Oei Tiong Ham - Life

Life

The significance of Oei Tiong Ham is related to his role with the Oei Tiong Ham Concern (OTHC), which was the largest conglomerate in the Dutch East Indies during the late colonial era and early Indonesian independence period.

The OTHC originally started with the trading firm of Kian Gwan, established in 1863 by Oei Tje Sein, Oei Tiong Ham's father. In 1890, Oei Tiong Ham took over the firm Kian Gwan which diversified and grew into one of the largest firms in Southeast Asia. At the time Tiong Ham took over the firm, Kian Gwan’s main activity was trade, especially trade in rubber, kapok, gambir, tapioca and coffee. In addition, it was involved with pawnshops, postal services, logging and the highly lucrative opium trade. It has been estimated that between 1890 and 1904, Kian Gwan made a profit of some 18 million guilders in the opium trade alone, which provided the basis for his empire.

Unlike many of his Chinese contemporaries, Oei Tiong Ham relied heavily on written contracts in conducting his business. This did not make him popular in Chinese circles but it provided him with a legal basis to acquire the collateral for the loans he extended. Among his main debtors were often owners of sugar factories in East Java and when these factories were unable to repay the loans, due to the long-lasting effects of the sugar crisis of the 1880s he used his rights as a creditor. In this way he acquired five sugar factories. Sugar now became the backbone of the company and would remain so for the next several decades.

In the period between the 1890s and the 1920s, OHTC grew and diversified rapidly. It started branches in London and Singapore, created a bank, a steamship business and had a large wholesale business. Of all the ethnic Chinese business conglomerates in pre-war Asia, the Oei Tiong Ham concern was by far the largest. The company was even larger than the well-known "Big Five" Dutch trading companies that supposedly dominated the foreign trade of the Indies. The OTHC was strong in foreign trade, particularly in China. The basic strategy of the company was to take advantage of the opportunities on the world market for commodities produced in Indonesia. In 1912, Kian Gwan, the trading branch of the conglomerate was capitalized at fifteen million guilders, double the amount of the largest Dutch firm Internatio.

During the post-war boom of 1918-1920, the worldwide demand for Java sugar was high, creating many opportunities for sugar-mill owners and sugar brokers. But fortunes gained were easily lost in a couple of days. Oei Tiong Ham followed a cautious policy during these boom years. He did not speculate too heavily and took steps to improve its financial administration. Oei Tong Ham recruited talented accountants to set up a modern accounting system for the sugar factories. Due to the cautious and independent strategy, the company survived the subsequent sugar crisis while many other Chinese firms perished.

Besides making use of written agreements and a modern accounting system, Oei Tiong Ham also diverted from yet another Chinese business practice of the time. Instead of relying solely on family members in running his wide ranging business enterprises, he deliberately chose capable outsiders, such as Dutch directors, managers, and engineers to manage his companies. In 1920, Oei Tiong Ham left Semarang and settled in Singapore to escape Dutch colonial succession law and tax regime. Having eight wives and twenty-six official children, inheritance became important issues. He decided to hand his daughters and some of his sons cash, and make eight of his sons his rightful heirs, dividing among them an inheritance worth two hundred million guilders. Since only two of them, Oei Tjong Swan and Oei Tjong Hauw, had reached maturity, immediate succession did not seem to give too many problems.