§ 1. In October, 1942, a declaration was made on behalf of His Majesty's Government to the effect that it would be the general aim of His Majesty's Government after the war that, with a view to the well-being of the people and the resumption of productive activity, property and goods destroyed or damaged in the Colonial Empire should be replaced or repaired to such extent and over such a period of time as resources might permit. It was added that, if the resources of any part of the Colonial Empire were insufficient to enable this purpose to be achieved without aid, His Majesty's Government would be ready to give what assistance they could, in conjunction with such common fund or organisation as could be established for postwar reconstruction. In September, 1947, on completion of the collection of claims for war damage in Malaya, the Claims Commissioner conferred in London with the Colonial Office, and after his return, the Governments in Malaya, in January last submitted jointly to His Majesty's Government, through the Governor-General, the outlines of a scheme for the settlement of war damage claims and claims under the War Risks (Goods) Insurance Scheme in the Federation of Malaya and Singapore. Apart from claims under the Insurance Scheme, where a legal liability is involved, these proposals were based on the conclusion that, in the present financial circumstances both of His Majesty's Government and the Malayan Governments expenditure must be restricted to the sum necessary to meet essential needs on an austerity basis. The total expenditure contemplated under the proposals, on all classes of claims, was $475,000,000 (Straits) or approximately £55,000,000.
§ 2. With the personal assistance of the Governor-General, who arrived in England shortly after the submission of the proposals, and of the Malayan War Damage Claims Commissioner who visited London specially for this purpose, His Majesty's Government have now fully considered the proposals, and they consider that the general scheme outlined therein is sound and is calculated to achieve its essential object. At the same 17W time they recognise that the Malayan Governments are not in a position to finance such a scheme entirely from their own resources, and His Majesty's Government have accordingly agreed to contribute a sum of £10,000,000 by way of a free grant, towards the expenditure involved. As regards the remaining expenditure, His Majesty's Government have agreed to stand behind the Malayan Governments up to a maximum additional liability of £35,000,000, on the understanding that the latter will meet the cost of the scheme directly from their own resources to the greatest possible extent. In so far as the Malayan Governments may prove unable to meet the liability in the direct manner indicated above, it would be met by interest-free loans from His Majesty's Government to the Malayan Governments. The latter have envisaged that the remaining £10,000,000 out of the total of £55,000,000 should be met from the proceeds of Japanese reparations. In the event of any such proceeds falling short of £10,000,000, and in the event of the Malayan Governments finding themselves unable, in spite of all efforts, to meet the balance directly from their own resources, further discussions with His Majesty's Government would take place.
§ 3. Having regard to the financial difficulties with which the United Kingdom is itself faced as a result of losses incurred during the war, and having regard to the heavy burden which the United Kingdom taxpayer is called upon to bear, this contribution by His Majesty's Government towards the solution of Malaya's problems represents a great effort and a very real proof of sympathy and good will.
§ 4. The Governments of the Federation of Malaya and Singapore will now draw up a detailed scheme within the framework outlined above. Particulars of the scheme will be announced shortly, in order that it may be put into practice as rapidly as possible. Actual expenditure, however, will inevitably be spread over a considerable period, and, moreover, it is essential, both from the point of view of limiting calls on the productive capacity of the United Kingdom at this critical time and of avoiding local inflation, that the bulk of the expenditure should not be too suddenly incurred. In these circumstances, it has been agreed that His Majesty's Government should not be called upon for assistance to the extent of 18W more than £6,000,000 in 1949 (the year in which payments are expected to commence), and that the same limit should be imposed in 195o and 1951. The Malayan Governments have also agreed to keep a close watch on the level of sterling balances held on Malayan account in the United Kingdom and to consider taking such action as may be necessary to maintain these balances, by way of continuing or extending limitations on imports.
§ 5. His Majesty's Government have also taken this opportunity of informing the Malayan Governments that, as further evidence of good will, they will not seek any contribution from the latter in respect of the costs of the Military Administration amounting, in all, to over £7,000,000. Further discussions will take place between His Majesty's Government and the Malayan Governments on the apportionment of the expenditure incurred on goods supplied by His Majesty's Government to the territories after civil Government had been re-established.
§ 6. His Majesty's Government have agreed to ask Parliament for the necessary authority to implement the above decisions.