This article, largely based on archival research, highlights two contradictory outcomes of colonial state formation in central Borneo. The first is characterized by territorial consolidation and efforts to neatly sedentarize peoples within each colonial territory, while the second is characterized by pacification that unwittingly liberalized the flows and movements of people and commodities transgressing colonial state boundaries. The 1924 Kapit Peacemaking Agreement in colonial Sarawak is often noted for its significance in bringing a final end to the practice of inter-ethnic headhunting, principally between the Iban of Sarawak and the Kenyah from Dutch Borneo. While it marked the successful outcome of a long phase of colonial pacification and territorial consolidation for both colonial states in Borneo, the agreement's outcome simultaneously highlights the contradictory inter-colonial motives and expectations regarding the resulting increase of cross-border flows of people and commodities. The presented case highlights challenges facing Dutch colonial state formation when attempts to subjugate and sedentarize riverine peoples, who were geographically tied to fluid commodity chains and flows, directly undermined the former's own efforts to establish authority in its borderland frontier.