Traders’ Interaction at the Root of the Rubber and Palm Oil Cluster

Traders were crucial actors in the expansion of the plantation-based economy in colonial territories. British trading houses first introduced palm and palm kernel oil from West Africa to European markets in the early nineteenth century.^{Footnote 39} Following the price increases and numerous scientific achievements that occurred in the first half of the century,^{Footnote 40} palm oil products started to be used as industrial lubricants and components for the production of candles, soaps, and, eventually, margarine. In the 1850s, when palm oil prices experienced a downward trend,^{Footnote 41} the oil palm seeds had just reached the fertile soils of Southeast Asia, thanks to the activity of Dutch and British traders and the support of agricultural institutions in the colonial territories, such as the Botanic Gardens.^{Footnote 42} Although planters in the region were seeking new alternatives to diversify from coffee, the major export crop whose demand was stagnating, the oil palm initially spread only as an ornamental crop. Some minor attempts of domestication resulted in fiascos^{Footnote 43} and were not pursued further as palm oil prices continued to plummet at the end of nineteenth century.^{Footnote 44}

Meanwhile, natural rubber from South America made its entry in the region. It soon revealed itself a game-changer for the whole local plantation economy and led to the emergence of a regional agricultural cluster. In the 1880s, the Botanic Gardens of Singapore received the first seedlings of what was alleged to be the best rubber variety, Hevea Brasiliensis, which the British adventurer Henry Wickham had smuggled from the Amazon region around Manaus via London.^{Footnote 45}

Between 1870 and 1900, the British formal and informal empire significantly broadened in several locations of the global South^{Footnote 46} through the expansion of commercial activities and the financing of infrastructure for primary production. The geography of the empire featured a net of hubs for global trade,^{Footnote 47} hosting dense trading communities comprising ethnically heterogeneous and thick networks of families, which Charles Jones has labeled as “cosmopolitan bourgeoisie.”^{Footnote 48}

After the abolition of the East India Company’s monopoly in 1813, a vast array of unincorporated individual or partnership concerns grew out from family and friendship connections among this community of merchants, specializing in distant trade across the empire (see Table 1).^{Footnote 49} By setting their headquarters in major European ports such as London and Liverpool in the United Kingdom, Hamburg in Germany, and Le Havre in France, these cosmopolitan bourgeoisie could access crucial information on demand (for example, volumes and product specifications),^{Footnote 50} while leveraging important complementary networks in banking, shipping, and highly skilled human resources to expand their activities abroad.^{Footnote 51} Finally, due to their presence in multiple trading locations, these merchants were in a privileged position to transfer inputs such as crops, capital, and labor from less politically stable business environments to more suitable colonial locations. Particularly, Singapore, after it became a crown colony in 1824, emerged as a global city within the British Empire and as a major trading hub where Western merchant firms established their regional branches and to which colonial institutions channeled knowledge and capital.^{Footnote 52}

On the other hand, nonlocal Asian (often Chinese and, to a lesser extent, Indian and Hadhrami Arab)^{Footnote 53} traders controlled the regional trading routes from the major Southeast Asian ports, and especially Singapore. The presence of a large community of Chinese merchants operating in both British Malaya and DEI was critical to ensure Southeast Asia’s dominance in the export of tropical produce vis-à-vis other competitor locations. Unlike Brazil or West Africa, where indigenous middlemen managed local trade, in Southeast Asia commercial activity had been in the hands of outsiders since the fourteenth century. Chinese merchants were “middlemen in Singapore’s middleman economy.”^{Footnote 54} As such, they connected Southeast Asia’s markets with China’s, became involved in credit activities, subsequently integrated vertically into production in remote areas, and supported the rapid development of the tin industry and the cultivation of crops such as gambier, tapioca, and pepper in the early nineteenth century.

When Western traders established themselves in the Strait Settlements—Singapore, Dinding, Penang, and Malacca (see Figure 1)—these Chinese merchants represented their first natural interlocutors.^{Footnote 55} Due to their access to regional markets, the Chinese operated on credit as distributors of Western manufactured products in the region in exchange for raw material in bulk. Thus, securing sound contacts within the Chinese community was considered a priority for anyone who intended to run a business in the Eastern colonies, so much so that Western merchants competed (and often bankrupted themselves) to offer them the best credit terms.^{Footnote 56}

Figure 1 Map of the Malay Peninsula, 1911.

Source: Papers collected in 1989 by Guy Nickalls for Great Enterprise: A History of Harrisons and Crosfield Ltd., including some original documents, ca. 1948–80, copies of press cuttings, and notes from company employees, CLC/B/112/MS37394/007, London Metropolitan Archives.

While Western traders tapped into Asian entrepreneurial dynamism, the Asian business community came to rely increasingly on Western-financed infrastructure, even for intra-Asian transactions.^{Footnote 57} This interaction among different groups of nonlocal traders, and the introduction of increasingly specialized services in support of the plantation business, strengthened Singapore’s role of regional interaction pole.^{Footnote 58} By linking traders’ activities across the Straits, Singapore brought together two formally distinct colonial territories, British Malaya and DEI, defining the geographical reach of the emerging cluster and ensuring enhanced cohesion. Western traders supplied capital inputs (seeds, machinery, and finance) and educated human resources (estate managers and engineers) who acted primarily as wholesalers to European markets. They also operated as brokers and agents for the vast community of foreign planters. Among them were young Eric MacFadyen and Herbert Brett, who would later become key employees of the leading firm H&C, and other British and Scottish owners of large estates, such as H. C. Rendle; T. W. Bailey and E. V. Carey; E. B. Skinnier (who would be the future chairman of the Rubber Growers’ Association [RGA] in the 1920s); and the Kindersley Brothers (who allegedly planted the very first rubber lot on their Selangor estates).^{Footnote 59}

Conversely, Chinese brokers controlled the inflow of low-skilled tappers and harvesters from the surrounding territories, and operated as retailers by channeling trade flows from rural areas. The most powerful Chinese businessmen in Singapore at the turn of the century were two Malacca-born men, Tat Chin Seng (who was active in shipping and tropical planting) and Lee Keng Liat (who had a large interest in tapioca); the Singaporean Tat Tock Seng; and two self-made men from China, Yap Ah Loy and Loke Yew (who had built huge fortunes through tin and tapioca).^{Footnote 60}

As bulk buyers and labor brokers across the region, Chinese merchants contributed to the early expansion of plantations by integrating vertically in production themselves and by distributing seeds and supporting smallholders’ activity in East Sumatra.^{Footnote 61} Furthermore, Chinese traders were dominant in the “coolie trade,” which involved providing indentured labor from South China, and later from Java, to the foreign-owned plantations in Malaya and Sumatra.^{Footnote 62} Although labor shortages remained a leitmotiv of the agricultural sector in this region too, the greater availability of labor resources relative to other tropical areas such as Africa or South America was a major factor attracting European investors and planters to Southeast Asia.^{Footnote 63} After 1877 the British established three colonial Protectorates of Chinese Immigrants—in Singapore, Penang, and Malacca—with the purpose of regulating the increasing flow of migrants.^{Footnote 64} At the turn of the century, the rubber boom boosted demand for unskilled labor so much that, between 1881 and 1932, more than one hundred thousand coolies per year reached Singapore from China and were directed to the plantations in the surrounding areas.^{Footnote 65} As a consequence of the increasing volumes traded,^{Footnote 66} the number of Indian, Chinese, and Western merchant houses more than doubled in Singapore, and between 1870 and 1915, the entrepôt city overtook the other two commercial centers of the region, Malacca and Penang, establishing itself as the major regional port for rubber.^{Footnote 67}

In total, the extensive partnership—which almost became a mutual dependency—between these two communities of foreign merchants was vital for the emergence of the rubber—and later palm oil—cluster. Linking Asian locations with European demand, Western traders scaled up the existing Chinese commercial activity from a regional to a global scope. Furthermore, being outsiders, Chinese and Western merchants performed the function of transnational “linkers,” integrating British Malaya and DEI with both regional and global markets via Singapore.^{Footnote 68}

Agency Houses Fund the Rubber Cluster: Vertical Integration and Concentration between 1905 and the 1920s

World demand for natural rubber more than doubled, from 20,000 tons in 1890 to 52,500 tons in 1900. At the turn of the century, Brazil and West Africa accounted for almost the entire world’s supply of the crop, with Southeast Asia representing only 5 percent of global output until 1907.^{Footnote 69} Between 1903 and 1907, price increases triggered a rather confused and disorganized speculative expansion of rubber estates, which, in turn, sparked a process of backward integration of existing trading activity.^{Footnote 70} Until 1908, global demand for rubber grew at a rate of 5.5 percent per year, followed by double-digit increases averaging over 16 percent per year until 1917.^{Footnote 71}

Until 1905 large portions of investment in rubber had come from colonial planters previously operating in Ceylon or in the region. Faced with the escalation in demand, they found themselves lacking the financial and organizational ability to support a quick expansion. Therefore, in the first decade of the century, trading firms brokering the commodity started to support the opening of new rubber estates by sourcing financial capital from their network of bankers, directly participating in the floating of estate companies in Europe, and supplying managerial and organizational expertise to the planters in the field. In doing so, several of these firms retained equity shares in the new plantation ventures, both as a speculative investment and as a reputational signal to the financial institutions funding the expansion.

The trading firms that provided agency services to the major rubber planters were the ones destined for longstanding success: Jim Allison, of Barlow Brothers, had links with the planter Tom Bailey; Guthrie’s John Anderson used the firm’s reputation in Singapore and its contacts with powerful Chinese, such as Loke Yew, to consolidate agency in and control of the rubber estates. The Boustead Brothers—under the leadership of Edgar Money, was one of the first in Ceylon either to convert plantations from tea to rubber or add rubber to their tea investment—quickly expanded in Malaya, employing the planter Eric MacFadyen as director.^{Footnote 72} Finally, H&C, one of the major tea traders in Ceylon, entered the Malayan scene because of Arthur Lampard’s, its director, enthusiasm for rubber and the advice of the experienced planter Herbert Brett.^{Footnote 73} Simultaneously, Chinese brokers were encouraging the development of indigenous smallholdings in both Malaya and DEI, which would reach half the region’s agricultural acreage in the 1920s.^{Footnote 74} Taking advantage of the infrastructure available to the estates, Chinese merchants distributed rubber seedlings to ethnic Chinese farmers or former indentured labor occupying peripheral land and provided them with logistics and marketing services via Singapore.^{Footnote 75} This spillover effect furnished the industry with regional cohesion and bolstered the emergence of the cluster.

In line with Casson’s theory, the process of backward integration of trading concerns into production marked the transformation of trading houses from private partnerships, where they had been termed “merchant houses,” into joint-stock companies,^{Footnote 76} also called “agency houses,” multinational businesses, trading specialized agency, or managerial services.^{Footnote 77} From 1904, Guthrie, H&C, Thomas Barlow & Brothers, Boustead Brothers, Edward Boustead, Cumberbatch & Co., and others were frontrunners in this field (Table 2). Due to their liaisons within the UK banking and shipping industries, these companies were in a strong position financially and logistically to support the expansion of acreage needed to match the growing Western demand.^{Footnote 78} Moreover, by acquiring stakes in the plantations, these companies could monitor the mechanism of price formation and stem profit volatility through cost control. External financing went hand in hand with vertical integration, as these firms were even better able to leverage their reputations to secure creditors when they showed a commitment to the direct management of the estates. As reported in the financial press: “The fact that firms of repute such as Harrison & Crosfield were prepared to assume the responsibility of effectively controlling the management of the estates created a feeling of confidence that has not been misplaced.”^{Footnote 79} In 1903 H&C participated in the flotation of Anglo-Malay Rubber & Co., and of Petaling Rubber Estates Syndicate shortly thereafter. In the same year, H&C’s major rival, Guthrie, financed the acquisition of Linggi Plantations and Selangor Rubber Company, both in the Malay Peninsula.^{Footnote 80}

Table 2 Major Foreign Players in the Emergence of Rubber and Palm Oil Cluster (1880–1930)

Note: BC = Barlow Collection; GC = Guthrie Collection; LMA = London Metropolitan Archives; TNA = The National Archives; UL = Unilever Archives.

* Share of acres and capital in Malaysia and Indonesia, CLC/B/MS37394/004, LMA. Although the table refers to the period 1880-1930, the values from 1972 document the long-lasting persistence of selected players within the cluster.

Sources: Pye and Bhattacharya, Palm Oil Controversy, 25–26; Tate, RGA History, 205–220; papers collected by Guy Nickalls in 1989 for Great Enterprise, Rubber Producing Companies Zorn and Leigh-Hunt’s 1972 List, CLC/B/112/MS37394/004, LMA; Linggi Plantation, GC/17, GC; Business Papers and Correspondence, 1908–1930, TB/199, BC.

In 1908 Dunlop’s introduction of the motorcar tire came alongside the expansion of automotive production in the United States, which accounted for more than 40 percent of global demand for rubber.^{Footnote 81} Price increases further fueled plantation mania, widely known as the “rubber boom,” through 1909 and 1910, when prices reached 12/9 USD/lb., almost doubling the 1905 level. H&C’s Petaling dividend grew 165 percent in 1909, and twice that in 1910. Rubber returns were even higher for Guthrie’s ventures, both with Linggi and with Selangor, with 1909 yielding returns of 165 percent and 287.5 percent, respectively, and almost doubling those figures in the following year.^{Footnote 82}

Over the subsequent decade, the plantation system underwent significant reorganization. The region transformed into the world’s foremost rubber supplier and brought the formation of the export cluster, which worked as a catalyst that attracted planters and investors from all over the world. Once the speculative sprout abated, smaller trading players found themselves unable to cope with the severe price declines starting in 1911, and the industry was quickly consolidated into the hands of the biggest agency houses. Ownership concentration followed vertical integration, and few agency houses reorganized into large concerns managing plantation estates. Although several of them were also diversifying geographically into different business lines, their exposure in Malaya and DEI became increasingly specialized in rubber.^{Footnote 83}

Despite the presence of a limited number of hardened competitors rushing to Singapore (such as Japanese traders),^{Footnote 84} the U.S. Rubber Company,^{Footnote 85} and giant manufacturers (e.g., Dunlop, Goodyear, and Firestone), by the early 1920s a few large British agency houses were in control of the lion’s share of the rubber acreage. According to Tate: “Of the 18 agencies with five or more client sterling companies in 1917, the big five merchant houses (…) controlled 2/5 of all the companies concerned, along with similar percentages for the total area owned and the capital investment in them”.^{Footnote 86} Above all, H&C and Guthrie rose as dominant players, partially as a consequence of their mutual hatred, yielding a rivalry that endured for more than fifty years and resulted in an investment race.^{Footnote 87}

Despite these internal frictions, during this phase of consolidation, these cluster players also grouped several of their rubber interests in the form of investment trusts,^{Footnote 88} which had the effect of funneling the industry even further into the hands of a restricted nexus of businessmen (and colonial officers) through a maze of interlocked and interlinked financial ties. The second decade of the century saw these companies expanding plantations further, especially toward Sumatra and, eventually, Borneo. H&C had already opened a branch in Medan (Sumatra) in 1906 and in Java in 1911, while Guthrie opened in Medan in 1913.^{Footnote 89} By 1911 Sumatra already boasted almost two hundred rubber companies; 44 percent of them were registered in London under these major agencies and accounted for 70 percent of the estate land.^{Footnote 90} By the end of World War I, both H&C and Guthrie were involved in more than forty plantation companies, while smaller players such as Barlow or Boustead Brothers participated with different ownership stakes, with between ten and twenty companies each.^{Footnote 91}

The ongoing concentration triggered the creation of industrial associations. In 1907 a preliminary meeting of thirty rubber agencies operating in Southeast Asia took place in London, and this, in practice, sealed the foundation of the RGA.^{Footnote 92} Among those present were Herbert Brett for H&C, L. T. Boustead of Boustead Brothers, and several other representatives of the most prominent rubber interests in Ceylon and Malaya.^{Footnote 93} The formation of the RGA represented a watershed moment in cluster emergence, whereby key participants formalized the existence of an interest group; outlined a long-term business strategy; and started collective negotiations with external stakeholders, such as the colonial government. In 1913 the RGA agreed to maintain a presence equaling one-third of the board at the Rubber Trade Association, the newly formed association of brokers and dealers in London. The same year, H&C’s Arthur Lampard supported the creation of the International Association for Rubber Cultivation in DEI to integrate the RGA with the combined rubber interests outside of Malaya.^{Footnote 94} Although the RGA was widely considered the voice of British agents and failed to represent a substantial part of the industry—namely non-British Western players and the large Asian interest^{Footnote 95} —its main advantage was that it offered an institutional umbrella to the inherently fragmented plantation industry. The RGA also held close connections with colonial officers, for example with Frank Swettenham and William Treacher, the first two resident-general officers of the Federated Malay States, who had obtained positions in the industry after serving for the colonial administration.^{Footnote 96} Thanks to these connections, the RGA became the main interlocutor with different industry stakeholders, to the extent that matters of marketing, promotion, pricing, and taxation became the bread and butter of its daily operations.^{Footnote 97} The RGA was also the prime driver for joint research efforts. During the 1910s, the RGA advocated the introduction of publicly funded research stations and the coordination of existing research projects across the empire.^{Footnote 98} These efforts materialized in the interwar period with the formation of the Rubber Research Institute in 1926.

The RGA in London represented the core of the cluster’s global institutional linkages, with Singapore acting as a detached geographical pivot connecting production and services through a formal institutional apparatus. Through the creation of industry associations such as the RGA, agency houses helped construct the international profile for the cluster vis-à-vis outsiders, namely global (mostly American) buyers. At the same time, the RGA lobbied for a smoother connection between different parts of the value chain. It provided the plantation economy with a service and infrastructural platform, which allowed the cluster to stretch from Singapore to the plantations in the surrounding areas. By 1920 the total combined rubber acreage for Malaya and DEI was about 3.5 million acres, which represented 80 percent of the world’s supplies, a quarter of which were auctioned through Singapore.^{Footnote 99} After trading firms became more involved in production activities, Singapore gradually became the main reference site for the cluster players, attracting increasingly specialized services and highly skilled specialists. Simultaneously, as happened in the case of Ceylon, similar players who were attracted to the Eastern colonies diminished the competitiveness of other rubber locations, whereby the remaining agents struggled to access the specialized knowledge and services needed to maintain a foothold in the international markets.

Palm Oil and Portfolio Diversification from the 1920s Onward

From the 1920s, agency houses’ diversification strategies initiated the gradual transformation of the rubber cluster into palm oil, whose production would escalate only after World War II. The introduction of palm oil as an alternative to rubber, and its rapid development as a global export commodity, proves that in the region the trading firms had transformed from diversified, short-term-oriented concerns into cluster players. Following Casson’s model, these companies avoided decline by adapting the plantation business model. However, the increased rigidity that ensued from rubber specialization narrowed their range of diversification options.

In the early 1920s, global demand for rubber was sluggish, prices plummeted, and the rapid expansion wiped out most of the other crops that had made the region its fortune before the turn of the century. Major price fluctuations stoked massive speculation on rubber, reinforcing its volatility through the 1920s.^{Footnote 100} Further, big players started to perceive smallholders’ competition as a rising threat.^{Footnote 101} Also in the early 1920s, rubber produced in Malayan and Sumatran smallholdings^{Footnote 102} buttressed the downward trend in international prices, pushing Britain to support the introduction of a restriction plan—the Stevenson Scheme—to stabilize prices between 1924 and 1928.^{Footnote 103} The policy aimed to improve Britain’s debt position after WWI, but it seriously concerned U.S. buyers, who represented about 75 percent of global demand for rubber at the time.^{Footnote 104} Given Britain’s stubbornness in defending its quasi-monopoly, the need to manufacture a synthetic version of rubber became a pressing one for Russia and the United States, which together represented the majority of world demand.^{Footnote 105}

On the producer side, the organizational structure, which resulted from the vertical integration and acreage expansion in the 1910s, turned into a challenge against a backdrop of depressed demand. This was especially true for Malaya, where rubber occupied the majority of cultivated land. Overdependence on one source of revenue pushed the industry to start looking for diversification strategies.^{Footnote 106} However, agency houses’ regional agricultural activities had become so specialized around rubber that the existing practices, agronomic knowledge, and coordinating institutions could be adapted only to a limited range of crops. The perennial problem of price volatility initially triggered the need to make production more efficient, which resulted in the increasing application of scientific methods to solve problems connected to growing and manufacturing rubber. From the end of the boom, European experts employed private companies to research efforts; these included industry associations, such as the HAPM and AVROS^{Footnote 107} research stations in East Sumatra, and colonial institutions, such as the Agricultural Department of Malaya and the Botanical Gardens in Singapore and Buitenzorg (eventually known as Bogor). Until the 1920s, most research activity had been focused on rubber, but during the post-WWI slump, advances in the edible oil market and several technological breakthroughs in oil processing made the production of edible oils increasingly attractive.^{Footnote 108} The cluster organization, already in place for rubber, could be easily repurposed for the domestication of the oil palm as an estate crop. Serendipitously, the oil palm also showcased a series of advantages over the Hevea tree. First, it flourished well in the local volcanic soil and was easier to develop because it took only three years to mature as compared to seven years for rubber trees. Second, it could grow only in a much narrower latitude span, which reinforced the region’s comparative advantage and thus reduced the number of competitor locations. Third, the oil palm was introduced directly as an estate (and European) crop, which provided a solution to rubber companies’ most pressing problem of smallholder competition. Indeed, given the need to process the fruit bunches within forty-eight hours of harvesting to contain oil acidity, the plantation lots needed to be close to mill facilities, which posed high fixed costs, favoring large-scale production over smallholding.

Finally, palm oil products represented a suitable alternative to rubber not just at the plantation level but also along its global supply chain. As palm oil products required similar bulking and shipping infrastructure to that used for liquid latex, maritime companies could leverage their expertise in rubber and easily repurpose existing facilities to store and transport palm oil.^{Footnote 109}

Similarly, at the plantation level, new palm oil ventures could leverage low-skilled labor already working on plantations as well as a cohesive network of experienced agronomists and cutting-edge research infrastructure. In the early 1920s, The Planter, the leading publication on regional plantation agriculture, started publishing agronomists’ contributions on the potential of oil palm.^{Footnote 110} The pioneers of oil palm domestication in the region were indeed a handful of major rubber players. In 1911, following some investments in rubber, the Belgian agronomist and plantation entrepreneur Adrian Hallet launched experimental oil palm estates in the Deli region of Sumatra.^{Footnote 111} In the same period, Hallet supported two French planters, Henry Facounnier and Franck Posth, by floating a company for their coconut estate in Selangor, where the first Malayan commercial cultivation of the oil palm began in 1917.^{Footnote 112} During the 1910s, the Hallet Group, which merged with Société Financière des Coutchoux (Socfin) in 1919, was at the forefront of oil palm domestication, especially in Sumatra.^{Footnote 113} Thanks to its expertise in rubber and knowledge of oil palms acquired in Belgian Congo, the group, under the leadership of Hallet, and later his nephew, Robert Michaux, managed to lead a quick expansion of the new crop in both Malaya and DEI. In the 1920s, Socfin set up the first palm oil bulk shipping station in Belawan, East Sumatra. By the early 1930s, the company controlled more than one-third of the region’s oil palm acreage, and by 1939 it accounted for an estimated 16 percent of global exports of palm oil products. Of the agency houses based in Malaya, Guthrie’s was the first to plant oil palms in a group of estates (Linggi Plantations, United Sua Betong Rubber Estates, and Malacca Rubber Plantations) around Kluang in Johor. In 1930 Guthrie merged these three estates by creating Oil Palms of Malaya,^{Footnote 114} and in 1933 it organized its own palm oil bulk shipping facility in Singapore.^{Footnote 115} In both territories, producers were organized into selling pools (the Sumatran Pool and the Malayan Palm Oil Pool), and, by the end of the decade, Socfin and Guthrie together controlled more than 70 percent of the nascent Southeast Asian industry, accounting for more than 50 percent of global supplies. Before WWII, Sumatran estates, mostly controlled by Socfin, represented the core of the regional palm oil exports, with acreage between 24,000 and 31,000 hectares in 1925 and around 100,000 hectares in 1940^{Footnote 116}; meanwhile, in British Malaya, expansion had been steady but remained more timid, from less than 10,000 hectares in 1922 to about 46,000 hectares in 1940.^{Footnote 117}

In summary, at the dawn of World War II, an independent palm oil cluster had spun off from the rubber cluster, displaying its own facilities and institutions, although in an embryonic form. However, through the interwar period and up to the end of WWII, the scope of the palm oil business remained negligible as compared with rubber, and its fate was still uncertain. In a 1928 letter to Lady Anderson, a major shareholder of Guthrie, the firm’s director, John Hay, explained:

Thus, with the exception of these selected companies operating in palm oil since the early 1920s,^{Footnote 119} Malayan rubber players were initially wary of entering the business on a large scale, which supported the preeminence of rubber through the interwar period.^{Footnote 120}

First, as an export commodity, palm oil competed with several substitute oils, which yielded tough price competition. Second, a major cause of concern was the monopsonistic character of demand, as the soap manufacturer Lever Brothers accounted for the majority of global purchases.^{Footnote 121} This was the main reason for H&C’s delayed entry into the market. The firm’s chairman, Eric Miller, was skeptical if palm oil was well known; he considered it foolish to invest in vegetable oils while Unilever dominated the buyer-side of the market.^{Footnote 122} Thus, on palm oil, H&C initially lagged behind its archrival Guthrie, as it opened experimental lots only in 1925 and maintained a small exposure in the crop from the interwar period through to the end of WWII.^{Footnote 123}

Lever Brothers (later Unilever) built its major soap brands on palm oil and was the major driver behind the survival of its production in Africa during the rubber boom. In 1911 the company obtained a license to open the first processing factory to exploit wild palm groves in the Belgian Congo.^{Footnote 124} A decade later, as palm oil was gaining ground in the East, Unilever was struggling to match production with mill capacity in both the Gold Coast and Sierra Leone.^{Footnote 125} Local governments in West Africa resisted granting land concessions to European producers as it could interfere with the local farming system.^{Footnote 126} This bears out in the correspondence between Governor Sir Ransford Slater and W. E. F. Jackson, the colonial secretary in the Gold Coast: “The cultivation of the oil palm in the hands of the natives and factors governing the ownership of land form serious obstacles to the introduction of the plantation system.”^{Footnote 127}

The fact that Unilever held strong interests in British West Africa through the United Africa Company, and also held large concessions in nearby Belgian Congo, represents a strong indication of why the industry remained divided between West Africa and Southeast Asia for a long time instead of shifting to the latter location more quickly during the first phase of palm oil domestication. Nevertheless, the correspondence between the representatives of Unilever and the Nigerian colonial officers clearly points to the paucity of the African business environment in terms of labor, infrastructure, regulation, and the state of research, which required the company to seek the reiterated support of the colonial administration.^{Footnote 128}

Indeed, the beneficial influence of the cluster organization on palm oil production in the East was already evident to West African producers in the mid-1920s and similar to what had happened with the South American rubber industry before the decline of Manaus,^{Footnote 129} palm oil production in the East was referred to as “a menace” in the conversations among high colonial officials.^{Footnote 130}

Although industrial organizations, such as the Association of West African Merchants, were operating in the region, the palm oil industry did not display the same institutional cohesion along the supply chain and across different colonial territories, which in Southeast Asia was granted by the preexisting rubber cluster. While in Asia researchers and companies operated at the regional level, West African palm oil development remained long compartmentalized within different colonies, to the extent that during the interwar period there were more contacts between West Africa and Southeast Asia via colonial institutions than within the different territories of the Palm Oil Belt. In 1925 the colonial governments of Nigeria and the Gold Coast financed an expedition to Sumatra, sending two agronomists, William Waters and Christopher Auchinleck, to investigate the alleged superiority of palm oil production techniques in Malaya and Sumatra.^{Footnote 131} In his report on the condition of oil palm estates in the Far East, Auchinleck’s was struck by four major aspects: (1) the rigor in the organization of the estates; (2) the scientific methods applied to cultivation; (3) the comparatively superior infrastructure; and (4) the availability of more disciplined labor. His report was rather skeptical of the possibility of African colonies catching up to the agricultural efficiency found in the Far East:

Indirectly, Auchinleck described the impact of the cluster organization on the quick development of palm oil in the East as opposed to western Africa. This suggests the cluster’s key role in supporting the increasing dominance of Asian locations as producers of palm oil in the subsequent years. Indeed, in 1936, Sumatran palm oil production surpassed the industry’s leader, Nigeria, and by 1939 the plantation cluster of British Malaya and Sumatra accounted for 50 percent of global exports.^{Footnote 133}