pay, provided all the lines were able only to earn their operating expenses. Even were this true, it is believed the increased taxable values thereby created, to say nothing of the saving in the cost of transportation of troops, civil officials, mails and government freights `would probably more than meet the outlay. It is not, however, within the range of probability that properly located railroads would only pay operating expenses. On the contrary, it is believed that under wise management, as already stated, several of the lines, perhaps half of them, would pay from the beginning as much as the government guaranty, and would probably do better than that, and that ultimately all would earn as much as, or more than, the government guaranty.

It may be well, as an interesting contribution to this discussion, to call attention to the circumstance that all of the trunk lines of the East Indian Railroad district were constructed upon this basis. Under the administration and direction of Lord Dalhousie, the Indian government thus brought to its aid English capital and within a very few years there were built a number of great trunk lines, carefully and intelligently located with reference to military and commercial necessities, which, besides advancing marvelously the commerce and wealth of India, settled for all time the supremacy of the English in that great empire. The rate of interest was in that day much higher than now and, accordingly, the government guaranteed a minimum rate of 5 per cent, with the proviso that, after earning that sum, the excess should be equally divided between the company and the government. The right of purchase was reserved to the government after the lapse of a term of years and the right of governmental representation and supervision was provided for. The predictions made by Lord Dalhousie that this policy would cost the government nothing and that it would give an extraordinary impetus to domestic and foreign trade, and especially to the exchanges between England and India, were more than verified and did more for the advancement of India in a decade than had been accomplished in the preceding one hundred years.

It will be seen from what has been said that the commission, if it had authority to act, would, wherever necessary to secure the desired railroads―-certainly as to the island of Luzon and probably as to Mindanao-prefer to secure the capital required for construction by guaranteeing thereon a low rate of interest. It may turn out, however, as to the latter island and also as to the islands of Paragua and Mindoro, which are much in the condition of Mindanao, that this course would not be best or even feasible, and that a subsidy in the form of a donation of lands, or both a guaranty of interest and a donation of lands, might be in the public interest. In these last named islands the amount of land held by the Christian natives, as compared with the P C 1901-PT 1- -5

lands of the entire islands, is almost nominal. The datos or chiefs of the Moro and other non-Christian tribes claim, as we are informed, a sort of general ownership of the lands within their respective jurisdiction, their subjects having no separate interests therein. What shall be done as to the lands thus held is a matter requiring careful thought and delicate handling. It is believed that the chiefs can be dealt with on a satisfactory basis, if it is deemed advisable to open negotiations with them. Such a step would be undoubtedly necessary before any disposition of lands was made, as all room for friction or doubt as to the validity of the government's title should first be removed.

In recommending that it be given power to grant franchises, make donations of land or guarantee interest, as above set forth, it should not be understood that the commission would in every case and without exception exercise all of the powers thus vested in it. The aim of the commission would be to secure needed lines of railroad upon the best possible terms. It might come to pass that one-half the lines in Luzon might be built without government aid of any sort, and further investigation might develop that it is not best at once to begin railroads in Mindanao and the other southern islands referred to. It is also within the bounds of possibility that competition between capitalists might result in offers more favorable than are now anticipated.

BUREAU OF COAST GUARD AND TRANSPORTATION.

The difficulties of communication between the various points in the islands, already referred to, is a serious obstacle to the efficient administration of all branches of the Government. When it is considered that in some cases a month or more, in others weeks, and in nearly every case days, must elapse in going from Manila to the various provincial capitals, and vice versa, the extent of this difficulty can, in a measure, be understood.

It is almost impossible, under such conditions, for the various departments of the insular government to keep in touch with their subordinates and intelligently direct their operations, while their remoteness and inaccessibility tend to generate in them a lack of that sense of immediate responsibility so essential to systematic work and discipline. Aside from this, and not an inconsiderable item, the expenses of all the departments are largely increased by this circumstance. Especially are the offices of the auditor, treasurer, chief of constabulary, collector of customs, the light-house service, the post-office, the insular purchasing agent and the various provincial boards seriously handicapped in their operations for lack of transportation.

From a political standpoint also it is most desirable that the people in all the islands should feel themselves always in close relations with the capital and the central government, and understand that the latter has a lively interest in their affairs, is fully informed as to what is