CO129-355 - Governor Sir Lugard - 1909 [1-3] — Page 338

335

Restriction

in the

6

has

many other resources, such as the development of minerals, a tax on spirits and the purification of her system of collection of taxes.

So far I have dealt with the aims of the Chinese Government, and the direct Colony of assistance afforded to it by India and Hongkong in its efforts to restrict the Hongkong, importation (legally or illegally) into China of raw or prepared opium. I will now pass in review the methods adopted by the Hongkong Government to restrict and control the consumption of opium within the Colony. I will add some proposals by which restriction may be made still more effective in the future.

(a.) The

Farm".

Enhances prices.

Checks

The most effective of these, both for restriction and control, has, as experience proves, been the institution of a monopoly leased for a specified period of three years to a

"Farmer", for the sole right to prepare opium for sale, and to sell it, in the Colony. His right to import prepared opium without declaration and to export it were also recognised. The farm is a lucrative business and its acquisi- tion therefore is the object of keen competition, and the Government derives from the sale of the Monopoly a sum equal to nearly a fourth of its entire Revenue. Seeing that the farm is a restrictive agency this Revenue is entirely legitimate and in any case is no more subject to criticism than the licence fees derived from public houses here or in England. The Government derives no other revenue from opium, except the negligible licences to divan keepers. I have already in a previous paragraph quoted the conditions imposed by the terms of his licence upon the Farmer, and the privileges reserved to him by Ordinance. In order to protect his Monopoly the Farmer has to employ a large staff of detectives and to offer rewards to informers.

In order to pay for these and also the high fee to Government he is com- pelled to enhance the retail price of opium, and this enhancement has been pro- gressive in each triennial period for which the farm has been let. In 1900 the price of prepared opium in Hongkong to the smoker, was $1.50 per tael: In 1904 the next Licencee put up the price to $3 which was again increased in 1905 to $3.30. Thus the amount of opium purchasable for 10 cents has been as follows between the years 1896-1904 :-----

1.5, 1.2,

*1, *8, 57, 4, *3, mace (11⁄2 oz.)

175, 195, 228, 233, 243, 293, 331, thousand population.

The price in Hongkong is therefore much higher than in the neighbouring city of Canton. In Hongkong it varies from $3.50 to $3.50 per tael while in Canton it is from 80 cents to $1.53.

This fact naturally encourages smuggling into the Colony, and since Hong- smuggling kong, being a Free Port, has no Customs Preventive Service it would be impossible to check the smuggling of raw or of prepared opium as effectively as the Farmer can do it when his own pecuniary interests are involved, for it must be remembered that the Colony of Hongkong consists of an island and a peninsula, around whose shores are fleets of trading and fishing junks, while opium being light and of small bulk is easily concealed.

The Farmer can employ spies and informers, both to check smuggling and to detect illicit boiling of opium, but such methods should, when possible, be avoided by a Government on any extended scale. The Government, however, renders him all possible assistance and issues search warrants on information supplied by the Farmer. The Farmer's Excise Officers also search all persons landing in Hongkong, except a few exempted for public service. This search is most unpopular amongst the Chinese and exemption incidentally stimulates men to come forward for public service. The Farm is disliked in consequence of the search which, however, it would be equally necessary to maintain if the Farm were abolished, (in which case the odium would be incurred by the Government), unless restriction of opium ceased. Beyond doubt the creation of a Monopoly in Chinese hands is the most effective method conceivable for controlling the smuggling, sale, and use, of opium in the Colony.*

* sir J. Russell, Chief Justice of Hongkong who had made an exhaustive study of the opium question reported as follows on 6.1, 1892:—" The only practicable way in my opinion of getting any proper revenue out of opium in a free port is by levying a tax on the Manufactured Article, just as on manufactured tobacco or on spirits. Opium in the raw state is not useable. It has to be made fit for smoking, and the raising of a tax on it is just like raising a tax by distilling licenses, or the duty on spirits or tobacco. To diminish consumption of opium, to get an adequate Revenue, and to help China to put down smuggling I am satisfied the Farming system properly controlled will under local circum- stances best carry out Lord Knutsford's wish to diminish the evils of the opium traffic independently of Revenue." In this view the then Governor and Executive Council concurred.

7

Revenue.

A monopoly by Government was tried and resulted in a decrease in the Increases receipts in the second year to less than half those of the first year, due to the impossibility of coping with the smuggling and illicit “ preparation of opium. The Revenue lost by Government was therefore so much additional profit to the Smuggler, instead of going to the Farmer who provides the Preventive Service and to the Government which uses its profits for the maintenance of Police, Sanitation, Education, etc. A Government monopoly is moreover more likely to tend to veuality and corruption of subordinate officials. In view of what I have said it cannot be justly argued that the Government delegates its functions to an individual and loses prestige, since it co-operates in the duties of search and arrest, while avoiding the odium of employing informers and of making a direct profit by the sale of opium.

drawn and

Under the terms of his licence the Farmer is entitled to withdraw from bond, Amount (in order to "prepare" it), 1,800 chests per annum.

be increased by exported. This may imports of prepared and dross opium (not of raw) and he may export as well as supply the local demand. It appears to be a fact that in former years the Farmer did import prepared opium from Singapore, and that much was smuggled to China, but he states that none has been imported for 15 years. However that may be Mr. Clementi's examination of his books proved beyond question that none is imported now except opium dross, "halan", and "tautsingko" which are imported from Canton and Macao to be used in the "preparation "of crude opium for smoking.*

Although Macno was always a rival in the export trade and secured the greater share of it, the Hongkong Farmer does a certain amount of business in this line. The markets of Australia and the Philippines are now closed, and more recently (by the prohibiting Ordinance of 1908) that of China also, but it is probable that he still exports about 12 per cent of his opium. The actual number of chests withdrawn by him from bond, since 1895 is as follows:----

1903 990 1907 725 15153 1900 1098 1904 725 1908 934 †

1895 1607 1899 1749

1896

1897

1589

1901

1898

1704

1036 1905 858 1902 929/ 1906 497

The low figures in 1904 and 1906 were due to financial embarrassments of the Farmer in those years, caused by the fact that he had tendered for a larger payment to Government than the monopoly could afford. The payment which stood at $2,041,940 in 1905 and 1906 fell in the next contract (March 1907) to $1,452,000. In fact in 1906 the Farmer had to suspend the operations of the farm altogether for some months and adulterated opium was sold. The average for the period excluding these two years is 1,253 chests per annum.

price and de-

Since the year 1901, the farm has been in the hands of Singapore merchants, Increased who have put up the local retail price from $2 per tael (in 1901) to its present creased con- rate [$3.37] and by this means,aided by the reduction in the Government sumption. rent,--have succeeded in making it pay, in spite of the cessation of smuggling to China and the loss of the Australian and other markets.

This great increase in local selling price would naturally result in a con- siderable decrease in smoking, for the poorer classes could not afford to buy so much, but since there are no records of the quantities of prepared opium imported and exported (whether legitimately or otherwise) by the Farmer, it is not possible to gauge the decrease precisely, by the quantities of raw opium drawn from bond by the Farmer. It will, however, be noted that this decrease in smoking, together with the abolition of the smuggling traffic, have conbined to reduce the revenue received by Government as rental for the Farm by $588,000, since the last contract was made. It will be noted also that the amount of opium prepared by the Farmer has greatly decreased since 1898 in spite of the acquisition of the New Territories in that year which added about to the population.

* Table 6 (b) and (3) of Mr. Olementi's Memo,

† 118 of these chests were Chinese Opium.

The Straits Commission are emphatic in their view that opium consumption varies inversely with the price, and the dearer it is the less is consumed. The price in the F.M.S. is 40% to 50% less than in the Straits and the consumption per head is nearly double which is undoubtedly attributable to the relative cost". Report $67-69. They however point out that the danger of increasing the price is that it induces smokers to take to cheaper substitutes. The consumption of morphia increased when the price of opium was raised. It also induces an increase of smuggling. Ibid $248, 256.