2 -
Enclosures
}
6.
This report was so detailed that a full reply would have taken many months to compile, if indeed such a reply had been possible in view of the fact that many of the vital decisions were taken during the exacting period which followed the transfer of authority from the Military Administration to the Civil Government, in many instances by officers who are no longer in the Colony. Nevertheless, I considered that the legislature should be informed of the position, and accordingly the Director of Audit's Report was laid on the table at the meeting of the Legislative Council held on the 9th February, 1949, &3together with a brief covering Memorandum by the Financial
Secretary. Copies of the Report and of the Memorandum are enclosed herewith.
7.
The principal burden of the Report is the fact that your approval has never been obtained for the various Suspense Accounts which have been operated by the Director of Supplies, Trade and Industry. The decision to continue to operate the Supplies Trade and Industry Department on a commercial basis after the handover by the British Military Administration was an inevitable one, and necessarily involved the opening of Suspense Accounts. The reason why your authority was not sought for such accounts lies, I am convinced, in the fact that an overworked staff, struggling to re-establish order out of a disorder that approached chaos, found itself too overwhelmed with work to find time to prepare the necessary clear picture which should have been presented to you. It was only when the Director of Audit found sufficient time to go into the matter in detail that the full magnitude of the departures from Colonial Regulations became apparent.
8.
The position regarding the Suspense Accounts has been set forth by the Director of Audit, and is commented on in paragraphs 3 to 10 of the Financial Secretary's Memorandum. I feel that it is necessary, nevertheless, go into greater detail over the Japan Trade Suspense Account.
9.
The history of trade between this Colony and Japan since the re-occupation is well known to you and to His Majesty's Treasury, and was the subject of discussion with Mr. Norman Young during the course of his recent visit to Hong Kong. It is operated by means of an open account maintained in United States dollars between this Government and the Supreme Commander, Allied Powers, and in theory, though not in practice, the balance either way is payable at six monthly intervals.
to
10.
Initially the usual Suspense Account was opened with the Treasury by the Department of Supplies, Trade and Industry, which not only bought and sold on its own account, but also acted as an agent for Hong Kong merchants. When at a later date, Japan was opened to private trade, such merchants were required to make with Japanese suppliers their own contracts, which were cleared through the open account after validation by the Supreme Commander, Allied Powers, and by the Hong Kong Government Agent in Japan. All imports continued to be consigned to the Department of Supplies, Trade and Industry, which charged the importer a commission of 12%.
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