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envisaged. This compared with the US$300 million borrowed by the AsDB by means of their recent Dragon Bond issue. He noted that the World Bank had borrowed on the Hong Kong market and that the IFC would also do so.
5.
Mr Freeman asked what view the AsDB Board was likely to take of the proposal. Mr Davis thought that their interest would focus on the percentage of the total project cost represented by the proposed loan. Mr Nendick said that the total project cost was estimated at US$14 billion. Mr Davis said that there was an overall limit of US$1 billion for private sector lending by the ASDB, of which US$650 billion had already been spent. He thought that the projected benefits to South China constituted a potential argument in favour of AsDB participation.
6. Mr Freeman asked what view the markets were likely to take of any loan from AsDB to the airport projects. Mr Nendick said that he had in draft a reply to Mr Freeman's telegram which covered this point. The proposed loan would provide comfort to lenders. Furthermore the Chinese favoured the idea, although at the same time they were overdue in responding to certain points put to them by HMG. In particular they thought that the callable equity for the project was too low; the Hong Kong Government might have to concede a higher figure in 1997. Mr Nendick added that the AsDB were none to pleased at what they saw as the "over- commercialisation" of the airport project at the Annual Meeting, particularly the display outside the Convention Hall.
7.
Mr Nendick then turned to the question of Hong Kong's continued separate membership of the ASDB after 1997. He recalled that there had been written exchanges on this subject in 1985 and 1986 between the UK and China and the then President of the Bank, Mr Fujioka. Unfortunately Mr Fujioka had not passed any of this on to his staff. This was now being sorted out and he hoped that the matter could be resolved.
8.
Mr Nendick noted that Mr Freeman was to call later that day on Mr Chen Yuan, the Chinese Alternate Governor. Mr Freeman undertook to raise both the airport and the membership question with Mr Chen Yuan.
International Financial Institutions Department Overseas Development Administration May 1992
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