Sir Thomas Stamford Raffles, the lieutenant governor of Bencoolen in 1818, vigorously opposed his government's plan to abandon control of the China trade to the Dutch. Raffles, who had started his career as a clerk for the British East India Company in London, was promoted at the age of twenty-three to assistant secretary of the newly formed government in Penang in 1805. A serious student of the history and culture of the region and fluent in Malay, Raffles served as governor general of Java (1811-16). In 1818 Raffles sailed from Bencoolen to India, where he convinced Governor General Lord Hastings of the need for a British post on the southern end of the Strait of Malacca. Lord Hastings authorized Raffles to secure such a post for the British East India Company, provided that it did not antagonize the Dutch. Arriving in Penang, Raffles found Governor General James Bannerman unwilling to cooperate. When he learned that the Dutch had occupied Riau and were claiming that all territories of the sultan of Johore were within their sphere of influence, Raffles dispatched Colonel William Farquhar, an old friend and Malayan expert, to survey the Carimon Islands (modern Karimun Islands near Riau). Disregarding Bannerman's orders to him to await further instructions from Calcutta, Raffles slipped out of Penang the following night aboard a private trading ship and caught up with Farquhar. Raffles knew of Singapore Island from his study of Malay texts and determined to go there.

On January 28, 1819, Raffles and Farquhar anchored near the mouth of the Singapore River. The following day the two men went ashore to meet Temenggong Abdu'r Rahman, who granted provisional permission for the British East India Company to establish a trading post on the island, subject to the approval of Hussein. Raffles, noting the protected harbor, the abundance of drinking water, and the absence of the Dutch, began immediately to unload troops, clear the land on the northeast side of the river, set up tents, and hoist the British flag. Meanwhile, the temenggong sent to Riau for Hussein, who arrived within a few days. Acknowledging Hussein as the rightful sultan of Johore, on February 6 Raffles signed a treaty with him and the temenggong confirming the right of the British East India Company to establish a trading post in return for an annual payment (in Spanish dollars, the common currency of the region at the time) of Sp$5,000 to Hussein and Sp$3,000 to the temenggong. Raffles then departed for Bencoolen, leaving Farquhar in charge, with instructions to clear the land, construct a simple fortification, and inform all passing ships that there were no duties on trade at the new settlement.

The immediate reaction to Raffles' new venture was mixed. Officials of the British East India Company in London feared that their negotiations with the Dutch would be upset by Raffles' action. The Dutch were furious because they considered Singapore within their sphere of influence. Although they could easily have overcome Farquhar's tiny force, the Dutch did not attack the small settlement because the angry Bannerman assured them that the British officials in Calcutta would disavow the whole scheme. In Calcutta, meanwhile, both the commercial community and the Calcutta Journal welcomed the news and urged full government support for the undertaking. Lord Hastings ordered the unhappy Bannerman to provide Farquhar with troops and money. Britains foreign minister Lord Castlereagh, reluctant to relinquish to the Dutch "all the military and naval keys of the Strait of Malacca," had the question of Singapore added to the list of topics to be negotiated with the Dutch, thus buying time for the new settlement.

The opportunity to sell supplies at high prices to the new settlement quickly attracted many Malacca traders to the island. Word of Singapore's free trade policy also spread southeastward through the archipelago, and within six weeks more than 100 Indonesian interisland craft were anchored in the harbor, as well as one Siamese and two European ships. Raffles returned in late May to find that the population of the settlement had grown to nearly 5,000, including Malays, Chinese, Bugis, Arabs, Indians, and Europeans. During his four-week stay, he drew up a plan for the town and signed another agreement with Hussein and the temenggong establishing the boundaries of the settlement. He wrote to a friend that Singapore "is by far the most important station in the East; and, as far as naval superiority and commercial interests are concerned, of much higher value than whole continents of territory."

Data as of December 1989