TNAG-2352-FCO40-3422-Visits-by-Lord-Caithness--Minister-of-State-for-Foreign-and--1991 — Page 34

CONFIDENTIAL

8.

At about the same time (I learnt from the responsible Commission official in DGI visiting Hong Kong between trips to Hanoi), the Commission are hoping to finalise their Scheme of Assistance. This is a good scheme, and one we have encouraged since it was first announced a year ago. The EC hope to organise a Pledging Conference in October.

The important thing is to avoid the scheme turning into a

further "pull" factor. I believe that the EC have this

point well on board (through the use of a cut-off date) but

that it is a point to watch. Meanwhile, we should

seriously consider timing the return of double-backers for

mid-September. The US angle will remain, and require careful handling. And we should not act before the Prime

Minister's visit. But we cannot delay this exercise

indefinitely. Hong Kong's capacity to absorb new arrivals

is now very limited (a maximum of 5,000 spare places) and

the figures of the first days of August are bad. Looking ahead, the new sailing season will start in January/February

next year.

It may well take three or four months to set up

a basic centre, even once agreement is reached. So, unless

we can reach agreement with Vietnam by the end of September,

we have all the ingredients for a major problem early next

year. You may be able to take matters forward yourself if

you meet the Vietnamese Foreign Minister in the margins

of UNGA.

ExCo/LegCo relationship

9.

Everyone in Hong Kong is speculating about the September direct elections to LegCo. Martin Lee is now widely expected to win 12-14 seats. As the largest

directly elected party his will wield considerable

influence. Ideally he should be brought into the fold and given a seat on ExCo. But he says he will not accept

ExCo's conventions of collective responsibility and

CONFIDENTIAL

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