Counter-Insurgency and the Economic Factor: The Impact of Korean War Prices Boom on the Malayan Emergency 9789814376433

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The Institute of Southeast Asian Studies

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COUNTER-INSURGENCY AND THE ECONOMIC FACTOR THE IMPACT OF THE KOREAN WAR PRICES BOOM ON THE MALAYAN EMERGENCY

by

Richard Stubbs

Occasional Paper No. 19 Institute of Southeast Asian Studies Price: $5.00

PREFACE A state of emergency, popularly referred to as "The Emergency", was proclaimed in w~at is today known as Peninsular Malaysia on 16 June 1948 following the outbreak of an armed communist revolt. The revolt aimed at the overthrow of the then British system of government in the country and the establishment of a "People's Democratic Republic". Almost every aspect of life in the peninsula. was substantially changed by the Emergency which ended on 31 July 1960 with the defeat of the communists. One ot the most far-reaching effects resulted from the resettlement of a million rural dwellers in more than 600 ' new · settlements. This massive movement of people not only remoulded the population pattern of Peninsular 111alaysia but also had far-reaching economic and social consequences, the ramifications of which are felt to this day. Yet, much of the scholarly work on the Emergency up to now has been confined to its military and political aspects. In this light, the following contribution by Mr. Richard Stubbs is all the more welcome as it concentrates on a hitherto neglected sector - the impact of the Korean War prices boom on the Malayan economy and the prosecution of the Emergency counterinsurgency operations. Let's hope this paper will circulate widely, particularly in Malaysia, and stimulate others to look closely into the whole phenomena of the Emergency, a proper comprehensive account of which is, as far as I am aware, yet to be published. In wishing Mr. Richard Stubbs all the best, it is clearly understood that responsibility for facts and opinions expressed in the work that follows rests exclusively with Mr. Richard Stubbs, and his interpretations do not necessarily reflect the views or policy of the Institute itself or its supporters. 10 January 1974

Kernial Singh Sandhu Director

List of Tables Page I

World Rubber and Tin Prices 1947-56

10

II

Malayan Rubber Export Duty

11

III

Rubber and Tin Duty Revenue

13

IV

Governme nt of Malaya Revenue and Expenditu re

14

V

Federal Expenditu re

16

VI

State and Settlemen t Expenditu re

16

VII

State of Perak Expenditu re

17

VIII

State of Selangor Expenditu re

17

IX

Role of Resettlem ent

28

X

Comparati ve Acreage of Agricultu ral Crops

32

XI

Wages

34

XII

Employme nt Opportun ities for New Villagers by State

38

XIII

Wages and Cost of Living

39

XIV

Rubber Prices and Profits

42

XV

Compositi on and Regrouprn ent Areas

47

INTRODUCTION! The economic variable has long been recognized as Similarly, the salient to any study of why men rebel. n when consideratio economic variable is a necessary It analyzing the course and outcome of an insurgency. can be crucial to understandin g why rebels succeed or fail . Analyzes of this nature have been lacking in studies of the Students of the Emergency have confined Malayan Emergency. themselves to analyzing the execution of the British Colonial Government's civil, military and administrati ve policies . 2 Factors which affected the outcome of the insurgency but were outside the direct control of the This paper details government have been largely ignored. and analyzes the impact of the Korean War prices boom on the Malayan economy and the prosecution of the Emergency In particular, three counter-insu rgency operations. the revenue and expenditure first, aspects are dealt with: of the Malayan Government; second, the progress of the resettlemen t programme and the source of income of those resettled; and, th1rd, the ability of the rubber and t 1n industr1es to cope with the insurgency and its burdens. While the focus of the paper is the wealth generated by the Korean War boom and its contribution to the successful prosecution of the government's counterguerilla policies, it is not the purpose of this paper Rather the intention is to establish a unicausal link . to demonstrate the importance of the Korean War boom as one of a number of necessary, though by no means sufficient, conditions for the success of the Malayan Government . Moreover, it will be argued that the boom was important not so much for the increase in money per s e , but because of the way in which the money entered the Malayan economy,

1

All figures 1n this study are in Malaysian $ unless otherwise indicated (M$1 = 33 cents U. S.; M$1 = 2s 4d Sterl1ng 1948-54).

2

A nurber of the stu:hes of the British Administratirn ' s policy have been good . See Rebert 'Illa1p5rn, De feati ng Cormruni st Insurgency, Olatto and Windus, I..a1drn, 1966; Richard Clutte.rbuck, The Long Long War: The Eme rgency i n Mawya~ 1948-1960 , Cassell, I..a1dcn, 1967; Victor Purrell, Ma~aya: Communi st Or' Free? , Gollancz, I..a1dcn, 1954; J .B. Perry RcDinsrn, Tronsforma ti on i n Mal-aya, Seeker and Wa.rburg, I..a1drn, 1956; Harry Miller, Jungl-e War in Mawya, Arthur Barker, I..a1drn, 1972 . cnly Purcell and Rd:>inscn provide sene analysis of the social, ecrnanic and political" backgromd to the Errergency and even that is limitedc

-

2 -

how it was spent by the government, and to whose benefit. The Korean War boom, therefore, may be viewed as one of an accumulation of factors, which, in aggregate, brought about the defeat of the Malayan Communist Party (MCP). Many of these factors, such as the administrative reorganization , the development of military and police t ac t ics, intelligence and information policy and MCP s t rategy have been analyzed elsewhere . 3 However, the contribution of the Kor ean War boom has been neglected to the detriment of any overall understanding of the Emergency. The official declaration of the Malayan Emergency on 18th June , 1948, was in response . to a campaign of subversion and terrorism initiated by the MCP . Slow to emerge during the 1920s, the MCP had experienced little success in the years prior to World War Two . However, their fortunes changed when the Japanese swept down the Malayan peninsula, for the commun i sts not on l y began to receive aid from the Briti sh b ut. also became the focal point for resistance. a gai ns t t he J apanese occupation . The Kudos and wide organizational experience gained in this role enabled the MCP to take advan t age of the postwar chaos that was fostered by the shortage of food, the slow recovery of the Ma l ayan economy and the flux of ideas that engulfed Sout heast As i a o The British Administrat.ion in Malaya, whose prest i ge had been seriously shaken by the fa l l of S i ngapore, wa s too preoccupied with constitutional, socia l and economic problems resulting from the Japanese occupation to fully appreciate the growing strength of the communis t mov ement . Hence , when, in early 1948, t he MCP leaders de ci ded to abandon the policy of "peaceful agitation" and continue the struggle by force from t he jungle, the Ma l ayan Government comple t ely underestimated t he communist threat.4 A primary tar get of the communist guerillas was the Malayan economy . Based on British and Chinese capital coupled wi t h Tamil Indian and Chinese labour, the twin

3

See for exanple, Tha:tpson, op. cit. , Clutterbuck, op. ci t . , and Gene Z. Hanrahan, The CommWList Struggle in Ma laya , University of Malaya Press , Kuala Lunpur, 19 71.

4 Many reasons for the MCP decision ha~ been posited. For an interesting "discussicn" see M.R. Stenson and G. de Cruz, The I948 CommWLi st Revolt in Malaya: A Note on Hi s t orical Sources and Inte rpre t ation and a Reply, O:::casional Paper No. 9, Institute of Southeast Asian Sttrli es, Singapore, 1971.

pillars of the Malayan economy, the tin mines and rubber plantations, had developed to the point where Malaya was one of the most prosperous and valuable assets in the British EmpireoS The Federation of Malaya produced at this time nearly one-third of the world's total output of natural rubber, over half of the world's first grade rubber and one-third of the world's tin.6 This wealth of raw material was of great importance to the sterling area in general, and Britain in particular, in so far as Malaya's exports to the United States of America provided vital dollar earnings necessary for the expansion of British trade , 7 This was increasingly so in the post World War Two years when Britain's dollar credit was exhausted and her economy was plagued by recurring balance of payments crises o It was natural, therefore, that the communists should attempt to undermine the crucial economic link between Britain and the Federation of Malaya. The British Government had to be persuaded that the cost of Britain's responsibilities in Malaya outweighed the economic ad·v::mtages and political obligations ~ If the British "wi 11" cou .J..d be eroded then the MCP, as the strongest party and most viable alternative to the British Administration, could attain power.

On 25th June, 1950, the Korean War broke out. This heightening of international tension catapulted the prices of raw materials, particularly rubber and tin to record heights , There had been, early in 1950, a steady increase in the price of rubber stimulated by the slow build up of stockpiles 1n America and Russia, a resurgence of the American economy (after the slump of 1949), the devaluation

5

Inrnigraticn had created a situaticn whereby in 1947 of the 4,908,086 pc.pulaticn of Malaya, 44 "05% were Malays, 38.4% Chinese, 10o81% Indians, 5, 41% Eurq:lean, 20% Eurasian and 93% Other Ccmnunities. M. V. Del Tufo, A Repor-t on the 1947 Census of Population, Ferld War '!Wo see Rcbinsrn, op. cit. , p. 35 . 12 Report on Agri au l ture in Malay a, 19 47, Malayan Unim, p . 4. 13 Straits Echo, 2oth July, 1950. 14 The Times, 8th May, 1950; The Economist, 18th November, 1950, Vol , 159, p. 834, reported that in the first 9 months of 1950 world prcrluctirn of natural rubber was 1,335,000 tens and CXJllSlDTptirn 1,212,500 tens. See also Annual Report, 1950, p. 75.

-

6 -

for the Colonial office noted . tha t "on .. any reasonable assump tion the prospective demand for natural rubber over the next decade or so can be entirely, or almos t en ti rely, satisfied from the four low-cost producing territories {the NEI, Siam, Sarawak and French Indo-China ) if their mature areas are ful l y tapped." 15 This was a black prospect indeed for Malayan p r oducers . Even the fairly high prices of Apri l/May, 1950, were viewed as a temporary aberration which wou l d be e li minated by a rapid increase in the producti on of synthetic rubber . l6 Estimates in the Draft Deve loprnen t Plan , which was d r awn up early in 19 50, were based on an assumption that the price of rubber wou l d be maint ained at about 45 cents per pound . ~? Given the importance of the rubber and tin exports to the health of the Malayan economy, it is clear why there was so much concern over increasing expenditure . Call s fo r economy became a familiar refrain in the i mme diate post World War Two years . Because the fina n cing o f r ehab ilitation programmes c o uld not be covered by current exports, a proport ion of imported goods had to be p a id for from t he reserves o f rubber and tin companies and the government's a c cumulated credit. The outbreak of the Emergency added to the drain on the public pur se and compe lled the introduction of stricter economic measures to stern the flow of government capital and halt depletion

15 16

P.T . Bauer, Th.e Rubber Indus try : A S t udy ·w Competi ti on and Monopo ly , Longmans, Landon, 1948, p . 344. Annual Repor t , 1950, ppo 72-73.

There was a 15-20 cent drc:p

in the price of rubber in the week ending 17th June, 1950.

17th June, 1950. Many pec:ple in the natural rubber industry attributed the fact that the price of natural rubber was well belc:w that of corrparable corrm::x:lities during the :t:ericrl 19 45-49 to the production in Arrerica of synthetic rubber. See The Times~ Briti sh Coloni es Review , June 1951, No. 2, p . 15 c For cc:mrent s an the effect of synthetic rubber stabilizing the rwber market at a relatively lON price, see "'Ihe State and Peasant Innovation in Rural Develq:ment: 'Ihe Case of Malaysian Rubber", by Martin Rudner in Society and De ve lopmen t i n Asia, Asian and African Studies Special No. (edo M. Rudner), Jerusalem, 1970, p. 81. See Strait s Echo,

17 Draft Developmen t PLan of the Federation of Malaya, 1950, p . 172 .

- 7 -

18 Sir Henry Gurney, High Commissioner of the coffers. to Malaya, noted in November, 1948, that "until the full nature of our commitment in dealing with the Emergency is known further measures to secure economy will be necessary . Terrorism is the most expensive form of illness from which any community can suffer and becomes more so the longer it is permitted to drag on . "l9 By the end of 1948, it was estimated that the Emergency was costing between $250,000 and $300,000 a day . 20 The Chief Secretary told the Legislative Council that estimates for 1949 put the cost of the Emergency at _ $93 million ~ 21 While it is difficult to give precise figures for Emergency expenditure, these estimates attest to the substantial sums it was thought would be required to combat the terrorists. Rising Emergency costs necessitated government decisions about its order of priorities. Draft estimates of expenditure were carefully reviewed and pruned by the Finance Committee, creating an atmosphere of uncertainty which inhibited planning and often caused bitterness over retrenchment . 22 The result, of course, was cut backs in departments not regarded as directly concerned with the Emergency. The Draft Development Plan best detailed the problems faced by the government in planning the extension of its services . It was stated that "very little capital will be available for expansion of the social services, unless

18 en 1st January, 1950, the surplus ftmds of the Federatim of Malaya stood at cnly $40,415,887 with an accumulated deficit of $13,412,555 shewn en General Reven~ Balance . See, Progress Report on the Development Plan of the Federation of Malaya, I950-52, pp. 18-19 .

19

Communist Banditry in Malaya:

The Emergency June I948-June I95I,

Department of Info:cnatim, Federatim of Malaya, p. 36 .

20 Ibid. , p. 8, and p. 13. 1949.

See also Times of Malaya, 4th Jtme,

21

Legislative Counai l Proceedings, 2nd Sessim, 1949, p. 80.

22

Annual. Report on the Puhl.ia Works Department, 1948, Federatim of Malaya, p. 3 and p. 7; Annual. Report on Eduaatiorc1 1948. Federaticn of Malaya, p. 32; Draft DeveZ.opment Plan, 1950,

p. {i) and p . 173.

- 8 -

cuts are made in present recurrent expenditure or revenue is increased o Indeed , there is not really even this alternative, since if economies of any size were to be effected this could only be done at the cost of existing social services . "23 It was also noted that social services were not merely non-productive themselves but usually involv ed large sums of future recurrent expenditure . Even assuming that the Emergency costs would be gradually reduced, i t was estimated that revenue would only just be sufficient to cover normal recurrent expenditure and the very limited capital expenditure on social services envisaged in the Plan . 24 The underlying assumption that there would be a gradual and progressive lightening of the Emergency was particularly interesting, for it clearly indicated an underestimation of the task ahead and the resources it would require . Clearl y, vast expenditure on such programmes as the expansion of the police force, social services and the resettlement of terrorized rural squatters was not anticipated. The "gloomy financial position" of 1949 did not encour age optimism . 25 Tax reform was the obvious way tha t revenue could be increased but only minor items of revenue were considered suitable for review.26 The Administration was wary of introducing any majo r new reforms after the fight it had had to get a moderate income tax law accepted . If, as Sir Henry Gurney had said in 1 948, "the solution of our difficulties and our future development in all fields is going to be concerned 27 very c l osely with finance" , the outlook was not encouraging. It seems somewhat prophetic, therefore, that it should be suggested in the Draft Development Plan that, "The annual revenue from a country derived from taxation and other receipts can only in times of quite exceptional prosperity be used to finance large capital project."28

23 24

Draft De velopment Plan, 1950, p. 3. Loc , ci t o

25

'Ihis was an official characterizaticn of the situation . See Progress Report on the Development Plan, 1950-52, p. 19.

26

Draft De velopment Plan, 1950, p . 167 .

27

~e gi sla tive

28

Draft De ve lopment Pl an, 1950, p. 3.

Counci l Procee di ngs, 1st Sessicn, 1948, B537.

- 9 -

The incredibly high prices of the Korean War boom did Prices on bring "quite exceptional prosperity" to Malaya. during quickly rose all the major rubber and tin markets February the second half of 1950, reaching their peak in The price of rubber wa s and March of 1951 (see Table I). the most remarkable, averaging 169.55 cents per pound o n the Singapore market in 1951, over four times the average The average price of tin i n 1951 was price for 1949. nearly double that of 1949 and would presumably have go ne higher but for the American Government's decision o n 6th March, 1951, t o officially cease further purchas e s o f t1n until the price was reduc ed o29 As it was, the Febru ary and March, 1951 prices for tin were generally o v er £1,3 00 per long ton on the London market as compared with th e average price of £590 . 0 for April, 1950 . 30 Both rubb e r and t1n attracted inflated prices until well int o 1952 and while there was a slump during the latter part of 1 953 and the early months of 1954, the average price for th ese tw o years rema1ned well above pre-Korean War pr i ces . Essentla l ly, then, the Korean War prices boom lasted f or three years - 1950, 1951, 1952 - and enabled the Colonial Government to reap a healthy harvest in revenue o Rubber produced by far the greatest boost to the The $214 million government's income (see Table III). 1mport duty collected in 1951 represented an eightfold Much of this increase over the sum collected in 1949 , startl1ng increase in revenue can be attributed to a new slid1ng scale tax introduced by the government in 1951 (see An orig1nal tax change proposed in the autumn Table II) , of 1950 was partly in response to a need to curb internal inflation and partly a method of increasing revenue . 3l

A Review of the World Tin Industry , p . 66 o For an interesting analysis (by an American mine manager working in Malaya at the t..1Jfe) of the American Goverrurent' s behaviour on the t1n market, see N, Cleave land, Bang Bang in Ampang , Syrrcon, San Pedro, California, 1973, Chapter 10. 30 Tin reamed £1,615 :per lrng ten and rubber 72 l / 2d per lb during February on the Londrn Marke t. The Economist , 24th February, 1951, Vol. 160, p . 457; and The Economi st , 24th March, 1951, Vol . 160 , p . 701 " 31 For an analysis of the governrrent' s anti -inflation policy, see J c:hn Paul Meek, Malaya : A Study of Governmental Response to the Korean Boom, Data Paper No .. 17, Southeast Asia Program, Departrrent of Far Eastern Studles, Cornell University , 1954.

29

See Tin 1950- 51:

Table I:

World Rubber and Tin PriCES ,1947-56

Rul:ber PriCEs Rubber SIIDked Sheet No. 1 Year

M¢ per 1b Singapore

d per 1b Landon

US¢ per 1b New York

Tin Prices M$ per pikul Singapore/Penang

£ per long tan

Landen

ffi¢ per 1b New York

1947

37.3

12~

21.0

n.a.

427.6

77.94

1948

42.1

12~

22.0

n.a.

551.5

99.25

1949

38.2

11~

17.6

n.a.

605.8

99.32

1950

108.2

31~

41.1

365.42

744.6

95.56

1951

169.5

49

59.1

526.58

1,077. 3

128.31

1952

96.1

28

38.6

480.08

964.5

121.33

1953

67.4

19~

24.2

363.92

731.7

95.77

1954

67.3

20

23.6

353.59

719.4

91.81

1955

114.2

33

39.1

365.50

740.1

94.73

1956

96.8

28

34.2

387.03

787.7

101.26

SourCE:

n.a.

RUbber Statistics Handbook, 1956, Federatim of Malaya, p. 53; Internationa l Tin Study Group Statistical Year Book, 1956, The Hague; Yip Yat Homg, The De velopment of the Tin ~ning Industry of Malaya, University of Malaya Press, Kuala Lunpur, 1969, p. 396. The sterling price of tin, Singapore ex-works, may be found in An Economic Survey of the Colonial Territories, Vol. 5, HMSO, Landon, 1955, p. 26. not available.

1-'

0

• 11

'Dible II:

Malayan Rul:iler E?Cport Duty (per lb)

Price of IU:ber cents

!!"'

pence

Existing Duty cents

Original Proposal cents

M:xiified Versicn cents

60 80 100

16l

3

3

3

22~

7

7

28

4 5

12

11

120

33~

6

18

15

140

40 45

7 8 9

25 33 42

19 23 27

10

52

31

160 180

5~

200

56

Source:

The Economi st , 9th December, 1950, Vol. 159, p. 1023.

However, it was considered too drastic by the rubber industry and pressure was exerted so that a revised version was introduced which fell short of the original proposals. Nevertheless , this tax reform greatly swelled the government's revenue.32 The rise in the price of tin, coupled with a steady increase in production and exports, resulted in a doubling of the duty received from the export of tin (see Table III). Indeed, there was a general and substantial increase in all revenues from customs duty, both Federal and State. Further, as a result of higher incomes and profits during the boom years, income tax returns rose sharply, with the one year lag for collection helping to spread out revenue from the boom (see Table IV). The impact of the prices boom on the total government revenue was, therefore, both unexpected and radical. The estimate for total revenue in 1950 was put at $273.7 million;

32

An analysis of this and other tax refonns concerning nbber may be fo\.l'ld in Lim Cheng Yah, "Export Taxes oo Rul:ber in Malaya - A Survey of Pest-War Develq:mant", Malayan Economic Review, Vol. 3, No. 2, ~tcber, 1960, pp . 46-58.

See Table I I for details of this tax.

- 12 -

33 Similarly, the sum actually received was $443.4 million . the esti mate for 1951 was $410 . 3 million while the sum actually received was $735 . 4 million . 34 Indeed, the total revenue for both 1951 and 1952 was well over twice that received in 1949 . A remarkable turn of events! Moreover, an accumulated deficit of $13 . 4 million shown against the General Revenue Bal ance and a Total Surplus Fund of only $40 . 4 mill i on at the beginning of 1950 became, by the end of 1951, a Genera l Revenue Balance surplus of $283 . 9 million and a Tot a l Surplus Fund of $334 . 8 mill i on . 35 And this was It was this i n spite of very heavy capi t a l expenditure . p h en o me na l i ncrease i n t he prosperity of the country which prompted the Financi al Secretary to note that "the financial fortunes of the Federation vary in direct proport i on to the for t une of our two main primary products, rubber and tin , and of these t he more i mportant is rubber . So close is this connecti on that it is probably not incorrect to say that ' Malaya i s as rubber does . •" 3 6 I ncr eased r e v enue allowed for incr eased expendit u ~ e . The g overnmen t , faced with escalati ng costs arising from t he Emergency, was ab l e to meet and expand i t s security Pol i ce costs were among the greatest burdens . commi t men t s . As t he size of the Poli c e Force g r ew, money was needed fo r both men and equi pment . 37 Est i ma ted costs continually lagged behind actual expendi ture and the increase in gove~tal i ncome over the period 1951-53 was fully utilized . It enab l ed the Police Force to firmly re-establish itself as the p ri mary instrument in the fight against the communists , a pos i t i on wh i ch the Army, initially better equipped to With handle the out break of terrorism , had taken over.

33

Report of t he Director of Audit on the Account s of the Fe de ration of Malaya , 1950, p. 4o (Hereinafter cited as Audit of Accounts ).

34

Audi t on Accounts, 1951, p. 4.

35

Progress Report on the Development

36

Legi s lative Council of Proceedings , 6th Session, 1953, c . 800.

37

For instance, the Police Force expanded from 10,819 in 1947 to 60,914 Regular Poli ce, Extra Police and Special Constables in June, 196L See PoUce Annual Report, Federation of Malaya, 1955 , P o 1 ; and Communist Banditry in Malay a , op . cito , p . 120.

Plan ~

I9 50- 52 , pp . 18-19.

- 13 Table III:

RW:ber and Tin Duty Reveme

Tin

Rlbber Year

Productim

Duty

tens

M$ millicns

Production long tons

Duty M$ millions

1946

403,

34.0

27,CX::O

5 .0

1947

32.0

1948 1949

645 , 697 ,CX::O 670,CX::O

44,800 54,900 57,500

1950 1951 1952

693,ax> 604, 583 ,(X)()

89.3 214.1

57,400 57,100 56,400

13.5 29.4 31.1 50 .9 76 . 2 69 . 6

1953

573, 585 ,ax> 637 ,ax>

54.7 52.6 174.3

60,900

51.3

61,200 62,300

52 . 7 55 . 1

1954 1955 Source:

33.0 28.1

110.8

Month Zy Statistical. BuUe tin, Federaticn of Malaya; Statis ti cs Re Zating to the Mining Industry, Federaticn of Malaya; International. Tin Study Group Statistical. Year> Book, 1956.

larger numbers of men and a greater amount of equipment, the Police Force was able to accept full responsibili ty for static security in populated areas, leaving the Army to patrol the jungle itself. While it is difficult to give precise figures for total Emergency costs because of the arbitrary nature of assigning portions of certain expenditures to the Emergency operations, it does seem that the biggest jump in the amount spent on the Emergency came in 1951, the year the increase in revenue was the greatest. The total cost of Defence, Police, and Emergency rose from $82 million in 1948 to a peak of $296 million in 1953 with the two years, 1952 and 1953 being the most expensive.38 This represents a 38 'nlese figures are from the report of the Internaticnal Bank for Reccnstructicn and Develcprent , The Economic Development of Mal- aya , Singapore, 1955, p. 140. Figures given in the Progress Report of the Devel-opment Pl-an~ 1950-52~ are: 1949 $122 millim; 1950 $136 mi.llim; 1951 $240 mi.llim; 1952 $256 million, p. 6. Figures fran Monthl-y Statistical. BuUetin, July, 1957 are: 1950 $90.9 million; 1951 $167 . 1 million; 1952 $207 . 8; 1953 $280.0; 1954 $235.2 million.

Table IV:

Govemrt of Malaya Revenue and Expenditure ($ million)

Total CUstans Revenue Collected Fed- State

Year

Incarre Tax

Total Revenue Original Estimate

Total Revenue Actual

'I'otal Expenditure Actual

Surplus or Deficit

1947

137.9

-

213.4

268.7

285.6

-16.9

1948

182 . 5

-

197.6

235.5

290.8

-55.3

1949

201.1

40.2*

261.1

345.2

347.3

- 2.1

1950

314.3

46.6

273.7

443.4

340.0

+103.4

1951

533.2

126.6

410.3

735.4

548.7

+186.7

1952

414 . 5

220.5

640.9

725.1

672.2

+52 . 9

1953

325 . 4

175.7

588.7

620.2

790.4

1954

341.6

123.2

603.6

622.2

714.0

*

·:

Source:

'

-170.2 -91.8

Indicates 1948 tax oo1lected inc1u:ied. in this year.

Audit on Accounts, 1947-54; AnnuaZ Reports, 1947-54; Monthly Statistical Bulletin, 1947-54.

1--' ~

- 15 -

350% increase in Emergency expenditure; a notable asset in the fight against the communists o39 Just as Emergency operations expenditure rose, so did expenditure on the social services. This is in marked . contrast to the 1949-ear l y 1950 period, when, because of the greater priority given to security operations, money was taken from the Federal budgets of such social services as education and health . 40 The availability of more money became crucial as the strategy of winning "the hearts and minds of the population was adopted . Indeed, it is the opinion of this writer that only with increased expenditure made possible by prices boom revenue was the hearts and minds approach practical . Fede rally, the money spent on Education rose from $2 o7 million in 1949 to $14 . 2 million in 1952 . 41 The State/Settlement expenditure rose from $26 . 25 million in 1950 to $58 . 0 million in 1952 . 42 Capital charges by all De partments of Education went up from $ . 3 million in 1948 to $11 . 7 million in 1952.43 The money spen t on schools for the Chinese went up from $1.2 million in 1946 to $19 o2 (inc l uding New Vi llage Schools) in 1953.44 Federal Medical and Health expenditure increased from 11

39

Sir Geral d Terrpler, High Carm:ission8r to Malaya, has noted A main weapon in the past four years has been the ability cerived from a l arge Federal incorre to carry through rapidly the resettlerrent programre, the sevenfold expansim of the Police and the raising of 240,0CX) Horre Guards and of 4 rrore battalions of the Malay Regirrent. See The Pro te c tion of Es t ate s and MI-nes , Director of ~rations, Malaya, 8th May, 1953. 11

11

40 '!he nurrber of primary education schools for Chinese had gone do.vn from 1,242 in 1948 to 1,197 in 1949 . See Annual Repor t on Education , 1949, p . 57 . 41 Audit on Accounts, 1949, 1952 . 42

Monthly Statisti cal Bu lletin , July, 1957 .

43

International Bank for Recmstruction and Developrrent, op , cit. , p. 469.

44

Statement of the Federa l Government on the Repor t of the Special Committee on the Imp lementation of Educational Policy , 1954, p. 6.

- 16 -

Table V:

Year

Federal Expenditure ($ million)

Education Medical &

Health

Public Works Extraordinary Non-Recurrent

Police

Allocation to States & Settlenents

Defence 6 Police & Errergency

1948

6,6

8.1

4.3

32.0

82.8

n.a.

1949

2. 7

6.9

11.8

69.0

81.7

82

1950

3 o8

7.7

13.9

73.5

71.0

101

1951

6.9

13.1

34.3

138.4

99.6

217

1952

14.2

13.3

39.9

170.8

131.5

287

1953

12.4

14.3

51.9

171.8

155.4

296

1954

10.8

14 . 5

26.6

155.7

n . a.

n. a.

Source:

Audi t on Aaaount s, 1948-54; International Bank for Reconstruction and Developrrent, op. ci t . , p. 140; Annual Report, 1948-54 .

n . a.

not available.

Table VI:

State and Settlerrent E:xpendi ture ($ million)

Year

Medical . & Health

Educaticn

1950

17.1

26 . 2

29.7

135 . 4

1951

21.4

36.8

38.5

153.7

1952

30.3

58.0

56.2

217.3

1953

34.3

65.8

66.9

248.0

1954

34 . 9

70.4

58.4

251.0

Source:

Public Works

Monthly Stati stical Bulleti n, July, 1957.

Total

- 17 State of Perak Expenditure ($ millioo)

Table VII:

Year

Educatioo

Medical

Total Experrli ture

Federal Furxis Allocated

1948 1949 1950

3.1 5.1 5.8

3.1 3.6 3.9

28.6 29.2 30.7

17.5 17.4 16.3

1951 1952

9.9 11.7

5.7 6.7

39.9 48.7

21.7 28.9

Source:

Audit on Aaaoz.Mts Perak Financial Statem::nt, 1948-52.

Table VIII:

Year

State of SelanSOE Expenditure ($ million)

Fducatioo

1949 1950

4.8 4.7

1951 1952 1953

4.5 9.3 11.6

5alroe:

Medical

2.8 2.9 3.1 5.0 5.5

'lbtal Expenditure

Federal Funds Allocated

19.6 19.5

10.9 9.6

26.2 33.8 36.3

13.3 19.9 19.8

Audit on Aaaoz.Mta Selangor Financ:ial Statement, 1949-53.

- 18 -

$6.9 millio n in 1949 to $13.3 millio n in 1952 and State / Settle ment costs rose from $17.1 millio n in 1950 to $30.3 millio n in 1952 (see Tables V-VII I). The import ance of this expans ion of the social servic es should not be undere stimat ed. As the Finan cial Secre tary, Mr. Himsw orth, stated to the Legis lative Counc i 1, "To our people these servic es expres s the promis es and hopes transl ated into fact of the way of life in the free world in contra st with what can be expect ed from the other side of the Iron Curtai n . "45 The govern ment, backed by the Korean War boom revenu e, set out to improv e the condit ions of the people of Malaya , and in so doing, win their allegi ance in the fight agains t the commu nists. Educa tional Despit e a high propo rtion of facili ties were improv ed. childr en in the popul ation, and a seemin gly insati able demand for educa tional facili ties from the Chines e commu nity, the percen tage of childr en who receiv ed primar y schoo ling increa sed. Medic al and public health facili ties also played their part in the hearts and minds strate gy. Mobile units, Red Cross and St. John's welfar e teams, treatm ent rooms and missio n statio ns served to improv e an almost nonLarge sums of money were invest ed existe nt rural servic e. Rudner makes the assess ment in agricu ltural develo pment . that $155.6 millio n was put in agricu ltural program mes under the Develo pment Plan, 1950-5 5, with $102-$ 120 millio n devote d to agricu lture in the New Villag es where many rural farmer s had been resett led.46 This is an immens e sum when it is consid ered that the origin al estima te for total agricu ltural spendi ng during this period was only $46.5 millio n . 47 Moreo ver, public works expen diture , which accoun ts for such items as roads, drains , irriga tion, water supply schem es, marke ts,and villag e halls rose sharpl y. Federa l non-re curren t public works costs amoun ted to $51.9 millio n in 1953 as compa red with $11.8 millio n in 194948 (see Table V). And State/ Settle ment public works

45

Le gi s l ati ve Council Proceedi ngs, 6th Session , 1953, c. 808.

46

Martin Rudner, "'!he Draft Develcp nent Plan of the Federa tion of Malaya, l95o-55 ", Journal of Southea st Asi an Studi es , Vol. 3, No. l, March, 1972, p. 95.

47

Ibi d . , p . 6 7.

48 Audi t on Accoun t s, 1949, 1953.

- 19 -

expenditu re increased from $29.7 million in 1949 to $66.9 million in 195249 (see Table VI). These advances in security and social and economic services were parallele d by an increase in the amount of informati on made available to the public. Money spent on the main channels of media communic ation was quickly raised after the revenue was increased . For instance, the amount spent on broadcast ing rose from $.4 million in 1949 to $5.1 million in 1952.50 This enabled the governmen t to explain its security policy more fully and to make the public aware of the benefits the social services offered. By this means, the governmen t was able to grasp the initiativ e in political education , an all important feature in the ideologic al struggle for the hearts and minds of the populatio n. Thus, not only were security and social and economic services improved, but people were also made aware of these improvem ents. And all this was made possible by the Korean War prices boom. Yet it may be argued that the increased revenue could have been obtained from other sources such as the general growth of trade, British Governmen t aid, loans or a combinati on of all three. These arguments must be examined carefully . With regard to the general growth of trade, the statistic al prospects have been covered above. They were not good. Further, the general feeling expressed in the Draft Developm ent Plan about future income was not over optimisti c. Even with the knowledge of the April/May increase in rubber prices, it was estimated that the revenue for 1950 would amount to approxim ately $383 million.5 1 Moreover, allowing for an increase in the average yearly price of rub~er to 45 cents, governmen t revenu7 would not gr?w 52 apprec1ab ly because of the probable decl1ne in product1o n. Increased aid from the British Governmen t was a distinct possibili ty. But it is likely that it would have been limited. It seems certain that both Whitehall and

49

Monthly Statistiaa l Bulletin, July, 1957.

SO Audit on Aaaounts, 1949, 1952. 51 Draft Deve loproont Plan, p. 171. '!he original estimate of govemrrent zevenue for 1950 was $272.7 millicn. See Table 4. 52 Droaft Development Plan, p. 172,

- 20 -

governme nt officials in Kuala Lumpur were anxious that The evidence for this is Malaya should pay her own way. First, when Dato Onn, then leader of the United threefold . Malays National Organiza tion (UMNO) , sarcasti cally pointed out the insignifi cance of the 5 million "gift" made by the British Governme nt in 1949 and demanded that the full cost of the Emergenc y be borne by His Majesty' s Governme nt, he was told that the people of Malaya must accept their responsi bility to end the Emergenc y.53 Second, the assumptio n underlyin g the governme nt's economic policies This was stressed was that the budget should be balanced . in the Draft Developm ent Plan,54 and arose frequent ly Sir Gerald Templer, during the debate on the 1954 estimate s. the High Commissi oner was at pains to emphasiz e the need to re-estab lish the principle of the balanced budget,SS while the Financia l Secretary stipulate d that "the main plank of governme nt's present and future financia l policy is to get rid of this deficit and to bring the Budget back into balance. " 56 A European represen tative stated that, "we must stand on our own feet eventual ly and demonstr ate our determin ation that the cost of governme nt shall be kept within the bounds of our revenue expectat ions. n5 7 Third, the policy of a budget surplus was encourag ed by The Colonial Office seemed to have concurre d Whitehal l. with the view that a balanced budget was sound business practice and, therefor e, a necessar y policy for a governme nt But a wishing to attract capital and private investme nt. more importan t consider ation from the British Governm ent's point of view was Malaya's ability to finance Britain by way

53

Legislativ e Council Proceeding s, 2nd Session, 1949, pp. 28-9, 75-7. 'fuis qtEsticn had been raised by Eur~an and Chinese leaders in 19 48 and rejected by the governnen t. See Rudner, "Draft", op. cit. , p. 69.

54

Draft Development Plan, p. 3.

55

Legi slati ve Council Proceeding s, 6th Session, 1953, c. 749, c. 755. Sir Gerald becarre High Camri.ssian er in 1952 after the anbush and murder of Sir Hen.ry Gumey in Oct.d:>er, 1951.

56

Ib i d. , c. 823 (emphasis in original)

57

Ibi d.

I

c. 828.

21 -

of building up sterling balances in London . 5 8 Malaya was discouraged from buying industrial equipment and consumer goods from America in order to maintain Britain's balance of payments position.59 Indeed, the trade surplus that Malaya did ·accumulate was piled up in sterling assets and not release either for spending in Britain or for transfer into US$ . 60 Hence, under Whitehall's tutelage , the Malayan Government was urged to be frugal and do everything it could to become and remain financially self-supporting.61 It certainly appears that heavy deficit spending would have been frowned upon . And Britain's ability to provide 1 arge sums of money for the expansion of Malayan Government programmes must be questioned. That loans could have provided enough money to greatly expand expenditure seems very unlikely. The ability of a country to obtain loans is based on its past and prospective revenue, its political stability and its overall financial s t rength. But for the Korean War boom, Malaya's finan c ial pos iti on would have been weak . No doubt some loans c o uld have been obtained, but they would have been of limited value . The problem of obtaining loans was noted in the Progress Repor t o f the Development Plan . 62 Moreover, late in 1953 the Financial Secretary stated that having financed the 1953 deficit with a $100 million issue of security, it would not be possible to raise another loan for this purpose in 1954 . 63 This statement was made while the government had a substantial General Revenue Balance surplus and the communists were on the defensive . Had the 1949 economic and political situation continued, the Malayan Government certainly would have found it difficult to gain the vast sums required to initiate many of the capital programmes made possible and sustained by the Korean War boom revenue.

58

"In 1951 ... Malaya earned US$400 millicn (over M$1,000 million), of which she only spent 17% and paid 83% into the sterling pool in Lcndcn . Without Malaya the sterling currency system, as we knew it, could not exist . " See Briti sh Survey, J1.me, 1952, Main Series, No. 29, p. 17 .

59

See Andrew Shcnfield, Briti sh Economic Policy Since the War, Penguin Books, 1959, p. 136 .

60 The Economis t , 18th August, 1951, Vol. 161, p. 380. 61

See allusion to this in

Draft Development Plan, p. 174 .

62 See page 13 . 6 3 Legislati ve Council Proceedings, 6th Sessicn, 25th Noverrber, 1953.

- 22 -

The major casualty, had the Korean War boom not boosted revenue, would undoubtedly have been the social services . The social serv ice programmes were low on the list of priorities, and had the Malayan Government been limited to a r elatively small and gradual increase in its revenue, they would have been starv ed of funds. And it was these programmes t ha t gave substance to the hearts and minds policy which was so impor tant in the ideological battle waged against the c ommun i s t s . The low priority given to social services wa s ind i cated by the attitudes and actions of both governmen t and the business c ommunity . First, there was hostility in Ma l aya t o social schemes t h at might detract f r om the governme nt's ab ili ty to develop the economy of Malaya. Doubts were exp r es sed by the bus i nessmen as to the wisdom of the very limited s oci a l serv i ce programmes proposed in the Draft Development Plan . 64 Later , the Finance Committee of the Legislative Council voiced their opposition to the rapid increase in social service spending . 65 Se con d , when t he recession that set in after the ~ ubbe r b o om di ctated cut s i n government expendi t ure, the soc ial servi ce programmes were the most severely hit . Ear l y in 1 95 3 , Si r Gerald Templer had to admit that "the a mounts av a i lab l e fo r e x panding social services are at present be ing curtai l ed by the exceptionally heavy expenditure on the Emergen c y . "66 The annual report for 1953 noted that " l a r ge sums of money had still to be spent on the operations aga inst the commun i st terror ists and were thus not available fo r t h e p l ~nned e x pans i on of the social services and impor t ant development schemes .... "67 The major consequence of these cuts was that although, of necessity, the increase i n recur r ent expendi t ure on such items as education , public medicine and health was maintained, capital expenditure was severe l y r estricted . Indeed, the planned implementation of certain prog r ammes was postponed or even ha l ted . For instanc e ,

64

See Rudner , "Draft" , op . ei t. , pp. 6 4 , 6 6. See also the editorial in The Plante r, Septerrber 1950, v..hich talked of the govemrrent's "hi gh faulting social progress plans" and counselled that "nON is the tirre to pull in one's horns and, apart from re-establishing lavJ and order wait and see what the result of the Korean War will be from the rubber angle . " Vol. 26, No . 9, p. 371.

65

Rudner, "Draft", op. cit. , pp . 79, 86 .

66

Legislative Couneil Proceedings, 6th Sessicn, 1953, c . 24 .

67

See Annual Repor t , 1953, p. xi.

- 23-

during 1954 and 1955, no new investment in health was allowed because of the tight money situation.68 Further, the Financial Secretary was forced to warn the Legislative Council early in 1953 that while the government upheld the National School policy, the required increased public expenditure on education would be subject to budgetary considerations, notably the Emergency, economic investment and balanced budgeting.69 Third, loans were viewed as a means of raising money to finance schemes of economic development which would eventually pay for themselves. 70 They were not to raise money for nonrevenue producing projects which, by definition, precluded the use of loans to finance social service programmes. Perhaps the importance placed on the development of the economic infrastructure in relation to social development can best be shown by the respective amounts planned for and actually spent over the period of the Draft Development Plan 1950-55. The planners initially allotted $58.3 million to Social Development. This was raised to $79.1 million following the rubber boom, but only $48.3 million was actually spent, an amount much lower than the original estimate. On the other hand, $109.9 million was the original estimate for Urban Infrastructure (including such items as public util1ties, transport, public works plants, and industry), with $577.4 million the revised estimate and $394.5 million the actual amount spent . 71 This represents nearly a fourfold increase over the original estimate. It may well be that investment in the economic infrastructure eventually produces revenue for social services. But the point that needs to be emphasized is that in the early 1950s priority was given to Government Administration, the Emergency, and economic development with the social services receiving money only after these needs had been satisfied. Hence the importance of the Korean War boom which allowed even low priority programmes to be fully pursued.

68

Annual Me di ca l Depca'tme nt Reports, Federaticn of Malaya, 1954, p . 3; 1955, W· 3-4. Cited in Rudner, "Draft", op . cit ., p. 91.

69

See Rucber, "Draft", op. ci t . , p. 88, referring to Legis lati ve

Counci l Procee dings, 5th Session, 1953, pp. 817-19. statenent was nade 7th January, 1953.

70 Draft De ve l opment Plan, p . 3. 71

Rudner, "Draft", op. cit . , Table I, p. 67.

The

-

24 -

The boom suppli ed money for securi ty forces , the resettl ement program me72 and econom ic develo pment - money which otherw ise would have been impos sible to acquir e. Furthe rmore, it stimul ated expans ion of the social servic es which, in all proba bility , would have been neglec ted becaus e It is the of the proble m of limite d, finite resour ces. le by the possib made wa~ which initia tion of these scheme s worth their boom revenu e that is so vital, for they proved quickl y and thus create d an atmosp here in which their contin uation was accept ed. Had these social develo pment program mes had to fight in the "free market " of govern ment priori ties under less favour able econom ic circum stance s, their incept ion would have been long delaye d and their crucia l contri bution to the winnin g over of the popula tion to the govern ment's side nullif ied.

Resett lemen t At the same time as the Korean War boom was boosti ng a flaggi ng econom y, a radica l transf ormat ion was taking place in the settlem ent patter n and life style of the Indeed , throug h increa sed govern ment rural popula tion. revenu e and higher wages to labou rers, the newly create d econom ic wealth greatl y facili tated the redist ributi on of This over half a millio n rural squatt ers and land owners . factor l crucia a be demog raphic upheav al, which proved to in the fight agains t the commu nists, was the basis of a plan drawn up by Lt . Genera l Sir Harold Briggs immed iately after his appoin tment as the first Direct or of Opera tions. 73 He direct ed that as from 1st June, 1959, the rapid resett lement of squatt ers be given top priori ty in the govern ment's This policy brough t the rural popula tion Emerge ncy operat ions. under the admin istrati ve contro l of the govern ment and physic ally isolat ed the people from the gueril las in the jungle o The follow ing sectio n, theref ore, concer ns the impact of the Korean War boom on the resett lemen t program me First, the securi ty proble m presen ted and those resett led. by the rural popula tion and the initia l attemp ts to find a

72

See secticn on resettle rrent.

73

See The Conduc t of Anti-Te rrorist Operati ons of Malaya, 1958, p . 5 .

~n

Malaya, Federa tim

- 25 -

solution will be outlined. Second, the way in which, the Korean War boom enabled the government to increase the rate and expand the scope of resettlement will be examined. Third, the grievances of those being resettled will be described. Finally, the importance of the Korean War boom in providing a voracious demand for labour and extremely high wages,and thus mitigating the frustrations of resettlement, will be analvzed. The squatters problem was not new but the necessity of its resolution became more immediate as the Emergency progress7d. There had been squatters, illegal occupants of land, 4 from the time of the first Chinese immigrants. Their numbers swelled each time there was a recession in the economv and unemployment forced labourers to cultivate land on the fringes of the jungle. Conversely, their numbers decreased once trade revived and employment became plentiful. The Japanese occupation and the slow rehabilitation of the Malayan economv had thus created by the late 1940s a situation in which there were about 400,000 squatters liv1ng around the fr1nges of the jungle.75 This pool of self-sufficient fam1lies under scant government administrative control provided the ~CP with an ideal source of supplies and recruits. A residue of sympathy for the communists left over from the days of the Malayan People's Anti-Japanese Army, combined w1th a number of economic grievances held 76 by the squatters, induced many to cooperate with the MCP.

74

For a d1scuss1oo of the cx.nfusioo in the use of the tenn "squatters" see Iles has been quiet for so lmg. "

- 26 -

Min Yuen (People's Movement) units were set up among these

squatters and with the aid of sympathe tic followers , politica l education programm es, and terrorism , the jungle fringes became the domain of the guerilla squads. Initial attempts by the Malayan Governme nt to stop cooperati on between the squatters and communis t guerillas The policy of detention and deportati on foundered failed. because of overcrowd ed detention camps (mostly filled with women and children , the men disappea ring just before round up) and the closing of Chinese ports. Squatter resettlem ent In Septembe r, 1948, the became the obvious alternati ve. Mentri Besar {Chief Minister) of each state was asked to sit on a Squatter Committee with Federal officers and report The on the squatters and the prospects for resettlem ent. Federal the by report produced in January, 1949, was approved Legislati ve Council and adopted by the Executive Council. 77 State and Settleme nt Governme nts were requested to prepare proposals based on an analysis of the squatters and to survey possible sites. 78 The importanc e of the project was Indeed, Sir Henry Gurney noted in continua lly emphasiz ed. 11 early 1950 that, It is our most pressing problem .... There can be no question that upon its solution depends the end of the Emergenc y. n79 And yet when General ·Briggs arrived in April, 1950, very little had 11 been achieved.11 80 Only 18,500 squatters had been brought under control • Moreover , in a number of cases, resettlem ent had proved Lack of convictio n in the distinctl y unsucces sful. feasibili ty of the resettlem ent policy, combined with the problem of raising adequate funds, had disuaded State and Settleme nt Governme nts from proceedin g beyond the planning stage. Many seemed to concur with the assessme nt made in the Report on the Squatter Problem, 1949, that resettlem ent .. could only be accomplis hed at considera ble expense to the Governme nt - an expense that the country could ill afford if it were multiplie d by a large number of such operation s

77

Report on the Squatter Problem, 1949, op.cit.

78

See

79

Legislativ e Council Proceeding s, 3rd Session, 1950, p. 8.

80

Squatter Problem, Leg. Co. Papers, 1950.

11 'Ihe Squatter Problem in the Federation of Malaya in 1950 , Papers laid before the Legislativ e Council, 3rd Session, 1950, B89-109. (Hereinaft er Squatter Problem, Leg. Co. Papers, 1950). 11

- 27 81 And unless the policy was on an extensive scale." pursued on an extensive scale, the guerillas would simply move to unresettl ed areas and the problem would recur. So why start at all? In June, 1950, the Federal Governmen t took over responsib ility for the resettlem ent programme s and General Briggs injected direction and urgency into its execution .82 But direction and a sense of urgency alone did not account for the speed and comprehen siveness of resettlem ent. It was the revenue acquired from the Korean War boom that supplied the much needed resources to fuel the governme nt's new drive. The rate of resettlem ent was far greater than had been anticipat ed (see Table IX). The original proposal for Johore estimated that "with the experienc e that had been gained in synchroni zing movements and land developm ent", 500 to 1,000 families or between 3,000 and 5,000 people could be resettled each month.83 In the first eleven months, an average of just under 8,000 people per month were moved in Johore; during May, 1951, when the resettlem ent programme was in top gear, over 8,500 people were moved in Selangor and 23,628 moved in Perak.84 A remarkabl e increase over even the most optimisti c figures prepared prior to the inception of the Brigg's Plan! Moreover, it was originall y estimated that less than 300,000 squatters were to be relocated . However, by December, 1951, 385,000 people were moved and by the end of 1954 over 570,000 squatters and land owners were living in resettlem ent areas.85 The original estimate 81 See R?· 2-3. 82 Aesettlerre nt becarre c:lul:bed, by s~, as "resquattle rrent". See Cleaveland , op.oit . , p. 146. 83 Squatters Problem, Leg . Co . Papers, 1950, B97. 84 See "Progress of Resettlerren t" , Office of the Director of Operations , June, 1951, No. CS 10298/50, Tan Cheng Look Private Papers, item 170, Naticnal Ardlives of Malaysia. 85 The resettlerre nt areas becarce kna,.m as New Villages. See Progress Report on the Development Plan, 1950-52, p. 61; and Legislative Council Proceeding s, 6th Session, 1953, c. 756, for the nunbers resettled. For original estinates of nunbers to be m::>ved (by state) see Squatter Prd::>lern, Leg. Co ., Papers, 1950, passim. Of those resettled 80% were Clinese, a vital factor cx:nsidering that over 90% of the M:P were Chinese. See Kernial Singh Sandhu, "&nergency Resettlerre nt in Malaya", Journal of Tropical Geography, Vol. 18, August, 1964, p. 165.

- 28 -

had been nearly doubled. To achieve these results, recruits were brought into government service from both Britain and Malaya and others were seconded from less important tasks within the Administrat ion. There was also a massive infusion of money. By the end of 1953, over $100 million had been spent by the government on the basic resettlemen t scheme.86 Thus, in a very short time, an extremely large investment in both men and capital had been made by the government. Role of Resettlement

Table IX:

No. of people 300,0)()~--

250 , cx:xr~2oo ,CDO--

150,CX:Xr100 ,CXX)---

5o,axr-o-- ------------- --- ------- ---------- --Source:

---- ---

.1:-=~-~--__.,.,.

1948 1949 1950 1951 1952 1953 1954 Progress Report on the Development Plan~ l950-52, p. 61; Communist Terrorism in Malaya, .passim ; Legislative Counail Proaeedings, passim.

The scope and pace of resettlemen t shook the MCP. The compr ehensivenes s of the programme proved to be of great significanc e in at least two ways. First, it went a long way towards eliminating the so-called "bad" squatter areas, making those who had consistentl y cooperated with the guerillas much more inaccessibl e. Second, it denied the guerillas alternative groups of people to whom they might have turned for support and supplies.87 In this regard, the simultaneou s regrouping of labour lines if of equal importance and will be discussed

86 Progress Report on the Development~ I950-52, p. 61; Sandhu, "Saga", op.ait., p. 171. 87 For instance , in the Kinta Valley of Perak, a particularly bad area, 4 out of 5 of the 200,CXX> inhabitants were resettled. ROOinson, op.~ait. , p. 87.

- 29 -

88 The speed of resettlement compounded in de t ail later. the problems faced by the MCP . The difficulty of communication within the jungle acted as a severe constraint on any immediate and thorough analysis of the situation . Hence, the development of a counter strategy and its dissemination to all guerilla and Min Yuen units did not take place until well into 1952 089 By this time, the MCP had lost the strategic initiative . And yet, while the phys i cal isolation of these people behind guards and barbed wire was important, its effect might have been negated but for another aspect of the Korean War boom: high wages and a demand for labour, To be successful, resettlement required that the rural population not only by physically separated from the communist guerillas, but also that their sympathies lie with the government rather than the MCP. The actual process of moving was often unpleasant and dis tressing for t hose being resettled and c ould well have led t o frustration, deep resentment and further cooperation with the anti-government guerill as o Indeed, support for the MCP might well have grown and become extensive within the New Villages . And such a situation could have easily arisen, given the many grievances of those being resettled. Firs t , the cost was considerable. Although each family received a $70 a llowance for building their new home and a subsistence allowance for two weeks, while it was being built, these sums by no means fully compensated for the cost of material or wages lost . 90 Further, the simultaneous resettlement of t housands of peop l e naturally created a great demand for all types of building materials, and, of course, demand forced prices up . For instance, secondary hardwoods (sawn) which had a base price of 100 in 1948 were up to 138 in 1950 and 237 in 1951 . 91 For a certain type of roofing material the

section on Rubber and Tin Producers below.

88

See

89

The revised strategy was not decided upon until Octcber, 19 51, and many units did not receive the new orders nntil 1952 . The "Directive" was published in English translation in The Times , 1st December, 1952 . See also Hanrahan, op . cit . , pp . 121-123 .

90 See Malaya Under t he Emergency, Departrrent of Infonnatian, Federation of Malaya, P o 69; Sandhu, "Saga", op . cit. , p. 61. 91 Annual Repor-t' , 1951, p. 112.

- 30 -

92 buyer had to pay $10 per sheet and 35 sheets were needed. In th1s case the family had to pay $280 extra for roofing alone, a considerable sum for any poor rural family. Second, the confining space within the barbed wire resettleSanitation and water ment areas created many difficulties. Squatters were needs were often not immediately satisfied . not used to living in large communities and social habits had to be adapted. Outbreaks of certain diseases were initially not uncommon and among the poultry Ranikhet disease often proved devastating.93 Security operations dictated that curfews be imposed, severely restricting the Moreover, food restrictions working hours of New Villagers. prevented meals being taken out of the resettlement areas, reducing the efficiency of the workers by up to 15%.94 Even increased security, which had been the reason for the This was because move, did not materialize immediately. the MCP made resettlement areas a prime target and security guards were not always paragons of virtue and steadfastness. 'rhJ_rd, and probably the most important problem faced \Vhile by those being resettled, was their loss of land. New Villagers may be classified as originally farmers, mining or estate workers, or shopkeepers, almost every family, if not evey individual had more than one occupation A squatter might and nearly all cultivated a piec2 of land. work part time as a rubber tapper and also rear pigs and grow vegetables on nearby plots of land claimed from the But when resettled, many who were classif1ed as jungle. wage-labourers were not necessarily allotted pieces of Even those land equivalent to their previous holdings. Although officially designated as farmers fared badly. the distance involved in the resettled might be onlv a few miles, as T.vas usually the case, all immovable property was destroyed, including crops and sometimes l1vestock. Once Compensation was paid later rather than on the spot. month resettled, farmers were only given $12 per head per for five to seven months, while they attempted to cultivate the land they had been allotted.95 But cultivation of resettlement farm land was sometimes extremely difficult.

92

MaLaya Under the Emergency, pp. 68-9.

93

See E . H.G. Dobby, "Recent Settlerrent Changes 1n South Malaya", Malayan J ournal of Tropical Geography, Vol. 1, October, 1953, p. 6.

94

Sandhu, "Saga", op. cit. , p. 170. Ib id. , p. 161.

95

- 31 -

As Sir Gerald Templer noted, the proces~ of creating the New Village s had "been a hurried one, and without the opportu nity for careful sociolo gical and economi c survey and plannin g which would normall y precede so abrupt a 96 disturba nce of a long establis hed pattern of rural life." Such factors as fertilit y of the soil, possibi lities of floodin g, ease of irrigati on and access to markets were Speed of resettle ment, security factors , not fully explore d . or Malay land rights were in some instanc es given greater priority , with the result that frequen tly the fertilit y of the availab le agricul tural land was poor and product ion of good crops and livestoc k was slow to get back into full The result was, of course, a drastic reductio n of swing ~ For income from farming and a shortag e of fresh food. that ally drastic so fell ion product example , in Johore the total weight of fresh vegetab les mov1ng from Johore to Singapo re fell from some 200 tons per month to 30 tons per month in late 1951.97 Moreove r, in the whole of the Federat ion of Malaya, the total acreage under food cro ps fell from 96,839 acres in 1948 to 67,465 acres in 195i as people were moved off the land and into the resettle ment areas98 (see Table X). About 335,000 of those moved to the New Village s were farmers and many had to abandon their traditio nal Ideally , liveliho od altoget her because of the conditio ns . up to utilize could farming on nt depende familie s wholly te cult1va could ent employm paid three acres while those in limited the of up to half an acre, but the problem availab ility of defenda ble land around each village severel y restrict ed land usage.99 Moreove~ land that was availab le could rarely be persuad ed to produce a crop without prolong ed cultiva tion o These two factors combine d to force many former agricul turalist s and part-tim e farmers By 1952, the to look for alterna tive sources of income . percent age of agricul turalist s in New Village s had dropped

Proceedin gs, 5th Session, 1953, p. 11 .

96

Legis~ative Counci~

97

[)(:tl)y,

98

See Annual Report, Departme nt of Agricultu re, 1949, p . 87; 1950-1, p. 69 .

99

See Annual Report, Departme nt of Agr•icultu re , 1950-51, p. 4. Sare early resettlem ent scheires put each house on its Otln .land but this proved difficul t to patrol and defend properly o See Ooi Jin Bee, Land, People and Economy i n Ma~aya, I.ongmans, London, 1963, p. 168.

op. cit , , p. 6 .

- 32 -

Table X:

CcnJ?arative Acreage of Agricultural Crops

Acreage of Agricultural Crops

Year 1939

82,209

1940 1946

102,880 125,830

1947 1948

97,273 96,839

1949

88,970

1950

79,946 67,465

1951

73,755 82,082 95,616 96,852

1952 1953 1954 1955 Source:

Agricultural Reports, 1949-55.

from 60% to 27%. 100 Had it not been for the increasingly favourable economic situation, destitution might well have been widespread. It was indeed fortuitous that just when resettlement forced many to abandon farming, the Korean War prices boom should generate both high wages and an i nsatiable demand for labour. The trade boom, historically t .he antidote for burgeoning squatter populations, not only provided alternative employment for New Villages but also considerable prosperity, thereby mitigating the distress and resentment caused by resettlement. Hence during the period in which adjustments were made to the new social and working

100 Sandhu,

11

Saga .. , op.cit., p. 169.

- 33-

conditions, and small plots of land were coaxed into production, the rubber and tin estates provided ample compensatio n.lOl Wages rose most spectacularl y in the rubber industry (see Table XI). The daily wage,s for unskilled field-worker s, who formed 20-25% of estate labour, increased steadily from $1.43 per day in the first quarter of 1950 (the rate it had been for the two previous years) to a record high of $2.90 per day in the second quarter of 1951. The average rate for the year 1951 was $2.60 per day for these unskilled fieldworkers. Official wages, agreed to by both sides of the rubber producing industry in Malaya, were higher for sk i lled Daily rated tappers labourers such as tappers and foremen. piece rate and day per could earn approximatel y $3.65 tappers approximatel y $4.35 per day during the palmy days of April-June, 1951.102 Skilled tappers were in great demand as more and more smallholders put trees under the On small properties, wage rates were raised to knife . attract skilled piece rate tappers. As the price of rubber rose so did the wages offered, sometimes being three or four times the official rates paid on large estates.l03 In order to counter these incentives,l arger plantations were compelled to offer many forms of bonus pay and such payments made up no small part of the tappers wages.l04 Hence, the figures quoted here are for the most part basic wages paid and it should be noted that many were able to earn a great deal Further, the high price of rubber encouraged owners more. and managers to contract out for tapping areas of their estates which have previously been considered too prone to Fortunes could guerilla attacks for the safety of employees. be made by enterprising Chinese tappers who often claimed Similarly, on smallas much as 60% of the rubber tapped. to be highly proved profits holdings a system of shared renumerative for skilled tappers.l05

101

For an account of the resettLement and same of the discontent and even hatred felt by the Chinese see Han Suyin . . . And the Rain My Drink 1 Mayflooer 1 london, 1970 1 passim.

102

Extrapolation fran figures in Annual Reports 1 1951 1 p. 36; 1952, p. 37.

103

Annual Report , 19 50, p .. 32.

104

Loa. ai t.

105

Annual Report, 1950, p. 27.

- 34 - .

Table XI : Wages

Rubber Wages Unskilled Fi e l dworker

Year/ Quarter

Yearl y Average

1948

1949

1 2 3 4

1.10

$

$1. 10

1.40 1.40 1. 40 1. 40

$1. 40

1 2 3 4

1. 10 L 43 L 43 1.43

$1.35

1.40 1.40 1. 40 1.40

$1.40

1

1.43 1.43 1.43 1.43

$1. 43

1. 40 1.40 1. 40 1. 40

2 3 4

$1. 40

1950

$1. 61

1. 40 1. 40 1.40 1.97

$1. 60

1951

$2 . 60

2. 28 2 . 28 2 . 28 2 . 28

$2. 28

1952

$2 . 22

2 .28 2 .28 2 . 28 2.28

$2.28

1953

$2 . 10

2 . 28 2.28 2. 28 2.28

$2 . 28

Source:

LlO 1.10 1. 10

2 3 4

1. 43 1.60 1.60 1. 79

1 2 3 4

2.60 2 . 90 2 . 60 2 . 30

1 2 3 4

2 . 30 2.30 2 . 20 2.10

1 2 3 4

2.10 2 . 10 2 . 10 2 . 10

1

$

$

$ 194 7

GoverrliOOnt wa2es Unskilled Yearly Worker Average

Annual Repor>ts, 1947-5 3.

- 35 -

In the tin industry, too, wages followed the upward trend of prices. After an adjustment in the controlled price of tin in June, 1948r. had prompted a moderate increase over the $1.78 per day unskilled labour rate of 1947, wage rates remained stable until 1950.106 At the beginning of September, a new prosperity bonus scheme was introduced by the Malayan Mining Employers' Association which tied wages to the price of tin and was payable to those with good attendance.l07 This put the rate for male unskilled mine labourers on European dredges at $3.20 per day (including bonus) for the last quarter of 1950 and meant that the basic wage rose to $3.81 per day for the second quarter of 1951. The average rate for 1951 was $3.42 per day and this rose slightly to $3.49 for 1952 and 1953.108 Just as in the rubber industry, skilled workers such as dredge crewmen and engine drivers received much higher wages and small Chinese mines and dredging operations offered very competitive rates. Indeed, some Chinese workings operated on a profit sharing system and a great deal of money could be made.l09 Given the possibilities for acquiring small fortunes from both rubber and tin, it would seem that stories of scruffily dressed Chinese labourers walking into the most respectable jewellers in Ipoh, Johore Bahru or Kuala Lumpur with sacks of dollar notes over their backs are not all apocryphal.llO Moreover,the high wages paid to rubber and tin workers forced other industrial and commercial organizations and the government to grant substantial increases in pay. This proved necessary to stop labour moving to estates and mines and to protect people from the results of inflation.

106 Annual Report, 1949, p. 17; 1951, p. 36. 107 Annual Report, 1950, p. 32. 108 Annual Report, 1951, p. 37; 1952, p. 38; 1953, p. 27. 109 For an excellent description of wages and ocndi tians during the boan years in the tin industry, see Siew Nirn Chee, Labour and Ti n Mining i n Malaya, Data Paper No. 7, Southeast Asia Program, Depart:Irent of Far Eastern Studies, Cornell University, 1953. 110 Private radios and bicycles with the latest gadgets could be seen at all the large mining and rubber resettlerrents and labour lines. The only cx:rrplaint cne Labour oepart::m:mt representative heard during a visit to a mine area was conoemed with the poor radio reoepticn fran Peking! Labour Department Man th ly Report, Qct.d::)er, 19 50, P. 9.

- 36 -

The shortage of labour considerably boosted the rise in wages. There had been very little surplus labour prior to the Korean War boom; indeed, it was officially e~timated This that there was a shortage of some 25,000 workers.ll had been caused mainly by the ravages of the Japanese 112 occupation and the post-war restrictions on immigration. The sevenfold expansion of the Police. Force, recruitment for the Malay Regiment and the hiring of armed guards and watchmen by tin, rubber and other businesses fur·ther depleted the available pool of labour. Hence, when the boom prices encouraged smallholders to tap their rubber trees to the limit, estates to step up replanting,ll3 and new mines to open up, labour was in great demand and nobody needed to go short of work. From the very inception of the resettlement programme, therefore, jobs were available for all those who were moved. And while employers had been reluctant to engage Chinese labour prior to June, 1950, because of the Emergency situation, they were happy to employ everyone they could possibly get after the prices started rising so drarnatically.ll4 In the rubber industry, it was the expansion of activities on the smallholdings that initially created the abnormal demand for labour. Many holdings were given their first slashing and cleaning in a long time. But it was not the field-worker who was required so much as the skilled tapper. The prospect of high returns induced many tappers to leave the established estates. And thus, it was on the estate that the New Villagers could be assured of employment. Even with this influx of new employees, the estates werei apparently, short of labou~, particularly skilled tappers. 15 This situation continued on into 1951 with piece rate t~ppers leaving the large estates and working on smallholding while the number

111 Legislative CounaiZ Proaeedings, 1st Session, 1948, B534. 112 Note that the population of males 15-54 years old was only 1,695,308 in 1947, as carpared to 1, 751,952 in 1931. Del Tufo, op. cit. , p. 101. 113 There was a 25% increase in planting in 1951 over 1949. Meek, op.ait., pp. 14-15. 114 For the general reluctance to enploy Chinese see Labour Department Monthly Report, January, 1950, p. 3. 115 Annual. Report, 1950, p. 29.

See

- 37 of less skilled daily rated tappers, the majority of whom 116 were resettled farmers, increased on the large plantatio ns. Further, as a large majority of Chinese smallhold ers were residents of the New Villages, those being resettled could find part time employmen t on these holdings as well.ll7 During 1952, although many smallhold ings were forced to cease tapping, there was little sign of unemploy ment.ll8 In the tin industry, the expansion took place towards the end of 1950 with 41 mines being reopened or started and in all an additiona l 47 sites being worked.ll 9 Seven more were opened up in 1951 and with the high wages enticing many workers to rubber smallhold ings, labour was scarce and employmen t readily available for uprooted squatters . At this point, it needs to be emphasize d that the majority of resettlem ent took place in areas where the rubber and tin industrie s dominated the economic life of the communit ies (see Table XII). In Johore, where 23% of New Villagers were resettled , there were over 362,000 acres cultivate d by smallhold ers. This constitut ed onethird of the total smallhold ings acreage in Malaya.l2 0 Indeed, Johore, Perak and Selangor, where over 75% of the resettlem ent took place, have within their boundarie s over two-third s of all rubber smallhold ings. Moreover, Perak and Selangor provided 64.7% and 18.7% respectiv ely of the 121 number of places of employmen t in the tin producing industry. Hence, not only were jobs available for those being resettled but they were most readily come by in the areas where there was most dislocati on of the populatio n. A consequen ce of the great influx of wealth into the country and its distribut ion to all levels of Malayan society was inflation . Assessing the full impact on the Malayan society of the rise in the price of food, 116 Annual Report, 1951, p. 34. 117 See P.K. Voan, Chinese Rubber Smallholdin g Industry in Se~angor, University of Malaya, M.A. Thesis, 1967, p. 3. 118 Annual Report, 1952, p. 37. 119 Annual Report, p. 29 and Monthly Statistica l Bulletin, July, 1954, p. 36. 120 Rubber Statistics Handbook, 1952, Table 28 (ii), pp. 77-82. 121

COmputed Qctd:)er 1

from statistics in the Labour Department Monthly Report, 19 51.

- 38 -

E!tFloyrrent Oppc?rhmities for New Villagers by State

Tabl e XII:

Smallholders Places of (less 100 acres) Eirployment in the Tin Industry Planted Acreage

State

Johore Ma1acca Negri Sembilan Selangor Perak Kedah

Penang Perlis

&

Source:

362,156 87,144 68,763

139 474 14

10

108,347 195,249 141,501 25,731 4,777 40,573 43,282 22,580

733

1,100,103

Prov. Well. 40

Pahang Kelantan Trengganu Total

25 3 21

7

Population of New Villages 130,613 9,555 30,294 97,346 206,900 22,522 10,717 682 50,233 1,495 12,560 572,917

Monthly Report Labour Department, Octd:>er, 1951; Table 28 (ii), Rubber Statistics Handbook, 1952; Sandhu, "Dnergency Resettlerrent", p. 165.

Table XI:P:: Wages and Cost of Living

Costs of Living for Chinese Labourers Rubber Wages unskilled Field WOI:kers

Year

Goveinment Wages unskilled Workers

Costs Foodstuff & Kerosene

Total Wei9flted Index

Real Wages* of Unskilled Chinese Rubber Workers

100

100

87

141

76

82

160

114

86

88

167

236

163

129

116

203

1952

202

163

135

120

168

1953

191

163

123

120

159

1954

n.a.

n.a.

109

116

n.a.

1947

100

100

1948

123

100

1949

131

100

1950

147

1951

Base

:

*

.

100

100 in 1947 Carputed fran ratio of rubber field workers wages over cost of living for Chinese labourers. Cf. Purcell, op.cit. , p . 148. The 1939 base of 100 would seem lll'lSuited to post~war analyses.

Source

Annual Reports, 1947-53; Cf. Ronald Ma, "Carpany Profits and Prices in the Rubber Industry in Malaya, 1947-58", Malayan Economi c Revi ew, Vol. IV, No. 2, October, 1949, Table 3, p. 38; Monthly Stati stical Bulletins, 1947-54.

n.a.

not available.

w

\0

- 40 122 clothing, and other important articles is difficult. First, substitutes on alternative items may be purchased according to the relationship between wages and prices, thus making the consistent quantification of the actual cost of living for any specific group hazardous. This becomes readily apparent in any pre-war/post-war comparison Second, the situation varies of the standard of living. from region to region and, depending on the items chosen for comparison, there may be great differences between urban and rural areas within one region o Third, living c onditions may change and not be reflected in the official cost of living analyses. This was the case during the Korean War boom~ Because labour was so scarce, mines and estates provided increased amenitied to attract workers. These living quarters for those who resided on the estates or tin mines.I23 However, even if one were to discount these factors, real wages, and therefore, the standard of living, increased during the period of the booml24 ( see Table XIII). After the price of rubber and tin began to drop back to more normal levels, wages were ~ot reduced too drastically and the cost of living went down, resulting in only a moderate drop in real wages and the maintenance of a relatively good standard of living comp~red to the immediate post World War Two period.l25 And by this time, although there were still considerable problems with land titles,l26 farming had been resumed in the New Villages and provided a buffer against falling wages and reductions in employment opportunities. The Korean War boom, then, greatly facilitated the resettlement by the government of over half a million It provided many millions of dollars for rural people. the construction of the New Villages, the installation

122

For a discussion of the problems of assessing the cost of living at this tirre, see M.S.S. Awberry and F.W. Dalley, Report on Lahour and Trade Union Organization in Federation of Malaya, 1948, p. 16; and Joint Wages Commission Report, 1947, op . cit . , passim.

123

See Siew Nbn Chee,

124

Annual Report, 1950, p. 31.

125

Legislative Council Proceedings. 6th Session, 1953, c. 863; The Cotombo Plan; The Second Annual. Report of the Consultative Committee on Economic Development in South and Southeast Asia, HMSO, London, 1953, p. 60. A General. Survey of New Villages, ReportbyW.C.S., Corry, 12th October, 1954, p . 9 .

126

op . cit., p. 36.

- 41 -

of amenities and the developme nt of social services . The boom increased employme nt opportun~ties at highly lucrative rates for those deprived of their land and generally reduced frustratio ns and discomfo rt experienc ed by all who were resettled . The importanc e of the Korean War boom in aiding the governmen t in its policy of physicall y isolating the rural populatio n from the MCP guerillas and simultane ously winning their hearts and minds should not be underesti mated . The New Villages severed the links between the guerillas and the rural populatio n. Prosperit y neutraliz ed antipathy Indeed, J.B. Perry Robinson makes towards the governme nt. the assessmen t that for the Chinese, "by far the most important event of recent years in their eyes is not the Emergency but the Korean War which produced a wave of prosperit y in Malaya such as it had not known since 1940 . "127

Rubber and Tin Producers The Korean War prices boom had its most immediate impact on the rubber and tin companies . Faced with low prices and profits, the attrition of the Emergency added an extra burden that multiplie d the hardships experienc ed in both industrie s and called into question the economic future of Malaya. The boom provided both the resources and incentive s to overcome these problems . This section, therefore analyzes the benefits bestowed on the rubber and tin producing industrie s by the Korean War boom. First, the prices boom generated high profits, capital, and confidenc e in the economic future of Malaya (see Table XIV) . The low prices of the immediate post ~'7orld War Two period had made rehabilit ation extremely difficult . Many smallhold ings ceased to be tapped, the costs being too great, and some less efficient e~2gtes were forced to reduce wages or cut back Small, Chinese~owned tin workings were operation s. deeply in debt because of the loans taken for rehabilit ation . These loans had to be paid even if the mining or dredging ceased, so operation s were continued out of necessity in

127

Rd:>inson, op . cit. , p. 103.

128 See Interim Report on Wages by t he Joi nt Wages Commi s s i on, 1947, p. 8.

- 42 -

Table XIV:

Rubber Prices and Profits (cents per lb)

Average Rubber Price RSSl

Year

1947 1948 1949 1950 1951 1952 1953 1954 1955

37.3 42 . 2 38.2 108.2 169.6 96.1 67.3 114.2 96.8

Source:

All-in Production Costs

Price less Residual Costs All-in Costs 10.9 13.1 9.5 70.0 107.6 32.7 14.2 18.2 55.5

26.4 29.1 28.7 38. 2 62.0 63.4 53.2 49.1 58.7

3.8 6.5 2.6 32.8 54.3 9.1 3.4 0.8 21.4

carpany

Profits (net)

7.1 6.6 6.9 37.2 53.3 23.6 10.8 li.4 34.1

Ma, op.cit., p. 44.

the hope of a revival of fortunes. 129 Prospecting for new tin deposits was impossible once the Emergency began. Replanting on estates were severely limited and on smallholdings virtually non-existent.~30 Yields in rubber estates decreased because tappers were reluctant to work at certain times in certain areas. There was general dissatisfaction with the tardy distribution of war damage claims which could have done much to aid the development of both industries. And to add insult to injury, the government introduced what was thought by many in the rubber and tin industries to be a harsh and inequitable income tax. With prospects for the future dim, capital

129

See Labour Department , Monthly Report, July, 1949, p. 3. As one In the circumstances there see'nrl mine manager had noted: little that Malayan tin producers oould do but fight Camnmists with one hand and sell their tin at rapidly deq;J..ining prices Cleaveland, op . ait., p. 120. with the other. 11

11

130

See Annual Report, Department of Agriaulture 1 1949 1 p. 4.

- 43 "" flowed out of Malaya and rubber and tin shares were not in great demand. Both capital and faith in the political future of the country were in short supply. The steady rise in prices from July, 1950 onwards changed the whole situation. Profits which had averaged below 7 cents per pound over the period 1947-49 rose rapidly to average over 37 cents per pound in 1950, and over 53 cents per pound in 1951.131 Large profits were transmitted to shareholders and owners with managers receiving healthy bonuses. Demand for rubber shares increased especially in the wake of news that the autumn Commonwealth Conference in London would discuss a great development scheme for Southeast Asia.l32 Capital was quickly accumulated within Malaya and Singapore, enabling operations, such as replanting to proceed.l33 The boom injected into the rubber industry both capital and a confidence in the future. Second, the Korean War boom mitigated to some extent the economic losses inflicted by the guerillas. From the beginning of the communist guerilla campaign, the rubber estates and tin mines had been primary targets o Slashing rubber trees was very much part of this attack plan, but it was not until the middle of 1950 that tree slashing became extensive. During the last six months of 1950, $6.3 million worth of damage was inflicted on estates, while during the same period in 1951 damage amounted to $8.1 million.l34 In 1952, there was a sharp decline in attacks from 70,000 trees damaged in February to only

131 See Table XIV. 132 See Straits Echo, 26th September, 1950. 133 Replanting was vital to the rejuvenation of the rubber industryo see Annual Report of the Director of Cooperation, Federation of Malaya, 1949, p. 2; Report of a Mission of Inquiry into the Rubber Industry of Malaya, 1954, Chapter 4. Total fixed capital for Federation of Malaya and Singapore rose fran $272 million in 1949 to $571 million in 1952. The Colombo Plan, the Third Annual Report of the Consultative Committee on Economic Development in · South and Southeast Asia, HMSO, london, 1954, pp. 62-63. 134 Labour Department Monthly Report, July, 1950, p. 1; Annual Report, 1951, p. 4.

- 44 135 600 in Decernber . In order to limit damage and prevent casualties, companies spent a great deal on defence and security measures. Dunlop, one of the major rubber plantation owners, spent well over $4 million on security, providing, among other things, 70 armoured cars and highly trained European security officers.l36 In all, estates had to pay $16 million in defence during 1951.137 In 1949, prior to the profits of the Korean War boom, less than $4 million had been spent on defence.l38 At the same time, therefore, as the boom made rubber production a prime target of the MCP, it enabled the estates to devote more resources to security. The overall result was to the detriment of the communist cause, for not only did tree slashing hurt the ordinary labourer by reducing his production and, therefore, his wages,l39 but also the guerillas were unable to shake the firm resolve of the plant.ing community . What the Korean War boom could not fully compensate for was the loss of life among the planters and mine managers , While in absolute terms the numbers were small just under 100 planters were killed during the whole of the Emergency - it was a high percentage of planters. These murders lowered morale and made recruitment exceedingly difficult. What the wealth from the boom years did do .. was to provide substantial material benefits while the danger was endured. It also meant that retirement, if it was not preempted by a bullet, would be adequately provided for. This situation became popularly known as ending up in "Devon or Heaven".l40 Thus, the Korean War boom provided

135 Annual Report, 1952, p. 4. 136 The Times 6 16th September,

1954 ~

137 Natural Rubber News, May, 1952, s. 28. See also Straits Times, 1st August, 1960, for an estimate of $21 million for costs in 1951. 138 Sunday Times (Malaya), 31st July, 1960. 139 Note, for exarrple, that Mr. J. S. Ferguson made the assessm:mt that because of the various i.rrposi tions of the Errergency, the average yield per acre an his estate had falled from 848 pounds to 803 pounds, Straits Echo, 18th April, 1950. 140 See, for exarrple, The Planter, Vol. 27, Octcber, 1951, p. 448.

.... 45 ...

planters and mine managers with the money to defend themselves and their estates and a healthy bank balance for their return to England. Third, the profits from the boom enabled the tin and rubber owners to carry out the government's orders and relocate their labour in defensible areas. The cost and inconvenienc e of this relocation and the general disruptlon caused by the whole government resettlement programme could be accepted because of the large margin of profit . Had this task and the ensuing labour problems been undertaken at a time of low prices, many tin mines, dredges, and rubber holdings would have been forced out of business or not have complied with government policy. The result, in either case, would have been highly detrimental to the government's strategy. The MCP guerillas, deprived of their former resources by the comprehensiv e resettlement of the squatter community, could have turned to estate and mine labour and cajoled them into feeding and supplying them . This did in fact occur for a short time while the resettlement and regrouping of labour took place . However, once resettlement and the relocation of labour had been largely completed, the guerillas were forced into the jungle to grow their own food, rely on food dumps and attempt to re-establish contacts with former sympathizers . This relocation programme, therefore, contributed in no small measure to the fight against the communists. It is estimated that some 650,000 people were regrouped: 510,000 on estates; 80,000 on mines; and 60,000 in other In a few cases it regroupment areasl41 (see Table >: V). just meant the erection of a barbed wire fence around the labour lines, but more often dispersed labour lines had to be transferred to a central fortified area, or, as was the case on smaller estates, concentrated at the factory . On medium holdings, and some small estates, labourers were regrouped on nearby large, usually European, estates.l42 Relocation on tin mines was not so difficult because The total cost of regrouplabourers were not so dispersed. concerned, and the mines and estates ment was borne by the other settlements government had little to do with these than to see that the policy was carried out and that security measures were adequate . Once regroupment and resettlement

141

Sandhu, "Errergency Resettlem:mt", op . cit . , p . 174 .

142

Sandhu, "Saga", op . cit o, p . 154 o

- 46 -

was c omplete d, further p rob l ems a rose. Labourers and casual workers from the New Vi l l ages had to be transported, often by armoured trucks, to and from their place of work . Curfews and food r estrictions which reduced production added to the burdens of both labourers and managers . Producti on and residual co s t s rose markedly during t he period of r e l o cation and most certainly could not have been absorbed but for the high profits , l 43 The es t ates and mines, t herefore , f orced by government pol icy t o regroup their labour, were able to defray the great cos ts incurred be c ause of the abnormal p ro f its from t he boom years . Finally, the profit a ccumulated by Chinese bus inessmen f many of whom h ad extens ive intere s t s in the rubber and tin industry, provi ded r esources for the po litical development of the Malayan Chinese Associ ation (MCA) • Formed in Februar y, 1949 , to prote ct the interes t s o f t he Ch inese business commun i ty, the MCA was encouraged by the government to a i d the resettleme:nt programme , Howeve r, prior to ..:.he Korean War boom, members were not forthcoming with f unds , except i n Johore 1 and were seemingly reluctant t o ge t 144 personally involve d with the p rob lems of t he squatters " But once the Bri ggs Plan got into full swing and t he Kor ean War boom p rofits began to roll in MCA membe rs proved to be extremely he lpf ul . Mone y was collected from t wo ma jor sources, private dona t ions and a lottery . l45 In al l, ne a r ly $4 million was spent by the MCA in subs i d izing the building of houses, t he erection and mainten ance of school buildings, the provision of s uch ai11eni tie s as p iped water , dispensa rie s , and recreational facilities, and t .he forma tion of home guard units . l46 The profits from t he boom, t herefore, enabled

143 See Table XIV. Setre benefits did accrue to managers and ONner s frcm regrouprent. For instance, rubber thefts were reduced and managers had greater control over their employees . 144 Annua'l RepoY•t, 1949, p . 212 . 145 The first lottery draw was in February 1 1959, with the t ot al pool nearly $350,le XV:

CCl1pOSi ticn of Reg:rolpr e!lt Areas

Reg:roupt elt Areas

Estimated Total Pq>ulatic n

Percentag e of Total Populatic n

Estate Reg:rotpt ent 510,cx:x:>

Al:eas

Mining Iegroupt ent Areas

71.5

Percentag e of Chinese

29.0

Percent a~ of Malays

16.0

Percentag e of Indians

50.0

Perrentag e of Javanese & Others

5.0

....

~

80,cx:x:>

21.5

68.7

17.6

13.6

0.1

Areas

60,0CX>

7.0

71.8

14.0

14.0

0.2

Total

650,CXX>

100.0

45.0

32.0

18.0

5.0

Other

RegrolplB lt

Sourre:

Sandhu, "Energenc y Fesettlem ent" 1 op. ai t.

1

Table 7, p. 17 4.

I

- 48 -

the MCA to gain an entree into the political life of the New Villages . Moreover, the money proved useful in initiating and maintaining the alliance between the MCA and the United Malay Nationalist Organizatio n. The MCA was able to contribute to the Alliance money for campaigning and a portion of the enfranchize d Chinese vote while the UMNO ensured the support of the politically dominant Malay voter ·· a combination that proved to be very successful. The Korean War boom boosted resources and morale at the nadir of the government' s fortune. 1951 was, in terms of incidents and deaths, the worst year in the Emergency, culminating as it did in the murder of Sir Henry Gurney, the High Commissione r. The MCP, recognizing that the tide was turning against them, stepped up their terrorist activities.l 47 But this guePre ~ outrance failed. In analyzing the reason for the ability of both the rubber - and tin industries to withstand the MCP's terrorism, the benefits from the boom must be taken into account. As Sir Gerald Templer had noted, "where courage provides the spirit of defence, economics provide . the sinews and it is only right that we should recognize also the great strain which the Emergency has imposed upon the financial resources of these industries~ It is fortunate indeed that this occurred at a time when the prosperity of these industries has been much greater than in preceding years ~ "l48

Conclusion The Korean War prices boom has been neglected in past analyzes of the Malayan Emergency. It has been the purpose of this paper to fill in this gap. This is not to 147 Total incidents for 1951 were 6,082 as compared to 4,739 for 1950 and 3, 727 for 1952. Total security force casualties far 1951 were 1,195 as oprx:>sed to 889 in 1950 and 664 in 1952. After 1952 total security force casualties never rose above 250 per year. See Emergency Statistics for the Federation of Malaya since June I948, Dr .

Inf. 7/60/160 (Drerg) Federation of Malaya, 1960.

148 Legis ~ative Counei l Proceedings, 6th Session, 1953, c. 25.

~

49 -

argue that the boom was the single cause of the Malayan Government's success, but rather that the boom played a crucial role in the synergetic process which brought about the government's ultimate victory. It is this interaction of factors and their accumulative effect which is important. The simultaneous occurrence of the Korean War boom and the inception of the Briggs Plan complemented each other. Without the wealth from the boom, the resettlement programme would have been limited in scope, slow to be executed, and the cause of widespread unemployment and destitution o Without the overall strategic policy and integrated administrative framework developed in the Briggs Plan, the money from the boom would have just found its way into the coffers of the MCP and perpetuated the existing relationship between the guerillas and the rural population . Moreover, the strategic advantages of both the Briggs Plan and the rise in prosperity dovetailed into other factors which aided the government in its fight against the MCP. First, as has been discussed above, the provision of amenities and social services was facilitated. Second, food control measures could be ~effective. Introduced in June, 1951, the measures enabled government personnel to monitor and fully supervise the production and distribution of crops and livestock , Deprived of their former easy access to food supplies, the guerillas were forced to converge on the new ~ttl~t areas to reestablish contacts. Having had to face ambushes in the past, the government security forces could now turn the tables and set their own traps, knowing that the communists had a limited pattern of movement ol49 Third, the government's task of disseminating information and the work of the newly emerging political parties were made much easier. With the New Villages developing their own internal organizations, meetings could be arranged, film shows publicized, and grievances articulated and passed quickly to the proper authorities . Fourthly, with the greater degree of security offered by the New Villages, information on which the army and police could act quickly and dec1sively was more readily given. These, and other crucial factors, such as the strategy adopted by the MCP, the morale boosting escapades of Sir Gerald Templer and the rise of widely supported and influential political parties, 149

W. Pye, Lessons from the Malayan Struggle Against Communism, center for Internatiatal Studies, Massadmsetts Institute of Tedloology, canbridge, Massachusetts, 1957, pp. 51-2.

See LUCian

- 50 -

all interacted and contributed to the accumulation of v a riables which, in aggregate, enabled the qovernment to prevail . A consequence of this analysis concerns prescription. If one accept.s the argument that the success of the Malayan Government was due to a conca.tenation of events, some of which were the result of deliberate government pol i cy and some the result of economic or social forces outside the government's control, then one must also accept that the government alone was not totally responsible for the MCP' s defeat.. Hence, there would seem to be no one plan of action that can guarantee a government's success, only a theory that can guide governments given very specific economic, political and social conditions ~ To concentrate solely on those factors which are under the control of a government may create a false impression that a given policy, if properly adhered to, will automatically bring victory . Insurgency wars are not so mechanistic nor so easily controlled . For those intent on advising governments, certain principles may appear to be useful, but for those whose interests in an analysis of an insurgency war, a systematic approach would seem much more fruitful. This analysis also highlights the importance of t .he international system in considering the outcome of an insurgency war . How men, money, material or ideas are injected into an insurgency situation is extremely significant ~ The money from the boom spread to all layers of the Malayan society, entering the economic system as it did through rubber and tin companies. If, howeveri the money had been introduced as direct aid to the Malayan Government, it seems extremely doubtful that it would have trickled down to the level of the labourers. Thus, labourers would have been faced with inflation caused by extra money entering the country and the demands on goods caused by resettlement, but would not have had the benefits of increased wages. This in effect, is what happened in Vietnam where money was made available, but it was channelled into the economy through the government which spent it unwisely and allowed little to percolate to the urban workers or rural peasant farmers. Increased money brought inflation, with the result that the people the government wanted to win to its side became relatively poorer as prices rose but wages did not. HeAce, depending on the administrative structure, organizational abilities, and distribution channels of each side in an insurgency war, certain groups will benefit and others put at a

- 51 -

disadvantage as the impact of the international system is felt. It is in this respect that the importance of the boom to such groups as the Police Force, the social service departments, and the rural Chin~se in general should be evaluated. The boom years brought prosperity. Tan Cheng Lock, the leader of the MCA at the time, has acknowledged !gBt the Chinese tend te th~nk primarily of makinq money. The boom years provided them with an opportunity to do just that and in the process won their cooperation. As Sir Gerald 'rempler has sc:Ud, "You cannot win this sort of war with bulle~s. You can only win the people over in my opinion - to use that nauseating phrase I think I invented - by capturing their hearts and minds. The strategy ie to win it by getting people on your side, by getting prosperity, a hiqher standard of living among the people and so proving that 'What_·>Ne ·call the Hestern way of life is better than the Communist way of life."l51 It seems a strange paradox, therefore, that while communist aqqression should pose the problem in Malaya, communist involvement in Korea should contribute so much to its solution.

150 Speech at the National Convention, 23rd August, 1953, UMNO Files, GNO/SG 1954, National Archives of Malaysia. 151 Straits Times, 27th March, 1968.

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Clutterbuck, Richard L. The Long Long War: Counterin s urgency in Malaya and Vietnam . Praeger, New York, 1966. '!Recent Settlement Changes in South Malaya", Dobby, E.H.G. MaLa yan JournaZ of Tropical Geography, Vol. 1, October, 1953, pp. 1-8. Han, Suyin. 1970.

.. .

And the Rain My Drink .

Mayflower, London,

Hanrahan, Gene. The Communist Struggle in Malaya. University of Malaya Press, Kuala Lumpur, 1971 . "Export Taxes on Rubber in Malaya - A Lim, Chong Yah. Survey of Post~War Development", Malayan Economic Review, Vol. 3, No. 2, October, 1960, PP ~ 46-58. "Company Profits and Prices in the Rubber Ma, Ronald . Industry in Malaya, 1947-58", Malayan Economic Review, Vol. 4, No.2, October, 1959, pp. 27-44. Malaya, Federation of. AnnuaZ Report of Audit of Accounts of the Federation of Malaya, 1948-54. Kuala Lumpur.

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Kuala Lumpur.

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Malaya, Federation of. The Economic Development of Malaya: Report of a Mission Organized by the International Bank for Reconstruction and Development at the Request of the Government of the Federation of Malaya~ the Crown Colony of Singapore and the United Kingdom. International Bank for Reconstruction and Development, Singapore, 1955. -~-=·

w. c.s .

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Malaya Rubber Statistics Handbook, 1952 and 1956. kuala Lumpur. Monthly Statistics Bulletin, 1952-57.

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-w--·

Report of Committee to Investigate the Squatter Problem. Kuala Lumpur, 1949.

A Report on the I947 Census of Population by London, 1949. M. V. Del Tufo. State of Perak Financial Statements, 1948-52. Kuala Lumpur. State of Selangor Financial Statements, 1948-55. Kuala Lumpur.

Markandan, Paul. The Problem of the New Village in Malaya. Donald Moore, Singapore, 1954. Meek, John Paul. Malaya: A Study of Governmental Response to the Korean Boom , Data Paper No. 17. Southeast Asia Program, Department of Far Eastern Studies, Cornell University, Ithaca, N.Y., 1955. Ooi, Jin Bee. Land~ People and Economy in Malaya. London, 1963.

Longmans,

Purcell, Victory. Malaya: Communist or Free? Stanford Univers~ty Press, Stanford, California, 1954.

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Pye, Lucian W. Lessons from the Malayan Struggle Against Communism. Center for International Studies, Massachusetts Institute of Technology, Cambridge, Massachusetts, 1957. Robinson, Perry J.B. Transformation in Malaya. Warburg, London, 1956.

Seeker and

Rudner, Martin. "The State and Peasant Innovation in Rural Development: The Case of Malaysian Rubber", in Martin Rudner, ed., Society and Development in Asia. Asian and African Studies Special No. Jerusalem, 1970. "The Draft Development Plan of the Federation of Malaya, 1950-1955", Journal . of Southeast Asian Studies, Vol. 3, No. 1, March, 1972, pp. 63-96. Sandhu, Kernial Singh. "Emergency Resettlement in Malaya", Journal of Tropical Geography, Vol. 18, August, 1964, pp. 157-183. "The Saga of the Malayan Squatter", Journal of Southeast Asian History, Vol. 5, March, 1964, pp. 143;,...172. Siew, Nim Chee~ Labour and Tin Mining in Malaya. Data Paper No. 7. Southeast Asia Program, Department of Far Eastern Studies, Cornell University, Ithaca, 1953. Stenson, M.R. The I948 Communist Revolt in Malaya: A Note on Historical Sources and Interpretation; a Reply by Gerald de Cruz. Occasional Paper, No. 9. Institute of Southeast Asian Studies, Singapore, 1971. Thompson, Robert. Defeating Communist Insurgency. and Windus, London, 1966.

Chatto

United Kingdom. The Colombo Plan: Annual Report of the Consultative Committee on Economic Development in South and Southeast Asia. Second-Fourth Annual Reports. HMSO, London.

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THE AUTHOR Mr. Richard W. Stubbs is a full time Ph. D. Candidate in the Department of Political Science of the University of Alberta, Edmonton, Canada.