CONFIDENTIAL
The FCO/ODA proposal for HMG to take on a contingent liability to make up HMOCS pensions if the Hong Kong dollar fell below a specified exchange rate also remains on the table. The Treasury are strongly opposed to this approach and we judge that it will be very difficult to secure the agreement of Treasury Ministers. That being so, we also need to consider two other options:
A decision by Ministers that no safeguard scheme is possible. That would risk an exodus of HMOCS officers from Hong Kong and a campaign of pressure on HMG to reverse the
decision. It would also throw the ball into HKG's court to take whatever steps were necessary to keep key HMOCS officers (eg in the police). We have asked the Governor for
thoughts on what Hong Kong would do if confronted with this
outcome.
- A decision by Ministers to put off a choice on this issue, until much nearer 1997. That would, in some ways, be the most unsatisfactory outcome, given that it would ensure maximum uncertainty for HMOCS officers and invite mounting
pressure on HMG
We agreed with the Treasury that:
4.
They would continue work on the commercial loan option;
- We would consider hypothetically how the capitalisation option might be presented to the Chinese in the event of a Ministerial decision to go down this route;
- To maintain the momentum, we would produce a discussion paper which sets out the political arguments for and against the various options, together with factual Annexes summarising the detail. We would aim to have at least a
draft of this paper agreed at official level in time for the Governor's visit (22-24 January) when he will be seeing
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CONFIDENTIAL
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