17 November 1949
SUMMARY
Primarily, Malaya is of importance to the US
because it is the world's greatest producer of rubber and tin. In 1948 Malaya
produced almost half of the total world production of natural rubber and more
than a third of the world production of tin. World War II brought forcibly to
US attention the importance of these vital commodities to a war-making machine;
they retain their importance, if less urgently, in time of peace, and are on
the lists of strategic materials designated for US stockpiling. Through the rubber
and tin industries, Malaya is the sterling bloc's biggest dollar-earner. As
such, Malaya's economic position materially affects that of the UK in the
Western Alliance and thus affects ERP and other US financial commitments in
Europe.
Of secondary but considerable importance are
Singapore's extensive naval facilities and strategic location on world shipping
lanes. Control of the Malayan peninsula, and especially the island of
Singapore, entails control of the Straits of Malacca through which passes most
of the sea-borne commerce between the West and the populous nations of the Far
East. Singapore's harbor, with its repair facilities, is a natural base for
naval forces, while the airfields on Singapore Island offer the best potential
facilities in Southeast Asia for long-range aircraft.
Withdrawal of British forces from India and
Burma gives Singapore even greater importance as a staging point for British
Commonwealth military forces. The naval installations in Singapore have been
restored, and Singapore is the focal point of all British armed forces from
Ceylon, on the west, to Hong Kong, on the east. Unrest in the Far East not only
has further aggravated the problem of area defense there, but also has thrown
greater responsibility upon Singapore in the British Empire Defense Plan.
The UK has thus far been successful in
maintaining control of Malaya, and Malay nationalism has not yet developed to
the point where it could threaten this control in the near future. Certain
pressing problems, however are facing the British. The most urgent is
terrorism, carried on by a predominantly Communist guerilla movement numbering
3-5,000 armed members, led and inspired by Chinese whose purpose is the
wrestling of political control from the British.
To counteract this threat, the British have
instituted strong political and military action. Although terrorist activity
has been fairly well contained, the threat is still present and necessitates
large expenditures of money and manpower. An additional problem, and one which
is likely to grow steadily in importance, is that of communal friction between
the Malays, who are favored politically by the British, and the Chinese, who,
second only to the British, dominate the economic life of the peninsula. So
far, efforts to increase racial harmony between these two have had at best only
a superficial effect.
Although neither tin nor rubber production has
been seriously affected by terrorist activity, the producers fear the possible
effect of a decline in world markets. The rubber industry (which wholly or
partially supports a third of Malaya's population) faces not only the
likelihood of increased competition from neighboring countries' natural rubber
but the competition of synthetic rubber. The danger is less with respect to tin,
but a lessening of world demand, with a consequent drop in price, is a strong
possibility. A decline in either or both industries, accompanied by serious
unemployment, would mean an end of Malaya's economic stability and might bring
political chaos.
Continued British control of Malaya and,
consequently, continued US access to Malaya's strategic commodities, will
largely be determined by (1) how Malaya's 2 1/2 million Chinese align
themselves politically when the full effect of China's Communist victory is
felt; (2) the extent of moral and material aid given Malaya's terrorists by the
Communist regime in China; (3) the degree of friction or cooperation between
the almost numerically equal Malay and Chinese communities; (4) the degree of
Malay political solidarity and willingness to accept continued UK control; and
(5) the status of Malaya's rubber and tin industries.
Over the next five years, the net effect of
these pressures on the UK probably will be to threaten British control of the
area, and, toward the end of this assumed period, will mean the granting of
greater participation in the government to Chinese in Malaya, thus legally
recognizing there increasing influence.
Note: The intelligence organizations of the
Departments of State, Army, Navy, and the Air Force have concurred in this
report. It is based on information available to CIA as of 31 October 1949.
-------------------------------------------------------
CURRENT SITUATION IN MALAYA
THE POLITICAL SITUATION
1. Background.
After World War II, the government in Malaya
underwent several changes, finally evolving into two distinct entities - the
Colony of Singapore and the Federation of Malaya. The British Military
Administration was superseded on 1 April 1946 by a Malayan Union which brought
together the nine prewar Malay States (four Federated and five Unfederated) and
the Straits Settlements, excluding Singapore which became a separately governed
Crown Colony. Malay opposition to the Union led to its replacement by the
present Federation of Malaya on 1 February 1948.
The Federation differs from the earlier Union
mainly in that it nominally restores sovereignty in the States to the Sultans,
and makes several other relatively minor concessions to Malay sensibilities. As
now constituted, the Federation of Malaya is a protectorate, over which the
British exercise exclusive control of all internal and external affairs,
through the mandatory advice of British advisors in each of the States, except
in matters pertaining to the Mohammedan religion and Malay customs, which
remain under the jurisdiction of the Sultans. The framework of the Federal
Government includes appointed Executive and Legislative Councils, with
numerical representation in these bodies heavily weighted in favor of the
Malays as against other racial communities. Similar Councils appointed by the
Sultans exist in the various States.
At the top of the Federation Administration is
a British High Commissioner in whom are vested such extensive powers as
unlimited veto, unilateral promulgation of Legislation, and appointment of
members to the Executive and Legislative Councils.
The Crown Colony of Singapore, quite similar in
governmental structure to the Federation, is administered by a Governor. Six of
its twenty-two Legislative Council members are elected. 1
The major obstacle to efficient operation of
these two Governments is the peculiar opposition of Malaya's population, which
is a constant and increasing threat to British control. The 1947 census of both
areas indicates a total population of 5,818,434, approximately half Chinese and
half Malay. In the Federation itself there are 1,882,874 Chinese and 2,135,811
Malays. In Singapore Colony there are 728,523 Chinese and only 73,802 Malays.
There are, in addition, 534,148 Indians in the Federation and 71,300 in
Singapore. The Chinese, and to a lesser degree, the Indians, object to the
favoritism shown the Malays by the British administrations in the Federation
and Singapore. Even the Malays are not enthusiastic over the British rule, but
most of the accept it as a temporary expedient against domination by the
politically and economically aggressive Chinese.
2. Current Problems.
a. Terrorism.
(1) Terrorist Organization, Strength,
Composition.
The most pressing current problem in the
Federation is terrorism which began in May 1948, instigated and led by the
Malayan Communist Party (MCP). The terrorists, approximately 95 percent of whom
are Chinese, now number between 3,000 and 5,000 according to the best available
estimates. Their fighting organization, the Malayan Peoples' Anti-British Army,
evolved from the Malayan Peoples' Anti-Japanese Army, a jungle-wise guerilla
force which during World War II was largely under the direction of the Malayan
Communist Party, although partially supplied and trained clandestinely by the
British.
The terrorists' organization, which never
reached a high degree of efficiency, has deteriorated in the past few months,
owing to vigorous British countermeasures and lack of general support from the
populace. Direction of the terrorists is in the hands of several hundred
"hard core" Communists, but there seems to be almost no coordination
between guerilla bands in various parts of the country. Since June 1948 the
guerillas have sustained in excess of 879 confirmed casualties. The terrorists
have been forced to withdraw to rather inaccessible and sparsely populated
jungle areas in central and northern Malaya, leaving behind only small groups
known as "killer squads" to continue sporadic and relatively
ineffective attacks against estates and mines and civilian personnel. 2
(2) Terrorist Aims, Program, Propaganda
XXXXXXXXXX the guerilla program underwent a
significant change toward the end of 1948. There is reason to believe that, in
the early stages of violence, when the terrorists were enjoying the advantages
of surprise and considerable freedom of movement, they hoped to wreck Malaya's
economy and wrest political control from the British in a matter of months.
There are also indications that they anticipated moral and material aid from
other Communist-led movements in Asia. However, a reappraisal of the situation
several months later reportedly led the terrorists to change from a short-term
campaign of sabotage, violence, and murder to a long-range strategy of
attrition both of the country's economy and the Government's authority. through
a campaign of continued, but less intense military action, and greater
political work towards gaining public support and recruiting new members.
Terrorist, activities seriously affected
general morale, and a marked lack of popular cooperation with British forces
was evidence of decreasing faith in British ability to maintain law and order.
The Chinese, who suffered the heaviest casualties, were the most noticeably
affected. Europeans engaged in rubber and tin production, inadequately armed
and lacking proper protection by British troops and police, found themselves
easy targets. However, the full deployment of the security forces and the
resultant drop in terrorist incidents has had a salutary effect on morale.
Clandestine MCP newspapers and pamphlets
present a steady stream of propaganda, the keynote of which is hatred for the
British soldier and the British Government. Highly colored accounts of
terrorist exploits and security force "atrocities" appear regularly,
along with bitter denunciation of British imperialism. 3
(3) Exploitation of Populace.
Although much of the terrorist propaganda is
directed toward the Malays, they have so far been unaffected by it. Neither has
the vast majority of Malaya's Chinese population shown signs of being swayed to
overt action, although many of them are susceptible to such propaganda as a
result of dissatisfaction with their present status or because of sheer
opportunism.
In the past, terrorists have been unsuccessful
in extracting "protection money" from Chinese rubber estate and tin
mine owners, but recent police measures have probably reduced this practice.
One serious problem which some British
officials regard as the key to the terrorist situation is the more successful
exploitation of Malaya's "squatters" by the guerillas. The squatters,
who number roughly 500,000, are displaced or immigrant Chinese who have settled
illegally on Government holdings, or land reserved for the Malays, in scattered
groups throughout the Federation. It is believed that relatively few squatters
have voluntarily aided the terrorists, but many more have been intimidated and
blackmailed into contributing food, money, information, and shelter to
marauding bands. Furthermore, the illegal squatter communities provide ideal
cover for the terrorist guerillas, and threats of violence and death prevent
many squatters from reporting the presence of guerilla bands to the security
forces.
The great majority of Malayan Chinese, however,
still pursue a noncommittal policy toward Malaya's civil strife. Although some
of Malaya's most influential Chinese have shown signs of accommodation with the
victorious Communists in China proper, there is yet no indication among Malayan
Chinese in general of a significant swing to the Communist movement. The fact
that they have traditionally been aligned politically and economically with
China nonetheless presages increasing difficulties for the British when the
full effect of the Communist victory in China is felt. Already the Kuomintang
has become decreasingly effective, 4 and several Chinese newspapers
have adopted a strong sympathetic attitude toward the Chinese Communists.
(4) Soviet Direction and Support.
There is no evidence of overt Soviet direction
of current developments in Malaya or of Soviet agents operating in the area.
There are, however, strong indications that the order for the terrorists
uprising emanated either from the World Federation of Democratic Youth
Conference or from the Second Congress of the Communist Party of India, both of
which were held in Calcutta early in 1948. The militant policy which emerged
from these conferences is believed to have been the basis for the
near-simultaneous Communist-inspired uprisings in Burma, Indonesia, and Malaya.
Furthermore, Malaya has received the attention of the Soviet radio and press,
which terms Malaya's insurrection a "national liberation struggle of the
Malay people" and derides British promises for the country's eventual
independence in the face of what is called the "greedy colonial war."
(5) Chinese Communist Direction and Support.
Evidence exists of Chinese Communist interest
in the Malayan situation. On 22 May 1949 the Peiping radio, in a statement
prepared by two banished Malayan Chinese labor leaders, protested the British
hanging of an Indian Communist labor leader in Malaya, and characterized the
guerilla warfare as a "revolutionary upsurge" and "a sign of
solidarity of the revolutionary forces of the workers of Chinese nationality
with the Malayan peasants." Propaganda interest in Malaya, together with
the promises of "moral and material aid wherever possible" to
colonial areas in Southeast Asia, indicate that the Chinese Communists will try
to counteract the British anti-Communist campaign.
There has been no evidence of material support
from the Chinese Communist Party (CCP) since the latter part of 1948. At that
time, xxxxxxxxxxxxxxxxx twenty members of the CCP arrived in Singapore to
assist the MCP in the work of reorganization. Another report, possibly
referring to the same development, stated that the South China Bureau of the
CCP planned to send sixty reinforcements to the MCP and that some if not all of
them left Hong Kong for Malaya in September 1948. 5
(6) British Political Countermeasures
Apart from the military effort against the
terrorists, the British have rigidly enforced numerous and drastic political
measures designed to counteract lawlessness in Malaya and to halt the spread of
Communism. The Communist-infiltrated Pan-Malayan Federation of Trade Unions
(PMFTU) was proscribed on 14 June 1948, and on 23 July 1948 the Malayan
Communist Party and its Satellites, the MPAJA, the new Democratic Youth League,
and the PETA (a Malaya youth group) were banned throughout Malaya. The China
Democratic League, presumed to be a Communist front, has been declared illegal
in the Federation, and is operating under such severe restrictions in the
Colony as to make its future doubtful. Police emergency powers, invoked first
on 16 June 1948 in certain parts of the Federation, were legislatively enacted
a few weeks later as Emergency Regulations Ordinances affecting both the
Federation and the Colony.
These Emergency Regulations grant wide powers
to the two governments: banishment of individuals, a mandatory death sentence
for illegal possession of arms, powers of search of persons and premises
without a warrant, long-term detention of suspects without trial, close control
over movements of persons and vehicles, and power to impose curfews and occupy
properties, Legislation, making compulsory to the registration of Chinese over
twelve years of age and the carrying of identity cards, was later enacted.
From the beginning of the Emergency through
June 1949, 3,000 aliens and 56 British subjects (most, if not all, Chinese and
Indians) have been deported under the Emergency Regulations, and some 7,500
persons have been detained, among them many Chinese squatters, suspected or
convicted of aiding the terrorists. In particularly bad areas of the
Federation, whole groups of squatters have been deported, and for security
reasons some squatter areas have been completely evacuated and resettled. 6
The Emergency Regulations also provide that
anyone contributing funds to the guerillas is liable to arrest and prosecution.
Although some property owners have been arrested, it is believed that the
terrorists still are able to collect funds through extortion sufficient to
cover a large part of their operating expenses.
(7) Labor Movement.
Immediately before the formal outlawing of the
MCP in July 1948, Malaya's leading labor personalities, who were also Communists
Party members, reportedly went underground, taking the Union's funds with them.
This action, combined with the earlier banning of PMFTU, which pretended to
represent most registered labor unions in Malaya, left Malayan labor in a
seriously demoralized state. Immature, lacking in spontaneity of unionization
and collective action, frustrated by racial antagonism and handicapped by the
peculiarities of Chinese workers' membership in guilds and secret societies,
organized labor in Malaya has been seriously disorganized since that time.
While the Government has pursued a policy of encouraging workers' groups and
has registered 163 individual unions, which are attempting to maintain some
corporate status at the present time, emergency conditions are severe obstacles
to the restoration of trade unionism. The lack of money, union distrust
of Government assistance, as well as unfriendliness in some business quarters
toward a revival of trade unionism, all further hamper Government efforts to
re-establish Malaya's unions.
b. Nationalism.
Nationalism as it is known in neighboring
Southeast Asian countries is still incipient in Malaya and does not now
constitute a serious threat to British control. The present terrorist
disorders, involving, as they do, only a small segment of the Chinese
population, largely under immigrant Chinese leadership, cannot properly be
considered a manifestation of nationalism. The Malays have themselves only
recently displayed an appreciable degree of political awareness and a desire
for self-government - a desire rather effectively held in check by fear of
Malayan Chinese domination in the event of independence.
(1) Political Organization and Activity.
Of the two major Malay political organizations,
the United Malay Nationalist Organization (UMNO) is by far the larger. Its
leader, Dato Onn bin Jaafar, is Prime Minister of Johore, the largest Malay
State, and the most influential and respected Malay in the country. Relatively
conservative in its political orientation, the UMNO stands for what Dato Onn
calls "Malayism," which "aims at achieving and maintaining Malay
interests." The organization, until recently supported by the Sultans,
accepts the premise that Malaya will not be ready for self-government for several
years. Its most recent move, devised to broaden its popular support, was to
allow associate non-voting membership to non-Malays. Dato Onn's increasing
political strength and the aims of the UMNO, which include the establishment of
a single Malayan state with one ruler, have aroused considerable opposition
from the Sultans, who are cognizant of these threats to their sovereignty. As a
result, some of the Sultans are attempting to undermine the influence of both
Dato Onn and UMNO, which may lead to the polarization of most Malays into
either pro-Sultan or pro-UMNO factions. Such a split in Malay ranks could be
extremely embarrassing to the British administration which would, in supporting
one faction, alienate a sizable group of Malays in the other.
The Malay Nationalist Party (MNP), a relatively
small left-wing organization, has been more vociferous and reportedly was used,
before the Emergency, by the MCP in an attempt to draw Malays into the
Communist bloc. Whereas the UMNO has adopted a cooperative attitude toward the British,
the MNP is considerably more militant and nationalistic, and British
intelligence indicates that only a decision to conserve strength prevented MNP
collaboration with the terrorists.
While recent intimations from leaders of both
the UMNO and the MNP indicate that a rapprochement achieving greater unity
among the Malays may be reached some time in the future, an effective union of
the two groups does not appear immediately feasible.
The only articulate non-Malay political
organization in Malaya is the left-wing Malayan Indian Congress, a rather
ineffectual group that maintains close ties with India.
(2) Nationalism and Self-government.
The Federation and Colony Governments have
encouraged political activity as valuable training for the eventual orderly
assumption of self-government. Commissioner General MacDonald stated on 17
January 1949 that the purpose of the British administrators in Malaya is to
"unite and gradually transfer rule." Prime Minister Atlee's 13 April
1949 statement that Britain has no intention of withdrawing prematurely from
Malaya has reassured both European businessmen in the Federation and those
Malays fearful of the Malayan Chinese threat.
(a) Communal Friction
Malay nationalism is closely bound up with the
increasingly vexing problems of communal friction between Chinese and Malays,
a problem which looms large in any consideration of self-government for the
country. The British policy, which favors indigenous Malays, has prevented the
Malayan Chinese from dominating the country politically as they now do
economically. The Malays are opposed to any concessions given the Chinese which
might threaten present Malay political supremacy. Malaya's Chinese, on the other
hand, are generally dissatisfied with the political framework of the
Federation, and with their lower political status in particular. The Malayan
Chinese resent the difficulties of obtaining citizenship, the treatment of
squatters and other hardships resulting from the present Emergency Regulations,
and their unequal representation in the Government.
The British are making some efforts to allay
this communal friction. A Government-encouraged Malayan Chinese Association
(MCA) was established on 27 February 1949 to foster inter-communal harmony and
cooperation. So far, its results have been disappointing. The Commissioner
General also sponsored a ten-man Sino-Malay Goodwill Committee, composed of
leading Malays and Chinese, to explore the objective of political homogeneity
and to foster a common Malayan nationality. The group, now known as the
Communities Liaison Committee, includes representatives of other racial groups
and reportedly is reviewing the whole field of relations between the
communities in Malaya - economic, social, and political. Such organizations,
however, will not be able to provide a final solution to racial differences in
the foreseeable future.
THE ECONOMIC SITUATION
1. Importance of Malaya's Products to US and
UK.
Although Malaya is a significant exporter of
coconut products, palm oil and pineapples, these are secondary in importance to
the two major exports, rubber and tin. In 1948, rubber constituted over 60
percent of the value of total exports from the Federation alone and provided the
sole or main source of livelihood for one-third of the population. Rubber
production in the Federation reached an all-time record of 696,978 long tons in
1948. 7 The US was the leading purchaser with 371,391 tons, over
half of total US rubber imports. Slightly lower production and export levels
have been maintained so far during 1949.
Tin-ore production in 1948 rose to 59,753 tons,
approximately 67 percent over the previous year although some 50 percent below
the highest prewar levels. Tin-metal exports were 47,214 long tons, of which
the US took 29,497 tons, about a third of total US tin-metal imports. Malaya's
tin production in 1949 is expected to be somewhat higher than that of 1948.
Rubber and tin, currently being stockpiled as
strategic commodities in the US, represent the principal source of Malaya's
income and made that country the sterling area's greatest dollar-earner in
1948. US interest in the Malayan economic situation, then, is two-fold: (1)
Malaya is the principal source of two important strategic materials; and (2)
Malaya's earnings strengthen the UK financially.
2. Current Production and Outlook.
a. Rubber.
During the first six months of 1949 over
300,000 long tons of rubber have been produced in Malaya. The future of the
Malayan rubber industry, however, is clouded by several economic factors, The
most publicized of these is the competition offered by synthetic rubber,
although the ultimate results of this competition cannot now be conclusively
assessed. An equal threat lies in the fact that the greater part of Malaya's
production is from large Western-owned estates which produce at a high cost as
compared with Asiatic small-holdings. Over half the production in Indonesia,
Malaya's principal competitor, is from small-holdings. The industry's
competitive position is also adversely affected by the comparatively advanced
age of Malayan plantings and by the small percentage of high-yielding rubber
trees. These factors cannot be overcome except over a period of years and at a
cost which the present price of rubber makes difficult. The Malayan industry
has benefited since the war from the abnormally low production in Indonesia and
Indochina, a result of unstable political conditions. A return to normal
production in those countries will bring a decline in Malaya's relative
position in the industry. For these reasons, the weakness of the rubber market
since the fall of 1948 has been a matter of extreme concern both to the
planters and to Malayan and UK authorities as well.
b. Tin.
During the first six months of 1949, over
35,000 long tons of tin ore have been produced in Malaya. Factors adversely
affecting the outlook for Malayan tin production, however, are (1) the slow
progress made in rehabilitating the industry; (2) uncertainty over the future
market for tin; and (3) the temporary cessation of prospecting and development
of new tin-producing areas.
c. Rice.
A factor of primary importance in all Malayan
labor costs and therefore in Malaya's competitive position in world markets, is
the price of rice. 8 Malaya, able to produce only approximately
one-third of its rice requirements, is dependent upon imports. Malayan authorities
have taken several steps to stimulate domestic rice production but it is
estimated that maximum production cannot provide more than 40 percent of
requirements.
3. Effect of Terrorism.
According to figures issued by the British,
terrorism has so far had no appreciable effect on current Malayan production.
Terrorist activities, however, probably have affected future production, and
should terrorism continue, the long-term outlook is not encouraging. The tin
industry has probably suffered most. Prospecting for new tin deposits has been
virtually halted because of danger to personnel from guerilla bands and further
rehabilitation of the industry - repairing of dredges, and development of
present installations - has suffered for the same reason. The uncertainty of
the European position in Malaya, particularly when terrorism was at its height,
made owners of rubber estates and tin mines reluctant to invest in new capital.
The danger of terrorists in the relatively unprotected large rubber estates has
resulted in a low rate of replanting, which seriously affects future
production. Government aid in rehabilitating and developing the industries,
moreover, is necessarily limited by the large Government expenditures for the
terrorist suppression campaign.
4. Antagonism toward US Tin and Rubber
Policies.
Malaya's rubber planters are deeply disturbed
by the US synthetic rubber program. Planters complain that although the program
may be partially justified for US security reasons, it is holding down the price
of natural rubber to a level where some estates can operate only at a deficit.
Relaxation of certain of the mandatory regulations concerning US use of
synthetic rubber following the US-UK-Canadian financial discussions in
September 1949 was well received. There remains considerable fear, however,
that an increase in the use of synthetic rubber in the US, with a subsequent
reduced demand for natural rubber, may force many planters out of business and
create mass unemployment, which in turn would threaten British control in
Malaya.
Tin producers likewise have grievances against
US policies. While the price of tin has been satisfactory, Malayan producers
fear that US stockpiles may be unloaded on the world market at some future date
without regard for the interests of the industry. They dislike the pressure
from the US to acquire ore for the Texas City smelter, since the capacities of
Singapore and Penang are far above present Malayan ore output. A
long-established complementary relationship exists between Malayan mine owner
and smelter.
5. Devaluation
Malayan currency was devalued by the same
amount as sterling on 18 September 1949. 9 The effect on the price
of rubber, which is determined in a free market, was of course a rise in terms
of sterling and Straits dollars, and a fall in terms of US dollars. Undoubtedly
devaluation will, at least temporarily, benefit Malayan producers. The lower US
dollar prices will improve the competitive position of natural rubber relative
to synthetic, and the higher return in local currency to Malayan producers will
- again, temporarily at least - ease their cost problems. The position of the
Malayan industry relative to other major producers will be little affected in
view of the similar devaluation of other soft currencies.
All Malayan tin has been purchased and sold at
a fixed price by the British Ministry of Supply. Following devaluation, the US
dollar price was lowered from $1.03/lb. To $.95/lb. and the sterling price
raised. UK authorities now plan to reopen the London and Singapore metal
exchanges and permit tin to find a free market price. A further reduction in
the dollar price is probable which, however, should serve to stimulate
dwindling demand.
6. Finances.
The finances of the Federation are severely
strained. During the past few months, urgent representations for financial aid
have been made to the UK. It is estimated that the emergency is costing the
Federation S$300,000 a day. Total expenditures of the Federation in 1948 were
an estimated S$385,182,017 and the resultant deficit estimated at over
S$113,000,000 was met through borrowing and drawing on Reserve Funds, The
estimated 1949 deficit (now believed too low because of increased Emergency
costs) is S$58,717,447.
The Colony of Singapore, in somewhat better
financial condition, recently presented the Federation with a gift of
S$4,000,000 for the suppression of lawlessness. Although a S$25,200,000 deficit
occurred in 1948 (practically all accounted for by a shortfall of S25,000,000
in estimated revenue from income tax), the anticipated surplus for 1949 is
$6,500,000. According to the Colony's Financial Secretary, the present
financial position apparently gives no cause for concern.
An £8,000,000 3 percent loan was floated in
London in May 1949 for Federation financing of rehabilitation and development
projects. The total amount of assistance to Malaya from the UK is expected to
reach £31,000,000, which will be variously used to finance Emergency costs, pay
for war damage compensation claims, and contribute toward colonial development
schemes.
THE MILITARY SITUATION
1. British Strength and Capabilities; Morale.
The strength of British Far East Land Forces
(FARELF) in Malaya totals 39,000. Tactical units consist of seven battalions of
British infantry, seven battalions of Gurkha infantry, three battalions of
Malay infantry, one British artillery regiment, 10 one Malay
artillery regiment, and one British armored car battalion. The various support
and administrative units are composed mainly of Malays with smaller elements of
Ceylonese, Chinese, and Indians. All arms, equipment, ammunition, and part of
the rations for this Force are supplied from the United Kingdom.
The Royal Air Force strength in Malaya is 68
aircraft, of which approximately 50 percent are directly involved in the
suppression of the terrorists. The RAF assists in locating terrorist units and
bases, attacks isolated concentrations independently, strafes terrorist
hideouts in support of ground forces, and transports men and supplies to
forward areas. Carrier-based aircraft of the Royal Navy have participated
recently in ground support missions.
In addition to the British military forces
there are 60,000 to 70,000 police and auxiliaries, mostly Malays of varying
levels of training and usefulness, engaged in terrorist suppression under
British command. The overall capabilities of the police forces have steadily
improved.
At present, the security forces have the capability
of protecting mines and plantations from serious losses. Recent operations,
together with the positive measures which the British are continuing to take,
offer reasons to believe that the situation will continue to improve. Despite
these optimistic signs, military strength in the near future will undoubtedly
be maintained at the maximum permitted by commitments elsewhere.
The morale of British forces in Malaya has
improved considerably during recent months, as a direct result of the improved
security situation. RAF morale is particularly high.
2. Terrorist Strength and Capabilities; Morale
The scattered nature of the Malayan terrorists
makes it difficult to develop an accurate estimate of their strength. A figure
of 3,000 - 5,000, based on an analysis of terrorist attacks over a period of
time, is considered the soundest available estimate. Reportedly, terrorist
forces are well supplied with small arms but are chronically short of
ammunition. Their base of popular support, the Chinese squatters, is being
weakened by British countermeasures.
While the terrorists are able to disturb
Malaya's economic life by means of murder and sabotage, they do not now possess
the capability either of completely disrupting the economy or of driving the
British out of the country. Recent vigorous measures taken by the security
forces apparently have weakened the terrorists but, while their morale has
suffered accordingly, there is no evidence to suggest that it has collapsed.
Indeed, the success of the Chinese Communists undoubtedly has encouraged the
Malayan Communists, even though it has not added to their present physical
capabilities.
3. Terrorist Tactics.
Terrorist tactics are to avoid contact with the
security forces as much as possible, while inflicting maximum damage upon
public order and the economy. The terrorists operate in small groups of twenty
men or less, and typical activities during the past six months include: (1)
slashing of rubber trees; (2) sabotage of electric power lines; (3) sabotage of
hydraulic intakes to tin mines; (4) burning of cover crops on rubber estates,
with consequent damage to trees; (5) ambushing of security patrols; (6) raiding
in order to obtain arms and ammunition; and (7) assassinations.
The reduction of terrorist activities in recent
months is primarily the result of reinforcement and full deployment of the
security forces, with a consequent interdiction of terrorist communications and
destruction of some terrorist bases of operations. Compelled to modify their
tactics, the terrorists have begun to concentrate their attacks on the easier
targets offered by unguarded estates and mines, vehicles on isolated roads, and
vulnerable railroads and telecommunications. Theft of civilian identity cards
has facilitated terrorist infiltration and sabotage.
4. British Tactics.
British tactics are centered on intensive
patrolling activities, pursuit of terrorist bands, and the destruction of known
terrorist concentration areas and bases of supply. The RAF assists the security
forces in locating terrorist units and bases and, on occasion, by bombing
suspected terrorist strong points. Units of the Royal Navy patrol both coasts
of Malaya to prevent arms smuggling. Elements of the security forces and special
police, deployed defensively for the protection of important estates and
installations, are inadequate to safeguard every target, however, and scores of
places remain vulnerable to terrorist attack.
5. Foreign Implications.
a. Thai-British Cooperation.
The British security forces and the Thai Army
have been conducting joint operations, under British direction, against the
Malayan terrorists along the border of Thailand, where the Thai Army has
stationed five infantry battalions, totaling about 2,500 men. The British have
sold the Thai Army $25,000 worth of small arms and ammunition exclusively for
the use of these battalions and, in addition, have been training a small group
of Thai officers in the Jungle Warfare School in Johore.
Owing largely to Thai inefficiency, however,
these joint operations have not been effective in stopping the escape of
terrorists across the border, and the British have recently concluded an
agreement with Thailand permitting British security forces to pursue escaping
terrorists a distance of forty miles inside the territory of Thailand, provided
that the security detachments are accompanied by Thai police. It is believed
that this measure will improve the capabilities of the security forces in
dealing with the terrorists.
b. Possible Terrorist Infiltration and
Smuggling.
The British have no evidence that the Communist
Chinese terrorists in Malaya have been receiving supplies of arms and
ammunition from outside the country since 16 June 1948. While some Chinese have
arrived illegally by sea then, it is uncertain whether those arriving can be
classed accurately as terrorist reinforcements.
An important consideration in assessing future
terrorist capabilities is the relative isolation of Malaya from the present
centers of Communist armed strength in China and northern Indochina. As long as
the British Navy dominates the Malayan coasts and the Thai border is adequately
policed, the terrorists will have to depend largely on local resources and can
expect little external support either in terms of manpower or material.
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Notes:
1) Singapore also serves as the headquarters of
the Commissioner General for the UK in Southeast Asia, whose job it is to
coordinate policy in Britain's Southeast Asian possessions, which include, in
addition to Malaya and Singapore, portions of Borneo, the Crown Colony of Hong
Kong, and minor islands in the eastern Indian Ocean.
2) The terrorists appear to be increasingly
short of arms and ammunition. British security forces (totalling over 100,000)
have recovered considerable quantities of guerilla supplies and a program of
material aid from outside the country has apparently not materialized. From 1
May 1948 to 30 June 1949, more than 2,600 rifles, nearly 500,000 rounds of
ammunition, 2,000 shells, nearly 1,700 hand grenades, more than 1,400 mortars,
and nearly 500 pistols and revolvers were recovered by the British.
3) A booklet, captured in Perak and entitled
"The Aims of Present Propaganda," contains a typical illustration of
the current line: (1) expose the violence of Britain's postwar colonial policy
and the extreme hardship and suffering it inflicts on the Malayan people; (2)
represent Britain as being forced into a policy of fleecing the Malayan people
as a result of its weakened domestic and international postwar position; (3)
accuse British imperialism of robbing the people of their victory in World War
II and of adopting the Fascist method of police and military rule to suppress
the people's movement; (4) convince the masses of the invincibility of the
forces ranged against British imperialism; and (5) recount the Party's
"glorious" history of struggle for the independence of the Malayan
people during the past twenty years.
4) Rather than face recent restrictions, the
KMT in both the Colony and the Federation has decided to close its branches and
to cease (overt) activities.
5) Captured documents and interrogation of
terrorist prisoners, indicate that Chinese Communists from Indochina, Thailand,
and Indonesia have infiltrated into Malaya. A captured terrorist leader
reported that thirty leaders, sent into Indochina for training in 1947,
returned to Malaya some time in 1948 and were responsible for increased
terrorist activities in certain areas of the Federation in December of that
year.
6) The squatter problem continues to be a
costly one, and the Government hopes to implement as soon as possible the
recommendations of a Squatter Committee's report, issued 8 February 1949, which
suggests that the squatters be settled legally on the land they now occupy,
and, where that is not possible, resettled permanently on other lands, The
report stresses the necessity for re-establishing the administrative control
over squatter areas which has been completely lacking in the postwar period.
7) Total exports of rubber from Malaya (which
included imports for re-export, mainly from Indonesia) were 979,172 tons.
8) At the present time, the
Government-controlled price for rationed rice is approximately three times the
prewar price and the price for open-market rice, with which all Asiatics must
augment their ration, is considerably higher. Rice imports, principally from
Burma and Thailand, are a major source of those Government's income and the
Malayan employer who pays a living wage must, in effect, raise wages to include
the mark-up that these Governments place on their exported rice. The rubber
industry, whose product is selling below 1940-41 prices, is particularly
burdened by current rice prices and, within the industry, the estate producers
who employ large labor forces are affected most severely.
9) Prior to devaluation on 18 December 1949,
S$1.00 equaled £0.2.4 or US$0.4675. Since devaluation S$1.00 equals US$0.325.
10) A British Army artillery regiment
corresponds to a US Army artillery battalion.
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