SECRET HKA 2331
193
036371 MDHIAN 8660
TOP COPY
SECRET
FM HONG KONG
TO IMMEDIATE FCO
TELNO 938
OF 301053Z MARCH 92
INFO ROUTINE PEKING, UKREP JLG HONG KONG
Q DIST?
la
PERSONAL FOR RICKETTS, HKD
PEKING PERSONAL FOR AMBASSADOR
UKREP JLG HONG KONG FOR GALSWORTHY
175
YRTELNO 566: HMOCS STERLING SAFEGUARDS
1. THANK YOU FOR TUR RELAYING FURTHER TREASURY THOUGHTS ON STERLING SAFEGUARDS. OUR VIEW REMAINS THAT HKG WILL BE POLITICALLY UNABLE TO MEET HMOCS CONCERNS ON THIS ISSUE. HMOCS OFFICERS WILL CONTINUE TO INSIST ON ASSURANCES FROM HMG.
2. THE MARGOLIS REPORT IS NOW BEING STUDIED BY OUR MONETARY AFFAIRS AND FINANCE BRANCH EXPERTS. THEIR PRELIMINARY VIEW IS THAT IT WOULD REQUIRE FUNDAMENTAL CHANGES TO HONG KONG'S MONETARY POLICY TO MAKE THE PROPOSAL FEASIBLE. IN ADDITION, THE TWO MAJOR BANKS WE HAVE SOUNDED OUT ARE NOT/NOT ENTHUSIASTIC ABOUT PARTICIPATION. OTHERS ARE LIKELY TO TAKE A SIMILAR VIEW. UNDER THESE CIRCUMSTANCES IT IS UNLIKELY THAT EXCO WILL WISH TO PURSUE THE IDEAS IN THE MARGOLIS REPORT.
3. WE ARE STILL CONSIDERING VARIOUS PENSION SAFEGUARD OPTIONS FOR THE HONG KONG CIVIL SERVICE AS A WHOLE, INCLUDING A POSSIBLE ROLL-FORWARD RESERVE FUND WHICH WOULD COVER ONE YEAR'S PENSION EXPENDITURE. BUT, AT BEST, THIS WOULD PROVIDE A LIMITED RESERVE BACK-UP FOR THE HKG TO CONTINUE PAYING PENSIONS ON AN ONGOING BASIS AND WOULD NOT ADDRESS THE HMOCS PROBLEM. FURTHER MORE, THINKING ON THIS IS STILL AT A PRELIMINARY STAGE: THE POLICY MAY NOT BE FEASIBLE OR POLITICALLY SENSIBLE.
4. WE CONTINUE TO BELIEVE THAT THE TREASURY SHOULD BE ENCOURAGED TO CONSIDER OUR ORIGINAL PROPOSAL THAT THE HKG PAY HMOCS PENSIONS TO ODA ON AN ONGOING BASIS AND THAT ODA PAY OUT A STERLING PENSION TO HMOCS OFFICERS POST-1997. THE KEY HERE WOULD BE THE RATE AT WHICH THE SAFEGUARD WOULD BE PROVIDED.
5. WE FULLY APPRECIATE YOUR NEED FOR STRONG ARGUMENTS TO DEFEND
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