An island rather larger than Guernsey, Labuan is the only British territory, as opposed to a Protectorate, which we shall find in this region. Rounding a headland we turn northwards into a broad and deep inlet, and come to anchor opposite a small town of white houses with red roofs and a background of low hills; this is Victoria, the capital and only town. We may have time to travel by the light railway to the coal mines at the other end of the island, but we shall find nothing else to detain us, as the country is mostly occupied by swamps and decayed villages. The harbour and the coal: these two things explain why Labuan is now a British Possession. Though it had been, for a short time in the eighteenth century, a station of the East India Company, it was unoccupied and seemingly of little value when we acquired it from the Sultan of Brunei in 1846; but we looked to its position on the flank of the great route to China, with its excellent harbour and supplies of coal. It was thought by some that the island would become a smaller Singapore, a port of call for shipping and a collecting centre for the whole mainland of Borneo. Labuan started with great expectations; its history has been a series of disappointments. The coal business failed from the first, while the transit trade did not develop, and the reason is not far to seek. In spite of the great natural resources of Borneo, there could be no progress in trade until piracy and head-hunting had been suppressed and some form of settled government introduced. Now that this has been accomplished and the country is prospering and developing, the mainland has its own seaports from which the goods are shipped direct to Singapore or Hongkong, so that Labuan derives no benefit. Politically Labuan has had a varied career. In 1848, it was made a Crown Colony, Sir James Brooke being the first Governor; later it was handed over to the North Borneo Company to administer for a time; and since 1907 it has been annexed to the Straits Settlements. It has been eclipsed completely by its greater neighbour.