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Fiscal Policy and Political Transition: The Case of Malaya, 1948–1960
Published online by Cambridge University Press: 07 April 2011
Extract
British rule in the Malay peninsula and the island at its southern tip—Singapore—took a new form after the defeat of the Japanese in 1945. Previously Singapore had been only part of the Straits Settlements which also included Penang and Malacca. In 1946 Britain chose to run Singapore separately as a Crown Colony and grouped the mainland Malay states and British settlements into what was first a Malayan Union and later, from 1948, the Federation of Malaya. In so doing, the seeds were laid for what was to be the independent nation of Malaya in 1957. At that time the White Paper explained:
A stage has now been reached when the system of government should be simplified and reformed. International relations as well as security and other interests of the British Commonwealth require that Malaya should be able to exercise an influence as a united and enlightened country appropriate to her economic and strategic importance.
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- Copyright © The National University of Singapore 1974
References
1 Great Britain, Colonial Office, Malayan Union and Singapore: A Statement of Policy on Future Constitution, Cmd. 6724, 1946, p. 2.Google Scholar
2 The Alliance consisted of three communal parties namely the United Malay National Organisation (UMNO), the Malayan Chinese Association (MCA), and the Malayan Indian Congress (MIC).
3 Ratnam, K.J., Communalism and the Political Process in Malaya, University of Malaya Press, 1965, p. 186. Of a total of just over 1,280,000 who ultimately were registered as electors (registration was voluntary) approximately 84ċ2 per cent were Malays, 11ċ2 per cent Chinese and the remaining 4ċ6 per cent mainly Indians.Google Scholar
4 Musgrave, R. A., The Theory of Public Finance, McGraw Hill, 1959, p. 116.Google Scholar
5 Even here it can be doubted whether the 1957 Constitution broadened the 1959 electorate sufficiently to give fair representation to all ethnic groups, as it was a product of consultation and compromise. See K. J. Ratnam, op. cit.
6 In 1965, Singapore separated from Malaysia which she joined in 1963: 1966–70 is the First Malaysia Plan period and 1971–75 the Second Malaysia Plan period.
7 See Lee Soo Ann, Economic Growth and the Public Sector in Malaya and Singapore, Oxford University Press, forthcoming.
8 Heller, W., “Fiscal Policies for Underdeveloped Countries” in Bird, R. M. & Oldman, O. (ed.) Readings on Taxation in Developing Countries, John Hopkins Press, 1964Google Scholar. There is a technical difference between the concepts of national income and domestic income but in the Malayan 1949–60 context, the difference (the net income paid abroad) was only about 4 per cent of domestic income.
9 W. Heller, op. cit.
10 In the absence of a central bank, government borrowing from the monetary authority was not possible. In any event, the currency issue system, as was true of other colonies, did not allow any fiduciary issue, i.e. issue other than in exchange for sterling at a fixed rate. Only the drawing down of past reserves and borrowing from the private-sector financial institutions, firms and individuals was possible. Even then, these sources of funds were not fully tapped, as will be pointed out later.
11 Lee Soo Ann, op. cit.
12 Hong, Huan Tzu, “The New System of Revenue Allocation to the States and Settlements in the Federation of Malaya” Malaya Economic Review, April 1957.Google Scholar
13 Federation of Malaya, Report of the Public Service Commission, 1959.
14 Federation of Malaya, Second Five Year Plan, 1961–5, Kuala Lumpur, 1961.Google Scholar