TNAG-1745-FCO40-2464-Visits-by-FCO-officials-to-Hong-Kong--including-visit-by-Lor-1988 — Page 115

CONFIDENTIAL

HKB 027/1

CONFIDENTIAL

FM FCO

TO DESKBY 29010OZ HONG KONG

TELNO 1703

OF 28153OZ JUNE 88

157

159

002470

MDHOAN 9302

COPY CIST ?

YOUR TELNO 2459 VISIT OF LORD GLENARTHUR TO HONG KONG: MEETING

WITH OMELCO

1.

MANY THANKS FOR THIS ADVANCE WARNING. WE SHOULD BE

GRATEFUL IF YOU COULD ADD THE FOLLOWING SUPPLEMENTARY MATERIAL TO

LORD GLENARTHUR'S BRIEFING FOR USE WITH OMELCO AND THE PRESS:

DEFENCE COSTS AGREEMENT

Q :

HOW MUCH IN TERMS OF SAVINGS TO HONG KONG DOES THE NEW

AGREEMENT REPRESENT?

THIS.

VERY DIFFICULT TO PUT A PRECISE HONG KONG DOLLAR FIGURE ON

BUT NOTE THAT THE FINANCIAL SECRETARY HAS ESTIMATED THAT

THERE COULD BE SAVINGS TO HONG KONG OF ONE THIRD IN HONG

KONG'S CONTRIBUTION TOWARDS THE COST OF MAINTAINING THE GARRISON BETWEEN NOW AND 1997 AND THAT THIS WOULD AMOUNT TO

SIGNIFICANTLY MORE THAN THE ESTIMATED TWO BILLION DOLLARS IT WOULD COST TO EXPAND THE POLICE FORCE OVER THE SAME PERIOD.

*

Q:

HOW MUCH HAS THE AGREEMENT COST THE UK IN TERMS OF REVENUE

FOREGONE?

THAT WOULD BE FOR THE MOD TO ANSWER. I DOUBT IF THEY COULD

GIVE YOU A PRECISE FIGURE.

ca

BUT THE FINANCIAL SECRETARY'S ESTIMATE OF SAVINGS TO HONG

KONG GIVES YOU SOME IDEA OF THE ORDER OF MAGNITUDE.

THESE ARE SIGNIFICANT SUMS: TWO BILLION DOLLARS IS FOR EXAMPLE THE EQUIVALENT OF A FULLY EQUIPPED MODERN WARSHIP.

Q :

AREN'T THE CONCESSIONS TO HONG KONG BY THE UK MINISCULE

AS A PROPORTION OF ITS OVERALL DEFENCE BUDGET?

WE HAVE MADE THESE CONCESSIONS TO HONG KONG AT A TIME WHEN

THE UK'S DEFENCE BUDGET IS COMING UNDER INCREASING PRESSURE: IT

HAS DECLINED BY 6 PERCENT IN REAL TERMS SINCE 1986 AND COULD WELL

DECLINE FURTHER IN REAL TERMS IN THE COMING YEARS.

AT THE SAME TIME, THE UK'S WORLDWIDE DEFENCE COMMITMENTS

HAVE NOT BEEN REDUCED.

SO IMPORTANCE OF THIS CONCESSION BY UK SHOULD NOT BE

UNDERESTIMATED.