THE Hong Kong Forex Association has drafted a six-point plan to reverse the territory's waning role as one of the leading foreign exchange centres in the Asia-Pacific. The territory's traders are concerned about the volume of business they are losing to Singapore. They are also critical of the amount of management business passed their way from China, which has massive foreign exchange reserves. The alarm bells have been ringing for several years. The two most recent Bank for International Settlement surveys conducted in 1989 and 1992 have shown Hong Kong's role in the international market is slipping. While the results of this year's survey are still unknown, the fact that Singapore remains as a fierce competitor is a foregone conclusion. After studying a strategy paper presented recently to the Provisional Working Committee's economic sub-group last month by Hong Kong Monetary Authority (HKMA) chief executive Joseph Yam Chi-kwong, the foreign exchange association's executive committee yesterday came out in support of a proposal to set up a special ad hoc advisory committee or task force to review the territory's international strategy. 'This will surely enhance the competitive position of Hong Kong as a leading international finance centre,' an association spokesman said. In a report issued yesterday, the association outlined six areas where improvements could be made. First, it would like to see improvement in Hong Kong's relationship with China. As foreign exchange reserves in China grow, the HKMA hopes its good connections and regular dialogue with the mainland will drive a significant amount of reserve management activities through Hong Kong. China's foreign exchange reserves stood at US$58 billion last month. The association said the territory, being the sixth biggest foreign exchange centre in the world, was capable of handling large foreign exchange transactions. Hong Kong has in the past not fulfilled its true potential. This is partly due to the yuan's inconvertibility and stability of the Hong Kong dollar linked exchange rate system which precludes the need for users to perform currency hedges for their US-Hong Kong dollar requirements that form the bulk of Sino-Hong Kong trade. 'The transactions through Singapore, which is located in the same time zone as Hong Kong, can only hurt our competitive position and widen Singapore's lead over Hong Kong,' the association said. 'It is important for China to realise that this active involvement in doing business in Hong Kong will be positively perceived as a commitment to maintain Hong Kong's role as a leading foreign exchange centre of the world.' The association's second proposal is that Hong Kong should be considered as a test site for offshore yuan transactions. This would be in line with China's plan to eventually make the yuan convertible. Third, the association has backed a proposal by Mr Yam to reduce the tax rate on offshore financial business transactions. As financial institutions in Singapore pay tax at a reduced rate of 10 per cent for offshore financial business, most foreign exchange business goes offshore to reduce their tax liability. The same is true with Australia. Other countries that have created offshore centres to provide incentives for financial institutions include Japan, Malaysia, Thailand and Taiwan. Fourth, the association has called for greater promotion of the Eurodollar and bond repurchase market in the Asian time zone to attract business. Other proposals include better education and training, particularly in the use of English language, and greater promotion of the use of the international foreign exchange master agreement.