COMPANY MEETING

UNITED SUA BETONG RUBBER ESTATES

PROFITS OF RUBBER PRODUCERS PRODUCTION COSTS IN MALAYA THE OIL PALM INDUSTRY MR. J. G. HAY'S VIEWS THE twenty-ninth annual general meeting of the United Sua Betong Rubber Estates, Ltd., was held on June 1st at 59 Fenchurch Street, London, E.C.

Mr. J. G. Hay (the Chairman) said : Ladies and Gentlemen — During 1937 we succeeded in earning a profit of £220,000. Although that profit represents a not inconsiderable percentage on our issued capital, on the real capital engaged in the business it is just short of r t per cent. After making what we deem to be necessary appro- priations, we are able to recommend and pay dividends for the year which, on the same basis, are equivalent in total to approximately 7 per cent. Carrying that basic calculation a little further it may interest you to know that our earnings for the years 1928-1937 inclusive are equal to 4.87 per cent., and that the average rate of dividend for the same period is 3.74 per cent, that is without making any deductions for amortisation. For any company engaged in tropical agriculture such earnings are modest indeed, and, since they relate to a company which is supposed to have enjoyed a singular success, my citation would seem to demonstrate that during the last decade the Rubber Plantation Industry has been poorly requited for its endeavours.

I make these observations because I detect a tendency to exaggerate the earnings of the Plantation Industry, a tendency which emanates from a school of thought which would seem to entertain the view that while it may be legitimate and even praiseworthy to earn profits in other commercial pursuits, such as, for example, rubber manu- facturing, the attempt to make some modest profit out of rubber production is one that should be opposed.

OIL PALM INDUSTRY After dealing with estate matters, Mr. Hay referred to the interest of the company in Oil Palms of Malaya, Ltd. Continuing, he said : As in rubber, palm oil is consumed to a large extent in the United States, and the depression there has, unfortunately, hit the palm oil industry just as heavily as any other. A further contributory cause is the very heavy processing tax of approximately £13 per ton which is levied on all palm oil used in the United States. Even at its present depressed world price of L14 per ton, this tax makes it quite expensive to the American consumer at £27 per ton. This acts as a very severe handicap to trade with America, and it seemed to your directors that the trade negotiations now proceeding between Great Britain and America offered a favourable opportunity of endeavouring to secure a remission or reduction of the tax. On making representations to the British Government to that effect it was a great disappointment to be informed that it had been decided to omit palm oil from the list of articles on which con- cessions would be sought by the British negotiators. The British Empire is still the largest producer of palm oil, and the omission of this commodity from the list of articles which are to be the subject of discussion between Great Britain and America for a new trade agreement is inexplicable.

Our recent experience in this and other Colonist matters engenders the depressing thought that the Imperial Government take little interest in Colonial affairs until they have assumed the serious and disagreeable form of unrest in Jamaica and insulicalon in Palestine.

CHANGE IN RUBBER SITUATION A striking and dramatic change in the fortunes of the rubber industry has taken place since last we met. When we were here this time last year consumption in America was running at a high record level, and so optimistic was prevailing opinion that when I announced that this company had sold forward for delivery over 1938 four and three-quarter million pounds of rubber at !id. per pound I was reproved by some shareholders then present.

In the first half of 1937 America consumed 312,500 tons. For the corresponding period of 1938 she is not likely to consume more than 170,000 tons. This heavy fall in American demand has been aggravated by a fall—although not so steep—in the requirements of the rest of the world, and it seems only too probable that world consumption for 1938 will fall below that of 1937 by over

200,000 tons.

Under the scheme for regulating supplies exports were running at the rate of 90 per cent. for the second half of 1937. By successive cuts the International Committee reduced this to 6o per cent. But these measures have proved inadequate and, with stocks mounting and consumption declining, prices have fallen heavily. This fall has brought loss and disappointment to many, and it would be surprising indeed if under such trying circumstances the Committee which is responsible for administering the Regulation Scheme were to escape wholly from criticism. Speaking for myself--and I imagine that my colleague Sir Andrew McFadyean, who is also a member of that Committee, will agree with me—I feel that on the whole the Committee's actions have been reviewed with fairness.

MANUFACTURERS AND PRODUCERS

Some time ago it became pretty evident that manufacturers were unable to absorb the high exports that were permitted in the second half of 5937, and that a lesser rate of release than 90 per cent. would have been ample for their requirements. But before you can judge the Committee's action in that instance you would have to know the sort of pressure to which they were subjected. Moreover, in their attempts to resist that pressure they were not helped by the industry's own spokesmen, who asserted publicly and confidently that the major countries, particularly Malaya, could not produce their quota and that there was in prospect a real shortage of rubber which could not be relieved by any action of the Committee. These assertions seem mere foolishness now, but at the time they were given widespread credence, which encouraged an optimism on the part of the producer and an apprehension in the mind of the con- sumer, neither of which was justified by the facts.

It is unfortunate that producers are now called upon to adjust themselves to a cut in exports drastic enough not only to catch up the heavy decline in consumption but also to correct the too generous releases of 1937. Violent changes in permitted exports are to be deplored, since inevitably they cause serious disorganisation in pro- ducing countries as well as acute employment problems, particularly in Malaya, which is so dependent on immigrant labour.

DRASTIC LIMITATION OF PRODUCTION

To correct the situation that now confronts them the Committee have felt compelled to reduce permissible exports to 45 per cent. for the third quarter of this year. Such a severe limitation of production is bound to lead to a further increase in costs, and unless, therefore, the latest cut leads to a substantial increase in price we shall be little better off. I am afraid there is no device or scheme by which we can escape the consequences of a heavy fall in con- sumption. Whilst we continue to be grateful for the present plan of regulation which gives some amelioration under these difficult circumstances, we must recognise the fact that until consumption again comes back to a figure which approximates more closely to productive capacity the industry cannot enjoy health and prosperity.

In the present state of political and economic unsettlement it would be foolish to attempt to predict the probable course of future consumption, but you may derive some hope from this fact : that America is by far the biggest consumer and that there is inherent in that country the ability to make most rapid recovery.

COST OF PRODUCTION IN MALAYA

I suggest, however, that instead of spending time speculating regarding an uncertain future we might with greater advantage turn our attention to the other element in the determination of profits, namely, cost of production. Malaya, which formerly enjoyed the advantages of economic agricultural production, has in recent years lost ground.

Malayan production is approximately 8o per cent. of the British share of the Plantation Industry. In 1937 the value of Malayan exports of rubber produced within that territory was over £4o,000,000. Any decline in competitive power must eventually result in the loss of valuable export trade which can be ill afforded. For Malaya in particv1 • r, any deterioration in her rubber industry is a serious matter indeed for on that industry depends, more than any other, the economic welfare of the whole country.

NEED FOR CLOSE ENQUIRY

I suggest that the question of cost of production is a fitting one for close enquiry and that if our performances are fairly measured by those of other competing countries our complacency will be seriously disturbed. Having just returned from that country, I have some knowledge of the obstacles to cheap rubber production in Malaya, but no united and sustained effort to overcome these obstacles will be made until there is conviction in the proper quarters of the necessity for action. I suggest that the conviction will only come from a thorough and unprejudiced examination of our position in relation to other countries engaged in the same industry.

I hope sincerely that the Governments concerned and the industry through its associations both in London and in the East will enter into dose and friendly collaboration for a proper ascertainment and study of the facts and with a determination to take all such steps as are within their competence to restore to Malaya's chief industry its former power to compete.

The report and accounts were unanimously adopted.