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C. 62382/29 [No. 4].

No. 239.

UNFEDERATED MALAY STÁTES (BRUNEI).

THE HIGH COMMISSIONER to THE SECRETARY OF STATE. (Received 19th July, 1929.)

(No. 70.) SIR,

Government House, Singapore, 20th June, 1929. Wirя reference to paragraph 2 of Mr. Amery's Unfederated Malay States despatch No. 11 of the 23rd April, I have the honour to report that Brunei is still contributing to its Opium Revenue Replacement Fund at the original rate of 20 per cent. of its net opium revenue.

C. 62427/29 [No. 3].

I have, &c.,

HUGH CLIFFORD, Malayan Civil Service,

High Commissioner for the Malay States.

No. 240.

279

7. There is the further consideration that apart from the $80 millions loan (of which some $72 millions have been spent on works of development to date, and for the redemption of which our Sinking Funds will amount to over $9 millions at the end of 1929) many millions. have been spent on Capital works in the Railway, Public Works, Electrical, and Posts and Telegraphs Departments. The full benefit of this large expenditure will be felt in the future, when there will be no burden of Sinking Funds and interest to be borne as there would have been had the works been constructed from Loans.

8. Thus in 1928 and 1929 alone on Capital Account for Railway, Public Works, and Electrical Departments, we shall have spent out of revenue and surplus balances a sum of about $50 millions, and although the whole of this sum cannot, it is true, be rightly regarded as expenditure on remunerative works of development which will bring in increased revenue in the future, at least 75 per cent. of it can be so regarded. 9. While there is every reason to be sanguine for the future, in view of the present financial situation and the effort which is being made to reduce the gap between the estimated revenue and expenditure, I should be glad if Your Lordship would approve my recommendation to reduce the annual contribution to the Reserve Fund from 15 per cent. to 7 per cent. of the opium revenue. If this sanction is given a reduction of approximately $900,000 in the annually recurrent expenditure will be effected.

I have, &c..

HUGH CLIFFORD,

Malayan Civil Service,

High

Commissioner.

PUBLIC RECORD OFFICE

Reference :-

C.O.882/11

PUBLIC RECORD OFFICE, LONDON

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

FEDERATED MALAY STATES.

THE HIGH COMMISSIONER to THE SECRETARY OF STATE.

(No. 447.) MY LORD,

(Received 19th August, 19297)

[Answered by No. 241.]

Government House, Kuala Lumpur, 24th July, 1929.

I HAVE the honour to refer to Mr. Amery's Straits Settlements despatch No. 551 of the 20th December, 1928,† regarding the Opium Revenue Replacement Reserve Fund.

2. In that despatch sanction was given to my proposal that the Colony_should suspend further contributions to the Fund until the position become clearer after the Conference due to be held this year.

3. Although I am not prepared to recommend that the Federated Malay States should follow the example of the Colony and suspend further contributions for the present, yet I am of opinion that the Federated Malay States Reserve Fund is now of sufficient magnitude to allow of the annual contributions towards it being reduced from 15 per cent. to 7 per cent.

4. The Reserve Fund at the end of this year will amount approximately to $21 millions; and with a contribution of 7 per cent. instead of 15 per cent., it will amount to $31 millions five hence.

years

5. The opium revenue is variable but, taken over the past fifteen years, the average yearly revenue might be taken as $12 millions. Assuming that the 15-year period begins to run from 1st January, 1935, and that the revenue from opium will decrease at the rate of 1/15th per annum, i.e., by $800,000 in the first year, $1,600,000 in the second year, $2,400,000 in the third year, and so on, then the sum of $31 millions standing to the credit of the Fund on 1st January, 1935, will be sufficient

(a) to meet all these yearly deficits till 1943 if no action whatever is taken by the Government during that period of 8 years to tap new sources of revenue and if no further contributions are made to the und;

(b) to meet half the yearly deficits (the other half being found from new sources

of revenue) till 1949.

6. As the opium revenue forms only about 17 per cent. of the total revenue and taxation is very light, I consider that the periods mentioned in (a) or (b) of my preceding paragraph are sufficiently long to enable the Government to take stock of the position and institute new measures of taxation to cover the total loss of opium revenue before the Reserve Fund is exhausted.

* No. 238.

† No. 235.

C. 62427/29 [No. 7].

SIR,

No. 241.

FEDERATED MALAY STATES.

THE SECRETARY OF STATE to THE HIGH COMMISSIONER.

(No. 408.)

2.

Downing Street, 1st October, 1929.

1 HAVE the honour to acknowledge the receipt of your despatch No. 447 of the 24th of July,* on the subject of the Opium Revenue Replacement Reserve Fund. You propose that the annual contributions to the Fund should be reduced fron 15 per cent. to 7 per cent. of the annual opium revenue. The considerations affecting the Opium Revenue Replacement Reserve Funds in Malaya have been explained in detail in my predecessor's Straits Settlements despatch No. 551 of the 20th of December, 1928,† but it may be useful if I recapitulate them here.

3. These Funds are designed to provide for the contingency which will arise when the time comes to commence the total suppression of opium smoking, in accord- ance with the international obligations entered into on behalf of the Malayan Govern- ments. As was explained in the Straits Settlements despatch referred to, the opium revenue need not be expected to disappear within the first few years of the 15-year period within which suppression of opium smoking is to be completed, and reasonable notice may be expected of the commencement of that period. It was further explained in that despatch that there was no reason to anticipate that it would be impossible to replace the opium revenue by revenue from other sources, and that the object of the Reserve Funds is, therefore, to provide for the period when the opium revenue has already commenced to decline, while other sources are still only in process of develop-

ment.

4. In the case of the Straits Settlements, the Fund having already reached a total of more than three years' opium revenue, I felt that it was adequate for the purpose described above and approved the suspension of further contributions. Similar action has since been approved in Johore. The conditions, in the case of the Federated Malay States, are not, however, quite the same. The Fund will amount to about $21 millions at the end of this year, that is less than twice the annual opium revenue, estimated at $12 millions. At the reduced rate of contribution which you propose it will still be considerably less than 3 years' opium revenue at the time you assume

† No. 235.

* No. 240.

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