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5.

In my view the only possible official course is to stick with equal passion to the principles of British justice and the letter of the quisling directive. The Kotewall case, which will be debated for years to come, is still under consideration.

29.

It is increasingly obvious that the rehabilitation of the colony depends on a large scale reconditioning of living accommodation at present uninhabitable because of looting and bombing. If essential work is to be carried through, essential workers must be housed. For the first time in my experiance, I find Chinese improvisation defeated: it appears that after all cven they cannot suddenly materialise timber and cement and steel. It has to be imported in ocean-going ships.

30. Meantime rents have been controlled by Proclamation and Tribunals are being set up to adjust individual cases. This legislation has had a more favourable reception by the public of Hong Kong than any I can remember.

31. Very prolonged and stubborn (if friendly) negotiations with the utility companies are in train. The effort here has been to avoid the complications of requisition and to attempt to formulate arrangements by which the companies can operate under their own managements under the general control of, and with help from, the Administration. They should obviously resume commercial operation at the first moment possible.

32. In the meantime nothing has been allowed to hamper their actual operation. Telephones, trans, ferries, docks, wharves, power and lighting have been kept at work on the maximum scale which war damage and the availability of coal have permitted. Much accounting and costing will have to be undertaken when staff is available before any clear picture can be obtained of the arrangements which have enabled the utilities to function during the immediate post-occupation phase. Company staff, R.A.F. and Naval engineers, ex-internees and civil affairs officers have been mixed up together in working the utilities. By no stretch of imagination can the organisation be called satisfactory; but it may be considered that the important thing has been gained in that in Hong Kong you can turn on the tap and water flows, press a switch and lights go on, the trams run, the telephones work, and some ships lie alongside the wharves and cargo is discharged. Accountants of the future civil government, however, may conceivably hold other views.

33. Of the civil affairs staff position I do not trust myself to write. The establishment has been implemented up to 18% of strength. By direction of the C.-in-C., I have now ordered the officers under my command to absent themselves from their offices one day per week.

34+. Finally, in broad outline, the present situation of the colony is estimated as follows: disease and unrest have been prevented. Law and order prevails, the currency has been re-established, the shops are open, the merabants have brought out their hidden ledgers, and the harbour waits to handle coasters instead of battle-ships. There for the moment there is a pause, already too long. And there with increasing difficulty the position is held. The next step is not within the power of the administration to take. From now on each day until supplies reach us we lose ground. There is a limit to the amount of ground that can be lost. north of us.

There is unrest south of us and

(Sgd.) D.M. MACDOUGALL.

C.C.A.0.

2/11/45.

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