TNAG-1592-FCO40-2177-Appointment-of-Sir-David-Wilson-as-new-Governor-of-Hong-Kong-1987 — Page 144

CONFIDENTIAL

HONG KONG DEFENCE COSTS AGREEMENT

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1. The present Hong Kong Defence Costs Agreement (DCA) came into effect

on 1 April 1981 and runs for seven years, until 1988. Like its predecessor

(which ran from 1976 to 1987) it provides for 75 per cent of the overall

cost of the Hong Kong Garrision to be paid by the Hong Kong Government.

Overall cost in 1985/86 was £192 million, of which HKG paid £144 million.

2.

Renegotiations will start in Spring 1987, with the aim of completing

them by the Autumn. A Defence Costs Agreement Steering group under MOD

Chairmanship, DUS (P), will be the forum for resolving policy issues and for

overseeing preparation for DCA renegotiations. AUS(GF) will lead the

negotiations themselves on behalf of MOD and will deal with the financial

aspects of the follow-on Agreement. A separate though closely related

Steering Committee under ACDS (0)'s Chairmanship has responsibility for

reaching decisions on future force and equipment levels and phased withdrawal

of the Garrison.

3.

As noted in preceding briefings, the Hong Kong Government can be

expected to take a hard line on the level of its contribution to the

Garrison from 1988 to 1992. They will doubtless press for savings, given

the extra cost involved in expanding Royal Hong Kong Police capabilities.

HMG's objective will be to achieve a new Agreement which is financially no

less favourable to UK than the present one, recognising that the terms

and conditions of a new arrangement must be consistent with HMG's responsibility

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CONFIDENTIAL

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