TNAG-1256-FCO40-1589-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 142

CONFIDENTIAL

MICK 040/5

RECEIVED IN REGISTRY

GRS 610

CONFIDENTIAL

4 KUALA LUMPUR 12073OZ OCT 83

TO IMMEDIATE FCO

TELEGRAM NUMBER 397 OF 12 OCTOBER

DESK OFFIC

INDEX

PA

AND TO HONG KONG (PERSONAL FOR GOVERNOR)

1283

RY

tion Taken

(427)

Munters The

BANK BUMIPUTRA AND THE HONG KONG CONNECTION 1. THE PRIME MINISTER, DR MAHATHIR ANNOUNCED AT A PRESS CONFERENCE YESTERDAY THAT BANK BUMIPUTRA AND BMF DIRECTORS RESPONSIBLE FOR QUOTE IMPRUDENT BANKING PRACTICES UNQUOTE WILL BE ASKED TO RESIGN QUOTE IN DUE COURSE UNQUOTE. ACTION HAD NOT BEEN TAKEN AGAINST ANY OF THEM HITHERTO BECAUSE THEIR SERVICES WERE NEEDED TO HELP RECOVER THE BMF LOANS TO HONG KONG PROPERTY COMPANIES. BUT THE RECENTLY ANNOUNCED . LEGAL ACTION AGAINST CARRIAN DIRECTORS MEANT THAT THE PROSPECT OF RECOVERING A MAJOR PART OF THE LOANS QUOTE HAD DIMIN SHED UNQUOTE. MALAYSIAN DOLLARS 1.7 BILLION HAD BEEN LENT TO THE CARRIAN GROUP ALONE. (EARLIER THIS WEEK THE MALAYSIAN PRESS REPORTED THAT THE WITH- DRAWAL OF WARDLEY AND HAMBRO AS INVESTMENT ADVISERS TO CARRIAN HAD BROUGHT TO AN END QUOTE SECRET ATTEMPTS UNQUOTE BY BMF TO RECOVER ITS LOSSES).

2. DR MAHATHIR ALSO REVEALED THAT BMF DIRECTORS HAD AWARDED THEMSELVES QUOTE CONSULTANCY FEES UNQUOTE AMOUNTING TO HONG KONG DOLLARS 3.3 MILLION BETWEEN 1979 AND 1981 ON THE HONG KONG LOANS WITH THE KNOWLEDGE OF THE THEN BANK BUMIPUTRA CHAIRMAN, WHO WAS ALSO INVOLVED. WHILST THESE PAYMENTS WERE MORALLY WRONG, THEY WERE NOT QUOTE STRICTLY ILLEGAL UNQUOTE. THE PRESS HAS IDENTIFIED THOSE CONCERNED AS TWO CURRENT BMF DIRECTORS, LORRAINE OSMAN AND MOHAMED SHAMSUDDIN, TOGETHER WITH THE FORMER BANK BUMIPUTRA CHAIRMAN, KAMARUL ARIFFIN.

3. DR MAHATHIR ADDED THAT QUOTE THERE IS NO EVIDENCE OF ANY HIGHER AUTHORITY THAN THE FORMER BANK BUMIPUTRA CHAIRMAN BEING INVOLVED UNQUOTE. MEANWHILE ENQUIRIES BY THE CENTRAL BANK WERE CONTINUING AND THE GOVERNMENT INTENDED TO MONITOR BANKING ACTIVITIES MORE TIGHTLY. HE STRESSED THAT BANK BUMIPUTRA REMAINED QUOTE AS SOUND AS EVER UNQUOTE HAVING RECENTLY RECEIVED A FURTHER EQUITY INJECTION OF MALAYSIAN DOLLARS 600 MILLION FROM THE GOVERNMENT.

4. IN FURTHER COMMENT, DR MAHATHIR NOTED THAT EMF'S TROUBLES HAD BEGUN WITH THE COLLAPSE OF THE HONG KONG PROPERTY MARKET, WHICH- HE BLAMED QUOTE IN PART TO THE HAM-FISTED HANDLING OF THE COLONY'S FUTURE (BY BRITAIN) WHICH PROMPTED CHINA TO ACT STRONGLY TO ASSERT ITS CLAIM OVER THE COLONY. POLITICALLY I WOULD SAY THE CHINESE HAVE EVERY RIGHT TO DO SO. IT IS THEIR TERRITORY AND IT WAS TAKEN AWAY (BY ME BRITISH) THROUGH UNEQUAL TREATIES ENTERED INTO WHEN CHINA WAS WEAK. NO COUNTRY WOULD ACCEPT THAT SUCH TREATIES WERE BINDING FOREVER. I HAVE NO DOUBT THAT COME 1997 HONG KONG WILL BE RULED BY CHINA, AND I WOULD SAY THAT THIS, IN A WAY, IS A FORM OF JUSTICE UNQUOTE.

5. DR MAHATHIR SAID HE WAS NOT CAMPAIGNING FOR CHINA BUT MERELY STATING THE QUESTION OF RIGHTS OF THE CHINESE TO HONG KONG AND MACAO,

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See (430) 434

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