Preliminary economic report on the U.K. colonial development corporation's loan proposal

 TIONAL l3ANK FOR RECONSTRtTCTtON AND DEVELOPMENT ? .' , --,--- E.. ~- . 66847 l?RELI!v!INARY EOO:iJOMIC REPORT ON THIiJ IT. K. COLONIAL DEVELOPMElfr CORPORATIOHl S LOAN PROPOSAL January 8, 1949 Economic Department Copy Jio.  CONTENTS Int:i.~oduction • • • • . ................. I (~Villiam G. vJelk) I. Repayment Prospects of an IBRD Colonial Development Loa~ Guaranteed by the United Kingdom.. • •••• 1 (An'tonin Basch and lvlartin l~. Ros.::n) II. The Pattern of International Payments of the U.K. Colonies l~ri th S ecial Reference to Dollar Earnin,Q:s 14 Antonin BaE'ch and Victor Urquidi) III. A Surve of British Colonial Develo~ment Plans. • • •• 30 ~lilliam G. ilelk and Benjamin B. King) IV. Comments on the List of Projects Submitted b~~ U. K. Colonial Deve1.opmBL!'G COJ:'"po:..~atiOl.l • • • • • (Hessrs. ~Iarrama~ Craig-Hartin, Spottst'TQod, Lipko,·ri tz and 1;fubnig)  j. I UJrrRODUCTJQN The four studies contained in this paper are intended to throl!T light on the basic economic factors "Thich the Bank must examine in consideri!'lg the recent U.K. colonial loan proposal. Since the loan is to be guaranteed by the United Kingdom Government. and is to be made to a ",holly o\,'ned U. K. government agency t i t is, in essence, a loan. to the United King.iom. The first paper, consequently, seeks to determine the repayment prospects of a loan of moderate size made to the United Kingdom at the present time. The paper points out that although it is impossible at this moment to determine the long run prospects of the U. K. balance of payments I·Tith complete assurance, latest official estimates indicate that by the end of the Marshall Plan period (1952-53) the over-all balance of payments of the Uni ted Kingdom should shm·/ a considerable surplus on current accotl.."lt and sufficient income in hard currency to meet current obligations and to leave some margin for increased dollar allocations to the members of the sterling area. The servicing of the loan nO\oT proposed shoulo. therefore be possible \or! thout difficulty if the assumptions listed in the papeX' are realized. The first study indicates clearly that the colonies con~ti tute. E',t present, an important source of hard currency income for the United Kingdom. In the second paper, the pattern of international payments of the :.T. K. colo- nies ",ith special reference to their contribution of hard currency to the sterling area hard curreuay pool is ~~alyzed in some detail. The paper concludes that in 1948 this contribution ,.ri11 amount to about $300 million. The third paper indicates how the current programs of colonial development of the United Kingdom and the efforts currently made to increase the hard currency earning ~apacity of the colonies fit into the broader  II pattern of :British colonial development plans of the last t\!lro deceites. The paper shoy!s that at the present moment a conoiderable number of development projects are in various stages of planning and practical realization through- out the British Empire. These include projects to be carried out by the various colonial governments themselves and by the recently established central agencies for colonial development. It may be expected that as 1'Iorld political and economic condi tiona become more stabilized, rrivate foreign capital too 1"ill contribute importantly to d.evelopment in the colonial field. This should add further to the dollar availabilities of 1(,.1( the~hard currency pool. As an example of the projects which it is prepared to lli'1dertake lft!hen the loan is granted, the U.K. Colonial Development Corp()ration has furnished the Bank with a list of 37 development schemes in agriculture) industry and mining which are expected to provide dollar savings or earnings considerably in excess of the 3xpected loan service. Although the data contained in the list are too scanty and incomplete to make possible a detailed evaluation of the projects described. some observations made by the interested Sections of the Economic Department are nevertheless presented in the last of the papers included in this report.  I. REPAYl4ENT PROSPECTS OF AN 113RD COLONIAL DEVELOPMENT LOAN , Gti.A.R.4WEED T13y THE UNiTED KINGDOM) SUMMARY (I) The official estimate of the U.K. balance of payments for 1952-1953 sho\\1s an over~all surplus on current account of $400 million. The deficit '~'i th the l'!estern Hemisphere will continue t hal·rever. and is put at $291 mil- lion. It is to be met from a surplus ~]ith other areas, chiefly t'fi th the sterling area, The figures for current account transactions of the U. K. colonies and dependencies for 1948 ah~fl roughly net dollar earnings of about $300 million. In the future it can be assumed that South Africa ,dll continu( to pay- in gold i tel deficit 1,r1th the United Kingdom on invisible items and also on trade to the amount of about $200 million. The t,.ro items -- $500 million altogether -- should suffice to cover the expected deficit with the ',vestern Hemisphere and to provide a reserve from \,rhich dollar releases on a limi ted scale of the old and ne~"rly created sterling balances could be met. Although the balance of payments situation of the United Kingdom is and will remain difficult. the United Kingdom can still be regarded as a creditor nation on income account. Expected SUbstantially increased income from the operations of British oil companies should also be ta~en into accotL~t. The dollar position of the sterling area could be further improved if resources could be developed increasing dollar earnings or dollar savings. The devel- opment of the dependent territories belongs certainly in this category. The discussed loan is a part of the \"hole program and its servicing should be possi ble from the U. K. surplus ,.rith the dependent territories and South Africa.. to be paid for in dollars and gold. I. (2) The follo"'ing analysis is based primarily on the official estimate of the U.K. bala~ce of payments for 1952-1953. submitted to the O.E.E.C.  - 2 - (C. M. D. 7.572). The over-all balance of payments for 19.52-1953 sho1,·!s a sur- plus of ;p400 million on current account. The trade deficit f Mhich arnounh to $663 million, has been reduced to about one-fourth of the pre1rr ar defiei t at pre1.>TaI' prices, a!'l.d is more than coV'ered by a surplus on inV'isible items, the largest among them being iP700 million for nother receipts. n (3) \fhile the over-all balance of payments on current aCCOll'l.t is esti- mated to have a surplus, the balance with the ',restern Hemisphere still Sh01"S a deficit of $291 million, in spite of a substantial reduction of the trade defici t 1Plith the 'Jestern Hemisphere.!! The 13ri Ush "Thite Paper estimRtes that this deficit of nearly $300 million "~,ith the '1estern Hemisphere It can be covered by the gold production and dollar earnings of the rest of the sterling area, together 1PTi th U. S. commercial inV'estment in the United Kingdor. and the rest of the sterling area." The U. K. balance of nayments 1.· ' ith the sterling area, shm.ring a surplus on current account of $816 million, is the strongest part of the total balance of payments. This surplus is due to net shipping earnings of $316 million, net interest, profits, dividends of $277 million, and a trade surplus of $276 million. The ;~Thi te Paper does not assume that this 'III,1101e surplus would be paid for in dollars or in gold. For the purpose of estimating "'hat Pa!"t of it might be converted into dol- lars, or paid for in gold. the sterling area is divided here into U.K. dependencies and other parts of the sterling area. U.K. Dependencies (4) The U.K. dependencies, as pointed out in the next section of this report,?J will probably sho~'r net dolla!" earnings of about $300 million in 11 Excludes British and European colonies, but includes the Philippines. y II. "The Pattern of International Payments of the U. K. Colonies '''i th Special Reference to Dollar Ea.rnings. 1I  - 3 - 1948. They ,..rere net dollar earners before the 1,Tar. also in 1947. The ',\l1ite Paper lists U.K. dependent and overseas territories under the heading "par- ticipating sterling area and U. K. dependent overseas territories" I·J11ioh includes also Eire a.."'ld Iceland. The U. K. balance of payments 1,'1 th the l'rhole group ends with a deficit of $29 million. The main items are: ~rade surplus $194 million II Net shipping earnings 69 Net income on interest, profits and di"V'idends 25 n Service of debt II -20 ~ret travel expenditure If -72 These items together give a surplus of $196 million. "Other receipts, ho\,.- ever, sholp1 a defici t of $225 million, lp1hich account then for an over-all current account U. K. defiei t ,·,ith this '!IThole area. II '\'\fi thout further infor- mation i t is not possible to explain of t..rhat the item "othsl" receipts ll -$225 million consists. It is certainly much greater than oil imports into Eire and other areas of this group. It might include investments in the petroleum industry and some military and government e:~enditures in the African and other colonies. Further information is also reauired on the trade surplus estimate, especially on its composition by areas. (5) Ho,"'eV8l", because of the mechanism of the sterling area, the balance of payments of this group is not changing our assumption that the dollar pool can expect substantial dollar income from the trade of the U.K. deDen- dent territories. The Rest of the Ster1inp, Area (6) The balance of payments -."rith the rest of the sterling area is listed as IInon-participating sterling area." sho\<ring a total current surplus of ~845 million in 1952-1953. The main items of this surplus are: Trade Surplus $183 million Shipping 247 II Net income from interest, profits and dividends 252 II Other receipts II 257  - 4- This ",hole balance of payments surplus, hO IN'ever, cannot be considered as convertible into dollars. In the past some important members of the area such as Australia and New Zealand have not been net dollar earners. India is no", entitled to keep its net dollar earnings (if any) and the same ,,'auld. apply to Pakistan. It ,,'ould be prudent not to expect any substantial dollar contributions to the dollar pool from this group of the sterling area. Tha dollar earnings probably will not be large and, moreover, some of then might request that further parts of their sterling balances be con'V'erted into dollars. e7) south Africa occupies a special position. The Un! ted Kingdom has had traditionally substantial current account surplus 1p,Hh South Africa, \·,h1ch has been paid for in gold. (Trade surplus alone totalled $149 million in 1938 and is estimated at $358 million in 1948.) It might be expected that this will continue t providing the United Kingdom 1<11 tIl an amount of about $200 million of gold a year. (The gold production a~ounted to $426 million in 1938, $392 million in 1947. and around $400 million in 1948.) (8) If the dollar earnings of the U.K. dependencies and the expected gold imports from South Africa are taken together i t can be assumed that the United Kingdom might have in the tfifties an annual gold and dollar incooe from its surplus '\>li th the sterling area of about $.500 million --,. other thing~ being equal. This should be enough to meet the defiei t ~·ri th the ',Testern Hemisphere and to provide some dollars for the eou.~tries holding sterling balances, such as India, Egypt, Eire and Iraq. (9) The "Jhi te Paper is very careful in calcule,ting the dollar deficit and the possibility of meeting it. It emphasizes that this possibility denends "upon the maintenance of a strong demand in the United states for the raw materials ~!rhich are produced in the sterling area, and a continued restriotio:  -5- of dollar imports by the other sterling area oountries themselves. Indeed. this entire balance depends upon the ability and \<Ti111ngness of the United States to absorb sterling manufactures, petroleum products and ra't<T materials, and upon continued econo~ in dollar expenditures throughout the sterling area. II It ends by saying: "The balance nQ\<r envisaged is precarious and depends to a considerable extent on factors outside the control of the Unite~ Kingdom." (paragraph 207) Accepting the qualifications stated in the U.K. White Paper, it might be said that the United Kingdom should be able to service the iPl6 million loan to the U.K. Colonial Development Corporation under oonsideration, the more so because a great many of the projects \-Tould result in dollar savings or dollar earnings, thus improving the sterling area dollar balance of payments. The yearly addi tiona! burden "rould not be great measured by the total expenditure going to the '[estern Hemisphere. (10) denends upon its current surplus ,-'1 th the sterling area. in pa:rticular "'ith the U. K. dependencies and South Africa. 1.rhich in tur"1 is paid for from dollar earnings or from the current gold nroduction. Our conclusion is based on the general assuJrq:>tions on 'lorhich the U.K. balance of payments estimE"tes have been prepared. These assumptions are discussed in the Ap?endix to this paper. II. (11) The 1952-1953 estimate includes normal arnortizatio~ and interest on the U,g, loans in the United States and Canada and probably on the E,C.A. loans. This total payment in 1952 "rill be around $186 million. (12) Some remarks are necessary Nith regard to the U.K. position as a debtor or a creditor nation. A. U.K. Debts aug Foreign Inve~tments 1. U.S. loan (including the Lend-lease settlement) $4,400 mi Ilion  -6- Canadian loan (of this $1.015 million has been used up to date) $1,250 million E.C.A. loans (estimates) 11 $ 313 In addition, $300 million 1I"ere purchased from the Fund. 2. Sterling balances. As of the end of 1947 total sterling balances ""ere estimated at ~3,338 million, equal to about $13,352 million. "'hile no exact program of rep~ment of these balances exists, the "rhi te Paper indi- cates that part of the expected over-all surplus of $400 million ',Thieh, as mentioned, will come to the largest extent from the sterling area, will be used for the repayment of sterling balances. SUbstantial periodical releases of these balances in dollars are not very probable in view of the dollar position of the Sterling Area. B. U.K.ts Foreign Assets (13) There are no detailed figures of long-term U.K. foreign assets. A prewar estimate put them at around ~4,000 million at nominal value. Aceordin to the 1948 111111 te Paper, $1,050 million \"as sold since the beginning of the "'ar. Further foreign investment ~Tas sold in 1948. making the total of dis- investment of around ~l,250 million. To that the ~oss must be added which the U.K. !!Iuffered from nationalization in Eastern Europe and through ',rar losses in the Far East. This \<rill bring the pre11'ar value dO"Tn to about ;(,2,500 million. It should not be assumed, hot.Tever, that there has been no fUrther development in existing British foreign investments during the war and since the 'lIJ'ar. The expansion of existing foreign investment and also the addition of ne"r onee continues. In 1947 there "rae a considerable capital outflow from the United Kingdom. A substantial part of it was u~ed for investment purposes abroad. This capital outflow ~'as not only in pounds but also in dollars. in particular for investment in the petroleum industry.  - 7- As the '"fhi te Paper states, "The oil industry makes at present t.he lar,!,9st single claim for dollar expenditure." (paragraph 19) The transactions of the British o,"rned or British controlled oil companies are carried under "other receipts", or !lather expenditure." :By 1952-1953, the income from "other receipts" is estimated at $700 million, of 1!<Thich a substantial ]Jecrt "'ill certainly come from the operations of British oil companies. r:!:hus eVe"l during the U. S.-Bri tish loan and the E. C.A'_..El'..2g,t.B:ID.~.1h~21!~1?J?vJ?~!','1 C01;- tinuing to export capital and to l~~ease its foreign in~e~tment. (14) It is difficult because of a lack of data to make an estimate of the present value ,of British foreign investments; it is very prominent in the petroleum industry, mining, rubber, cocoa, quebracho and others. It is equally difficult to state "'hether and to ,,,hat extent the United Kingdom is a net debtor or a creditor country, but one difference must be pointed out. The British foreign debt is a 10\<1 interest debt; in the case of the sterling balances, no or negligible interest has been paid so far. British foreign inV'9stments, on the other ha.'"ld, being n()1,r mostly business enterprise! (goV'ernment debts have nearly all been repaid and many public utilities and raih 'ays sold) is proV'idlng higher prof! tEl U..a.ll the normal interest rate paid on the U. K. IS debt. This can also be seen in the 1952-1953 FJsUmate of interest, profits and dividends. The U.K. is supposed to pay $546 mil- lion against an expected inoome of $700 million. giving a net income of $154 million. This amount ll1ou1d substantially increase if the income from the operations of the petroleum companies listed under "other receipts!! ,.rere included. It can be said, therefore, that on income account the Un! ted Kingdom might still be considered a creditor nation. • - 8- .APPID1Jll.L (1) The UK. has submitted to the OEEC, in corij'U.i'l::rUon wHh its long.•term pro~"am, an ectimate of a balance of !>aymerriis in 1952-53 (Sl!pP,::H33Uly' typi~al ot the P08~i-ERr ysazos) which 'Would permit it to msiDta1.n i';;::I51f by Hs 0\Jll productive efforts at that timeo The reasoDablgn66s of this balance of pal- ments projeo'tion is examined in the paper to which this no'~e ~,i3 attached. The conclusion emerges that, granted the assumptions upon whi~h the balance of payments projeotions haa been di:)'veJ>op~~d~ the G!'Gdlt w07'tiJ,inaes of tho UK in terms of a pl"ojac'tad loan of $16 m:111:101'l to the C01')111a1 D(,;f''1elny,mtent Corporation is corta Inly not in doubt. ~ (2) The credit worthiness of the UK lsp to a B'l1bata~1thl extent, dependent upon the assumptions upon which the balance of p<1ymen';:'s proje,r:rdon has beel) based. Propar evaluation, th€?efo!"e, of the UK posi'tlon r€lqui:..·es, as a mini."l1Uln, the enumeration of same of the mOTe impo:'tent. of the:.;e assumptions. (a) ,froq\L1!tloll_J;l.W'!'WJ! (1) !ttt:L~uJ.~~e. - QQtput in 19:52 about 15% above war'i;. peak ot 194.3-41., In terms of calorific content, this is equivalent to an incr.eaee of one-third above pre-war productiono This will involve investment of ap~~oximatel1 $1800 million, about one-half of 'Which will be spent on maohinery, and about 75,000 more oivilian agrioultural workers than in 19460  -9- (il) £L~ - Total production of 250-260 million metric tons with exports of 40 million tons. This compares with 1948 production of 212 mil- lion tons and exports of 17 milli0n tons, and with 1938 production and exports of 231 million tons and 47 million tons respectively. (iii) ~\1 - Crude oil output of British companies in 1953 of double the 54 million tons production in 1947. Refinery capacity to treat 20 milJ.ion tons of crude oil annue1ly is expectec., oompared with prooeRsing of 2tmillion tons in 1947. This ?rog~am is contingent upon availability of adequate quan"cities of steel and steel equip- ment for the petroleum industry» Estimates of requ.ired stael total 3imillion tons. (iv) k~d SJGsi?t:. - Crude steel producM.on of over 17 million tons, as oom;?ared with less than 15 million in 191.'/;;/49, -cog0thvr with import of approximately 370-380 thousand tons of sotli-f,1i'lished steel for processing in the tlKo Expor'" of 146 million tons of finished steel in 1952-53 is expected. (v) ~g~!!~~~Il:l.d'.1.stries - Production of mechanical and electrical engineering products at 170% of the 1938 level, compared with 150% in 1948. (vi) Q~eJa!~als - Expansion in the fields of organic chemicals and plastic materials, dyestuffs and basic chemicals (particularly alkalis) in a magnitude sufficient to meet all needs of the intern~ market and to maintain extended export trade. (Vii) Text~~ - Increase in the output of woven cotton end rayon cloth by 35-40% above 1947. (Total textile production in 1947 was about one-third below pre-war output).  - 10- (viii) Shipping - Increase in tonnag~ of dry cargo vessels (allowing for obsolescence) to 12.9 million groBs tons by the end of 1952, compared with 12(,1 million tons in 1948 0 The British tanker fleet at the end of 1952 should be 4.3 million gross tons, compared with 3.4 million tons at the end of 1947. An·ticipated earnings from this larger fleet provide a net income on shippl~? account of $360 million in 1952/53, compared with $121 million in 194.7 Q (1x) Tou:r.i~ - Gross dollar earnings from "Gourism of $150 million in 195~/53 compared with $60 million in 1948 when an estimated 500 thouannd tourists visited Britain~ (b) Investme:n1 (i) &~ - Annual gross investment p~ogram of $u500 ~il1ion, excludinf col~nlal areas. Total investmsnt is enticip~ted to be 20% of gross national producto (ii) Dietributio:g - The percentage of total investm0nt to be applied to housing is to be limited to 16% B.nd only 12% for social services, defence and public administration. One-t~ird of the total invest- ment is to go to industryt and another third to fuel and power, and tranapoY'"t. and communications. ( c) Stand&.~d of Lj.v~ ng (i) Fond - In 1952, food consumption per capita will approach, but not exceed, the pre-war volume. (i1) ~n~umers Good~ - Manufactured goods available for the consumer would be 15-20% above the 1947 level with clothing and household goods slightly abcve the pre-war level.  - 11 - (d) E;xporta (i) Amoun....:1. - Total exports of $7377 million, amounting in volume to 150% of 1938, as oompared with volume of 13S% in 1948. (ii) Geographio Distr.ibution - Exports to the U.S. of $340 million in 1952/53 compared with $195 million in 1947 and doubling exports to Canada from $180 million in 1947 to $365 million in 1952/53. TotD1 exports to Western Hemisphere are expeoted to be 120% above 1947 and 55% above the annual rate in the first six months of 1948. The proposed trade distribution is the following: N':':'lrth end Central Amerio<:! ., 'I • • • • • l i t ~ Q •• It. ll% South i'.lllerioe. "It" (j . . . . . 0 , " •• 0 0 .............. ~ • " 8 9 Non-partioiyating Ster-lj.~1g AraB < . . . . . . . . o. 29 other non-participating 0ountr:tes 0 •• , • 0 (I" 13 other participating cou'ltries (except stel'liZlg area oountries) "" e. ... ~ . . . . . . . . . . 20 Participating sterling a!,.~a cOit:at:d.df.l and UK d0pendent overse~c tarr!toriea ~oO.'. 18 ( e) J;rrrport.s (i) ~ount - $8 billion imports in 1952/53, app~oximate1y the same as in 1948/49, and 10% above 19/1-7 volume. This level i!3 15% below 1938 volume .. (ii) !li..st.1'loo.tton - Subs'GBntial shift awa:;r f:"om d6pende;.}ce on Western Hemisphere sinoe imports from that area are $1,000 million below 1947 and $450 million below 1948/49. Mo:re tban 25% of imports are expeotE:ld to come from the non-participati~g star-ling area and about 14% from the participating sterling area and u~ overseas territories (iii) Pric!lU!, - Terms of trade are expected to be the same in 1952/53 as in 1948.  - 12 - (f) Development of_Qverseas TerritqrfJU! (1) Production Increa~ - Expansion of the production of primary raw materials, particularly of the dollar earning and dollar saving category, in the magnitudes indicated belows (In .~~i~IQB.tl 1936 ..J9l .6 .]..9.2,21;;)__ (Forecd.s r) Groundnuts (exports only) .300,000 3.35 9 000 880,000 Sugar 980,000 895,000 19~'OO. 000 Rubber 400,000 435,000 830,000 Tin 78~OOO 27,500 94,500 11 Copper 158~000 202,000 .356 p OOO Cobalt 885 Y 475 19 200 Bauxite 160,000 1,.250,000 1,950,000 y' Lead 580 16,000 'J.I 35 1 °00 V 1950; Y 1937; Y 1947. (ii) J:qvestmen;t. - $750 million expenditure is required for seventeen major long-term plans already approvad o (iii) ~lI-~~bili~j.e~ - Supply of necessary capital goods (particu 1ar1y machinery supplies and steel) trom the tJT1 and other partici- pating countries and necessary technical experts and technicians must be provided. (1v) ~ wit~~ - The long-term program, as submitted by the UK, anticipates development of trade with the UK in the following manner: j.948/1t9 195~/53 Colonial exports to UK 600 800 950 Colonial imports from UK 9.30 1,000 (The expected pattern of payments between the UK and the colonies is discussed in more detail in the basic note on the Prospects of the UK, in which there is an analysis indicating that the pattern of trade may be different from that shown in the above table).•  - 13 - (g) A9c~ul-!~ed S~~~K_Bal~ (i) Releases - The long-term program, as submitted by the UK, does not discuss the issue of dollar releases of accumulated sterling bal- ances; nor is account taken of such an outlay in the projected 1952/53 balance of payments. According to the note on the Prospect of the UK, anticipated dollar receipts from the sterling area of $500 million, available to meet a dollar deficit of approximate~v $300 million, would leave a possible margin of $200 million for releases of accumulated sterling balances and current contributions to the dollar requirements of those portions of the sterling area which cannot meet their necessary dollar needs. The over-all current account StU-plus of $400 million is, of course, available to draw down the accumulated sterling balance::! to t.he extent to which this amount is not utili~ed for new UK fore~gn investme~tB as is partially intended. (ii) Continllation-2f-th~rlin~!~~ - It is assumed that, in 1952/53, the cGmposition of the sterling area will be the same as qt present with South Africa contributing gold to cover its deficit with the UK and the colonial dollar earners paying these earnings into the dollar pool~ Independence of these colonial areas and their withdrawal from the sterling area would affect this computation.  - 14- II. THE PATTERN OF YUE-l1J1L\l'l.9li.l\L,..PAYME~"TS OF THE U.K" COLONIE..§. WITH . . . . . . Sl'ECIAL REFERENCE rr.......... r t. TO DOL!..AR EARNIN::lS _"''''':;.)f:.--r~''''''''''' 1. Although \hider the sterlIng exohange standard of the UQKo colonies and dependen~ies the latter have no tHile to any foreign curron,;;iee except sterling, a geographical analysis of the trade of the co~.onies p:r-()"'vides a us a·- tul indication of the pattern of internatio~'lal payments of that part of the sterling area. 2. Befo!'e the war$ as e"11denced in dat.a fer 1928 and 193~, the U.K. colonies had a si3able export surplus with the U"S. and Canada (excluding gold) amounting to $170 million in th~ fOTmer y~aT and $80 million in the latter. This export sUX'plus was dU3 mostly to l11als18 and~ t.o a smal). extent, to :·Jest Africa. Trade with ~leste;;.~n Eu:.:'ope 8S a whole waa sligMily bet·ter than in balance. Trade with othel" countries, con£listing mostly of tlam::sotions within the Far Eastern region~ partic1!!.ar:!.y with the Neth9r:isnds Bust. Indies, showed a deficit that was nrobahly fil1Snc"3d thl"ot~gh irr:hlible pay:nents. 3. Dedu:Jting the trade dl:ifiait of the }Jest Indies with the U.S. and Canada (largely fin:ul00d by invisib:'e Inoome), Sild adc1:i.ng gvld production in all colonies, the mt dollar earnings may be e~ti'.!lated S'C ~?211 million in 1928 and $15.5 million in 19.38 0 They ao~ued lal'gely to the U.K. in payment of freight, insurance, dh7 1dends, pl"of'its and various other services. 4. In 1948 , the trade position of ths colonies as a whole is strong~ There continues to be a trade surplus with the U~S. and Canada, again mostly sttributab1e to }!a1aya and ~Jest Africa. Trade with the U.K. and :Jestern Europe. also shows a surplus. There is evidence that the colonies have net dollar earnings trom trade with the U~S. and Canada which ere not used to meet trade  - 1.5 - imbalances with other countries ano which, therefore, contribute to ~eet the dollar deficit of the U,K. and the rest of the sterling a~ea. The net dollar surplus from trade alone may be put at over $300 milliono A~usl data cal- culated from retw.ns of 7 to 8 months indioate ~?323 million, excluding ",45 to $50 million of gold production and export. Such a ~-plu3 is com~o~ed of the trade sll4-plua or Malaya with the UoS. and Oanada - $187 million; that of West Afl~ioa with the UeS. and Oanada - $12~ mil1i0n~ and that of East kfr!ca with the UcS o and Oanada - $8 million. This computotivn exc2udes t~e follow- ing: the trade deficit of the 1rlest Indies and Atla!Jt11l g:"cup with the UoS. an Oanada, on the assumption that it is app....oxi"no:te1y financed Ol!t of in7islble income; the defioit of the Arabian dependenci~s~ whiQh i3 finan:ej out of funds allooated sOp8l"a"Gely to the petroleum campanies; and all H~~g Kong data, since the bl.uk of an apparellt. dollar tl"sde def:l~.tt in th1:s OG!!J':.V relates to transit trade and almost certainly invohrcs no 1'J~3 of dolla':'so ;~ Allo;..ring for probable settleme"'lt in do~.la:.rs of the t:rada deficit with Belgium ($1'" million) and a t::-ade surplus vd.th Sv.·I~~el·lllnd s'luhraltmt to the receipt of do:.'..lers ($2 million), and taking aleo int.o aOCOU:illt f.c-aight and other service pcyment.s in dOJ.!fU."S 1:;" tHe UoK '" oolo~'llGS of SOine $25 - ~~30 mil- lion in 19M~, anc!~ O:':'l the othel' Hand, gold. p!'ooU~t~.(h1 esMmatad a';' $45 - :')50 million, the fins! ne·t dollar su:rplus on Gm'::'ent a~cl.:nmt. may be Pilt at. $:;;23 - $333 million" In l·ound numbers, at least. $300 millionQ 6. This compal"es with en estimat3d net dollar s\l!'plus of about~~l.80 mU- lion for: 1947. It should be noted that th:a :lmp1"ovement has been achie'1ed chiefly through sevel"e impOl"'t restriotions (ali:.hough there was at the same time some increase in exports) alld that potent.1al demand for imports continues  - 16- l~:;:ooduotif.!.1l 10 The term "U*K, coloniea ft is here used to mean c.olon:1es and dependen- cies, inCilooing protectorates and t!'t::.steeships of the U.K q , as of Doccmbel" 19~ with the exeept10n of the two co;.l"ldoru1n:tuma& Ang.1.o-Egypt:tan Sudan '.md New He~ides. A tu11 list is given 1."l Append:1x Ao 2~ As discussed els3yhare p the e:ctel'nal currenoy S"'lotem of the UQKo colonies is, for the most Pru.~t9 a l"ig:ld st.erlirJg e:;!:chang3 syatsm 'Whereby the issus or currenoy t3 au:t.om~:t1.:;a11y and ex('.;Lusively lia,,\:Gd to belan •.\e of pay- menta fluct.uations, and where bl mOlleta:..~y reSGI""v.30 l' Wh:Vih no?mally consti ·~ute a 100% bac~d..ng of the CU2'l'(;m';y p a1:-e he:"d in the fOl'm of sterling bnl3nces or ste:rling aacUT1tiea ~ Au:r earnl:'lgs by the colc.n!f.ls in hal'd CtD-:"4."p.n'1:~.es - chief].; U('S., dolla:..· eSl'n:hlg.:i "" a~CA'U~ ..~o the central l'SHCl";res of th~ ste;:l:lng area, adrni:l15te~ed by the U,K 0 $ l1!dla the colol'llt;S a::'3 {ol·e~U;;.e:l l::!'~h {!orre spending amount!3 in fr~er11ng. A~1..1ol;'~'i:.::'l.t"):::s in ha:\'d curl~e!1I:~i9B a:t'e made to the 0010111es pe2"iodioolly (') 1\'ade with so1'ii currenc.1 al'eas ls mot3t:t.;y- f'int;1~1~d in otel'l:ing/li In ganoral t the patJvern or ex~hange anCl t:..'s.1e c0!.'r~.... clu i., trlG ooj.o.11eo is similar to that of' the U?Ko]l in particular the :rSDt.drrtion 01~ l.'Ylports f:rom hard. currency a'~'es s ~ J0 There are a raw exoepti0l18, mostly mln~jl' i to this iJy(r~~.ll1"" 0.19 of them is Hong KOl1lS.. uh9:."'e, alm.gaida the official ~:;~~hanga "llarket, a 1':;:'ee market is perm1tted in (!el"t.aiYl cl.U'!'f.moi99 "" t"....no:.1g the'1l the dollar ow1ng to the peculiar posit.ion of JGhE.l"\i 0.,)10-r.Y ss a cente:s." of ent.repot tl·&d~. &:-itieh Honduras is nominally 0:''1 a dollar c:xc!lange Bta~l:3.ard, but subject to sterling area controls" In other coll):'lles~ duo to spaoial circumstanoes at different times, the currency has not always been baoked lOC~. In yet others there is, increasingly, some elaattcity in the issue of cUTTency, as the banking and cre~ dit system developsQ !n Southern Rhvdesia, for 1netanea, and in the 1:1est !rd1es> there have been moves in the di'!'ec'~ion of establishing a Central Bank.  - 17 - 4. Given the generally rigid system and the lack of an autonomous reserve polioy, three general statements may be made regarding the balance of payments position of the U~K~ 0010n1e33 (a) Cha:lges in cu:i.'rency in circulation (whe:ce known) may be taken as an indication of the net ()'llsrall balance of payments position (hlCJluding capital movements), e~g~, the increase in curren~ between 1939 and 1947 re- flects the wi!lrtirne balance of' payments surpluses, pe~.. ticuJ,axJ.y the trade sur- pluses, less the accumulation of budget reserves in ste~lirJg and private corpora'Hen sterling aAsets~ (b) The geog".L'aphi-Jal brealcd->wtl of the trade of the colo:\.1ie9 does not show, strictly speaking, the type of curren~ias ea~ned, sines individual cC'loniea have no title to any fo:reign currencies excapt ste:d~.ng or ~~he equivalent sterJ,1ng credit,s arJCi'uing to theiT balan'~I3;;:" I:.i i.e fo ..' instance immaterial, f'com the colon;¥-is point; of vie:.T r under the Dre::lOnt sY::j).jem, whethezo exports are shipped directly to a hard curre:loy cOilnt~·y, are consigne, to the U~K 0 for reexpo!'t, or a:"e shipped to othe:- C()u':l'~~:les" (~) Under the ste!'ling a:~ea S73~e'!ll, any 1llr~.)u.-:'ed net hard C",JI'renoy earnings of the U,K. color:a:ies are only a part of the dollar pool and may be absorbed by net reqt:iE'ernen'Gs of o'ther stel'!:"lil'lg area members~ l"e", the dolle.r position of the st~~ling area must be looked at as a wholeo 5. BE;aring these factol's in lllind: an at·t.~mpt is nevcrt,celess made below to appraise the patte~n of international payments of the UoR. colonies, both as a whole and by ~"oups of colonies] wi~...h spe(;ial refe:::'ence to apparent or imputed dollar earnil1gs. Aocount :n:.t!Bt be taken, howe·/er, of the fect that statistical information on trade is incomplete and ~ot always p~ecise, and that data on invisible transactions are even less available. Furthermore, 1948 data have had to be derived from UQS~, U.K 9 , Canadian and European and other statistiCS, sinoe the colonies' own data are not yet obtainable.  - 18 - frewar trade pattern 6. Before the war, the U~K. colonies and dependencies (excluding those which have since ceased to come under the heading) had a slight exoess of exports over imports, abstracting trom freight and other transportation charges. As U'£iy be seen in Table I, the major trade gr01.1p was the Far Easter group of colonies and dependencies, chiefiy Ualaya. No very significant changes took place in the geographical composition of the trade of the col- onies as a whole bGtween 1928 and 1938 except for the rising importance in the trade of the ~ast African group, and the relative decrease of the trade deficit with the U.IC • 7. A closer e~~ination of the direetion of the tTade is of !nterest (see Table II)q In both 1929 and 1938, the colonies as a whole had trade surpluses with the United S'~atgs and Canadal ~:~'70 million ~.n the former year and ~80 mUlion in the latte:ro II They also had de1iclts t-rlth the United Kingdom, which were more than offset by su:..·pluses with 'Jest.ern Europe (includ~ ing Germany). It would appear that to the extent that the trade \lith Europe as a whole, including the U"K .. , was approx!rnaiialy in balanC"ie p the surplus with the U.9., which wa.s chiefly earned by ;·falaya. am to a small extent by the West African g~~up, represented a net dollar gain depending on how much of it was necesSBry to finance trade def1c~ts with the gl'OUP of "other coun- tries", composed mostly of net imports into i.falaya from the Netherlanes East Indies. There is in any case the presumption that a part of the trade defici~ between Malaya and the Netherlands East Il~dies was financed by invisible trans actions between the t",O ter:ritories.The dollar surplus may furthermore be increased by deduct.ing the U.S. and Canada trade deficit of the ':lest Indies i7 A trade surpiU;"'with Canada is eqUivalent to dollar em·nings. Since the Canadian loan to the U.K. ceased being used in April 194~, this is also true in 1948.  - 19 - and Atlantio group (;~10 million in 1928 and $13 million in 1938), which may bt assumed to have been f1nant;ted by in'tTisi'ble dollar income II Finally, gold production ($Jl million in 1928 and ~62 million in 1938; must ba added. s. To swa~aTize, tTanaactlons with the U~S. and Canada yi€laed a sizabls net surplus, whiohl inoluding gold, waG $2J.1 million in 1928 al1d,,155 m!.lliof.'. in 1938 (see Table III) Q Trade with Europe was slightly more than i., ba.:1al'lOEo and the net trade defi(dt with other oountl'ies was probably fin:::mGsd largely through invisible payments. The net d.ol1er SUl~plu.G, eftar orobably not very large freight payments in dollars, accru9d mOfltly to the UcKo in paj~ent of freight, insurance 1 dividends, profits alld 'various other ser.rioeso ~-I?~&:i;:2.j.l~~l. 90 On the basis of data fer 7 to 8 months of 1948 it 8pp~crs that the trade position of the oolonies as a whole (LlC]'udi~'lg g~':ld p:~~O:l:lc~ion and export) is strong$ In spite of far f'1'\>-T!1 ss:i:.isi'a.,o'i;.o:r;r leiJc:',s of production (although stead1.1y :rhd.ng) in the Far Eastarn C,jlIJ~lit:.s., thd:i'e iS lI as in prewa~ times, a sizable trade SUI'pIU6 with the U"S" III aoclt.l:::n, t!l<Jl"e is a surplue with Canada, '-11th which cou~t:r.f the position was nlo::e 01' lesiJ :i.n balance before the wa:rQ t·Je3te~11 Eu,,-Ol:.a, taken together 'Wi"~h the UoK", she"Js as befoL~ a surplus fo:- th£ t;olollies bu.t it is now due mostly (e've:i1 allow:tng for geld exports) to t:rade with the U,Ko sirJoo t!'ade witr o":.he:." En.? coun'tries is in ba1anoe. 10. The outstanding teatm'e of the 1948 situs':'ion is that, in addition t, the dol1a:'.:"s provided by the Far East group, chiefly r1'alaya, the l<Jest Africa group has developed into a do'.lar earner almost as important as the former. This ~y be clearly seen in Tables IV and V which show the trade balance of the colonies with the four major groups of trading oountries and the relative contribution of each group of 0010ni9s to the total net balanee.  - 20 - 11. The conclusion aeemete be, then., that on the basis of an examinatio!' of the trade slone of the Uc.K. colonies and dependencies (excluding gold), there is a net surplt'l.3 of' dollars not used to meet tI'ade 1mbalauocs with othe: trading coun'f:,ries and presumably available for non-trade pa;rmen-~s and to helo meet the dollar def'ici't of the rest of' the stel·ling area It The a'b.'3!)lute a:-rroun of this dollar surplus fl'om trade for 1948 can reasonaLly be P'ut at, over $30C mUlion. An.Tl"J.al data oalculated from l"etUl.'i.1S of '7 to 8 Ulorr1:..hs i~laicate C323 million composed aa f'0110t-l8: trade surplus o~ tJf..alaya with U.S. and Canada, $187 million; trade su:.:plus of' vlest Af\"'ic:a vr.lth UQS~ and Canada, $128 million and trade surplus of Eaat Afl":i.ea with U()S. and. Canada~ :D8 million., In this compu'tatlon are not inl~luded the trade deficit wIth the UoS. and Can9.da of' the Hes'~ Indies and Atlsn~~ic group of Colox1ieso7 'Whi~h is ;;64 mJJ.lion in 194e, sinee it is assumed to be approximal:ie!.y finan ....ed ou';' of ir,::rl::dble transactior. mostly tra'7el receipts; nor is the dollar trade derie::!:. 0·;- th3 j'.JiJ.dle Eastern grou.p of colonies inoluled, namely an jIif..?O;~.. t surp1.us of i;30 million for Aden end Kuwait, since it 13 p:;.·e~umad to be financed out of ftUlds al::'o·~ated sGpara ly to the p'9'Lroleu.m Cl'!:lmpanies 3 whose t:i."'anSB(r;:':l0l13 8:\.'3 no'::' tr:a.c·w;.-;.:,'J/ finally, the U.S. and Canada osc,a tOI" Hong Kong are omiMia::! al~oge·ther beoause though trade st.at:lst:1.,~s :t1111cate al~ impCl"t su:"'ilus of ::,;g'7 mUlion with the U,>S. and Canada, this am01.mt does not represent a loss of do:,lsJ:'s imputable to Hong l\l in view of' the free dollsr market prevs.lli:lg in that colony through lrJhich su... imports are made for reexpo~t to Ch~. 17 Petrole~a·· S:oeeiarrreiii~iUihesterringa;ea7SIi1m7I;-ib.!.aa:~count It· is, however, itse:"f' a source of dollar deficit. Acco:i."dlng to statements in the UoKo's long-term prog1.·am submitted reoently to OEEC (f'l.Y!~~l.l..Q~pe!'­ §L1J..Q!b Cmd. ~/572, December 1948) ~ "the oil indust:....y makes at present the largest singJ.e claim for dollar expenditul'e~ ,,, both for operating expenses and for the purchase of equipmerlttl (p::: 20). No details are givell, It is assumed that dollar expenditures are involved in ~uwait~  - 21 - :+2. A certain amount of trade thBt involves dollar payments takes place with B ~ew other eOIDltries. Such is the case with the Philippines, and a number of La'Un A..1'llerioan countries. E:::ccluding Hon8 Kong data for the reasons indicated above, the res'li of the colonies, chiefly Malaya and the Africl3n groups, show a negligible trade deficit of lesa than i$100,000 " •.dth the Philippines in 19M~. Bl~t.Hdl and Chile account together fm." an epPE.!rer.t U.K. colonial trade su.."'Plt'l.s of ~p" million, in 1948 0 This net 'total, hcw~ve::.:", con·· sists, on the po:;i"\';i've side, of :;:a4 million of pet!'claW.'n exports f\'om T.rinidot which, as indicated in a footnote above, are part or the "petl"ole!,,'l1l aoc;ount ll of the sterling 6~ea and should not be includod unde1' o~d!naTy trade; deduct- ing that alllount~ there remains a net import sU!'p:~uo of ;/"/ millio71, chiefly an import deficit of r1alaya wit;h &sz:Uo It is ,robable that such a deficit did not entail a dollar fu~aln in v1,ew of Brazi:1. 's rell9t::Gns lIiH.h the sterling area. The rest of Latln il.mel"i'-'8 1 so far as pa:..~tial d8.~a i:trJIIJDGe, did not haye a significant a1'Jl\)u.."l'~ of trade with the U~K. co],ol:.ies,. 13. Belg:1uLl present~ a spa,:,:tal ease ~ The U~K 3 collJ:'l13S show a trade deficit with Belgiam (including L~~3mbou~g) in 1948 ruuotmt!r.g to $17 mill ion 4 In view of the 1i."Tlit.s r.a8!:ht:'ld :In the UoK",-Belg:t:::m payln0nts 8gl'ee'nen"::'s, it is reasonable to aSS1..t11le that this def'lo;:t had to be me".. in dollars. lii".-;h Swit.scrland, 011 the other hand, the oolvnies had a surplus of :.:;2 ~i:..l:!.cn, prcsumab:1y equivF..lIE::ln't to til dollal" earning" A nat (~15 In::l1io..l Dhould therefGl'( be charged to the doll~ trade s~rplnso 14. Finally, gold 'Oroduction of' the U"K~ C010l1ius adds ~~1}S-$50 million to their dollar assets in 194B; on the other hand, an estimated ~p25... 30 should be deducted for f'!~elgirt; and other service payment.s in doj..lars. 1;0 Summarizing, the net dollar SU1'plus of the UQK .. colonies in 1948, or to put it another way, the contribl):tion of the Uo1\, colonies to the dollar pool of the sterline area in 1949 can be put at:,i323 to f;)333 million. In  I - 22 - round numbers,. at least f~JOO m'-lliono This total is arrived at as fo110ws (aocordL"lg to (leta indicated in previous paragraphs): Trade surplus of :,1alDya, ';Jest Afr.loa 8fld East Af!'ica with the U,5. and Canada 3~J J"es8 -trace deficit with Belgium J.? PlL~s t.~ade siX!"plua with Switzex-land 2 Flu,s eatilnalj(;3d gold prvdu:.tlon 45 - 50 Leas estima~ed r~eight & service payments Estimf.l'tl?d net, dollar surplus 323 .• 3:33 In rotlrld numbers ~:~ 300 milJion 16 0 In o~deT to appraise the full meaning of this surplus, account must be taken, howeve~, of the fe~t that it has baen achie7ed largely by a drastic cut in i.1lpo:rts, al·though the value of exports has in'.)::'cesed Sub::fiiar.tially at the same t!.'lle 0 In 1947, the tl'ade sUI'plud of the U;!L tJvl::>:.l.t.es uith the U.S. and Canada ws ~243 million (e~:cluding Hong KOllg, the Ucot. 11ldi(.'ls a:l.d the l>1editel-renean end iil"abhn colonies) a Hel:r~ Afi'l~a show ad a surplus of only ~~52 million~ East Af".r!ml aet;uB.lly had a dei'ioi't of' ~~40 million and 1-1alaya a surplus of;;;2jl mUl~.o:lo Con~ide:i:'ing other itema (go).d~ f::eeight, etco) on a oosis cO!!lparable with thl::) estirll9.te of the 1948 dollar au:::-plus given in para- graph 15, the 191:7 tt:rGal net su:rplus was in the nsighbo:;"hocd ott ~J.80 million .. from 1947 to 1948 would have taken plaoe. At pres9;:rt, the potential demand for imports oontinues unabated and the dollar s\t1:'plus of the colonies will continue to be la:ogely dependent on 8 cm."'i:.a1lmtiut of imp"r·ts~  - 23 - 1. Gambia Gold Coast (& B-.rit:1sh Toge) Nig~~ia (& British Cameroons) SierrB LAona st. Hele~a & Ascension Kenya Ugarda '1'-sugs l!;i'}.ka NyafJa1.'m,:;' a~lt1~h Somaliland Zanzib~ VJau."rit:1Utl SeyC'1helles NOI"'iJhe:rrA RhGd(!s~'l.13. Southe~·n Hhodssia 'Via13lf3. (Federation of, La 1>, St.:..'a:!:ts Sett.lemeuts & p:"ott!Jcted SlllgaPf);.:"O - a:reas) Hcng Ko1'!g' El/l&1e:t S~l'll',r:lk N,j';",',!! B01'nao ... rl'':'.~'" ........ ", G:Uoort &. E1B.oe So~~o;nc.:l Island 8 'l.'cngs. Cypr.us G!b:::-sj:Ger Malta  - 24 .,. Aden & p~otectcrates Bah:::"ein Kt"."I8:i.t, Qa'ca:-, Oman J'~m~d.t.la. T!'!;::id~d & Tobago B:-:·:tt1zh Gu:i.r.ma D:-:-:ltlsh Houdw..'8S B~b::unas BEl!' b~.d.:)s Bermnna. Irt!ew:xrd Islands vi il'l.dwai:'d Islands ( G;.·enolda (s;;.. Lu...~:ta (Dore1n:i./sCl (s;; Vint!~n':;; 0 FalkJ.e.mi Islailds  - 25 - "~":1S ....... ....-~j.:;..z.~'t~ ..............,.._,_ E:;:po:.."\.;;J ::.illpO:!'7.S -i·, !.o.bo f.o~bo ~-Jest Africa 161 131 89 78 III East J~fricaY 140 149 184 152 .;. 32 Far East V ?71 756 510 474 .;. 36 West Ind:les & Atlan~icV 92 90 73 94 - 21 Mediterranearlu' o. .0 Middle East!~ _ _ _ _._o.i--_____ _....:~~~;.., Total ~ . 1164 ~q".u,rC9~ Network of ~JorldTrade.. J..mpo:,:,ts oci"fo adjustl3d roughl;r to fro.)b" IIU.K~ coitn-.d.cs and dspendencies" daf:lnod as those in e~dstenoo in Deoembel.~ 1948 (,Jae Appendi:;; A) Gold exclud3d o 'JJ Including prooobl=r !Jegligible data of the t!'ade of S.H. Af!'i"::31' a d~pet!denoy of the UlllOtJ of Sou';,;h Af'rics. p not of the U~KIl !/ Including Z'(;:la't,ively nOil=slgnif:1ct.111t a:mO,(lnts of t~ado of POl"tuguese Timor end i4ac!1o, efKl eX'Jlud!l~g the sind.1.sl" nOIl<'>signifi :;e.::1';:; -'..'ooe of F 1.j.t ~ Gill::ert and Ellice Islands and TOl1ga, whi.:;h are not a'vailabl~ separately from the other Eu:r.opean <.loloaiea in Oceania!) V Excluding Bri'iiish Gl,liana, not available sElpa,;ately" It/ Not available separately r but 'Orobably dOGS ilot affect overall picture in so far as the import surpluses of these areas are self-financed o  - 26- ...;:}~~ _ _,~-,- .. -~_..... -.-.'Y....._ Elq;orts Imports l' f "o . . b" I~ oOGb" Total Trade ...... ~ ~1>A flj~ L§..t-~n!!.£.~~~ 2~4 114- 169 ,l..EQ ~~S9 United St.ates 266 ... i-i~i) ~ '7 '74 Canad.a & Newfoundland 18 25 2B ~ 6 I H.. EUF~ ..ill .)..iQ 2tP 7'/ 1::'_'-";1: Uo Ko ~99 25"- 2i)9 ~- 4 ERP Europe llA. 66 )'1 f 59 Germany 58 3'7 31 I- 19 179 18"7 - 8 144 .J. 7 3~O ~". 2813 -:!'03 56 93 ::"66 274 195 - 3'7 ~.Q.lY:.~!t: r.:etwork of l'.1orld Trade. Imports, c"iS" adju.:lted roughly to f -o~ h., tlU ,K. colonies aad dapendenclE=!s" del':lnad as those ,.n exi34 .$11:Je in December ;1948 (~{~e A~nclix A) Gold eXCil!!led. V See notes to Table 1.  - 27 - 1925 ~"IIf"~~ ~~~ '!:"~S Trade Surpl1..1S ,,11th U9 S. and Canada .;. 170 zI. SO Less trede deficit of !':est Itldies group - ~~~ 10 ~ 1.3 ........ -~ ,< 180 I- 93 V Gold production 31 62 -"'..- .......,--"-~ Estiruated net dollar earnings before net fre1g{r~ alld oths:r ser"tica payments ill dollar's 211 :'55 y 2!l~~~ 1928, Network of Horld Trade; 1938, I.F .50  - 28 - Table J! Trs.ge gfU,K •. CoJ&nitfs.8Ud Dep~n.(l!F!.Jlj.!:h Hartor TradiOO, Count!;ie! 1947-194tS (US $ nm_> .,12A7 l~e Exports Imports iii II 7 Exports Imports -7 - f.o.b .. f .1).b. -- f.o.b. f.otb. United States 402 355 f 47 457 322 ,l 135 Canada and Newfoundland 73 124 - 51 100 95 ,l 5 United Kingdom 470 634 - 164 6BO 625 I- 5S other ERP Europell 61 72 .. 11 lOS 106 1 Source: IBRD, Statistical Section. Trade data of U.S., Canada, U.K., and ERP Europe, adjusted to f.o.b. both ways. For 1948, un~djusted annual rates based on 7 to 8 months' data. Gold excluded. "Colonies and dependencies tt a.s defined in Appendix A. W' Excluding Belgium-Luxembourg in 1947; exclucUng Portugal, Greece, and Germany in both years. An estimate for the trade deficit of the U.K. colonies with Belgium in 1947 suggests a figure of a.bout:~30 million.  - 29 - ---- U.. S" - 1947 .,---...... .. Ca.llad.s. Total - -- ~ ........... U~8. ::'?!..3 ~.--- U<.Hl:.da ..........--,........--. Tota":' & Newtll & Nuw:. Iotal ( a.~.....:1 m b"~ n~) -:1-J;,..~~...~.. -~,.{ ..... l.-J:l :.--21 ~.~ I i i~S _~I::ft "£_-2 f),J.,Q vles't Africa f 48 .;.. 4 f. 52 f 113 I- 15 1-128 East Africa - 35 5 /;0 I- 4 ,t. 4 I- 8 Far Ea&t (inel. Hong f 133 ;. 7 f. lL~O f. 93 ,1. 7 f 100 Kong) It II (ox~l. H~ Kong) f 219 f 12 f 2'."".I. 1" I- 1'74 I- 13 I- 187 Ned i tsrraneall 6 '1 13 0 2 2 ;vTiddle East - 22 2 - 24 3·') - 30 Uest Indies & Atlantio 71 - 48 - 119 45 19 - 64 !9.1t!iki~1i~1€LiS.2n.~, H~t11i!~£~l\.q*g, l'r~~J~;~£~~ ~t Indi~~ I- 232 l- 11 I- 243 I- 291 f 32 f 323 ~~: See Table IV.  - 30 - III. A SURVEY OF BRITISH COLOIHAL DEVEtOPME1TT PtAt"1S Introduction (1) Direct, planned intervention by the government of the United I~incdom in the economic development of the British colonies is comparatively recent. Only a decade before the last torar, Bri Ush colonial policy l,ras concerned mainly with the maintenance of orderly civil administration; economic matter' 1.o1ere left almost exclusively to local colonial governments. These fin?Jlced. mainly through indirect taxes and loans, such projects, largely in the field of essential public utilities, as 1,.rere to be undertaken. The cardinal prin- ciple in economic affairs \oras that of free private enterprise, and colonial economic development "ras guided by it almost exclusively. The result 't-'as that because of the considerable obstacles offered to econ,)mic de"V'e1opment in Africa by nature and physical environment, sueh developm6n't took place on the "Thole rather slotor1y. (2) Before 1929 the British government acted on the general principle that colonies should be finanCially self-sl1pporting, although it did make grants or loans-in-aid to them from time to time. But these grants or loans ,,'ere made only 1,'hen it 1,ras recognized that a colony 1,rae in a narticular1y difficult financial posi tion~ and a direct l"e!Cmlt of such a grant Nas close control by the Brl Ush Treasury of the colonyl s finances. The Colonial Development Act of 1929 (3) The first general step to aid economic development rather than to give relief \,'as the Colonial Development Act passed in 1929. The purpose of the Act was to fUrther II schemes likely to aid and develop agriculture and industry ••.• and thereby promote commerce Nith or indu~try in the United Kingdom •••• tl A recent Colonial Office paper, in fact, states that  - 31 - relief of unemployment in the United Kingdom "ras the primary object of the Act.V The administration of the Act "ras placed in the hands of a Colonial Development Advisory Committee appointed to consider applications for assis- tance under it. The Act provided that f, 1 million a year ',ras to be naid into a Colonial Development Fund from "'hieh loans or grants Here to be maie to individual colonies. The territories OVer "lh1ch this sum "raS to be spre2d included all colonies, protectorates, protected states and ma'1dates for ,,'hieb the Colonial Office 1Jor as responsible •.Y (4) On the 'l<lhole. the stipulation in this first Colonial :;)evelopment Act that assistance be directed tOI.rard projects likely to "promote cOl':1rJerce 1,rith or industry in the United Kingdomll , and the implicit provision that assistance be given in a manner to aid in the relief of unemployment in the United Kingdom, appears to have been interpreted rather liberally by the Colonial Development Advisory Committee. Q-d of the]; 8.9 million approved during the eleven years of operation of the Act I ±. 1.5 million ','as devoted to public health in the colonies. In the Wes)\j Indies; the colonies \·rhich recei.ved the greatest assi~tanGe ll..'1der the Act l'rere Brj.tiRh 'Wj1i;;:u~ and British Honduras; precisely those l"hich had obtained the bulk of the previous gra.."l.t s or loans-in-aid. The Committee I ho"'eYer, observed that they made it ~"l. express condition of assistance that subsequent im- ports should be of United Kingdom or Empire origin. (5) In its final report ,the Colonial Development Advisory Committee stressed tl.,TO limitations to the scope of its activity. It pointed out that the poorer colonies often had neither the staff nor the revenue to maintain 11 The yolonial Empire. 1939-42. Cmd. 7167. gj In Africa, Southern Rhodesia, the Anglo-Egyptian Sudan and the South African mandate of Southl.rest Africa ,.rere excluded from the J?rovisions of the Act; the High Commission terri tories, hOl.rever. ,,'ere included.  ... 32 - the capital ,,'orks for t·,hich they applied for assistance. the terml'l of the Act in general preventing assistance in these circumstances. Secondly, the Corom! ttee felt that schemes 1"rere presented to it in a piecemeal fashion and that they lacked any comprehensive vie1•r of a colonyf s economic development. The Colonial Development and Welfare Act of 1940 (6) Even before the last 1·'ar, to,,'ard the end of the 1930' s, the nece?sity for further assistance to the colonies had become recognized. In 1938, a special commission ~ras sent to investigate social and econo~ic conditions in the ~Test Indies l~!here chronic unemployment reBul ting from continuing population pressure and the depressed state of the sugar industry had led to sporadic disturbances over a period of years. Announcement of a ne~" policy of governmental assistance to the colonies, in fact, "'as made on the same day on \,Thich the 'rest Indies Royal Commission Report "'as pub- lished. In this statement of policy I ,.,hieh preceded the passage of the ne\·' Colonial Development and "{elfare Act l i t "'as said that the "principle that a colony should have only those services w1:ich it Can afford to main- tain out of its Olflrn resources •.• nOl" calls for re·vision.u]j The accent v.rae thus transferred from development to \·relfi?re. Through the ne1H Act. money ,,'as to be made a:\Tailable not only for the capt tal costs of public 1"orks but also for the maintenance costs over a period of years. (7) ',Ihen the Colonial Development and '[elfare Act of 1940 1,'as finally passed, it provided for the expenditure of not more than t 5 million a year for 10 years and a further ~ 50C,OOO a year for research. The Act also remitted a large number of outstanding loan obligations totalling nearly ~ 10 million, the major items being ~ 5t million and ~ 1 million 17 Statement of Folicy of Colonial Develonment a.YJ.d 'lelfa.re, Gmd. 6175.  - 33 - for rail~,!ay loans to Kenya and Tanganyika respectively. (8) In addition to the Colonial Development and T';elfare Advisory Com- mi ttee t as it 1,'as no~r called, ,.r hich Teras to pass on the development sche:nes submi tted under the Act, there 1.ras set up a Colonial Research Advisory Commi ttee '"hich '.ras to dispose of the :j:" 500,000 a year '"hich the Act pro- vided for research activities. This recognition of the need for a coor- dinated long-term research program w"as directly attributed to Lord Hailey, one of the leading authorities on United Kingdom colonial affairs. Some- what later, a Colonial Economic Advisory Committee 1.tas also set up. (9) Even though it ,.ras recognized that little could be accomplished during the '"ar t i t ',ras decided that long-term plans should be dra,m up by each colony and submitted to London so that a comprehensive view could be taken of the Colonial Empire as a 111hole. A significant fad in this con- nection l,ras that the initiative, as opposed to the concurrence. in a1):Proving each scheme ',ras shifted from the Treasury to the Colonial Office. (10) During the five years ending on March 31, 1946, schemes totalling some ±:, 29 million l,'ere approved under the Act a..lld just over a;, 10 million '"ere actually disbursed; the corresponding figures for research Nere :j:" 1.1 million and J:, 0> 2 million. Among the schemes a-ppro'9"E;d, large sums '-rere allocated to long-range plans, notable examples being the ~ 8 million approved for the 10-year plan envisaged by the Nigerian government and the a;, 9 million approved for the --{e~t Indies. It "ras clear that the Colonial Development and 'Jelfare Advisory Committee 1.ras placing considerab:!e importance on planned long-range development.  - 34- The Colonial Development andVelfare Act of 1942 (11) The resources made available under the Act of 1940 being reg&rded as insufficient t another Act, the Colonial Deve1o:nment and '~;elf9re Act of 1945 "'as passed in that year. The ne,\' Act increased ass! stance to the colonies to a total of ~ 120 million for 10 years and permitted eJ~endi- tures up to b 17.5 million in any one year. There v'as thus more scoTle for raising the level of annual expenditure gradually. (12) Soon after the passage of the Act. the Secretary of State for the colonies outlined the principles on ,·'hich he expected to operate.V Each dependency "'as asked to dra,\<' up a broad IO-year development plan for the approval of the Colonial Office. To assist in the preparation of these plans a ne,'! step 1!las taken. An allocation Nas immediately earmarked for each dependency, the total of these initial allocations being ± 85t million out of the total of ±. 120 million. ±. 23t million Nas allotted to central schemes and research and the remaining ~ 11 million held in reserve. (13) The Colonial Office had become al,rare of the danger that Colonial governments might place too great an emphasis on "relfare, a strong tradi tional tendency. The Colonial Secretary ,,'ent so far al'l to describe development as more fundamental than 1,'elfare, a..1"J.d suggeqted the 8!'ltablish- ment of local Development Committees Hi th unOfficial representation.Y Development plans ~,rere not to be confined solely to territorial limits, but the importance of regional !'!chemes - particularly i1'1 the ',vest Indies, East Africa and Central Africa - pas stresseu, some of the Despatch dated 12th ~rovember. Secretary of State for the Colonies to Colonial C~vernments. Cmd. 6713, 1945. It is perhaps not l,'i thout significance that the old Colonial Development and ',;'elfare Committee and Colonial Economic Advisory Committee Nere replaced by a ne",1 Colonial ";conomic and Development C01Ll1cil in Septem- ber, 1946,  - 35 - allocations being made on a regional basis.lI (14) E.Y June 1948, 19 pl~~s had been approved; the allocations for them totalled nearly three-quarters of the ~ 85t million initially allotted to territorial plans. In Africa, the only dependencies vrhose plans had not been approved, lflr ere the Gold Coast t British Somaliland and SNaziland. (15) The sums involved in these plans vary from the ~ 55 million "'hicn lTigeria proposes to expend, to the ±. 830,000 for 13echuanaland. As Table 1 on the follo\dng page shol-'s, there is also a great V'ariation in the propor- tions in ",hich the total expense is to be borne by local revenue, loans, and the Colonial Development and ':Telfare Vote. Colonies such as Uganda and Northern Rhodesia, ",hich are, for quite differen'j; reasons, in a com- paratively favorable financial position, expect to f:nd more th~~ four times their C.1). & W. allocation from their o'm resources. In ccntrast I abou t t"ro-thirds of the proposed expenditure under Gambia I s plan is covered by the C.D. & ·'r. allocation. (16) No single criterion Nas used to determine the sums to be allocated to each territory. Factors taken into account included tithe size and :nopu- lation of the territory, its kno"Tn economic resources and possibilities, the present state of dAvelopment, the development schemes Kn01.rn to exist or to be under contemplation and the financial resources likely to be avail- able locally.lI Although the need to bias assistance in favor of the "'eal-cer dependencies ,.,as still strongly felt, it was tempered by the con- flicting desire to see this investment in the colonies pay as large a dividend in the form of economic progress as possible. The colonies "rere 11 This policy, in line Idth subsequent political developments, does, hOl-leVer I raise certain problems in Central Africa, ,,'here one nartner in the Central Afrioan Council, Southern Rhodesia, is a self-governing colony and therefore not covered by the Act.  - 36 - Table 1 Estimated Expenditure under Ten-Year Pl~s of Certain Colonial Territories as of J}1D.e 1948 . _______ ________________________________________ __ ~ _=L~s'=~~~e.~~~_,----------- ______,__ , ~S2~ur~c~e.~of~Fun~~d~s___________ Total C.D. & ';{. Loans local Funds Expenditure Vote gJ & ?evenu.:; Is lviillion Nigeria 55.00 23.00 16.00 16.00 Sierra Leone 5.26 2.90 1.40 0.96 Gambia 1.98 1.30 0.25 O.Lt-) Kenya 22.00 5.10 7.00 9.90 Uganda 13.86 2.50 2.00 9.36 Tanganyika 18.01 7.15 6.88 3.98 Zanzibar 1.44 ,0.75 0.25 0.144 N. Rhodesia 13.00 2.50 5·00 5.50 }Tyasaland 5.65 2.04 3.60 Cyprus 6.35 1.75 3.00 1.60 Jamaica 23.03 6.35 5.28 11.40 Barbados 3.41 0.80 LOO 1.61 st. Vincent 1.11 0.35 0.36 0.40 Aden 2.11 0.80 0.10 1.21 Mauritius 7.70 1. ~- 3.75 2.16 179.90 59.08 52.27 68.55 Percen'~ of Total Nigeria 100 42 29 29 Sierra Leone 100 55 27 18 Gambia 100 65 13 22 Kenya 100 23 32 45 Uganda 100 18 15 67 Tanganyika 100 40 38 22 Zanzibar 100 52 17 31 N. Rhodesia 100 19 39 42 l\fyasaland 100 36 64 Cyprus 100 28 47 Jamaica 100 28 23 49 Barbados 100 24 29 47 St. Vincent 100 32 32 36 Aden 100 38 5 57 Mauritius 100 23 49 28 100 3J 29 38 §J Includes in some cases central re~earch or regional allocations. Source! The Colonial Empire 1947/48, R.N, S.O., C~d. 7433.  - 37 - urged to help themselves, firl'ltly by revie~'T1ng their ta..'lC ra.tes particularly on higher incomes and secondly by not undertaking projects "'hich they ,,'auld find it difficult to maintain. The total assi~tance thus far approved under the various Colonial Development and 'lelfare Acts is sho~.Tn in Table 2. The Overseas Resouroes Development Act of 1948 (17) The primary object of the Acts of 1940 and 194.5 '·ras to raise the standard of living of the colonial peoples; the subsequent failure of the balance of payments of the sterling area to sh~T any marked improvement, ho',rever, gave a new tm.'n to colonial development planning. In I/Tay 1947 a new Oorom! ttee, the Colonial Primary Products Conmittee, on ",11ich the Treasury, the :Soard of Trade, the Mini atry of Food and others I}Tere repre- sented, was formed by the Colonial Office. The terms of reference of the Committee "Jere: "To revie'.". coromodi ty by cOr:1lI1ocli ty t the possi DilHy of increasing colonial production, having regard on the one hand to the interests of the Colonial Empire and, on the other ~~d, to the present and prospective Norld needs and the desirability of increasing foreign exchange resources." Later, the need for mutual aid betNeen Europe and Africa \,ras emphasized bo'lih by Sir Stafford Cripps and Nr. Bevin, and colonial development thus became bound up t·rith the Marshall Plan. The 'I>!heel had turned full circle; in addition to promoting the r.'elfare of t:le colonies, colonial development '·ras no',' to combat the European shortage of dollars just as in 1929 1 t ,,'as to mi tiga'ce u.'1employment in the United Kingdom. In its interim report the Colonial Prima~y Products Committee pointed to the need to give colonial producers a sure and stable market. and assessed the possibilities and the desirabilHy of increasing colonial production of certain agricultural commodities, the principal criteria for  - 38 - Table 2 Assistance Approved under the Colonial Development~d ':Jelfare Acts 1929 Act 1940 Act 10 year Approved Total in First 2 Ye~rs ±. rlillion East Africa h.52 ~ 15.50 6.98 General 0.27 3 •.50 3.84 Kenya 0.43 1.31 3<.50 0.8.5 Uganda 0.26 1.51 2 •.50 0.24 Tanganyika 0.86 0 •.56 .5.25 1..53 Zanzibar 0,04 0.24 0.7.5 0 •.52 Central Africa 1.34 0.74 .5.:.2Q 1.92 General 0.02 1.00 0.19 Northern Rhodesia 0 •.54 0.33 2 •.50 1.37 Nyasaland 0.80 0.39 2.00 0.37 ','fest Afrioa h.1i 10.0~ 30.40 h.8l General 0.1.5 0.2.5 Nigeria O.:n 8.28 <3.00 3. Gold Coast 0.16 0.L~7 3·50 0.48 Sierra Leone 0.63 0.70 2,6G 0.L;3 Gambia 0.03 0.4.5 1.30 0.42 Other Africa ~ 0.72 1..52 3.2.5 0.83 I'iedi terranean !d 0.28 1.37 2.8.5 O.l.J-S F£;"r East ~ Indian Ocean sJ 0.29 0.11 10.30 1.30 Pacific gj 0.06 0.12 1.80 0.1.5 Atlantic fEi 2.22 11.13 15.8.5 2.45 rUscellaneous !J 1.10 0.16 0.05 0.02 Central Schemes 0.14 0.92 34.50J! 2.79 TOT_ilL 8.88 30.02 120.00 21.73 Of ,,!hieh: Grants 5.67~ 27.48 21.28 Loans 3.20 2 . .54 0.4.5 Actual disbursement hi 10.37 8.8'7 Percent of Total East Africa 20.4- 13.0 14.2 3?2 Central Africa 17.2 2 . .5 5.1 8.8 ';vest Africa 14.8 33.6 27.9 22.2 Other AfriCa eJ 9.2 5.1 3.0 3.8 iliedi terranean }d 3.6 4.6 2.6 2.2 Far East & Indian Ocean sJ 3.7 0.4 9.4 6.0 Pacific g) 0.8 0.4 1.7 0.7 Atlantic §j 28.5 :37.2 14· 11.3. Central Schemes 1.8 3.1 21. ,iW 12.8 TOTAL 100.0 100.0 100.0 100. () ,. For footnotes see next page.  - 39 - Footnotes to Table 2 High Commission territories and Somaliland. Cyprus, Balta, Gibraltar. Halaya, Singapore, Borneo, Sara1tr ak, Hongkong, Aden, Seychelles aJ'l.d Mauritius. Fiji, Solomons~ Gilbert and Ellice Islands. 'fest Indies (including British Honduras, British Guiana and Bermuda) • St. Helena, Falklands. Ne,,'foundland, Ceylon, Transjordan, Palestine; all of ltThic.:h have nOlfr dropped out. They are excluded from percentage calculations. !'1.2.5 million of the loans subsequently converted to grants under tlle 1940 Act. It is presumed that virtually all the approved sum '~Tas disb~U'sedt thoug...'l some possibly later. Central Scheme figure includes !'ll million for reserve, 1,rhioh is excluded from percentage calculation. Sources; Colonial Development Advisory COD'l'11i ttee, Eleventh a.."ld Final Report, H.I:l.S.O., Cmd. 6298, 1941. - Colonial Development and }e1.;fare Act I 1~40, Retu:cn-..E.!. Schemes 19_~2L46, H.fv1.S.0., H.C.R. 1.50, 1946. Colonial Development and 'Jelfare Acts, ~_e.:!:~r~<?!__~E:::!!l~~_1946!47 and 1947/48r H.M.S.D., H.C.:q. 127. 1947 arl-i E.C.Lt, 16.), 19,~e. ColoniAl Development and ~Ielfare Act. 1<t4-0.  -40- desirability being either a probable long-term demand in the U,K. or a saving of dollar expenditure by the sterling area. (18) To expand productive activities in the colonies further and to encourage the development of private enterprise therein, another important measure, the Overseas Resources Development Act, l.ras passed in Feorua!"y 19l.j·A, The Act established tl}TO nel}! corporations, the Colonial Development CorTIora- tion, authorized to borroN up to t 110 million, and the Overseas Food Corporation, 1,;i th borro1!!ing pOI,rers up to t 55 million.lI (19) The role of the second n~!ly created body, the Overseas Food Corpora- tion, is mainly that of facilitating the produc'~ion of food and auxiliary products. It took ove!" the "rell-kno1,1n East African gl'oulldllUtS Elcheme 1·'11ic11 had as its immediate reason, liThe urgent need for ne1," sunplies of fats for the United Kingdomll although "its long-term importance rnc.y 'be even more in the practical demonstration it ,·rill provide of the improved 'Drocluctivi ty. heal th, social l,relfare and prosperity 1.1hich scient 1fic agriculture can bring to Africa," The Corporation ONes its allegiance to the Ministry of Food and in future l·lill only operate in the colonies 1.rith the 'Dermission of the Colonial Office.Y (20) The role of the Colonial Development Corporation, the other age:.ncy established by the Overseas Resources Development Act of 1948, is tl,ro-fold: i t must supplement private enterprise in the colonies, and it mus'li stimulate colonial economic development through the formulation and operation of new 1) Of these sums ; 10 million and ~ 5 million respectively are for short- term loans. ?J Considerable anxiety ~.'Ias in fact expressed during the debate upon the Bill as to the 1"isdom of allo~,ring the at~ent of 9-11 "alienI! Ninistry to operate in the colonies and it does not seem likely that the O.F.C. ~.rill be engaged in colonial projects. even those concerned t,ri th food, unless they are of a highly speCialized nature on virgin land -- as in the case of the groundnuts scheme.  - 41- development projects, mainly in the agricultural, mining, industrial and commercial fields. Its policy is governed mainly by the Colonial Office; itl' terms of reference charge it Nith the duty of developing the resources of colonial territories generally and it appears to have for this the broade~i scope and the broadest pOl. ers. t It is intended that it should, in the long run, pay its o'r'U ,.ray but it is not intended on balance to make a prof1 t nor to compete lJ1ith private enterprise. (21) The Colonial Development Corporation is thus destined to fill a gap existing in the institutions for colonial develo::;>ment created thus far; it is equipped to deal l>Tith projects unsuited to direct colonial goV'ernr.Jent control and 'flith projects which do not giv'e sufficient inc~mtive to private enterprise or are of a type l,rhich colonial governments would not permit private enterprise to undertake for social reascns. ]e3~dn,s projects nut to i t by colonial governments the C.D.C. is nOl.' conside:.d.ng pTojec!is such as the West African GrolL~dnuts Scheme which have their origin in irrvestiga- tions made by the Primary Products Research Committee a:..lc. others put forNard by such bodies as the Empire Cotton Gr01!<rillg Association. In all Hs opera- tions it ",ill undoubtedly have before it the II oyer-riding necessity for the balancing of overseas payments" "Ii th ',rhich the Colon1al Office is presen·tly concerned.. (22) It is too early to pass judgment on the probable effectiveness of these nel.,; instruments of British colonial policy. At fjrst sight they lack the tidy appearance of the French colonial plan '"hich makes prOVision at the outset for the PaJ:t to be played by private enterprise, groups almost all operations lL'rlder a aedes of functional Societes d t2:tat I defines and sets a goal for the most important categories of the plan, and finally places all financial activity under one central agency, the Caisse Centrale.  - 42 - The Select Committee on Estimates which examined the ~,'hole field of British colonial development in the first half of 1948, in fact. pointed to the need for closer coordination behreen government, public corporations and private enterprise. As a result, it nm·r a-ppears that the ne'r' economic intelligence and planning staff of the Colonial Office is beginning to undertake this task in cooperation ",i th the Central Economic Planning staff of the British gQvernment. '\ (23) On the \'.,hole the ne'" legislation for British colonial development and the ne'!Ar institutions which it has created are likely to achieve lasting benefits for both the United Kingdom and the colonies. At the present moment, a considerable number of development projects are in various stages of planning and practical realization throughout the British Colonial Empire These include projects to be carried out by the various colonial governments themselves under the Colonial Development Acts of 1940 ~ld 1945. projects to be carried out under the aegis of the Overseas Food Corporation, such as the East African groundnuts scheme, and a variety of projects to be undertaken by or through the Colonial Development Corporation. There appears to be little doubt that through these various activities produc- tivi ty in the colonies "rill rise and their stanclard of living \,r111 increase, and tha:t growing colonial production of primary cOlD..modi ties '\oTill ultimately improve both the terms of trade and the foreign exchange position of the mother country_  - 43 - IV. COMMENTS ON THE LIST OF PROJECTS StT.BMITTED BY THE U. K. COLONIAL t _ DEVELOPMENT CORPORATION 1. As is explained in detail in the ~Opera.tional Reportl! on the C.D.C.IS loan application the Corporation is prepared to undertake, ~Then the loan is granted, that it ~rill carry out a series of projects of colonial development tfllhich ,.Jill provide dollar savings or dollar earnings in considerable excess of the expected lo~~ amortization. A list of 37 such projects has been sub- mitted to the Bank and is available separately for the Staff Loan Committee's inspection. ~;Jhile the data oontained in the list are much too scanty 8.nd in- complete to make possible an evaluation of the projects described, the list was, nevertheless, circulated 1"rithin the Economio Department for comment. The observations made by the various Sections concerned are reported belo\'T' A. GEDTERAL STUDIES SECTION (The comments "rere made on the assumption that the projects are technically feasible and \vill be car.:.<ed o....l.·~ as planned) 1. As a result of the development projects in i,he B:dtish Colonies i t has been estimated that the dollar earnings or sa9.tngs of the principal ne,,' economic activities "rill amount 1n the years to t..'..)Yrl9 to some ;1;,5,767 000 j annually (current f.o.b. prices), or $23,241,000 a'~ the current dollar- pound exchange rate. The purpose of these comments is: (a) to check the estimates made for eaeh development project on the assumption that no major economic change will occur in the inter- national trade structure up to the year of full production of each project. Ali.;hough this assumption is rather ''leak, the offiCial estimgtes !'\'i')em to be based on a similar one. (b) to distinguiah bet,<reen dollar savings and dollar earnings projects. (c) to attempt an estimate of the degree of concentration over time of the dollar earnings or savings of the ne1N' activities in the British Colonies. In our opinion this point is also relevant.  - 44- 2. Comments on the estimates made for each development project may be summarized as follows: Agriculture Agrioultural devel0E.~nt in TIyasaland. U.S. demand for tung oil is very strong and it is expeoted to continue so in the future. S1lJ:.1ply, ','hich originates mainly in China. is on the contrary very short. It is difficult to say ,.rhether or not the Chinese production will be more adequate in the years to come. H01Jlrever, considering that U.S. imports of tung oil are of the order of 60,000 tons annually, it seems safe to aS8ume that the estimated output of the development project in fwasaland (6,250 tons) can be absorbed by the American market to a large extent. Dollar earnings in this field, therefore, might be estimated at some ~500,OOO. Hemp in North Borneo. The estimated dollar earnings or savings of the development in North Borneo appear too high. U.S. exports of hemp fibre have been nil or negligible before the ~Tar and are likely to be negligible in the future. On the other hand, U.S. imports of hemp fibre are uompara~ tively small and are likely to continue so. l'fi.oreover, other markets, such as Italy, Yugoslavia, and Chile, compete on the U.S. marke'G. A safer esti- mate of dollar earnings or savinf;s of the hemp development in Nor'i;h Borneo ',Tould be at around ~900. 000. : '. Groundnuts in Nigeria. No co~~ents. Agricultural development in Baha@~. Co~sidering the high U.S. demand for spices and pa'lfrpa"r juice. i t is p::"J'bable that the dollar earnings of the development in the Bahamas might amount to some 180,000. Nixed farming in Bechuanaland. }To comments. Tobacco etc. in Nyasaland. Ho comments. Sisal in S"raziland. Although in this field the campeti tion of other producing areas (such as Ja:V'a, Hai ti, and other Central American Republics) will be fairly strong, it might be expected that a large part of the future sisal output in S1.<raziland ,·rill be shipped to the U.S. The dollar earnings of this development may be estimated at some =100-200,000. Summar;y:: The total dollar earnings or savings of the ne", agricul tu.1.~al developments in British Colonies may be estimated at some =2,015,000- 2,115,000.;., ' Animal Products Poultry farm in the Gambia. No comments. Abattoir in Kenya. The U.S. demand for hides and skins is at present very strong and large imports are to be expected in the near fu'~ure from aJ.l sources (mainly South America, Africa, Australia, Canada). Also the demand for meat products is fairly strong, but the imports "rill 1.reaken. together with those of hides and skins, as a result of the improvement in the domestic  - 45 - . livestock situation expected in the years ahead. On the 1t'hole, hm·tever, it is to be expected that the development in Kenya 1,,111 be both dollar saving and dollar earning (at least to a certain extent). The estimates may be raised to some ~400,oOO. Hides in British Somaliland. No official estimates are available. Hm·/ever, it is to be expected that any increase in the production of hides as a result of the development in Somali land ,.r111 be both dollar earning and dollar saving. Freezer in Falkland Islands. No comments. Beef in Fiji. No comments. Oat tIe ranch in Bechuanaland. No comments. Abattoir in Bechuanaland. No co~~ents. Abattoir in S1,raziland. Ho comments. Dairy in }Tyasaland. No comments. Sheep farm in Nyasaland. l~o comments. Summary: The total dollar earnings or savings of the new development in the field of animal products in British Oolonies may be estimated at sene ~750,OOO. Engineering: No comment s. Dollar savings equal <;0 J;,,;O, OO!). Factories. Salt in Turks and Oaiccs Islands. No comment~. Ootton textiles i!L-1L~~!tda __@d ..:t~..<:tiles in Nigerl~. It is not clear in what manner these projects may save dollars (estimated at ~l,OOO.OOO). A more detailed explanation of this point lIrill be necessary. Oement in Northern Rhodesia. No comments. Sand, Lima, Bricks. in British Guiana, No comments. Summary: The total dollar e1;U'nings or savings of the ne,·' factory developments in British Oolonies ~ be estimated, without the textiles; at ±150,OOO. Fisheries. Seal~ng in F'alkland Islands. No cOmr:lents. Fishing in Aden. No comments. Fishing in :fe!'lt Africa. Estimates not available.  - 46- Summary: The total dollar earnings or savings of the nel..r fisheries develon- ments in the British Colonies m~ be estimated at ~78.000 as in the official estimates. Forestry. Hanaka concessipns in British Guiana. The developments consist of the output of lumber and round logs. ~nis production is both dollar earning and dollar saving. The estimates seem rather conservative; they may be raised to ~2.50,OOO. Bartica concessions in British Guiana. See previous paragraph. Soft"roods afforestation in Kenya. No comments. Afforestation for pulp in Uganda/Kenya. No comments. ~<fattle in Tangan;vika. ~iattle exports will compete "rith highly developed South African ~,rattle bark iniustry and, of course, also ~;.'Hh quebracho. It is difficult to forecast the outcome of the competition. Summar;r: The total dollar earnings or savings of the nel ,' forestry develop- ments in British Colonies may be estimated at ±'1,300~OOO (or less because of the uncertain position of "rattle). Minerals. 1To comments. Dollar savings or earnings "rill amount to t754.000 as in the official estimates. 3. The follo,"dng table summarizes the resuH;;:! of the present comments and compares them 1.<,i th the official estimates (pounds) 3 Official Estimates Agricultural 1,985,000 2,065~OOO Animal prvducts 600,000 750,000 Engineering .50,OOf) 50 ,000 Factories 1,150,,000 150 1 000 Fisheries 78,000 78,000 Forestry 1.150,000 1 1 300,000 i~Iinerals 754,000 754i 000 Total 5,767,000 5.1 47,000 The suggested estimates are belol,' the offiCial ones by 12 -per cent. Converted into dollars, at the current exchange rate. the ne1.r figwe 1,'ould be $20,742,000 as compared to $23,241.000 according to the current estimates. As a "Thole. the cha..1'lge is not very significant. 4. It seems interesting to see h01.T these expected benefi h "'iLl be distri- buted between dollar earnings and dollar savings and, moreov'er, hOl'! they ,\>1i11 be concentrated over a period of time.  - 47 - 'nth regard to the distribution bet"Teen dollar earnings and dollar savings, the official estimates, corrected as mentioned above, have beE'n follm·red to the extent to 1,.rhich they give specific figures. ~qhere specific figures are not available tentative estimates have been ~,rorked out. The tabulation appears as follows (thousand pounds)1/ Dollar qaving Dollar Earning Total Agriculture 785 1,280 2,065 Animal products 450 300 750 Engineering 50 .50 Factol~ies 100 50 1.50 Fisheries 78 78 Forestry 1,050 250 1,300 lviinera1s 654 100 75 4 Total 3,167 1$980 5,14 7 The table sho1:.fs that the new de'velopments in the British Colonies l,rill probably be much more dollar saving than dollar earning. 5. In order to calculate the concentration of the benefits of the ne\\T colonial developments over a period of time, the period necessary to reach full production of each development project has been taken into acco'.mt. The result may be tabulated as follo,·rs; {Thousand_rOQ~~s) 1 to .5 5 'Iii) 10 F1'om 10 Activltins Yea.. s ~~ Yeal'c on Agricul ture 515 1,565 2,06.5 Animal products 650 6:;0 750 Engineering 50 Factorios 150 1.50 150 Fisher-ies 78 78 78 Forestry .500 1,)00 1,JOO Hinerals 7.5 4 7.54 754 Total 2 , 647 4,497 5,147 Although taking into account that the dollar sa;vings or earnings projects in the British Colonies "rill start producing their results before each of them l.·rill reach full production, the table 8hm'Is o"ui te clearly that the bulk of the benefi ts "'ill start accruing on an appreCiable scale only in five or more years time.gj 11 Exports to South Africa are considered as "dollar earnings." Y This conclusion suggests that many of the previous estimates ;.'111 have to be substantially revised, considering tp~t beyond a reasonable period of time, say from 3 to 5 years, remarkable changes may ta.les place in the ",hole picture of the international trade so that a large part of the previous estime,tes may become obsolete,  - 48 - 6. It can be said that the whole development project is "rell in line with the ne1..r pattern of international trade made necesse.ry 'h'.r the impact of ;'lorld War II. The results of these projects should make it possible for the United Kingdom, and perhaps some other European nations to obtain from Africa goods purchased otherftfise in hard currencies. IvIoreover, some of the projects flhould prove to be dollar earnings, thus improving the dollar position of the ster- ling area. All the projects assume an expanding trend of international trade '~rhich "rill accommodate a larger volume of goods n,an was the case prior to the ""ar. B. TECHNOLOGY SECTIONS. (The comments of these Sections endeavor, to the very limited extent made possible by the scarcity of the data provided, to evaluate the general feasibility of the projects in question. ) AGRICULTURE SECTION: It is very difficult, if not impossible, to comment adequately on these projects for 1Iihich only short descriptive paragraphs are provided. In general they are all small schemes of a fairly general nature, the results of which may be expected to be felt primarily in the locality of their developm~nt~ Further, many of the schemes are inter-dependent on other non- agricultural development such as road building, housing and harbor "yorks; from the information available it is often not olear as to ",hat portion of the costs m~ be directly agricultural and what other developments are served by the non-agricultural aspects. The bulk of the African schemes appear to be directed tOl,rards increasing the standard ofUv1ng of the inland native which is considerably belo;,! that of the coastal native, who has profited from recent high prices for eXTIort crops. The follollT1ng are a fe ..' comments on some of the individual pro,iects: }1Y 1 General Development1n the ViPXa By the end of last year the export of tung 011 from China, the main source, had fully recovered but oNing to the position of hostilities, hae fallen off again. Tung oil is a drying oil ",hich Nhen combined 1,'1 th other oils gives an excellent product competing ,.rith linseed oil obtained by the U.K. from South America. BOR I Hemp in North Borneo North Borneo is oonsidered an excellent place fOr development, the main problem being overseas transportation. I'ITa. 1 a.roundnuts :in Nigeria There is a. plethora of schemes for grou'1dnuts all over the "rorld and each one must be considered on its merits. Presumably the development of Nigeria palm oil is being left to Unilever.  - 49 - B,tl..H 1. BE 1 andDG 4 ~v~..st. Indi~s Pro,jects These are schemes for small scale export development partly for Bri Hsr Caribbean markets and partly for the United states and Ca.~ada. BEC 1. :t,.TY ~ and g',oJA 1 These Bchemes appear to be designed to improve the relative position of the native of these areas. Transport to provide an outlet ffil:W prove the difficul ty in the case of l'Jyasaland tobacco, lIrhile ~d sal in SIAr asiland may encounter labor difficulty as this crop is most unpopular among native Norkers. GAM 1 and GAM 2 Development of poultry farms in ',rest Africa to su;'!'ply local markets on a small scale is probably desirable but the prospects for any appreciable exports are remote Oliling to compeU tion from Europe a.~d other foreign and Common1p!ealth suppliers. Refrigerated storage and transport 'I'ould also prove a problem. lIT I, ERS I, BRS 2. FA!. 1. FIJ I, BEC 2, BEe 4 t S~1A 2 and l'1Y..l All serve "rell recognized needs but are unlikely to result in any large volume of exports ",i th the exception of the by-produc~s of sle.ughtering for meat for local consumption. They should all increase lives'cock production in the Various areas over the longer term. NY 2 and NY 4 m~ present some distribution problems. FAt 2. lUG 9. JW 6. AD 1 and GAH J These are all small scale schemes and their products should find rea~~ markets, though almost all local. BG 1, KY 2, TA..~ 2. UG 1 and EG 2 ',ath the exception of the Guiana schemes these are v'ery small sca.le. The Tanganyika ",attle plantation "rill serve the additional :nUI'pose of pro- viding cellulose. The British Guiana schemes present many pt'oblems alld considerable detail regarding them \·'ould be needed for aie(',uate considera- tion. I~TDUSTRY !lTD PUBLIC L~ILITI~S SECTION: gydroelectric ~roject in Fiji Islands. The total inV'eetment in the project in relation to po,"rer output anrears to be extremely high; the amount to be invested outside the colony seems out of proportion to the amount to be spent locally and the years required to at- tain first and full production are unreasonably long. All of the data given seem to be so far out of line that it is suspected they are perhaps typo- graphical errors. If not t the project certainly should be reconsidered "rith a view to its elimination or revision.  - 50 - Factory projects. In general, the unit prices of the various products appear to be reasonable and the industries are probably logical investments, but the annual gross income anticipated from the investments in projects J~J, UG2 and llTIG 7 seem very optimistic. If it can be assumed that these returns are possible, then the sale prices should be revie"'ed or the product!on costs reexamined. General Co~ment. The equipment loan as proposed is a departure from the t~Je of loan the Bank has considered in the past and would present difficulties of end use supervJ.sJ.on. This, hov>rever, is a matter of policy ar"1.d not a technical problem. From a technical point of view t ho~,'ev'er I the Banlt: should have some means of kno¥ling the effectiveness of its loans and ,,'hether or not its funds (l.e. the equipment) are being prudently and not wastefully employed. For this reason more information should be submitted on all of the projects. MI~mRALS SECTION: The schedule of the principal mineral projects submi tted. for analysis contains the follmdng: 3 gold mining projects (2 in the Gold Coast and one in British Guiana) I copper mining project in Cyprus I coal mining project in Tanganyika The limited information presently available en these projects preclude, any detailed analysis; therefore, the follOT,ring comments should be construed as merely tentative and subject to reexamination, if deemed desirable. Gold lUning. The gold mining projects are in colonies ,!rhich have been significant gold producers for several decades. The salability of gold as an export is unquestioned. The major question to be raised is ",hether or not })rivate capital ~rould be i~terested in such investments, inconvertibility of sterling being, of course, a principal deterrent. Data are not available as to probable future costs and reVenue of the specific projects. The British Guiana Consolidated Goldfields Co~any is known to have operated at a profit of over ~2 per oz., in 1946. Preliminary, de~Jatering operations and development I'rork have been done on the Nanwa (Gold Coast) mine. No additional information is immediately available concerning the Tokosea (Gold Coast) mine. The estimates of ne\,r capital required and probable revenues car-not be checked. 'iii th reference to the Gold Coast mines, recent lef,islat:'i.on reducing taxation on mines with 10'11' profit margins is uncloub·tedly fatrorable.  - 51 - Copper-C:mrus • Oopper mining in Cyprus has a long history. The ores contain copper. gold, silver and sulphur. The pyrite concentrates are utilized for the manu- facture of sulphuric acid in importing countries, notably Germany and U.K. Large stocks \·rere accumulated during the 1,'ar "'hich have probably been drat'!!l dot·m in the interim. lITeither the copper nor the gold projects are sufficiently ','ell ela- borated to permit of analysis. For example no data on grades of are; reserve tonnages or Horking costs are presented. Presumably the CDO, if it makes investments "'fill satisfy itself on these points. Since the U.K. is a net importer of copper on a larger scale, the project may ,,'ell be considered dollar saving. It is likely, hopever, that the copper concentrates and/or pyrites ',rill be processed in <'estern Germany. It should be noted that the pyrites replace sulphur, largely imported from U.S.A. and to a lesser extent; Italy. Co£!l-TanganYika The Ruhuhu coalfields in Tanganyilr.a have long been knot.m, but their commercial ,·'orth has not yet been established, to my kn01·/ledge. An official Tanganyika publication in 1943 described the territory's coal resources as follow's: liThe Territory possesses extensive resources of bi tu..llinous coal but the coalfields are SO remotely situated from places ~rhere industrial demands exist that they have never been "lorked and their exploitation up to the present has been consider~~ impracticable. At the moment their potentialities are under reexamination. nl! The Ruhuhu coalfields are believed to be very extensive, one group alone containing 11800,000,000 tons at a conservative estimate". Samples indicate a thick seam (18 ft.) "'ith a high calorific value (12,300 B.T.U.) and a 101/,1 ash content (7.57~); these samples, h01"ever, indicate the coal to be of a non-coking Variety. These fields are located on the eastern shore of Lake ~wassat anproxi- mately 300 air-line miles from the ocean. The coal, even if fully proven as to quantity a~d quality, could not be economically exported. Since Tangan- yika t s coal imports are small (25,000 tons per year pre1,rar), the economic justifice.tion of a scheme to provide an annual output of 500,000-2,000,000 tons of coal per year rna;y be difficult. Huch ",rill, of course, depend on the course of development of other industries "rhich may be lHrge fuel consumers. Y Tanganyika Territory, Department of Lands and Mines, Geological Division, Bulletin lTc. 16. THE 14nTERAL RhSOL~CES OF TANGAIWIY.A T:.s-RR I TORY t 1943. p. 59.  - 52 - No transport projeots "'ere inoluded in the list furnished the Bank by the CDC. The follol,.rlng general comments ~,reret nevertheless, nrovicled by the TF'.A];TSPORTATIOH .A,lID COMI-1ID.TICATION SECTION: ~athout questioning the soundness of the CDC projects, I doubt that the British are realizing the full potential of their existing colonial re- sources. The main bottleneck is bad transport in the form of under-e~uipped raihrays and ports. It is holding back exports of oopper, chrome, peanuts, sisal, etc, particularly from the Afrioan colonies. To break the bottlenecks, more locomotives, more freight cars, and better port facilities are required. A sedous barrier to their prompt procurement is the British policy of con- centrating the orders on overbooked U.K. manufacturers. If the British llTere ,.Tilling to buy part of the equipment outside the U. K., speedier delivery could be had ",ith enough immediate yield of dollar income to repay all the dollar costs by a wide margin. Short of a project-by-project analysis, I cannot say lr,hether the CDC program "1111 be competing for locomotives, freight cars, and port facilities '1,<.'1 th existing colonial sources of essential materials. This is an issue 1.,hich has to be checked "rith the British themsel·V'es. ~:'le ought to be sure that the transport equipl'lent to carry through the CDC prograrn ,,1111 not be procured at the expense of Rhodesian copper and chrome, Higerian peanuts. sisal from East Africa, etc.