Penang was one of the two British ports in Southeast Asia belonging to the East India Company. It had been founded in 1786. The other British settlement was Beencoolen on the West Coast of Sumatra. Bencoolen had been founded about a hundred years earlier than Penang.

The British were not the only Europeans trading in the region. The Dutch had been trading in the Malay Archipelago for more than 200 years. In the 17^th century the Dutch East India Company fought against other European traders in the Malay Archipelago, especially the Portuguese and the English. The Dutch finally succeeded in driving off the Portuguese and the English from almost all parts of the Archipelago. The English East India Company was left with only a small unimportant trading station at Bencoolen.

The Company then become more active in India, where the English won several battles and wars against their Europeans competitors (the Portuguese, the French and the Dutch) and against Indian rulers. The English Company gradually built up a large empire in India.

In the meantime, the Dutch built up a trading empire in the East Indies during the 17^th and 18^th centuries. They ruled over Java, where they had their headquarters at Batavia (Jakarta). They also controlled the Spice Islands (the Moluccas) and other important islands to east of Java. On the Malay Peninsula the Dutch ruled Melaka, which they captures from the Portuguese in 1641. To the south of the Malay Peninsula they controlled the Riau Archipelago belonging to the Johor-Riau Sultanate.

When Raffles went to Penang in 1805, he found that the Dutch had by the time lost much of their power in the East Indies. This was because of a Great War in Europe, which had broken out twelve years earlier. During the war, the French Army conquered Holland, the country of the Dutch, and before long, Holland became a part of the French empire in Europe. This meant that the Dutch ports in the east were in the danger of falling into the hands of the French.

To prevent the Dutch ports from being used by French warships against British ships, the English India Company sent troops to occupy Melaka. The British took over Melaka from the Dutch because it was the port that controlled the sea traffic along the Straits of Melaka. The British also took over Riau and some important islands in the eastern part of the Malay Archipelago. In 1811, a large British fleet and army, led by the governor-general of British India, conquered the main Dutch Island of Java. After the conquest of Java, Raffles was appointed the Lieutenant Governor of Java.

During the years when Raffles was the ruler of Java, British trade with the Archipelago greatly increased. At the same time, British trade with China grew more important. British ships to and from China, passed freely and safely through the Straits of Melaka. From the ports of Penang and Melaka, the British controlled the Straits of Melaka, making the Straits safe from enemy (French) warships.

After the war in Europe had come to an end in 1815, the British government handed back Holland all the Dutch islands and ports in the East Indies, including Java, Melaka and Riau. Raffles had to leave Java before it was handed back to the Dutch.

While in Java, Raffles had studied and learned a great deal about Java and the Javanese. When he returned to England, he published The History of Java. This work of his was a great success. Raffles became famous and was well liked by the members of the royal family as well as the great scientists and public leaders. He was made a knight and from then onwards he was known as Sir Stanford Raffles.

In 1818, Sir Stanford Raffles returned to the East as the Lieutenant- Governor of Bencoolen in Sumatra. Back in the East, Raffles found that the Dutch not only had re-occupied the areas they had previously controlled, but were becoming more powerful than ever before in the region. With a large fleet of warships and a strong army, the Dutch were enforcing stricter rules about trade. They did not allow the British to trade freely in the Archipelago. British ships were not allowed to trade with any of the Dutch-controlled ports except Batavia (Jakarta). At Batavia, British traders were charged high fees for using the port and had to pay heavy taxes on goods, which they sold or bought.

All Asian trading boats had to fly a Dutch flag and carry a Dutch permit or pass. They were not allowed to trade with any ports except Dutch-controlled ones.

By enforcing such rules and controls, the Dutch were having a trade monopoly. A monopoly is the right of only one person or one group of people to control or carry on a certain trade or business. The Dutch were spreading their trade monopoly to more and more areas in order to keep out the British traders. They sent official and troops to occupy new areas controlled by local rulers who had been independent or free from the Dutch rule. British ships and traders were shut out form these areas.

Raffles was strongly opposed to the Dutch monopoly of trade. He saw more clearly than any British official did the need to break the Dutch monopoly. The Dutch wanted to keep British trade to the ports of Penang and Bencoolen. But Raffles knew that with only these two ports, the British could never break the Dutch monopoly.

Hence, he went in search for the third port. Bencoolen had long proved to be totally useless as a trading centre. It was situated on the wrong side of Sumatra, facing the Indian Ocean instead of the Straits of Melaka.

Penang, lying to the far north of the Straits of Melaka was not very useful for controlling the Straits of Melaka and protecting the British ships using the straits. Melaka, occupying a better position in the Straits, now belonged to the Dutch. The Dutch from Melaka and Java controlled both the Straits of Melaka and the Sunda Straits (between Java and Sumatra). They could cut off the valuable trade between Penang and the important trading centres within the Archipelago.

Raffles thought that if the British had beside Penang, another port to the south of Dutch’s Melaka, the new port and the older port of Penang could be used as bases or centres to protect British shipping and trade along the Straits of Melaka.

If the new British port were situated to the south of the Malay Peninsula, it would command the southern entrance to the Straits of Melaka. It would lie where trading ships between China and India had to pass close by as they sailed round the southern end of the Malay Peninsula.

Most important of all, the new southern British port would be much neared than Penang to the main trading area in the edge of the Archipelago. Penang, lying in the outer edge of the Archipelago was too far from Java and the islands east of Java to attract the trade of the Archipelago. In fact, most Archipelago traders did not want to make the long voyages north to Penang unless they had special goods to sell or buy.

As the new southern port would be much neared to Java and the eastern part of the Malay Archipelago, it could be a centre of free trade to attract traders from all over the Archipelago. From such a trade centre the British could begin to break the Dutch monopoly of trade.

Raffles began to write complaints to the East India Company against the Dutch and also put forward his ideas about forming a new British settlement. However, his complaints and ideas were not accepted. Fortunately, his chief in Calcutta, the governor-general of British India, agreed to let him visit Calcutta and explain his ideas in person.

Raffles went to Calcutta and meet the governor-general, Lord Hastings. He presented his ideas and arguments so well that Lord Hastings agreed to send him as his Special Agent to set up a new British settlement to the south of the Malay peninsula--- at Riau or its neighborhood.

Raffles acted quickly for fear that the Dutch would occupy the places he thought of. When he hurried back from Calcutta to Penang, he learned that the Dutch had just re-occupied Riau, one of the places he had in mind. Therefore, Raffles and his assistant, Major William Farquhar, had to look for another suitable place. They examined a group of islands to the west of Java but found them unsuitable. Sailing eastwards, they soon reached Temasek, which Raffles decided to set up the new port at.

Raffles found the island to be the very place he had been looking for. Its geographical position was even better than that of Riau.

The British fleet reached Temasek’s waters on the 28 January 1819.