International management in a free-standing company: The Penang Sugar Estates, Ltd., and the Malayan Sugar Industry, 1851-1914

Business History Review

Volumn 81, Issue 1, 2007, Pages 27-57

  Lees, Lynn Hollen ^a,b  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

^b Joseph Lauaer Institute of Management Ana International Studies   (United States)

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EID: 34250803779     PISSN: 00076805     EISSN: None     Source Type: Journal    
DOI: 10.1017/s0007680500036242     Document Type: Review

References (104)

1. The history of the firm and the associated activities of its owners are recorded meticulously in company and family papers. The firms' letters from London and the answers from Penang are held by the American Philosophical Society (APS) in Philadelphia, in the British Library of Political and Economic Science (BLPES) at the London School of Economics, the Cumbria County Record Office (CRO) in Whitehaven, U.K., the West Yorkshire Archive (WYA) in Leeds, the Buckinghamshire County Record Office (BRO) in Aylesbury, and the archive of the National University of Singapore (NUS). Family papers relating to the business activities of Edward Horsman, John William Ramsden, and John Frecheville Ramsden are held by the WYA, the BRO, and by the Gordon-Duff-Pennington family at Muncaster Castle in Ravenglass, Cumberland. I want to thank Phylida Gordon-Duff-Pennington for allowing me to see the Ramsden papers at Muncaster Castle, as well as the very helpful archivists on three continents who have helped me locate these widely scattered materials.
2. P. J. Drake, "The Economic Development of British Malaya to 1914: An Essay in Historiography with Some Questions for Historians," Journal of Southeast Asian Studies 10, no. 2 (1979): 276;
3. Noel Doeerr, The History of Sugar (London, 1950), 2: 531;
4. James C. Jackson, Planters and Speculators: Chinese and European Agricultural Enterprise in Malaya, 1786igai (Kuala Lumpur, 1968), 172-75.
5. John H. Drabble, An Economic History of Malaysia, 1800-1914 (New York, 2000), 53-54.
6. "Penang Sugar Estates Company, Ltd.," 8X31/2235/1067, 1, 5, 46, 53; "Penang Rubber Estates Company, Ltd.," 6X21464/129040; 8X31/3723/165712,61,62, National Archives, Kew.
7. The Colonial Directory of the Straits Settlements for 1875 (Singapore, 1875), 13-14;
8. The Singapore and Straits Directory for 1904 (Singapore, 1904), 224-25, 488-89.
9. "Travel and Colonization: A Five Years' Sojourn in Province Wellesley," The Field, the Country Gentleman's Newspaper, 3 July 1880,39;
10. Tan Kim Hong, "Chinese Sugar Planting and Social Mobility in Province Wellesley," Malaysia in History 24 (1981);
11. D. J. M. Tate, The R.G.A. History of the Plantation Industry in the Malay Peninsula (Kuala Lumpur, 1996), 122-24.
12. Their production of 5,500 tons of sugar can be compared with the average export level of 37,500 tons per year around 1900 for the Malay peninsula as a whole. I estimate their landholdings around 1900 to have constituted about 7 percent of all the land in Perak and Province Wellesley alienated for sugar production. See Tate, The R.G.A., 126.
13. T. A. B. Corley, "The Free-Standing Company in Theory and Practice," in The FreeStanding Company in the World Economy, 1830-1996, eds. Mira Wilkins and Harm Schröter (Oxford, 1998), 137, 139.
14. Mira Wilkins, "The Free Standing Company Revisited," in Wilkins and Schröter, The Free-Standing Company, 26.
15. Ibid., 8; Mira Wilkins, "The Free-Standing Company, 1870-1914," Economic History Review, 2nd ser., 41 (May 1988): 259-82.
16. Geoffrey Jones, British Multinational Banking, 1830-1990 (Oxford, 1993);
17. Stanley D. Chapman, Merchant Enterprise in Britain (Cambridge, 1992);
18. Mark Casson, "An Economic Theory of the Free-Standing Company," in Wilkins and Schröter, The Free-Standing Company, 99-128.
19. "Penang Sugar Estates Company, Ltd.," 8X31/2235/1067, 1, 5, 46,53; "Penang Rubber Estates Company, Ltd.," 8721464/129040; 8X31/372/82/165712, 61, 62, National Archives, Kew.
20. British control of the Malay peninsula began with bases in Penang (1786), Malacca (1795 and 1824), and Singapore (1819), which joined to become the Straits Settlements in 1826. British officials became advisors to the Perak state in 1874, soon moving into Selangor, Pahang, and Negri Sembilan, which became the Federated Malay States in 1896.
21. Investment in West Indian sugar production was a common and lucrative investment for Members of Parliament during the late eighteenth century. See Alexandra Franklin, "Enterprise and Advantage: The West India Interest in Britain, 1774-1840" (Ph.D. diss., University of Pennsylvania, 1992);
22. Jackson, Planters, 142-44.
23. Khaw Boo Aun was a leader of the Teochew community in Penang and north Perak, and he became a justice of the peace, was appointed to the Penang Advisory Board, and served on the Perak State Council, acting as an intermediary between colonial authorities and the local Chinese. No European held local power in as many forms and settings. Tate, The R.G.A., 121, 128;
24. Tan, 31. C. S. Wong. A Gallery of Chinese Kapitans (Singapore, 1963), 81.
25. See also Jennifer Cushman, Family and State: The Formation of a Sino-Thai Tin-mining Dynasty, 1797-1932 (Singapore, 1991).
26. "Edward Horsman, "Accounts, 1853-54; 1868," D/RA/A/SE/25, BRO; "Journal," Ramsden papers, D/Pen/Malaya/2/1, CRO. John William Ramsden, "Letter to Messrs. Matheson and Co, 7 June 1876," and "Letter from Penang Sugar Estates to Messrs. Matheson and Co, 7 June 1876," Pen/Malaya/Film 5627, reel i, NUS.
27. The firm Boustead & Co. was founded in Singapore by the merchant Edward Boustead in 1830. The firm also had a Fenang office that offered marketing and accounting services to local plantations. Boustead & Co. sold most of the refined sugar produced by the FSE to merchants throughout Asia, using its network of regional contacts to find the best prices. It continued after 1913 as agent for the Penang Rubber Estates. See Tate, The R.G.A., 247,
28. and Geoffrey Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (Oxford, 2000), 33.
29. In 1899, the Assam Company, the ninth largest tea company in India, had a sterling capitalization of £200,000. See Stanley Chapman, "British Free-Standing Companies and Investment Groups in India and the Far East," in Wilkins and Schröter, The Free-Standing Company, 213.
30. John William Ramsden, "Penang Estate Financial Accounts, 1876-1882," D/Pen/Malaya/ 1/8; see also D/Pen/Malaya 1/6/1882, CRO; "Yearly Accounts, 1861-1895/96," Ramsden collections 8/2, box 45, WYA, Leeds.
31. Jean-Francois Hennart, "Transaction Cost Theory and the Free-Standing Firm," in Wilkins and Schröter, The Free-Standing Company, 8-80.
32. BT 31/191391/106499, National Archive, Kew; "Letters P. Taylor to J. Turner," 19 Feb. 1909, 26 Aug. 1909,19 Nov. 1909, D/Pen/Malaya 2/18/1909, CRO.
33. "In 1914, the PSE controlled the Caledonia, Victoria, Byram, Krian, Jawi, Changkat, TransKrian, Golden Grove, Strathmashie, Sabrang, and Sungei Separap estates; its sister firms were the Straits Rubber Co., which managed the Gedong and Nova Scotia plantations, and the Rubana Rubber Co., which ran the Rubana Estate. Singapore and Straits Directory for 1914 (Singapore, 1914), 758,760,765-66.
34. Adam W. Kirkaldy, British Shipping: Its History, Organization, and Importance (New York, 1970; reprint of 1914 ed.), 127-28, 132-36, 600.
35. See PSE, "Letters and Papers," 4 June 1878, vol. 2:1-2; "Report for November, 1877," vol. 3: 241-44, 664.1 P 19, APS; "Letter J. Turner to M. Arnold," 6 May 1899, vol. 25., Coll. Misc. 373, BLPES.
36. PSE, "Letters and Papers," 26 Jan. 1883, vol. 9: 46; 22 Mar. 1883, vol. 9: 61, 65-66; 4 May 1883, vol. 9:77-78; 1 June 1883, vol. 9: 85,664.1 P 19, APS.
37. See Jones, Merchants to Multinationals, chs. 9 and 10;
38. Chapman, Merchant Enterprise, ch. 4.
39. Wilkins, "The Free-Standing Company," 279.
40. PSE, "Letters and Papers," "Letter J. Ray to J. Bowes," 13 Mar. 1877, vol. 2: 83-86, 664.1 P19 APS.
41. See Sir John William Ramsden, "Letters from John W. Ramsden," 9 May 1876, 7 June 1876, 6 July 1876, 29 July 1876, HF 485, "Papers relating to the sugar and rubber companies in Malaya," microfilm reel 5627, NUS; Sir John William Ramsden, "Annual Abstract of Accounts, 1860-1896," RA-4S, WYA, Leeds.
42. Pierre Van der Eng, "The Silver Standard and Asia's Integration into the World Economy, 1850-1914," Working Paper No. 175, Economic History of Southeast Asia Project, Research School of Pacific Studies, Australian National University (Aug. 1993): 2-3, 11. The Straits dollar also depreciated against the U.S. dollar as its rate of exchange per U.S. dollar declined from 0.88 in 1870 to 2.33 in 1903, and then rose to 1.76 in 1914. See Van der Eng, "The Silver Standard," 27-28; I am grateful to W. G. Huff for this reference.
43. A best estimate of the annual rate of return on Ramsden's initial purchase price, assuming a 5 percent cost of capital rate and using a published valuation of the company in 1912, is 2.25 percent. This calculation includes an estimate of depreciation but does not include the capital Ramsden continued to pour into the firm. I am indebted to Jason Berry for this calculation and for his expert help in examining the company's accounts over the period 18751912.
44. Lance Davis and Robert Huttenback have calculated that the unweighted rate of return to agriculture and extractive industries during the 18708 was 0.9 percent in the U.K. and 19.6 percent in the Empire; the gap diminished during the 188os. Lance E. Davis and Robert A. Huttenback, Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860-1912 (Cambridge, 1986), 17.
45. Land rents declined in Scotland by 18.5 percent and in pastoral regions of northwest England by 12 percent between 1875 and 1895. Ramsden has to have experienced sharp declines in the rate of return on his British estates during this period. See David Cannadine, The Decline and Fall of the British Aristocracy (New York, 1992), 92.
46. Sidney Mintz, Sweetness and Power: The Place of Sugar in Modern History (New York, 1985), 69.
47. PSE, "Letters and Papers," "Letter J. Ray to A. Morrison," 22 Dec. 1876, 27 Apr. 1882, vol. 1: 51-56; "Letter A. Morrison to J. Ray," 27 Apr. 1882, 195; "Letter A. Morrison to J. Ray," 18 Jan. 1883, vol. 9:174-75, 664.1 P19, APS.
48. See "Maps and Plans," D/Pen/Malaya/is, CRO; PSE, "Letters and Papers," "Letter A. Morrison to J. Ray," 18 Nov. 1876, vol. 2:64-65; "Letter A. Morrison to J. Ray," 18 Jan. 1883, vol. 9:174-75, 664.1 P19 APS.
49. PSE, "Letters and Papers," "Letter J. Ray to J. E. Bowes," 13 Mar. 1877, vol. 1: 83-86, 664.1 P19, APS.
50. See, for example, PSE, "Grinding Returns," Aug. i884-July 1885, vol. 11: 486-506; "Grinding Returns," Jan. 1888-July 1888, vol. 14: 446-61; "Mail Reports, Caledonia," vol. 20: 204-10, 664.1 P19, APS.
51. PSE, "Letters and Papers," "Letter A. Morrison to J. Ray," 12 Aug. 1882, vol. 9: 98; "Letter J. Turner to M. Arnold," 15 May 1895, vol. 21:108; "Letter M. Arnold to J. Turner," 28 June 1895, vol. 21: 50-54,664.1 P19, APS.
52. PSE, "Letters and Papers," "Letter J. Arnold to J. Turner," 21 Aug. 1896, vol. 23: 4-5; "Letter Golden Grove Plantation to M. Sargant," 27 Nov. 1896, vol. 23: 21; "Letter M. Sargant to J. Arnold," 20 Jan. 1897, vol. 23:102; "Letter Henry Ridley to M. Sargant," 22 Feb. 1897, vol. 24:107-11, 664.1 P19, APS.
53. James C. Scott, Seeing Like a State (New Haven, 1998), 268-69.
54. "A Five Years' Sojourn in Province Wellesley," The Field, the Country Gentleman's Newspaper, 3 July 1880, 39.
55. PSE, "Letters and Papers," "Letter A. Morrison to J. Ray," 10 Mar. 1877, vol. 3:130-31, 664.1 P19, APS.
56. PSE, "Letters and Papers," "Letter J. McDougall to J. Ray," 2 Sept. 1886, vol. 13, pt. 1: 266-68,664.1 Pig, APS.
57. PSE, "Letters and Papers," "Letter J. Ray to J. McDougall," 4 Sept. 1885, vol. 12:159, 664.1 P19, APS.
58. PSE, "Letters and Papers," "Letter E. Underdown to J. McDougall," 24 Dec. 1886, vol. 12: 391-93, 664.1 P19 APS.
59. Vijay Gurbaxani and Seungjin Wang, "The Impact of Information Systems on Organizations and Markets," Communications of the Association for Computing Machinery 34, no. 1 (1991): 61-63.
60. After decades of experimenting with new cane varieties and different fertilizers, PSE yields were approximately the same as those of the Chinese farmers to whom they subcontracted individual fields. Access to global information on sugar-cane production was of marginal help. Tate, 118-19; PSE, "Letters and Papers," "Mail Returns," vols. 24-26, 1897-1900, Misc. 373, BLPES.
61. On the strength of the rubber-tire industry, demand for rubber in Europe and in the United States doubled between 1900 and 1910 and then tripled in the next decade. Prices rose almost steadily from 1893 to 1910, increasing by over 300 percent. See J. H. Drabble, Rubber in Malaya, 1876-1922: The Genesis of an Industry (Kuala Lumpur, 1973), 212; and Drake, "The Economic Development of British Malaya," 279.
62. Drabble, Rubber, 2-12.
63. I owe this phrase to David Ludden. See David Ludden, The New Cambridge History of India. Vol. 4: An Agrarian History of South Asia (Cambridge, 1999).
64. Richard Drayton, Nature's Government: Imperial Britain and the "Improvement" of the World (New Haven, 2000).
65. Drabble, Economic History, 64;
66. Tate, The R.G.A., 294;
67. Drake, "Economic Development," 274-75.
68. Walton Look Lai, Indentured Labor, Caribbean Sugar: Chinese and Indian Migrants to the British West Indies, 1838-1918 (Baltimore, 1993);
69. Marina Carter, Servants, Sirdars, and Settlers: Indians in Mauritius, 1834-1874 (Delhi, 1995);
70. David Northrop, Indentured Labor in the Age of Imperialism, 1834-1922 (Cambridge, 1995).
71. Isabella Bird quoted in R. N. Jackson, Immigrant Labour and the Development of Malaya, 1786-1920 (Kuala Lumpur, 1961), 93-94.
72. See also Drake, "Economic Development," 278;
73. P. Ramasamy, Plantation Labour, Unions, Capital, and the State in Peninsular Malaysia (Kuala Lumpur, 1994), 19.
74. K. S. Sadhu, Indians in Malaya: Some Aspects of their Immigration and Settlement (Cambridge, 1969), 304-10;
75. Drabble, Economic History, 67.
76. PSE, "Letters and Papers," "Fortnightly Returns, 1888-1889," vol. 15: 335, 345, 385, 664.1 Pig, APS. See Sir John William Ramsden, "Quarterly Reports from the Estates: General report from W. Duncan," 23 Sept. 1910, 10, "Papers Relating to the Sugar and Rubber Companies in Malaya," microfilm 5633, NUS.
77. Quoted in Jackson, Immigrant Labour, 113.
78. PSE, "Letters and Papers," "Letter Mr. Low to J. Ray," 23 Jan. 1889, vol. 25:195; "Letter Mr. Low to J. Ray," 5 Mar. 1889, vol. 15: 209-10, 664.1 P19, APS. See also PSE, "Fortnightly Mail Reports: Caledonia Estate and Byram Estates," vol. 17: 340, 368, 664.1 P19, APS.
79. PSE, "Letters and Papers," "Letter J. McDougall to J. Ray," 9 Mar. 1885, vol. 11: 331-34, 664.1 P19, APS.
80. The PSE Estates used two firms, Ganapathy Pillay & Co. and Adamson MacTaggart & Co. Report on the State of Labour, 1891, Evidence, 85;
81. "Manager's Report, J. MacDougall," 24 June 1885, PSE "Letters and Papers," vol. 11: 516-19.664.1 P19, APS.
82. W. L. Blythe, "Historical Sketch of Chinese Labour in Malaya," Journal of the Malayan Branch of the Royal Asiatic Society 20, pt. 1 (1947): 64-114;
83. Report of the Commissioners Appointed to Enquire into the State of Labour in the Straits Settlements and Protected Native States (Singapore, 1891), 9-14.
84. Jackson, 46-56; PSE, "Letters and Papers," "Letter J. Turner to J. Arnold," 19 Feb. 1890, vol. 16: 243,664.1 P19, APS.
85. J. H. Drabble calculates that, in 1886, indentured Indian sugar workers' wages were 14 cents a day, those of free Indian laborers were 18 to 20 cents a day, while Javanese earned 24 cents a day on the estates; Drabble, Economic History, 66.
86. Hugh Clifford, "Life in the Malay Peninsula," in Honorable Intentions, ed. Paul Kratoska (Singapore, 1983), 248.
87. Tate, The R.G.A., 168, 284, 290.
88. PSE "Letters and Papers," "Letter J. Turner to J. Arnold," 25 Dec. 1895, vol. 22: 102, 664.1 P19, APS.
89. "Notes of Information given me [John W. Ramsden] by Mr, Turner at Aardverikie on Friday, July 27th, 1894," D/RA/A/3E/28/29/; "Notes of Information given by Mr. J. W. Turner at Aardverikie, October 30th, 1896," D/RA/A/3E/28/28, BRO.
90. Not until the mid-1930s did major conflicts and unionization reshape local labor relations. See Ramasamy, Plantation Labour.
91. PSE, "Letters and Papers," "Letter J. Turner to J. Arnold," 8 Aug. 1895, vol. 22; 76; "Letter J. Turner to J. Arnold," 5 Feb. 1896, vol. 22:107, 664.1 P19, APS.
92. PSE, "Letters to and from London," "Letter J. Sargant to J. Arnold," 16 June 1905, D/ Pen/Malaya/2/18, CRO.
93. Sir John William Ramsden, "Letters from Penang, 1905-1910: Alex Crawford to John Turner," 19 May 1907, 21 June 1907, "Papers Relating to the Sugar and Rubber Companies in Malaya," microfilm NUS film R 0011898.
94. Tate, The R.G.A. 126-27;
95. Jackson, Planters, 170-74.
96. See also Paul Kratoska, "Rice Cultivation and the Ethnic Division of Labor in British Malaya," Comparative Studies in Society and History 24, no. 2 (1982).
97. Doeerr, Sugar, 2: 505; J. H. Galloway, The Sugar Cane Industry: An Historical Geography from its Origins to 1914 (Cambridge, 1989).
98. J. H. Drabble argues that sugar production in Malaya was profitable because wage rates were kept low through the system of indentured labor and favorable tax structures. See Economic History, 30, 66.
99. The FMS levied rubber duties of 2 1/2 percent, ad valorem. See Drabble, Rubber, 6, 24.
100. Government-supported marketing quotas during the later 1920s and 1930s helped to shield larger producers, like the PSE, from sharp price declines. See Drabble, Rubber, 174-84;
101. Tate, TheR.G.A., 345-48, 378-82.
102. Drabble, Economic History, 36-38, 67;
103. Drabble, Rubber, 205.
104. Casson, "Economic Theory," in Wilkins and Schröter, The Free-Standing Company, 127.