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Contents Page



    Transforming the Trading World

                                                    of Southeast Asia[i]


                                                                       Wang Gungwu



     When the first Asian businessman was listed among the world's billionaire entrepreneurs, the news was received as if he had been awarded a Nobel Prize in Business. Soon after, the questions became more boastful, even blase, "How many will we get this year and how many more the next?" These entrepreneurs are socially respected and popularly admired. Many have greatly improved their access to power and are even regularly consulted by political leaders both within and outside their countries.  It is hard to believe that, not that long ago (in some places, early this century and in others, much later), merchants in Asia were despised by those in power. [Kathirithamby-Wells 1993; Rudner 1994:15-50; Wang 1989]  For hundreds of years in China, merchants were carefully controlled and denied entrance into the political establishment. In India, theirs was an inferior caste. As for Southeast Asia, they were hardly mentioned in their own historical records.


     A remarkable change occurred during the 20th century. The entrepreneurial classes in Asia have now established a role in politics unthinkable at the beginning of the millennium. Many have become essential today to systems of power in countries where they had been subject to the whims of kings, nobles and the literate elites since time immemorial. That transformation is specially dramatic in Southeast Asia. After centuries spent struggling vainly for status, indigenous merchants have transformed their relations with those in power. They still include many who have started from humble beginnings, but many more are better educated and have received a variety of training. And they are increasingly expected to play public roles, some of which would prepare them to be partners in the power structures of the next millennium.


      How did that happen?


      From the first millennium of the modern era, the coastal peoples of South and West Asia (largely from India, Persia and later the Arabian states) took the lead to trade with both mainland Southeast Asia and the islands of the Indonesian archipelago en route to Chinese ports. [van Leur 1955; Hall 1985; Briggs 1951; Dumarcay 1985; Stierlin 1984] Their reach was remarkable when one considers the shipping and navigational conditions of the time, but perhaps their most enduring achievement was to show how trading initiatives could leave great cultural artifacts in their wake. We still point to the early monuments of Borobodur and Angkor Wat that show influences from these merchants who came by sea. But there were also persistent ideas and institutions of religious, political and artistic life that have enriched the region as a whole. The best examples would be the nature of kingship and the role of ritual, the spread of Hinduism, Buddhism and Islam, and the marvellous stories adapted from the Ramayana and Mahabharata. Such achievements testify to the way commercial vigour could fashion and enhance civilisation when trade flourished freely and attracted the active participation of local elites.


            Maritime commerce in Asia, however, had to contend for long centuries with agricultural empires whose interests lay elsewhere. It was challenged by states which placed stability over mobility and which were engrossed with defending land borders from nomadic confederations greedy for their wealth. Both China and India established value-systems that neglected the sea and asserted the primacy of politics, and these influenced the values of their neighbours in mainland Southeast Asia. Over time, even the successive polities in Java, the Central Vietnam coast and the Menam valley that profited from the trade brought to their ports adopted similar prejudices against trade. Like in China, Southeast Asian rulers were wary of their own traders and preferred that their officials dealt directly with foreign merchants. In this way, they were inhibited from creating their own long-distance trading empires that could take advantage of the free flow of sea-going commerce.


            Although the conditions for a maritime civilisation were absent locally, the trade through the region continued to grow during the second millennium. For such trade to be successful over a sustained period, there needed to be political support for armed shipping and a commitment to mercantile values that encouraged risk-taking for high profits. A thousand years ago, only the Arabs and Muslim South Asians who led the trade with China had such a background and their efforts enabled them to extend their enterprises into the Malay archipelago. Eventually, they stimulated Chinese merchants themselves to develop better ocean-going shipping to trade in the region as well. [Hirth and Rockhill. 1911; Batuta. 1983]


            During the 10th century, the briefly independent kingdoms in southern China, in Guangdong, Fujian and Zhejiang provinces, welcomed that trade and opened a new era of maritime activity for the Chinese. This trade was built around a network of official relations with Champa and the Khmer empire on the mainland, and the Srivijayan port cities of Sumatra and the Malay peninsula that later came under the dominance of Javanese Madjapahit. The trade also opened up relations with parts of Borneo and the Philippine islands. With the support first of the Southern Song dynasty (1127-1279) and then of the Mongol Yuan dynasty (1260-1367) officials in southern China, a strong Chinese trading presence was established in all the littoral states of the South China Sea. [Wang 1998; Schafer 1954; Wolters 1967; Hirth and Rockhill 1911]  It did not challenge the through trade which the South and West Asians had pioneered and still dominated, but it made inroads into the intra-regional and entrepot trade.


            Wherever there was rivalry and competition, conflicts were inevitable, and various Chinese and Muslims were involved in the wars of Champa, Srivijaya and Madjapahit. But records are scanty, being largely Arabic and Chinese rather than preserved in local language sources, and all are short on details about the volume of the growing trade and the specifics of the serious disputes that arose from time to time among local rulers and port officials. What is clear, however, is that, on the eve of the arrival of European armed merchants during the 16th century, a number of large emporia had been established in Southeast Asia which provided the early Portuguese, Spanish and Dutch officials and traders with the basic conditions for commercial expansion. [Reid 1988 & 1993; Ptak and Rothermund 1991; Prakash 1997; Wills, Jr. 1974; Wills, Jr.1984]


            Thus the first half of the 2nd millennium saw local trade develop alongside a larger through trade created by merchants from the Indian Ocean. The fact that there was no East Asian counter response was not due to the lack of naval strength. Only just a century before the coming of the first Portuguese in 1508, the Chinese of the Ming dynasty (1368-1644) demonstrated that they had the power by sending out the seven great naval expeditions of 1405-1433 led by the Muslim Chinese Admiral Zheng He (Cheng Ho). These did not, however, reflect any change of Ming anti-mercantile policy. On the contrary, the expeditions were an affirmation of the dynastic concern to monopolise all foreign trade and keep it out of private Chinese hands. [Wang 1998: 301-332 & 992-995; Levathes 1994]   This was a policy that the Ming rulers maintained for nearly 200 years. It was not until 1567, in the face of intensified maritime trade off the China coasts spearheaded by the Portuguese that the policy was relaxed and some Chinese merchants were officially permitted to trade abroad. Still, unlike the Europeans and some Southeast Asian rulers, and more like the isolationist rulers of India and Japan, the Chinese gave their traders no naval support. This left the region open to further external penetration by the West, which was not long in coming. By the end of the 16th century, both the Spanish and the Dutch had begun to intensify the European rivalry that dominated economic growth in Southeast Asia for the next three centuries.


            What is even more important was that, for the Europeans, a fundamental shift in the relationship between trade and power had begun. This had its beginnings in the Mediterranean world of trading empires. In contrast, all attempts to build trading empires in Southeast Asia, whether by the Javanese, the Chams, the Khmers, the Malays or the Thais, had been futile. This had been due to the fact that, for their rulers, it was political power that made trading wealth possible, never the other way round. This had also been true of other polities elsewhere in Asia, strikingly so in India and China. It was political power that generated and guaranteed wealth. Rich merchants could be instruments of that power, but their wealth did not translate into power. Without legal protection of private wealth, confiscation was an oft repeated means of ensuring that great wealth did not build up a rival power base. Thus, such wealth was always peripheral to political power.


            The Europeans were to offer a different model. They brought not only stronger ships and new methods of naval warfare, but also represented different political systems. When they first arrived, their distance from their home bases on the shores of the Atlantic Ocean made them cautious and vulnerable. Nevertheless, they were strong enough to establish fortified ports to secure their trading needs, especially in Southeast Asia. In succession, the bases were erected as extensions of those in India and the African coasts. The larger ones that remained secure for centuries were those in Goa, Melaka (Malacca), Macau, Manila and Batavia. [Meilink-Roelofsz 1962; Schurz 1959; Glamann 1958; Kathirithamby-Wells and Villiers 1990; Furber 1976]  Other attempts to found new ones in Taiwan, Vietnam and the Malay peninsula were aborted, but the quest for more bases continued well into the 18th century, culminating in the major British advances in India and then in Penang in 1785. By that time, the French were also pushing into the region, and succeeded in establishing their foothold in the Indochinese peninsula at the beginning of the 19th century. [Tarling 1962; Nguyen 1987]


            On the surface, the European merchants and officials acted like local potentates in using political and naval power to gain trading wealth. In fact, they knew that the nature of political power at home was changing. The most advanced in directly linking political and merchant power had been that of the Dutch. The merchants who managed their East India Company represented the new political spirit of participation and responsibility that marked the prelude to the citizen and nation states that ultimately transformed European politics. They formed the  bourgeois class and established the nexus with professional politicians that have characterised modern governance ever since.


            Throughout Europe in the 18th and 19th centuries, governments were being modified by mercantilist ideas. Even the imperialism that arose from the far-flung territories controlled by the Spanish, the British and the French was based on institutions developed out of those ideas. The state would marshal its resources to support industrial capitalism and the capitalists who competed successfully against their foreign rivals were rewarded for their contributions to national power. It was not for nothing that imperialism came to be linked to the capitalism that began to flourish following Western advances into Asia. [Elson 1992; Betts 1975; Robinson and Gallagher 1953: 1 - 15]


            There was, of course, a transitional phase in this realignment of the power balance between European merchants and the political establishment. Stories of the extravagant displays of wealth by company officials and country traders in India and Southeast Asia during the 17th and 18th centuries showed that European merchants were willing to follow local practices because such displays bought status where wealth alone could not be translated into power. But the evolving European political system offered the newly rich a share of power and positions of trust. There were also other dramatic changes. The industrial revolution in Britain gave even greater advantages to the maritime power that had introduced global trade to all parts of the world. The emergence of a series of nation-states in Europe after the French revolution and the empire of Napoleon led these states to build rival empires all over Asia and Africa. Trade had openly become the handmaiden of political expansion, and trading wealth began to influence the political arena more directly.


       This transformation became the greatest challenge to the feudal elites of the Asian states. When they came under direct or indirect colonial rule, they saw that their own traders could acquire new sources of influence and power. In the Malay archipelago, Bugis and Minangkabau businessmen joined Chinese, Arab and Indian merchants in seeking out foreign officials and trading organisations to bypass the traditional ruling class. The threat of being displaced by newly enriched elites had become real. Some members of the ruling elite found safety by becoming colonial bureaucrats; others turned to anti-colonial nationalism to win back their pride and self-respect. Malay aristocrats trained for the civil service, while their military counterparts in Thailand evolved a nationalist ethos. In Dutch-controlled lands, Sukarno and Mohammed Hatta thought their people needed higher ideals than commercial wealth. But, whichever route they took, they sought out allies among those who had mastered the skills to exploit the larger and more open trading world. [Johan 1984; Sutherland 1979; Milner 1995]


            During the last century of the millennium, global economics vied with political power, for the first time in history, to play the dominant role in our lives. This phenomenon was most strikingly obvious in maritime countries like Japan and its former colonies of Taiwan and (South) Korea and the new nations created out of the Malay archipelago. Japan, and then Hong Kong, Singapore, Malaysia and the Philippines have been exposed to the two largest trading empires created by sea power during the past two centuries; the highly structured empire of the British and the informal one of their successors, the Americans. The impact of such changes has now brought the possibility that the global markets that grew so spectacularly in recent decades will finally triumph over residual feudal and authoritarian structures.


            For Asia, especially Southeast Asia where trade had been more open and flexibly managed for centuries, the new millennium offers its greatest challenge - and opportunity. Will the new nation-states allow their nationalism to turn them back to older value-systems and keep their entrepreneurs out of political power, or will they allow power to be shared and accept that their new merchant classes offer the best chance for their countries to thrive in the borderless economic order? Whichever the outcome, the choice itself highlights a fundamental economic power shift during the past millennium that no state can afford to underestimate.




1.  J. Kathirithamby-Wells. 1993. "Restraints on the Development of Merchant Capitalism in Southeast Asia before c. 1800". In  Southeast Asia in the Early Modern Era: Trade, Power, and Belief, edited by Anthony Reid. Ithaca, N.Y.: Cornell University Press;  David W. Rudner.  1994.  Caste and Capitalism in Colonial India: the Nattukottai Chettiars. Berkeley: University of California Press, chaps. 2 and 3, pp. 15-50; Wang Gungwu. 1989. The Culture of Chinese Merchants, Toronto & York University Joint Centre for Asia Pacific Studies (Working Paper Series No. 57), Toronto.


2.  J.C. van Leur. 1955. Indonesian Trade and Society: Essays in Asian Social and Economic history. Translated by James S. Holmes and A. van Marle. the Hague: van Hoeve; Kenneth R. Hall. 1985. Maritime Trade and State Development in Early Southeast Asia. Honolulu: University of Hawaii Press; Lawrence P. Briggs. 1951. The Ancient Khmer Empire. Philadelphia: American Philosophical Society; Jacques Dumarcay. 1985. Borobodur. Edited and Translated by Michael Smithies. Singapore: Oxford University Press; Henri Stierlin. 1984. The Cultural History of Angkor. London: Aurum Press.



3.  F.Hirth and W.W. Rockhill. 1911. Chau Ju-Kua: His work on the Chinese and Arab trade in the twelfth and thirteenth centuries, entitled Chu-fan-chi. Translated from the Chinese, and annotated by Frederich Hirth and W.W. Rockhill. St. Petersburg: Imperial Academy of Science; Ibn Batuta. 1983. Travels in Asia and Africa, 1325-1354. London: Routledge and Kegan Paul (Reprint of first edition published in 1929).


4.  Wang Gungwu. 1998. The Nanhai Trade: the early history of Chinese trade in the South China Sea. Second edition. Singapore: Times Academic Press; Edward H. Schafer. 1954. The Empire of Min. Rutland, VT: C.E. Tuttle; O.W. Wolters. 1967. Early Indonesian Commerce: a Study of the Origins of Srivijaya. Ithaca, N.Y.: Cornell University;  Hirth and Rockhill. 1911. Chau Ju-kua (see note 3).


5.  Anthony Reid. 1988 & 1993. Southeast Asia in the Age of Commerce. In two volumes, especially vol. 2: Expansion and Crisis. New Haven: Yale University Press; Roderich Ptak and Dietmar Rothermund. Eds. 1991. Emporia, commodities and entrepreneurs in Asian Maritime Trade. Stuttgart: Franz Steiner Verlag; Om Prakash. 1997. European commercial expansion in early modern Asia. Aldershot, Hants.: Variorum; John E. Wills, Jr. 1974. Pepper, guns and parleys: the Dutch East India Company and China, 1622/1662-1681. Cambridge, Mass.: Harvard University Press; and John E. Wills, Jr. 1984. Embassies and Illusions: Dutch and Portuguese envoys to Kang-hsi, 1666-1687. Cambridge, Mass.: East Asian Monographs, Harvard University.


6.  Wang Gungwu. 1998. "Ming foreign relations: Southeast Asia". In The Cambridge History of China, vol. 8: The Ming Dynasty, 1368-1644, Part 2, edited by Denis Twitchett and Frederick W. Mote.  Cambridge and New York: Cambridge University Press, pp. 301-332, and 992-995; Louise Levathes. 1994. When China ruled the seas: the treasure fleet of the Dragon Throne, 1405-1433. New York: Simon & Schuster.


7.  M.A.P. Meilink-Roelofsz. 1962. Asian Trade and European Influence in the Indonesian Archipelago between 1500 and about 1630. The Hague: Nijhoff; William L. Schurz. 1959. The Manila Galleon. New York: Dutton (reprint of 1939 edition); Kristof Glamann. 1958. Dutch-Asiatic Trade, 1620-1740. Copenhagen/The Hague: Danish Science Press and the Martinus Nijhoff; J. Kathirithamby-Wells and John Villiers. Eds. 1990. The Southeast Asian Port and Polity: Rise and Demise. Singapore: Singapore University Press; Holden Furber. 1976. Rival Empires of Trade in the Orient, 1600-1800. Minneapolis: University of Minnesota Press.


8. Nicholas Tarling.  1962. Anglo-Dutch Rivalry in the Malay World, 1780-1824. St. Lucia: University of Queensland Press; Nguyen Khac Vien. 1987. Vietnam: a Long History. Hanoi: Foreign Languages Publishing House.


9.  Robert E. Elson. 1992. "International Commerce, the State and Society: Economic and Social Change". In The Cambridge History of Southeast Asia, Vol. two: The Nineteenth and Twentieth Centuries. edited by Nicholas Tarling. Cambridge: Cambridge University Press; Raymond F.Betts. 1975. The False Dawn: European Imperialism in the Nineteenth Century. Minneapolis: University of Minnesota Press; Ronald Robinson and John Gallagher. 1953. "The Imperialism of Free Trade", Economic History Review, Second Series, no. 6, pp. 1-15.


10.  Khasnor Johan. 1984. The Emergence of the Modern Malay Administrative Elite. Singapore: Oxford University Press; Heather Sutherland. 1979. The Making of a Bureaucratic Elite: the Colonial Transformation of the Javanese Priyayi. Singapore: Heinemann Educational Books (Asia); and Anthony Milner. 1995. The Invention of Politics in Colonial Malaya: Contesting Nationalism and the Expansion of the Public Sphere. Cambridge: Cambridge University Press.













[i] An earlier but not the same version of this article appeared in the Far Eastern Economic Review in June 1999.