}
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accepted that responsibility when Hong Kong joined the Bank
in 1969. The PRC has agreed to take over the guarantee when Hong Kong is returned to them in 1997. This is a purely contingent liability. Expenditure would only be involved if Hong Kong were to default in its obligations to the Bank; and that is a very remote contingency indeed.
5. Hong Kong's current liabilities to the Bank, consisting of callable capital, a contribution to the current AsDF replenish-
ment (AsDF IV) and outstanding loans, total the equivalent of
some £66 million. We recently obtained Parliamentary approval
of an increase in the statutory limit of our guarantee to
£140 million. This was to enable Hong Kong to purchase new
shares under the Bank's recent general capital increase, costing
nearly £41 million. There is thus a margin within the new statutory limit, which was mainly designed to allow for possible fluctuations in the exchange rate between Sterling and the
US dollar in which Hong Kong's obligations are denominated.
6. A replenishment of the Bank's concessional Asian Development Fund resources is currently being negotiated, involving the usual
OECD donor countries. But the United States suggested that those developing member countries which contributed to the current replenishment Hong Kong, Indonesia, Korea and Taiwan
should be asked whether they would contribute to the next one.
7.
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Following the consequent enquiry from the Bank, Hong Kong
has asked whether HMG would agree to its providing a contribution of, say, US$1 million, which would be the same amount as it contributed to AsDF IV. Arguments for and against a further contribution are evenly balanced. Hong Kong wishes to demonstrate
that its continued involvement in the Bank is a reality which
will not cease in 1997 when the colony is returned to China.
8.
The arguments in favour of a small contribution include: demonstrating that Hong Kong is playing a full part as a member of the Bank, and has something to offer less developed regional
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/partners;