The Semarang Sugar Tycoon Whose Global Business Empire Collapsed Overnight
Jakarta, CNBC Indonesia – One of the world’s largest sugar business empires once emerged from Semarang, Central Java.
The company owned by businessman Oei Tiong Ham was able to dominate the international sugar market and generate extraordinary wealth. But the success built over decades eventually collapsed after the state seized all the company’s assets in Indonesia.
The story began with Oei Tiong Ham Concern (OTHC), a conglomerate that was once a major force in the sugar trade during the Dutch East Indies era. It grew rapidly, eventually challenging Western companies that had previously dominated the sugar industry.
The business’s success did not last. After its founder died, the company faced various legal problems and asset disputes. The culmination came in 1961, when a court ruling in Semarang ended the Oei family’s control of its business assets in Indonesia.
OTHC was founded in 1893 by Oei Tiong Ham, a Chinese businessman born in Semarang. It had four sugar-sector subsidiaries located in India, Singapore and London.
According to Onghokham’s Konglomerat Oei Tiong Ham (1992), the scale of the group’s business enabled OTHC to export 200,000 tonnes of sugar, surpassing Western companies in 1911–1912. At the same time, OTHC successfully captured 60 per cent of the sugar market in the Dutch East Indies.
Such a large business empire helped Oei Tiong Ham amass a fortune of 200 million guilders. By way of comparison, one guilder in 1925 could buy 20kg of rice. Using a rice price of Rp10,850 per kilogram, his wealth is estimated to have been equivalent to Rp43.4 trillion.
After Oei Tiong Ham’s death, however, a series of problems beset the company, eventually leading to its collapse. The story began when OTHC’s heirs filed a claim in a Dutch court against Bank Indonesia’s Amsterdam branch.
They sought the return of millions of guilders in deposits held at De Javasche Bank, the predecessor of Bank Indonesia, before the Second World War, in 1942.
The Indonesian Government wanted to use the money to build a sugar factory. The heirs argued that the government had no right to use the company’s inherited funds.
The heirs ultimately won their case. The Dutch court ordered the government to return the deposits. The government complied, but the family considered this the beginning of the downfall of OTHC’s business empire.
“According to Oei Tjong Tay (Oei Tiong Ham’s son), this repayment prompted the government to look for reasons to seize all of OTHC’s assets in Indonesia,” Benny G. Setiono wrote in Tionghoa dalam Pusaran Politik (2003).
Not long after the claim, in 1961, the Semarang court summoned the shareholders of Kian Gwan, the principal vehicle of the OTHC conglomerate. They were to face trial on economic charges over alleged violations of foreign-exchange regulations.
Because all the heirs lived overseas and no defence was presented, the Semarang court found OTHC guilty. On 10 July 1961, the evidence connected with the case was confiscated and seized by the state.
The seizure, carried out in a single day, also encompassed Oei Tiong Ham’s inheritance. In other words, all the assets of OTHC and the Oei family were seized. The proceeds from the confiscation later became capital for the establishment, in 1964, of the state-owned sugar company PT Rajawali Nusantara Indonesia (RNI).
Following the state takeover, the decades-long history of OTHC, a major conglomerate during the colonial era, faded away. The descendants of Oei Tiong Ham also disappeared from public view, leaving only a place in history.