Cablegate: Codel Berman Courtesy Call On Chief Executive

DE RUEHHK #1587/01 2341138
R 221138Z AUG 09




E.O. 12958: N/A

(U) Sensitive but unclassified -- please protect accordingly.
Not for dissemination outside USG channels.

1. (SBU) Summary: In a wide-ranging courtesy call with CoDel
Berman August 22, Chief Executive (CE) Tsang expressed
concern about legislation under consideration in the United
States which would list Hong Kong as a tax haven and plans to
restore the Hong Kong Policy Act (HKPA) reporting
requirement. Chairman Berman and the delegation undertook to
look into the issue of the tax haven listing, which bill is
not under the purview of the Foreign Affairs Committee. On
the HKPA Report, while the Chairman agreed many of the
concerns held in Congress at the time of the handover had not
come to pass, there was still an interest in Congress in
following Hong Kong's democratic development. While Hong
Kong's economic and financial fundamentals have weathered the
crisis well, CE Tsang is skeptical a real recovery can occur
without a rise in demand from Hong Kong and China's
traditional overseas markets. Secretary for Constitutional
and Mainland Affairs Stephen Lam also updated the CoDel on
Hong Kong-Taiwan relations. End summary.

Two Areas of Concern

2. (SBU) In an August 22 courtesy call, Chief Executive (CE)
Donald Tsang warmly welcomed the Congressional Delegation led
by House Foreign Affairs Committee Chairman Howard Berman,
and stressed the long-standing and broad U.S.-Hong Kong
relationship. While overall relations are excellent, CE
Tsang noted, he did want to raise Hong Kong concerns
regarding two pieces of pending legislation, one which would
declare Hong Kong a tax haven and another which would restore
the Hong Kong Policy Act (HKPA) reporting requirement. Tsang
found it ironic given the transparency of Hong Kong's
economic and financial system that Hong Kong could be
declared a tax haven. He told the CoDel Hong Kong was
actively legislating to ensure all its disclosure
requirements would be in line with OECD standards, a process
he expected would conclude in a few months' time. On the
HKPA Report, CE Tsang noted that Hong Kong's democratic
progress since the handover is far greater than what occurred
under the British, yet there was no reporting requirement
when Hong Kong was a colony. Hong Kong is an open society
where events are easily monitored, Tsang stressed, so there
is no need to put it "under a microscope."

3. (SBU) Chairman Berman and members of the delegation
concurred in CE Tsang's assessment of Hong Kong's transparent
financial system, and undertook to look into the issue of
Hong Kong's listing as a tax haven. With regard to the HKPA
reporting requirement, Chairman Berman recalled that, when
the initial requirement was set, there were concerns whether
key institutions such as human rights and the rule of law
would endure following the handover. Those fears had not
come to pass. However, the Congress remains interested in
the pace of democratic development in Hong Kong. He noted
that the language to restore the report came after a
perception that the democratic development of Hong Kong had
been delayed.

4. (SBU) CE Tsang recalled that universal suffrage was not
mentioned in the Sino-British Joint Declaration, but the PRC
had nonetheless written it into the Basic Law. A timetable
has been set for Hong Kong's democratic development, which
Tsang feels represents a firm commitment by the central
government, and now the issue is reaching consensus within
Hong Kong. Within LegCo, this means reaching a two-thirds
majority including the sectorally-elected functional
constituencies, which will effectively need to vote
themselves out of existence. Secretary for Constitutional
and Mainland Affairs Lam noted that the 2007 National
People's Congress Standing Committee had stipulated that
universal suffrage elections for the Chief Executive was
defined as participation by all of Hong Kong's registered
voters. In sum, Tsang suggested that restoring the HKPA
reports was not only unnecessary, it "would be an irritant in
Sino-U.S. relations in the long run."

Financial Crisis

5. (SBU) While Hong Kong has weathered the financial crisis
better than its regional neighbors, CE Tsang remains
cautious. Although there are positive indicators, until and
unless trade figures and ship and plane movements through

HONG KONG 00001587 002 OF 002

Hong Kong increase, he will not believe a full recovery is
underway. The Chairman noted, and CE Tsang agreed, that Hong
Kong stock and real estate markets were both doing well.
However, Tsang believed the key element is a revival in
foreign demand in Hong Kong and China's overseas markets.
The Chairman asked whether Beijing concerned itself with the
regulatory and economic management of Hong Kong. This is our
business, CE Tsang replied. We are in contact with Chinese
regulators and counterparts much as Hong Kong is in contact
with U.S. Fed Chairman Bernanke and other counterparts.


6. (SBU) Secretary Lam, whose bureau manages relations with
Taiwan, briefed the delegation on recent developments in Hong
Kong-Taiwan relations. Gambling on the possibility of a Ma
Ying-jeou presidency, Hong Kong began making preparations for
a change in relations in 2007. In October 2008, the Hong
Kong Trade Development Council opened an office in Taipei,
the first formal presence by a Hong Kong statutory body in
Taiwan. The two sides are also developing an Economic
Cooperation Committee, which while meant to promote
business-to-business relations, will have government
officials as "advisers". In this unofficial context, Lam
explained, contacts can occur between the two governments.
CE Tsang noted there had also been a steady exchange of
official visitors between the two sides, including a visit by
Secretary Lam to Taiwan.

7. (U) Participants:

United States
Chairman Howard Berman
Hon. Eni Faleomalvaega
Hon. Jack Kingston
Hon. Diane Watson
Acting Consul General Christopher Marut
Consulate and Congressional Staff

Hong Kong
Chief Executive Donald Tsang Yam-kuen
Secretary for Constitutional and Mainland Affairs Stephen Lam
Raymond Tam Chi-yuen, Director, Chief Executive's Office
HKSARG staff

8. (U) This message was cleared by CoDel Berman.

© Scoop Media

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