CO882-(6-8) — Page 489

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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12. Moreover, difficult as this may be to give an explanation of, there will always be a tendency on the part of most members of the Board who are not Govern- ment nominees, to stick together, as "against the Government."

13. Two Government nominees on a Board of nine cannot give control, nor will they ever be sure of bringing to bear a degree of moral influence sufficient to guide matters when they want to do so.

14. It is at the meetings of the Directors (not at General Meetings of Share- holders) that the policy and business of the Company is decided on and worked. It is at these Directors' Meetings (held weekly) that control is, in my view, essential if the port is not to suffer by dictation and secret commands from London.

15. In writing here my suggestions for consideration by the Resident-General, Federated Malay States, I start on the opinion and assumption that the interests of the Colony and the Federated Malay States are-particularly in this matter-so interwoven that it is necessary to consider them together.

16. Particularly it seems to me must this appear the case if one looks ahead to the day when the railways of the Federated Malay States will have (as they must have) their principal and most important terminus at the docks and wharves of Singapore.

17. Although, in perhaps a less degree, this likewise applies to the Penang terminus, for the Tanjong Pagar Dock Company is also the proprietor of the Com- mercial Dock and Wharves at Prai, and of the land upon which these can probably he most favorably extended.

18. Then, as regards Singapore itself; if the proposed harbour improvements of Messrs. Coode, Son, and Matthews are accomplished, the scheme of a quay at which to discharge and load steamers that at present use the Roadstead, and the storehouses and warehouses at Teluk Ayer, which are a relative part of Mr. Matthews' scheme, must in the conveyance of merchandise brought in from the Archipelago for re-shipment again into vessels at Tanjong Pagar wharves (and vice versa) create a necessary relationship between the two (Matthews' quay and warehouses, and Tan- jong Pagar wharves and warehouses) that cannot possibly be worked to fullest possible advantage unless, in the control and direction of each, there is "the same blood" working in co-operation and accord.

19. Then again, supposing that Mr. Matthews' schemes are not carried out; in that event there will arise all the greater congestion at Tanjong Pagar Wharves. And, when the Federated Malay States terminus reaches Tanjong Pagar, this con- gestion may be expected to increase still further, with the then more urgent necessity arisen for Government to have and exercise the major say in the organisation and working at Tanjong Pagar.

20. One thing may, I think, be looked on as a certainty, namely, that when Tanjong Pagar becomes the railway terminus of the Federated Malay States, it will then be found imperative that the Federated Malay States must have a certain amount of control, not merely control of the kind exercised in the casting of votes at Board or Shareholders' Meetings, but control in the organisation and daily working of the establishment. And, if this control has to be purchased compulsorily at the eleventh hour, it will prove then a very costly transaction to the purchasers.

21. To me it seems as if there is in this application by the Dock Company for a loan of $10,000,000 the possibility of Government creating the best and most favour able opportunity that is ever likely to present itself of obtaining now and for all time atisfactory control of the policy and doings of the Tanjong Pagar Dock Company.

22. By this, I mean that the advantage to the Company, if Government will offer to give it, from time to time as may be required, the money that it asks for at a rate of interest considerably below what it can finance at for itself elsewhere, will be so great that the Company would be compelled to acquiesce in conditions that Government would lay down as quid pro quo.

23. As to such conditions, this is the time at which Government should exact all that it can, for the opportunity is not likely to occur from the Company's side again.

24. I would venture to advocate most strongly that Government should lend the Company $10,000,000, in sums as from time to time required, on mortgage deben- tures at 3 per cent. per annum, but only provided that the Company will agree to the following conditions of Government, viz. :—

(a) that half of the directorate-or if the number be undivisible by 2, then the nearest number approaching, but above one-half-shall be appointed by Government;

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(3) that everything in the Company's Articles of Association necessitating any reference to shareholders in Europe or to a Committee of shareholders in Europe on any matter whatsoever of the business or management of the Company shall be expunged.

25. If the above is obtained, Government would then have undoubted control in all matters of the Company's policy, business, and working, and this without the creation of or expense involved in what is usually understood by the term "Port Trust."*

26. It should, I think, be“ rubbed in to the Company (if Government decides to offer the loan) that "the Company having already recognised as reasonable and proper the policy of Government having representation by two members on the direc- torate, it is assumed that Government representation in more equitable ratio cannot in principle be taken exception to when Government is asked to lend the Company, and that at an abnormally low rate of interest, a sum of money approaching to nearly three times the amount of the Company's paid up Capital. The more so, as it would be the policy of any Government nominee to promote to the fullest possible extent the combined and now interwoven interests of the shareholders and the port."

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27. This would seem too, to be an appropriate opening and opportunity for pointing out to the Company that—

Government has not failed to observe, on reference to the Company's Articles

of Association, that the powers of the Directors in Singapore are con siderably restricted, and may be hampered, under No. 124 of the Company's Articles. In the view of Government, the direction and working of a Company, that is of Singapore, and on whose policy and operations much of the welfare of the Settlement as a shipping centre must hang, should most appropriately lie in Singapore alone, and Government is unable, in the interests of the Colony, to look on the unusual conditions imposed in this respect by Article No. 124, as in any way desirable or necessary."

28. I am not by any means certain that the London controllers of the affairs of the Tanjong Pagar Dock Company will accept the conditions above suggested. But I think it would be wise at least to definitely make the offer of the loan, subject to the Company's acceptance of these conditions.†

29. And, it seems to me that the advantage and economy to the Company, and to the public, of getting the loan of such an amount of money at a rate of interest considerably below what could be negotiated on the open market will be so great, that the London controllers will find themselves-vis-a-vis the majority of the share- holders and the public-in a position so unjustified if they decline the offer, as to be untenable for the refusers.

30. In other words, I would urge that they be made an offer, the terms and conditions of which are not only such that they cannot get elsewhere, but such that the judgment of the general body of shareholders, and the public, will declare must he accepted.

31. The Tanjong Pagar Dock Company will, I should think, be able to get the money—if it decides upon that course on the open market at, I think, 5 per cent. per annum, possibly some of it at times at 4 per cent. At present, the Company is getting an overdraft from the Hong Kong and Shanghai Bank of $300,000 at 2 per cent, per annum, but the circumstances and conditions relative to this are exceptional.

32. In replying to the letter of the Tanjong Pagar Dock Company, I would suggest that Government of the Federated Malay States should take the opportunity of "pinning" the Company to certain facts and views that the Directors have advanced in their letter, e.g.:—

(a) that the very important works recommended by the Managing Director appear in the Directors' own view to be necessary for the welfare and improvement of Singapore as a port:

(b) that the improvement and welfare of the port depends very considerably on the ability of the Company to give efficiency and facilities of an up-to-date nature in all departments;

* See separate memo., dated 3rd January, 1903.—J. A., 17th August, 1904. To-day, 17th August, 1904, I believe they would have to accept.-J. A. To-day, 17th August, 1904, I hardly think so.—J. A.

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