TNAG-0458-FCO40-523-Future-of-financial-and-economic-policy-of-Hong-Kong-1975 — Page 16

Акк

Para s chied to

543

110/9

Ник

1.

Мар

Mr Stuart

As

10

RECEIVED IN REGISTRY No. 51

30 SEP 1974

CONFIDENTIAL

bree

все

Stuart des 24/9

LUNCH WITH MR HADDON-CAVE:

23 SEPTEMBER 1974

He

Mr Haddon-Cave gave lunch to Mr Barratt and myself. asked Mr Barratt about the future of the Sterling Agreements. Mr Barratt played a very straight bat, and Mr Haddon-Cave did not press him at all.

2. Most of the discussion was about recycling and allied topics. Now that Hong Kong is an international borrower, he is of course more interested in international flows of funds than he has been in the past. Needless to say, his instinct is to say that recycling is best handled by private institutions with- out government interference. The latter can only result in rigged markets and inappropriate flows of funds. Mr Haddon-Cave is on somewhat less secure ground when he seeks to transfer his economic philosophies to the world in general; and the discussion may have served some slight educational purpose. Though I must say that there were few signs of doubt or humility. In the course of discussion, mention was made of the Chancellor's ideas for a bigger Witteveen facility primarily for developed countries to be operated through the IF. Mr Haddon-Cave made the point that Hong Kong is not a member of the IMF: I suppose that this an aspect which will need to be thought about in the event that the Chancellor's ideas get off the ground.

3.

Mr Haddon-Cave got excited only when he chose to talk about the Defence Review. It was made clear to him that he was addressing the wrong audience, but he nonetheless took the opportunity to let off some steam. He was particularly incensed by a remark which he attributed to the Chancellor, to the effect that Hong Kong had money running out of its ears. This remark betrayed a fundamental ignorance of Hong Kong's position, and particularly of its budgetary position. (No doubt the interview which he gave to the Financial Times was one way of seeking to put the record straight). He said that the sort of attitude under- lying that remark was linked with what he claimed to be the UK proposition that Hong Kong should pay the whole of its defence costs. This proposition was unprecedented and immoral, was an abrogation of UK's responsibilities to a dependent territory, added to his financial difficulties, and could not fail to have an adverse impact on confidence. Mr Barratt said that these arguments did not come as a surprise to him, in that he seemed to recall rather similar arguments being deployed in the context of earlier discussions in which he had been more directly involved, on Hong Kong's defence contribution. He gently pointed out that poverty and riches were relative, and that it would be

"

/difficult

CONFIDENTIAL