Financial Secretary Donald Tsang Yam-kuen sought to untangle himself yesterday from the controversy caused by his suggestion that Hong Kong could abandon the peg to the US dollar for a common Asian currency. Mr Tsang's office issued a swift rebuttal of the report published in the Straits Times of Singapore, saying the comments were taken 'out of context'. In the interview, which took place on Wednesday after the East Asia Economic Summit, Mr Tsang was quoted as saying that Hong Kong and Singapore should consider moving to a common currency that could later take in the rest of Asia. Hong Kong would give up the peg to the US dollar in order to join such a scheme, Mr Tsang was quoted as saying. Officials usually maintain a strict line of supporting the US dollar peg, for fear of encouraging speculators. The Government had to spend $118 billion to beat off speculation against the Hong Kong dollar in August 1998. 'We are thinking in terms of a horizon of five to seven years. Everyone will have to make a compromise somewhere. Singapore will have to give up its managed float,' Mr Tsang was quoted as saying in the Straits Times. 'I feel brave and courageous in even uttering these words. It's the unthinkable. But we must think the unthinkable now.' However, Mr Tsang's office said yesterday: 'The HK dollar parity with the US dollar has remained rock solid and unchanged. The Government has no intention whatsoever to change the system.' His spokesman said Mr Tsang was responding to a question about the feasibility of an Asian Monetary Union in 'the very long term'. 'Mr Tsang also emphasised that if Europe took some 50 years to set up a common currency, it would take a much longer time to pursue a similar concept of monetary union in Asia,' he said. Monetary Authority chief executive Joseph Yam Chi-kwong also said Mr Tsang had been misrepresented. 'There were certain discrepancies in what the Financial Secretary said and what was reported in the Straits Times, ' Mr Yam said, but did not elaborate. The Straits Times said Mr Tsang was quoted accurately and in context. Analysts and politicians were puzzled by Mr Tsang's remarks. Desmond Supple, Asian research head at Barclays Capital in Singapore, said: 'One of the taboo subjects has always been life after the peg. It is never talked about by government. 'The danger is you may see some softening of confidence in Hong Kong because of this.' Analysts were sceptical Hong Kong-Singapore monetary union could work, because the two territories have different economic cycles and hinterlands. Mr Supple said: 'You need to have economies growing at the same pace, with the same inflationary pressures.' Mr Tsang, considered a contender to succeed Anson Chan Fang On-sang as Chief Secretary for Administration, acquired a reputation for speaking too soon after suggesting the Asian financial turmoil would be over by Christmas 1997. In this year's Budget in March Mr Tsang suggested a deal with Walt Disney to bring a theme park to Lantau Island would be concluded in July. An announcement is now expected next month. Mr Tsang's comments failed to trouble the dollar. One economist said: 'The markets didn't react at all.' Monitor - Business 16
