Before the founding of Tawau, the region around it was the subject of dispute between the British and Dutch spheres of influence. In 1893, the first British merchant vessel sailed into Tawau, marking the opening of the town's seaport. In 1898, the British set up a settlement in Tawau. The North Borneo Chartered Company (BNBC) accelerated growth of the settlement's population by encouraging the immigration of Chinese. Consequent to the Japanese occupation of North Borneo, the Allied forces bombed the town in mid-1944, razing it to the ground. After the Japanese surrender in 1945, 2,900 Japanese soldiers in Tawau became prisoners of war and were transferred to Jesselton. Tawau was rebuilt after the war, and by the end of 1947, the economy was restored to its pre-war status. Tawau was also the main point of conflict during the Indonesia–Malaysia confrontation from 1963 to 1966. During that period, it was garrisoned by the British Special Boat Section, and guarded by Australian Destroyers and combat aircraft. In December 1963, Tawau was bombed twice by Indonesia and shootings occurred across the Tawau-Sebatik Island international border. Indonesians were found trying to poison the town's water supply. In January 1965, a curfew was imposed to prevent Indonesian attackers from making contact with Indonesians living in the town. While in June 1965, another attempted invasion by the Indonesian forces was repelled by bombardment by an Australian destroyer. Military conflict finally ended in December 1966.