CONFIDENTIAL
FM FCO
TO DESKBY 17003OZ HONG KONG
TELNO 1627
OF 1618O6Z NOV 92
CONFIDENTIAL
HKA 233/1
FROM PS/GH (VISITING)
MIPT: HMOCS
TOP COPY Q DIST?
WAN
618
054606
MDHOAN 4255
1. THE GOVERNOR IS ENCOURAGED BY THE FACT THAT MR PORTILLO SEEMS PREPARED TO MAKE A DEAL AND REMAINS KEEN THAT THIS SHOULD BE DONE DURING HIS VISIT THIS WEEK. BUT HE DOES NOT THINK THAT THE 26:1 SAFEGUARD RATIO PROPOSED BY THE TREASURY IS IN ANY WAY ACCEPTABLE.
2.
SUBJECT TO YOUR VIEWS, HIS INCLINATION IS TO SUGGEST THAT THE FCO REVERT TO THE TREASURY ON THE FOLLOWING LINES:
(A) RESTATING THE CASE FOR ADEQUATE COMPENSATION (I.E. OPTION C) AS PART OF THE STANDARD HMOCS PACKAGE:
(B) CONFIRMING THAT HKG CAN, WITH SOME RELUCTANCE, BE BROUGHT TO AGREE TO ALLOWING A RIGHT TO RETIREMENT AS PART OF AN ACCEPTABLE PACKAGE: BUT
(C) MAKING IT CLEAR THAT, TO BE ACCEPTABLE, THIS PACKAGE MUST HAVE A DECENT SAFEGUARD RATE. 16:1 IS ALREADY A COMPROMISE FROM THE RATE PUT FORWARD BY THE HMOCS ASSOCIATION, AND THE HK DOLLAR HAS NEVER FALLEN THAT LOW SINCE IT WAS DELINKED FROM STERLING IN 1972 (?).
3.
GRATEFUL FOR COMMENTS DESKBY 1709OOZ. THE GOVERNOR WOULD
LIKE TO KNOW IN PARTICULAR WHAT SAFEGUARD RATE WE THINK THE HMOCS ASSOCIATION MIGHT BE BROUGHT TO ACCEPT, WHETHER THERE ARE ANY MORE STRONG ARGUMENTS FOR THE 16:1 PROPOSAL AND WHETHER YOU ARE HAPPY WITH TACTICALLY LINKING THE SAFEGUARD RATE AND THE RIGHT TO RETIRE IN THIS WAY.
4. THE FCO WOULD FIND IT HELPFUL TO BE ABLE TO BRIEF THE TREASURY ON OUR THINKING ON THE RIGHT TO RETIRE. DO YOU SEE ANY
OBJECTION IN THEM GIVING THE TREASURY A COPY OF THE PAPER
ENTITLED QUOTE HMOCS: GENERAL RIGHT TO RETIREMENT UNQUOTE THAT
PA BROUGHT TO LONDON? IF THERE ARE ANY SECTIONS IN THAT PAPER
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CONFIDENTIAL
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