TNAG-1489-FCO40-2046-Hong-Kong-and-the-Asian-Development-Bank-1986 — Page 89

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partners; meeting the Bank's expectation that Hong Kong is financially strong enough to play a role; and indicating that the Hong Kong Government is confident about future prospects, and its ability to conduct normal business in the

lead-up to 1997.

9.

Arguments against are primarily financial: a second successive contribution will set a pattern from which it may

be difficult to disengage; there is no direct financial benefit to Hong Kong, and it is not certain that goodwill will be a cashable cheque; Hong Kong's future participation in the Bank is assured, as China has agreed to take over the guarantee of

outstanding liabilities, the callable capital, from 1997; and

a continued contribution would be seen as confirming a more

advanced status, with implications on the trade policy front.

10. Hong Kong believes, and we agree, that there would be a slight balance of advantage in its contributing. Arrangements would be made to ensure that the proposed amount would be fully

disbursed before 1997, so that there would be no contingent

liability for the Chinese to inherit. It would obviously be prudent to advise them what was intended, however, at the next regular meeting of the Joint Liaison Group which discusses

matters of common interest.

11. A new commitment of US$1 million would have a marginal

effect on our overall liability in relation to the revised

statutory limit. The total liability will be reducing on a regular basis as the existing loans which Hong Kong has had

from the Bank are repaid. We therefore believe that Hong Kong

could be allowed to take on this new, relatively short-term

obligation.

Kustrat

KG W Frost

International Financial Institutions Department

25 March 1986

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