Mr Wilford
CONFIDENT IAL
14
Flags
HONG KONG:
FINANCIAL MANAGEMENT AND INSTITUTIONS
You will have seen that Mr Royle's personal message to A) the Governor offering financial advice from here has received a
C (74) somewhat dusty reply (Hong Kong telegram No. 866 of 1 August),
which inter alia casts doubt on the ability of the Bank of England and FCO to provide useful help. I do not know what,
if anything, passed on this subject between Mr Royle and the Governor when they met in Gloucestershire earlier this month. None the less it might be useful if I offered some personal views on the Governor's initial reactions, leading to some thoughts on how this issue might be handled with the Governor when he is in London during September.
2.
1
The Governor's first point was that we should do nothing which could be taken as a vote of no confidence in Mr Haddon-Cave, regard this as a point which we in the FCO should take very seriously. Next month the boil of the Sterling Agreements will be lanced in some way or another. On all past form, one has to expect that, whatever the Chancellor proposes, this will be a difficult period for relationships between the UK and the Hong Kong Government. Furthermore, and perhaps more important in this context, the Hong Kong Government and Mr Haddon-Cave in particular are likely to be under a good deal of criticism in Hong Kong from unofficials, from the press, from the banks, and perhaps even from the public at large over their management of the Colony's reserves, They are unlikely to resist the temptation to lay any supposed faults on HMG's doorstep. Until the emotions which may well be generated have died down, a visit of a UK team to discuss financial management and institutions would almost inevitably be interpreted as reflecting on Mr Haddon-Cave personally, and be represented as yet another attempt by HMG to impose on the Colony. Much as I dislike suggesting another delay for I am conscious that in matters of this sort it is all too easy to wait for the right moment which never comes I am forced to conclude that "this autumn" may turn out to be too early for the sort of substantive discussions we have in mind. At any rate, we should be prepared to concede that the timing of this exercise calls for careful thought and further discussion with the Governor.
3. His second point was that perhaps the advice could better come from sources other than UK officials. I do not necessarily dissent. In my view, the main requirement is that someone thoroughly expert in such matters should take a cool hard look at financial management and institutions in Hong Kong, discuss any problems which he sees with those concerned in Hong Kong, and make any suggestions which he thinks appropriate. Anticipating an attitude which is now evident, I some time ago threw out the idea that perhaps a team from the IMF might be more acceptable in Hong Kong, and that perhaps such a team would be more effective than a
1 CONFIDENTIAL
/UK