420 Years Ago, VOC Makes the World’s First IPO

Commerce & Business, Economic history, Financial history

Stock Exchange 1.0
The world’s first known stock exchange is thought to be a market established in Bruges, Belgium, around 1309. This operation was a family concern conducted in the home of textile merchant Robert Van der Burse (or Van “ter Buerse/Buerze”). This type of early market which primarily deals with the exchange of commodities, ie, various agricultural products—and in its modern connotation, also with gas, oil, coal, etc—acquired the name ‘bourse’ from its founder. A bourse (typically European in location) is “a market organised for the purpose of buying and selling securities, commodities, options and other investments” [‘Bourse’, Investopedia, www.investopedia.com]. Another early bourse was located in Antwerp<>.

𝕍𝕒𝕟 𝕕𝕖𝕣 𝔹𝕦𝕣𝕤𝕖: 𝕥𝕙𝕖 𝕠𝕣𝕚𝕘𝕚𝕟𝕒𝕝 𝕓𝕠𝕦𝕣𝕤𝕖

The Van der Burse exchange was the first organised market, before this landmark development such transaction processes were unorganised and informal – sellers and buyers would meet up one-to-one at specific meeting places such as town squares to conduct their trade <> [‘Creation of the first stock exchange’, www.citeco.fr].

The Dutch, pioneers of capitalism
For the first ‘modern’ securities market we need to look to Belgium’s neighbours, the Dutch. The Amsterdam Stock Exchange is the oldest such market, founded in 1602 with the establishment of the Dutch East India Company (Verenigde Oostindische Compagnie or VOC). Amsterdam was the first bourse to deal in securities <c̷>. The VOC was empowered with quasi-government and monopoly status by the States General of the Netherlands, granted a 21-year charter to conduct all Dutch trade in Asia. In so doing, financial history was made…the VOC was a world first, a public company founded by a state government. Hitherto the Dutch trading environment comprised a number of competing private companies known as voorcompagnieën or “pre-companies”. By the 1602 Charter, the government merged those small, private companies into one “nationalistic Goliath”, VOC, creating a proto-megacorporation.

𝟙𝟞𝟘𝟚 ℂ𝕙𝕒𝕣𝕥𝕖𝕣 𝕕𝕠𝕔

Raising capital
At VOC’s commencement of business it held an unprecedented initial public offering (IPO). The company’s directors opened up share-holding to all Dutchmen by subscription (while investing 12,000 guilders of their own money up front). The public nature of the share issue was its revolutionary feature, hitherto predecessor companies (like the Oude Compagnie) had raised capital from a small circle of private investors. Some investors balked at the opportunity offered by VOC, wary of tying up their precious savings for such a long period (ten years). Concessions made by the VOC eased these concerns – in a subsequent amendment to the charter, investors were permitted to on-sell their shares to a third party prior to ten years [‘The world’s first IPO’, Lodewijk Petram, The World’s First Stock Exchange’, 15 October 2020, www.worldsfirststockexchange.com].

𝔸𝕞𝕤𝕥𝕖𝕣𝕕𝕒𝕞 𝕊𝕥𝕠𝕔𝕜 𝔼𝕩𝕔𝕙𝕒𝕟𝕘𝕖 𝕒𝕟𝕕 𝕓𝕦𝕝𝕝

What would NOT have seemed novel to financial market investors of the day was the ‘office’ for doing business…initially lacking a business premises the VOC—after the fashion of the Bourses’ 14th century Bruges exchange—issued an open invitation for would-be investors to come to the private home of the company co-founder Dirck van Os to do the paperwork and deposit their money. Ultimately, by the time subscriptions closed, some 1,143 individuals <> had invested a total of 3,674,945 guilders in the Verenigde Oostindische Compagnie (including Dirck van Os’ own maid!) [Petram].

ℕ𝔸𝕊𝔻𝔸ℚ (ℙ𝕙𝕠𝕥𝕠: 𝕄𝕒𝕣𝕜𝕖𝕥𝕤𝕎𝕚𝕜𝕚)

Footnote: the VOC’s IPO had profound ramifications, fundamentally altering the nature of investing. Originally intended to facilitate the financing of risky capital-intensive ventures, it “inadvertently created an alternative for investor beyond fixed income investments, marking the beginning of retail investing in equities” [‘World’s First IPO: Dutch East India Co’, Suede Investing, www.suedeinvesting.com].

•°¯`••••´¯°• •°¯`••••´¯°•

<> the most famous bourse today is that of the Paris Stock Exchange

<> including the square in front of the Van der Burse residence

<> printed stocks and bonds, debt and other interests in companies, government and private businesses

<> in addition to the six directors

Whither West Papua? A One Way Trip on the Integration Highway

International Relations, Politics, Regional History
Western New Guinea

The western half of the island of New Guinea has been known since its discovery by Europe by different names, varying according to just who is doing the delineating. To the Dutch colonialists it was, unsurprisingly, Dutch New Guinea, to the Indonesians it was initially Irian Barat and then later after a dubious plebiscite endorsed Indonesia’s takeover of the territory, Irian Jaya (Victorious Irian), and more recently, Central Irian Jaya, West Irian Jaya and Irian Jaya when Indonesia divided it into three provinces (only to subsequently revert to the present arrangement of two after Papuan opposition). To the indigenous pro-independence movement and most outside observers it is West Papua.

The struggle of the indigenous population of West Papua to determine its own destiny long precedes the period of subjugation at the hands of their current overlords, Indonesia. From the Sixteenth Century on, the Portuguese, the Spanish, the Germans, the Dutch and the British, have all staked claims on various parts of the island of New Guinea. Spanish mariner Alvara de Saveedra on visiting the territory in the 1520s named it Isla Del Oro (Island of Gold), which turned out in light of the later discovery of its vast mineral wealth, to have been very prescient [Bilveer Singh, Papua: Geopolitics and the Quest for Nationhood].

Emblem of United States of Indonesia 1949-50

When the emergent Indonesian nation won independence from the Dutch colonists in 1949, the Netherlands refused to cede Dutch New Guinea to the newly-created Republic of the United States of Indonesia. The Indonesian Government argued at the time and have done so ever since in the international forum that, as the successor state to the Dutch colonial territory, it should by right have possession over the entire area of the former Dutch East Indies which included the western part of New Guinea. The Dutch Government’s rebuff of Indonesia’s claim to Western New Guinea was predicated on the fact that its inhabitants were ethnically different to the rest of the East Indies populace [ibid.]. This was Amsterdam’s stated view anyway, on this basis it proposed to guide Western Papua to self-determination at a time to be deemed appropriate.

But as Professor Peter King described the Indonesian mindset on the issue, “(their) agreement to the temporary ‘loss’ of the territory was never anything more than an expedient” [‘Indonesia and Ethno-nationalist “Separatism” since Independence: East Timor, Aceh and Papua’, University of Sydney, Papuan Paper # 6 (Nov. 2013), www.sydney.edu.au/]. Indonesia responded diplomatically by raising the issue at the UN General Assembly four times between 1954 and 1957, but failed to obtain a two-thirds majority. After the last failure Indonesia’s president, Sukarno, changed tack. Taking a more proactive approach, Sukarno seized Dutch enterprises in Indonesia and expelled 46,000 Dutch nationals from the country [PH Kratoska, Southeast Asia, Colonial History: Independence through Revolutionary War].

Through the 1950s tensions between the Dutch and the Indonesians over West Papua were high and intensified after 1957. At the time of the Indonesian Republic’s foundation western powers had indicated that they supported the Dutch plan to bring West New Guinea to self-determination, but by the early sixties the intensification of the Cold War had prompted the United States to reassess it’s priorities. The US’s focus had turned to Asia and the perceived influence of Red China on Indo-China and Southeast Asia in general. It was eager to ensure that geostrategically-important Indonesia did not become lost to communism. Sukarno’s lean to the left, bringing the burgeoning PKI (Indonesian Communist Party) into the political framework, was a particular concern for Washington at this time [95/03/06: Foreign Relations Series, US Department of State, 1961-63, Vol XXIII, Southeast Asia (March 6, 1995). www.dosfan.lib.uic.edu].

The late 1950s saw the Netherlands step up Dutch New Guinea’s preparedness for autonomy, laying the groundwork for an autonomous Papuan entity: new infrastructure was built, education was expanded, political parties and labour unions were created [‘Neglected Genocide: Human Rights Abuses against Papuans in Central Highlands, 1977-78’, (AHRC/HRPP), www.tapol.org/sites/default/files/sitesy/default/files/pdfs/NeglectedGenocideAHRC.pdf].

Indonesian stamp: Battle of Arafura Sea AKA Battle of Vlakke Hoek

Following the appointment of the indigenous representative New Guinea Council in April 1961 to produce a manifesto outlining the Papuans’ feelings on the issue of self-determination, an official raising of the Morning Star flag took place on 1 December 1961 in Hollandia, now Jayapura (Victory City), celebrated as West Papua’s Independence Day (these hopes for independence were however to be dashed on the rocks of political pragmatism within a year). All of these unwelcome developments prompted Jakarta to issue threats to invade the Western New Guinea territory by force. A naval military clash in early 1962 (Battle of Arafura Sea) saw the conflict reach a dangerous flashpoint. An Indonesian attempt to infiltrate West Papua by landing troops in the territory to incite rebellion against Dutch rule was repulsed by Dutch air and naval forces with losses incurred by the Indonesian side [‘Battle of Arafura Sea’ (Wikipedia entry), www.en.m.wikipedia.org/wiki/Battle_of_Arafura_Sea].

Kennedy–Sukarno talks 1962

The expediency of American foreign policy and the manoeuvrability of its stand on self-determination was exposed bare through statements by US President Kennedy. Freshly into the White House in 1961 Kennedy espoused the principle of self-determination, powerfully so in light of the Berlin Wall crisis, advocating the right of West Berliners to choose freedom in the face of threats from the Soviets and the Eastern Bloc. Simultaneously, demonstrating the ascendancy of realpolitik, Kennedy did a complete volte-face on West New Guinea. The US President summarily dismissed the Papuans’ right to choose their own future, intoning the disdain of the ‘superior’ white man: “The West Berliners are highly civilized and highly cultured, whereas those (only seven hundred thousand) inhabitants of West New Guinea are living, as it were, in the Stone Age” [cited in David Webster, ‘Self-Determination Abandoned: The Road to the New York Agreement on West New Guinea (Papua), 1960–62], Indonesia, No. 95 (April 2013)]. The Americans, in the end, reasoned that giving West New Guinea to Indonesia was the price it was happy to pay to keep the Republic out of the Soviet and/or Chinese camps.

In this polarised climate Western opinion had well and truly shifted on the issue from supporting the Dutch position to the Indonesian one. With Washington putting pressure on the Netherlands and things becoming increasingly uncomfortable for the Dutch in their former colony, the Kingdom advanced its exit plan to completely wash its hands of the East Indies. The US brokered a series of negotiations between the Dutch and the Indonesians which led to the signing of the New York Agreement in August 1962 (significantly no representatives of the West Papuans took any part in the talks). The Agreement stipulated that a plebiscite would be held in West New Guinea by 1969 to determine its future, all adults would be allowed to participate in the “Act of Free Choice”, and the Musyawarah (consultative councils) would be instructed as to how the referendum should reflect the will of the people. Under the Agreement’s provisions the territory was placed under temporary UN administration (UNTEA) until May 1963 when it was handed over to Indonesia to administer in accordance with the pre-agreed conditions for holding a vote to determine independence or incorporation.

From the start Jakarta was determined to snuff out any semblance of Papuan separatism and desire for autonomy. Assimilation into the Indonesian economy and culture was the plan. Government policy and programs aimed at diluting the tendency of the indigenous population to identify themselves as Melanesians, and trying to substitute in them a sense of being Indonesian [Dale Gietzelt, ‘Indonesization of West Papua’, Oceania, 59(3), March 1989]. As part of this policy the Papuans’ use of Dani and other Melanesian languages was forbidden by the Government [‘Neglected Genocide’, op.cit.]. Papuans were reclassified as ‘Irianese’ by Jakarta. To keep a close watch on the indigenous population and especially those the Government identified as subversives, Indonesia had troops on the ground in Irian Barat right from the onset of the interim UN period and the military build-up continued apace [Pieter Drooglever, ‘The pro- and anti-plebiscite campaign in West Papua: before and after 1969’ in P King, J Elmslie & C Webb-Gannon (Eds.), Comprehending West Papua.].

Grasberg Mine, Wt Papua

The military (ABRI) influx and crackdown in West Irian, which escalated in the years up to the Act of “Free Choice” had a secondary purpose, aside from neutralising opposition to Indonesian integration. After the 1963 takeover Sukarno welcomed foreign multinational companies to the new province to engage in what would become a ruthless exploitation of natural resources. The Dutch during the colonial era established that the territory was incredibly rich in minerals. At Tembagapura (“Copper Town”), the large US company Freeport Copper and Gold built a giant gold mine, Erstberg Mine (Dutch for “Ore mountain”), and later near Puncak Jaya, a second even larger open pit mine called Grasberg, the largest in the world – and in partnership with Rio Tinto, the world’s third largest copper mine.

One of the principal functions of the large military presence was to protect these vital economic assets from sabotage. Both mining operations were given free rein by Jakarta with the predictable resultant environmental damage. Freeport Copper became a lucrative source of patronage for the government, especially for the later, Suharto regime. In return, the regime protected Freeport, politically and physically [Denise Leith, ‘Freeport and the Suharto Regime 1965-1998’, Contemporary Pacific, 14(1), Spring 2002].

After the fall of Sukarno in 1966, it was business as usual for his replacement, General Suharto, in regard to the corrupt practices and under-the-table money transfers between the Indonesian regime and huge US corporations. In fact the quid pro qua relationship between Jakarta and foreign capital was further extended with a widening of mining licence access and concessions to US business interests. Suharto’s New Order government and US multinationals were now partners for the long haul [‘Neglected Genocide’, op.cit.].

Acquiring the 420 thousand square kilometres of West New Guinea in 1963 allowed Indonesia a means of easing the archipelago’s demographic pressures on the overpopulated islands. The Government instigated a transmigration program, moving mainly Javanese, Sumatran and Sulawesi Indonesians to live in West Irian. Jakarta provided special autonomy funding (in part sourced from the World Bank) in effect to divide and rule the Papuan population. By favouring certain Papuan elites and regions who were more cooperative with it, over others, the Government was able to undermine and weaken the local separatist movement [Peter King, ‘Self-determination and Papua: the Indonesian Dimension’ in P King et al (Eds), op.cit.]. Despite Government pledges that there would be no transmigration to West New Guinea, the transplanted population from other Indonesian provinces by as early as 1964 was estimated at 16,000 (twice the maximum number of Dutch residents in the territory pre-UN administration) [John Saltford, The United Nations and the Indonesian Takeover of West Papua, 1962-1969: The Anatomy of Betrayal].

The growing presence of loyal, pro-Indonesia migrants in the West Irian province was also designed to shift support toward the unification goal of the Government. The attempt to assimilate Melanesian locals into Indonesian life, culture and economy was however counterproductive because the money Jakarta poured into the province creating new jobs in work projects benefitted the subsidised Asian newcomers much more than the urban and rural Papuans. This had the effect of marginalising Papuans from the rewards of economic development. Therefore ironically, rather than binding them to Indonesia the experience with the centre resulting in a sharpening of their sense of racial and cultural distinctiveness, laying the seeds of an embryonic nationalism [Gietzelt, op.cit.].

With the Act of Free Choice required by the terms of the NYA to take place by the end of 1969, Indonesia lost no time in consolidating its plans to secure West Irian. Occupation of the territory was accomplished in a three-pronged strategy, by transmigration of non-Papuans into Irian (as outlined above), through a bureaucracy dominated by Javanese and other Indonesians intent on keeping a tight rein on the Papuan majority, aided in this by in excess of six thousand well-equipped Indonesian soldiers on the ground in West Irian. Jakarta’s objective for ABRI (the Indonesia armed forces) was to pacify the resistance to integration, so that the referendum, when it came, would be assured of a vote for unification with the Republic.

From about 1965, ABRI, under the command of General Suharto, engaged in a “secret war” against the Papuan resistance group, OPM (Free Papua Movement) as well as a terror campaign against targeted groups of Papuan villagers. This involved aerial bombings of Papuan villages located in the Arfak Mountains as well as the Ayamaru, Teminabuan, Paniai and Enarotali regions. The indigenous uprising against the Army in the Arfak highland continued sporadically over several years with the security forces eventually suppressed it, killing approximately 2,000 tribesmen and villagers in the process. Military operations in other parts of West Irian, ie, Ayamaru, Teminabuan and Inanuatan (code name: Operasi Tumpas (Obliteration)), resulted in an alleged 1,500 deaths, including whole villages being wiped out by aerial strafing [‘The Indonesian Army – Act of Free Choice’ (Joseph Daves), www.theindonesianarmy.com]; ‘Papuan Conflict’, (Wikipedia entry), www.en.m.wikipedia.org/wiki/Papua_conflict].

Papuan perspective of the “Act of Free Choice”

In the lead-up to the Act of Free Choice, the Indonesians stepped up the intimidation of Papuans. President Suharto issued thinly-veiled threats: anyone who opposed West Irian’s integration with Indonesia would be “guilty of treason” [Brian May, Indonesian Tragedy, cited in Daves, ibid.].

The military command, aside from intimidation and force, used other methods to win over the population (or at least the various tribal elders). Brigadier General Moertopo, put in charge of the ground operations by Suharto, alternated coercion with transparent bribery to secure acquiescence. Planeloads of much-valued consumer goods were distributed to selected local chiefs and community leaders to bring them across to the Indonesian side. Those that accepted the Indonesian largesse would be required to help deliver the pro-integration vote [‘The Indonesian Army’, ibid.]. Many of the Papuan separatists captured by ABRI, such as the Arfak leader Lodewijk Mandatjan, “turned” (dibina) against the resistance or in some cases were recruited to the Indonesian cause by the Red Berets in West Irian [ibid.].

The provisions of the New York Agreement (NYA) which stipulated that self-determination had to be allowed to take its course were breached by the military repeatedly right up to the plebiscite. Because of the tight control kept by the Indonesian administration and army the native population was denied the freedom of speech, movement and assembly that Jakarta had pledged to guarantee in the 1962 accord [Socratez Sofyan Yoman, ‘The injustice and historical falsehood of West Papua’s integration into Indonesia through the Act of Free Choice, 1969’ in King et al, op.cit.].

When it came to the vote itself, the decision-making process was profoundly flawed. Instead of the specified fully-participatory referendum, exercising the one adult one vote principle, the Indonesians set up a consensus by discussion mechanism (Musyawarah Dewan) to decide the matter. Further, the ABRI manipulated the process, appointing a hand-picked consultative committee, 1,026 men (out of a total population of nearly 810,000) who in an open forum with the army standing menacing by, opted for incorporation with Indonesia. Thus, the community representatives who voted to join Indonesia did so because they were either cowed or bribed into doing so it. Papuan students and anyone else suspected of expressing support for independence were rounded up and detained during the consultative meetings to prevent them demonstrating against the ‘yes’ vote [May, op.cit., Indonesian Tragedy].

Indonesian stage-show: the appearance of unity for Ortiz-Sanz’s arrival

The Act of Free Choice was thus completely undemocratic, a travesty of justice. To compound the crime, the UN itself was complicit in the Indonesians’ act of “deceit and theft”, bestowing upon it an air of legitimacy [ibid.]. The UN’s representative in attendance, F Ortiz-Sanz, despite blatant evidence of the illegality of the process, basically rubber-stamped the Indonesians’ actions (detailing only minor objections to the process in his report). Consequently the UN Secretary-General (U Thant) merely ‘noted’ that the Act had resulted in West New Guinea’s integration into the unitary Republic of Indonesia [ibid; UN General Assembly Resolution 2504 (XXIV).]. Papuan and external critics of the Act would come to refer to it as “an Act of No Choice” or “an Act Free of Choice” [Nonie Sharp, Review of RJ May, ‘Between Two Nations: The Indonesia-Papua New Guinea Border and West Papua Nationalism’, Journal of Polynesian Society, 97(3), Sept. 1988].

With Indonesia making the outcome a fait accompli by force and the UN giving a half-hearted nod of approval, other countries such as Australia and the UK basically looked the other way. The Americans by 1969 were deeply embroiled in Vietnam and in the region were all about advancing the cause of anti-communism [‘Indonesian Army’, op.cit]. The integration outcome was seen as good for political stability and for business. ‘Strongman’ Suharto and his New Order regime had the green light to apply an even firmer clamp on radicalism in West Irian. And the retention of a territory abundant with minerals, oil and timber by a friendly power open for business (especially American) was a status quo that suited Washington economically as well as politically.