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150432
MDHOA 013
THAT OUR DECISIONS WILL HAVE A DIRECT BEARING ON THE PROSPECTS FOR A SMOOTH TRANSITION AND STRENGTHEN ANY CHINESE DISPOSITION TO ARGUE THAT WE MUST NOT ONLY BRIEF THEM BUT CONSULT THEM AND PERHAPS EVEN REACH CONSENSUS BEFORE DECIDING HOW TO PROCEED?
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THE STRUCTURE OF THE DRAFT SPEAKING NOTE LOOKS ON THE RIGHT LINES, BUT WE WONDER WHETHER IT WOULD BE BEST TO INTRODUCE THE PASSAGE ON THE COMPENSATION/INCENTIVE SCHEME ('INSOFAR AS COMPENSATION IS CONCERNED... TO THE END) WITH AN EXPLANATION THAT IN VIEW OF THE COMPLEXITY OF THE SUBJECT AND THE PRESSURE FROM HMOCS OFFICERS FOR EARLY DECISIONS, WE HAVE DECIDED TO ADDRESS THE DIFFERENT ELEMENTS SEPARATELY, BEGINNING WITH COMPENSATION. WE SHOULD WELCOME YOUR VIEWS ON WHETHER, AS A REASSURING ELEMENT, WE SHOULD HOWEVER STATE IN THIS FIRST SPEAKING NOTE THAT WE DO NOT ENVISAGE ASKING HKG TO PERMIT RETIREMENT IN 1997 WITH IMMEDIATE PAYMENT OF PENSION, OR WHETHER WE SHOULD KEEP THIS ''GOOD NEWS'' IN RESERVE FOR LATER. WE ALSO WONDER WHETHER WE SHOULD SAY FROM THE OUTSET THAT WE WOULD SEEK TO ENSURE THAT ANY MEASURES TO ADDRESS CONCERN ABOUT THE STERLING VALUE OF PENSIONS DID NOT REFLECT BADLY ON HONG
KONG'S ABILITY TO MAINTAIN THE LINK WITH THE US DOLLAR OR REFLECT A CONCERN BY HMG THAT THE HONG KONG DOLLAR MIGHT DEVALUE POST-1997. THIS WILL CLEARLY BE A DIFFICULT MESSAGE TO PUT ACROSS. THE KEY THOUGHT IS THAT HMOCS OFFICERS MUST BE ABLE TO RETIRE IN THIS COUNTRY WITHOUT CONCERN
ABOUT THE EFFECT OF INTERNATIONAL EXCHANGE-RATE FLUCTUATIONS (EG STERLING/US DOLLAR) AND THEIR ABILITY TO LIVE ON THEIR PENSION.
5. IT IS ALSO FOR CONSIDERATION WHETHER THE SPEAKING NOTE
SHOULD BE A LITTLE CLEARER ABOUT THE LIKELY OPERATION OF THE SCHEME, IE MAXIMUM COMPENSATION AMOUNTS WILL PROBABLY BE SET AT AN ABATED PROPORTION OF TRADITIONAL ACTUARIAL FACTORS, BUT ONLY A PROPORTION WILL BE PAYABLE IN 1997 WITH EXTRA SLICES PAID ANNUALLY FOR SEVERAL YEARS THEREAFTER PROVIDED THE OFFICER REMAINED IN THE SERVICE OF THE SARG. (WE WOULD PREFER TO AVOID DESCRIBING THE SUM AS DIVIDING INTO A COMPENSATION PART AND AN INDUCEMENT PART: THIS MIGHT ENCOURAGE THE TREASURY TO WORK TO ERODE THE FORMER.)
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WOULD IT BE HELPFUL TO HAND OVER COPIES OF THE WHITE PAPERS, OR WOULD THAT BE MORE LIKELY TO CAUSE FURTHER DELAY WHILE THE
CHINESE STUDY THEM? (IT IS ALSO A DISADVANTAGE FOR THE FUTURE
THAT THEY DO NOT REFER TO STERLING SAFEGUARDS.)
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