File 3047/1909 'Railways: Asiatic Turkey; railway construction in Asia Minor' [‎56r] (116/368)

•m.
• 3p>
[This Document is the Property of His Britannic Majesty s Government.]
ASIATIC TURKEY AND ARABIA.
CONFIDENTIAL.
[July 4.]
Section 10.
[23951]
No. 1.
Sir G. Lowther to Sir Edward Grey.—{Received July 4.)
(No. 431.)
Sir, Therapia, June 27, 1910.
I HAVE the honour to report that at the sitting of the Chamber of the 26th June
a convention was voted with the Societe Ottomane du Chemin de Fer Smyrne-Cassaba
et Prolongement for the construction and working of a branch line from Soma (sanjak
of Magnesia) to Panderma, a port on the Sea of Marmora.
The concession is to expire on the same date as the concession for the lines
Smyrna-Alashehir, Smyrna-Beyronnabat-Magnesia-Soma and Alashehir-Afioun-
Karahissar, all of which lines have been constructed and are worked by the same
society. At the expiry of the concession the line Soma-Panderma, together with the
other lines above mentioned, shall revert, free of all charge and in good repair, to the
Ottoman Government.
The society is to furnish plans for the line within one year, and the Ministry of
Public Works will then have a period of three months for their approval, modification,
or rejection.
Work shall be begun one year after the approval of the plans, and should be
finished within four years.
The Ottoman Government shall give to the company for defraying the cost of
construction 77,832 bonds at 4 per cent, of 500 fr. each, redeemable during the term
of the concession. The company thus starts with a total nominal capital of
38,916,000 fr., or, the length of the line being estimated at 190 kilom., of 204,800 fr.
per kilom. The Ottoman Government undertakes to pay interest and sinking fund on
these bonds, but, on the other hand, the company shall guarantee, with all its property,
movable and immovable, the services of this interest and sinking fund. The company
shall pay interest until the line is working throughout its entire length. The line can
be set working by sections of 20 kilom. at a time.
The working expenses of the whole line are calculated at 947,670 fr. per annum,
or 4,987 fr. per kilom., say, 200L per annum.
Working expenses shall be deducted after payment of interest and sinking fund.
If during the first ten years the receipts do not cover the working expenses, the deficit
will be made good by the Government. The sums required for this purpose will be
deducted from the surplus of the revenues affected to the kilometric guarantee of the
line Smyrna-Cassaba-Prolongement, or from the general revenues of the budget.
These sums will be advanced by the Government, and will carry interest at 4 per cent,
in favour of the Treasury, and they will be repaid by the share which the Government
will receive later on from the surplus values of the receipts. In this way the
Government will have given nothing to the company, but will merely have invested
its money at 4 per cent.
If the receipts are in excess of the working expenses, the surplus shall be divided
equally between the Government and the company.
The consideration of this convention gave rise to some discussion in the Chamber.
The Opposition was led by Loutfi Fikri Bey, and the chief objection raised was that
the estimate of cost of construction (204,800 fr. per kilom.) was excessive. A proposal
was also made to modify the convention so as to give the Government an effective
control of the works in connection with the railway, but this proposal was dropped.
Djavld Bey declared that the estimate of the cost of construction was not excessive.
From the figure which appeared in the convention must be deducted costs of
expropriation of rolling stock and other preliminary items, and, above all, the cost of
issuing the bonds. The price of issue might be influenced by the political situation at
home or by a war. In the case of the bonds of the Bagdad Railway loan, with a State
guarantee, the price had been fixed at 86 . It might be that in the present instance it
would be impossible to get more than 80. This would reduce the real cost of
construction to about 160,000 fr.
Finally, the Chamber approved the convention by 110 votes to 20.
The method of guarantees is analogous to that adopted for the Bagdad Railway.
[ 1:817 d —10]
L J -
COPY