The Malaysian Island of Penang fell under British Imperial rule in 1786, when the British East India Company acquired the island from the sultanate of Kedah in exchange for financial assistance discharging a debt between Kedah and Siam (now Thailand). The deal, brokered by Francis Light, also included military assistance against Siam; when Light reneged on this deal, Kedah attempted to reclaim Penang, though this incursion was quashed by British forces. Penang became the first British holding in South Asia and was renamed Prince of Wales Island. The first city established was George Town—named for then-king George III of England. It was a free port, meaning no duties or taxes were imported, thus luring merchants to Penang instead of Dutch-controlled ports in the area and causing George Town to boom with an influx of immigrants from Europe and Asia.

In 1826, Penang was united with Singapore and Malacca into the Straits Settlements, which operated under the control of the British East India Company. Singapore replaced George Town as the capital of British Malaya in 1832, though Penang remained a trading center in Southeast Asia. Though diverse, 19th-century Penang was frequently segregated, with different ethnic and racial groups occupying different portions of the workforce and different areas of the city.