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THE HONG KONG GOVERNMENT GAZETTE, SEPTEMBER 19, 1941.
immediately preceding that date of expiry it became increasingly apparent, in view of, firstly, the uncertainty of supplies from Indo- China and Thailand, the Colony's normal sources of supply, which uncertainty in turn necessitated increasing reliance on Burma, and, secondly, the growing scarcity of shipping, that the maintenance of ade- quate defence reserves and their turnover to prevent deterioration could not be satisfactorily ensured if importation were left in the hands of private traders who were primarily concerned with their own interests. It was also becoming more difficult, in spite of the fixing of maximum wholesale and retail prices by the Controller of Food, to maintain effective price control of all the grades of this commodity; this difficulty could not be overcome while the import trade remained in the hands of private enterprises who naturally preferred to buy on a rising market. For the above reasons Government decided that it would take over the existing reserve stocks and assume a monopoly of all rice imports and exports as from 1st June, 1941. That decision was endorsed by a Resolu- tion passed by this Council on 8th May, 1941, when it was also announced that arrangements would be made to finance the Monopoly from surplus Government funds, the balance to be made up from moneys advanced by the Hong Kong and Shanghai Banking Corporation.
3. As announced in Government Notification No. 617 of 19th May, 1941, the Monopoly is controlled by a Board of Directors composed of highly experienced business men under the chairmanship of the Financial Secretary.
4. The function of the Monopoly is to import rice direct from the sources of supply for two purposes, one being to maintain the emergency reserve stocks in good condition and in prescribed quantities; the other being to sell to the public as directly as is practicable, i.e., through the medium. of registered retailers only, a reasonable number of grades of whole- some, palatable rice at prices which are as low as economic conditions permit.
5. The very nature of the undertaking and its vast scope-the feeding of over one and a half million people-necessitate that the Rice Monopoly be run strictly on commercial lines if it is to be successful. But although run on commercial lines the Monopoly is a public institution and not a commercial enterprise, which would seek to make profits in order to pay dividends to shareholders. Properly regarded, the funds with which the Monopoly is financed are public funds, and, while the Monopoly has no desire or intention to make profits from its transactions, it is equally important that it should operate in conformity with sound economic principles.
6. The price at which rice can be sold by the Monopoly is governed by several considerations, one of the most important being the price at which it can be replaced; and the factors which determine replacement cost are unfortunately to a large extent beyond the control of the Monopoly. In addition to its overhead expenses, which are compara- tively small, the Monopoly has to meet interest charges and to prepare for the day when, the war having come to an end, it will have to dispose of its remainder stocks: consequently, in order to avoid a heavy ultimate loss falling on the taxpayer, it is necessary throughout the Monopoly's life gradually to reduce the value at which stocks stand on its books to the figure which it is estimated will then be the market price. In order that this may be achieved in due course it is essential that a margin should now be made between buying and selling. It should also be borne in mind that the cost of holding the large reserve of rice, which is considered necessary as a defence measure, is a direct charge on the income of the Monopoly and affects the price at which it can dispose of its stocks.
7. In arriving at that price it is the concern of the Board to import rice at the lowest possible cost and to handle and dispose of its stocks with all due economy.
Administration in accordance with that policy should mean that rice is put upon the local market at the lowest prices con- sonant with commercial practice, except that no profit is sought. It is