Heritage – OTH story

Oei Tiong Ham , Majoor-titulair der Chinezen (黃仲涵; Huáng Zhònghán; 1866–1924) was a Chinese Indonesian tycoon, his father, Oei Tjie Sien , the founder of the Kian Gwan, a multinational trading company. Born in Semarang, Central Java, Indonesia., He was the first conglomerate of the twentieth century at the Far East. Part of his wealth originated in his involvement in the sugar industry.

Oei Tiong Ham (OTH) was born in Semarang on 19 November 1866, a Chinese-born migrant and his father established the firm Kian Gwan in 1863. OTH’s significance relates to his role in expanding his father’s trading house, Kian Gwan, into the Oei Tiong Ham Concern (OTHC), to become the largest conglomerate in Southeast Asia at the beginning of the twentieth century.

30 year later, OTH took over the firm Kian Gwan from his father, he was focused in rubber, kapok, gambir, tapioca and coffee. He diversified the company into one of the largest firms in Southeast Asia.

OTH’s initial strategy was gradually to build up dominance in the highly lucrative opium market towards the end of the nineteenth century and then the sugar market. He relied on contract with collateral for loans he extended. During the 1880, there was a sugar crisis and he acquired five sugar factories. Sugar now became the backbone of the company and would remain so for the next generations.

Kian Gwan gradually integrated its plantations, mills, shipping lines, banks, and complementary enterprises. OTH’s company was also groundbreaking in employing professional personnel, instead of relying completely on family members in the old Chinese way. Only ownership of Kian Gwan rested with the family.

The OTHC grew and diversified rapidly in the period around 1920’s. It started branches in London, Amsterdam, Singapore, Bangkok, and New York, created a bank, a steamship business and had a large wholesale business. Of all the ethnic Chinese business conglomerates in pre-war Asia, the OTHC was by far the largest. The company was even larger than the well-known “Big Five” Dutch trading companies that supposedly dominated the foreign trade of the Indies. The OTHC was strong in foreign trade, particularly in China. The basic strategy of the company was to take advantage of the opportunities on the world market for commodities produced in Indonesia.

During the post-war boom of 1918-1920, the worldwide demand for Java sugar was high, creating many opportunities for sugar-mill owners and sugar brokers, but fortunes gained were easily lost in a couple of days. OTH followed a cautious policy during these boom years. He did not speculate too heavily and took steps to improve its financial administration. OTH recruited talented accountants to set up a modern accounting system for the sugar factories. Due to the cautious and independent strategy, the company survived the subsequent sugar crisis while many other Chinese firms perished.

Besides making use of written agreements and a modern accounting system, OTH also diverted from yet another Chinese business practice of the time. Instead of relying solely on family members in running his wide-ranging business enterprises, he deliberately chose capable outsiders, such as Dutch directors, managers, and engineers to manage his companies.