CO129-629-4 Commerce and Industry Department- supplies branch. Includes a statement of accounts for May 1946-March 1950-... 1-11-1951 - 31-1-1952 — Page 9

£ 4A

LOWE, BINGHAM & MATTHEWS, HONG KONG

8

when reviewing results of the year's operations :

at

1. Although the accounts are presented on com-

mercial lines it cannot be said that the Branch is

operated strictly on a commercial basis. We believe

Government policy calls for the retaining of stocks at

specific target levels but it is extremely doubtful

whether a commercial concern would find it necessary

to carry the quantity of stocks required to be held by

the Branch.

It is not practicable to separate extra

costs and expenditure incurred as a result of stock-

piling but the following costs are considerably increased

as a result thereof: Storage Charges, Interest, Storage

Losses, Incidental Expenses, Losses arising from Deter-

ioration (e.g. Flour) and Loss in Weight (e.g. Firewood).

It would appear therefore that these accounts

are burdened with considerable expenditure and losses

which are, strictly speaking, not applicable to a true

trading concern.

2.

Interest at the rate of 3% per annum has been

charged in these accounts on the maximum monthly balances

of the combined Suspense Accounts. We understand that

this interest, which amounted to $1,825,807.80, will be

credited to general revenue in the Colony's accounts.

Authority for this procedure is contained in the Secre-

tary of State for the Colonies' despatch HK. No. 62

(Confidential) of 9th March, 1951, to His Excellency,

•(4)/54126/19/51

The Governor.

If the Branch were operating on purely com-

mercial lines then perhaps this interest charge would

be justified as, if operations were not financed by the

Treasury, necessary working funds presumably would have