reasonably balanced. But it is neither prudent nor reasonable deliberately to force selling prices down below replacement costs, even if it were practicable.
Price Control
The regulations do not permit direct control of prices, and I should be reluctant to seek such powers. If I may quote the words used in this Council in March last year by my honourable Colleague. He said: 'If on welfare grounds the Government is to control the price of rice to the consumer, the only way to do this is virtually to control the whole trade-importation, wholesale dealing and retail sale. I think'--he went on to say that it will be difficult to make out a valid case for making such a change.' During 1966, my department addressed itself to this question of price control, and reached the conclusion that it would be ineffective unless it did cover the whole trade. It would place upon Government the almost impossible onus of determining a whole range of maximum prices for the wide variety of qualities imported to satisfy consumer demand, and would have the inevitable effect of inhibiting supply or keeping prices up to the maximum unless buttressed by a measure of rationing. I feel confident that the relative shortage of rice in Hong Kong which has characterized the last few months will not be of indefinite duration. I do not believe that current price levels at present justify introduction of the complicated apparatus of price control, with its incalculable effects on the whole distribution and credit structure of the rice trade.
Profits of Importers
Advocates of price control have tended to couple their advocacy with strictures on what are alleged to be the inordinate profits of registered importers, and some wild guesses have been made at the collective extent of such profits. I said earlier that, taking one year with another and bearing in mind the risks involved, registered importers have not made huge profits. I have drawn honourable Members' attention to adjustments in the balance of commercial advantage between wholesalers/retailers on the one hand and importers on the other hand. But there is other contributory evidence to substantiate my assessment.
In 1966, registered importers voluntarily made their books and records available to independent examination by the Government's Cost Control Officer. He was able to determine that, neither in terms of net profit on
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capital employed, after deduction of tax, nor in terms of net profit on turnover, did registered importers collectively in the years 1963, 1964 and 1965 taken as a whole, make a profit of an order higher than that customarily expected by merchants in Hong Kong. In cash terms, the average profits of registered importers on Thai rice sold probably amounted in 1963 to less than one cent a catty. In 1964 the equivalent figure was a little over half a cent and in 1965 one and a quarter cents a catty. In 1966, up till October, the figures were certainly lower, as the mark-up between the import and selling price of both broken and whole rice had up till then narrowed. The hard commercial facts are that when external prices are steady, importers can share a steady profit with the rest of the trade; when they are falling, they risk relatively greater loss than the rest of the trade; when they are rising, they stand to make a relatively greater profit.
Future Prices and Profits
Events since October 1966 have underlined these observations. Importers have been the principal-but as I have said, nor the only- beneficiaries of the temporary cessation of supplies from Thailand. They face an erosion of profits now that supplies have been resumed. And when the cycle of nature comes round, as it inevitably does, they will have to face not merely erosion of profits, but possible substantial loss, unless their experience and commercial acumen are equal to the occasion. Other sectors of the domestic rice trade do not share this risk in the same degree.
I should add here a note of warning. For so long as there exists a world shortage of rice, we must accept that prices will remain at a higher average level than they were before 1966. It would be rash to predict when this shortage will disappear. But we in Hong Kong are better placed than most to take advantage of regional availability. This is important because supplies from more distant sources are more expensive and in general less palatable.
I am aware, Sir, that honourable Members of this Council, and of your Executive Council, are all much concerned with the supply and price of rice, and I can assure them that I too, as must anybody who has the interests of Hong Kong at heart, share their concern. I am happy to co-operate with those of my honourable Friends whom I am aware take a particular interest in these matters and who I understand have made themselves into an informal committee. I am ready to consult
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