TNAG-1489-FCO40-2046-Hong-Kong-and-the-Asian-Development-Bank-1986 — Page 94

DRAFT SUBMISSION

PS/MINISTER

RESTRICTED

HONG KONG: UK GUARANTEE OF LIABILITIES

TO THE ASIAN DEVELOPMENT BANK

FROM:

K G W FROST

DATE:

MARCH 1986

CC

Mr Ainscow

Mr Buist (o/r)

Mr Ireton

Mr P E Denison (Treasury)

Mr T W M Smith (FCO-HKD)

Problem

1.

Should we authorise Hong Kong to contribute US$1 million to the next replenishment of the Asian Development Fund (AsDF V), thus increasing the UK's contingent liability under our guarantee of Hong Kong's obligations to the Asian Development Bank (AsDB)?

Recommendation

2. Hong Kong believes, and we agree, that the balance of advantage. which is essentially political, just lies in making a contribution to the ASDF V. As the effect on our liability is relatively marginal, and the obligation should be discharged before we return Hong Kong to the People's Republic of China (PRC) in 1997, I recommend that we should agree that Hong Kong may contribute US$1 million to AsDF V.

This submission has the support of Hong Kong Department in the

Diplomatic Wing, the Treasury, and APD.

3.

Background and Argument

4.

Under the ASDB's Articles of Agreement, the UK is required to guarantee Hong Kong's liabilities for as long as it is responsible for the territory's international relations. We accepted responsibility when Hong Kong joined the Bank in 1969. The PRC has agreed to take over the guarantee when Hong Kong is returned to them in 1997. This is a purely contingent liability. Expenditure would only be involved if Hong Kong were to default in its obligations to the Bank; and that is a very remote contingency indeed.

122/7

2 1 MAR 1986

RECEIVED IN REGISTRY HRK 10:

AJBRY

RESTRICTED

/5.

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