HK$33b slips away without even a 'thanks'

SCMP Friday May 15 2009

Politicians, media, academics - please wake up to the continuing erosion of Hong Kong's supposed autonomy. All of you appear to have been asleep at the wheel when it was announced on May 3 that Hong Kong would contribute HK$32.76 billion (US$4.2 billion) to something called the Chiang Mai Initiative Multilateralisation.

The announcement came not from the Hong Kong government or Monetary Authority but at a press conference of finance ministers of the Asean plus three grouping - the 10 members of the Association of Southeast Asian Nations, plus China, Japan and South Korea.

It was made in Bali at the time of the annual meeting of the Asian Development Bank, of which Hong Kong is a member in its own right. Yet no one from the Hong Kong government was on hand to explain this commitment of public funds.

Indeed, it now appears likely that local officials were simply told by Beijing what Hong Kong's contribution would be, even though Hong Kong is not a member of the Chiang Mai Initiative (CMI). Its US$4.2 billion is part of China's US$38.4 billion contribution. Though it is separately identified, and Hong Kong will be able to borrow up to 2.5 times its contribution, it has no representation on the fund's decision-making body.

No wonder, then, that Chief Executive Donald Tsang Yam-kuen and Monetary Authority chief Joseph Yam Chi-kwong, both given to crowing about government efforts to develop Hong Kong as a financial centre, kept quiet. I can find no mention of it on the government website or that of the Monetary Authority, and no hint of a need to inform legislators or the public about the commitment.

The press, too, largely failed to notice it. This newspaper carried a Reuters report on the creation of the Chiang Mai Initiative Multilateralisation, with no mention of Hong Kong.

The Chiang Mai Initiative Multilateralisation is an excellent idea and should help maintain currency stability in East Asia at a time when the International Monetary Fund, which is supposed to do the job globally, has insufficient resources.

But what is the point of Hong Kong pretending to be autonomous in economic and financial affairs, or of having its own currency, if its resources are to be used as a pawn by the mainland without a hint of consultation or joint decision-making?

Although the CMI is a grouping of sovereign states, it is closely associated with the ADB, which will take the lead in providing an economic surveillance mechanism. The CMI group will also establish a guarantee fund administered by the ADB to encourage the issuance of local currency corporate bonds and try to develop cross-border trading. In other words, there was every opportunity for Hong Kong to leverage its contribution to the Chiang Mai Initiative Multilateralisation to get a seat at the table and promote the city as the global centre for issuing and trading local-currency Asian bonds.

But a leadership obsessed with Beijing, and ignorant of events elsewhere in Asia, is failing to exploit membership of international organisations to develop its regional role. No wonder that the IMF's representative here, Olaf Unteroberdoerster, is quietly moving to Beijing.

The Hong Kong market already hosts a key element in the ADB's efforts to develop regional bond markets - the listed Asian Bond Fund Pan-Asia Index Fund. But, instead of thinking regionally about how to provide a market for non-US dollar Asian issues, the government is issuing Hong Kong dollar bonds, which it does not need. These are make-work jobs for investment banks and add to Monetary Authority empire building. Yes, Hong Kong wants to be a yuan and Hong Kong dollar bond trading centre. But what about being one for won, rupiah or baht issues?

Hong Kong is getting nothing from its HK$32 billion commitment. No wonder the government has kept so quiet about it. And shame on the media for failing to notice it.

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