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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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Enclosure in No. 4.

APPENDIX :

Resident-General, Federated Malay States, to Acting Colonial Secretary.

[No. 1086 98.]

Resident-General's Office,

Selangor, Malay Peninsuls,

18th August, 1908.

Subject.

Gold Standard Currency Question. Sir, I have the honour to acknowledge your letter, Miscellaneous 833/98, of 6th April last, with enclosures, concerning the adoption of a gold standard coinage in the Straits Settlements and Federated Malay States, and asking for my opinion on the subject and that of interested persons in these States,

2. I have consulted the residents of the four Protected States, and, through them, most of the persons in- terested in this question; and I enclose for your infor- mustion, copies of reports* from the Resident of Selangor, (against a Gold Standard), the Becretary for Chinesu Affairs (for such a Standard), and Mr. Baxendale, Super- intendent. Posts and Telegraphs, Selangor, who has in- terested himself in the general question of Gold versus Silver Standards of coinage.

3. As regards the views of those I have referred tv, I may say that two Residents are in favour of a Gold Standard, with a silver token dollar as recommendert by the Singapore Chamber of Commerce, while the other two consider that it would be better to keep our present silver coinage. European planters scan to be divided in their opinion, but the United Planters' Asso- emation passed a resolution to the effect that Any action having for its object fixity of exchange is un- desirable in the interests of the planting community." European miners appear to be about equally divided on the question. The Chinese generally are probably in favour of the present Silver Standard, for, though some leading Chinese in Perak voted at a public meeting for a Gold Standard, it is possible that they did not fully understand the proceedings. The Malays have no in- terest in the question, and I take no account of the opinions of Government employees, natives of England, Australia, India or Ceylon, who regard the question

imply from a personal point of view.

4. In offering you my own opinion, I confine myself imply to plain issues, and I desire to avoid all the subtleties of a difficult position on which I am not com- petent to speak.

5. I agree with a great deal that Mr. Haro has written in his memorandum enclosed, and, so far as the Malay States are concerned, the question appears to me to resolve itself into this:-

a) Our exports enormously exceed our importe. The exports are nearly all sold for gold, but the cost of production is paid for in silver. So far, the fall in the price of silver has been of advan- tage to producers, ie., Chinese and European tin miners, and European planters.

Most of our imports have hitherto come from silver-using countries and been paid for in silver, so the consumers have not greatly felt the fall in the value of silver. By far the largest proportion of these consumers are Chinese.

The attitude of the Chinese (and to a leas degree that of European emplovers of native labour) is therefore easy to understand.

(b) The Government exports nothing, but is by far the largest importer of English manufactures. The Government is a great loser by having to pay more dollars for these imported articles, whilst its revenue is still collected in depre- einted silver. The largest revenue is raised from tin, and, as the capital of the country in steadily being drained away, the Government, which takes a percentage on the dollar value of the metal, gets less and less as the gold value decreases, as it has continually done of late year, until the present moment.

The Government has also to make good to its servants a certain portion of the loss which they have sustained through the fall in the gold value and local purchasing power of the coin in which they are paid,

A silver coinage, under present circumstances, is therefore much against the Government in- terests.

(c) If silver were likely to rise again in value to an appreciable extent, it would benefit the Govern- ment and injure producers who sell in a gold market. But all the weight of the best opinions is that it is not likely to rise, and it may fall considerably lower than its present price. 1 beliove that a further considerable fall would not benefit our producers, because we have the experience of many years to show that, with a falling price in silver, the value of tin in European and American markets has fallen so greatly that, whilst the tin-mining industry in other countries has been strangled or greatly reduced, the production in the Malay States has at last been seriously affected. This fall in price is no doubt due to some extrut to over- production here; but it must not be forgotten that, as we can produce tin more cheaply here than elsewhere, some of our extra production was to supply the earlier falling off in countries where tin is more difficult to get at, and labour more expensive than in Malaya

As long as our supplies of alluvial tin do not fall short, we control the production, but we can only control the market by reducing the supply, and, when the price rises, our rivals can again work at a profit and so increase the supply against us. In my opinion, the price of silver has now reached a point beyond which a further fall would not benefit our tin miners.

(d) Mr. Hare has explained that our Chinese miners are not capitalists, and they cannot stand any strain on their small resources. By reason of this want of capital they are not planters on a large scale, and probably never will be. Plant- ing does not attract them. The road to wealth is too slow and difficult, the profits too small, the risks too great, and the capital required beyond the means. Our planters must be Europeans, and as their needs are supplied by imports from gold countries and labour from India, I think a further fall in the value of silver would out both waya and rather damage than benefit their interests. But as all their capital come from gold-standard countries, a fall in the price of silver immediately reduces the value of their property here, and so alarms European in- vestors that they regret the investment of money in a country where such fluctuations are possible, and they decline to make further in- vestments or extend their operations.

(e) This last fact is a very serious consideration for the Government. For the development of these States, especially in planting, we must look to capital from England and other gold-standard countries, and it is of the highest importance that investors should feel confident that a pro- perty which, any, cost £100,000 and yielded an income of 4 per cent, should not, in a few years, by worth only £75,000 yielding 24 per cent, in gold on their original outlay. The Sungei Tjong Railway in a case in point.

(f) We have had to borrow money in a gold-standard country; we may have to do it again; and interest and principal have to be repaid in gold. It is needless to point out what it would cost the Government if such loans were raised on a two shilling dollar exchange Md had to be paid at & one shilling and sixpenny rate.

Of course,

in this case also the interests of the Government mean the interests of the country and all those who live in it.

6. The great need of these States is capital and labour. To secure capital I believe fixity of exchange with gold- standard countries is almost a necessity; while labour will not be adversely affected by that step. The Chinese in the Federated Malay States are not capable of giving any valuable opinion on the question, and, for the reasons set out by Mr. Hare, it is not necessary to attac vety great importance to their view, though I doubt whether they have any very distinct opinions on the subject. The Europeane (non-official) are divided in opinion many of them do not represent capital, but are paid servants. As I have said, I believe fixity of

• Not printed.

COMMITTEE ON STRAITS SETTLEMENTS CURRENCY.

exchange, at present rates, would be the best for their interests. For the Government I have little doubt that a gold standard would have many advantages, both direct, as a large consumer of European manufactures and a large employer of Europeans to whom it has to show consideration; and indirect, as leading to the introduction of European capital and the consequent development of the country.

7. On the whole, therefore, I am in favour of a gold standard with a silver token dollar as recommended by tho Singapore Chamber of Commerce; provided that a qualified expert advised that the change in ourrency could be introduced without any prohibitive initial sacri- fice on the part of the Government. If the change could be made now on the basis of a two-shilling dollar, I

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believe that the interests of the public and the Govern- ment would be benefited. The considerable advantages to be gained by fixity of exchange at the present (or very nearly the present) rate seem to me to be worth more than what I understand is the estimated cost of making the change from our present currency to a gold standard. At the moment we have little to complain of, and I would not recommend any new departure, possibly in- volving all kinds of unforeseen difficulties, if we could only be sure that silver will remain at its present value. Of that we cannot, be sure unless we take steps to fix it artificially.

I have, etc.,

F. A. BWETTENHAM,

Resident-General, F.M.8.

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APPENDIX: