The Depression of the 1930s, followed by the outbreak of the Sino-Japanese War, had the effect of ending Chinese emigration to Malaya. This stabilised the demographic situation and ended the prospect of the Malays becoming a minority in their own country. At the time of independence in 1957, the Malays were 55% of the population, the Chinese 35% and the Indians 10%. Since the Malays have until recently had a higher birth rate, the proportion of Malays has increased since independence – by 2000 it was over 60%.This equation was upset by the inclusion of Singapore, which increased the Chinese proportion to close to 40%. Both UMNO and the MCA were nervous about the possible appeal of Lee's People's Action Party (then seen as a radical socialist party) to voters in Malaya, and tried to organise a party in Singapore to challenge Lee's position there. Lee in turn threatened to run PAP candidates in Malaya at the 1964 federal elections, despite an earlier agreement that he would not do so (see PAP-UMNO Relations). This provoked Tunku Abdul Rahman to demand that Singapore withdraw from Malaysia, which it did in August 1965.
The most vexed issues of independent Malaysia were education and the disparity of economic power among the ethnic communities. Since there was no effective opposition party, these issues were contested mainly within the coalition government, which won all but one seat in the first post-independence Malayan Parliament. The two issues were related, since the Chinese advantage in education played a large part in maintaining their control of the economy, which the UMNO leaders were determined to end. The MCA leaders were torn between the need to defend their own community’s interests and the need to maintain good relations with UMNO. This produced a crisis in the MCA in 1959, in which a more assertive leadership under Lim Chong Eu defied UMNO over the education issue, only to be forced to back down when Tunku Abdul Rahman threatened to break up the coalition.
The Education Act of 1961 put UMNO’s victory on the education issue into legislative form. Henceforward Malay and English would be the only teaching languages in secondary schools, and state primary schools would teach in Malay only. Although the Chinese and Indian communities could maintain their own Mandarin and Tamil-language primary schools, all their students were required to learn Malay, and to study an agreed “Malayan curriculum.” Most importantly, the entry exam to the University of Malaya (which moved from Singapore to Kuala Lumpur in 1963) would be conducted in Malay, even though most teaching at the university was in English until the 1970s. This had the effect of excluding many Chinese students. At the same time Malay schools were heavily subsidised, and Malays were given preferential treatment. This obvious defeat for the MCA greatly weakened its support in the Chinese community.
At the time of independence Malaya had great economic advantages. It was among the world’s leading producers of three valuable commodities, rubber, tin and palm oil, and also a significant iron ore producer. These export industries gave the Malayan government a healthy surplus to invest in industrial development and infrastructure projects. Like other developing nations in the 1950s and '60s, Malaya (and later Malaysia) placed great stress on state planning, although UMNO was never a socialist party. The First and Second Malayan Plans (1956-60 and 1961-65 respectively) stimulated economic growth through state investment in industry and repairing infrastructure such as roads and ports, which had been damaged and neglected during the war and the Emergency. The government was keen to reduce Malaya’s dependence on commodity exports, which put the country at the mercy of fluctuating prices. The government was also aware that demand for natural rubber was bound to fall as the production and use of synthetic rubber expanded. Since a third of the Malay workforce worked in the rubber industry it was important to develop alternative sources of employment. Competition for Malaya’s rubber markets meant that the profitability of the rubber industry increasingly depended on keeping wages low, which perpetuated rural Malay poverty.
As in education, the UMNO government’s unspoken agenda in the field of economic development was to shift economic power away from the Chinese and towards the Malays. The two Malayan Plans, and the First Malaysian Plan (1966-70), directed resources heavily into developments which would benefit the rural Malay community, such as village schools, rural roads, clinics and irrigation projects. Several agencies were set up to enable Malay smallholders to upgrade their production and increase their incomes. The Federal Land Development Authority (FELDA) helped many Malays buy farms or upgrade ones they already owned. The state also provided a range of incentives and low-interest loans to help Malays start businesses, and government tendering systematically favoured Malay companies, leading many Chinese-owned businesses to “Malayanise” their management. All this certainly tended to reduce to gap between Chinese and Malay standards of living, although some argued that this would have happened anyway as Malaysia’s trade and general prosperity increased.
