The Golden Age of the East Indonesian Economy During the NIT Era (1946–1950)

The golden age of the East Indonesian economy during the NIT era (1946–1950)

L. Evita & Abdurakhman Department of History, Faculty of Humanities, Universitas Indonesia, Depok, Indonesia

ABSTRACT: Federation model is a governance model that aims at developing economic sovereignty and national integration. If the decline of the Majapahit Kingdom was due to the weak economic power in the periphery that facilitated invasion of Muslim traders, then how can national integration be achieved in Indonesia through economic empower- ment from the periphery? In this study, we will discuss the economic sovereignty in eastern Indonesia after its independence. The State of East Indonesia (Negara Indonesia Timur/ NIT),which was established in 1946, implemented a comprehensive system of economic openness and a two-way cooperation in all fields, thereby providing financial support to the government of the Republic of the United States of Indonesia (Republik Indonesia Serikat/ RIS). The emergence of the regional economic power in East Indonesia was influenced by the presence of foreign and local companies, including Mandeers, Seeman & Co, Company Insulinde Makassar, Moreoux & Co., Coprafonds and South Pacific Trading Company, and Manado, which flourished the economy in eastern Indonesia. Commodities available at that time were being sought for by the world. Through the disclosure system, the State of East Indonesia revived its glory in the kingdom of Makassar as the pivot of the world maritime economy until 1950. Here, we apply historical methods using archival sources and contemporary newspapers.

1 INTRODUCTION

In this study, we will describe the economy of eastern Indonesia during the NIT era. The fact that eastern Indonesia consists of many small islands is well known. One of the most signifi- cant tribes in the region is the Bugis-Makassar, which is famous for its sailors. In addition, they were experts in making boats connecting all islands in Indonesia. In 1947, there were boats measuring >20m3 in NIT, 92% of which came from South Sulawesi. The boats pro- duced by Bugis-Makassar are one of the largest contributors to the Indonesian economy. Approximately 50% of the boats were destroyed by bombs and bullets during the independence war, thereby stagnating the trade and economy. The following are the efforts made by the government to revive the economy that made NIT experience a golden age.

1.1 Establishment of fonds of South Sulawesi’s boats Several attempts were made by the NIT government to revive the economy and trade activities. One of the successful attempts was the establishment of the Fonds of South Sulawesi’s Boats agency. It was proposed by Najamuddin Daeng Malewa, the then Prime Minister of NIT. Najamuddin was also a trader from the native Makassar region; therefore, this agency was based in Makassar. The purpose of the establishment of this agency was to provide loans to repair and make new boats, regardless of whether they were automatic or manual. The following are other purposes of the establishment:

687 1. Providing loans to makers of boats or motorboats for coastal shipping. 2. Providing loans directly or by intermediaries to finance the goods loaded by boats or motorboats. 3. Providing loans directly or through the items stacked, which would be loaded by boats or motorboats. 4. Establishing programs to educate Indonesian students as well as providing trainings for technicians, sailors, and employees. 5. Advising the government regarding designing the rules concerning sailing between the islands of Indonesia. 6. Establishing the Veem company, to which shipbuilding and other companies related to ships and sailing were affiliated by the Republic of the United Indonesian States (Negara Baroe, Monday, 20 October 1947: 2). This agency received financial assistance amounting to f1,200,000 from the government. In order to revive the past glory of the economy, Najamuddin recommended improving the shipping transportation sector. He proposed that the transportation route, related to both shipping transport and private boats, should be supported by the government as well as the economic development in the fisheries sector. To achieve these targets, Najamuddin further requested the facility aids, such as motor equipment and machinery, to be given to the fishermen, through which he believed that these efforts could increase the number of cruise opera- tions in Indonesia. He expected to increase the people’s income by enhancing the shipping facilities.

Source: Collectie Moluks Historisch Museum.

Many measures were taken to increase the number of boats in South Sulawesi, one of which was to establish a company intended specifically to make boats in Tampoena village, in Boetoeng Strait. This area used to be the site of a Japanese airline company, which then became a shipbuilding area due to its suitable land condition. In addition, access to timber and labor was also easier, close to the regional center. Labor costs were still low, and the pub- lic facilities such as pangreh pradja and hospitals were within reach. The following are the ship companies that participated in reviving the shipping activities in NIT (Harsidjo, Saleh Sarif, et al. 1953: 378): 1. N.V Maskapai Kapal Sulawesi Barat, established in July 1947 in Makassar. The company operated six ships serving the route of Makassar–Raha, Makassar–Selayar, Bone Bay, Makassar–western coast of Sulawesi to Toli-Toli (north). 2. N.V. Nocemo in Manado, established in July 1947. The company operated eight ships. It served the route of Manado–north coast of Sulawesi to Toli-Toli, Manado–Tomini Bay, Manado–Sangir/Talaud, and Manado–North Moluccas. 3. N.V Lokumij in Gorontalo. It served the route to Tomini Bay. The number of vessels were three. 688 4. N.V. Pelayaran Nasional in Gorontalo, established in March 1951. It had three ships serving the route to Tomini Bay as well. 5. N.V. Perkapalan and Pelayaran Indonesia, Gorontalo, established in April 1947. It operated one boat with a route in Tomini Bay. 6. N.V. Maskapai Kapal Makmur, in Gorontalo, established in December 1951, operating one boat. 7. Al Ichwan Firm in Gorontalo, having one boat with transporting 100 tonnes in Tomoni Bay. In order to avoid competition among carrier ships in Gorontalo, according to the instruc- tion of the People’s Business Organization Department in Makassar in May 1952, Sulawesi’s Combined Shipping was established. In addition, for the purposes of sea transport, seaports were built along the coasts of Sulawesi. One of them was the Makassar port, which is the economic center in the eastern region of Indonesia. In addition, there are seaports built in Pare Pare Bay, Kendari Bay, and Kolonedale Bay, all of which are natural ports frequently visited by large ships. Makassar Port became the center of the economy in NIT. It is frequently visited by not only KPM ships but also overseas ships from Japan, the Philippines, and Australia (Ibid. p. 378). Table 1 presents a list of destinations of Makassar copra exports in 1949. Journalists who visited Makassar in 1946 reported that the city was making progress. South Sulawesi had already experienced a new stage of development. The construction was in progress; therefore, a good infrastructure was inevitable. In addition, import of medicines, textiles, building materials, and others was needed. During his meeting with Van Mook in an effort to establish political cooperation, Najamuddin Daeng Malewa requested necessary facilities to expedite the development in South Sulawesi. He wanted to increase exports of copra, rattan, resin, coffee, timber, and nickel from South Sulawesi that could amount to approximately 30 million gulden, intending to cover the cost of imports. In addition, the oil fields located in Buton and Bone could be explored to support the economy. One of the sectors that could be used as well was the agriculture sector. South Sulawesi had a surplus of food (rice), approximately 60,000 tonnes, which could be used to cover the shortage of food throughout eastern Indonesia (Ide Anak Agung Gde Agung, 1985:86). NIT is slightly different from other areas in terms of the economic pattern. In Java, for example, most of the area was occupied with various industries. On the contrary, in Sulawesi, people were still highly dependent on nature, such as agriculture, plantation, and marine products.

Table 1. Destination of Makassar copra export.

Destination of exports Total payload (tonnes)

Dutch 108,038 Germany 8,548 USA 13,310 England 14,731 Belgium 4,064 Czech 2,438 Canada 3,709 South Africa 2,540 Poland 505 Swiss 1,016 Singapore 2,134 Japan 7,112

Total (tonnes) 168,148

Source: A. Rasyid Asba, Kopra Makassar Perebutan Pusat dan Daerah Kajian Sejarah Ekonomi Politik Regional di Indonesia: 208.

689 Eastern Indonesian seas are rich with fish, with its fishermen inhabiting small villages on the coasts. The production of all seawater fishery in 1946 was no less than 15 million kg with a value of f30 million (Verslag van het Agentschap te Makasser over het jaar 1948: 44). It was realized when marine fisheries were of utmost importance for the people of eastern Indonesia, and the fish stocks were enough for the whole population of Indonesia. It was also important to focus more on the possibility of mechanization in fishing and the applica- tion of scientific methods. It is necessary for the marine fisheries department of the state to buy boats in large numbers and provide them to the fishermen.

1.2 Agriculture in NIT During the NIT era, the availability of food resources in some places, such as Sumba, Flores, and Lombok, was quite sufficient. Rice, corn, and milk powder were delivered to prevent people from starvation. The price of rice in November 1949 remained the same as in previous months. Nevertheless, paddy harvest was not really satisfactory. A prolonged drought and invasion of pests were the reasons behind the harvest failure. Rice fields in NIT occupied 680,000 hectares, comprising approximately 60% of South Sulawesi. Land planted with dry-field rice was estimated to be approximately 250,000 hectares. The annual production of rice reached 1 million tonnes, usually exceeding the needs of the population. Famous surplus regions were South Sulawesi and Bali-Lombok, which could produce about 75,000 tonnes of rice for both internal consumption and areas out- side of NIT before the war. However, there were some rice-deficit areas in NIT, such as Manado and South and North Moluccas (Verslag van het Agentschap te Makasser over het jaar 1948:44). Comparison of the development of rice production in NIT in the last two years of the golden age with the current development—after a slight setback during the Japanese occupation—shows a great improvement. In the first years, there was an increase in the surplus of rice due to the irrigation schemes as well as the improvement in farming techniques. Indeed, the focus of the government was shifted to promote rice production for several years. For example, the government realized the opening of rice nursery centers, where the types of rice and a second plant could be chosen by the farmers to be distributed by seed growers. The Sadang project in South Sulawesi during 1947 and 1948 increased the irrigated land by 10,000 hectares (Verslag van het Agentschap te Makasser over het jaar, 1948: 66). After completing approximately 60,000 hectares, it could technically be irrigated. The main focus was on better cultivation methods in paddy fields and fertilization, and the provision of agricultural equipment and rat poison was taken into consideration as well. To stimulate production, agricultural weeding was also practiced. The intervention of the NIT Agricul- tural Bureau from the Department of Eastern Indonesian Economic Affairs was successful. No exact figures were reported with regard to corn production. The only area with a surplus of corn was South Sulawesi, which had exported 50,000 tonnes before the war. Corn production before the war in eastern Indonesia reached 456,000 tonnes. At that time, farmers irrigated corn crops with water from the lake. On the contrary, the war that had broken out caused a decline in the production of crops such as nutmeg, coffee, and cloves, whose areas of production also decreased from 24,000 (1940) to 16,500, 28,000 to 25,000, and 3,400 to 3,300 hectares, respectively. The export of nutmeg and mace in 1939 reached 3,335 and 587 tonnes respectively, which dropped to 1,551 and 383 tonnes in 1947 and increased to 2,084 and 473 tonnes in 1948. The volume of corn harvest in the rainy season in South Sulawesi was estimated to reach 200,000 tonnes, of which 30,000 tonnes was exported. If the “1949 harvest” during the nor- mal dry season had prevailed, then in the following year, there would have been 50,000– 70,000 tonnes of corns available for exports compared to zero in 1948. In addition to corn, fruit nuts such as peanuts, soybeans, and mung beans were important produce in eastern Indonesia, as they were could generate surplus for exports, too. Surplus of nuts were usually exported to South Africa (about 5,000 tonnes per year), whereas soybean and mung beans (about 5,000 and 4,000 tonnes per year, respectively) were usually sold interisland. 690 In 1949, corn crops in South Sulawesi alone expanded to 11,400 hectares, and the same also happened in Minahasa. Wetland and farmland of eastern Indonesia in 1941 reached approximately 680,000 and 250,000 hectares, respectively. The average annual harvest amounted to approximately 1,050,000 tonnes.1,050,000 tonnes. The surplus of annual rice exports reached approximately 20,00020,000 tonnes. tonnes. This surplus was a result of various irrigation projects such as the Sadang project located in the northern part of South Sulawesi and the one near Tonsea Lama in Minahasa. Thus, the Sadang project in eastern Indonesia resulted in a surplus of 100–150,000 tonnes100-150,000 tonnes in 1953 (Ibid.). In 1948, a study on the possibility of massive cultivation of beans was conducted in east•eastern Indonesia. A commission visited the area near Kendari, Flores, and Timor. Another important crop for food supply in NIT was cassava, as it was considered that there may have been opportunities to export tapioca. To summarize, the development of agro-food in the last two years of the golden age in NIT reached the prewar production capacity. Nonetheless, there were food shortages, for example, in Flores and Sumba. Because of the low income of people in that area, government had to provide food for the people. Basically, the food supply in NIT was becoming more satisfying in the last two years of the golden age. The most important trade crop in NIT was coconut copra, with about 500,000 hectares of land and potential production of approximately 500,000500,000 tonnes, tonnes, approximately 80o/o80% of which were exported. FigureFigure 1 1 shows shows the progress of the export of copra in eastern Indonesia during 1946–1949.1946-1949. FigureFigure 1 1 illustrates that the volume of copra exports in the NIT increased from 1946 to 1949, as well as in Makassar, although not as significantly as the eastern Indonesia exports. Some increase was also noted in other regions such as Manado. In addition to copra, other annual crops in NIT were coffee, spices, kapok, and cocoa. Cof•Cof- fee did not grow well due to the Japanese imperialism. The Arabica coffee plants in Sulawesi and Bali also experienced bad harvest. To recover from the crop failure, a large number of nurseries for coffee seeds and seedlings were established. In 1940, the entire coffee plantation area in NIT covering 28,000 hectares (19,000 hectares in Bali and 5,500 hectares in Sulawesi) dropped to 25,000 hectares. During these years, coffee proved to be a weak export product as its domestic value was higher than the export value. As a result, export of coffee dropped. The plantation areas for cloves also declined from 3,400 hectares before the war to 3,300 hectares. Cloves were also considered as a weak product. Nutmeg plantation also suffered greatly during the war. Many of the plantations were turned into food crop plantations. The areas of plantation declined from 24,000 to 16,500 hectares. While exports in 1939 amounted to 3,3353,335 tonnes tonnes of nutmegs and 587587 tonnes tonnes of mace, in 1947, only 1,551 and 383383 tonnes tonnes of them were exported,

400 350 300 250 • East Indonesia 200 • Makassar 150 • Manado 100 Other Ports so 0 1946 1947 1948 1949

Source: Sejarah Sulawesi Selatan Jilid 2. p. 243

FigureFigure 1. 1. Volume of copra exports in the NIT from 1946 to 1949.

691 respectively. Before 1948, these figures reached 2,084 and 473 tonnes,473 tonnes, which showed a signifi-signifi• cant rise. Restoration of the plantation was still possible; however, they had to wait for 7–87-8 years before harvesting. Cotton crops suffered severe losses during Japanese occupation. After the war, almost nothing was exported from NIT, considering that people had adequate income at that time. Therefore, they were not motivated to pick cotton. One experiment was conducted in this sense, yet it was unsuccessful. On the contrary, cocoa proved to be a profitable commod-commod• ity. Although cocoa had been grown in eastern Indonesia minimally, it apparently had the potential to be a successful commodity, especially in South and Southeast Sulawesi. The State Agricultural Bureau for Eastern Indonesia attempted to stimulate the planting of cocoa in the country. Having a potentially high demand, with the world supply being low, this product showed good prospects. The first cocoa nursery was opened in Minahasa, Ambon, South Sulawesi, and Timor, and Flores would follow afterward. In addition to cocoa, tobacco plants yielded good prospects, especially in South Sulawesi, Bali, and Lombok. During this time, in South Sulawesi, experiments were conducted by planting Virginia tobacco as a second crop in open fields. Tobacco plant production before the war was very high in NIT. Besides corn and nutmeg, wood production in eastern Indonesia could be taken into account. Firewood was considered important as it was used as fuel for transport, as coal was not yet available due to the war. Figure 2Figure 2 shows shows the annual production of wood. Figure 2Figure 2 shows shows that the total production of teak wood and firewood increased from 1946 to 1948: −- 1938 20,507 m20,507 m3 teak wood and 19,477 m19,477 m3 firewood −- 1946 32,238 m32,238 m3 teak wood and 22,970 m22,970 m3 firewood −- 1947 67,075 m67,075 m3 teak wood and 56,711 m56,711 m3 firewood −- 1948 72,012m3 teak wood and 71,092 m71,092 m3 firewood The increased production of wood was parallel to the rise in the market demand for tim-tim• ber. Timber was used as a substitute for coal as fuel for transportation. Coal became scarce due to the war and hence coal production was impaired.

1.3 Industry in NIT Before the war, a nickel mine, mostly exporting to Germany, was opened in Kolaka. After independence, the mine was managed by the Oost-Borneo-MijOost-Borneo-Mij and Smelting Co. (USA), which continued operating the mine (Negara Baroe, Saturday, 11 October 1947: 2). An impor-impor• tant issue was the energy resources to operate the factories. Therefore, to support industry in NIT, power plants were opened in order to provide power to operate the machines. Electricity was majorly generated from runoff water in the NIT region, Sadang, and Teppo near Pin-

8o,ooo--.------70 ,000 -t------: 60,000 -+-----; so,000 -+------1 . 1938 40 ,OQQ-1------1 . 1946 30,000 . 1947 20,000 1948 10,000 0 Teak Wood Fire Wood

Figure 2.Figure 2. Production of wood. Source: Kedaulatan Rakyat, Tuesday 20th May 1947:1.

692 rang. This hydropower would drive the motors to generate electricity power. In addition to Sadang, there were power stations in the cities of Pinrang, Pare Pare, Rappang, Pangkajene, Tanroe Tedong, Sengkang, and Watangsoppeng. There was also one in Minahasa built in Tondano River, which served as a power source for industry. Another important export product from eastern Indonesia was copra. Approximately 75% of the population was directly involved in the production, export, and trading of copra. A total of 315,000 from 530,000 tonnes of copra exported by the Indies in 1939 came from this region, which was located within the boundaries of NIT. In the same year, copra covered 80% of the total volume of exports and 60% of the total export value of Makassar. This attracted the attention of the Western countries in the economic sector, and a number of Directors from Lever Brothers & Unilever Limited—a large industrial company in the United Kingdom—visited the region to set up a soap factory to meet the demands of soap in NIT and Kalimantan. NIT, producing more than 320,000 tonnes of copra annually, was a gateway to open a new economic sector in Indonesia. In addition, it facilitated the expansion of other industries, such as garments, tobacco, and animal skin (Negara Baroe, Saturday, 11 October 1947:2).

2 CONCLUSION

The State of East Indonesia (1946–1950) had considerable potentials and strengths due to their economic and finance sectors. As a state of the Republic of the United States of Indo- nesia, NIT was able to emerge as an economic power from the periphery. NIT was able to fulfill the need for food and agricultural products of its people and export the excess goods to Borneo and Java. The golden period of the NIT economy was facilitated by the government empowering all potential natural and human resources in it. Supported by dynamic policy rules, NIT attracted foreign investments; thus, a network of international economies was formed to enable the products from NIT to be enjoyed by the community and also be exported. In other words, this success contributed to the golden period of the economy of RIS at that time.

REFERENCES

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