In continuation of H.25 , the following is a note on three recent developments of which you will no doubt have been informed already either directly from the British Consul-General at Batavia  or from other sources.
(A) CONSULAR VISIT TO TIMOR
The suggestion was made in a recent despatch from the Consul- General at Batavia that an official investigation on the spot of conditions in Portuguese Timor would be well justified in present circumstances. It was proposed that the visit should be made by Vice-Consul Lambert  who is at present, I understand, at Batavia, and that among its objects should be to ascertain the extent, if any, of Japanese penetration and the attitude of the Portuguese authorities towards foreign concessions. The suggestion has been approved and it has been pointed out that the visit is likely to prove as valuable to the Commonwealth as to the United Kingdom Government. It has also been suggested that the Commonwealth Government might care to prepare a questionnaire and forward it to Consul-General Fitzmaurice at Batavia on which Mr Lambert would obtain information. It is at present intended that Mr Lambert should leave Batavia on 14th December.
(B) AIR CONNECTION WITH DILLI
The suggestion made by the new Governor of Portuguese Timor  for a regular air connection betwcen Dilli and the outer world, preferably by a British Company, was reported fully in Batavia despatch No. 125 of 30th August last.  The proposal was further discussed between the Consul-General and Mr Hudson Fysh  on the occasion of the visit of the latter to Batavia shortly afterwards.
Mr Hudson Fysh expressed himself on that occasion as personally in favour of such a connection with Dilli if it proved practicable and he told Mr Fitzmaurice that he would take the matter up with Imperial Airways and the Air Ministry in London. On arrival in London Mr Fysh wrote in this sense to the High Commissioner  and it is understood that he has since been in consultation with the Air Ministry, with what results it is not yet known. Meanwhile the Consul-General's reports on these conversations had aroused interest in the same quarters in the Foreign Office referred to in H.16.  It was pointed out that the proposal to include Dilli in the Qantas Empire Airways route between Singapore and Darwin might conveniently be linked with the other suggestion now on foot for an extension of Australian influence in Portuguese Timor, namely, development of the Staughton oil concession. The view was expressed that if the hoped-for exploitation of the concession went through the Commonwealth Government might find that the logical consequence was the development also of communications with Portuguese Timor. With this in mind a Foreign Office enquiry was made of the Air Ministry as to the feasibility on practical grounds of including Dilli on the Singapore-Darwin route. The Air Ministry replied, however, that from an operational point of view Koepang was preferable and that there were sufficient difficulties already in the establishment of the route without the additional one which the inclusion of Dilli would involve. An important point was that the accuracy of the weather reports essential for crossing the Timor Sea could not be relied on from the Portuguese side. The Air Ministry therefore suggested that if it was desired to connect Dilli with the Singapore-Darwin route this might be done by a shuttle service, preferably at the direct request of the Portuguese. According to the individual view at the Foreign Office already referred to, these objections, although weighty, might well be modified when political considerations are taken into account. In the same opinion, the question of whether the political advantages would outweigh the operational disadvantages of using Dilli instead of or as well as Koepang would seem to be closely connected with the question of the action which the Commonwealth Government might be prepared to take to obtain a firm commercial footing in Timor in order to keep the Japanese out.
Supposing such a policy were decided on the desire of the Portuguese for an air connection with Dilli could perhaps be used as a bargaining factor in aid of the Australian concession.
(C) WITTOUCK CONCESSION
It will have been observed that the new Governor of Portuguese Timor gave the impression in Batavia that he had suspicions as to the genuineness of Wittouck's activities in Timor, and he seemed favourably disposed towards the continuance of the Staughton concession. Meanwhile, a copy has been received here of an elaborate volume descriptive of the investigations pursued in Portuguese Timor by the Allied Mining Corporation. This publication has been commented on at length in Batavia despatch No. 137 of 10th September  of which you will have had a copy.
It is sufficient here to note that the book has been prepared obviously at considerable expense. It contains a great number of diagrams, charts and photographs, some of which last reveal the decidedly modern character of the Corporation's establishment at Dilli.
2. You will have noted that the Consul-General at Batavia reported in a despatch dated 14th September  that he had been informed that a Japanese named Segawa had been to Lisbon on behalf of the Nanyo Kohatsu Kaisha and completed a deal whereby Dr Luiz  transfers to a new company the lands of the Sociedade Agricola.
According to the Consul-General's information this will form part of the assets of a new Portuguese-Japanese company under the management of Mr Owada.
3. Copies of a letter from the Minister of External Affairs to the Consul-General at Batavia dated 18th August, 1937 , and of the Consul General's reply dated 9th September  have now been received at this office through the Foreign Office.