British Business and the Uncertainties of Early Independence in Indonesia

Abstract

British private investors were not inclined to view the leaders of newly independent Indonesia with much confidence. In 1949, when the transfer of sovereignty from the Netherlands to the Republic of Indonesia was imminent, the chairman of the United Serdang (Sumatra) Rubber Plantations disclosed the following opinion to the firm's shareholders at a gathering in London's Great Tower Street: “The Republican leaders are mainly ambitious men, whose records are well known, striving for personal aggrandizement. The measure of their interest in the welfare of the country is to be gauged by their policy of wanton destruction of life and physical assets, such as estate factories and ancillary buildings, which are essential for the restoration of the economy of the country once the political problem has been settled.” This article is about how a British enterprise dealt with the significant uncertainties prevailing in the business environment of Indonesia during the early independence period, in particular the 1950s.The economic situation in newly independent Indonesia was a peculiar one. As a major exporter of primary products in high demand such as oil and rubber, prospects were generally bright for the Indonesian economy during and after the Korean War. Just as under colonialism, a modern, large-scale sector accounting for almost 25 per cent of GDP (gross domestic product) was still dominated by Dutch firms and British and American multinationals. Eight large Dutch trading companies handled 60 per cent of consumer goods imports. Nevertheless, the business climate had changed dramatically for foreign firms operating in Indonesia. The 1950s saw a gradual shift away from moderate policy-makers towards an increasingly vocal economic nationalism. The former were acutely aware of the country's dependence on foreign capital and know-how, whereas the latter relentlessly pushed for full decolonisation, that is not only in political but in economic terms. Nationalist sentiments gained the upper hand during the first cabinet of Ali Sastroamidjojo (July 1953–July 1955), culminating with the takeover of virtually all remaining Dutch-owned enterprises in Indonesia from December 1957 onwards, eventually followed by formal nationalisation in 1959. Although economic nationalism in the 1950s primarily targeted Dutch enterprises, British foreign firms were affected as well. At a later stage, in the context of the Indonesian military confrontation with Malaysia (1963–6), they were also seized, albeit not nationalised.