156

25th October, 1928

PERSONAL AND CONFIDENTIAL

(Due to arrive Canberra 24.11.28)

My dear P.M.,

With regard to the development of our part of New Guinea-the following appeared in an article in the American publication, 'Foreign Affairs', for October:-

Australia has not taken any great part in the economic development of the Pacific Islands, and shows little interest in developing trade with them. The former may be due in part to the fact that the bulk of her capital is required at home and in part to indifference; the latter we may put down to shortsightedness and indifference.

One would naturally expect that Australians would take a particular interest in developing their holdings in New Guinea, but such is not the case. F. W. Eggleston [1], chairman of the Australian delegation at the conference of the Institute of Pacific Relations, has written: 'The mandate involves heavy obligations. We are not supplying either Papua (as the Australians call their part of New Guinea) or New Guinea with adequate capital. They are obviously undercapitalised, even so far as the Government is concerned, while the capital for development cannot be supplied by Australia.' Seeking to bring about a rational consideration of the problems, he asks two questions: '(1) Are we going to assist our own territories in the Pacific with adequate capital for development, or, if we cannot supply it ourselves, allow other capitalists to do so? (2) Is it right or beneficial to protect our own Australian industry from island products? For the benefit of banana-growers in Queensland we have destroyed our trade with Fiji, and, no doubt, have impaired the development of the islands. The Queensland sugar industry has been so tied up with artificial legislation that it is difficult to see how it can be extricated without destroying the industry, but if a few men start growing peanuts and other tropical crops in Australia, are we going to give them protection against the Islands? If so, we have no claim to handle the Islands. I have no hesitation in saying also that we are short-sighted, because the economic development of the Islands will be of the greatest value to Australia.'

This, in essence, presents the economic aspect of Australia's Pacific relations. It appears that she cannot supply capital to develop such territory as she directly controls, and that she prefers to develop her mainland tropics at the expense of natural and normal trade with the islands. [2]

Sooner or later it seems likely that New Guinea will come under the notice of American capital. In an effort to foresee and forestall this, would it be of any interest to you if I were to bring this question of New Guinea development to the notice of certain influential financial people in this country? I do not for a moment suggest that anything concrete would come of it but at least it could do no harm.

New Guinea is practically a virgin country except for very small areas along the coast that have been brought under coconuts. Its possibilities for growing a wide range of tropical products are untapped: its mineral possibilities and the potentialities of the high country inland from the coast are unknown.

There is reason to believe that the timber resources of the Territory are very large. Men whom I have met from New Guinea speak of the great possibilities of the pasture lands in the high country.

Development such as I have in mind would entail opening up large districts of the interior, and coast land now inaccessible for want of harbours: areas which are at present almost unexplored and where the native population is not yet under effective control by the present administrative organisation.

A mere extension of the areas at present producing copra would be inadequate.

My knowledge of the state of affairs in the Territory, which is necessarily vague and probably incomplete, is as follows.

You sold the last of the expropriated properties 18 months ago, and under the resulting private ownership the Territory has since seen a reasonable degree of personal prosperity and minor development.

The three big factors in the exploitation of the Territory are:-

The Melanesia Company, which was formed to tender for expropriated properties and obtained a limited number. Sir Harry Brittain [3] is Chairman. In accordance with the regulations for the sale of expropriated properties, nominally only one-third of the capital is non-British. I have heard it said that probably considerably more than a third is German in actual fact. The company is known to have strong German affiliations.

W.R. Carpenter & Co., an Australian company formed at the start of the war, applied for and got a limited number of properties in their own name, and others, I am told, in the name of nominees.

(I hear rumours that the Melanesia Company and W.R. Carpenter &

Co. are about to amalgamate their interests.)

Burns Philp own practically no plantations. Their interests are confined to trading and shipping.

I believe that Lever Brothers have plantations in various places in the adjacent islands.

Developmental work on any scale would be rather a shot in the dark and, I would presume, would have to be preceded by some concrete indication of the goodwill of the Commonwealth Government. The obvious directions that occur to me in which this might be shown are as follows:-

(a) Assisted passages for personnel from this country to New Guinea.

(b) Possible extension of government subsidised shipping to the Territory.

(c) On the guarantee of an agreed expenditure by the Development Company within so many years, the Government to undertake agreed expenditure on roadmaking, harbour and jetty facilities, light railways or flying ropeways, in accordance with the Company's requirements.

(d) The Government to extend the existing administrative and police arrangements to districts that it is proposed to exploit but which are not yet under control.

(e) The Government to give every assistance in their power in the matter of recruiting of labour within the framework of the existing recruiting regulations.

(f) Possible extension of the existing bounty system with regard to specified products.

(g) The possible extension of wireless communications within the Territory.

It might be politic to specify that say 10% to 25% of the capital be Australian. Presumably oil would be retained as a Government monopoly. I understood previously that this was the case at present, but I hear lately that there are several private oil prospecting syndicates operating in the Territory.

I am not unmindful of the fact that any benefits or assistance that you were to provide for any large scale Development Company would also have to be provided in some reasonable measure for the existing individuals and companies-but I do not think that this should preclude efforts to get the big work done. The toes of vested interests would have to be trodden on a bit.

I imagine that there is also the question as to whether Sydney would continue to get the rather artificial entrepot trade under any big development scheme.

I have no particular group in mind in suggesting the above. But if I had an indication from you that something on these lines would appeal to you, I would look about and see what could be done- entirely without committing you.

I am, Yours sincerely, R.G. CASEY

P.S. I attach copy of a letter from two American gentlemen, addressed to the King, containing what I am sure they regarded as a reasonable request.

1 Victorian Attorney-General and Solicitor-General 1924-27 and Minister for Railways 1924-26.

2 C. Hartley Grattan, 'Australia and the Pacific', Foreign Affairs 7, 1928, pp. 144-9.

3 Conservative M.P., also active in politics, journalism and business.