How Penang’s Early Prominence was Lost

The early decades in the life of Prince of Wales Island did not see it living up to the expectations of its administrators, especially as a ship-building port. But as a trading station at the northern end of the Straits of Malacca, the port of Penang did succeed very well, which was what prompted the East India Company to make it its Fourth Presidency (alongside Calcutta, Bombay and Madras) in 1805.

The following abstract is an attempt to understand why Penang, despite certain successes, was surpassed by Singapore so quickly. Written in October 1929, it was first published in the Journal of the Malayan Branch of the Royal Asiatic Society (Singapore), pp. 377-414. The piece is titled “A Contribution to the early history of Prince of Wales’ Island”. The author, F.G. Stevens, dismisses several suggestions for Singapore’s quick rise at the cost of Penang, which had been proposed at the time, such as the failure of the ship-building project; the claim that Singapore was better positioned geographically for regional trade; or the assumed slow progress in the cultivation of spices in Penang. He found the reasons to be in the “unwise land policy” that was exercised, and in the “failure to provide for an adequate revenue”. The following text delves into these two factors. The full essay, as found in the Journal, goes on to discuss other relevant issues, namely Law and Order, Medical Matters, and Public Works. This remainder of Stevens’ article is scheduled for later publishing in this column.

The failure of Penang was an administrative failure.1The settlement was a dead loss to the East India Company. It was natural that the administration should shew a loss for the first twenty years; but, in spite of optimistic forecasts to the contrary, the loss continued to increase steadily during the succeeding twenty years. So it is not unnatural that in 1826 the Company was disgusted at its failure; and it is worthwhile to inquire into the reasons for that failure.

It will be found to be due in the main to two immediate causes. (1) An unwise land policy. (2) Failure to make provision for an adequate revenue. Both of these causes may be traced back to one original source, namely, the omission of the Company to provide Francis Light and his immediate successors with adequate funds and a staff adequate for the foundation of a government on sound lines.

Briefly it may be stated that the defect of the land policy was a wholesale and reckless alienation of land, the Company’s principal asset, to grantees who could not make adequate use of it; while the revenue failed because of the inability of the Government to impose and collect reasonable and necessary taxes. These conclusions are based upon the historical facts which follow.2

Light’s primary object was to attract settlers of all nationalities. But the island was almost uninhabited, and covered with dense jungle. He therefore adopted a policy of allowing settlers to occupy such land as they could contrive to clear, under promise of future title. This policy was immediately successful in attracting settlers; and the clearing and occupation of the eastern side of the island proceeded with amazing rapidity.

Light’s difficulties on landing at Penang were very great. The Company had accorded only half-hearted support to his project. It was Light himself who persuaded the Directors to found the Settlement. But for many years they remained unconvinced that Penang was the best place for their experiment; and during the whole of Light’s administration, and for some years afterward, it was a matter of constant discussion, whether Penang should be abandoned in favour of some more suitable place, such as the Andaman Islands. In consequence of this, the support accorded to Light was very niggardly. Light himself, an ex-Lieutenant of the Royal Navy, and for some years agent in Kedah of the Madras trading firm, had no experience of the art of administration. Nor had he at first any trained assistants. At the time of his death in 1794 he appears to have had an assistant, named Thomas Pigou, while a magistrate had recently arrived in the person of Mr. Manington, who assumed temporarily the duties of Superintendent pending the appointment of Light’s successor. Light’s companions on landing were a few military and naval officers and a small force of Indian troops. He was provided with a salary of one thousand rupees a month, and was ordered to practice the strictest economy, to levy no taxes and to make Penang a free port.

He had however a companion in one James Scott,3 a shrewd adventurer who had many years’ experience of trade in Kedah. Light combined the role of Superintendent with that of Scott’s partner in trade. Scott himself in a report made to Colonel Macdonald in 1796, stated that he and Light had “joined stocks” in 1787, one of the conditions of the partnership being that Mr. Light was to give perfect liberty of trade to all frequenting the port, but was calculated to, and did, secure to Scott a predominant position in the trade of the new Settlement.

Light’s primary object was to attract settlers of all nationalities. But the island was almost uninhabited, and covered with dense jungle. He therefore adopted a policy of allowing settlers to occupy such land as they could contrive to clear, under promise of future title. This policy was immediately successful in attracting settlers; and the clearing and occupation of the eastern side of the island proceeded with amazing rapidity.

Light had no land or survey staff by the aid of which to establish a proper land settlement. He was unable to issue any form of title; and even at the time of his death in 1794, after eight years of administration, very few titles had been issued, and those only in respect of a few sites close to the Tanjong itself. But after his death, in the years 1795 and 1796, a very rough survey was effected of the lands then in the occupation of the settlers, and the records of this early survey constitute the best authority for the tenure of land in those days. Between 1794 and 1800 a large number of grants in perpetuity, reserving a small quit-rent, were issued to redeem Light’s original promise.

This land policy, hastily improvised, proved disastrous to the future of the Settlement. While it is obvious that a promise of future security of tenure was necessary in order to induce settlers to incur the labour and expense of making clearings, some safeguard should have been provided to insure that only such lands would be permanently alienated as could be brought under effective cultivation. Light provided no such safeguard. He was lavish in the permission he accorded to Europeans (including, as the practice then was, the servants of the Company) to appropriate large tracts of the finest land, without reference to their ability to make effective use of them. Already in 1796 Major Macdonald, in a report to the Directors, pointed out, with his customary shrewdness and absence of grammar, that it was unfortunate that the promise of a future title had not been limited by the proviso that lands not actively cultivated within a given time would revert to the Company, and that the extent of land permitted to any individual had not been more carefully curtailed. Light himself set a bad example by appropriating several large estates in various parts of the island, in addition to a considerable area of valuable land on the north coast, not far from the Fort. Scott too, as was natural, appropriated large areas; and both Mr. Manington and Mr. Caunter possessed themselves of much larger estates than would appear to have been desirable. Mr. Caunter acquired an extensive block immediately south of the Penang River; while Mr. Manington took possession of a large estate in the Ayer Itam valley and another property in the neighbourhood of the Burmah village. Numerous other Europeans, mostly, it would appear, nomadic captains of trading-ships, took up large blocks of fertile land in the district of Telok Ayer Rajah, north of the Waterfall River. Asiatic settlers of every description appropriated such land as they could clear throughout the entire plain east of the hills.

The bad results of this imprudent policy were accentuated by two circumstances which in the condition of the Settlement, were inevitable. Many of the settlers, Europeans and Asiatic alike, were adventurers of a type not likely to settle down permanently as residents of the island. Further, the island was unhealthy, with practically no medical staff or equipment, and the medical science of  those days could not cope with malaria and the intestinal diseases prevalent in swampy and ill-drained tropical areas. The death rate was very high among all sections of the community. The consequence was that many of the holders of land died or left the settlement, and valuable lands were continually falling into the market for one or other of these reasons, to be picked up cheaply by the highest bidder. Had the Government been possessed of capital, large areas could, as occasion arose, have been cheaply re-purchased by the Company. But the Government had no funds; and it was James Scott who profited by the situation. Scott and Company added to their virtual monopoly of the import and export trade of the settlement the role of sole bankers and money-lenders to the entire community. Scott himself is a witness to the fact that his firm of Scott and Company were the principal source of “aids”, secured by mortgages, to needy settlers; and that they had already (1796) advanced almost a lakh of rupees in pursuance of that system. It would appear too, from the elaborate instructions issued by the Court of Directors to the new Government established in 1805, that loans had sometimes been made, not in cash, but “in ship goods” at a considerable rate beyond the cost price in the bazaar, and that “those advances actually cost the parties to whom they had been made 34% per annum”.

The Land Office records illustrate the amazing extent to which lands, apart from those originally acquired by Scott, passed into his hands by foreclosure of mortgages or purchase from impoverished debtors or representatives of dead or absent owners. Major Macdonald in 1796 complained bitterly of the supremacy in the island of James Scott, and of his arrogance and insubordination.

To turn to the question of revenue; Sir George Leith, in his short account of Prince of Wales’ Island published in 1804, gives a concise account of this subject covering the years 1789 to 1803. He states that till the year 1800 the revenue was derived from the farms of opium, arrack and gaming, with the addition of a small tax on shops. In 1788 Light made proposals for the establishment of certain farms and import duties, a ground rent, a shop tax, and a duty on the transfer of land. Of these proposals it would appear that all were adopted except the import duties. But the ground rent, though provided for by the terms of grants, obviously could not be collected until a Land Office was established with a Settlement Register and some machinery for collection. No figures appear in Sir George Leith’s statistics of any kind of land revenue, and he states that until 1800 the revenue arose solely from the farms. The shop tax appears to have been ear-marked for police expenditure, and the proposed customs house was built at the extremity of the Tanjong adjoining the Fort. The farms produced a small revenue, which rose from 2,500 dollars in 1789 to about 30,000 dollars in 1800. In the absence of any staff for the collection of revenue, the method of farming was the only expedient possible for the early administration. All such farms are of course open to the objection, experienced in comparatively recent years in Singapore, that if the farmer fails to secure a large profit from his farm, he is apt to crave some relief from his contract, a request which is not infrequently conceded at the expense of the revenue; while if the profits of the farm come up to the expectations of the farmer, a large amount of potential revenue is lost. Probably in Penang the farmers made a large profit at the expense of the Government. A conspicuous instance of this recorded in a letter written by Mr. Crauford from Singapore in 1825, in which he discusses the better return obtained by his system of licenses than from the Penang practice of appointing a farmer. He gives as an instance a case in which the Penang farmer paid 72,000 dollars for a farm out of which he made a profit of 186,000 dollars.

The letter referred to gives some very interesting information regarding the Penang revenues. The population of Penang at the time was 55,000: the population of Singapore about 12,000; but the proportion of Chinese in Singapore was greater and the writer considered that the Chinese were more productive of revenue than the Chulias. The revenue of Penang from farms was 72,000 dollars and that the adoption by Penang of the system of a number of licenses, instead of one farm in the hands of one farmer, a system which had been productive of a great increase of revenue in Singapore, would have a similar consequence in Penang. Had the revenue of Penang been proportional to that of Singapore, having regard to the respective populations of the two Settlements, it should have amounted to about 350,000 dollars. Penang taxed European and American spirits and wine, and farmed out a duty on pork and sereh or betel-leaf, both of which taxes Mr. Crauford considered to be productive of very little revenue and to be vexatious.

The population of Penang at the time was 55,000: the population of Singapore about 12,000; but the proportion of Chinese in Singapore was greater and the writer considered that the Chinese were more productive of revenue than the Chulias. The revenue of Penang from farms was 72,000 dollars and that the adoption by Penang of the system of a number of licenses, instead of one farm in the hands of one farmer, a system which had been productive of a great increase of revenue in Singapore, would have a similar consequence in Penang.

In general, the criticisms of the Penang administration to be found in the dispatches printed in Logan’s Journal under the heading “Notice of Singapore”, will do much to convince the reader that the methods of obtaining revenue practised in Singapore, in the earliest years of that Settlement, were a great improvement on those that had prevailed in Penang for many years and were productive of a very much particularly when the great disparity in the population of the two Settlements is considered.

With regard to customs duties, it must be remembered that the Company instructed Light to make Penang a free port. It was not desired to impose any duty that might hamper trans-shipment trade and tend to drive it to Dutch ports. What the Company desired was to collect the produce of Malaya and Sumatra and ship it to Canton for disposal at that port. But it would not have been impossible to distinguish between goods imported for home consumption and goods imported purely for trans-shipment to Canton. But when Major Macdonald in 1796 endeavoured to consult the merchants, principally Mr. James Scott, as to the best means of raising additional revenue, they not unnaturally opposed any measure which might prejudice their trade. Their principal argument however was that a customs duty on imports would tend to divert trade to the mainland opposite, over which Penang had no control. As this coast was known to be a nest of pirates, and the inhabitants of Penang doubtless appreciated the advantages of British protection, there would appear to have been very little in this objection. In Leith’s time however a strip of land was acquired on the opposite cost, the nucleus of the existing Province Wellesley, in order to obviate the merchants’ objection; and in 1801 a duty of 2% was imposed on imports of tin, pepper and betel nuts. In the absence of any staff for the collection of the duty, Sir George was compelled to farm it out to the highest bidder. The tax was expected to realize about 5,000 dollars. However, in reporting his action to the Calcutta Government in June 1801, Sir George Leith observes:

“The house of Mr. Scott and Company became the purchasers, and gave every unexpected and large sum of 12,360 dollars for the duties; but as I have since learnt, they were determined at all events to become the purchasers in order to obtain an influence in the trade, no just conclusion of the real value of the duties can be formed from the very high prices.”

With regard to customs duties, it must be remembered that the Company instructed Light to make Penang a free port. It was not desired to impose any duty that might hamper trans-shipment trade and tend to drive it to Dutch ports. What the Company desired was to collect the produce of Malaya and Sumatra and ship it to Canton for disposal at that port. But it would not have been impossible to distinguish between goods imported for home consumption and goods imported purely for trans-shipment to Canton.

The duty was abandoned after one year, as it was supposed to give the farmer undue influence in the market, to the prejudice of other merchants. An export duty on pepper and other local produce was substituted, and the Governor recommended the appointment of a customs officer for the port. This recommendation however was not adopted; though it would seem from paragraph 52 of the dispatch of the Court of Directors establishing the new Government of 1805, in which they direct that the customs should not be farmed but should continue to be managed through a regular customs house by the Company’s officers, that the Directors were not aware that the local government had no such machinery. The error was pointed out in paragraph 57 of the new government’s first dispatch to the Directors dated the 12th November 1805, wherein they reported that “all your duties have hitherto been collected by ‘a farmer’”.

By 1804 the revenue amounted to about 75,000 dollars. It was derived solely from certain excise farms and the export duty above-mentioned. The disbursement exceeded the revenue by approximately 100,000 dollars.

In 1805 the commercial prosperity of the island, the still cherished hope of making it a ship-building port, and the optimistic forecasts of the late Governor Farquhar, led the Directors to been made in the past. They prohibited the further alienation of lines. They were apparently fully alive to the necessity of taking steps to secure an adequate revenue, and to the mistakes that had established a fresh government on more liberal, even extravagant, lands to Europeans except subject to their approbation, and then only on long leases, renewable on payment of a fine, with a quitrent increasing with the increase of cultivation. They advocated at the same time small grants of land to industrious Chinese; directed that uncultivated land should be resumed by the government, being apparently under the impression that the original grants had been saddled with a cultivation clause; and they further directed that usurious transactions upon the island should be discovered and prevented.

These wise directions came too late. The damage had been done. But recently the Government had had to hire land from Scott to build a Government House. No land had been reserved for public purposes. It had all been alienated; and an astounding area had passed into the hands of Scott and his partners, prominent among whom was Mr. David Brown.

Not only had the land policy been wasteful of the Government’s principal asset, but none of the functions of the Government had been properly carried out. Everything was in arrears. There were few roads and public buildings, no medical service, no department for the collection of revenue, the scantiest provision for the maintenance of law and order and, strangely enough, no law. And yet this very parsimonious administration had been maintained for nearly twenty years at a large and increasing loss to the Company.

The new Government of 1805, consisting of three Councillors in addition to the Governor and eleven other officers, including Thomas Raffles and W.E. Philips, on very liberal salaries, constituted a much more expensive administration than Penang had hitherto enjoyed. But it was hoped that the expense would be met, not only by obtaining a more adequate revenue, but by the profits of the Company’s trade. Accordingly, while the liberty hitherto afforded to the Company’s servants to engage in private trade was discontinued, the Directors entertained “a reasonable expectation that the Company will be indemnified, for the charges that they have already been at and are further to incur in supporting on establishment at Prince of Wales’ Island”; and they directed that “indemnification must be supplied in great degree from trade, which the company may carry on properly in pepper and in other exports of the island and imports from Europe.”

They also reasonably looked forward to a considerable increase in customs and taxes, and invited recommendations from the new Government to that end.

View of David Brown's Glugor House and the surrounding spice plantations.

The expectations of the Directors were not however fulfilled.4 Indeed, it is difficult to see how a few officials, suddenly appointed from the Indian service to take over the administration of a settlement with which they were with few exceptions wholly unfamiliar, could expect to compete with the great vested interests and long experience of the house of Scott and Company. Though James Scott died in 1808, his interests passed into the hands of his surviving partners, of whom David Brown, a man of immense enterprise and ability, was the principal. The lands of the settlement continued to gravitate into the hands of David Brown, as they had formerly done into those of James Scott. Before his death in 1825 David Brown had acquired great wealth and an amazing proportion of cultivable land on the island. 

But the Director continued to deplore an increasing loss on their annual budget: and this condition prevailed until the success of the new and more economically administered settlement of Singapore caused them to curtail the administrative staff of Penang and transfer the principal seat of government to the southern settlement.

Raffles, like Light, was very half-heartedly supported in his Singapore project. But he was an experienced and unusually capable administrator. He had had too the advantage of having served for several years in Penang in a subordinate capacity, and had therefore had ample opportunity of seeing the results of the mistakes made in the administration of Prince of Wales’s Island. And he contrived to carry on a government in Singapore, with slender resources economically used, without presenting his Directors with very serious deficits.

1As an experiment in colonisation, Penang was in no sense a failure. It was a rapid and permanent success. Its valuable spice plantations were approaching the full tide of their prosperity when the change of Government took place.

2In the introductory Note, it has not been thought worthwhile to give the detailed references which are supplied in the succeeding parts of this Article. The information is derived mainly from the various dispatches printed in. “Notes on Penang” in Logan’s Journal, and to some extent from an examination of the early records of the Penang Land Office.

3A second cousin, once removed, of Sir Walter Scott; his father was a brother of Sir Walter’s grandfather (Rev. Keppel Garnier).

4From 1807 to 1826 duties were levied both on imports and exports. Some figures shewing the proceeds of these duties appear in Col. Low’s "Account of the origin and progress of the British Colonies in the Straits of Malacca", published in Volume 4 of Logan’s Journal. It would seem that the duties at first realised a considerable revenue; but this fell off, and from 1811 onwards average considerably less than $100,000 annually and tended to diminish. Towards the end of the period the duty-free port of Singapore tended to prejudice Penang’s trade. The farms yielded about an equal amount, and this too appears to have diminished in the later years of the period referred to.



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