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percha, india-rubber, seed pearls, rattans, tortoise-shell, and tripang from North Borneo, Sulu, and Appendix No. 4. other islands in the Sulu Archipelago.

Should the North Borneo Company succeed in the establishment of trading posts at Sandakan Harbour, Koudat, and other places in the territory lately acquired by them, the trade of Labuan must be seriously interfered with.

Besides coal the island now produces nothing.

With the exception of some timber still left on the hills on the westward, nearly all the fine forest trees which existed when the Settlement was first formed have been cut down to make rough clearings, on which one or two crops of padi were grown and then left, or have been burnt in jungle fires.

There are three sago-washing works on the island, the sago being received in a raw state from Borneo, and converted into sago flour by a process of hand-washing.

One thousand one hundred piculs of fish-about 30 tons--are caught annually for food.

About 1,700 acres of land are under cultivation, half perhaps being under padi in the low ground, the remainder being cocoa-nut and fruit plantations.

In 1877 the revenue amounted to 7,4907., and expenditure to 7,9951.

In 1880 the revenue was 5,9237., and the expenditure 6,7137., the diminution since 1877 being due to the cessation of the work at the coal mines.

Labuan being a free port, and the principal source of revenue being derived, as in all the Colonies in these seas, from opium, tobacco, and arrack, revenue must depend upon population, and this will be further diminished if trade decreases.

In 1880-

LABUAN.

Resources.

Revenue.

Tons.

4 Sailing-ships, all foreign, entered of

1,234

3 Ditto, ditto, cleared

962

(Two North-German ships making one or two passages yearly from Hong Kong and

returning.)

44 Steamers, British, entered

•

9,048

2 Ditto, foreign, entered

1,000

(Two steamers trading regularly with Singapore, and two making occasional trips to

Sandakan and Sulu.)

43 Steamers, British, cleared

8,935

2 Ditto, foreign, cleared

1,060

In the same year 688 native boats, with crews amounting to 3,799 men, entered the port. In that year nineteen vessels of war visited the place:-

British

French

Dutch

Spanish

Belonging to the Rajah of Sarawak

••

14

1

2

The object in taking possession of Labuan (see paper to Intelligence Department of 10th March, 1879) was to extend our commerce in the China and Sulu Seas, and in order to do so it was thought that the establishment of an English Colony would tend to—

1. Clear the sea of pirates.

2. Put the native Governments in Borneo in a more settled state, and so protect the poorer and producing classes.

3. Extend the knowledge of the interior of Borneo, and facilitate the intercourse with the native tribes.

With the exception of the suppression of piracy, none of the expectations formed at the founda- tion of the Colony have been realized.

The harbour of Victoria and the coal measures give, as stated in the War Office Memorandum, whatever Imperial importance the island may now possess.

We inspected the sites of the coal mines, which lie in a valley at the northern end of the island Coal mines. about 8 miles from Victoria Harbour.

The mines, which have not been worked since August 1879, are full of water, and the machinery and plant, which must have been imported at considerable expense, is fast going to ruin.

All stores, &c., are now the property of the Colonial Government, having been taken from the Company for non-payment of rent.

The coal was leased in 1868 to the Oriental Coal Company for a term of forty-two years, at a rental of 1,0007, a-year.

Since then four different arrangements for working it have been made, all of which have failed, doubtless due to repeated changes in managers, want of proper machinery, and to too much attention being paid at first to getting surface coal for immediate returns.

A certain amount of surface coal is obtained at present from shallow workings under a licence from the Colonial Government at a place about a mile from the head of the harbour, but this is of little value, the deeper seams alone being of any good for marine purposes.

There can be no doubt that there is coal in abundance in the island, and that it could (see Return in Appendix No. 2) be raised in sufficient quantities to afford a fair profit to any company starting with a capital of 50,000l. who could find a market for it at 6 dollars (say, 17. 2s. 6d.) a ton, placed on board ship at Labuan; but to do this it would be necessary to dispose of 60,000 tons a-year, and to construct a railway from the mines to Victoria Harbour, as Raffles Anchorage, owing to its exposure to the north-east monsoon, is unsuited for the shipment of coal; the coal besides, owing to its friable nature, not being capable of standing much transhipment.

As a coaling-station for Her Majesty's fleet, it is presumed that in time of peace the only object of keeping a supply at Labuan, whether obtained on the spot or imported from Singapore, would be to provide for vessels cruizing on the north and east coasts of Borneo and in the Sulu Sea, and for the filling up the coal of vessels proceeding from Singapore to Hong Kong during the north-east

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