Colonial adventures in tropical agriculture : new estimates of returns to investment in the Netherlands Indies, 19191938
Faculty of Applied Economics
, p. 197-224
University of Antwerp
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 (19191938). We adopt the DimsonMarchStaunton 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 19191928 were impressive (14.3 %), being almost 3 percentage points higher than the world average. In the following decade 19291938 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 19191938) were about a factor 2.5 higher than returns to investment in the Dutch domestic economy (2.1 % in 19201939). 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.