TNAG-0103-FCO40-139-Briefs-and-background-notes-for-Lord-Shepherd-1967 — Page 35

of capital expenditure.

The Hong Kong Government

assumes that average oupital expenditure will be #16773 m. per azium (£48.3 m.). The International Bank team assumed a rather higher rate of Ky905 m. per

aumum (£56.5 m.). (1966 ospital expenditure was about

HĽA726 m. (€45. 4 m.).

(b)

Government as "lender of last resort":

Hong Kong has

no central bank. In effect Government aots as "lender

of lest resort" to the banking system. In the 1965

bank orisis, Goverment lent £20 million to the system.

in view of Hong Kong's heavy dependence on the state of

business confiéence and the effects of a loss of confi-

dence in the banking system, this is an important poten-

tial liability.

Develotment Frojects

The

intermediate

A number of possible major projects have been recently

under consideration – e.g. a masa transit scheme for Hong Kong,

a containerization port and other infrastructure schemes,

International Bank toam suggest that there would be advantage

in the establishment of a lending institution supplying/immediate

and long-term finance for development in the private asetor.

This would be established jointly by the Government and the

largest banks. There will also undoubtedly be increased 'desand

for housing and social services over the next few years.

have insufficient information here to assess any of these

projects such assessment must be done locally in the light of

the Hong Kong Government's viows of its economic and social

priorities. The following considerations, however, are

rolevant I-

(e) Hong Kong has sufficient actual and potential reserves

to allow for some expansion in the rate of development

spending. Moreover, in addition to these reserves, her public døbt is vory mall (Mƒ78.8 m. : £4.9 m.)

and she could easily raiss loans if she had to,

/(b) But