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APPENDIX 14.
BUILDING MATERIALS PROCUREMENT, STORAGE AND CONTROL OF ISSUES.
This Report sets forth certain proposals in connection with the fifth and sixth of the terms of reference of the Committee, that is to say:-
"(v) To advise on the policy for importation of building materials.
(vi) To recommend what Government control (if any) should be imposed to ensure that materials in short supply are allocated in the best interests of the rommunity."
2. In regard to the importation of building materials, present procurement action is through the following channels:
A. Military Procurement.
(a) Military procurement of all the items in Sheets 90-91 of Appendix “A” to War Office Memorandum B.M.C.A. 13/7834 of the 23rd August, 1945, has been sanctioned by the Validities Sub-Committee of the War Office Shipping and Supplies Committee, and action to call forward these supplies has been taken. They were intended to constitute a "first-aid" provision only, in connection with building reconstruction during the military period.
(b) Certain building materials have been received by Col. C.A. (Works) from D.C.E. 144, as immediate provision to meet pressing needs for repairs and reconstruction in the interests of the Military Administration.
B. Civil Procurement.
(a) Procurement by the Crown Agents for the Colonies is in progress on indents prepared by the Hong Kong Planning Unit of the Colonial Office, against ad hoc sanctions of expenditure issued by the Treasury as an ultimate charge against the funded debt of the Colony. Procurement of further requirements through this channel is under consideration.
(b) Procurement of building materials in Australia, New Guinea and Okinawa, from military surpluses and other sources, has been and is being effected on Government account.
C. Commercial Procurement.
(a) Certain prominent foreign firms are procuring materials for importation for
sale, and or for the rehabilitation of their own premises.
(b) Procurement to an unknown extent by Chinese and other local contractors has begun, and is increasing with the development of communications and trade with the mainland.
The quantities of materials known to be under procurement through the above channels are quite inadequate for the huge programme of reconstruction with which the Colony is fured. If the accommodation factor is not to retard the rehabilitation of the Colony an active policy in the stimulation of imports of building materials must be pursued. With the end of the military period, military procurement will presumably be limited to procurement for the repair and reconstruction of Services buildings, and it is therefore by ihe development of programmes of procurement on Government account and on commercial account that the needs of the Colony must be met.
tay Development of procurement on Gurerument account. Where materials are in short supply and perhaps subject to allocation, or where Government-to-Government dis- posal of Military and other surpluses offers peculiarly favourable terms of purchase, the advantages of procurement on Government account are manifest; and, provided that such supplies, thus procured, as may not be required for direct use on Government buildings are sold without delay within the Colony, the financial liability of the Government will be limited, and extensive expenditure of Government funds, on a temporary basis, would appear to be unobjectionable.
(b) Development of procurement on commercial account. A number of factors, which are examined in the Report of the Committee, may have deterred, and may still deter, commercial and private enterprise from procurement. These factors need not be cited here; it is sufficient to state that everything possible should be effected along the lines recommended by the Committee to promote confidence and enterprise in this connection. An important element in giving effect to this policy would be the extension to commercial firms of the advantages which Government may enjoy in its own procurement, whether by way of obtaining priorities in allocations of materials in short supply; by acceleration of delivery dates through official intervention in the countries of supply; or by securing early shipments on favourable freights. Such aid could be given in many directions, and as
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specialised knowledge is required the establishment of a small ad hoc official organisation for the purpose would be desirable. The essential condition would be the development and maintenance of the spirit of co-operation between Government departments and commercial enterprise which is already proving effective in the rehabilitation of public utilities. Full exchange of information as to availabilities; the establishment of an official agency for the dissemination of such information, and for the sponsoring of commercial procurement; and the maintenance of the present Hongkong "Rear Link" in London, and of the Hongkong agency in Australia, to assist in such action, are indicated, In the present difficult times, the best results, to the common good of all elements in the community, will be achieved only by co-operation along the above lines in securing for Hongkong, at reasonable prices, an adequate supply of building materials.
4.
The development of import programmes, however, will not meet all the im- mediate dangers in the situation. If inflationary tendencies are to be countered, in connection with building costs as well as in other directions, some measures of control of the distribution and sale prices of building materials, after they have been imported, would appear to be essential.
It is clear that, owing to shortages of supplies, the reconstruction
of damaged properties is being retarded. As such materials are durable, and can be stored for fairly long periods, deliberate hoarding to maintain high prices must be prevented, and control over their allocation must be exercised in the interests of the community. Action
on the following lines will be necessary:
(a) Materials in short supply.
(i) It is recommended that the necessary powers be taken to secure periodical registration of stocks on hand, and as imported, together with particulars of the place of storage: The list of registrable materials may be in- creased or reduced as the supply situation develops.
(ii) Licenses should be issued to importers of registrable materials for their sale to hong fide builders, stipulating the appropriate maximum prices, and prescribing a date by which they must be used in actual construction.
(iii) Maximum prices for sales of such materials should be prescribed and announced from time to time, usually on the basis of landed cost plus a reasonable percentage for distributor and retailer.
(ix) The use of the materials in construction should be subject to official
inspection.
(v) Government should take powers to requisition stocks of registrable
materials where hoarding thereof may be evident.
(b) Materials not in short supply, surpluses, salvage, etc.
It would appear that, except where Military surpluses, or stocks on hand with the Custodian of Property, may be disposed of as under (7) above, control would not be effective, and it would be impolitic to attempt to introduce it.
5. The above proposals to establish a system of registration in a tiovernment pool do not imply any necessity for the physical custody of such materials to be assumed by Government. Their storage, in the interval between importation and use, could be the responsibility of the importer. The Stores Department would store materials imported by Government, and commercial and private importers would store in their own Godowns the materials imported by them. The controlling organisation would at all times have access thereto for inspection.
6. The necessary legal sanctions to secure compliance with the regulations regarding registration and licensing for use should include, in addition to a substantial maximum fine, provision for the confiscation by Government of any registrable materials in respert of which an offense might have been committed.
7. The active intervention of Government, in connection both with the procurement and with the disposal of building materials in short supply, would appear to be an unavoidable necessity at the present time. The additional costs to the taxpayer of main- taining, for a year or two, the ad hoc organisations required to further procurement programmes, on the one hand, and to control the disposal of materials in short supply, on the other hand, would be more than offset by the advantages of securing a reduction in landed costs and of the prevention of the profiteering which the present abnormal situation must inevitably encourage.
(Signed) W. G. WORMAL, Lt. Col.
A.D.C.A., Supplies, Transport & Industry.
Hong Kong, 8th April, 1946.
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End