Secret bank: The government and the HKMA
The government needs to be far more transparent about recent dealings
at the Monetary Authority
SCMP June 02, 2009
I make no apologies for returning to the subject of my last column:
official silence on the Hong Kong Monetary Authority's HK$33 billion
commitment as part of China's contribution to a regional stabilisation
fund known as the Chiang Mai Initiative Multilateralisation (CMIM).
It goes to the heart of the government's use of the HKMA as a slush
fund circumventing the Legislative Council and the proper budgetary
Since that column appeared, it has also been revealed that the government
conducted a phoney head-hunt for a successor to HKMA chief Joseph Yam
Chi-kwong. This has long been expected to be Norman Chan Tak-lam, head
of the Chief Executive's Office, so the use of a bunch of allies to
go through a secret "selection" process illustrates the contempt
with which Donald Tsang Yam-kuen views the public. (It also demeaned
Victor Fung Kwok-king and Sir John Bond to be part of this charade).
But, back to the tortuously named CMIM. The government now says that
it was not announced because it was merely an "agreement in principle".
In that case, one wonders why Asean plus three - the 10-member Association
of Southeast Asian Nations, together with China, Japan and South Korea
- made such a fuss of an agreement that has been given much coverage
in the global and regional media. There was no sign of any Hong Kong
presence at the time ministers and central bankers made the announcement
To my suggestion that Hong Kong was simply told of its contribution
by Beijing, the government now says that Hong Kong was "part of
the Chinese delegation" and was "fully consulted".
If so, why has the government not told the people who was there as
Hong Kong's part of the Chinese delegation and, also, what gave him
or her the authority to make even a "commitment in principle" to
laying out this huge sum?
While Hong Kong does have separate representation in bodies such as
the Asian Development Bank, the World Trade Organisation and the World
Health Organisation, it does not have any formal connection to the
Asean plus three group. So the public must be told who has been, as
claimed, participating in this group's discussion and on what basis.
For sure, the fund is a good idea. But if Hong Kong is contributing
so much, its role as a separate entity should be known. As it is, it
has hidden itself behind Beijing's skirts.
The government's claim to having been consulted does not fit very
well with accounts from one Asean delegate. According to that source,
Hong Kong's contribution was introduced as a separate item, to paper
over a dispute between China and Japan over precedence. Bringing in
Hong Kong as part of China created a useful ambiguity as to whether
China was contributing the same as Japan.
The government is also pretending that the departure of the International
Monetary Fund representative for Beijing is simply a "cost-cutting" measure
of no significance for Hong Kong's separate financial status. Dream
At one level, the transfer of Mr Chan back to the HKMA, where he was
once deputy to Mr Yam, is no problem. He clearly knows the job. But
his recent performance suggests that he is even more the secretive
bureaucrat than Mr Yam, who has excelled at his own public relations,
as well as empire-building.
That makes it all the more urgent that Legco - not just the pro-democracy
camp but anyone who cares about accountability - take an in-depth look
at the HKMA and its functions. After all, this is not an independent
central bank, but comes directly under the financial secretary.
The CMIM payment should be agreed by Legco (if given the chance),
but only provided that the government agrees to the following reforms
of the HKMA:
First, transfer the HK$300 billion or so of its retained profits to
the fiscal reserves, where they belong. This will allow the public
a more accurate picture of reserves and limit the HKMA's ability to
act as a slush fund. It should be accompanied by the transfer of all
government funds lying idle for more than two years to the fiscal reserves
- roughly another HK$300 billion.
Second, require the HKMA to cease expansion of all its trading activities,
most notably the Mortgage Corporation, and agree a timetable for privatising
And, third, bar the HKMA from using its public funds for political
objectives - as in its acquisition of a big block of shares in Hong
Kong Exchanges and Clearing .
For sure, the salary currently paid to the HKMA chief is outrageous
and will attract debate. But let us hope that discussion gets beyond
what is a marginal issue to the key point: making the HKMA accountable.