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April. My further recommendation in that telegram, that payment should be made half at 19 and half at the rate of the day, was based upon a careful review of figures and accounts put forward by the local owners. I am satislied that in the case of the ships now in question the grant of this additional remuneration is fully justified". A similar representation was made to Colonel Thomson, but the Shipping Controller could not see his way to accede to the request. Colonel Thomson had written on the 25th March, 1918:-"you will observe that Loulou lays great stress upon the fact that payments to owners out East should not be greater than those paid at home.”
A revision of Blue Book rates for tramps enabled the Hongkong Government to increase its payments to owners with effect from the commencement of the local scheme, but about the same period notice was given that the arrangements as to owners' commission were being modified. It was urged that there should not be any reduction in the rate paid to owners under the Hongkong scheme, and, pending receipt of further instructions, the full commission was paid up to the end of the requisi- tion period. Some correspondence on the subject ended in May, 1920, with a letter froin the Ministry of Shipping:-"I am to say that the Shipping Controller regrets the decision arrived at by the Government of Hongkong and feels bound to place on recordl his view that the reasons adduced for that decision do not seem to him to be altogether adequate ".
This letter is quoted, and the matter of owners' remuneration has been dealt with in some detail, because there has been a wide-spread impression that the Hongkong Government had a free hand in the matter and had not been liberal in its treatment of The owners.
20. There were some who did not see eye to eye with the Hongkong Government on this question of remuneration. A complaint was made to the Shipping Controller in London regarding the alleged preferential treatment accorded to the Hongkong controlled ships, in their category of tramps, as compared with ships classified as liners. The Hongkong Government, being asked to report, expressed the opinion that the arguments, which had been advanced in support of the complaint, were untenable. The Hongkong vessels were old and of inferior class and they were not considered seaworthy enough for full requisition. For this reason the cost of upkeep was proportionally heavier and special concessions should be granted. The ages of the vessels varied from 27 to 43 years, and, as they were not in good condition, constant repairs were necessary, at enormonsly enhanced cost compared with pre-war rates. The Ministry of Shipping had pointed out that the revision of trap rates in the United Kingdom was necessary largely on account of the cost of insurance. In the case of the Hongkong tramps marine risks could as a rule be insured against for "total loss only "at rates between 10 and 15 per centum, it being impossible to insure “with average", whereas the insurance rate for the two cargo liners under the Scheme was 3 per centum "for total loss only" and 6 per centum “with average"; and those liners might be taken as representative of all ihe liners on the China Coast.
21. The question of insurance against war risk was one of some difficulty. In a circular letter addressed on the 13th March, 1918, to all owners, they were informed that The Government would accept all war risks, and the question for decision was whether the longkong Government should insure or whether it should carry the risk itself. The risk was slight and insurance rates were high, but there was a possibility that vessels might be lost through the sudden appearance of a raider, or the placing of explosives in cargo, or other enemy action. On the advice of the Vital Requirements Committee the ships were insured for three months in the first instance. The Shipping Control Cou- mittee obtained from Messrs. Goddard & Douglas a valuation of each ship at its then valne, the total sum for the fourteen ships being 4979,000, and upon this sum insurance premia amounting to $48,716.41 were paid. At the expiration of the three months the Government had a sufficient sum in hand to form the nucleus of a sinking fund, and it was decided, again on the advice of the Vital Requirements Committee, that the Govern- ment should thereafter carry the risk. At a meeting of the Legislative Council on tlu: 17th October, 1918, the Colonial Secretary speaking of the Shipping Fund, said: "The money is kept for insurance against war risk".
No claim arose at any time in respect of war risk.
22. Another problem which confronted the Government was the question of the policy to be adopted with regard to the running of the ships at a prolit. Some figures
regarding certain profits which were being made at the time may be of interest in this connection. The balance sheets of a public company controlling one of the requisitioned steamers show the following figures :-
Capital $40,000 in 800 shares of $50 each. Value of steamer written down to $20,000. Profit for the years ending in February 1916, 1917, and 1918 respectively $163,762, $245,011, $534,339; Dividend per share of $50 in respect of these years, $183 $275.00: $598; and remuneration to Directors and Auditor $16,306: $24,524: $53,453. This may have been an extreme case, but there were other instances of very large gains. The Government had to decide to what extent it should take advantage of the extraordinary earning powers which the war had given to the steamers.
The Shipping Controller's instructions seemed to be clear. The ships which were not required for special Government work were to be run by the owners in their customary manner: "vessels will be left to owners to run as if for themselves but actually for Indian or Colonial Governments The Hongkong Control Scheme was to be based on the Liner Requisition Scheme, the instructions regarding which were:---- "It is not the desire of the Government to interfere either with the nature of the busi- ness of the Established Line or the method of conducting it which would have been followed had the controlled vessels not been requisitioned, except in so far as the National interest may require. Each Established Line shall continue therefore to manage its business and to run the controlled vessels with as much zeal and shall have the same discretion in such management as if its own interest alone were involved ".
rates
It was decided that the Government had no option but to charge the then market It was true that high freights meant inflated prices, but market rates were being charged in respect of vessels under Imperial control, and the Commodore had advised that full freight rates should be maintained in respect of Liner Requisition vessels; and, if the Hongkong Government had offered its ships below prevailing prices, instructions would no doubt have been received from the Shipping Controller that competitors, for example the Indo-China and China Navigation vessels, must not be undercut. In any event freight remitted to a shipper would not have gone into the consumer's pocket. There was the further point that the owners were getting 5% upon the earnings of their ships and they naturally did not want those earnings to be reduced. It may be mention- ed that in the case of a ship such as the Patriot, carrying coal for Government account in respect of which no freight was payable, the Government allowed the owners to draw commission on the sum which would have been paid for freight in the open market.
The Government strictly adhered to the policy that, in deciding upon the various uses for which ships were required, any consideration of profit making must be kept entirely in the back-ground.
23. Late in the year 1918 instructions were received from the Admiralty that a number of vessels, which had been on Imperial requisition, were to be transferred to the Hongkong Control Scheme, but after some telegraphic correspondence these instructions were cancelled and in a telegram dated the 23rd January, 1919, the Hongkong Govern- ment was authorised to use its discretion as to continuance of control, which it accordingly discontinued as from the 31st January, 1919.
24. The Hongkong Control Scheme resulted financially in a net profit of $2,231,201. The total expenditure, exclusive of war risk insurance, amounted to $6,387, a some what striking figure when it is remembered that it represents the entire cost of controlling seventeen ships, with detailed examination of all their trading accounts, for the best part of a year. Many a brokerage fee for negotiating a single charter amounted to a vastly greater sun, and, if the immense amount of work done had been charged for according to the spacious ideas as to remuneration in the shipping business then prevalent, the profits would have been most materially reduced. The opportunity may be taken to record the very great obligation which the Colony is under to Mr. Sutherland, Mr. Young, and Mr. Cary for their devoted work on its behalf. Mr. Sutherland and Mr. Young received no remuneration of any kind, and Mr. Cary, who was responsible for the control and checking of all ship's accounts, was paid at a rate which from a business point of view was merely nominal. Each member of the Control Committee had to find time for the shipping work in addition to his own work, which was in itself abnormal owing to depletion of staffs, and, having regard to all the circumstances, it is perhaps noteworthy that the critics have found such scanty material on which to base their denunciations. Mention may also be made of the gooil work performed by Commander Beckwith, B.N.,
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