To the Ealtor of the "Nonri-Curwa Dany News"
Sim—During the past few months number of letters have appeared in the local press written by shareholders of Shanghai Companies particularly Rubber Companies. -who have certain grievances which they desire to sce remedied, and there movement afoot, sponsored by Mr, NW. Hickling, that a Shareholders' Protection Association be formed oon "lines similar to those now functioning' in London and. other Gnanclat "centres, the purposes o¢ which are mainly to take up. the cudgels upon behalf of the small shareholder who, although collective ly possessing very substantial interests most joint-stock companies. Powerless when he tries to act alone. with the result that he takes little interest in the affairs of the undertakings in which he has invested his savings and rarely attends meetings, feeling that it would be useless to)
Se. as his voice would not be 'As the tenor of the majority of these loiters concerns the Cost of Administration of the local Rubber Companies, the object of this letter to give' some. information in this regard and to shew how, and to. what extent, "a Shareholders' "Protection Association, such as is being formed.
vesters ould prove of value to local in-
In order to form a reasoned opinion to the manner, cient or otherwise, in which' Shanghai Rubber Companies are administered, it Is necessary for purposes of comparison frst to give a short outline of the} Rubber Plantation Industry and then some facts relating to rubber com-Panles controlled from centres other than Shanghai...
About the beginning of this century the coffee planters in the Malay Peninsula were experiencing—very can times and were eager to find some other crop to plant on their estates which would give better results. There were vague references, here and there, to. Rubber. which grew in the wild state in Brazil and was fetching high prices at Para. Further, that the tree could be cultivated and had, in fact, actually been grown in Ceylon from seed, It also so happened that a Mr. HN. Ridley. had, a few years previously, planted some rubber trees, for ex: perimental purposes, in the Singapore jotanieal Gardens. These had thrived and he was in a position to supply foods. It was from these seeds that the hundreds of millions of trees, now to bp seen, grew.
'Nobedy' knew' much about the new tree, or how to deal with it, but it seemed to hold out prospects of good. profits, Planters had to learn as they went along, so there was of course a great deal of what now would be called inefficiency and the trees were shockingly overtapped.
The present assistant on an estate has probably forgotten more about rubber planting than was ever known by the" most. experienced Visiting Agent of that far-off period, who was.
important personage in his:
and generally contrived to retire, (usually to Scotland!) with a fortune.
Tu. 1000 four tons of plantation rubber were marketed. and four years Tater only 43 tons: The great boom year was 1910, when in April Rubber Teached 12/0d per pound, and about 11,000 tons reached the "world's markets during the 12 months, Costs of production were 2/- te 2/64 a ound, but who cared?
In JO11 the average price for the year was 5/5%d and there have been many vicissitudes since then. In, more recent years the highest price reached was 4/84 at the end of 1925 and the lowest 1% en June 2nd 1932. The first really "hard times" visited this hitherto amazingly prosperous industry towards the end of 1020 when the price dropped to the then unheard of level of 1/-, and the following year to Tid. Planters were sacked and estate expenditure cut down to the minimum. Then came the Restriction years which brought a measure. of temporary, relief, but it was not until five or six years ago that the industry really commenced to rationalize itself.
Weak estates have been taken over! by financially strong ones; amalgamations have been effected of numbers of individual estates which now form powerful groups under one Company. with one Board of Directors and the ick of the former estate staffs, while much attention is given to scientific progress. A planter now superintends many times the area dealt with by his prototype of a decade earlier. In 1920 an estate of approximately 1,000 acres would have a manager, with fitlier one or two European Ddesides a Kraut (native clerk). To: ay one manager with an assistant or two. frequently supervises 5,000 acres!
This logical and inevitable process of amalgamation has by no means ended and there is every reason to believe that a decade hence the average Rubber Company will control at Jeast 10,000 acres, and the cost of production will be in the vicinity of 24 per pound. a figure the contemplation of which should afford some mental relief to these holders of rubber shares who live in per-Detual fear of being ruined by the Advent of synthetic rubber, as was the case with indigo.
'Shanghai's interest in Rubber, which Is a very large one, may.be said to date from the boom year' 1910, 'There have, of coure, been the inevitable ups' and downs few of the companies retain their original capital structures, but mis a condition of affairs by no means confined to Shanghai. The present Issued capital at par is just over {$22,500,000 local currency. There are present 35 Rubber Companies, all but 6 of which are in the hands of two firms who act as: General Managers and Secretaries, and the remainder of this letter refers only to the estates under their control. The properties of 24 of these Companies are in the Malay Peninsula and 5 in Java. As the larier are all large concerns with average planted area of 4,600 res and their Administration Costs Just about one third of that of the Malayan group, they will not be referred to further, except to use them in drawing attention to the fact that they offer strong evidence of the contention, to be elaborated in due course. that the large unit is far more economical to operate than small on Of the remaining 24 Companies the Rubber Trust's properties are partly in Java, go that for this and other reasons, it has not been included in the statistics that follow.
Upon examining *the accounts. of these 23 Companies one is forcibly impressed by the small average size fof the properties (ust under 1,800 feeres) and the multiplicity and magnitude of the Costs of Administra-ton.
'By "Costs of Administration" is meant: Directors' Fees, General Charges, Shanghai Office' Expenses, Secretarial Fees and General Managers' Commission. In fact all charges which fall on the cost of production outside the estate itself.
One hesitates to submit too many. 'SMatistical figures for fear that the reader may be unable "to see the wood for the trees", but the follow-
Ing are appended.
Annual Cost of Administration amounts to: 1423 per cent. of the Net Sales or 44 etc. (local currency) per pound of rubber produced or 5.33 er cent. of the Issued Capital or [EL per cent. of the Dividends distributed fast financial year "which, Buclid would have ° said, "is!
The corresponding figures for the Java group are: 483 per cent, 1.69) per cent. 1.83 per cent. and 19.50 per Tu view of these figures one forced to the conclusion that the charge that little or no attempt has been made to rationalize the Malayan group would be very dificult' to refute.
"All the estates in this group have one facier in common: they are owned by the investing public in Shanghai. Intact, it is doubtless certain that many an investor has spread his holdings over half a dozen or even a dozen companies, so that the task effecting amalgamations should be materially simplified. The geosraphical distribution of these estates is such that their grouping into three, at the most. four large unite should hot present any insuperable digiculty.
As at present constituted these, 36,000 "odd acres of rubber cannot! possibly earn for their shareholders the maximum return onthe capital outlay which the world price of rubber affords.
By amalgamations the shareholder will receive a higher yield, which. in turn, will increase the capital! value of his investments. Further, the estates are burdened with ex: cessive administration charges and shareholders are not receiving a fair Proportion of the profits to which they must feel themselves entitied 'The days of fancy prices for rubber fare gone forever, although. taken over a period of' years, there are always bound to be considerable fluctuations in the price the fact that the commodity oes into consumption some 8 years after the) tree is planted, and it is impossible) [for the planter' to effect even an ap-should be so, then there is something. proximate adjustment between pro- definitely wrong somewhere. notion and consumption. and ever-increasing demand rubber provided the
Text read from the printed page and cleaned; old type leaves the occasional error.