Dutch East India CompanyThe 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 establish colonies.

BackgroundDuring 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.

BackgroundIn 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.

Formation 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 high-risk 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 overall control.

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.

Formation 

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 posts at Sukadana (southwest Kalimantan), Makassar, Jayakarta and Jepara inJava, 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.

GrowthIn 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.

GrowthIn 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 ISLE OF AMBOINAThe shipyard of the Dutch East India Company in Amsterdam, circa 1750.

A bond issued by the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins.

VOC headquarters in Amsterdam (the Oost-Indisch Huis)

Reproduction of a map of the city Batavia circa 1627 , collection Tropenmuseum.

Dutch Batavia in 1681, built in North Jakarta.

VOC Monogram formerly above the entrance to the Castle of Good Hope.

Graves of Dutch dignitaries in the ruined St. Paul's Church, Malacca in the former Dutch Malacca

Dutch factory of Hugly-Chinsurah in Bengal

Dutch ships in Chittagong, Bengal.