TNAG-2418-FCO40-3520-Hong-Kong-Her-Majesty-s-Overseas-Civil-Service-(HMOCS)-poli-1992 — Page 7

R A Burns Esq CMG

CONFIDENTIAL

HKA 233/1

JECCIVED (A: REGISTRY

Foreign and Commonwealth Office London SW1A 2AH

Dear Anghen,

27 FEB 1992

CER

Muilistalls : HMD

HONG KONG: HMOCS MATTERS

1.

2.

ODA

Overseas Development Administration

94 Victoria Street, London SW1E 5JL

Direct Line: 071-917 0380

GTN:

3535 0380

16 January 1992

Mr Cax

M

zoli

Mr Stone Mus withiony

Helebi

TGS Q 20

then BAR

Thank you for your letter of 6 January.

50

voneed

No

-pl comide a djr repboy

after the Gov's

went has wello

Jol Pa

I agree that we need to give Ministers a clear indication of all the options before us. I am sure you are right to rule out the first three options listed in your third paragraph. But Ministers will have to be warned that the HMOCS Association will press very hard for a traditional scheme given their belief that what lies in store beyond 1997 is much more unpalatable than that which faced HMOCS officers elsewhere.

3.

The capitalisation proposal is the most attractive option for HMG and also for HMOCS officers who might expect to receive a more advantageous protection rate than that which we have proposed to the Treasury. The Treasury have indicated their willingness to be reasonably generous over the terms of capitalisation. On this basis, this option would be attractive to the Chinese if they could be persuaded to take a conventional view of the economics of the matter. Seen from here the major obstacle to the capitalisation proposal is the political dimension in Hong Kong. Clearly, it is primarily for you to take a view on this aspect, but we understand your doubts about the likelihood of securing local approval for measures designed to benefit expatriates alone.

4.

As far as the 'loan' proposal is concerned you will know that Treasury officials have been discussing the possibilities with the Bank of England. Dave Fish attended a meeting last week and his view is that this avenue is likely to be a runner only if money can be raised in Hong Kong over an extended period and at fixed rates. The interim report from Margolis does not really address the problems we face with HMOCS officers but it does contain useful information about a number of the financial issues which we may need to consider in due course. I understand that the next step is a meeting with Margolis, to be attended by Sandra Brown, Peter Ricketts, Dave Fish and the Bank of England. It may be tactically wise to allow the Treasury to take the lead on drafting the part of the paper dealing with the loan proposal.

м

27/2

No hope

ли

CONFIDENTIAL

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