TNAG-2473-FCO40-3600-Asian-Development-Bank-liabilities-of-Hong-Kong-1992 — Page 3

CONFIDENTIAL

XCC(92)73

8

(b)

(c)

(d)

in response to our encouraging the Bank to issue its Triple-A rated debt instruments in Hong Kong to assist in the development of our capital markets, the Bank launched an issue of US$ denominated Dragon Bonds in Hong Kong in November 1991. The Bank is also proposing to issue HK$ denominated bonds in Hong Kong with a first issue in late April 1992 to coincide with Hong Kong's hosting of the 1992 ADB annual meeting. The first issue will be for HK$500 million maturing in 1999 - a clear demonstration of the Bank's confidence in the future of Hong Kong and of its

currency;

on several occasions during the past year, top Bank officials have lobbied Hong Kong to become a more active and generous contributor because some developed country members have cut back their donations and have been urging the newly industrializing economies to play a more befitting role in ADF replenishments. With Korea and Taipei each contributing US$15 million to ADF VI, we believe that Hong Kong's contribution needs to be increased substantially for it to be credible in relation to Korea and Taipei's contributions; and

a larger contribution coupled with our hosting of the 1992 ADB annual meeting would project a good image of Hong Kong's commitment to regional development and cooperation.

The main counter-argument is budgetary considerations. We believe, however, that a reasonably significant contribution will be a worthwhile investment in the long-term interests of Hong Kong.

Proposal

9

Having regard to the above considerations, we propose that US$3 million be contributed to the ADF VI. As with past contributions, we will arrange with the Bank for the amount to be fully disbursed by 1997 so that there will be no contingent liability for the Chinese Government.