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included in the Colony's Statement of Assets and Liabilities referring to the net asset or liability which these transactions represent at the time of the Statement and, as requested by you, the Departmental Trading Accounts and Balance Sheet will be submitted as an appendix to the Colony's Accounts. It is also proposed to table in Legislative Council the present Report and Accounts as soon as a reply to this despatch has been received from you.
7. In my despatch No.48 of the 19th March, 1949, I referred to the intention of passing to general revenue, in accordance with normal procedure, the profits which it was anticipated would be revealed when the accounts had been completed. Largely owing to the fact that it proved to be impossible to prepare separate annual accounts for the Marketing Section, it is more convenient to deal with the accrued profits for the period 1946 1950 as the subject of one transfer. I propose, if you see no objection, to introduce resolutions in Legislative Council providing for the establishment of a Development Fund and an Essential Commodities Equalization Fund and, in lieu of the transfer of the surplus to general revenue, to provide that the sum be appropriated to setting up these funds. I have reason to believe that these proposals will commend themselves to Unofficial Members.
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8. As you know, although Government would welcome a return to normal commercial trading and is facilitating this as circumstances allow, the international or regional allocation of certain essential commodities, and the need to ensure that adequate stocks of these commodities are available in the Colony in case of need, make it necessary for Government to continue to commit its funds in the acquisition of these stocks, and to maintain stocks at a considerably higher level than would be the case if normal commercial canons were the guide. Firewood, for example, is one commodity, the stocks of which are being maintained, having regard more to avoiding hardship in the event of a breakdown of supplies, than to commercial considerations, and a loss is very likely to be incur red. But by far the largest commitment is in respect of rice, and it is in respect of this commodity that the possibility of Government incurring a very heavy loss in liquidating its stock is most real. only small scale losses have been experienced in respect of particular grades, although there have been periods when it has been difficult to sell Government rice because better liked grades of rice were available from other sources. On the whole, however, the scarcity of supplies, particularly at a low price, has enabled Government to sell its own imports at a reasonable profit. But these conditions may not always prevail. As soon as the position becomes more normal, there is likely to be a very strong pressure for trading to revert to commercial channels, coming probably at a time when supplies are more freely available and when prices are falling. Rice from China is offered periodically
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