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owest cost we do not want to create unfortunate precedents in the DB. It seems appropriate to let the Australian ED,' who represents Hong Kong, continue to make the running with the Bank. President Tarumizu (whom the Hong Kong government believes has doubts about the loan proposal) did not raise the matter in my meeting with him.
5.
Mr Nendick also raised the question of Hong Kong's continued separate membership of the ASDB after 1997. It was agreed in 1985 between the UK and China that Hong Kong should continue as a separate member after 1997 under the name "Hong Kong, China"; this is analogous with the nomenclature agreed in 1986 (though not yet formally accepted by the Taiwanese) for "Taipei China". China will take over Hong Kong's actual and contingent liabilities to the AsDB, which are at present guaranteed by ODA. Satisfactory arrangements have been agreed in the Joint Liaison Group; although the Governor of the Chinese Central Bank seemed unsighted, he told me that he had no difficulty with the principles.
Bank Issues
6. Bank management considers that a (fourth) general capital increase (GCI-IV) is required by 1993. China, Indonesia and Japan, together with Denmark, Netherlands, Norway and Switzerland, spoke out in favour of an early GCI; but the major non-regionals were lukewarm. The US has put forward a plausible case for technical changes in lending limits which would increase headroom within the existing capital. Vice-President Schutz told me this is not possible; but the Bank will have to present its arguments to the Board. The US (Olin Wethington) also expressed concern about co-financing arrangements which
which effectively share the Bank's preferred creditor status with commercial lenders, and criticized the high level of Bank lending to China. We share the first point, but the second weakens the economic case against high levels of concessional lending to China which we are making in the IDA replenishment. India (Montek Ahluwalia) and China both thanked us for our attempts to overcome US opposition to their having access to the Asian Development Fund.
7.
were
an
Four out of the five former Soviet Central Asian Republics Kazakhstan, Kirghizstan, Turkmenistan and Uzbekistan represented at the annual meeting by observers. Iran sent observer also. It seems on the cards that all of these countries will become regional members of the Bank in the next year, although the US may succeed in blocking or delaying Iranian membership. The general consensus seems to be that while there is no legal or political objection to dual membership of both EBRD and AsDB, it will be of paramount importance for both Banks to cooperate on lending policies and to make sure that the Republics receive only one set of consistent advice, that there is no duplication of effort and that borrowers do not play one lender off against the other.
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