Month: February 2018

Background

In the early phase of the rubber industry in early 1900s, investors and speculators floated companies, which owned rubber estates or rubber lands in Malaya, on the London Stock Exchange. Their estates in major states like Selangor and Negri Sembilan had English-sounding names. Some of the English-sounding names included:

1. Aranlife
2. Balgownie
3. Beaumont
4. Blackwater
5. Braemer
6. Broome
7. Brown Comet
8. Caledonian
9. Carey Island
10. Castlefield
11. Coalfields
12. Cullerlie
13. Colwall
14. Devon
15. Didsbury
16. Easrnor
17. Ebor
18. Edinburgh
19. Effingham
20. Emerald
21. Galloway
22. Glenmarie
23. Golconda
24. Golden Hope
25. Haron
26. Harfenden
27. Hawthornden
28. Haytor
29. Highland & Lowlands
30. Holmwood
31. Inch Kenneth
32. Kent
33. Killinghall
34. Lambourne
35. Ledbury
36. Lunderston
37. Madingley
38. Merton
39. Midlands
40. Monmouth
41. New Amherst
42. Newbury
43. North hammock
44. Paradise
45. Pilmoor
46. Reading
47. St Andrew’s
48. Seafield
49. Seaport
50. Sedgeley
51. Shelford
52. Sione
53. Strathmore
54. Strathnairlie
55. Tremelbye
56. Vallambrosa
57. Wardieburn
58. Waterfall
59. West Country

 

We remember many of names existed until in the 1970s, while other estates were absorbed by larger companies. With a shipping travel time of about 40 days between London and Singapore in early 1900s, the owners of the rubber estates in London would need local companies or local managers to oversee their rubber estates in Malaya.

Enter the Agency Houses

The early rubber planters used the fund, raised through the flotation of public companies on the London Stock Exchange, to develop their rubber estates. However, the costs involved in opening up new rubber plantation on a scale dictated by demand lay well beyond the means of almost all rubber planters. In addition, the rubber planters had to wait for at least five years before the rubber trees could be tapped for latex.

Those early rubber planters had to seek capital from other sources, namely the established merchant houses based in Singapore and Penang, which have been operating since 1800s. The established merchant houses had the right contacts on the local and overseas financial market. It also involved experiences of business organizations and management techniques, of which most planters were woefully lacking, and the know-how for shipping and marketing rubber on the London market.

The big merchant houses which started in early 1800s, eventually dominated the rubber industry which came to be known as agency houses. By the end of the second decade of twentieth century, the agency houses had established itself in a dominating position in the rubber plantation industry and later in the oil palm industry.  However, it took a generation to consolidate their position. During this period, the early rubber planters made it to the boardroom of rubber companies which were listed on the London Stock Exchange and the rubber speculators from the City of London itself died off and were replaced by the nominees of the agency houses.

 

The major agency houses that existed in 1960s included the following:

Agency Houses	No. of Companies	Number of Estates	Planted Areas (acres)
Harrison Crosfield	42	111	231,180
Guthrie	22	39	182,800
Boustead-Buttery	37	58	121,870
REA-Cumberbatch	37	55	97,560
T. Barlow	19	42	102,440
Sime Darby	23	30	73,900
Oriental Estates	14	19	55,140
Plantation Agencies	10	29	48,040
Whittal	22	28	45,210
Harper Gilfillan	16	18	35,560
Ethelburga Agencies	1	9	27,860
J Warren	16	21	26,070
SOCFIN	6	10	62,150
East Asiatic	4	4	21,100
Unitac	7	12	20,260
Other Agencies	5	7	21,040

Source: Zorn Leigh Hunt, Manual of Rubber Planting Companies, 1960, and Strait Times Directory, 1962. Quoted in Fryer (1964)

There were several differences between the pattern of interests of the two largest agency houses, Harrison Crosfield and Guthrie. The first was by far the larger. Guthrie, however, appeared a much more specialized organization: it controlled relatively few companies and fewer estates than smaller rivals. The properties under its management, however, were of very large size, including both the largest rubber and oil palm estate in Malaysia. Guthrie had also a leading position in the cultivation of oil palm.

By the 1980s, the agency houses were bought over by Malaysian interests Several names such as   Sime Darby, East Asiatic and Boustead  are still operating under the new Malaysian owners until today.

As a business historian, we appreciate and value the contribution of individuals who managed these agency houses and created a plantation industry from the jungles of Malaya in the early 1900s.

Our thanks to Mr. Lampard, Mr. T. Barlow, Mr. Boustead Brothers, Sir John Hay, Mr. Money, Sir J. Anderson and others.

Reference:

1996. J. M. Tate. The RGA History of the Plantation Industry in the Peninsular Malaysia. Oxford University Press, Kuala Lumpur, 1996.

Introduction

Legend had it that four seed s of African Elaeis guineensis  brought over by the Dutch into Indonesia in 1848 and planted in Bogor, Indonesia, laid the foundation for the palm industry in Malaysia and Indonesia. The two countries now produce more than eighty per cent of palm oil in the world.

The earliest record of four seedlings showed two originated from Burdoun (Reunion) or Mauritius and two from Amsterdam. The Government of Holland, who ruled Indonesia, actively promoted the usefulness of the oil palm tree and established experimental plots at Banjar Mas in Java and Palembang in Sumatra, Indonesia. It took another fifty years before an oil palm plantation was established.

The lack of enthusiasm of local authorities of Java and the doubts of planters both about the profitability and the milling methods to be employed held back the development of the oil palm industry. The technology for processing palm oil was finally invented in the early 1900s. At that time, oil palm had to compete with rubber, which was experiencing near-fever demand to make tires for cars.

The foundation of the oil plantation industry is generally attributed to one M. Adrien Hallet, a Belgian with some knowledge of oil palm in Africa. He planted oil palms of Deli origin in 1911 on a large commercial oil palm plantation in Sumatra, Indonesia. Hallet recognized the avenue palm trees growing in Deli, near Medan, Indonesia,  were more productive than the palm trees in Africa and also had superior fruit composition. Within three years, 2,600 hectares of oil palm trees were planted. However, the growing of oil palm trees stagnated during the First World War.

In the meantime, another planter, M.H. Fauconnier, a Frenchman, who had been associated with Hallet, planted oil palm trees in neighbouring Malaya during 1911 and 1912 at Rantau Panjang, Kuala Selangor, Selangor. The oil palms were in full bearing by 1917 and in that year the first seedling were planted on an area later to be known as Tennamaram Estate.  When we visited the estate, the first oil palm trees in Malaya were no longer there as palm oil trees grow for about thirty years.  Nevertheless, the progeny of these early oil palm trees built the foundation of the globally important palm oil industry.

 

 

Other Planters Took Notice   

The second commercial oil palm plantation was established by Messr. Guthrie at Sungai Buloh, near Kuala Lumpur, which was known as Elmina Estate. The first palm oil processing mill was established by Sime Darby in 1925 at the Tennamaram Estate, which extracted crude palm oil from oil palm fruits.  Over the years, due to the growing population of Kuala Lumpur, Elmina Estate became a housing area, and nearby the largest prison complex in Malaysia.

In the period when rubber dominated the agriculture sector in Malaya, a few planters with an eye to overseas markets began growing the oil palm. Although palm oil was used in the manufacture of soaps, margarine, vegetable oils and grease, there was little progress in the industry. After the slump in rubber prices after the First World War, rubber planters were forced to search for alternative crops.  No large-scale development occurred until 1924, when three rubber companies in the Guthrie group formed Oil Palm Malaya Ltd. The example was followed by other planters. Because of the need for capital and special expertise, especially in processing of oil palm, the industry was confined to large plantations, using the then advantage of existing rubber industry infrastructure. In addition, the oil palm, which in Africa grew naturally in riverine forests or freshwater swamps, flourished in Malaya’s tropical climate. Without pronounced dry season, Malaya was a place where an oil palm tree could be planted throughout the year..

Following table highlights the key events in the palm oil industry

Date	Events	Impact
1875	Oil palm was introduced to Malaya as ornamental plants	The beginning of the oil palm industry
1903	First trial on planting oil palm in Batu Tiga, Selangor, by Malayan Department of Agriculture	The first agriculture research on oil palm in Malaya
1910	First commercial plantation of oil palm started in Nigeria	The start of oil palm plantation for export of crude palm oil
1911	First large-scale planting of oil palm by a Belgian company in Sumatra, Indonesia	The start of oil palm plantation in Southeast Asia
1917	First large plantings Malaya at Tennamaram Estate and Elmina Estate	The start of the commercial palm oil plantation Malaya
1953	Market pool system established by Malayan palm oil producers. Previously, palm oil was exported in drums.	The development of markets for Malayan palm by industry players to reduce shipping costs
1956	Establishment of FELDA, one of the largest palm companies in the world.	A Malayan government agency responsible to develop rubber and oil palm plantations.
1961	FELDA planted oil palm on a 350-hectare plot	This was followed by rapid expansion in areas planted with oil palm
1966	Malaysia (independent Malaya) overtook Nigeria as the world’s leading exporter of palm oil	Malaysia gained leadership in palm oil industry by pioneering many industry innovations
1972	Four palm oil refineries started operations	Start of processing industry to produce palm oil products for export markets
1979	Establishment of Palm Oil Research Institute of Malaysia (PORIM), now known as Malaysia Palm Oil Board	Start of a research institute specializing in palm oil industry
1980	Establishment of Kuala Lumpur Commodity Exchange	The exchange facilitates the trade in palm oil products
1981	Acquisition of Guthrie by Permodalan Nasional Bhd (PNB), a Malaysian government-owned investment company	The largest Brutish-owned plantation company was acquired by Malaysian interests
1981	Introduction of weevils, an insect from Cameroon, Africa, to pollinate oil palm trees	This new technique eliminates manual workers to pollinate oil palm trees. It increases the productivity of oil palm to bear fruits
1999	Guthrie established the first oil palm estate in Indonesia	The first purchase of a large piece of land in Indonesia by a Malaysian company
2000	Acquisition of a large listed plantation company in Indonesia by Guthrie	This expanded the plantation land owned by Malaysian companies.
2008	Mergers of three palm oil companies owned by PNB	Created the largest listed palm oil company in the world with more than 500,000 hectares. As a result, Guthrie ceased as a company.
Now	Indonesia is the largest producer of palm oil in the world	The country has more areas than Malaysia suitable for oil palm plantations

Source:  Dato’ Anuar Md Nor, The palm oil multinationals from Malaysia. Lambert Academic Publishing , 2015.

 

Continue in Part 2