PUBLIC RECORD OFFICE
Reference :-
C.O. 882
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
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3. The scheme prepared by the Consulting Engineers appears to me, so far as I am able to form a judgment on the matter, to be well devised and to make adequate provision, if it is carried out in its entirety, for the requirements of the port for many years to come; but its cost will be greater than you were led to expect. In para- graph 11 of your despatch you contemplate an expenditure of about £1,200,000, whereas the estimate of the Engineers is over £1,500,000, to be spread over 15 years.
4. It is evident that if this money is provided, and the proposed improvements are carried out, the position of the Company will be materially modified; its capital, in shares and debentures, will be increased nearly fourfold, and its influence at once on the affairs of the Peninsula, and indirectly on British trade and British interests the Far East, for good or evil, will be correspondingly increased. There can be no question as to the vital importance to the Settlements and to the Malay States of providing adequate shipping facilities; the Tanjong Pagar Dock Company has estab- lished a practical monopoly in this respect, and it would be difficult to name another Colony, at any rate any Colony approaching the Straits Settlements in size and importance, whose fortunes are so intimately connected with, and indeed dependent on, the policy of a commercial body. Mismanagement, or even an administration solely devoted to shareholders' interests, on the part of the Company would in course of time strike a blow at the prosperity of the Peninsula from which it might never recover. I therefore consider that intervention in the Company's affairs-whether it take the shape of control of its administrative policy in return for financial assistance, or otherwise--is amply justified in the public interest.
5. If the Company's management were beyond criticism, the question before me would admit of an easier solution, but this is far from being the case. Though the formal responsibility rests with the local Board at Singapore, by the Articles of Association a consultative voice in important matters is given to the London Committee which, in addition to the powers so conferred, is able to exercise a paramount influence over the Board from the fact that it represents a great majority of the share capital and that its members are senior partners in firms whose junior members are members of the local Board. I have no desire to make any reflection on the Committee-it is their business to promote what they consider to be the interests of their shareholders, as it is the business of the Government to protect the general interests of the com- munity-but I have not failed to observe that a powerful indictment of their policy has been made by the late Chairman of the Board of Directors, to which, so far as I am aware, no adequate answer has been forthcoming. In this connexion I note the observation made in the 5th paragraph of your despatch,*"it is possible that the parsimony in regard to equipment and improvement, which is alleged with con- siderable force against the Committee in London in recent years, may have been due to their expectation that the Government might find it necessary in the interests of the Colony to establish a Port Trust to take over their undertaking, and their desire, therefore, that the dividends on the basis of which, under such a scheme, their shares should be taken over should be as large as possible." And elsewhere you endorse the view already expressed by Mr. Taylor, when administering the Govern- ment, that "there is a large and growing opinion in the Colony that the public in- terest imperatively demands that some arrangement should be made for securing that the welfare of the Colony, and of the great shipping interest with which it is bound up. shall not be subordinate to the immediate interests of a body of absent share- holders."
6. The suggestions which you put before me in your despatch were therefore framed with a double object-to ensure that the Company should be equipped with adequate funds for carrying out the necessary works as quickly as possible, and to secure to the Government that effective control of the Company's policy which you rightly regard as indispensable in the public interest. To these ends you proposed
that:-
(a) The Governments of the Straits Settlements and Federated Malay States should take up 18,000 fresh shares in the Company at $200 per share, though you regarded the price as a matter of minor importance;
(b) The two Governments should guarantee an issue by the Company of 4 per cent. debentures up to an amount of $8,000,000-a proposal subse- quently modified by your telegram of the 13th September,† in which
• No. 6.
† No. 15.
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you suggested that the necessary sums should be borrowed by the Colony and lent to the Company;
(c) The Governor should have a veto on the appointment of all Directors and members of the London Committee, and the right to nominate at least two members of the Board and one member of the Committee; (d) The Articles of Association should be amended in respect of the pro- visions which require the previous approval of the London Committee to any expenditure of over $50,000, and which limit the voting power of large shareholders;
(e) The previous approval of the Government should be necessary for any increase in the charges on shipping and the warehousing and handling of goods, and for the distribution of any dividend.
7. While cordially agreeing in principle with the objects which you had in view, I felt it necessary, before arriving at any conclusion on your proposals, to ascertain what would be the probable attitude of the Company with regard to them, and I, therefore, caused to be addressed to the Company, the letter of the 2nd Sep- tember, of which I enclose a copy. My object was to elicit from them a statement as to their willingness to accept assistance in the Government and as to the terms which they would be prepared to offer in return, and in order to secure full con- sideration of the matter I gave them the opportunity of which, as you will observe, they took advantage of discussing the matter verbally before sending a written reply.
8. From their answer of the 14th ultimo† (a copy of which is also enclosed) you will see that the Company are willing to accept Government assistance on the fol- lowing terms:-
(a) The Government to take up the unissued 8,000 shares at $300 per share, and to lend the Company such further money as they may require for the scheme on 3 per cent. debentures;
(b) The Government to nominate two of its officials as members of the Singa-
pore Board and one as a member of the London Consulting Committee.
9. It will be obvious that this offer falls so far short of securing the objects aimed at by you that it hardly affords even a basis for further negotiation. There is no suggestion, such as you anticipated, of the creation of new shares. The ten thousand shares which, if the offer were accepted, would be held by the two Govern- ments, would confer a voting power of little more than 500 votes. The price sug- gested is 50 per cent. higher than that mentioned by you, and about 25 per cent. above what I understand to be present quotations, although the natural effect of a large emission of capital would naturally be to depreciate the price of the shares. The Colony would be lending a very large sum to the Company at a lower rate than that at which it would have borrowed the money for the purpose. The control offered to the Government as regards both its voting power and its representation on the two Boards would be wholly illusory, while the responsibility of the Government for the acts of the Company would be practically complete.
10. I may add that at the meeting with the representatives of the London Board they made it perfectly clear that they would not accept any measure of effective Government control, such as that proposed by you, unless the continuance of their present dividend of 12 per cent. were guaranteed to them; and it was evident that the inaintenance of that dividend was as you hinted in your despatch-the paramount consideration in their minds. They stated during the discussion that without Govern- ment assistance they could not hope to obtain the requisite capital on terms which they would be able to accept. In such case they proposed to go on with the im- provements gradually, and as money was available, and they suggested a term of 30 years as a possible duration of the work.
11. In these circumstances a decision has to be taken as to the attitude which the Colonial Government should adopt, and several courses are open.
12. It would be possible to take no further steps in the matter; but in view of all the considerations urged in your despatch, and already referred to here, such a course would clearly be contrary to the interests of the Colony and the Federated Malay States.
• No. 12.
† No. 16.
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