Freedom of navigation and trading

The instruction for the Commissarissen Generaal had indicated a number of subjects that the new Regeringsreglement should regulate. One of those was the freedom of navigation in the archipel. Under the VOC that freedom had in principle been denied both to foreign-flagged shipping and to private Dutch merchants. But this was no longer an option. So the Commissioners studied the history of the policies applied to the subject in the time of the Company, and later under the Daendels regime, and the Raffles regime. The Commissioners concluded that the only solution to the problem would be to allow freedom of navigation to both foreign-flagged shipping and private Dutch shipping on an equal footing, but that Dutch shipping would be privileged by a (discriminatory) tariff policy.^{[lower-alpha 12][47]} However, Elout did not think this was enough to protect the Dutch interests, so he convinced his colleagues to introduce another restriction on inward bound foreign traffic: an obligation for all imports to be landed in Batavia, which was to function as a kind of Staple after the example of the Amsterdam Entrepôt of old.^[48] Not only did this hurt the interests of ports like Semarang and Surabaya, who had a much more important hinterland then Batavia, but the accompanying bureaucracy suffocated especially the trade of non-European businessmen in the Indies, who were less used to having to navigate such obstacles. Kemp contrast this with Raffles' policy of deregulation in the new port of Singapore, which directly competed with the Dutch Indies ports, and which consequently was allowed to flourish.^[49] Finally, Van der Capellen promulgated an apparently innocuous executive order that limited the issuance of customs clearances^{[lower-alpha 13]} for shipping to the Spice Islands to ships under Dutch flag (unless a foreign flagged ship traveled under contract with the Indies Government). In effect this "administrative policy" severely limited foreign-flagged shipping in its free navigation in those islands. It would be a bone of contention with the British, who of course were the intended victims of this policy, though this was not acknowledged by the Dutch.^[50]

Embassy of the VOC to the Shunzhi Emperor 1656, by Johan Nieuhof

Related to the freedom of navigation was the freedom to trade in the commodities that the archipelago produced, first of all the Spice trade. Under the VOC this was legally non-existent. The VOC as a chartered company had the legal monopoly of trade on the Dutch East Indies. It was a private concern, but one endowed with quasi-sovereign rights, such as the competence to make war and peace with foreign entities, and to engage in international treaties on behalf of the sovereign of the Dutch Republic, the States General of the Netherlands. In the Indies it used these powers prolifically, using force to keep competitors like the EIC at bay, and to force indigenous rulers to conclude (unequal) treaties with it. Like the Portuguese Empire before it the VOC used a business model that could be characterized with one word: Monopoly. Or more precisely, Monopsony on the market for producers of spices, and monopoly for the market of European consumers of these spices. This policy was most successful for the market in nutmeg in the Banda Islands, where the growing of the spice was concentrated after 1621. For other spices such as pepper, that grew over a wider area, only an oligopsony, resp. oligopoly was achieved.^[51]

Official trade zone (Octrooigebied), allotted by its charter to the VOC

Two developments put an end to this halcyon state for the VOC. The British broke the monopoly for nutmeg during their occupation of the Moluccas by exporting rootstock to their other possessions. But more important was that new economic insights gave monopoly a bad name around the time the Commissioners had their deliberations. Monopoly rent as levied by monopolists and their ilk works to the detriment of consumers, and of the economy as a whole. The Commissioners realized that it actually was a good thing if the old monopolies of the VOC were abandoned under the new regime they were establishing. And so they decided. All merchants, foreign and domestic, would from then on be allowed to engage in the spice trade in the East Indies. Competition would eliminate the monopoly rent, and everybody (except the monopolists) would be better off. Oranje shows that these liberal views of trade had already under the VOC regime existed as a minority opinion, and that the British during their occupation had replaced the monopolies with a system of tariffs and excises on economic activities. The Commissioners decided to follow this example, but to bias the system in favor of Dutch citizens by differentiating the tariffs between foreign traders, and Dutch and Indonesian ( among whom ethnic Chinese) traders.^[52]

The VOC had (as only European traders) been allowed to trade on Japan, where a trading post had been maintained on the island of Dejima near Nagasaki. Even during the British occupation of the Dutch Indies this trading post had remained in Dutch hands. Commissioner Hendrik Doeff had been more or less marooned there during this time. The Commissioners now relieved him and sent Jan Cock Blomhoff as his replacement, to re-establish relations of the Kingdom of the United Netherlands with the Shogun.^[53]

Another matter related with foreign relations was the question whether to allow foreign nations to station their consuls in the Dutch Indies. The Commissioners opposed this notion, because they feared that this would lead to state interference with free trade. Also, as long as businessmen had free access to the Governor General, a possible conflict would not immediately have international repercussions in the absence of foreign representatives.^[54]

Tax system

Under the VOC the production of commodities remained under the control of the so-called Regents, who were deemed to own all land in their Fief and the people inhabiting it. The VOC found it convenient to deal only with these native rulers and not engage in "retail" trade (like their Asian competitors in the spice trade), but contract with them on the "wholesale" level for the delivery of the annual harvest of commodities. The Regent was solely held responsible for these deliveries, and he used his adat rights to get his subjects to expend the mostly unpaid labor necessary to produce the commodities. As a profit-maximizing enterprise the VOC directors were always concerned to avoid taking on unnecessary expense, and they certainly considered setting up a state apparatus in the archipelago, with its provision of public services, an expense to be avoided. The reverse side of this policy was that they could dispense with a system of taxation to gather the revenue that would have been necessary to maintain a state apparatus. Excise taxes were the only taxes the Company levied, just as the Dutch Regenten did in Patria.^[55]

When the Batavian Republic nationalized the VOC and so legally acquired its "assets", the reformers, like Dirk van Hogendorp, had very different ideas. He advocated an enlightened policy which would transfer the land rights to the people cultivating the land. He did not prevail, but his ideas influenced Governor-General Daendels sufficiently that the latter in practical terms abandoned the legal fiction that the land belonged to the Regents, putting another legal fiction in its place, namely that the land belonged to the sovereign of the Netherlands, and that all cultivators were legally his tenants. This would become the legal basis for the introduction of a system of taxation for the common residents to finance a state apparatus.^[56]

A Javanese sawah with cultivator

When the British took over, Raffles put this notion into practice in his landrente system, that was based on British common law concepts about land tenure. The Dutch colonial official Herman Muntinghe, who assisted Raffles with the design of the landrente system deserves a large part of the credit for this. The system was more than just a fiscal innovation. By introducing the notion that the land belonged to the cultivators as tenants, the economy of the archipelago was fundamentally changed. Previously, the people of the Indies were subsistence farmers who lived in a barter economy. They had no incentive to produce the commodities which interested the colonisators, and left to their own devices they would probably only have planted rice. The landrente system would transform them (at least in the long run) into farmers who produced for the world market, was the idea. This would be achieved by levying the tax for the moment in kind, in the form of obligatory amounts of prescribed products, but in future cash was supposed to take the place of these deliveries.^[57]

The Commissioners came, after long study, to a variant of Raffles' landrente, that was based on a mixture of individual and communal tenure of the land that was formally owned by the government. Every dessa head would parcel out the land allotted to the dessa among individual members of the community. These tenants would till the land as a kind of sharecroppers^[58] and pay the government an in-kind tax in the form of a percentage of the harvest. The tax was based on the principle of admodiation.^{[lower-alpha 14]} The estimated size of the harvest to be taxed was a matter of negotiation between the dessa head and the tax collector. In this context the Malay word tahar (to haggle) comes to mind.^[61]

Preanger region

An ancillary source of revenue for the East Indies government was the leasing of coffee plantations in the Preanger region of West-Java to the local population. The VOC had introduced the cultivation of coffee at the turn of the 18th century, and it had become a very profitable quasi-monopoly for a time. The Commissioners sought to give this cultivation a new lease on life by introducing a system that gave Javanese outside the Preanger region an incentive to engage in it.^[62] The government of the East Indies would henceforth lease out plantations to local village dwellers (with exclusion of Europeans and ethnic Chinese as Raffles had allowed^[63]) and not individually, but to entire dessas, for fixed terms. In no way the use of coercion was to be allowed (as had been the practice under Daendels). In the Preanger region the old system as it had been instituted under the British would be continued.^[64] One of the considerations of the Commissioners was that it would motivate the Javanese to engage in the cultivation of coffee if they were guaranteed the fruits of their labor. The plantations would be leased for 6-year terms to entire dessas that would collectively be responsible for the cultivation, including the replacement of diseased trees, and perform new planting to an extent of one-sixth of the existing acreage. They would have to follow the directions of a governmental botanical service. The rent would vary according to the quality of the plants, following a tariff that conformed to the landrente tariff. The rent could be paid in kind or in cash. If in cash the rent would be calculated according to a price that would be annually determined. In this way a cultivation that was once subject to coercion, was transformed to a form of free agriculture under market conditions. The stated purpose was to protect the population from arbitrary treatment; to improve their circumstances; to guarantee them the fruits of their labor; and to treat them on the same footing as other subjects of the king.^[65]

When it came to the implementation of the new system of taxation the Commissioners had to reckon with one practical: problem: the collection of the landrente had stagnated since the departure of the British in 1816. There were therefore large arrears of taxes owed, so large even that in some cases the arrears were equal to the annual harvest. The Commissioners therefore decided to remit the taxes for the years since 1816 by a decree they issued in early 1819. Doing otherwise might have caused great hardship for the population, and possibly have led to riots or worse. But this remission had dire consequences for the financial situation of the colony. And the delay in implementation also made it impossible to sense the acceptance of the new system under the Regents and the common population.^[66]

Finally, in this context of the general economy of Java in particular, the Commissioners promulgated a number of important regulations. So were immigrating Europeans no longer freely admitted, but had they to obtain permission from the Governor General to become residents. The development of jungle areas (for instance by logging the forests) was no longer freely permitted to Europeans either. And the slave trade (already prohibited by the British, and proscribed in the Convention of London), was formally outlawed. Not so, however, the institution of slavery itself, as this was deemed to be unacceptable to both Europeans and the indigenous population, who prized slavery as in accordance with adat.^{[lower-alpha 15]} The Commissioners, however, continued the policy instituted by the British to promote the gradual abolition of slavery by way of a "Java Benevolent Society" to aid the manumitted slaves.^[68]

The coinage

A Netherlands Indies gulden, 1821^{[lower-alpha 16]}

East Indies Java 'rupee, circulating next to the Netherlands Indies gulden

At their arrival the Commissioners encountered total chaos in the field of the coinage. All kinds of coins circulated, leaving it to the market to determine the exchange rates, which in turn hindered the free circulation of money, and economic activity in general. There also was simply too little money, both coins and paper money, in circulation to serve the economy adequately. Let alone to make the transition from a barter economy to a money economy feasible. Apart from this the Commissioners had received the instruction to erect a monetary union between the Netherlands and the Dutch East Indies. In short, the regulation of the coinage was a priority.^[69]

The Commissioners started with establishing a new standard coin or currency unit, the Indische gulden (Netherlands Indies gulden). This was a silver coin with the same face value as the silver Dutch guilder. The problem was that silver bullion was 20% more expensive in the Indies than in the Netherlands. Using the same silver content would therefore make the Dutch guilder 20% less valuable in the Indies, and therefore subject to Gresham's law drive the Indies guilder out of circulation. The Commissioner's therefore had to think of a ruse to debase the Indies guilder to such an extent that the intrinsic value of the two coins would be about equal. The solution was to abuse the fact that the subdivision of both guilders was 16 stuivers. However the exchange rate between the Indies stuiver and the Dutch stuiver was 20:16. By setting the intrinsic value of the Indies guilder at 16 Indies stuivers, instead of 16 Dutch stuivers, the problem was therefore solved.^[70]

An additional problem that one of the other coins circulating, especially under the indigenous population, was a local form of the rupee. The intrinsic value of this coin was less than that of the new guilder. The Commissioners used this as an argument not to adopt "rupee' as the name for the standard coin. The rupee was also the denomination of the local paper money, which had a bad reputation. Adopting another name than rupee would therefore prevent the new money to suffer from the bad reputation of the old.^[71]

The Indies guilder would be divided into 120 duiten, or 30 stuivers, reflecting the lesser value of the Indies guilder, as the intrinsic value of the Dutch guilder was 24 stuivers. This required however, that to avoid a factual lowering of government salaries, the exchange rate for the calculation of Indies salaries would be 25 stuivers for the guilder, or 100 duiten for each Dutch guilder.^[72]

The Commissioners had brought along 2 million Dutch guilders in specie to guarantee the value of paper money. The same amount of paper money was now issued. This helped anchor the value of the paper money in circulation. For every type of money metal (like copper and zinc) the exact value was established in terms of duiten. The issue of coins made of such other metals against a face value that did not reflect the intrinsic value was prohibited. Counterfeiting was made a capital offense. Paper money issued by the British was now taken out of circulation, as there was enough money available to finance this. Paper money issued under the Daendels regime, on the other hand, was disavowed. It lost what little value it might stil have had.^[73]

In his 1819 report Elout concluded that the reform of the monetary system in 1817 had been a success. The issue of silver Indies guilders had been disappointing, but on the other hand the coining of silver rupees had been very successful, and thanks to the fixed exchange rate with the guilder this achieved the same purpose.^{[lower-alpha 17][74]}

Colonial Administration and Judicial Organisation

Building of the Hooggerechtshof (Supreme Court) of the Dutch East Indies in Batavia

The Commissioners decided to leave the administrative division of Java into residencies that Daendels had instituted in place.^{[lower-alpha 18]} At the head of each residency stood the Resident (directly responsible to the Governor General), often deputized by assistent-residents, who headed the administrative organisation and colonial official corps. He was responsible for the government of the residency and the maintenance of law and order. He was therefore also the chief of police, and presiding magistrate for criminal and civil cases regarding the indigenous population, administering the adat cases that pertained to them.^{[lower-alpha 19]} The Residents could also make local ordinances. Furthermore, they headed the financial administration of the residency and were responsible for drafting its budget. The management of infrastructure, especially the hydraulic management for the residency, was another responsibility (under the supervision of the Chief Inspector for Water Management in Batavia). The position of the Regents and their remuneration was also codified in accordance with the new legal fiction that they were no longer sovereign in their fiefs, but subject to the Dutch king and his representatives in the colony.^[76] The position of the Governors and Residents in the areas in the archipelago that were not under direct rule was similar, with the proviso that these had to deal with sovereign Indonesian princes (like the Sultan of Aceh), or European powers (like the Portuguese settlements in East Timor^[77]), which introduced an aspect of the maintenance of appropriate foreign relations. Also, the Regents in these areas (like the Sultanate of Banjar and the Pontianak Sultanate) were generally more autonomous than the Regents on Java, so the relationship was characterized as indigenous Princes being "advised" by the Resident, not an explicit hierarchical relationship, therefore. The landrente was also not collected in these areas.^[78]

The appointment of Residents and Regents, and all other colonial officials, was to be the competence of the Hoge Regering (High Government) of the Dutch East Indies, i.e. the Governor General, "in council", or acting on his own authority. The only exception to this appointment competence regarded the heads of the dessas, who were henceforth "to be elected by the population", according to existing customs. It was the intent of the Commissioners not to interfere in the constitutional arrangements of the indigenous population, just to protect them from abuses by the Regents.^[79]

For the benefit of the colonial officials a pension fund was founded, as well as an orphanage for the children of deceased personnel; and the administration of estates of deceased personnel organised. The rules for the organisation of the corps of colonial officials were made part of the new Regeringsreglement.^[80]

The Commissioners built on the existing Judicial Organisation and Law. That law was codified under the VOC in the so-called Bataviasche Statuten (Statutes of Batavia).^{[lower-alpha 20]} That codex was only applicable to Europeans; its jurisdiction was not to be extended to the indigenous population that would remain subject to adat.^{[lower-alpha 21]} They codified a number of regulations, however. An Instruction for the Hooggerechtshof (Supreme Court) of the Dutch East Indies was promulgated, together with one for the Raden van Justitie (Appellate Courts), as were instructions for bailiffs and wardens of jails. A code of criminal procedure and one for the conduct of civil cases for Europeans was promulgated, together with a separate code for criminal procedures against indigenous people, and finally the geographical division of jurisdictions was determined. Similar arrangements were made for courts-martial and the High Military Court.^[82]

The 1818 Regeringsreglement

When the Commissioners General departed from Texel in late 1815, they carried along two important documents, a draft Regeringsreglement for the East Indies, and an Instruction. The first had all the external characteristics of a constitution, but lacked one defining characteristic: it was intended to bind the authorities in the colony, but not the metropolitan government that would ultimately promulgate it; the latter could (and would) diverge from it with the stroke of a quill, if necessary. To express this the term Regeringsreglement, which can be translated as "Regulation for the government," was used, and not the term Grondwet (Constitution). The Instruction in many respects overlapped with the draft-regulation, but its intent was to function as a regulation for this specific provisional government, that the Commissioners General, seen as a collective, were also to be for the colony. The draft reglement could have been promulgated before their departure, but this was left intentionally to their discretion, as the authorities in Patria had long been deprived of direct contact with the authorities in the colony, and king William therefore deemed it prudent to let the Commissioners take the true state of affairs into account, and act according to circumstances. And that is what they did, leaving much of what they found (like the high-handed change in constitutional fiction that Daendels had brought about, and thankfully adopted by Raffles, namely that the European king, whether he was called Napoleon, or George, or William, was the legitimate "owner" of the Indonesian soil, and the inhabitants his "tenants") in place. They sometimes improved on that (e.g. the reforms of Raffles landrente tax, and of the coffee-plantation regime). At other times they changed it (as with the lifting of the monopolies on the spice trade). In yet other circumstances they created something entirely new (like the system of the coinage). The organisation of the colonial civil service and the judicial organisation they mainly codified as they found it (in perfected form). All of this was cast in the form of a number of separate regulations, promulgated over the time of their sojourn in the Indies. But now, at the end of 1818, came the time to put it all together in the form of a definite Regeringsreglement. And also put the capstone on the edifice they had built, in the form of a regulation of the "government" in the narrow sense of ruling officials and their competences.^[83]

The palace of the Governor General in Buitenzorg by Josias Cornelis Rappard

The Regeringsreglement as it was eventually drafted had the following layout:

First chapter: Of the Governor General and the High Government

Second chapter: Of the Judiciary

Third Chapter: Of the Internal Administration

Fourth chapter: Of Public Finance and its Administration

Fifth chapter: General Provisions^{[lower-alpha 22][85]}

The High Government (Hoge Regering) was to consist of the Governor General "in council", or acting alone. The Council in question were four so-called Raden van Indië (Councilors of the Indies^{[lower-alpha 23]}) who together with the Governor General were to form this Hoge Regering.^{[lower-alpha 24]} The Hoge Regering was to be the highest executive and legislative authority in the Dutch East indies.^{[lower-alpha 25]} This encompassed the powers normally exercised by the sovereign of a country, with the proviso that the Hoge Regering in everything acted as the representative of the king, who was the ultimate authority. This included foreign relations (i.e. concluding treaties); military affairs; legislation, but also dispensation of laws; financial administration and levying of taxes; execution of punishments and giving pardons; special police powers (such as deporting of undesirable persons), and immigration and settlement matters; and so on, again with the proviso that the Hoge Regering had to report on all relevant matters to the government in Patria on a quarterly basis, which implied the possibility that the king would overrule measures or policies. The Hoge Regering was to be supported by a General Secretariat that would be seated in the administrative capital of Buitenzorg in the Buitenzorg Residency.^[87]

The High Government was advised and checked by three state organs, comparable to the Dutch High Councils of State: the General Audit Chamber, the Council of Finance, and a Receiver General for the Public Finances, for which instructions had been formulated earlier and these were left out of the Regeringsreglement, just like the instructions for the Judiciary. These instructions could be seen as organic laws, elaborating the Regeringsreglement, even though they preceded the Reglement chronologically.^{[88][lower-alpha 26]}

The organisation of the bureaucratic apparatus that would serve the Hoge Regering in Batavia, followed in large lines the set-up of the Hoge Regering itself: There was to be a Chief Director, comparable to the Governor General, as chief of the bureaucracy. Under him functioned the chiefs of the government departments (called "directors") who had the same kind of secretarial support as the three controlling councils.^[90]

A general government department that merits mention is that of Religion, Education and Arts and Sciences^{[lower-alpha 27]} The Commissioners General had (in accordance with their Instruction) also set up a system of regulation of basic education. Private Primary schools were subject to permits from the Governor General, and to an inspectorate that monitored the quality of education they provided. They were to be open to children of both genders, for Europeans and Indo people, as well as children of Javanese parents who wished their children to attend. This system was for the moment brought under the management of the director of agriculture, Reinwardt, who played many roles in this period. He was also director of the Botanical Gardens in Buitenzorg, which he had founded, and which played an important role in agricultural education.^[92]

With the promulgation, subject to homologation by king William, of this Regeringsreglement the Commissioners General completed their mission. The only thing that rested was to appoint the people who would lead the new, permanent government. The Commissioners confirmed their colleague Van der Capellen in his function of Governor General. As Members of the Council of the Indies the Commissioners General appointed: P.T. Chassé, J.A. van Braam, Herman Warner Muntinghe, and R. d'Ozy (who had been the secretary of the Commissioners General).^[93]