Changing from a post-war commercial slum to a modern industrial state, Penang has undeniably come a long way. Once a thriving port and settlement under the colonial government, Penang suffered an economic downturn after the Second World War. The emergence of economic nationalism at the federal centre following Malaysian independence precipitated the erosion of her free port status, and gravely sapped her entrepot trade, until then the mainstay of the state.

In order to salvage the economy, the Penang state government adopted a master plan in 1964, known as the Munro Report. But this quicky proved a failure. It was succeeded by the Robert Nathan Report 1970, which is given the credit for successfully turning Penang into an industrial economy.

This paper outlines the economic woes Penang faced in the post-war years, and discusses how and why the Munro Report failed where the Nathan Report succeeded in charting a new economic trajectory for the state.

Penang's Post-war Economic Condition (1948-1963)

Penang's vibrant entrepot trade with the surrounding areas like Perak, Sumatra, Thailand and Burma never really recovered after the Second World War. The Malayan Union structure that the returning British imposed on the peninsula soon after their return ended for good the Straits Settlements that the Japanese had overwhelmed. Despite official recognition of Penang's free port status, the post-war regime imposed trade regulations that contravened the interests of Penang. An example was the Prohibition of Export Order 1946, which prevented Penang from exporting to the lucrative markets of Sumatra and Siam. Merdeka in 1957 saw Penang turn another difficult corner. The nationalistic wish for greater centralization of trade and commerce restricted further Penang's entrepot trade.

In the early 1960s, economic nationalism hit Penang's entrepot partners in Sumatra, Thailand and Burma, and this led to further economic decline for Penang. Most of the newly independent countries were seeking economic dependence in one way or another, and building up import-substitution industries. Nothing seemed to be going Penang's way. Malaysia sought to industrialize it economy and began to develop Port Swettenham (now Port Klang), and this weakened further the trade volume in Penang. The first Five Year Plan (1956-1960) and the second Five Year Plan (1961-1965) highlighted the importance of manufacturing industries to the Federation's long-run development.

Most earlier works have long held that Penang's hey-day finished when Singapore emerged in 1819 at the tip of the Malay Peninsula. This new British colony was strategically situated and able to attract commerce and investment from both the region and the world. Thereafter, Penang was of no real importance, as the rise of Singapore necessarily reduced it to nothing but a local commercial centre. However, this chapter reveals that Penang continued as a flourishing regional hub for the whole of the nineteenth century, and was in some respects even more important than Singapore. It then goes on to discuss the operations of the leading Hokkien merchants, the Big Five, considering their various economic activities from shipping through to entrepot trade, commodity production, opium farming, to coolie trade, and how the Big Five dominated all these economic activities.

The Continuing Prosperity of Penang

The foundation of Penang by the British in 1786 was mainly due to strategic and commercial interests. A series of events in the early 1780s — the active presence of French naval forces in Indian Ocean and their intention to secure the tin trade of the Tenasserim coast during the early 1780s, the closure of Dutch East Indies ports to British ships during 1782–83, and the Dutch conquest of Riau in 1784 — had made the British (East India Company) greatly aware of the dangerous stranglehold two hostile European powers had on their mercantile interests in Southeast Asia. This exigency prompted the British to establish a base in Penang, an island off the west coast of Kedah. Situated at the northern end of the Melaka Straits and on the periphery of the archipelago, Penang was in close proximity to some old trading ports. Aceh in northern Sumatra was nearby in the west, while Kedah and Perak in the western Malay states flanked the east of the island. To the north, it was open to Rangoon and Mergui in southern Burma and Phuket of southwestern Siam, Selangor and Melaka lay to the south. Penang, in the middle of this matrix of ports, developed rapidly as an entrepot. If Penang suffered a decline in trade when Singapore was established in 1819, it quickly rose as a centre of regional trade in the 1820s (Raman 1969/70, pp. 29–30; Freeman 2003, p. 139).

The secret of how the Big Five could assert their dominance in the Penang region lies in the multiple alliances between them and other prominent families. However, different from the conventional beliefs that Chinese family networks were as closed as they could be, cross-dialect and crossethnic alliances played a major role in the Big Five's business partnerships. Yet this cluster of five families was able to form all these alliances and attain their economic predominance in the face of the fluid and plural socio-economic environment of the region. This chapter explores how and why this situation came about.

The family network of the Big Five, which was composed of a web of kinship ties based on extended consanguineal lineages and strategic intermarriages, inextricably bound the five families together and while also connecting them to other prominent Hokkien and Hakka families. Further a field, Indo-Malay families in Penang, Kedah, Perak and North Sumatra as well as Siamese and Chinese families in southern Siam and southern Burma were all woven into the net of marriage alliance. Extensive criss-crossing of kinship ties clearly served as an important foundation for the forging of inter-family and inter-ethnic alliances and partnerships between business families in the promising, yet potentially hostile and insecure, environment of competing colonial and indigenous powers. Through this web of kinship ties the Big Five families were able to establish their business concerns in Penang and the surrounding states.

Clan association in Penang is more popularly known as kongsiand here it refers to an autonomous organization of shared interests based upon blood ties and geographical affinity among its members. Each of the Big Five was grouped within and represented by its own kongsi: the Seh Khoo Kongsi, the Seh Cheah Kongsi, the Seh Yeoh Kongsi, the Seh Lim Kongsi, and the Seh Tan Kongsi (Yen 1995, pp. 81–86). Both Cheah Kongsi and Tan Kongsi were established in 1810; it was then followed by the Yeoh in 1834, the Khoo in 1835, the Tan in 1851, and the Lim in 1863. With such groupings each of the five families was able to develop extended consanguineal lineages which in turn led to the formation of a substantial agnatic or blood-related kinship group.

The Penang-centred region of the 1860s to the 1880s witnessed not only dynamic commercial and intensifying business competition. Opium revenue farming generated the most intense competition among the mercantile and political elite groups in the region. The Ghee Hin, a sworn brotherhood huicontrolled by the Cantonese, Teochew, Hakka (mainly Fui Chew) business elite, was the arch-rival of the Big Five. Besides, the Big Five also faced challenges from the Siamese local chiefs and British officials who attempted to break their monopolistic control of opium farms. This chapter investigates this competition. It begins by introducing the Cantonese, Teochew, and Hakka that clustered around the Ghee Hin before considering the challenges posed by the Ghee Hin, the Siamese, the British, and the Singapore Hokkien mercantile elite to the Big Five's opium and tin business. It then examines the strategies the Big Five adopted to deal with these challenges, showing how the Big Five weakened the challengers and achieved their opium farming hegemony in the region.

Sworn Brotherhood Hui: The Ghee Hin and Kian Teik To ng

The sworn brotherhood hui, more commonly known in Western sources as secret societies, were an inseparable element of the nineteenth-century Chinese society in the region. Carl Trocki has defined the sworn brotherhood huias organized agencies of social control and avenues of economic progress.1 As Francis Light wrote in January 1794 to the Governor-General of Bengal, the Chinese in Penang were a “valuable acquisition, but speaking a language which no other people understand, they are able to form parties and combinations in the most secret manner against any regulation of government” (Purcell 1948, p. 40). Light's statement indicated the existence of the sworn brotherhood hui, or the so-called secret societies in 1790s Penang. The Ghee Hin, founded in about 1790, was most probably the first and dominant huithere (Wong 1964/65, p. 120; Teoh 2002, p. 232). At the time it was jointly controlled by a group of influential Hokkien and Cantonese merchants.

In the early nineteenth century, however, as the Hokkien faction emerged as a dominant force in the business of revenue farming and played an active role in shipping and trading, the growing economic wealth of its main families enabled them to become more powerful in the hui.