Part 1: History of the Central Bank Development in the Indonesian Archipelago Long before the arrival of Europeans, the

Indonesian Archipelago had become the center of international trade. Meanwhile, in Europe mercantilism had developed into an industrial revolution and spurred the trade activities in Europe. This sparked the emergence of simple banking institution, such Bank van Leening in the Netherlands. This banking system was then taken by the Westerners while expanding their trade activities and colonizing the Indonesian Archipelago at the same time. In 1746, VOC in Java established De Bank van Leening which subsequently turned into De Bank Courant en Bank van Leening in 1752. This was the first bank set up in the archipelago and the pioneer the banking sector for the following years. On 24 January 1828, the Makasar Administration founded a circulation bank called De Javasche Bank (DJB). For decades this bank was operating and developing based upon a exclusive right of the Dutch Kingdom rulers. Such exclusive became a act, namely the DJB Bank Act of 1922. The Japanese occupation virtually halted the DJB activities and the Dutch Indies banking for a while. During the revolution era, the Dutch Indies Administration was confronted with the power dualism, between the Republic of Indonesia (RI) and Nederlansche Indische Civil Administrative (NICA). Likewise, the banking institution was divided into two, DJB and other Dutch Banks in the NICA territories, and Jajasan Poesat Bank Indonesia and Bank Negara Indonesia in the Republic of Indonesias territories. The Round Table Conference in 1949 ended the clashes between Indonesian and Holland. As a result, DJB was determined as the Central Bank for the Republic Indonesian Serikat (RIS). This status remained until the return of the Republic of Indonesia to the unitary state. Afterwards, as sovereign nation and state, the Republic of Indonesia nationalized its Central Bank. As from 1 July 1953, DJB became Bank Indonesia as the Central Bank for the Republic of Indonesia. Part 2 : Indonesian Archipelago up to 19th Century Prior to the arrival of the Westerners, the Indonesian Archipelago had turned into an international territory. There were then two international trade passages used by the traders, namely the overland and sea passages. In Indonesian Archipelago, there were major kingdoms which that contributed significantly to such foreign trade, namely Sriwijaya and Majapahit kingdoms. However, such trade booms lacked any standard currency though the communities had already known currency in rudimentary form. In the meantime during the 15th century, the European nations were attempting to expand their exploration to many different parts of the world, including Asia and the Indonesian Archipelago. Following the collapse of Constantinople to the Ottoman Turks power in 1453, these explorations were pioneered by Spain and Portugal which were then followed by the Netherlands, Britain and France. Such exploration activities triggered the emergence of mercantilism in Europe in the 16th and 17th centuries.

Subsequently at the end of the 18th century, the industrial revolution took place in Europe. The industrial activities developed and production output increased and this spurred export activities to Asia and United States. The speedy progress of the European trade sparked the emergence of financial service institutions which in turn paved the way for the establishment of modern banking, among others Bank van Leening in the Netherlands. This was later followed in stages by certain banks in Europe like the Bank of England (1773), Riskbank (1809), Bank of France (1800) which then developed into central banks. The emergence of Malacca as a trade emporium had attracted the Portuguese to arrive who eventually dominated the territory in 1511. The Portuguese continued to move to the east in search of spice sources in the Molucca Islands whereby they were confronted by the Spaniards who came via the Philippines. Shortly afterwards, the Dutch traders attempted to dominate the commodity sources in Java and the Indonesian Archipelago. Under the VOC flag, namely the holding company of the Dutch trading companies, the Dutch consolidated their power in Batavia in 1619. To smoothen and facilitated the VOC trade activities in the Indonesian Archipelago, in 1746 the Dutch set up De Bank van Leening and then changed to De Bank Courant en Bank van Leening in 1752. Bank van Leening as the first bank operating in the archipelago. At the end of 18th century, VOC experienced a digression and even bankruptcy. As a result, the VOC hegemony in the archipelago was taken over by the Dutch Kingdom. After the administration under Herman William Daendels and Janssen, East Indies fell to the British hand. The Queen of England assigned Sir Thomas Stamford Raffles to rule the East Indies but his administration did not endure. Following the end of battle against France under Napoleon in Europe, Britain and Holland reached an agreement whereby all the East Indies territories were returned to the Dutch. From this moment, East Indies was called Dutch Indies and was ruled by a General Commissioner (1815-1819) comprising Elout, Buyskes, and van der Capellen. In this period, a number of economic reforms began to take place in the Dutch Indies. Later Du Bus prepared for a series of policies that paved the way for the establishment of De Javasche Bank in 1828. Part 3 : DJB Pursuant to 1st until 8th Octrooi The idea for the establishment of a circulation bank for Dutch Indies was coined prior to the departure of the General Commissioner of Dutch Indies, namely Mr. C.T. Elout to Dutch Indies. The financial condition in Dutch Indies was considered in need of orderliness and payment system regulation through a bank institution. Simultaneously the business people in Batavia, Dutch Indies had spurred the urgency for the establishment of a bank institution to fulfill their business requirements. However, the idea was materialized only when King Willem the first issued a Power of Attorney to the General Commissioner of Dutch Indies on 9 December 1826. This letter authorized the Dutch Indies Administration to set up a bank pursuant to the special authority with a definite period or commonly known as the Exclusive Rights (Octrooi) With such power, the Dutch Indies Administration began to prepare for the establishment of DJB. On 11 December 1827, the General Commissioner of Dutch Indies, Leonard Pierre Joseph Burggraaf Du Bus de Gisignies issued Decree No. 28 regarding the Exclusive Rights and the provisions regarding DJB. Subsequently, on 24 January 1828 through the Decree of the General

Commissioner of Dutch Indies No. 25, the Deed of Incorporation of De Javasche Bank (DJB) was stipulated. Simultaneously, Mr. C de Haan was appointed President DJB and C.J. Smulders Secretary of DJB. The exclusive right served as the provision and guideline for the operation of DJB. The first DJBs exclusive right was valid for 10 years from 1 January 1828 until 31 December 1837 and was then extended until 31 March 1838. During the sixth exclusive, DJB renewed its deed of incorporation before Notary Derk Bodde in Jakarta on 22 March 1881. Pursuant to this new deed, banks status was changed to Naamlooze Vennootschap (N.V.). With such deed revision, DJB was treated as a new company. The eighth exclusive was the DJBs last exclusive until the enactment of DJB Bank Act in 1922. Within such exclusive period, DJB issued new provisions in the payment system aimed at improving the payment traffic in the Dutch Indies. This eighth exclusive expired on 31 March 1921 and was expanded for another year up to 31 March 1922.
Part 4 : DJB Pursuant to De Javasche Bank Wet 1922

On 31 March 1922 De Javasche Bank Act of 1922. This Act was then amended and added with Act dated 30 April 1927 and Act of 13 November 1930. This Bank Act of 1922 was the extension of DJBs eighth exclusive right which applied before. The period of Bank Act of 1922 was 15 years plus an automatic extension of one year as long as there was no annulment by the Governor General or the Board of Directors. The management of DJB in the DJB Act period comprised the Board of Directors consisting of a President and at least of two Directors, one of them was the Secretary. Apart from that, there were Acting President I, Acting President II, Acting Director I, and Acting Director II. The of the number of Directors was determined jointly in the meeting between the Board of Directors and Board of Commissioners. In this period, DJB was made up of seven sections; among others were economics and statistics, secretariat, bank draft, production and stocks. During this period, DJB developed fast with 16 branch offices, among others in Bandung, Cirebon, Semarang, Yogyakarta, Surakarta, Surabaya, Malang, Kediri, Kutaraja, Medan, Padang, Palembang, Banjarmasin, Pontianak, Makassar, and Manado, as well as a representative office in Amsterdam and New York. This DJB Act continued to prevail as the operational base of DJB until the enactment of Principal Act of Bank Indonesia on 1 July 1953.