies are either already strong enough for independence to be viable or, if not yet, they

The attached table (Annex B) can be strengthened sufficiently.

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makes some simple comparisons between the six possible candidates for ́independence, Commonwealth states made independent since 1973 and some other small states. These show that as independent states the Caribbean territories would be among the world's smallest in terms of population. They would not however be among the poorest as measured in GNP per capita (though admittedly this measure provides an uncertain guide to the viability of small states). Some would remain dependent on aid but then so do many independent states. They are all heavily dependent on one industry tourism - but not exceptionally so. And the financial services sector is still growing in many of the Caribbean dependencies. The Cayman Islands and Anguilla in particular claim that success in this field depends on the UK link. There is something in this claim but it need not be a conclusive obstacle to independence in conditions where financial markets are well established. Moreover the TCI episode has shown that

the UK "umbrella" is not completely waterproof. If the UK/Cayman/US Mutual Legal Assistance Treaty (see Annex D) can be adopted as a model for the other territories the UK link may be found to be less important to confidence in the region.

26 Further diversification of the economies and encouragement

for private investment are priorities, though each poses problems. In some territories (notably Montserrat, TCI and Anguilla) more infrastructure investment seems necessary. The

external sources of finance need not and should not all be

governmental. But extra money will probably be needed from HMG. Just as, if not more, important however will be help in

formulating developmental plans that are designed to attract finance from private firms and the international institutions.

CONFIDENTIAL