TNAG-2473-FCO40-3600-Asian-Development-Bank-liabilities-of-Hong-Kong-1992 — Page 10

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ASIAN DEVELOPMENT BANK: 25TH ANNUAL MEETING OF THE 'BOARD OF GOVERNORS

HONG KONG, 4-6 MAY 1992

Note of a Meeting on Monday 4 May between Mr Freeman and Mr David Nendick, Secretary for Monetary Affairs, Hong Kong Government

Present: Mr Freeman

Mrs Radice

Mr Davis

Mr Nendick

Mr Joseph Yam, Director, Office of

the Exchange Fund

Mr Norman Chan, Deputy Director

(Monetary Management)

1. After an exchange of courtesies, Mr Nendick thanked Mr Freeman for his recent telegram, to which he would shortly be replying, about a possible Asian Development Bank loan towards the financing of the airport core programme projects [no.668 of 16 April]. Mr Nendick emphasised that even the most token participation by the ASDB would be welcome to the Hong Kong Government. Any loan would go not to the Government, but to the private sector: perhaps towards the Mass Transit Railway extension, the West Harbour Tunnel or the bridge and motorway to be constructed to link Lantau Island to the mainland. Mr Nendick emphasised that all these facilities were needed for Hong Kong's economic relations with South China. Hong Kong handled 40% of China's exports. Air freight had become increasingly important and was growing at the rate of 15% per annum. 250,000 people suffered from the noise generated by Kai Tak Airport, whereas only a minimal number would be affected by the proposed new airport at Chek Lap Kok.

Furthermore

2. Mr Nendick conceded that it was difficult to get Hong Kong to concentrate on long-term things. The Mass Transit Railway had originally run into similar difficulties, yet it now had a very high credit rating (single A); and Japan had given it the same credit rating for the period after 1997 as before.

3.

China still suffered misconceptions about supposed British intentions to empty Hong Kong's coffers. Hence the need for perceived confidence in the viability of the airport project: not only facts and figures but also emotions played a part. This was why Morgan Stanley had advised in favour of a token contribution from the Asian Development Bank. The Bank's Vice-Presidents had been sympathetic to the proposal because of the benefits which the airport would confer on South China.

He

4. Mr Freeman thanked Mr Nendick for this explanation. himself had two concerns: first, the matter of counter- guarantees; and second, the amount which the Asian Development Bank would be expected to lend. What was meant by a "token"

contribution? Mr Yam said that US$100 million or less was

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