12 December 1990
Sir David Ford
Chief Secretary
Hong Kong Government
CONFIDENTIAL
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HMOCS MATTERS: LETTER FROM OSPA
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1. Mr Pusinelli of OSPA has written to Andrew Burns enclosing a record of the meeting held when you were here on 20 November between a delegation of them and yourself and Keith Shipley.
2. We are a little concerned about paragraphs 2 and 5 of the record. Paragraph 2 goes some way further than we have gone in public before and should the Treasury be alerted to the fact that the extent of the discussions we are having have been made known to OSPA, I am sure that they will be extremely unhappy. This will of course not help us to resolve the issues quickly.
3.
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Parts of paragraph 5 are simply not factually correct and I wonder whether OSPA have infact misrepresented what was said. I am thinking for example of the first sentence where it is suggested that we are jointly working on the "OSPA formula". This formula seems to be that set out in paragraph 4 but as far as I am aware we have not even got as far as discussing how a sterling safeguard would operate if one were to be introduced. Current thinking appears to be that it would act as some sort of safety net below which the exchange rate would not be permitted to drop. Personal exchange rates are something that Dave Fish in the ODA is giving preliminary thought to: but the issue has not been put formally on the table at all. The latter half of the first sentence suggests that HMG is thinking about a safeguard around the current exchange rate. Again this is simply not true. Both we and the ODA have given personal views that if a rate were to be agreed it would probably be somewhere between 16:1 and 20:1. And the Treasury have not give any comments whatsoever.
ROZAVG
CONFIDENTIAL
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