AIDS and the rate of inflation

PUBLISHED : Sunday, 28 March, 1993, 12:00am
UPDATED : Sunday, 28 March, 1993, 12:00am

THE case of the Hongkong AIDS Foundation, which lost more than $1 million playing foreign currency markets last year, raises far wider issues than those of simple financial ineptitude.

One simple reaction to the facts would be to ask what on earth a charitable institution, charged with the task of maintaining and furthering the interests of people suffering from a devastating disease, was doing dabbling in the exotic and mercurial world of foreign exchange in the first place? It is a fair question, and one that needs to be answered.

But those inquiring may well find the foundation's dilemma is mirrored in almost every Hongkong home where families are fighting to keep their savings from being eroded by the ravages of an inflation rate hovering just below double digits.

The foundation was given first $15 million ''seed'' money by the Government, then a further $15 million from the Royal Hongkong Jockey Club. Its administrators were told they should run their organisation from what funds they raised and any money they could make from the capital sum.

They maintain they simply could not make ends meet using ''safe'' investments. A deposit account in a bank, for instance, where interest rates currently average three per cent, would have lost them almost $2 million in real terms at an annual inflation rate of about 9.5 per cent.

So what should the AIDS Foundation have done? A meeting last December which discussed the body's $1,038,909.75 loss on peseta, pound sterling and Canadian dollar deposits and a further $290,000 loss on ECUs, concluded that, from now on, they should hold on to the Hongkong dollar and buy shares instead.

If they carry this through and choose blue chip companies that pay a reasonable dividend, it may turn out to be a sounder policy. If, on the other hand, share prices fall, they may find themselves again in the dock.

Clearly, the Government is right to look into exactly how the foundation came to lose so much and why. It should extend its inquiry to other charities and ensure they are managing their finances effectively.

Last week, Legislative Councillors discussing Financial Secretary Mr Hamish Macleod's ''give away'' Budget voiced concern that he had given the impression he was throwing in the towel in the fight against inflation.

Those living with the consequences of Hongkong's rising prices - from the AIDS Foundation to retirees trying to generate an income from savings safely - will echo that concern.