This article briefly outlines the phases of Arab capitalism in British Malaya from the 19th century to post-independence. It examines the role of Arab capital in trade, shipping, real estate, and moneylending. The free market economic conditions in colonial Malaya in which Arab businesses operated were conducive to their growth and influence; after independence, by contrast, multiple factors, including increased competition from western shipping companies and other trading communities, state capitalism and state control of the Hajj as well as communal politics effectively marginalized Arab capitalists.
Despite their relatively small numbers (Box 1), a few Arab capitalist families dominated lucrative niches in trade, shipping, real estate, and moneylending in parts of Penang, Singapore, and the Dutch East Indies from the 1880s, but there were no precise evolutionary trends in their development, as occurred among the Chinese in South-East Asia. The Chinese transitioned from revenue farming to banking and to the creation of conglomerates, each phase introducing new merchant groups with distinct functional ambitions. Their enterprises were assisted by the state and other significant trading networks.
The changes that occurred within Chinese capitalism were not replicated in the Arab world. While Arabs successfully created multinational trading and manufacturing links, their weak economic institutions and relationships, their limited interaction with other trading diasporas, and highly inconsistent relations with what became the Malaysian state and with their warring feudal sultanates in Hadhramaut sapped their entrepreneurial vigour.
The settlement of Malaya's Arab population began when a small group settled near Kuala Pahang more than two centuries ago. Arab migration to British Malaya from the early 19th century was principally from the Hadhramaut region in the south of the Arabian peninsula, near the Gulf of Aden. The majority were male Sayyids (claiming descent from the Prophet Muhammad). From information recorded in successive population censuses covering the territories in what became known as British Malaya, it is possible to identify changes in the size of the Arab population and where they were located from as far back as 1881, when the first census was held in the British Crown Colony of the Straits Settlements. In 1891, a population census was also held in the Federated Malay States, and by 1911 censuses covered all the constituent parts of British Malaya.
The commissioner of the 1921 census noted, however, that it was doubtful whether all those “who have described themselves as ‘Arab’ have any real claim to be considered members of that race ... Malays have a real veneration for the Arab race and especially for the Saiyids, the lineal descendants of the Prophet, and the name confers a social distinction approaching that of the Brahmin in India” (Nathan, 1922, p.91). Many of the Arabs enumerated in the censuses would have been second or third generation, and not born in Arabia.
Evidence from the 19th century shows that in the Straits Settlements there were about 2,000 Arabs, mainly concentrated in Singapore and Penang (Box Table 1). Throughout this period they were a minority group far below 1 per cent of the entire Straits population. When data became available for all the territories from 1911, some 3,500 Arabs were living in British Malaya; this number increased to almost 6,000 in 1947, when almost eight out of 10 Arabs were concentrated in either Singapore or the neighbouring territory of Johor. Successive censuses show that the share of Arabs in Penang dropped markedly.
By the 1880s, Arabs in Singapore, and those in Surabaya, Batavia, and Pelembang in the Dutch East Indies, had carved out powerful niches in trade, shipping, real estate, and moneylending. Abdallah bin Alawi al-Attas, for example, operated a lucrative trade and real estate enterprise in Singapore and Batavia. He was advisor to the Sultan of Johor, Abu Bakar in the early 20th century, and maintained trade and religious networks between Singapore and Hijaz, Hyderabad, Cairo, Istanbul, Syria, and Japan.
Similarly, the al-Akaff family—Sayyids from Hadhramaut—migrated from Hadhramaut to Singapore and rose after the mid-19th century. Three brothers—Abdullah, Muhammad, and Shaykh—based in Singapore, were prominent traders in spices, sugar, coffee, and textiles with India and Europe. Much of their trading profit was invested in properties and hotels in Singapore. Between 1880 and 1908, Alkaff was the largest property group on the island.1 They also subsidized road construction in Hadhramaut, as well as mosques, schools, textile mills, and agriculture in Java. They transitioned from tax farming in the Shihr in Hadhramaut to a diversified economic empire in South-East Asia and the Arabian Peninsula.
The Alsagoff family, too, who were also of Hadhrami origin, had diversified interests but was dominant in shipping. It had a powerful position in transporting pilgrims as well as inter-island shipping. However, in the 1930s its position in shipping went into decline, as the British and Dutch lines cartelized shipping routes.
A significant share of the Arab shipping monopoly, which dated from 1819 and which provided a crucial source of capital and profits, was centred on Singapore. One activity that proved highly lucrative related to the Hajj. The Alsagoff and al-Hibshi families were major financial brokers. In 1881, however, the Alsagoff family was accused by the British government of enslaving the poor through the Hajj. Laws were subsequently introduced, in 1901 and 1906, to curb excesses. As a result, the Hajj, which had originated as an individualistic endeavour in the pre-colonial period, was now organized and controlled by the governments in Malaya and Indonesia. The numbers of pilgrims from Java was around 5,000–6,000 between 1872 and 1926; for Singapore and Malaya there were dramatic increases between 1910 and 1924, but numbers fell during the Great Depression, though they had recovered by 1936.
The profits from shipping were mainly filtered into real estate and moneylending. Arab shipping reached a peak in the mid-19th century, with lines from Zanzibar and Kuwait to South-East Asia. The Sayyids dominated Arab shipping, but the Alsagoff and al-Hibshi families (the latter of a lower social class), encroached into the Sayyid domination from the 1870s. Shipping was linked to trade and the pilgrim traffic, as well as to the transport of horses and slaves, and to pearl fisheries. These Arab shippers moved from sail to steam, and monopolized the inter-island trade, and the trade in bulk low-value goods. Here they acted as intermediaries for the Dutch lines.Arab commission agents in Java, often family members, promoted investments in Singapore for Arab capitalists in Aden (a leading port for the Arabian peninsula and Horn of Africa) and Hyderabad.2
The single network of these Hadhrami entrepreneurs in South-East Asia was only occasionally linked to networks of other Muslim, Asian, or European commercial groups, which put them at a disadvantage with the rise of European cartels and the price-fixing of shipping conferences in the inter-war decades.3 The primary accumulation of capital and diversification was coordinated through single families. There was limited use of mudaraba and musharaka from the 1840s, but only for single missions, and they were not a permanent feature. These partnerships4 were organized on an ad hoc basis for a single initiative, and credit was secured largely through personal contacts or from family members. Informal networks of Arab moneylenders and moneychangers existed, but were drawn into acquiring and creating fixed assets in land and property rather than investing in productive sectors.
Arab moneylending was limited in scale, confined mainly to urban centres in Singapore. The Alsagoffs maintained substantial lending to the Sultan of Johor between the late 19th century and the first decade of the 20th. The Alkaff Group also combined a portfolio of financial interests in South-East Asia and Hadhramaut, which included tax farming in the Shihr and loans to the sultan in Tarim and to the Nizam of Hyderabad. Both families moneylending activities were localized, however, and lacking in clear specialization, which meant that their lending outlets were constantly changing, moving across vast areas, and lacking in organizational structures. Thus, despite their knowledge and expertise in terms of markets, currencies, trade, and shipping, they were unable to create a grid parallel to that of the Western, Chinese, and Indian financiers. The small size of the Arab community, aggravated by factions and tensions within families, worsened their prospects. Arab capital remained smaller than Chinese, as the latter had monopolistic advantages in commodity production and trade, with valuable comprador links to Western capital.5
This variety in financial institutions is also reflected in the remittance business. Some funds were carried by kinsmen and friends, and some were sent via banks in Singapore, Bombay, and Aden. Since 1907, the Alsagoff family had coordinated remittance transfers through couriers, Western banks, and Arab agents in Tegal, Singapore, Hyderabad, and Aden. These remittances had some impact on the Hadhramaut economy, in improving agriculture, transport, and food, and in subsidizing luxury imports. Nevertheless, there was a continuing incentive for the Arabs to maintain their moneylending activities and invest in land and property, with the Hajj profits enabling the rise of rentier capitalists in the Yemen and Hijaz.
Over the longer term since the 19th century, some Arab capitalists grew at an impressive pace, but their lack of institutional structures ultimately defeated them. The policies brought in by the independent states of South-East Asia disadvantaged many of them, “seducing” their elite into government and academic life.
In their trade with India and the Middle East they had carved out lucrative niches. The Alkaff Group, for example, had secured the revenue farm contract in the Shihr in 1919, owned real estate and agricultural land, and was a moneylender to the sultanate of Kathiri, as well as to the Qu’ayti sultan and local chiefs. It built the road between Tarim and the port of Shihr, and was a defence contractor. In 1924, however, it lost the contract for Shihr customs collection, which was handed to an Indian, Hajeebhoy Lalljee, for a lower bid of 80,000 Maria Teresa dollars.
After World War II, the Arab commercial community in South-East Asia went into serious decline. Its homeland had sapped their capital through remittances, had introduced unstable religious forces,6 and had provided few opportunities for productive investment. Arab capitalists were no longer a powerful force, increasingly being assimilated into indigenous capitalist groups. Arab entrepreneurship had been dislodged from economic sectors that it previously dominated in British Malaya.
The absence of strong Arab economic ties to the state prevented the consolidation of commercial organization and techniques through state patronage and privilege. To make the transformation from niche traders to global players, the Arabs needed, but lacked, political patronage. The decline of the Arab trading diaspora was also affected by the decline of Aden after the communist takeover of South Yemen in 1967.
In spite of these secular reversals, in contemporary Malaysia, Singapore, and Indonesia, there remain significant groups of Arab capitalists, such as the Malaysian Bukhari Group.
Brown, R. A. 2009. ‘The Decline of Arab Capitalism in Southeast Asia’. In Ahmed Ibrahim Abushouk and Hassan Ahmed Ibrahim (eds.). The Hadhrami Diaspora in Southeast Asia: Identity Maintenance Or Assimilation? Brill: Leiden, pp.109-134.
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Freitag, U. 2005. ‘Indian Ocean Migrants and State Formation in Hadhramaut. Reforming the Homeland’. Archiv Orientalni, Vol. 73. No. 4, pp. 516-519.
Mandal, K. S. 2017. Becoming Arab: Creole Histories and Modern Identity in the Malay World. Asian Connections Series of Cambridge University Press.
Nathan, J.E. 1922.The Census of British Malaya (the Straits Settlements, Federated Malay States and Protected States of Johore, Kedah, Perlis, Kelantan, Trengganu and Brunei), 1921. London: Waterlow & Sons Limited.
1 In 1885, an estimated 25 per cent of Singapore’s real estate was in the hands of Arabs, and even by the 1930s, Alsagoff, Alkaff, and Aljunied were still highly visible in property ownership.
2 Aden offered critical trade routes in produce, financial services, shipping, insurance, and revenue-farming activities through partnerships and joint-stock corporations, sustained by abundant international capital flows.
3 The Europeans’ superior technology, organization, and capital were creating global networks linking the Netherlands East Indies to the Pacific, Australia and North America.
4 Mudaraba is a partnership in profit in which one partner provides capital and the other provides labour and business expertise. Musharaka is an agreement between two or more partners to combine their assets, services, obligations or liabilities for the purpose of making a profit. (Investment and Finance: https://www.investment-and-finance.net/islamic-finance/tutorials/difference-between-mudaraba-and-musharaka.html).
5 A comprador is a person engaged by a foreign establishment to act as an agent as intermediary in investment and trade.
6 Political instability complicated the application of inheritance laws and wealth distribution.
