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Colonial adventures in tropical agriculture: new estimates of returns to investment in the Netherlands Indies, 1919–1938

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  • Frans Buelens

    () (University of Antwerp, Antwerp, Belgium)

  • Ewout Frankema

    () (Wageningen University, Wageningen, The Netherlands)

Abstract

How profitable were foreign investments in plantation agriculture in the Netherlands Indies during the late colonial era? We use a new dataset of monthly quoted stock prices and dividends of international companies at the Brussels stock exchange to estimate the returns to investment in tropical agriculture (1919–1938). We adopt the Dimson–March–Staunton method to compute real geometric annual average rates of return and assess our estimates in an international comparative perspective. We find that returns to colonial FDI in the Netherlands Indies during 1919–1928 were impressive (14.3 %), being almost 3 percentage points higher than the world average. In the following decade 1929–1938 fortunes reversed, with a rate of return of −2.8 % compared to a world average of 2.2 %. Over the entire period the returns to colonial FDI (5.4 % in 1919–1938) were about a factor 2.5 higher than returns to investment in the Dutch domestic economy (2.1 % in 1920–1939). We argue that these returns should be interpreted in a colonial context of systematic labour repression, but that they may also partly reflect a higher risk-premium of investments in colonial commodities.

Suggested Citation

  • Frans Buelens & Ewout Frankema, 2016. "Colonial adventures in tropical agriculture: new estimates of returns to investment in the Netherlands Indies, 1919–1938," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 10(2), pages 197-224, may.
  • Handle: RePEc:afc:cliome:v:10:y:2016:i:2:p:197-224
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    File URL: http://dx.doi.org/10.1007/s11698-015-0128-z
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    Keywords

    FDI-Netherlands Indies-Colonial economy-Tropical agriculture-Returns to investment;

    JEL classification:

    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East

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