THE SITUATION IN MALAYSIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001300010036-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 15, 2016
• Document Release Date: July 15, 2004
• Sequence Number: 36
• Publication Date: October 12, 1966
• Content Type: IM

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12 October 1966
No. 1694;`66
Copy No.;
INTELLIGENCE MEMORANDUM
THE SITUATION IN MALAYSIA
DIRECTORATE OF INTELLIGENCE
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This Document contains information affecting the Na-
tional Defense of the United States, within the mean-
ing of Title 18, Sections 793 and 794, of the U.S. Code, as
amended. Its transmission or revelation of its contents
to or receipt by an unauthorized person is prohibited
by law. The reproduction of this form is prohibited.
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
12 October 1966
INTELLIGENCE MEMORANDUM
The Situation in Malaysia
SUMMARY
Malaysia has a stable central government, a
buoyant economy, and a political situation free
from any immediate major subversive threat. How-
ever, the country's multiracial complexion--in-
cluding a large Chinese minority--and its division
into two geographically separated and very different
areas constitute basic divisive factors with serious
future implications. Moreover, although the ending
of Indonesian confrontation has been followed by a
detente in Malaysian/Indonesian relations, Indo-
nesia appears not to have abandoned its ultimate
objective of separating the Borneo states from
Malaysia. The end of confrontation and the UK's
economic difficulties, furthermore, have prompted
the UK to reducei:ts military commitments in the
country, with potentially significant adverse con-
sequences to Malaysia's future security. Malaysian
relations with the US are increasingly close and
friendly, and Kuala Lumpur strongly supports US
policy in South Vietnam.
NOTE: This is one of a series of memoranda produced
by CIA on those countries to be visited by
President Johnson. It was prepared by the
Office of Current Intelligence and coordinated
with the Office of National Estimates and the
Office of Research and Reports.
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1. When it was formally inaugurated in Sep-
tember 1963, Malaysia incorporated what had formerly
been the independent Federation of Malaya, the semi-
autonomous British-protected State of Singapore,
and the British Crown Colonies of Sarawak and Sabah
in northern Borneo. However, differences between
Chinese-dominated Singapore and the Malay-dominated
central government in Kuala Lumpur led to the po-
litical separation of Singapore from Malaysia in
September 1965. Since then virtually all residual
economic ties between Singapore and Malaysia have
been severed.
2. As now constituted Malaysia is a consti-
tutional monarchy modeled generally on the British
parliamentary structure. Democratic processes are
the accepted method of achieving power, and there
is a competent civil service and internal security
apparatus. However, the present political stability
is potentially threatened by friction between the
politically favored Malays and the economically
powerful Chinese (who comprise 44 percent and 36
percent of the total population respectively) and
between the central government and autonomy-minded
elements in Sarawak and Sabah.
3. In Kuala Lumpur the government is con-
trolled by the Alliance, a conservative coalition
of the three principal communal (ethnic) parties:
the UMNO (United Malay Nationalist Organization),
the MCA (Malayan Chinese Association), and the MIC
(Malayan Indian Congress). Of these the UMNO is by
far the largest and most important element. The
Alliance is not seriously challenged by any po-
litical opponent, its principal problem being divi-
sions within its own ranks,
4. The illegal Malaysian Communist Party (MCP),
which posed a serious insurgent threat from 1948
through the 1950s, has penetrated some of the minor
leftist parties
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5. Heading the government is Prime Minister
Abdul Rahman, who also presides over both the Al-
liance and the UMNO. The 63-year-old Rahman is
popular and politically astute, but his health is
not good, and there is considerable speculation
and political jockeying stemming from the expecta-
tion that a successor will have to be found within
the next two or three years. The heir apparent is
Deputy Prime Minister Dato Abdul Razak, a more force-
ful and perhaps more capable figure, but one who is
less popular and less predisposed to the cause of
maintaining good Malay/Chinese relations. Razak's
assumption of power would not result in any signif-
icant change in the strongly anti-Communist orienta-
tion of the government, but he would probably cater
somewhat to the more extremist Malay views, thereby
antagonizing Chinese sensibilities and endangering
the delicate balance now existing between the two
groups.
Developments in Eastern Malaysia
6. The most critical political problem facing
the government is the growing dissatisfaction in
Eastern Malaysia, particularly in Sarawak, with
Kuala Lumpur's rule. This discontent has been
manifested in demands for greater autonomy, espe-
cially from among the indigenous tribal elements.
In September Kuala Lumpur declared Sarawak under
a state of emergency and engineered the replacement
of the pro-autonomy Chief Minister, Stephan Ningkan,
by the less popular and less competent Tawi Slit
7. Although this move appears to leave the
immediate situation stabilized, it has intensified
popular resentment in Sarawak toward the Kuala
Lumpur regime. Observers believe that pro-autonomy
elements will emerge victorious in the elections
anticipated next year and that pressures for full
secession of Sarawak from Malaysia will grow.
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The Economy
9. Malaysia is the world's largest producer of
tin and natural rubber, but its heavy dependence on
these basic export commodities makes its economy
highly vulnerable to fluctuations in the world market.
Although Malaysia maintains one of the highest per
capita GNP rates in Southeast Asia, declining world
prices in rubber, high defense appropriations in-
curred as a result of confrontation, and a rapid
population growth have tended to slow economic growth
in recent years. Reductions in UK and Commonwealth
security and defense support, moreover, are now forcing
Malaysia to draw increasingly on its own resources in
these fields. Malaysia is now embarked on a compre-
hensive five-year development plan,. but its success
will depend to a great extent on foreign assistance.
Foreign Policy
10. The detente in Malaysian/Indonesian rela-
tions and the weakening of ties with the UK have
been accompanied by a growing interest within Ma-
laysia in broadening ties with the nonaligned and
Communist countries (excluding Communist China), al-
though the basic pro-Western orientation of the gov-
ernment is not expected to be modified. Fearful of
the effect that recognition of Peking would have on
its own large Chinese minority, Malaysia continues
to oppose any move in this direction.
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11. Despite current reductions in UK military
and economic aid to Malaysia, political relations
with the UK and other Commonwealth countries are
expected to remain relatively friendly and economic
and trade ties will probably remain strong, More-
over, the British are expected to retain their naval
and air units and facilities in Singapore, albeit on
a reduced scale, for the next two or three years.
12. Malaysian leaders see the US as their prin-
cipal protection against external attack and have
voiced firm public support for the US position in
Vietnam. The US has provided some relatively modest
economic assistance to Malaysia in the past, and the
reduction in UK commitments will almost certainly
result in requests for additional aid in the future.
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