The nine sultanates of the Malay Peninsula together with Port Singapore form the British colony of Malaya. Rubber plantations lead the shift from subsistence to export agriculture. The British encourage the immigration of Tamils from South India. Indian workers comprise the core plantation labor force.
Growth attracts Chinese immigrants, who settle in the urban areas of Singapore and Kuala Lumpur. The British policy of indirect rule maintains the status of traditional rulers and Malay class structure. The provinces of Sabah and Sarawak, on the island of Borneo, are governed by the North Borneo Company and the Brooke family. Port Singapore is Asia's main British naval base.
The worldwide depression hits hard the urban Chinese engaged in trade. Influenced by events in China, Chinese immigrants found the Communist Party of Malaya in 1930. Ethnic friction between Chinese and Malays marks the decade. By the 1930s, the Malay population shrinks to 50 percent as Chinese immigration rises. Chinese merchants dominate commerce and tin mining.
The Japanese occupy Malaya and Borneo in 1942, making Malaya a staging area and supply port and using forced labor to intensify rubber, palm oil, and mining operations. The Japanese are especially repressive towards the Chinese community. In 1943 Allied commando group Force 136 trains and equips Communist guerillas to mount a sabotage and resistance campaign.
Malaya is liberated from Japanese occupation in 1945. The Malayan Union incorporates all of Malaya except Singapore in 1946. Chinese and Indian immigrants receive full citizenship rights. Sarawak and Sabah become crown colonies in 1946. The United Malay National Organization (UMNO) is formed as a reaction to the inclusion of non-Malays as full citizens.
The Federation of Malaya is established in 1948 as a concession to UMNO demands and includes all of Malaya except Singapore. It decentralizes authority back to the Malay states and rescinds citizenship rights for non-Malays. Malayan Communists begin an insurgency, and the British declare a state of emergency. In 1949 Chinese business leaders found the Malayan Chinese Association (MCA).
The British begin talks with ethnic leaders, promising them independence. Postwar economic growth begins with increased rubber and timber production. The Chinese dominate commerce, civil service, and education. The UMNO, MCA, and the Malayan Indian Congress unite to form the Alliance Party. Headed by Tunku Abdul Rahman, it wins 51 of 52 seats in the 1955 national legislative elections.
Malaya gains independence in 1957 as a federal, constitutional monarchy with Kuala Lumpur as its capital and Tunku Abdul Rahman its prime minister. The state of emergency ends in 1960 with the defeat of the Communist guerillas. By 1962, proposals to merge with Singapore and the Borneo states of Sabah and Sarawak gain broad support. Raw material exports are Malaya's main source of foreign exchange.
Singapore, Sabah, and Sarawak join the Malayan states to form Malaysia in 1963. Indonesia's President Sukarno launches a "Crush Malaysia" campaign. Tensions arising from Chinese-Malay friction lead Singapore to withdraw from Malaysia in 1965. Confrontation with Indonesia ends in 1966 as Sukarno falls. Singapore and Malaysia help found the Association of Southeast Asian Nations (ASEAN) in 1967.
The Malay-dominated Alliance loses key seats and significant Chinese support, primarily to the Chinese-dominated opposition parties, in parliamentary elections. Following the outcome, tensions between the Chinese community and the Alliance Malays spark riots in which more than 2,000 people, mostly Chinese, die. The government declares a state of emergency. All parliamentary activities are suspended.
Tunku Abdul Rahman steps down as prime minister in 1970. A joint civilian-military body, the National Operations Council (NOC), governs for 21 months. The 1969 riots force a reappraisal of Malaysian society. The NOC launches the New Economic Policy (NEP), which aims to curb inequalities by favoring Malays in economic and social policy. It combines market policies with social justice programs.
Tun Abdul Razak reorganizes the Alliance Party into the Barisan National (BN). The BN wins 135 of 154 seats in the 1974 parliamentary elections. The NEP revitalizes Malaysia. A boom begins, sustained by high savings, political stability, and a successful economic transformation from raw materials to manufacturing. Tun Hussein Onn becomes prime minister in 1976 after the death of Tun Abdul Razak.
Dr. Mahathir bin Mohamad becomes prime minister in 1981. He embarks on an aggressive program of economic self-reliance called Malaysia Boleh ("Malaysia can do it"). Economic growth is fueled by oil revenues from offshore reserves in the South China Sea. In an effort to increase efficiency and government revenues, Malaysia begins privatization of state-owned companies.
Mahathir reorganizes his Cabinet after a rift within the UMNO. The party splinters into Mahathir's UMNO Baru and the Semangat '46 faction. Press freedoms are sharply curtailed. The reconstructed UMNO wins reelection in a rushed election in 1990. That same year, Mahathir announces Vision 2020, an ambitious plan to fully industrialize Malaysia by the year 2020.
Manufactured goods eclipse raw materials in export earnings; by 1995, Malaysia has ASEAN's highest growth rate (9.6 percent). Mahathir's BN coalition wins the 1995 elections in a landslide. The combination of political stability, foreign investment, and steady growth rate earns Malaysia global acclaim as an "economic miracle" and "Asian tiger" alongside Taiwan and South Korea.
The 1997 Asian financial crisis severely affects the economy. The Kuala Lumpur stock exchange plunges by 80 percent. Malaysia rejects IMF-recommended remedies. The government restricts currency markets and imposes strict controls to prevent capital flight. Malaysia pegs the ringgit at a fixed exchange rate of 2.45 ringgit to the U.S. dollar.
A political crisis erupts when Deputy Prime Minister Anwar Ibrahim is arrested on corruption charges. The national and international outcry draws attention to a growing authoritarianism. Nevertheless, Mahathir's BN wins the parliamentary elections of 1999. By 2000, Malaysia shows signs of a gradual recovery from the economic crisis.
Malaysia weathers the Asian financial storm better than many neighbors, apparently validating the government's decision to impose financial and currency controls when the crisis hit. Mahathir's political control remains firm, but in 2002, he announces that he will step down after the 2003 elections. Religious and social tensions, however, persist beneath the surface.
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