Sarawak's economy from the late 19th century to the mid-20th century

Professor Ooi Keat Gin, Asia Pacific Research Unit, School of Humanities, Universiti Sains Malaysia
Dr Vincent Lim Choon Seng, HRH Sultan Nazrin Shah’s Economic History of Malaya Project

Sarawak is located on the north-western side of the island of Borneo, and is separated from the Malay peninsula by the South China Sea. While the two territories are similar in land area, Sarawak was (and remains) much more sparsely populated. According to its 1947 population census, Sarawak’s population was less than half a million, with the peninsula’s some 10 times more at almost 5 million. Its population diversity differed from that in the peninsula, with the three largest communities that year Ibans (34 per cent), Malay and Melanaus (26 per cent) and Chinese (25 per cent), with the rest almost entirely other indigenous communities (Noakes, 1948).¹

From as far back as the early 18th century, northern Borneo had become a sphere of British influence—the rest of Borneo was under Dutch influence. Sarawak was governed by three generations of the Brooke family over 1841–1946, starting from James Brooke as the first Rajah and absolute monarch. In 1888, Sarawak became a British protectorate, but remained an independent sovereign state. Periodically, the British navy was requested by the Brookes to assist in suppressing piracy and to settle occasional territorial disputes (Azlan Tajuddin, 2012).

From December 1941, Japanese forces occupied Sarawak for three and a half years, bringing an end to the Brooke family’s rule. After liberation, the territory was placed under the British Military Administration until it became a British Crown Colony in 1946. In 1963 Sarawak, with North Borneo (Sabah) and Singapore, joined the Federation of Malaya to form the Federation of Malaysia (although Singapore seceded in 1965).

Sarawak's economy from the late 19th century to the mid-20th century

Sarawak’s domestic economic activities developed along the west coast and riverine towns (Map 1). During this period, its economy was based entirely on agriculture and mineral extraction, and was dependent on the exports of primary produce. Cash crops produced were mainly rubber, pepper and sago. The major mineral exports were antimony, coal, gold, and initially quicksilver but later petroleum (Table 1).

MAP 1: Sarawak's main economic activities in the mid-20th century

Source: Tate (1979)

The value of Sarawak’s exports at the beginning of the 20th century was about 6.7 per cent of Malaya’s, to give a rough indicator of the size of its economy, which appears to have grown in tandem with that of Malaya, as 40 years later, in 1938, the share was little changed at about 7.1 per cent (Federated Malay States, 1939; Kaur, 1995; Sultan Nazrin Shah, 2017). Throughout the Brooke dynasty’s rule, Sarawak’s trade was small relative to its territorial expanse. The size of the Sarawak government’s revenue in 1900 and 1938 was, respectively, just 5.9 per cent and 6.8 per cent of that of the four Federated Malay States (Federated Malay States, 1939; Kaur, 1995). Still, between 1877 and 1946, the Sarawak government recorded only three annual current-account deficits (Hepburn, 1949).

TABLE 1: Value of Sarawak's exports and mineral production (Straits dollars)

na= not available
* Estimated oil royalty and mining rents and fees, most of the oil export in 1948 was produced in Brunei.
Source: Hepburn (1949)

The main destination for Sarawak’s exports was Singapore, where goods were sorted, graded and bulked for re-export. Of the major trade and sea lanes, Sarawak tended to be bypassed in favour of, notably, the Malay peninsula’s west coast states. The Kuching–Singapore shipping link provided all-important access to international markets. In 1948, excluding oil, 70 per cent of Sarawak’s imports and 75 per cent of exports passed through Singapore (Hepburn, 1949).

Radial networks of roads were built around the main towns of Kuching, Sarawak’s capital; Sibu, its main port; and Miri, the centre of its oil industry. Rivers and coastal shipping continued to serve as traditional arteries of transport and communication. The second Rajah Charles’s only railway, a 10-mile line from Kuching southwards, mainly served Chinese market gardeners in carrying their fresh produce of vegetables, chickens and eggs to Kuching’s markets. Telecommunications developed slowly, but by the late 1920s, the main outstations had telephone networks and a line to Kuching. And by the early 1930s, Kuching’s residents could listen to the British Broadcasting Corporation and, in the late 1930s, the Sarawak Broadcasting Service began tri-lingual transmission in English, Chinese and Malay.

Mineral exploitation—antimony, gold and coal

Antimony and gold were first mined by the Chinese Hakka from around the 1820s. The extractive industries favoured European and Chinese participation owing to the requirements for large capital investment, technical expertise and labour. While antimony mining diminished as the 19th century progressed, gold mining enjoyed an output boom from the 1900s to the mid-1920s, and from the early 1930s to the 1940s, mainly due to the Borneo Company Limited (BCL), one of Sarawak’s few western enterprises.

Although the production of minerals was at first dominated by Chinese, later, as the Brooke family’s position became more secure, it was monopolised by James Brooke and the BCL (Kaur, 1995). The spurt in gold output was due to the application of ‘cyanidation’, and the ore from the BCL’s Tai Parit mine was the world’s first to undergo this process. Sarawak’s gold exports surged from 984 ounces in 1898 to 24,192 ounces in 1899 (Jackson, 1968). Gold production reached its apex in the late 1900s and mid-1910s, thereafter declining throughout the 1920s with only a brief recovery from the mid-1930s (Lucas, 1949).

Coal created high expectations and persuaded the parsimonious Rajah Charles to invest in two mining operations, at Simunjan and Brooketon. But the commercial promise was not realised (Ooi, 1997). Over its six decades of operation, the Simunjan colliery’s coal mainly fed domestic consumption—mining operations, government steamers and the Kuching railway line—with a small share exported to Singapore. Between 1881 and 1899, in the operation of the mines, revenue exceeded expenditure, but thereafter, losses were incurred until their closure in 1931 during the Great Depression (Ooi, 1997). Possibly worse, the rich coalfields at Silantek in the Lingga, discovered in the 1920s and early 1930s, attracted no investors despite favourable concessions, mainly because of the prohibitive costs of building suitable transport systems.

Prohibitive costs of transportation systems disincentivised prospective coal investors

Source: The National Archives of Malaysia

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Sarawak's first oil refinery in Lutong, 1914

Source: The National Archives of the UK

INF/10/288/8/003

Discovery of oil

In 1910, oil was struck at Miri Well No. 1, affectionately called the ‘Grand Old Lady’; the first shipment was in April 1913 (Hepburn, 1949). During the 1920s and 1930s, oil (with gold) brought significant income to Sarawak, accelerated development and formed the mainstay of the administrative revenue (Tate, 1979). Crude oil output peaked in 1929, followed by a steady decline. In 1929, Sarawak’s crude oil production was close to 15,000 barrels per day, against just 2,000 barrels per day in 1926. Oil revenue amounted to $11,472,193 in 1940, compared with only $377,537 in 1914 (cited in Kaur, 1995).

In 1914, Sarawak’s first oil refinery was built by Shell at Lutong, 11 kilometres north of Miri. The same year, a submarine pipeline was laid in Miri, also by Shell, which was considered an innovative breakthrough for transporting crude to sea-based tankers (Shell Malaysia, 2018). Oil was becoming a new form of energy, and was a strategic commodity located within both the British Empire and areas of British influence. In 1928, British military operations and intelligence made specific military arrangements together with local Sarawak forces to protect the Miri oilfields in the event of internal disorder or war (Archive document CO 531/21/4, 1927–1930).

Agriculture development and the rubber boom

The mainstay of Sarawak’s traditional trade was in jungle produce (such as beeswax, edible birds’ nests, gutta percha, jelutong and rattan) and sago, encouraged by the Brooke regime (Table 2 and Box 1). In 1940, the value of sago exports was close to 20 per cent of refined petroleum’s, but by 1948 the share was insignificant.

TABLE 2: Sarawak's main exports, 1870, 1940, 1948 (Straits dollars)

Source: Hepburn (1949)

Box 1: The Brooke family's intentions—do we know?

The reign of the Brooke family for more than a century undoubtedly brought substantial changes to Sarawak’s population and socio-economic structure. But views about the intentions of the Brookes differ.

During the late 19th century and early decades of the 20th century, the Brooke administration apparently envisaged a scenario in which the local indigenous population of swidden subsistence cultivators became settled farmers tilling their own land without entering large-scale commercial enterprises (Ooi, 1997). As Sarawak’s economy grew, land and migration policies were enacted by the Brookes to support locally expanding economic activities. The peasants remained as subsistence farmers with scant resources to fall back on when confronted with economic hardships, although they were generally free from indebtedness and landlessness. Still, by the 1930s, large numbers of Malay and other indigenous groups found work in the oilfields (Sarawak, 1935; Sarawak, 1952).

Another view of this period is that the Brooke family governed Sarawak for its own strategic and economic interests, and cared little about the welfare of local indigenous communities (Aeria, 2005). According to Kaur (1995), there was massive expatriation of profits from Sarawak by both the Brookes and other foreign investors. The Brooke regime gave little financial assistance to the local communities and tended to rely mainly on Christian missionaries to provide rudimentary education, medical centres and other social services. As Webster (1998) notes, the colonial office treated ‘the White Rajah’ very differently from his Malay peers. He enjoyed British military support against opponents to his rule, and ‘Sarawak state’s monopoly over mining enterprise in his territories would never have been tolerated by the British had it been implemented by a local ruler’.

Sarawak’s success story in rubber is similar to that of Malaya and other south-east Asian countries, with rubber the most valuable cash crop up to the 1940s. The first rubber seedlings were planted in Kuching in 1881, and more planting followed the early 20th century rubber price surge (Tate, 1979). Despite official discouragement, small clusters of Ibans and Chinese turned to rubber on account of its highly profitable returns from the 1910s. For example, Chinese immigrant farmers who initially came to Upper Sarawak for pepper and gambier planting, and to the Lower Rejang for rice cultivation, switched to rubber, which proved more lucrative.

However, large estate rubber plantations were not encouraged by the Brooke administration. By the late 1930s, smallholdings (areas under 100 acres) were responsible for making rubber Sarawak’s major commercial crop. Native-owned smallholdings predominated, while large Malayan-style plantations engaging foreign labour were the exception (Ooi, 1997). An interesting contrast is that smallholders were less affected by the fluctuation of rubber prices than Malaya’s heavily capitalised large estates (Tate, 1977). By 1940, the value of Sarawak’s rubber exports was more than double that of refined petroleum (see Table 2), and by 1941, out of 240,000 acres under rubber cultivation, over 95 per cent were smallholdings of less than 5 acres (Hepburn, 1949).

Beyond rubber, experimental farms focused on uncovering new plant species as viable commercial crops, including areca, coconut, coffee, pepper, gambier, oil palm, indigo, tobacco, sugarcane and wet-rice (Ooi, 1997). Between 1935 and 1937, Sarawak became the world’s largest producer of pepper (Tate, 1979). New methods, including buffalo ploughing, and new industries, such as silk production, were introduced to native farmers. In 1924, the Department of Agriculture was set up to promote self-sufficiency in domestic rice output (Ooi, 1998). Incentives were given to rice farmers through attractive land tenure terms and initial government support.

The reign of the Brooke family brought substantial changes to Sarawak's population and socio-economic structure

Source: The National Archives of Malaysia

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Timber extraction

The logging and timber industry began with the BCL going into the Lower Rejang for export to Hong Kong of rough-hewn logs, including the billian (Eusideroxylon zwageri), Borneo’s famed hardwood of the 1860s. At first, the industry grew very slowly owing to technical and logistical challenges, and only gathered pace in the early 20th century, although it was hit by a price slump on the international timber market (Ooi, 1997). By the 1920s, most of Sarawak’s sawn timber was used for local consumption, with a small amount exported to Brunei, Labuan, Singapore and Hong Kong. A decade later, the United Kingdom became a major export destination (Smythies, 1961). The 1930s saw the BCL moving timber operations to the Upper Rejang (Ooi, 1997). Despite the efforts of the BCL and of other small Chinese logging concerns, there was very limited exploitation of Sarawak’s rich timber resources before World War II, largely because of the poor transport network.

Migrant inflows

The Brooke administration welcomed Chinese settlers and migrant labourers to Sarawak to support its growing economy. It regarded Chinese effort as necessary for commercial farming, mining and trade (Ooi, 1997). In the 1820s, the Chinese population numbered between 30,000 and 50,000 (Craig, 1978). Initially they were mostly miners. Later, to support the rubber boom, new waves of Chinese migrants entered Sarawak. By the 1920s, they were recruited through Singaporean labour agents, because the British government did not encourage direct recruitment of indentured Chinese labourers from Hong Kong (Archive document CO 129/503/7, 1926–1928).

Many Chinese migrants prospered in trade and commerce. Since there were few large-scale western enterprises—a deliberate policy stance—individual Chinese traders and shopkeepers acted as a conduit between domestic consumers and Singaporean merchants and large distribution depots in Singapore. These Chinese merchants also had their business associates in up-river and coastal bazaars to whom they supplied goods and received jungle produce and rubber from them, who in turn sourced them from the indigenous communities (Hepburn, 1949; Tate, 1979). These arrangements resembled what Tate (1979) called a ‘transmission belt’ of commercial activities. Soon, Chinese merchants came to dominate Sarawak’s import-export trade, competing with European agency houses (Hepburn, 1949).²

Endnotes:

¹ Of the 4.9 million people counted in the peninsula’s 1947 census, 49 per cent were Malays, 38 per cent Chinese, 11 per cent Indians and 1 per cent ‘others’.
² In finance, Sarawak was one of the pioneers of locally incorporated banks. Kwong Lee Bank, founded by the Chinese community in Kuching in 1905, was the second local bank to be incorporated in British Malaya, North Borneo and Sarawak—the first was in Singapore (Tan, 1953). The first international bank to open a branch in Kuching, the Chartered Bank of Australia, India and China, came two decades later (Runciman, 2011).