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 benefit. Malaya is at present engaged in carrying out an intensive and rapid programme of rural development which, with adaptations, seems well suited to the needs of North Borneo and is indeed based on principles similar to those which are being followed here. Development in the Federation of Malaya is a joint subject (i.e., shared by the Federation and the States) and each State has its own development board. With independence, grants from Britain under the Colonial Development and Welfare Act would cease. Britain has, however, been ready to give financial assistance when this has been shown to be necessary to, other Commonwealth territories after independence, and there is no reason to suppose she would not be willing to consider the case of North Borneo in the same way. Aid under the Colombo Plan would continue to be forthcoming as at present. Aid from other sources such as the International Bank of Development and Reconstruction, would still be available for North Borneo as part of the independent Federation of Malaysia. The local and international standing of the currency of North Borneo (the Malayan dollar) rests on the combined strength and viability of all the territories which would make up the Federation of Malaysia, and would not be impaired by their entering into a permanent association.

12. The probability of increased taxation in the event of North Borneo joining Malaysia has also been a target for criticism. But on reflection this will be seen to be a probable corrollary of independence, whether or not North Borneo enters Malaysia and, if she should attain independence on her own, or simply in association with Sarawak, the cost of paying for her own defence and representation abroad would be proportionately heavier. Irrespective of whether Malaysia is brought into being or not, there is a growing demand for improved social services, communications, and development in the rural areas which is not to be denied and must inevitably lead to an increased burden of national and local taxation.

13. Of all the matters that will fall to be considered by the Commission of Enquiry perhaps the most crucial for the future well-being of the country is that of the Public Service. In the present Federation of Malaya there are two civil services, the Federal and the State. That there should be apprehension locally lest Malaysia should lead to Malayans taking over the best appointments in the North Borneo Public Service is understandable: but it has been made clear that these fears are not justified and, while control over the Federal Service would naturally rest with the new Federal Government, in all Federal Service appointments made to the Borneo territories the people of Borneo would be given priority. There would also be opportunities for Borneo Federal officers to serve in other parts of Malaysia and in external affairs posts overseas. It is clearly to the advantage of all that there should not be any breakdown in services caused by staff dislocations, and present serving officers would carry on in their posts. The progress of Borneanisation of the local service would continue. There are special provisions in the present Federation of Malaya's Constitution relating to scholarships, training and civil service posts for Malays. Similar provisions could be made applicable to the indigenous peoples of Borneo. But the process of Borneanisation, however much it is accelerated, cannot be achieved overnight, and the need for overseas staff will continue for many years to come. This is recognised by Tunku Abdul Rahman, who has expressed the hope that they will remain to guide the peoples of North Borneo after independence as they have done in the past. Arrangements will have to be worked out whereby they will be encouraged to remain in their posts while the process of Borneanisation continues on the principles already established.

14. When the Federation of Malaya was formed transitional arrangements were devised to permit the States to join the Federation gradually and smoothly. Similar transitional arrangements, extended perhaps over a longer period, will be necessary with the Borneo territories. The intention would be to cause as little dislocation in the daily life of the people as possible, and drastic immediate changes are not contemplated.

15. The main issue before the people of North Borneo is simply this. They must assess the future advantages of Malaysia; they must weigh up the prospects Malaysia offers of security from external aggression and internal Communist subversion, of stability and prosperity; and they must consider how far they are prepared to give powers to the Central Government of Malaysia to achieve these benefits. The