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companies would be compelled to yield to the terms of the Government, still the length of the conflict was doubtful, and it appeared unwise to forfeit, even for a time, a considerable portion of our revenue, at a period when our expenditure is unavoidably so high on account of the sanitary and other Public Works which have been undertaken. Consequently, with the advice of the Executive Council, it was determined to pursue what is probably the sounder economic course of reducing the duty upon opium prepared for export to such a figure as would render it to the immediate advantage of the Yan Wo and Trap-Shing companies to make Hong Kong their sole basis of operations, and thus it is hoped, to secure for this Colony the whole profit of the preparation of opium for export. To ensure this result it was considered that the rate for opium prepared for export should be reduced to forty-five dollars ($45) per chest; the rate for local consumption remaining unaltered.

9. It is satisfactory to observe that this reduction will apparently have the desired effect, for I am informed that the Yan Wo and Tsap-Shing companies are recommencing operations here upon a large scale, while the first-named firm are shipping their opium prepared at Macao through Hong Kong, paying, of course, the same duty as if it had been prepared in this Colony.

10. The above-mentioned facts and considerations fully explain the late diminution of the opium revenue; and there appears to be no reason to dissent from the opinion expressed by Messrs. Stewart and Lister that this diminution is in no degree to be attributed to the increase of illicit boiling and exportation, or to any negligence or other shortcomings on the part of the Government Opium Department. Of course there must be some smuggling in this Colony, as in all other countries where excise or customs duties are levied, but strenuous efforts will continue to be made to secure the interests of the public revenue.

11. For all further information on this subject, I beg to refer once more to the annexed papers, and to my previous Despatches on this question, especially to my Despatch of the 28th August 1883,* in which I stated as follows:—

"I entirely concur with what I believe to be the view entertained by your Lordship, "viz. that it is very desirable to minimise, as far as possible, the connexion of the "Colonial Government with the opium trade. However, your Despatch of the 9th May, "1883, conveyed your approval of the action of Mr. Marsh (the officer administering the Government before my arrival) and the Executive Council, in deciding 'in the absence of a suitable offer for the opium farm, to issue licenses at a fixed rate, " and to levy a tax on boiling under section 3 of Ordinance 2 of 1858." I added some further observations to which I would again request attention.

I have, &c.

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current year. Subsequently, however, the policy of exclusion was abandoned, and the sounder plan adopted of allowing a fixed drawback of duty on all opium prepared for export. The large firms have thus found it to their advantage for the present to return to Hong Kong, and have been permitted to resurne boiling operations, without making any promise, as far as I understand from the papers, to do all their business in the Colony.

4. I entirely approve of the conclusion finally arrived at, as it is manifestly dangerous to depend in any large degree on a duty upon opium boiled for export, and it is better to lower such duty independently of any arrangements that might be made with any firm to carry on its business solely in Hong Kong, especially as such bargains are only liable to be broken on a change of circumstances.

5. I observe that it is stated, in paragraph 30 of Mr. Russell's report of 14th March 1883, that the duty on opium in Singapore is much heavier that it is in Hong Kong; and it has occurred to me that it might be possible, with safety and advantage to the revenue, to raise the duty on opium prepared in Hong Kong for local consumption. The papers do not show whether such a proposal has passed under the consideration of your Government. It would appear not improbable that a considerable addition to the duty would not largely diminish the local consumption; and it will be for you to consider how far any such addition would be likely to increase the risks of fraud on the Government.

6. Apparently the notice in the "Gazette" of 3rd May last will preclude your making any addition to this duty, should it appear desirable, during the next two years; and I have to point out that the promise contained in that notice to continue existing licenses for the further period of two years was made without my sanction, although in my· Despatch of 23rd October 1883* I instructed you that "tenders for an opium farm should be again called for next year, in case it may then be found desirable to revert to the old system,’

21858.

No. 15.

I have, &c.

DERBY.

PUBLIC RECORD

OFFICE

Reference :-

LPEC.O. 882

5 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

14786.

(No. 220.) SIR,

No. 14.

G. F. BOWEN.

(No. 382.)

MY LORD,

The EARL OF DERBY to Si G. F. BOWEN. [Answered by No. 15.]

Downing Street, September 26, 1884.

I HAVE the honour to acknowledge the receipt of your Despatch of the 19th of July last,† on the subject of the opium revenue of the Colony of Hong Kong.

2. The papers which accompanied your Despatch very fully explain the fall in this revenue during the latter part of the year 1883-4; and they also reveal the great difficulties which your Government has had to meet in dealing with this complicated question.

8. I am glad to notice the care bestowed on the consideration of these difficulties by the officers who have advised you in the matter, though I observe that it was not found possible to maintain a consistent attitude in treating with the firms of opium boilers who had removed to Macao and Penang. After endeavouring in vain to make an arrangement with these firms, that the export duty should be lowered on condition of their boiling altogether or to a large extent in Hong Kong, you determined to exclude the two firms altogether, and sought to foster and encourage others working on a smaller scale by promising to extend their licenses for two years, after the expiration of the

• No. 7.

* No. 13.

SIR G. F. BOWEN to the EARL OF DERBY. (Received December 22, 1884.) [Answered by No. 16.]

Government House, Hong Kong, November 18, 1884.

I HAVE the honour to acknowledge the receipt of your Lordship's Despatch of September 26,† on the subject of the opium revenue of this Colony. I have again consulted on this question the Executive Council, Mr. Justice Russell, and the other gentlemen most competent to advise upon it; and now submit the following observations.

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2. With regard to your Lordship's remark in paragraph 4 of that Despatch, that "it "is manifestly dangerous to depend in any large degree on a duty upon opium boiled for export," I beg leave to point out that the trade in opium prepared for export is of considerably more importance than that in opium boiled for local consumption. In the very best years the duty on exported opium has been at least three fifths of the whole sum collected, and in 1883-4 no less a sum than one hundred and one thousand eight hundred and ninety dollars ($101,890) was received under this head alone.

3. Your Lordship's suggestion to increase the duty levied on the preparation of opium for local consumption is, no doubt, feasible; and, perhaps, no very marked falling off in local consumption would result from its adoption. But I would point out that the charge at present made was fixed (as I am informed) after very careful consideration and after consultation with the native dealers, who had not, when the trade was in their own, hands, thought it prudent to demand more, on the whole, than the Government is now charging. The practical check in this matter is the neighbourhood of Macao, and the facilities for anuggling in opium from villages and towns on the neighbouring mainland of China. Singapore is not exposed to corresponding disabilities.

• No. 3.

↑ No. 14.

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