The Dutch East India Company -was
a chartered company established in 1602, when
the States-General of the Netherlands granted it a
21-year monopoly to carry out colonial activities in
Asia. It is often considered to have been the
first multinational corporation in the world and it
was the first company to issue stock. It was also
arguably the first megacorporation, possessing
quasi-governmental powers, including the ability
to wage war, imprison and execute
convicts, negotiate treaties, coin money, and
During the 16th century, the spice trade was dominated by the Portuguese
who used Lisbon as a staple port. Before the Dutch Revolt, Antwerp had played an
important role as a distribution center in northern Europe. However, after 1591 the
Portuguese used an international syndicate of the German Fuggers and Welsers, and
Spanish and Italian firms, that used Hamburg as its northern staple port to distribute
their goods, thereby cutting Dutch merchants out of the trade.
At the same time, the Portuguese trade system was unable to increase
supply to satisfy growing demand, in particular the demand for pepper. Demand for
spices was relacaused tively inelastic, and therefore each lag in the supply of pepper a
sharp rise in pepper prices.
In addition, as the Portuguese crown had been united in a personal union
with the Spanish crown in 1580, with which the Dutch Republic was at war,
the Portuguese Empire became an appropriate target for Dutch military incursions.
These three factors motivated Dutch merchants to enter the intercontinental spice
trade themselves. Further, a number of Dutchmen like Jan Huyghen van Linschoten
and Cornelis de Houtman obtained first hand knowledge of the "secret" Portuguese
trade routes and practices, thereby providing opportunity.
The stage was thus set for Houtman's 1595 four-ship exploratory expedition
to Banten, the main pepper port of West Java, where they clashed with both the
Portuguese and indigenous Indonesians. Houtman's expedition then sailed east
along the north coast of Java, losing twelve crew to a Javanese attack
at Sidayu and killing a local ruler in Madura. Half the crew were lost before the
expedition made it back to the Netherlands the following year, but with enough
spices to make a considerable profit.
In 1598, an increasing number of fleets were sent out by competing
merchant groups from around the Netherlands. Some fleets were lost, but
most were successful, with some voyages producing high profits. In March
1599, a fleet of eight ships under Jacob van Neck was the first Dutch fleet to
reach the 'Spice Islands' of Maluku. The ships returned to Europe in 1599 and
1600 and the expedition made a 400 percent profit.
In 1600, the Dutch joined forces with the muslim Hituese on Ambon
Island in an anti-Portuguese alliance, in return for which the Dutch were
given the sole right to purchase spices from Hitu.Dutch control of Ambon
was achieved when the Portuguese surrendered their fort in Ambon to the
Dutch-Hituese alliance. In 1613, the Dutch expelled the Portuguese from
their Solor fort, but a subsequent Portuguese attack led to a second change
of hands; following this second reoccupation, the Dutch once again captured
Solor, in 1636.
East of Solor on the island of Timor, Dutch advances were halted by
an autonomous and powerful group of Portuguese Eurasians called the To
passes. They remained in control of the Sandalwood trade and their
resistance lasted throughout the 17th and 18th century, causing Portuguese
Timor to remain under the Portuguese sphere of control.
At the time, it was customary for a company to be set up only for the duration of a single
voyage, and to be liquidated upon the return of the fleet. Investment in these expeditions was a very highrisk venture, not only because of the usual dangers of piracy, disease and shipwreck, but also because
the interplay of inelastic demand and relatively elastic supply of spices could make prices tumble at just
the wrong moment, thereby ruining prospects of profitability. To manage such risk the forming of
a cartel to control supply would seem logical. The English had been the first to adopt this approach, by
bundling their resources into a monopoly enterprise, the English East India Company in 1600, thereby
threatening their Dutch competitors with ruin.
In 1602 the Dutch government followed suit, sponsoring the creation of a single "United East
Indies Company" that was also granted monopoly over the Asian trade. The charter of the new company
empowered it to build forts, maintain armies, and conclude treaties with Asian rulers. It provided for a
venture that would continue for 21 years, with a financial accounting only at the end of each decade.
In 1603, the first permanent Dutch trading post in Indonesia was established in Banten, West
Java and in 1611, another was established atJayakarta (later "Batavia" and then "Jakarta").In 1610, the
VOC established the post of Governor General to more firmly control their affairs in Asia. To advise and
control the risk of despotic Governors General, a Council of the Indies (Raad van Indië) was created. The
Governor General effectively became the main administrator of the VOC's activities in Asia, although
the Heeren XVII, a body of 17 shareholders representing different chambers, continued to officially have
VOC headquarters were located in Ambon during the tenures of the first three Governors
General (1610–1619), but it was not a satisfactory location. Although it was at the centre of the spice
production areas, it was far from the Asian trade routes and other VOC areas of activity ranging from
Africa to India to Japan.A location in the west of the archipelago was thus sought; the Straits of Malacca
were strategic, but had become dangerous following the Portuguese conquest and the first permanent
VOC settlement in Banten was controlled by a powerful local ruler and subject to stiff competition from
Chinese and English traders.
In 1604, a second English East India Company voyage
commanded by Sir Henry Middleton reached the islands
of Ternate, Tidore, Ambon and Banda; in Banda, they encountered severe
VOC hostility, which saw the beginning of Anglo-Dutch competition for
access to spices. From 1611 to 1617, the English established trading
at Sukadana (southwest Kalimantan), Makassar, Jayakarta and Jepara inJ
ava, and Aceh, Pariaman and Jambi in Sumatra which threatened Dutch
ambitions for a monopoly on East Indies trade.
Diplomatic agreements in Europe in 1620 ushered in a period of
cooperation between the Dutch and the English over the spice trade.This
ended with a notorious, but disputed incident, known as the 'Amboyna
massacre', where ten Englishmen were arrested, tried and beheaded for
conspiracy against the Dutch government. Although this caused outrage
in Europe and a diplomatic crisis, the English quietly withdrew from most
of their Indonesian activities (except trading in Bantam) and focused on
other Asian interests.
In 1619, Jan Pieterszoon Coen was appointed Governor-General of the VOC. He saw the
possibility of the VOC becoming an Asian power, both political and economic. On 30 May 1619, Coen,
backed by a force of nineteen ships, stormed Jayakarta driving out the Banten forces; and from the ashes
established Batavia as the VOC headquarters. In the 1620s almost the entire native population of
the Banda Islands was driven away, starved to death, or killed in an attempt to replace them with Dutch
plantations. These plantations were used to grow cloves and nutmeg for export. Coen hoped to settle
large numbers of Dutch colonists in the East Indies, but implementation of this policy never materialized,
mainly because very few Dutch were willing to emigrate to Asia.
Another of Coen's ventures was more successful. A major problem in the European trade with
Asia at the time was that the Europeans could offer few goods that Asian consumers wanted, except silver
and gold. European traders therefore had to pay for spices with the precious metals, and this was in short
supply in Europe, except for Spain and Portugal. The Dutch and English had to obtain it by creating a
trade surplus with other European countries. Coen discovered the obvious solution for the problem: to
start an intra-Asiatic trade system, whose profits could be used to finance the spice trade with Europe. In
the long run this obviated the need for exports of precious metals from Europe, though at first it required
the formation of a large trading-capital fund in the Indies. The VOC reinvested a large share of its profits
to this end in the period up to 1630.
The VOC traded throughout Asia. Ships coming into Batavia from the Netherlands carried
supplies for VOC settlements in Asia. Silver and copper from Japan were used to trade with India and
China for silk, cotton, porcelain, and textiles. These products were either traded within Asia for the
coveted spices or brought back to Europe. The VOC was also instrumental in introducing European ideas
and technology to Asia. The Company supported Christian missionaries and traded modern technology
with China and Japan. A more peaceful VOC trade post on Dejima, an artificial island off the coast
of Nagasaki, was for more than two hundred years the only place where Europeans were permitted to
trade with Japan.
In 1640, the VOC obtained the port of Galle, Ceylon, from the Portuguese and
broke the latter's monopoly of the cinnamon trade. In 1658, Gerard Pietersz. Hulft laid siege
to Colombo, which was captured with the help of King Rajasinghe II of Kandy. By 1659, the
Portuguese had been expelled from the coastal regions, which were then occupied by the
VOC, securing for it the monopoly over cinnamon. To prevent the Portuguese or the English
from ever recapturing Sri Lanka, the VOC went on to conquer the entire Malabar Coast from
the Portuguese, almost entirely driving them from the west coast of India. When news of a
peace agreement between Portugal and the Netherlands reached Asia in 1663, Goa was the
only remaining Portuguese city on the west coast.
In 1652, Jan van Riebeeck established an outpost at the Cape of Good Hope(the
southwestern tip of Africa, currently in Cape Town, South Africa) to re-supply VOC ships on
their journey to East Asia. This post later became a full-fledged colony, the Cape Colony,
when more Dutch and other Europeans started to settle there.
VOC trading posts were also established
in Persia, Bengal, Malacca, Siam, Canton Formosa(now Taiwan), as well as the Malabar
and Coromandel coasts in India. In 1662, however, Koxinga expelled the Dutch from Taiwan.
In 1663, the VOC signed "Painan Treaty" with several local lords in the Painan area
that were revolting against the Aceh Sultanate. The treaty resulted in VOC to build a trading
post in the area and eventually monopolize the trade there, especially in gold trade.
By 1669, the VOC was the richest private company the world had ever seen, with
over 150 merchant ships, 40 warships, 50,000 employees, a private army of 10,000 soldiers,
and a dividend payment of 40% on the original investment.
The shipyard of the Dutch East India
VOC Monogram formerly
Company in Amsterdam, circa 1750.
above the entrance to
Dutch shipsof Good Hope.
the Castle in Chittagong, Bengal.
Reproduction of a map of the
Dutch factory of
city Batavia circa 1627 , Hugly-Chinsurah
Graves of Dutch dignitaries in the ruined St.
Paul's Church, Malacca in the former Dutch
Dutch Batavia in 1681,
built in North Jakarta.
A bond issued by the Dutch East
India Company, dating from 7headquarters in
November 1623, for the amount
Amsterdam (the Oostof 2,400 florins.