TNAG-1251-FCO40-1584-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 62

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RJT McLaren Esq

Political Adviser HONG KONG

3D

CONFIDENTIAL

B.E, MANILA

13 January 1983

LIKIT 040/5

3 1 JAN 1983

DESK VAL

INDEX

Ар

THE PHILIPPINES AND HONG KONG

1.

When we were in Bangkok for the Heads of Mission Conference, I promised a report additional to Roy Marlow's letter to Alan Dunning of 19 November on Philippines' reactions to recent speculation about the future of Hong Kong.

2.

Inevitably, there has been a good deal of comment. As you are aware, there are substantial Philippines investments in Hong Kong both by the Soriano (San Miguel) and Ayala groups and by the Chinese who dominate Philippines banking and textiles and the retail trade. Many of these people lost a lot of money in the weeks following Mrs Thatcher's visit, and I am told that the Chinese here were particularly hurt by the collapse of the Hang Loong Bank. In general, these people tend to regard the British as having stirred things up unnecessarily; their prime consideration is their 'pocket. There is, however, a body of Filipinos which clearly values the Western presence in Hong Kong, is apprehensive of its replacement by a Chinese government and is concerned about possible consequences in Taiwan, the Philippines' nearest neighbour and at present a buffer between the Philippines and China.

The

3. The Philippines Government has for several years shown interest in attracting Hong Kong business into the Philippines and particularly into the xport Frocessing Zones. They have been moderately successful with, for example, the toy and artificial flower makers, and I am aware of one Hong Kong/British textile and one carpet firm which have transferred here. latest transfer is of Mindex Batteries into the Bataan Export Processing Zone. Recent moves to take advantage of uncertainties in Hong Kong were, I think, little more than an extension of this process and the brainchild, perhaps, of Bobby Ongpin, the Minister for trade and Industry, and his Board of Investment. Ongpin is very much aware that one of the Philippines' major currency earners, the manual assembly of semi-conductors, is viable only so long as Philippines wage rates can be maintained at their present low levels. Any increase in wage levels will encourage automation and the move of the industry back into the United States and the West. Ongpin has, therefore, been arguing that, as Hong Kong moves up market in the textile and electronic trades, Philippines industry should come in below them. The Philippines textile market is in such disarray that it has

/largely

CONFIDENTIAI-