a
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11.
Lastly, there are
not
certain questions either addressed in the report or need to be addressed clearly. These need to be taken up by the author
or
(a) Who would be the borrower of the funds? The civil
servants
a special vehicle set up for the purpose? In the latter case, who would monitor and supervise the operation of the vehicle?
(b)
(c)
12.
Where there are losses arising from the operation of the scheme, i.e. when the optimistic forecasts by the market participants fail to come about, who would bear the loss? Even if it might be argued that the point is obvious, the paper should make clear it is the civil servants and not the Government.
As we understand
it, much of the civil servants' concern over the question of pension is not confined to a possible sharp downfall in the value of HK$. It is less concern over devaluation than concerns over SARG's ability or commitment to pay pensions after 1997 (notwithstanding the new pensions legislation) and control measures which would prohibit
perhaps exchange
or restrict the outward remittance of funds. The scheme as proposed in the 20.7.91 paper by Margolis was to address also the concern over default by SARG, in that such risk is transferred for assumption by the lending institutions. This aspect is not clear in the present paper.
The second concern over possible exchange control would be more difficult and might involve the movement of funds outside HK for safeguarding. We are
not suggesting that this be pursued by the scheme but merely point out that such are probably the more practical concerns that need to be addressed other than the question of devaluation of
HK$.
Finally, Margolis might wish to replace Joseph Yam's designation in the report by the correct designation "Director, Office of the Exchange Fund".
(James H. Lau Jr.)
for Secretary for Monetary Affairs
c.c. S for Tsy (Attn: Mr. John Wilson)
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