PUBLIC RECORD OFFICE
19
Reference :-
C.O. 882
7
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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countries is larger, and that although the existing evils might be transferred to a different class of operations by the adoption of a gold standard, their magnitude would not really be reduced.
43. An important consideration is the difficulty under present conditions of obtaining capital from gold countries. The Straits Govern- ment have now no debt, and the Federated Malay States have no external debt. We understand, however, that the Straits Government are contemplating the raising of loans for important public works. This capital cannot be found locally except at high rates of interest, and if a gold loan be raised in London, a fall in exchange may impose an additional Burden on the Straits Government, both as regards payment of interest and repayment of capital. The same difficulty will be found by the Municipality of Singapore who are about to raise a loan of some £250,000. With rapidly developing countries such as the Straits and the Malay States, it is highly desirable to encourage the investment of European capital, and the absence of fixity of exchange with Western countries undoubtedly discourages such investment, and may also tend to exclude British and other European traders.
44. The gold obligations of the Government are heavy in connection with the pay of their staff. They have now placed all the higher officials on sterling salaries. The pensions of retired officers involve a further gold obligation.
45. The recent fall in the gold value of silver, not only aggravates the previously existing difficulties, but may give rise to further difficulties of the same class both in the case of the Straits Government and of private persons. As to the future gold value of silver we are unwilling to express any opinion. The evidence given before us by Mr. Pixley is interesting and shows that there are no reasons to anticipate a further immediate fall of any magnitude. Other witnesses have expressed the same opinion and, as it appears to us, on good grounds. But a very similar state of matters in the past has, not unfrequently, been followed by further and unexpected falls in gold value, and the future must be admitted to be quite uncertain.
46. It has been argued that, as the Straits is a collecting and distributing centre for purposes of trade, and as many of the countries with which it has commercial relations have hitherto had a silver standard and have used the same coins, the adoption of a gold standard may seriously affect its prosperity. We are not prepared to say that there is no force in this argument, but we think that too great weight may easily be attached to it. Singapore is u great centre of trade by reason of its natural advantages, and its freedom from Customs duties. In these respects the adoption of a gold standard will not make any change.
47. In trade between silver countries and gold countries the difficulties of a fluctuating exchange must be encountered at some stage, and the evidence before us justifies the belief that the Chinese merchants who chiefly manage the trade between the Straits and the adjoining silver-using countries are as well fitted to deal with difficulties of that nature as merchants of any other nationality. Moreover, in any case where the countries adjoining the Straits Settlements now use, or may hereafter adopt, a gold standard the difficulties of a fluctuating exchange so far as they arise from a difference of standard will be not transferred but wholly removed.
48. Our attention has also been called to the probable further fall in the value of silver which may follow the adoption of a gold standard by the Straits Settlements. We do not think that such a change would in itself have any considerable effect on the price of silver, but it would undoubtedly have some weight in inducing other countries to follow the same course and the cumulative effect of such changes might be considerable, On the other hand it can hardly be expected that the Straits Settlements, if it should appear advantageous to adopt the gold standard, should sacrifice their own interests out of consideration for other countries.
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49. There is a further objection to the establishment of a gold standard in the Straits Settlements which applies also to other Eastern countries such as India, Java, Siam and the Philippines. In such countries, although the standard may be gold,'the coins in actual use must continue, for an indefinite period, to be mainly silver coins, and such coins must be of unlimited legal tender. With a sufficient gold reserve these coins can be maintained at their legal value, so long as a settled Government exists which is able to enforce its laws. If the Government were destroyed and anarchy prevailed in any of these countries the gold standard would disappear, and the holders of the over-valued silver coins would suffer serious loss. The contingency is a remote one and we do not think that in the case of the Straits Settlements
greater weight need be attached to this objection than in the case of India,
Java or any other Eastern country under a civilised Government.
50. It will be seen that, apart altogether from the question of practica- bility, there are arguments both for and against the expediency of establishing a gold standard in the Straits Settlements. We have tried to set out these arguments with impartiality, and while we do not think a gold standard should be pressed on the Straits Settlements against the wishes of the Government and the people, we are equally of opinion that no objection should be raised on the part of His Majesty's Government to the principle of the change, if the Government of the Straits Settlements, after considering all sides of the question, should decide finally in favour of an alteration from the silver to the gold standard.
PRACTICABILITY OF A Change,
51. If it is decided that the gold standard ought to be substituted in the Straits for the present silver standard we are of opinion that such a change is practicable. Special difficulties are no doubt presented by the fact that at present the countries in question do not make use of standard coins which are peculiar to them. They employ the British and Mexican dollars which are current in the East generally, of which enormous quantities exist, and which may be indefinitely increased in number. Under these conditions it appears to us to be an indispensable part of any scheme for the establishment of a gold standard that there should be substituted for the Mexican and British dollars now in use a currency special to the Straits Settlements and under the control of its Government, unless it should be decided to make use of the Indian rupee in somewhat the same manner as is followed in Ceylon and Mauritius.
52. The extension of the currency of India to the Straits Settlements was advocated by five of the members of the Committee appointed in the Colony in 1893, and it has been advocated by others. Supposing that the Government of India would consent to such an extension of its currency and we assume that in this matter the Government of India would be consulted- we should still consider that the balance of advantage is against the proposal. It could scarcely be expected that the Indian Government would, except possibly for the initial supply, issue rupees to the Straits on more favourable terms than to others, .., at the rate of 15 rupees to the pound sterling. If therefore the Government of India did not make special arrangements the cost to the community would be just the same as if 15 rupees were actually worth a sovereign. In any case the Indian Government should, we think, enjoy the profit on future issues of rupees and in return they would of course be responsible for maintaining the gold value of the rupees supplied, as at present:
53. There would be much inconvenience in placing the currency and the system of accounts in the Straits on a rupee basis. The East India Company in 1855 adopted measures for forcing the rupee (which had previously been legal tender) into general circulation in the Straits and making it the only legal tender. Great inconvenience was experienced and public demonstra- tions took place, resulting in the project being countermanded. The dollar continued in general circulation without being legal tender, and Sir Hercules
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