Institute of Pacific Relations

Indo-China Faces Budget Deficit for 1939Author(s): Jack ShepherdSource: Far Eastern Survey, Vol. 8, No. 12 (Jun. 7, 1939), pp. 145-146Published by: Institute of Pacific RelationsStable URL: http://www.jstor.org/stable/3021900 .

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1939 Indo-China Faces Budget Deficit for 1939 145

they represent a substantial development of the indus?

try, which now ranks in importance with that of the

bauxite-producing areas of the Netherlands Empire in the western hemisphere. It is seldom realized that the Netherlands is a world colonial power in the fullest sense of the term or that the territories of the Empire in Europe, America and the Far East, though scattered

geographically, are rather closely knit politically and

economically in a single imperial organization. The Surinam Colony (Dutch Guiana) has been an impor? tant producer of bauxite for years, and if its 1937 pro? duction of 392,000 tons is added to production in the East Indies for that year it is found that Netherlands

Empire territories controlled only a little less than a fifth of the entire world output. Bauxite reserves in

Surinam, where both the Aluminum Co. of America and the Billiton Mij. have large interests, are estimated above 50 million tons, perhaps as high as several hun- dred million tons. While no recent estimate of bauxite reserves in Netherlands India has come to hand, earlier estimates ranged up to 20,000,000 tons. Taken together, these figures mean that the Netherlands Empire has more than one tenth of present estimated world re? serves of bauxite of ore grade.

Germany has been the best customer for Netherlands India bauxite, taking 128,000 tons out of 150,000 tons

produced in 1936; 139,000 out of 200,000 tons in 1937; and 193,000 out of 230,000 tons in 1938. Since German bauxite deposits are low-grade and are used mostly for abrasives when worked, the German aluminum indus?

try, which now ranks second to the United States in

production, imports almost all its ore. The commercial

treaty signed by Germany and the Netherlands in 1934, and subsequent agreements, took into consideration the

products of Netherlands India and opened the German market for Netherlands India bauxite when previous sources of supply for the Germany industry were some? what curtailed. France, the world's ranking producer of

bauxite, drastically restricted its exports of this com?

modity in 1935. Italy needed more of its domestic sup? ply for its own expanding aluminum industry. Germany continued to draw on Yugoslavian bauxite and more

recently has taken large quantities from Hungary, but German restrictions on the use of other base metals (a

military measure) have greatly increased the use of aluminum in that country. Consequently Netherlands Indian bauxite has found a ready market there up to now.

Japan also manifested an early interest in Nether? lands India bauxite and in 1936 contracted for 24,000 tons annually for an aluminum works on Formosa. For some time, however, shipments were irregular because of increased Japanese production of bauxite and diffi? culties over foreign exchange. In 1938 Japanese interest revived and regular shipments to that country from Netherlands India were begun. (See Far Eastern Sur?

vey, Aug. 18, 1937, p. 198; July 1,1936, p. 149.)

Although all Netherlands India bauxite has been sent abroad for smelting, plans are well advanced for estab-

lishing an aluminum industry on the islands. Cheap fuel and cheap electric power, together with the large bauxite deposits, make the prospects favorable. The aluminum-bauxite syndicate has been considering the installation of a smelting plant at Palembang on Su?

matra, but no final decision as to its location has been reached. The importance of the project is indicated by the fact that the cost of the reduction plant is estimated at 25 million guilders. Meanwhile, until the completion of the works, the syndicate intends buying aluminum for manufacture into various articles by smaller fac? tories in Java and elsewhere.

These plans for a domestic aluminum and aluminum-

manufacturing industry assure a market for Nether? lands India bauxite irrespective of the future trend of the German trade or of the development of bauxite on the Japanese mandated islands or in British India.

Recently, in Holland, an Amsterdam company was formed for the fabrication of aluminum, and there are

reports that Canadian-Dutch and French-Dutch com?

panies will establish rolling mills there. With these de?

velopments, the completion of the reduction works in Netherlands India would make the Netherlands Em?

pire self-sufficient as a producer of aluminum. Alvin Barber.

INDO-CHINA FACES BUDGET DEFICIT FOR 1939

After showing substantial surpluses in 1937 and

1938, Indo-China faces a budgetary deficit this year and probably for a few years to come. This situation is attributable partly to domestic factors and partly to economic and military adjustments made necessary by the conflict in China and concern regarding the recent course of Japanese policy.

During the depression period a policy of severe bud?

getary deflation was followed and although since 1936 there has been a renewal of prosperity, reflected in in? creased revenue, expenditures on public works con-

tinued to decline, and all available loan funds were used up. These trends account for the recent surpluses which were achieved despite rising prices resulting from the depreciation of the piastre, which is tied to the

franc, and increased expenditures on defense. The domestic factors accounting for the increase in

expenditures this year include a further rise in prices due to depreciation of the currency, increased subven- tions to local budgets, the necessity for financing pub? lic works out of the ordinary budget now that available loan funds are exhausted, the purchase of new stocks

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146 Indo-China Faces Budget Deficit for 1939 June 7

at higher prices for the state opium monopoly, and the

resumption of a large special program of public works

postponed during the depression?including important hydraulic works in northern Annam and the improve? ment of state railways. The disturbed international situation in the Far East has led the Government of Indo-China substantially to increase both its direct

expenditures on the defense services (see "Cam Ranh Base Would Fit into Strategic Network," Aug. 18, 1937) and its contribution to the French budget on account of expenditures incurred in the defense of the

colony by the mother country. Defense works are being financed for the most part by a loan of 44,200,000 piastres raised in the latter part of 1938, but as a result

larger provision has had to be made in the 1939 budget for servicing the colonial debt. Indo-China's contribu? tion to the French budget and payments on the colonial debt have together been increased by 2,500,000 piastres, a rise of 12.7% above the 1938 figure. Total expendi? tures for 1939 under the regular and special sections of the budget are estimated at 107,183,000 piastres, a fig? ure which exceeds the total estimated for 1938 by nearly 10%.

Revenues this year are expected to exceed those of 1938 but it is highly unlikely that they will grow suf?

ficiently to meet the increased expenditures. In fact it is surprising that the revenues should have remained as buoyant as they have when it is remembered that an

important section of Indo-China's trade has been vir?

tually paralyzed by the Sino-Japanese conflict. A poor

rice harvest in 1938 might have been expected further to depress the revenues. But fortunately for Indo- China the contraction of her Far Eastern markets has been very largely offset by increased purchases on the

part of France and the other French colonies, and the balance of her total trade was heavily in her favor in 1938 (see "France Becomes Indo-China's Best Cus-

tomer," Nov. 23, 1938). Although revenue from im?

port duties has fallen considerably, it is expected that direct and indirect domestic taxes, some of which were raised last July, will yield additional revenue. The ful-

fillment, or otherwise, of these hopes will depend very largely on whether the volume of foreign trade con- tinues to decline and whether the domestic consump? tion of articles subject to taxation is maintained at the level recorded last year.

Indo-China has substantial reserve funds accumu- lated over the prosperous years upon which she may have to draw this year to balance her accounts, but it is felt to be unwise to reduce this reserve unduly except in case of emergency. The only other alternative for the colony is to seek the enlargement of its borrowing powers. It has now borrowed up to the limit fixed by the French Government in 1931, but a move is being made to have the permissible limit raised. Further

loans, however, will aggravate the already heavy bur? den of debt which the colony has to bear. (See "Indo- China?France's Great Stake in the Far East," Jan. 20, 1937.)

Jack Shepherd.

The essential purpose of this journal is to present objective data on economic developments across the Pacific Where diverse interpretations of the facts are possible, responsibility for the interpretation selected rests solely with the individual author.

Research \ Alvin Barber, Kathleen Barnes, Kurt Bloch, Dorothy Borg, Miriam S. Farley, Frederick V. Field, Norman D. Hanwell, Associates y William W. Lockwood, Robinson Newcomb, Lawrence H. Odell, Catherine Porter, Jack Shepherd, John R. Stewart.

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