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45. I have said above (paragraph 39) that I think the licensing system would be preferable, but I have no doubt that it would be practicable to improve the farm system by greater restrictions than are at present placed on it, and by exercising a closer supervision over its proceedings.

46. Having regard to the existing practice of dross consumption and to the risk of smuggling, I doubt if the price of chandoo can be raised any further.

D. F. A. HERVEY,

Malacca, October 22, 1892.

Enclosure 9 in No. 27.

MINUTE BY THE COLONIAL SECRETARY.

Resident Councillor.

The system of raising a revenue from opium, spirituous liquors, toddy, and bhang by selling to an excise farmer certain exclusive rights in connexion with the manufacture and sale of these articles has been in force in these Settlements for a great many years.

The Indian Act XIV, of 1851, which consolidated the excise law of the Straits Settlements repealed old Regulations of 1830, 1831, and 1833.

-The farm system is thoroughly understood here, it is carried out in all Malay States and in the Dutch Colonies in the Eastern Archipelago, and after seeing it in force for many years unhesitatingly record my belief that, when worked subject to proper restrictions, it is more suited to our population and better adapted for the prevention of smuggling and the repression of excessive indulgence in opium than any other.

With the possibility of having to face, at some time or other, a combination of Chinese capitalists who would extinguish all competition for the opium farm and seek to acquire at their own price the exclusive rights sold by Government, I have often given much thought to various methods of raising a revenue from opium without having recourse to a monopoly of the right of the manufacture of chandu.

I have invariably had to dismiss as impracticable all such schemes, which enumerated as follows:-

I. A Government factory.

II. The licensing system.

may be

III. The levy of a tax per ball ou raw opium, leaving unrestricted the preparation of

opium for smoking.

The Colony has in its immediate neighbourhood, Malay States and Dutch Colonies, in each of which there is a Chinese population, and in each of which there is an opium farm. Every one of these places is a position from which the exclusive privileges of our opium farmer may be assailed. In order to protect his monopoly he has either to enter into friendly relations with the principal foreign farms, or he has to acquire them himself, or he has to exercise great vigilance and wage unceasing war on sinugglers.

Under the present system it is the farmer who maintains a preventive staff.

If at any time by any combination of circumstances now unforeseen, the Government were forced to work through State agency the excise privileges now farmed to a mono- polist, it could not be hoped that, from a revenue point of view, the department would be an efficient or satisfactory as an opium farm worked by Chinese. however, to dwell upon such a contingency. It is the second of the schemes enumerated It is unnecessary, above which has found advocacy in England, and I pass on at once to this.

The object with which a change of system is suggested is the diminution of the evils of the opium traffic and it is desired to bring this about without seriously crippling the revenue. The "evila" of opium are, in my opinion, habitually exaggerated, and the popular horror of opium, which is so common in England, is, like many other popular errors, founded on absolute ignorance. It is fostered, moreover, by the representations of well-meaning persons who conscientiously believe that they ought to denounce opium in the interests of morality. Without admitting the " argument, I have considered very carefully the possibility of introducing the licensing evils," except for the sake of systeın, and I am convinced that it would facilitate ail that it is desired to prevent.

The number of licenses would be limited, they would be disposed of to the highest bidder ard a number of privileged traders would thus be created instead of one monopo-

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list. This would be greatly in the favour of smugglers in the Malay States and Dutch Settlements. The license-holders, all of whom would be competing one with another, could not take concerted action against them, the Colony would be deluged with smuggled opium, the consumption would be increased and the revenue reduced.

Under the farm system the price of manufactured opium is artificially kept at a high figure, thus restricting the quantity consumed.

The object of competing licensees would be to undersell each other, thus promoting the consumption of opium.

be faced.

The third of the schemes I have mentioned is the levying of a tax on raw opium imported for consumption in the Colony, leaving the manufacture unrestricted. I should prefer this to the licensing system, and believe that it would be more efficacious in keeping down consumption, but here again the difficulty of repressing smuggling has to It would be necessary to have a bonded warehouse where all opium would be stored, and where a duty of from $20 to $30 a ball would be collected on all opium intended for consumption in the Colony and not for re-export. Raw opium would be manufactured into chandu on licensed premises. There would be much difficulty in introducing and working the system, and we might have to meet great opposition from the Chinese, while there would be the danger of having our police and preventive services demoralised by bribery.

Our position is altogether different from that of India and Hong Kong. We differ from India as regards population, and, from the point of view of practical administration, the position of Hong Kong is no guide for us.

The Chinaman does not stand in need of protection from himself, as it is possible the Native of India may do. Hong Kong does not stand in danger of wholesale smuggling from China, as we do from the foreign possessions surrounding us.

I have examined the question to the best of my ability, and feel sure that for the purposes which the British Government have in view, namely, the diminution of possible evils resulting from the opium trade, and the diminution of the consumption of opium, the farm system is the best that can be devised, though, like every other system of human invention, it may be used oppressively.

It is a mistake to suppose that among the Chinese in the Colony it is the custom to resort to an opium shop, or "divan," or "den," to smoke opium. Opium shops are places where the drug is retailed. They have sometimes accommodation for a few smokers, generally men whose avocations take them far from their own homes, but the ordinary practice of Chinese is to smoke at home. The use of opium is a recognised habit and not one to be ashamed of; there is no need, therefore, to have resort to low places as if for the gratification of an inavowable vice. Because such places exist in the East-end of London it is perhaps assumed that in Eastern Asia the votary of opium has to smoke in some haunt of vice and iniquity.

I do not think that the opium shops, where smoking is carried on, are unduly numerous, or that they do any harm that calls for legislative interference. I should prefer if it were possible to exclude Malays from them, but I do not see how this is to be done. There would be no objection to placing the shops more directly under Govern- ment control and less under that of the farmer.

No action is, in my opinion, required in the direction limiting the quantity of prepared opium which may be possessed by any one person, with the view of putting down unlicensed smoking rooms in private houses. Opium smoking in private houses is the rule. The fact that the luggage of every travelling Chinaman generally includes an opium pipe and other apparatus sufficiently proves this. Resort to a licensed smoking room is the exception. Competition, therefore, between licensed smoking rooms and unlicensed places in private houses is au imaginary difficulty.

To sum up, the evils, if not altogether imaginary, are enormously exaggerated, the farm system, though not faultless, makes opium dear and limits consumption, and any new measure short of rigid prohibition is likely to result in increased traffic in chandoo within the Colony, with a simultaneous transfer of our revenue to our neighbours.

February 22nd, 1893.

W. E. MAXWELL,

Colonial Secretary, S.S.

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