BI building founded on nation's wealth

By Ida Indawati Khouw

The Bank Indonesia building in Kota, West Jakarta, was where the Indonesian banking system began. The following article, the 54th in the series on old and protected buildings in Jakarta, provides a glimpse of its history.

JAKARTA (JP): The wife of a high-ranking official at the Royal Netherlands Embassy was discussing a grand old building in the old town of Kota in West Jakarta.

"I saw a very beautiful building just across from Kota railway station. I wonder what the building is," she said during dinner at an embassy officials' house.

She was referring to the white Bank Indonesia building, which is not only architecturally beautiful but was also the silent witness to the birth of the local banking system 172 years ago.

Located on Jl. Pintu Besar Utara, the building was the office of De Javasche Bank (the Java Bank), the first bank in the Dutch East Indies. It later became Indonesia's central bank, Bank Indonesia.

The Dutch lady was particularly impressed with the style of the two-story Renaissance-esque building, with its beautiful ornaments and intricate carvings.

The Renaissance style is apparent in the horizontal grooves along its walls, among other things. "The horizontal grooves give the impression of 'piles of rocks' that are found in almost all Renaissance-style buildings," says Yulianto Sumalyo in Arsitektur Kolonial Belanda di Indonesia (Dutch Colonial Architecture in Indonesia).

Yulianto says that unlike other buildings in Kota which resemble "a group of islands surrounded by streets" (they have no front yards), the Javasche Bank has a large open space in front of it.

The firm behind the building was Ed. Cuypers & Hulswit Batavia, a famous architecture house in the city at the time.

The building is actually older than the bank itself. It was formerly the property of Binnen Hospital (meaning Inner Hospital, because it was located inside the old walled city of Batavia).

But other sources show that the bank rented the building from private company Firma Mac Quoid Davidson and Co. for 500 guilders per month.

"Only two years after its construction did the bank buy the building for 50,000 gilders on an installment basis," said R. Hardjo Santoso, 70, a retired Bank Indonesia staffer who is now a member of the team in charge of founding a museum dedicated to the bank.

Javasche Bank was built on Jan. 24, 1828, on the orders of Dutch King Willem I.

Deficit

Dawam Rahardjo in his book Bank Indonesia dalam Kilasan Sejarah Bangsa (Bank Indonesia in the Brief History of the Nation) says that merchants in the Dutch East Indies founded the bank in the absence of a banking institution.

To import goods from Western Europe, especially the Netherlands, businesspeople needed to engage in export activities but if there was a trade balance deficit, the loss had to be covered by gold or silver.

"The buying of gold and silver resulted in the disappearance of the precious metals from the market. To solve the problem, the Dutch East Indies government had to import gold and silver from the Netherlands," Dawam says.

The East Indies administration suffered a deficit in export- import activity because the influx of Europeans required a soaring amount of imported goods.

"The deficit had to be covered by off-shore loans ... To cope with this, exports should have been boosted because the export value per capita in Java was still low. For export, Java relied only on coffee, rice and tobacco; but the international coffee price was declining at that time," says Dawam.

It was during these hard times that Javasche Bank was founded by Governor General Leonard Pierre Joseph Burgraaf Du Bus de Ghisignies, following the model of De Nederlandsche Bank in the Netherlands.

The Dutch government covered 50 percent of the bank's 1 million guilders paid-in capital, while the rest was covered by the Nederlandsche Handel-Mij (NHM), a large trading company which had banking characteristics.

The bank was opened for the public on April 8, 1828, and was advertised in the Bataviasche Courant newspaper. Its first director was C. de Haan, previously head of Semarang District Court in Central Java. Its secretary was C.J. Smulders, former clerk of Surabaya District Court in East Java.

Hardjo said that the bank was named Javasche Bank because the institution operated in Java. "That's why problems appeared when the bank wanted to open branches outside Java. It was later decided that Javasche Bank was 'just a name' and had nothing to do with its area of operations," he added.

Monetary conditions were unique. They were several "strange" currencies in circulation like those mentioned in the Gedenkboek van De Javasche Bank 1828-1928 (Commemoration Book of the Javasche Bank 1828-1928), namely De Gouden Doublon, De Gouden Ducaat, De Gecartelde Ducaton, De Piaster of Spaansche Mat and De Sica Ropij.

Only after 1912 was the Dutch Guilder introduced as the administration's sole currency system.

Hardjo said, however, that during World War II, the value of the Dutch guilder and the Dutch East Indies' guilder was different. "One Dutch guilder was equal to three Dutch East Indies guilders," he said.

The banknote was introduced here on March 11, 1828, when the Dutch authority released a decree on banknotes under the condition that the amount was not more than 1,120,000 guilders.

"The banknote was ordered from Enschede en Zoon in Haarlem (The Netherlands)," Dawam says.

Javasche Bank kept growing. In the late 19th century it had seven branches in Semarang and Solo (Central Java), Yogyakarta, Surabaya (East Java), Padang (West Sumatra), Makassar (South Sulawesi) and Cirebon (West Java).

Almost all of the bank's buildings had similar architectural styles because they were built by the same firm of architects.

Other foreign and local banks were also founded during this period.

During the Japanese occupation between 1942 and 1945, almost all the banks in the East Indies were liquidated after their assets were seized the new ruler. The only survivors were Yokohama Specie Bank, Taiwan Bank and Mitsui Bank.

On March 14, 1946, Javasche Bank resumed operations under the authority of the Dutch government.

On May 28, 1951, the bank was nationalized by the Indonesian government. Former finance minister Sjafruddin Prawiranegara become the director. Two months later, the Indonesian government bought 97 percent, or Rp 8.95 million worth, of the bank's shares at the Netherlands stock exchange.

It became Bank Indonesia on July 1, 1953.