Factories, South and Southeast Asia

Between the sixteenth and eighteenth centuries, European trading companies from Portugal, the Dutch Republic, England, Denmark, France, Sweden, and the Austrian Netherlands founded numerous trading factories in Asian port cities. These settlements varied in their form from simple business offices to strong fortifications, but had in common their central function: to provide access, whenever possible privileged, to indigenous commodity markets. Furthermore, the factories operated as supply centers and provided military protection. Accordingly, they were manned with administrative, mercantile, and military personnel. Spread over the whole of South and Southeast Asia and organized hierarchically, they made up the backbone of the European trading networks in Asia.

Europe's expansion into Asia in the early modern period never strove for the type of colonialism known from the late nineteenth and early twentieth centuries: Commercial profit rather than territorial expansion was the central aim of the chartered companies. Because Asia was characterized by established state systems, most European factories could only operate with the permission and protection of local rulers. Only in a few exceptional cases were the companies able to achieve control over port cities. As a rule, negotiations over trade agreements between European representatives and the local authorities were an essential first step. Agreements permitted European settlements and factories, and regulated the local commercial organization. The results of negotiations varied depending on the local situation. Strong local rulers were able to dictate conditions, refuse privileges, and determine the location of a new factory. Some local rulers allowed several competing factories under their control (e.g., in Bantam and Makassar), but mostly they were interested in reliable long-term trading contacts achieved through a privileged agreement with one single European partner. In places where indigenous rulers were weak or European military presence was strong, Europeans were able to force local rulers to accept unequal contracts. In these cases, the factory remained nominally under the ruler's protection, but became the actual authority (as, for example, on the Moluccas).

During the sixteenth century the Portuguese built up the first European factory network, with its center in Goa and important secondary factories in Diu, Malacca, and Macau. During the seventeenth century, with only a few exceptions (Goa, Macau, Timor), the Portuguese were displaced by Dutch and English trading companies—namely, the Dutch Verenigde Oost-Indische Compagnie (VOC) and the English East India Company (EIC). The heart of the Dutch factory system was Batavia, which in 1621 became the residence of the governor-general. On the next level of the VOC hierarchy, the fortified residences of governors (in Ambon, Banda, Ternate, Makassar, Malacca, Semarang, Cochin, and Colombo) ensured a strong Dutch position. Less important factories were led by directors (exclusively an economic position in the Dutch system) or simple residents who ran small settlements without military relevance.

The first English attempts to establish the EIC in Indonesia failed due to competition from the Dutch. The EIC's first center, in Bantam, was lost as early as 1682, and the factories in the Moluccas quite a bit earlier. Only some peripheral factories remained (Bencoolen on Sumatra, Balambangan off North Borneo). The EIC's main focus shifted to the Indian subcontinent, where residencies in Madras, Calcutta, Bombay, and Pondicherry were established.

Due to the VOC's dominance in Indonesia and the power of China and Japan's emperors, the greatest number of factories in Asia existed in India. Here, smaller European trading empires established limited networks—as with France (headquartered in Pondicherry) or Denmark (headquartered in Tranquebar)—or had to content themselves with isolated factories, as with Sweden or the Austrian Netherlands (the Oostende-Company).

Hypothetically, factories passed through five stages of development (see Rothermund, 1981). Initially, a factory would obtain goods for a company by purchasing whatever it found on the local market. In its second stage of development, a factory would zero in on specific items it wanted from the local population; it would produce samples to demonstrate its wants and use subscription payments to encourage focused production. In its third stage, it would begin to finance orders in advance, which allowed the company to implement standardization and quality control. Next, it began to intervene in the production process, in order to speed it up and thus increase the quantity of exports. Finally, it took over the organization of production by instituting a putting-out system, in which workers produced goods at home under company supervision and using company-supplied tools. This model most closely fits the textile trade in India, where these stages of development led ultimately to the economic system in which India became a British Crown Colony. Thus, the factories represented the core of the later territorial colonialism. Unlike India, settlements based on the spice trade normally finished their development at the third stage, as was the case with most of the Dutch factories in the Malay Archipelago.

The above remarks help explain the importance of factories for later colonial development, but they do not cover the whole spectrum. Depending on the function of a particular factory in a company's system and on the level of influence European representatives were able to achieve in particular local communities, divergent developments were also possible. Additionally, differences in the strategies and aims pursued by companies facing differing local conditions produced varying outcomes. Thus, the establishment of factories could lead to aggressive policies, as in Makassar where the VOC, after first attempting to control the spice market by offering the highest prices, later conquered the port in order to eliminate local competition. The subsequent establishment of a fortified factory under a governor solidified the factory's new function. Thus, the economic and political influence of European factories varied depending on local conditions and European strategies. Their cultural influence remained minimal, however, as factories were always primarily a key instrument of early modern mercantile expansionism.

see also Bullion Trade, South and Southeast Asia; English East India Company (EIC); Sugar Cultivation and Trade; VOC (Verenigde Oost-Indische Compagnie).

BIBLIOGRAPHY

Arasaratnam, Sinnappah. "European Port-Settlements in the Coromandel Commercial System, 1650–1740." In Brides of the Sea: Port Cities of Asia from the Sixteenth to Twentieth Centuries, edited by Frank Broeze. Honolulu: University of Hawaii Press, 1989.

Bassett, David K. "Early English Trade and Settlement in Asia, 1602–1690." In Britain and Netherlands in Europe and Asia, Vol. 3, edited by John S. Bromley and Ernst H. Kossmann. London: Chatto and Windus, 1968.

Farrington, Anthony. Trading Places: The East India Company and Asia, 1600–1834. London: British Library, 2002.

Foster, William. English Factories in India, 1618–1669. 13 vols. Oxford, U.K.: Clarendon, 1906–1927.

Furber, Holden. Rival Empires of Trade in the Orient, 1600–1800. Minneapolis: University of Minnesota Press, 1976.

Rothermund, Dietmar. Asian Trade and European Expansion in the Age of Mercantilism. New Delhi: Manohar, 1981.

Société Jean Bodin, ed. Les grandes escales, Vol. 2: Les temps modernes. Brussels: Éditions de la Libraire Encyclopédique, 1972.