The British Colony of Labuan was obtained by cession from the Sultan of Brunai and was in the shape of a quid pro quo for assistance in suppressing piracy in the neighbouring seas, which the Brunai Government was supposed to have at heart, but in all probability, the real reason of the willingness on the Sultan's part to cede it was his desire to obtain a powerful ally to assist him in reasserting his authority in many parts of the North and West portions of his dominions, where the allegiance of the people had been transferred to the Sultan of Sulu and to Illanun and Balinini piratical leaders. It was a similar reason which, in 1774, induced the Brunai Government to grant to the East India Company the monopoly of the trade in pepper, and is explained in Mr. Jesse's letter to the Court of Directors as follows. He says that he found the reason of their unanimous inclination to cultivate the friendship and alliance of the Company was their desire for "protection from their piratical neighbours, the Sulus and Mindanaos, and others, who make continual depredations on their coast, by taking advantage of their natural timidity."

The first connection of the British with Labuan was on the occasion of their being expelled by the Sulus from Balambangan, in 1775, when they took temporary refuge on the island.

In 1844, Captain Sir Edward Belcher visited Brunai to enquire into rumours of the detention of a European female in the country—rumours which proved to be unfounded. Sir James Brooke accompanied him, and on this occasion the Sultan, who had been terrified by a report that his capital was to be attacked by a British squadron of sixteen or seventeen vessels, addressed a document, in conjunction with Raja Muda Hassim, to the Queen of England, requesting her aid "for the suppression of piracy and the encouragement and extension of trade; and to assist in forwarding these objects they are willing to cede, to the Queen of England, the Island of Labuan, and its islets on such terms as may hereafter be arranged by any person appointed by Her Majesty. The Sultan and the Raja Muda Hassim consider that an English Settlement on Labuan will be of great service to the natives of the coast, and will draw a considerable trade from the northward, and from China; and should Her Majesty the Queen of England decide upon the measure, the Sultan and the Raja Muda Hassim promise to afford every assistance to the English authorities." In February of the following year, the Sultan and Raja Muda Hassim, in a letter accepting Sir James Brooke as Her Majesty's Agent in Borneo, without specially mentioning Labuan, expressed their adherence to their former declarations, conveyed through Sir Edward Belcher, and asked for immediate assistance "to protect Borneo from the pirates of Marudu," a Bay situated at the northern extremity of Borneo—assistance which was rendered in the following August, when the village of Marudu was attacked and destroyed, though it is perhaps open to doubt whether the chief, Osman, quite deserved the punishment he received. On the 1st March of the same year (1845) the Sultan verbally asked Sir James Brooke whether and at what time the English proposed to take possession of Labuan. Then followed the episode already narrated of the murder by the Sultan of Raja Muda Hassim and his family and the taking of Brunai by Admiral Cochrane's Squadron. In November, 1846, instructions were received in Singapore, from Lord Palmerston, to take possession of Labuan, and Captain Rodney Mundy was selected for this service. He arrived in Brunai in December, and gives an amusing account of how he proceeded to carry out his orders and obtain the voluntary cession of the island. As a preliminary, he sent "Lieutenant Little in charge of the boats of the Iris and Wolf, armed with twenty marines, to the capital, with orders to moor them in line of battle opposite the Sultan's palace, and to await my arrival." On reaching the palace, Captain Mundy produced a brief document, to which he requested the Sultan to affix his seal, and which provided for eternal friendship between the two countries, and for the cession of Labuan, in consideration of which the Queen engaged to use her best endeavours to suppress piracy and protect lawful commerce. The document of 1844 had stated that Labuan would be ceded "on such terms as may hereafter be arranged," and a promise to suppress piracy, the profits in which were shared by the Sultan and his nobles, was by no means regarded by them as a fair set off; it was a condition with which they would have readily dispensed. The Sultan ventured to remark that the present treaty was different to the previous one, and that a money payment was required in exchange for the cession of territory. Captain Mundy replied that the former treaty had been broken when Her Majesty's Ships were fired on by the Brunai forts, and "at last I turned to the Sultan, and exclaimed firmly, 'Bobo chop bobo chop!' followed up by a few other Malay words, the tenor of which was, that I recommended His Majesty to put his seal forthwith." And he did so. Captain Mundy hoisted the British Flag at Labuan on the 24th December, 1846, and there still exists at Labuan in the place where it was erected by the gallant Captain, a granite slab, with an inscription recording the fact of the formal taking possession of the island in Her Majesty's name.In the following year, Sir James Brooke was appointed the first Governor of the new Colony, retaining his position as the British representative in Brunai, and being also the ruler of Sarawak, the independence of which was not formally recognised by the English Government until the year 1863. Sir James was assisted at Labuan by a Lieutenant-Governor and staff of European Officers, who on their way through Singapore are said to have somewhat offended the susceptibilities of the Officials of that Settlement by pointing to the fact that they were Queen's Officers, whereas the Straits Settlements were at that time still under the Government of the East India Company. Sir James Brooke held the position of Governor until 1851, and the post has since been filled by such well-known administrators as Sir Hugh Low, Sir John Pope Hennessy, Sir Henry E. Bulwer and Sir Charles Lees, but the expectations formed at its foundation have never been realized and the little Colony appears to be in a moribund condition, the Governorship having been left unfilled since 1881. On the 27th May, 1847, Sir James Brooke concluded the Treaty with the Sultan of Brunai which is still in force. Labuan is situated off the mouth of the Brunai River and has an area of thirty square miles. It was uninhabited when we took it, being only occasionally visited by fishermen. It was then covered, like all tropical countries, whether the soil is rich or poor, with dense forest, some of the trees being valuable as timber, but most of this has since been destroyed, partly by the successive coal companies, who required large quantities of timber for their mines, but chiefly by the destructive mode of cultivation practised by the Kadyans and other squatters from Borneo, who were allowed to destroy the forest for a crop or two of rice, the soil, except in the flooded plains, being not rich enough to carry more than one or two such harvests under such primitive methods of agriculture as only are known to the natives. The lands so cleared were deserted and were soon covered with a strong growth of fern and coarse useless lalang grass, difficult to eradicate, and it is well known that, when a tropical forest is once destroyed and the land left to itself, the new jungle which may in time spring up rarely contains any of the valuable timber trees which composed the original forest.

A few cargoes of timber were also exported by Chinese to Hongkong. Great hopes were entertained that the establishment of a European Government and a free port on an island lying alongside so rich a country as Borneo would result in its becoming an emporium and collecting station for the various products of, at any rate, the northern and western portions of this country and perhaps, too, of the Sulu Archipelago. Many causes prevented the realization of these hopes. In the first place, no successful efforts were made to restore good government on the mainland, and without a fairly good government and safety to life and property, trade could not be developed. Then again Labuan was overshaded by the prosperous Colony of Singapore, which is the universal emporium for all these islands, and, with the introduction of steamers, it was soon found that only the trade of the coast immediately opposite to Labuan could be depended upon, that of the rest' including Sarawak and the City of Brunai, going direct to Singapore, for which port Labuan became a subsidiary and unimportant collecting station. The Spanish authorities did what they could to prevent trade with the Sulu Islands, and, on the signing of the Protocol between that country and Great Britain and Germany freeing the trade from restrictions, Sulu produce has been carried by steamers direct to Singapore. Since 1881, the British North Borneo Company having opened ports to the North, the greater portion of the trade of their possessions likewise finds its way direct by steamers to the same port.

Labuan has never shipped cargoes direct to England, and its importance as a collecting station for Singapore is now diminishing, for the reasons above-mentioned.

Most or a large portion of the trade that now falls to its share comes from the southern portion of the British North Borneo Company's territories, from which it is distant, at the nearest point, only about six miles, and the most reasonable solution of the Labuan question would certainly appear to be the proclamation of a British Protectorate over North Borneo, to which, under proper guarantees, might be assigned the task of carrying on the government of Labuan, a task which it could easily and economically undertake, having a sufficiently well organised staff ready to hand.[13] By the Royal Charter it is already provided that the appointment of the Company's Governor in Borneo is subject to the sanction of Her Majesty's Secretary of State, and the two Officers hitherto selected have been Colonial servants, whose service have been lent by the Colonial Office to the Company.

The Census taken in 1881 gives the total population of Labuan as 5,995, but it has probably decreased considerably since that time. The number of Chinese supposed to be settled there is about 300 or 400—traders, shopkeepers, coolies and sago-washers; the preparation of sago flour from the raw sago, or lamuntah, brought in from the mainland by the natives, being the principal industry of the island and employing three or four factories, in which no machinery is used. All the traders are only agents of Singapore firms and are in a small way of business. There is no European firm, or shop, in the island. Coal of good quality for raising steam is plentiful, especially at the North end of the island, and very sanguine expectations of the successful working of these coal measures were for a long time entertained, but have hitherto not been realised. The Eastern Archipelago Company, with an ambitious title but too modest an exchequer, first attempted to open the mines soon after the British occupation, but failed, and has been succeeded by three others, all I believe Scotch, the last one stopping operations in 1878. The cause of failure seems to have been the same in each case—insufficient capital, local mismanagement, difficulty in obtaining labour. In a country with a rainfall of perhaps over 120 inches a year, water was naturally another difficulty in the deep workings, but this might have been very easily overcome had the Companies been in a position to purchase sufficiently powerful pumping engines.

There were three workable seams of coal, one of them, I think, twelve feet in thickness; the quality of the coal, though inferior to Welsh, was superior to Australian, and well reported on by the engineers of many steamers which had tried it; the vessels of the China squadron and the numerous steamers engaged in the Far East offered a ready market for the coal.

In their effort to make a "show," successive managers have pretty nearly exhausted the surface workings and so honeycombed the seams with their different systems of developing their resources, that it would be, perhaps, a difficult and expensive undertaking for even a substantial company to make much of them now.[14]

It is needless to add that the failure to develop this one internal resource of Labuan was a great blow to the Colony, and on the cessation of the last company's operations the revenue immediately declined, a large number of workmen—European, Chinese and Natives—being thrown out of employment, necessitating the closing of the shops in which they spent their wages. It was found that both Chinese and the Natives of Borneo proved capital miners under European supervision. Notwithstanding the ill-luck that has attended it, the little Colony has not been a burden on the British tax-payer since the year 1860, but has managed to collect a revenue—chiefly from opium, tobacco, spirits, pawnbroking and fish "farms" and from land rents and land sales—sufficient to meet its small expenditure, at present about £4,000 a year. There have been no British troops quartered in this island since 1871, and the only armed force is the Native Constabulary, numbering, I think, a dozen rank and file. Very seldom are the inhabitants cheered by the welcome visit of a British gunboat. Still, all the formality of a British Crown Colony is kept up. The administrator is by his subjects styled "His Excellency" and the Members of the Legislative Council, Native and Europeans, are addressed as the "Honourable so and so." An Officer, as may be supposed, has to play many parts. The present Treasurer, for instance, is an ex-Lieutenant of Her Majesty's Navy, and is at the same time Harbour Master, Postmaster, Coroner, Police Magistrate, likewise a Judge of the Supreme Court, Superintendent of Convicts, Surveyor-General, and Clerk to the Legislative Council, and occasionally has, I believe, to write official letters of reprimand or encouragement from himself in one capacity to himself in another.

The best thing about Labuan is, perhaps, the excellence of its fruit, notably of its pumeloes, oranges and mangoes, for which the Colony is indebted to the present Sir Hugh Low, who was one of the first officials under Sir James Brooke, and a man who left no stone unturned in his efforts to promote the prosperity of the island. His name was known far and wide in Northern Borneo and in the Sulu Archipelago. As an instance, I was once proceeding up a river in the island of Basilan, to the North of Sulu, with Captain C. E. Buckle, R.N., in two boats of H. M. S. Frolic, when the natives, whom we could not see, opened fire on us from the banks. I at once jumped up and shouted out that we were Mr. Low's friends from Labuan, and in a very short time we were on friendly terms with the natives, who conducted us to their village. They had thought we might be Spaniards, and did not think it worth while to enquire before tiring. The mention of the Frolic reminds me that on the termination of a somewhat lengthy cruise amongst the Sulu Islands, then nominally undergoing blockade by Spanish cruisers, we were returning to Labuan through the difficult and then only partially surveyed Malawalli Channel, and after dinner we were congratulating one another on having been so safely piloted through so many dangers, when before the words were out of our mouths, we felt a shock and found ourselves fast on an unmarked rock which has since had the honour of bearing the name of our good little vessel.

Besides Mr. Low's fruit garden, the only other European attempt at planting was made by my Cousin, Dr. Treacher, Colonial Surgeon, who purchased an outlying island and opened a coco-nut plantation. I regret to say that in neither case, owing to the decline of the Colony, was the enterprise of the pioneers adequately rewarded.Labuan[15] at one time boasted a Colonial Chaplain and gave its name to the Bishop's See; but in 1872 or 1873, the Church was "disestablished" and the few European Officials who formed the congregation were unable to support a Clergyman. There exists a pretty little wooden Church, and the same indefatigable officer, whom I have described as filling most of the Government appointments in the Colony, now acts as unpaid Chaplain, having been licensed thereto by the Bishop of Singapore and Sarawak, and reads the service and even preaches a sermon every Sunday to a congregation which rarely numbers half a dozen.