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PUBLIC RECORD OFFICE

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TLC.O. 882

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PUBLIC RECORD OFFICE, LONDON

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

has retired from that position, made over to us a debt of a million dollars from Pahang alone, and looks to us for both interest and principal.

11. Under these circumstances I do not see how it will be possible to continue railway construction at even the very slow rate of progress hitherto made, and we must look forward to a long period of comparative stagnation. I use that word advisedly, because we have already found that in those times of trade depression, which comes not unfrequently (we are probably on the eve of such a period now), it has been the liberal expenditure of Government funds on useful works that have enabled us to tide over bad times without nterrupting the progress of general prosperity.

12. As to the prospects of tin mining we have twenty years experience to go upon, and I can only say that it is the opinion of those well qualified to judge that the Western States deposits will not be exhausted for another century, and there is Pahang besides. Agriculture has, in the last two years, made far greater strides than I thought at all likely, and if the land laws are such as to encourage planters, and the labour supply adequate, I do not fear for the future of this industry. But in both cases it is necessary to open communications, to get at mineral deposits and land suitable for planting, and, while roads are excellent, they must be supplemented by railways which yield a direct

reventre.

13. I plead earnestly because I am on the spot, and I am impressed by the necessities of the situation. If the arguments I have used have no weight I ought to remind Your Excellency that we annually receive a revenue from licensed gambling that forms the entire sum that we could probably devote to railway extension, and if at any time this source of revenue were closed to us we should have nothing to spend on the railways, which I had hoped would in time yield enough to enable us to dispense with the Gambling Farm, should we find it safe and possible to do so.

14. I have not received any copy of Your Excellency's despatch No. 288 of the 24th June, and should be glad to have one.

His Excellency

The High Commissioner,

Federated Malay States.

3335.

No. 6.

I have, &c.,

F. A. SWETTENHAM, Resident-General, Federated Malay States.

MR. CHAMBERLAIN to GOVERNOR SIR C. B. H. MITCHELL. (Native States. No. 57.)

*

SIR,

Downing Street, May 12, 1897. I HAVE had under my consideration your despatch, No. 15, of the 18th of January last, enclosing a copy of letter from the Resident-General of the Federated Malay States, in which he further presses the subject of a loan for railway construction in those Staten.

2. Mr. Swettenham proposes "to join up the four isolated sections" of railway in Perak, Selangor, and Sungei Ujong, "by the construction of about 200 miles of line," at a cost of one million sterling, of which £500,000 is to be provided by a loan, and the other moiety from current revenue. The works would, he anticipates, take five to

years complete. His scheme appears to include the projected Perak Province Wellesley rail. way, the construction of which ought clearly to take priority of the section intervening between the existing Selangor and Sungei Ujong railways; and in your despatch, No. 494, of the 6th of November last, you have given a reason for not, in any case, taking this last-named section in hand till 1898, in order to obviate any possible claim to the right to construct it which may be made by the Sungei Ujong Railway Company. Nor does he refer to any scheme for a railway in Pahang, which, as suggested in your despatch, No. 288, of the 24th of June last, may well await the completion of the road from Kwala Kubu to Kwala Lipis.

3. My position, hitherto, with regard to this question has been one of cordial sympathy with a policy of railway extension, but my doubt has been whether the

No. 3.

• No. 5.

↑ 25133: not printed.

n

conditions of the case are such as to justify the immediate borrowing of a large sum for the purpose.

You have expressed yourself as opposed to a policy of borrowing, while adding that if anything would justify incurring a debt, it would be the construction of railways in the Federated States; and, guiding myself by your advice, in my despatch of the 21st of November last, I negatived a loan for the time being. Against this decision Mr. Swettenham urges further and forcible arguments.

4. I am now inclined to meet his views, at any rate to some extent, for the following reasons:-From the purely commercial point of view it has been represented to me that the Malay States have lost money by the policy of making railways only out of balances, without borrowing for the purpose. That if the 175 miles which have been constructed in 15 years at a cost of, say, at a very rough calculation, £850,000, and which earn on an average 8 per cent. on the capital, had been finished in five years by the help of borrowed money, the States would have had for ten years an income of 8 per cent. on £850,000, and if from this 5 per cent. had been written off for interest and sinking fund, there would still have remained a net gain of 2 per cent., or £21,250 per annum, in addition to ten years' accumulation of sinking fund.

3. This argument appears to me to be based on the sound principles that when once the construction of a railway has been recognised as desirable the work should be completed as rapidly as possible, and that the burden of the cost of construction of such works of permanent improvement may legitimately be spread over a considerable period of years, by means of borrowed capital. It seems to apply with still more force under existing conditions than when the first railways were being made. There is no doubt whatever that the sections which have been constructed must, sooner or later, be joined, and that the Perak system should be prolonged to the sea, across Province Wellesley. This being so, it is difficult to resist the conclusion that it is a more paying course to make them sooner than later; in other words, to borrow money for the purpose.

6. For administrative purposes the advantage of continuous railway communication is so obvious that it would be superfluous to discuss it, and from a political point of view there is, I should judge, something to be said for Mr. Swettenham's proposals, in that they would tend to consolidate the union of the Federated States.

7. As to the objections to the course, which the Resident-General advocates, I think it is reasonable to contemplate that the resources of the peninsula, both mineral and agricultural, have sound promise for the future, and that the lines, as a whole, will well repay the cost of production.

8. Moreover, I should not propose that so large a sum as half a million sterling should be raised at once, nor that work should necessarily be hurried on at every point at once. My view rather is that a carefully considered plan of operations should be laid down, in which full allowance would be made for all disturbing causes, such, for example, as the possible effect of the simultaneous commencement of several sections of work on the local labour market, and that, such a programme having been settled, it should be carried out with all reasonable expedition, and with the assurance that the funds required year by year for its realisation will be provided either from revenue or by means of a loan. Subject to the requirements of services of a less permanent nature than railways, and, therefore, more legitimately chargeable to revenue, the existing balances should be used up in the first instance. Possibly, the first borrowed money should be lent by the Colony, especially if the Native States are to construct the line across Province Wellesley; and, finally, resort should be made to a loan raised in the market.

open

9. The scheme put forward by Mr. Swettenham in his letter of the 7th January last,† which has been described in the 2nd paragraph of this despatch, appears to me to embody such a programme, and I authorise you to instruct him to take immediate steps for carrying it into execution. In order that no time may be lost in the complete and careful preparation of the preliminaries, I have directed the Crown Agents to communicate my decision to the Consulting Engineers, and to select and send out, as promptly na possible, the additional surveyors and engineers, the particulars of whose appointment and duties are given in the enclosures to Mr. J. A. Swettenham's despatch, No. 483, of the 19th October last.

• No. 4.

† Enclosure in No. 5.

23159/96: not printed.