TNAG-1950-FCO40-2778-Hong-Kong-Exchange-Fund-1989 — Page 50

CONFIDENTIAL

016673

MDLIAN 3622

B

(REPEAT OF) THE GENERAL REVENUE OF THE COLONY IT IS THUS CLEAR THAT IN THE 1971 EXERCISE AN ERROR INADVERTENTLY CREPT IN WHEN ''OF THE GENERAL REVENUE'

11 WAS CHANGED TO ''ON THE GENERAL REVENUE

9.

·

DESPITE THE ERROR, THE AGC FEEL CERTAIN THAT IT CAN BE DEMONSTRATED THAT SECTION 3(3) OF THE EFO REFERS TO BORROWINGS AGAINST (I) THE SECURITY OF ANY ASSET

HELD BY THE FUND: AND (II) THE SECURITY OF THE GENERAL REVENUE. THUS, AS A CONSEQUENCE, THE LIMIT SPECIFIED IN SECTION 3(4) OF THE EFO REFERS TO THESE

SECURED BORROWINGS ONLY.

PROPOSED COURSE OF ACTION

10. WE HAVE CONSIDERED WHETHER THE OFFENDING ''ON'' MAY BE AMENDED TO ''OF'' UNDER THE POWERS CONFERRED UPON THE ATTORNEY GENERAL BY SECTION 13(4) OF THE REVISED EDITIONS OF THE LAWS ORDINANCE. FEELING THAT WE SHOULD ERR ON THE SIDE OF CAUTION, AGC HAVE ADVISED AGAINST THIS, ESSENTIALLY TO AVOID THE REMOTE CHANCE THAT THE EXECUTIVE MIGHT BE SEEN AS USURPING THE FUNCTIONS OF THE

LEGISLATURE BY THE USE OF THIS 'SLIP' RULE. THERE REMAIN THUS TWO ALTERNATIVES:-

(A)

WE LEAVE THE PHRASE AS IT IS BUT HENCEFORTH ADOPT THE LATEST LEGAL ADVICE AND REGARD THE TRANSFER OF MONEY FROM THE GENERAL REVENUE TO THE EXCHANGE FUND AND OTHER UNSECURED BORROWINGS AS FALLING OUTSIDE THE BORROWINGS DEFINED IN SECTION 3(3) OF THE EFO AND HENCE NOT CAUGHT UNDER THE LIMIT SPECIFIED IN SECTION 3(4): OR

(B) WE SEEK A FORMAL AMENDMENT TO SECTION 3(3) OF THE EFO TO REPLACE ''ON THE GENERAL REVENUE' TO ''OF THE GENERAL REVENUE''.

!

11. TO PUT THE MATTER BEYOND ANY DOUBT, (B) IS THE PREFERRED OPTION. BUT WE FEEL THAT INTRODUCING A BILL TO DEAL WITH THIS MATTER IN ISOLATION WILL AROUSE UNNECESSARY AND POSSIBLE UNHELPFUL ATTENTION ON THE MANAGEMENT AND USE OF THE EXCHANGE FUND. SUBJECT TO YOUR VIEWS, WE WOULD LIKE THEREFORE TO ADOPT (A). WE FEEL NEVERTHELESS THAT THE LEGISLATIVE COUNCIL SHOULD BE INFORMED OF THIS NEW INTERPRETATION ON AN APPROPRIATE OCCASION. THIS WILL BE WHEN THE FINANCIAL SECRETARY MAKES HIS FURTHER STATEMENT, AS ENVISAGED IN PARAGRAPH 38 OF THE 1989-90 BUDGET SPEECH, BEFORE THE START OF THE ISSUE OF EXCHANGE FUND BILLS. IF, HOWEVER, THERE IS IN THE MEANTIME OR IN THE FUTURE A NEED TO AMEND THE EFO FOR OTHER REASONS (INCLUDING IF NECESSARY ANY CLARIFICATION OF THE LEGAL BACKING FOR

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CONFIDENTIAL